<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 2, 1996
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
WHITE PINE SOFTWARE, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
DELAWARE 7372 04-3151064
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
40 SIMON STREET
NASHUA, NEW HAMPSHIRE 03060
(603) 886-9050
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES AND PRINCIPAL
PLACE OF BUSINESS)
----------------
HOWARD R. BERKE
WHITE PINE SOFTWARE, INC.
40 SIMON STREET
NASHUA, NEW HAMPSHIRE 03060
(603) 886-9050
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
----------------
COPIES TO:
PETER M. ROSENBLUM, ESQ. LOUIS A. GOODMAN, ESQ.
MARK L. JOHNSON, ESQ. PATRICK J. FOYE, ESQ.
FOLEY, HOAG & ELIOT LLP SKADDEN, ARPS, SLATE,
ONE POST OFFICE SQUARE MEAGHER & FLOM
BOSTON, MASSACHUSETTS 02109 ONE BEACON STREET
BOSTON, MASSACHUSETTS 02108
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after this Registration Statement becomes effective.
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. [_] 333-
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. [_] 333-
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
----------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par
value.................. 3,450,000 shares $10.00 $34,500,000 $11,897
</TABLE>
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- -------------------------------------------------------------------------------
(1) Includes 450,000 shares of Common Stock subject to the Underwriters' over-
allotment option.
(2) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)
Dated August 2, 1996
3,000,000 SHARES
[Graphic: White Pine Software, Inc. pine tree logo]
COMMON STOCK
-----------
All of the shares of Common Stock offered hereby are being sold by White Pine
Software, Inc. ("White Pine" or the "Company"). Prior to this offering, there
has been no public market for the Common Stock of the Company. It is currently
estimated that the initial public offering price will be between $8.00 and
$10.00 per share. See "Underwriting" for information relating to the
determination of the initial public offering price. Application has been made
to have the Common Stock approved for quotation on the Nasdaq National Market
under the symbol "WPNE."
-----------
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON
PAGE 6 HEREOF.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
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<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public Discount(1) Company(2)
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<S> <C> <C> <C>
Per Share................................. $ $ $
Total(3).................................. $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses, estimated to be $950,000, payable by the
Company.
(3) The Company has granted the Underwriters an option, exercisable within 30
days of the date hereof, to purchase an aggregate of up to 450,000 shares
at the Price to Public less the Underwriting Discount to cover over-
allotments, if any. If all such shares are purchased, the total Price to
Public, Underwriting Discount and Proceeds to Company will be $ , $
and $ , respectively. See "Underwriting."
-----------
The Common Stock is offered by the several Underwriters named herein when, as
and if received and accepted by them, subject to their right to reject orders
in whole or in part and subject to certain other conditions. It is expected
that delivery of certificates for the Common Stock will be made at the offices
of Cowen & Company, New York, New York, on or about , 1996.
COWEN & COMPANY
OPPENHEIMER & CO., INC.
VOLPE, WELTY & COMPANY
, 1996
<PAGE>
Accessing Information and Connecting People Around the World
[Graphic: White Pine Software, Inc. pine tree logo]
White Pine
Keeping You Connected
Leveraging the power of the global Internet and corporate intranets, White
Pine's award-winning Enhanced CU-SeeMe brings people and information together.
[Graphic: Enhanced CU-SeeMe logo]
[Graphic: Computer monitor displaying Enhanced CU-SeeMe windows, including:
(i) three pictures of videoconferencing participants; (ii) the
WhitePineBoard, displaying the typewritten words "CU-SeeMe
WhitePineBoard"; (iii) the Participants window; and (iv) a control
panel.]
[Graphic: New Media Magazine's 1996 Hyper Award Byte Magazine's "Best of PC
Expo '96 Winner" The Boston Computer Society's 1995 "Best of Show
MacWorld Exposition" PC Computing four-star logo]
----------------
The Company intends to furnish its stockholders with annual reports
containing financial statements audited by its independent accountants and to
make available quarterly reports containing unaudited financial information
for the first three quarters of each year.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus.
THE COMPANY
White Pine develops, markets and supports multiplatform desktop connectivity
software that facilitates worldwide video and audio communication and data
collaboration across the Internet, intranets and other networks that use the
Internet Protocol ("IP"). The Company's desktop videoconferencing software
products, Enhanced CU-SeeMe and the White Pine Reflector, create a client-
server solution that allows users to participate in real-time, multipoint
videoconferences over the Internet and intranets. White Pine also offers its
eXodus line of desktop X Windows software, which enables seamless
interoperability between local and remote environments, and its 5PM line of
terminal emulation software, which provides desktop access to data and
applications residing on enterprise legacy systems.
Until the 1990s, videoconferencing generally required expensive hardware-
based systems that communicated through proprietary protocols. Even today, most
videoconferencing systems are proprietary hardware-based products priced
between $1,000 and $40,000. The relatively high price and limited
interoperability of these systems have impeded the widespread adoption of
videoconferencing as a means of communication. In 1992, researchers at Cornell
University developed CU-SeeMe, real-time desktop videoconferencing software
that enables users to communicate over the Internet with hardware as basic as
28.8 kbps modems, standard videocapture boards and video cameras. CU-SeeMe is
distributed as freeware over the Internet. As a result of recent improvements
in interoperability, bandwidth and other videoconferencing technology, as well
as the emergence of the Internet as a mass communication medium, it is
estimated that shipments of desktop videoconferencing systems will grow from
approximately 100,000 units in 1995 to an estimated 21 million units in 2000.
In June 1995, the Company secured the exclusive worldwide rights to license
CU-SeeMe and its related software-only multipoint conferencing server. In March
1996, the Company introduced Enhanced CU-SeeMe, which provides real-time, one-
way or two-way audio and video communication and data collaboration over the
Internet at a suggested retail price of $99. Enhanced CU-SeeMe offers
significant improvements in features and functionality over freeware CU-SeeMe,
including color video and data collaboration through a white board, while
maintaining operability over bandwidths as low as 28.8 kbps. Enhanced CU-SeeMe
is available on multiple platforms and can be installed on most multimedia PCs
without proprietary hardware. In May 1996, the Company began shipping the White
Pine Reflector, the software-only server component of the Company's
videoconferencing solution. The White Pine Reflector enables real-time,
multipoint desktop videoconferencing, offers the ability to "cybercast" events
to large audiences, and solves the complex problem of enabling
videoconferencing over the Internet between users operating at different
connection speeds. The White Pine Reflector is offered at suggested retail
prices beginning at $395. Enhanced CU-SeeMe has been downloaded for evaluation
from the Company's World Wide Web ("Web") site more than 400,000 times since
March 1996, and the White Pine Reflector has been downloaded for evaluation
more than 50,000 times since May 1996.
White Pine's objective is to be a supplier of leading-edge network
connectivity software solutions. The Company seeks to develop innovative,
lower-priced, software alternatives to hardware connectivity products and to
enhance its software solutions through additional functionality and features.
To achieve this objective, the Company intends to extend its position as a
leader in Internet-based videoconferencing by continuing to invest in research
and development, leveraging the name recognition and installed base of freeware
CU-SeeMe, and supporting emerging industry standards. The Company also intends
to establish and extend strategic and OEM relationships with multinational
firms that offer unique marketing or distribution opportunities or
technological
3
<PAGE>
capabilities for Enhanced CU-SeeMe and the White Pine Reflector. In order to
take advantage of industry trends, the Company intends to develop low-cost Web-
enabled versions of its X Windows and terminal emulation products.
The Company markets and sells its products through a combination of
distributors, OEMs and strategic partners, through its direct sales
organization and over the Internet. The Company's distributors include, among
others, Ingram Micro, Inc. and Tech Data Corporation in the United States,
Macnica, Inc. in Japan, Hyundai Information Technology Company Ltd. in Korea,
E92 Plus Ltd. in the United Kingdom and TCI in France. The Company's customers
include businesses, government organizations, educational institutions and
individual consumers.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered hereby........ 3,000,000 shares
Common Stock to be outstanding af-
ter the offering.................. 9,027,870 shares(1)
Use of proceeds.................... For repayment of indebtedness, working
capital and other general corporate
purposes, including potential acquisitions
Proposed Nasdaq National Market
symbol............................ WPNE
</TABLE>
- --------
(1) Excludes, as of July 25, 1996, (i) 941,085 shares of Common Stock issuable
upon the exercise of options at a weighted average exercise price of $1.43
per share, (ii) 537,250 shares of Common Stock reserved for future option
grants under the Company's stock option plan and (iii) 100,000 shares of
Common Stock reserved for issuance under the Company's employee stock
purchase plan. See "Management--Benefit Plans" and Note 8 of Notes to the
Company's Consolidated Financial Statements.
----------------
Unless otherwise indicated, all information in this Prospectus (i) except in
the financial statements and notes thereto, reflects the conversion of all
outstanding shares of the Company's common stock, $5.83 par value ("$5.83
Stock"), into 394,511 shares of the Company's common stock, $.01 par value
("Common Stock"), and the issuance of 20,000 shares of Common Stock upon
exercise of a warrant held by the Cornell Research Foundation, Inc. (the
"Cornell Warrant"), all upon the closing of this offering, (ii) gives effect to
the issuance of 209,050 shares of Common Stock issuable on or before December
15, 1996 upon the expiration of certain indemnification provisions entered into
in connection with the Company's acquisition of About Software Corporation
S.A., (iii) gives effect to the filing of an Amended and Restated Certificate
of Incorporation (the "Restated Charter") and the adoption of Amended and
Restated By-Laws (the "Restated By-Laws") upon the closing of this offering and
(iv) assumes no exercise of the Underwriters' over-allotment option. See
"Certain Transactions," "Description of Capital Stock" and "Underwriting."
----------------
EXODUS, EXODUS EXPRESS, EXODUS NFS, REFLECTOR, TGRAF, WHITE PINE, 5PM TERM
OFFICE, 5PM PRO and 5PM TERM are trademarks of the Company. CU-SEEME is a
trademark of the Cornell Research Foundation, Inc. All other trademarks or
trade names referred to in this Prospectus are the property of their respective
owners.
4
<PAGE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
White Pine acquired all of the stock of About Software Corporation S.A.
("ASC") effective as of November 1, 1995. The following table sets forth
summary statement of operations data for (i) White Pine Software, Inc. (not
including ASC, "WPS") and ASC for the fiscal year ended December 31, 1995 on a
pro forma consolidated basis, adjusted to give effect to WPS's acquisition of
ASC as if such acquisition had occurred on January 1, 1995, (ii) WPS for the
three months ended March 31, 1995 and (iii) the Company (which includes the
consolidated operations of WPS and ASC) for the three months ended March 31,
1996. The table also presents summary balance sheet data for the Company as of
March 31, 1996 on an actual basis and as adjusted. These financial data have
been derived from unaudited financial statements and notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA
CONSOLIDATED
WPS & ASC WPS COMPANY
------------- ------------- -------------
FISCAL YEAR THREE MONTHS THREE MONTHS
ENDED ENDED ENDED
DEC. 31, 1995 MAR. 31, 1995 MAR. 31, 1996
------------- ------------- -------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue....................... $ 9,227 $ 1,593 $ 2,086
Income (loss) from operations....... (1,396) (5) (909)
Net income (loss)................... (1,171) 38 (962)
Net income (loss) per common and
common equivalent share............ $ .01 $ (.16)
Weighted average number of common
and common equivalent shares
outstanding........................ 6,104 5,900
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------
ACTUAL AS ADJUSTED(1)
------ --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $2,833 $26,724
Working capital........................................... 1,868 25,908
Total assets.............................................. 7,987 31,879
Long-term debt, less current portion...................... 358 178
Total stockholders' equity................................ 3,797 28,017
</TABLE>
- --------
(1) Reflects the sale of the shares of Common Stock offered hereby at an
assumed initial public offering price of $9.00 per share, after deducting
the estimated underwriting discount and offering expenses, the application
of the net proceeds thereof and the exercise of the Cornell Warrant. See
"Use of Proceeds" and "Capitalization."
5
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, prospective
investors should carefully consider the following risk factors in evaluating
an investment in the Company and its business before purchasing any shares of
Common Stock offered hereby.
RECENT OPERATING LOSSES
The Company incurred losses from operations of $446,000 in the fiscal year
ended December 31, 1995 and $909,000 in the three months ended March 31, 1996.
At March 31, 1996, the Company had an accumulated deficit of approximately
$10.9 million. In the fiscal year ended December 31, 1995 and the three months
ended March 31, 1996, the Company made significant expenditures for product
development and sales and marketing in support of the product launch of
Enhanced CU-SeeMe, which became commercially available in March 1996. The
Company expects that it will be required to continue to invest heavily in
product development and sales and marketing programs in order to be
competitive and capture market share, particularly in the videoconferencing
market. In addition, the Company has hired a significant number of employees
since January 1995 and expects to continue hiring additional sales, customer
service, management, software development and technical support employees
during the remainder of 1996 as the Company continues to develop and expand
its operations. This significant increase in its workforce may negatively
impact the Company's results of operations in the future, particularly if
sales of new products fall below expectations.
As a result of the foregoing factors, the Company may incur further losses
in the future. There can be no assurance that the Company will achieve
profitable operations in any future period. In addition, as a result of the
Company's acquisition of ASC on a purchase accounting basis in the fourth
quarter of fiscal 1995 and the Company's decision to shift its focus to the
development, marketing and support of videoconferencing software, the Company
believes that period-to-period comparisons of its financial results are not
necessarily meaningful and should not be relied upon as an indication of
future performance. See "--Transition of Product Focus; Dependence on New
Products," "The Company," "Selected Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
DEVELOPING MARKET; UNPROVEN ACCEPTANCE OF THE COMPANY'S NEW PRODUCTS
The market for audio and video services and related software products for
the Internet and intranets, such as Enhanced CU-SeeMe and the White Pine
Reflector, has only recently begun to develop, is evolving rapidly and is
expected to be characterized by an increasing number of market entrants. The
Company's future success will depend in large part on the continued expansion
of the videoconferencing market in general and the adoption of the Internet as
a principal medium for commercial and consumer videoconferencing in
particular. As is typical in a new and rapidly evolving industry, demand for
and market acceptance of recently introduced products, such as Enhanced CU-
SeeMe and the White Pine Reflector, are subject to a high level of
uncertainty. Certain factors, including the present inability of subscribers
of certain widely used on-line Internet access providers to use Enhanced CU-
SeeMe over these providers' networks, the present inability to videoconference
with users of other vendors' videoconferencing systems, difficulties in
locating people on the Internet and uncertainty regarding vendors' willingness
to adopt industry standards, may limit demand for and market acceptance of
Enhanced CU-SeeMe and the White Pine Reflector. The continuation of such
uncertainty or of such limitations may have a material adverse effect on sales
of Enhanced CU-SeeMe and the White Pine Reflector and on the Company's
business, financial condition and results of operations. Also, enterprises
that have already invested substantial resources in other means of
communicating information may be reluctant or slow to adopt videoconferencing
generally and Internet videoconferencing in particular. As a result of
networking latencies, data packet loss and significant variations in Internet
infrastructure and users' set-ups and configurations, the quality of audio
communications over the Internet is inferior to the quality of conventional
telephone conversations and the quality of video communications over the
Internet may vary from connection to connection and in certain instances may
be inferior to the quality of hardware-based videoconferencing systems. As a
result, there can be no assurance that videoconferencing communications over
the Internet and intranets will become widespread or that Enhanced CU-SeeMe or
the White Pine Reflector will become widely installed.
6
<PAGE>
Moreover, the market for Internet services and software has developed only
recently. Commercial use of the Internet has been constrained by customer
demands for increased accessibility, reliability, speed, security and support,
and there can be no assurance that the infrastructure or complementary
products necessary for the Internet to become a viable medium of business
communications and activity in general, and as a medium of videoconferencing
communications in particular, will develop. In particular, there can be no
assurance that access to the Internet will continue to be available on a
widespread basis, that the Internet will not experience dramatic and
unforeseen technological difficulties, that the Internet will not be plagued
by computer viruses or other destructive technologies, that the introduction
of complementary products and technologies such as high speed modems and
security procedures for commercial transactions will not be delayed, that the
development and adoption of new standards and communications protocols will
not be delayed, that the current pricing structure for access to the Internet
will continue, or that growth in the number of users or the level of usage of
the Internet will not exceed the capacity of the Internet infrastructure to
serve all potential users. Moreover, critical issues concerning the commercial
use of, distribution of information on, and governmental regulation of the
Internet (including access, security, quality of services, price, ease of use,
property ownership, and liability and other legal issues) remain unresolved
and may affect both the growth of the Internet and the Company's business. As
the Internet and the related infrastructure continue to evolve, there can be
no assurance that the Internet will not develop in unforeseen directions that
will have a material adverse effect on the Company's business, financial
condition and results of operations. For example, because the performance of
the Company's products depends on, among other things, the availability of
adequate bandwidth on network connections, any significant reduction in the
rate of improvement of the available speed of network data transmission could
have a material adverse effect on the Company's business, financial condition
and results of operations.
If for any reason the market for Internet videoconferencing services fails
to grow, grows more slowly than anticipated or becomes saturated with
competitors' products, the Company's business, financial condition and results
of operations will be materially and adversely affected.
COMPETITION
The market for videoconferencing products and services is extremely
competitive, and the Company expects that competition will intensify in the
future. The Company believes that the principal competitive factors in the
videoconferencing industry are price, video and audio quality,
interoperability, functionality, reliability, service and support, hardware
platforms supported, and vendor and product reputation. The Company believes
that its ability to compete successfully will depend on a number of factors
both within and outside its control, including the adoption and evolution of
industry standards, the pricing policies of its competitors and suppliers, the
timing of the introduction of new software products and services by the
Company and others, the Company's ability to hire and retain employees, and
industry and general economic trends. The Company anticipates that in the near
future the videoconferencing market will experience intense competition in the
form of product bundling or significant price reductions. The Company
currently competes, or expects to compete, directly or indirectly with the
following categories of companies: (i) traditional hardware-based
videoconferencing companies, such as PictureTel Corporation, VTEL Corporation
and Compression Labs, Incorporated; (ii) emerging videoconferencing technology
companies, such as Cinecom Corporation, Connectix Corporation, Creative Labs,
Inc. and VDONet Corp.; (iii) vendors of operating systems and browsers such as
Microsoft Corporation, which recently introduced NetMeeting, a product that
enables point-to-point audio and data communication over the Internet, and
Netscape Communications Corporation, which recently acquired Insoft, Inc. and
its audio and videoconferencing technology; (iv) videoconferencing support
companies, such as VideoServer, Inc., Lucent Technologies, Inc. and Accord
Ltd.; and (v) other companies developing videoconferencing systems. PictureTel
Corporation and Intel Corporation each recently announced plans to license
products competitive with Enhanced CU-SeeMe to manufacturers of personal
computers and modems for inclusion in prepackaged multimedia and other
systems. In July 1996, Intel Corporation also announced a cross-licensing
agreement with Microsoft Corporation to share implementations of certain
industry standards and application frameworks, which the Company expects will
enhance the competitiveness of the products offered by both companies. In
addition, because the barriers to entry in the software market are relatively
low and the potential market is large, the Company anticipates continued
growth in the industry and the entrance of new competitors in the future.
7
<PAGE>
Enhanced CU-SeeMe and the White Pine Reflector also compete with
videoconferencing software that is available on the Internet and can be
downloaded by users for either no charge or extended evaluation. The Cornell
Research Foundation, Inc. (the "Cornell Foundation") makes CU-SeeMe ("Freeware
CU-SeeMe") and a related server freely available over the Internet. See
"Business--Proprietary Rights."
In the market for X Windows products, the Company faces significant direct
competition from a number of PC X server software vendors, including
Hummingbird Communications Ltd., NetManage, Inc., Network Computing Devices,
Inc. and Walker Richer and Quinn Inc., as well as indirect competition from
manufacturers of dedicated X terminals. The Company's principal competitor in
this market is Hummingbird Communications Ltd., the largest supplier of X
server software products for the PC platform. To the extent that these and
other companies introduce new or enhanced PC X server software products, the
Company will face increased competition.
In the terminal emulation market, the Company currently competes with the
following categories of companies: (i) vendors of International Business
Machines Corporation host connectivity products, including Attachmate Corp.
and Wall Data Incorporated; (ii) vendors of TCP/IP terminal emulation
products, including FTP Software, Inc. and NetManage, Inc.; and (iii) vendors
of Digital Equipment Corporation and Hewlett-Packard Company host connectivity
products, including Walker Richer and Quinn Inc.
Many of the Company's current and potential competitors, including
Hummingbird Communications Ltd., Intel Corporation, Microsoft Corporation,
Netscape Communications Corporation and PictureTel Corporation, have
significantly longer operating histories and/or significantly greater
managerial, financial, marketing, technical and other competitive resources,
as well as greater name recognition, than the Company. As a result, the
Company's competitors may be able to adapt more quickly to new or emerging
technologies and changes in customer requirements and may be able to devote
greater resources to the promotion and sale of their products and services.
There can be no assurance that the Company will be able to compete
successfully with existing or new competitors. In addition, competition could
increase if new companies enter the market or if existing competitors expand
their service offerings. An increase in competition could result in material
price reductions or loss of market share by the Company and could have a
material adverse effect on the Company's business, financial condition and
results of operations.
To remain competitive, the Company will need to continue to invest in
research and development and sales and marketing. There can be no assurance
that the Company will have sufficient resources to make such investments or
that the Company will be able to make the technological advances necessary to
remain competitive. In addition, current and potential competitors have
established or may in the future establish collaborative relationships among
themselves or with third parties, including third parties with whom the
Company may have relationships, to increase the visibility and utility of
their products and services. Accordingly, it is possible that new competitors
or alliances may emerge and rapidly acquire significant market shares. Such an
eventuality could have a material adverse effect on the Company's business,
financial condition and results of operations.
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS
The Company has experienced fluctuations in its quarterly results of
operations and anticipates that such fluctuations will continue and could
increase. The Company's quarterly results of operations may vary significantly
depending on a number of factors, some of which are outside of the Company's
control. These factors include the timing of the introduction or acceptance of
new products offered by the Company or its competitors, changes in demand for
Internet services, changes in the mix of products provided by the Company,
changes in pricing strategies by the Company and its competitors, changes in
the markets served by the Company, changes in regulations affecting the
industry, changes in the Company's operating expenses, capital expenditures
and other costs relating to the expansion of operations, changes in its
personnel and general economic conditions. In addition, fluctuations in
exchange rates may render the Company's products less competitive relative to
local product offerings or result in foreign exchange losses. To date, the
Company has not engaged in exchange rate hedging activities to minimize the
risks of such fluctuations. Although the
8
<PAGE>
Company may seek to implement hedging techniques in the future with respect to
its foreign currency transactions, there can be no assurance that such hedging
techniques will be successful. Historically, the Company's revenue in the
third quarter of each calendar year has been adversely affected by seasonal
reductions in business activity in Europe and certain other parts of the world
during the summer months. There can be no assurance that the Company will be
able to achieve or maintain profitability in the future or that its levels of
profitability will not vary significantly among quarterly periods.
Fluctuations in results of operations may result in volatility in the price of
the Common Stock.
A significant portion of the Company's expenses are fixed and difficult to
reduce in the event that revenue does not meet the Company's expectations,
thus magnifying the adverse effect of any revenue shortfall. Furthermore,
announcements by the Company or its competitors of new products, services or
technologies could cause customers to defer or cancel purchases of the
Company's products. Any such deferral or cancellation could have a material
adverse effect on the Company's business, financial condition and results of
operations. Accordingly, revenue shortfalls can cause significant variations
in results of operations from quarter to quarter and could have a material
adverse effect on the Company's business, financial condition and results of
operations.
As a result of the foregoing factors, it is possible that in some future
quarter the Company's results of operations will be below prior results or the
expectations of public market analysts and investors. In such event, the price
of the Common Stock would likely be materially and adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
ABILITY TO MANAGE CHANGE
The Company has recently experienced significant growth in the number of its
employees, the demands on its operating and financial systems, and the
geographic area of its operations. In particular, the Company acquired ASC, a
French corporation, and its California-based subsidiary in the fourth quarter
of 1995. This growth has resulted in new and increased responsibilities for
the Company's administrative, operational, development and financial
personnel. Additional expansion by the Company may further strain the
Company's management, financial and other resources. Certain executive
officers of the Company have joined the Company only recently, including
Richard M. Darer, its Chief Financial Officer and Vice President of
Administration, who joined the Company in May 1996; Killko A. Caballero, its
Senior Vice President of Research and Development and Chief Technology
Officer, who joined the Company in November 1995; and Jack A. Dutzy, its Vice
President of Sales, Americas, who joined the Company in October 1995. The
Company anticipates that it will hire one or more additional vice presidents
in the near term. There can be no assurance that the Company will be
successful in hiring the personnel necessary to manage its changing business.
The Company's success depends to a significant extent on the ability of its
new executive officers to operate effectively, both independently and as a
group, and this ability may be impeded by past and future geographic expansion
of the Company internationally and domestically. In addition, the Company is
in the process of relocating its corporate headquarters to larger facilities
in Nashua, New Hampshire to accommodate its expanded operations, and this
relocation may result in delays and interruptions as the Company seeks to
build its marketing infrastructure and relationships, to develop significant
new versions of its products and to consummate the offering made hereby. The
Company is also in the process of moving the remainder of its servers offsite
to a third party's facilities in order to decrease the likelihood of system
failures. There can be no assurance that the Company's systems, procedures,
controls and space will be adequate to support expansion of the Company's
operations. The Company's future results of operations will depend on the
ability of its officers and key employees to manage changing business
conditions and to continue to improve its operational and financial control
and reporting systems. Any failure of the Company's management to manage
change effectively could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business--
Employees," "--Facilities" and "Management."
TRANSITION OF PRODUCT FOCUS; DEPENDENCE ON NEW PRODUCTS
Since its inception, the Company has derived a substantial majority of its
revenue from licenses of terminal emulation and X Windows software products.
These products are expected to continue to generate a significant
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but declining portion of the Company's revenue for the foreseeable future. As
a result, any factor adversely affecting sales of these products, such as
shifting of management focus and Company resources, increased price
competition, the introduction of technologically superior products by
competitors or the release of competing products by companies with
significantly greater resources and name recognition, could have a material
adverse effect on the Company's business, financial condition and results of
operations.
In June 1995, the Company and the Cornell Foundation entered into an
Exclusive Software License Agreement (the "License Agreement") that granted to
the Company the exclusive worldwide right to develop, modify, market,
distribute and sublicense commercial versions of Freeware CU-SeeMe and its
related server. Since that time, the Company has significantly redirected its
efforts, and particularly its product development and marketing efforts, to
focus on its videoconferencing products. As of June 30, 1996, 28 of the
Company's 40 research and development employees were devoted to developing
Internet videoconferencing technologies. The Company began shipping Enhanced
CU-SeeMe and the White Pine Reflector in March 1996 and May 1996,
respectively, and therefore has not had the opportunity to determine the
extent to which these products will succeed in the marketplace. A number of
companies have introduced, or have announced plans to introduce,
videoconferencing software that will compete with Enhanced CU-SeeMe and the
White Pine Reflector, including software for use over the Internet. The
Company's future success will depend in significant part on its ability to
develop and introduce new products and to continue to improve the performance,
features and reliability of its products, including Enhanced CU-SeeMe and the
White Pine Reflector, in response to both competing product offerings and
evolving marketplace demands. There can be no assurance that the Company will
be successful in developing new products or that any new products will be
accepted in the marketplace. The Company's future success will also depend on
its ability to comply with developing industry standards for videoconferencing
over the Internet. The introduction of competing products that incorporate new
technology or the emergence of new industry standards may render the Company's
existing products obsolete and unmarketable. Any failure or inability of
Enhanced CU-SeeMe, the White Pine Reflector or other new products to perform
substantially as anticipated or to achieve market acceptance would have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Products" and "--Competition."
DEPENDENCE UPON LICENSE AGREEMENT; LIMITED PROPRIETARY PROTECTION
The Company's success is heavily dependent upon its proprietary technology.
The Company's videoconferencing products, Enhanced CU-SeeMe and the White Pine
Reflector, are commercial versions of Freeware CU-SeeMe and its related
server. The Company's ability to develop, modify, market, distribute and
sublicense Enhanced CU-SeeMe and the White Pine Reflector, as well as the
right to use the trademark "CU-SeeMe," derives entirely from the License
Agreement with the Cornell Foundation. In order to maintain the exclusivity
provisions of the License Agreement, the Company must meet certain staffing,
product introduction and sublicensing obligations. There can be no assurance
that the Company will meet these obligations. Any failure to meet such
obligations will permit the Cornell Foundation to grant licenses to other
companies, including competitors of the Company, to develop, sell and
sublicense commercial versions of Freeware CU-SeeMe and its related server. In
addition, the Company's right to issue sublicenses is contingent upon the
Company's continued marketing of commercial versions of Freeware CU-SeeMe and
its related server. Even if the Company fulfills such obligations, the License
Agreement has a fixed term ending December 1, 1998. Although the License
Agreement contains certain provisions for automatic annual renewal, the
License Agreement may be terminated by the Cornell Foundation for "cause."
Under the License Agreement, "cause" includes failure by the Company to pay
any amount due under the License Agreement, if not cured within 30 days of
written notice of such failure to pay, or any "material breach" of the License
Agreement by the Company, if not cured within 90 days of written notice of
such breach. "Material breach" includes failure to exercise due diligence to
develop, manufacture and market commercial versions of Freeware CU-SeeMe and
its related server, failure to grant sublicenses as required by the License
Agreement, failure to maintain quality control over the Company's commercial
versions of Freeware CU-SeeMe and its related server, and failure to develop
and exploit the market to the extent necessary to meet the Company's minimum
royalty obligations under the License Agreement. Any termination of the
License Agreement would have a material adverse effect
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on the Company's business, financial condition and results of operations. The
License Agreement requires that the Company pay royalties based on the
Company's net revenue from its commercial versions of Freeware CU-SeeMe and
its related server (subject to certain minimum per-copy royalties) and share
sublicensing income with the Cornell Foundation. The License Agreement also
requires that the Company make certain annual minimum royalty payments,
including minimum payments based on royalties from sublicensing. Moreover,
Freeware CU-SeeMe and its related server are freely available on the Internet.
Such availability may adversely affect sales of licenses for Enhanced CU-SeeMe
and the White Pine Reflector. The Company also depends upon the Cornell
Foundation, as the owner of the trademark "CU-SeeMe," to protect and enforce
rights in the trademark. Any failure of the Cornell Foundation to protect or
enforce such rights could substantially impair the value of such trademark and
the Company's rights to use such trademark.
The Company currently has no patents and relies primarily on copyright,
trademark and trade secrets law, as well as employee and third-party non-
disclosure agreements, to protect its intellectual property. There can be no
assurance that the steps taken by the Company to protect its proprietary
rights will be adequate to prevent misappropriation of its technology or
independent development by others of similar technology. Certain of the
Company's products, including Enhanced CU-SeeMe and the White Pine Reflector,
are licensed to customers under "shrink wrap" licenses included as part of the
product packaging. Although in certain sales the Company's shrink wrap
licenses are accompanied by specifically negotiated agreements signed by the
licensee, in most cases its shrink wrap licenses are not negotiated with or
signed by individual licensees. Certain provisions of the Company's shrink
wrap licenses, including provisions limiting the Company's liability and
protecting against unauthorized use, copying, transfer and disclosure of the
licensed program, may be unenforceable under the laws of certain
jurisdictions. Also, the Company has delivered certain technical data and
information relating to Enhanced CU-SeeMe and the White Pine Reflector to the
United States government and, as a result, the United States government may
have unlimited rights to use such technical data and information or to
authorize others to use such technical data and information. There can be no
assurance that the United States government will not authorize others to use
such technical data and information for purposes competitive with those of the
Company. In addition, the laws of some foreign countries do not protect the
Company's proprietary rights to the same extent as do laws in the United
States. There can be no assurance that the protections afforded by the laws of
such countries will be adequate to protect the Company's proprietary rights,
the unenforceability of any of which could have a material adverse effect on
the Company's business, financial condition and results of operations.
Litigation may be necessary to enforce the Company's intellectual property
rights or to protect the Company's trade secrets. Any such litigation could
result in substantial costs and diversion of resources and could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Although the Company believes that its products and technology do not
infringe the proprietary rights of others, there can be no assurance that
third parties will not assert infringement and other claims against the
Company or that such claims will not be successful. From time to time, the
Company has received and may receive in the future notice of claims of
infringement of other parties' proprietary rights. Many participants in the
software industry have an increasing number of patents and have frequently
demonstrated a readiness to commence litigation based on allegations of patent
or other intellectual property infringement. Third parties may assert
exclusive patent, trademark, copyright and other intellectual property rights
to technologies that are important to the Company. There can be no assurance
that infringement or invalidity claims (or claims for indemnification
resulting from infringement claims) will not be asserted or prosecuted against
the Company or that any such assertion or prosecution will not have a material
adverse effect on the Company's business, financial condition or results of
operations. Regardless of the validity or the successful assertion of any such
claims, the Company could incur significant costs and diversion of resources
in defending such claims, which could have a material adverse effect on the
Company's business, financial condition and results of operations.
Furthermore, any party making such claims could secure a judgment awarding
substantial damages, as well as injunctive or other equitable relief, which
could effectively block the Company's ability to make, use, sell, distribute
or market its products and services in the United States or abroad. Any such
judgment could have a material adverse effect on the Company's business,
financial condition and results of operations. In circumstances where claims
relating to proprietary technology or information are asserted against the
Company, the Company
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may seek licenses to such intellectual property. There can be no assurance,
however, that such licenses would be available or, if available, that such
licenses could be obtained on terms that are commercially reasonable and
acceptable to the Company. The failure to obtain the necessary licenses or
other rights could preclude the sale, manufacture or distribution of the
Company's products and, therefore, could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Proprietary Rights."
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
Revenue from international sales represented 11%, 20% and 30% of the
Company's total revenue in the fiscal years ended December 31, 1994 and 1995
and the three months ended March 31, 1996, respectively. The increased level
of international revenue in the three months ended March 31, 1996 reflected
the acquisition of ASC on a purchase accounting basis effective as of November
1, 1995. ASC generates a majority of its revenue from outside the United
States. As part of its business strategy, the Company intends to seek
opportunities to expand its product and service offerings into additional
international markets. The Company believes that expansion into new
international markets is critical to the Company's ability to continue to grow
and to market its products and services. In marketing its products and
services internationally, the Company will likely face new competitors. There
can be no assurance that the Company will be successful in developing
localized versions of its products for new international markets or in
marketing or distributing products and services in these markets or that its
international revenue will be adequate to offset the expense of establishing
and maintaining international operations. The Company's international business
may be adversely affected by changing economic conditions in foreign
countries. The majority of the Company's sales are currently denominated in
U.S. dollars, but there can be no assurance that a significantly higher level
of future sales will not be denominated in foreign currencies. To the extent
the Company makes sales denominated in currencies other than U.S. dollars,
gains and losses on the conversion of those sales to U.S. dollars may
contribute to fluctuations in the Company's business, financial condition and
results of operations. In addition, fluctuations in exchange rates could
affect demand for the Company's products and services. Conducting an
international business inherently involves a number of other difficulties and
risks, such as export restrictions, export controls relating to technology,
compliance with existing and changing regulatory requirements, tariffs and
other trade barriers, difficulties in staffing and managing international
operations, longer payment cycles, problems in collecting accounts receivable,
software piracy, political instability, seasonal reductions in business
activity in Europe and certain other parts of the world during the summer
months, and potentially adverse tax consequences. There can be no assurance
that one or more of these factors will not have a material adverse effect on
any international operations established by the Company and, consequently, on
the Company's business, financial condition and results of operations. See
"Business--Strategy."
DEPENDENCE ON KEY PERSONNEL
The Company's success to date has depended to a significant extent on Howard
R. Berke, its Chairman, President and Chief Executive Officer, David O. Bundy,
its Vice President of Engineering, Killko A. Caballero, its Senior Vice
President of Research and Development and Chief Technology Officer, and a
number of other key management, engineering, research and development, sales
and operational personnel. The loss of the services of Mr. Berke, Mr. Bundy or
Mr. Caballero or any of the Company's other key personnel could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company believes that its future success will
depend in large part on its ability to attract and retain highly qualified
management, engineering, research and development, sales and operational
personnel. In particular, the Company will need to hire and train additional
software developers in order to support and increase its recent software
licensing activities. Competition for all of these personnel is intense and
there can be no assurance that the Company will be successful in attracting
and retaining key personnel. The failure of the Company to hire, train and
retain qualified personnel could have a material adverse effect upon the
Company's business, financial condition and results of operations. The Company
does not maintain key person life insurance policies on its key personnel,
except for a policy with respect to Mr. Berke in the amount of $1.0 million.
See "Business--Employees" and "Management."
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RISKS ASSOCIATED WITH CREATING AND ACCESSING NEW DISTRIBUTION CHANNELS
The Company's primary strategy for marketing Enhanced CU-SeeMe and the White
Pine Reflector is to form channel relationships in key markets with major
distributors. The Company also intends to license Enhanced CU-SeeMe and the
White Pine Reflector to original equipment manufacturers ("OEMs"), value-added
resellers ("VARs") and additional distributors for bundling with their
products and services. The Company expects that its future success will depend
in large part upon these OEMs, VARs and distributors. The performance of these
OEMs, VARs and distributors will be outside the control of the Company, and
the Company is unable to predict the extent to which these organizations will
be successful in marketing and selling Enhanced CU-SeeMe or the White Pine
Reflector or products incorporating Enhanced CU-SeeMe or the White Pine
Reflector. The Company's failure to establish relationships with OEMs, VARs
and distributors could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, the
Company is currently seeking to establish distribution relationships with
retail channels, including store chains, superstores and catalog sales, for
Enhanced CU-SeeMe. The Company has no prior experience in selling software
through retail channels, and no assurance can be given that it will succeed in
establishing a retail network for Enhanced CU-SeeMe or that, if established,
such a network will not result in unexpected expenses for inventory, returned
software, distribution or otherwise. The Company's distributors typically
carry the products of competitors of the Company, many of whom have
substantially greater financial resources than the Company. The distributors
have limited capital to invest in inventory, and their decisions to purchase
the Company's products and, in the case of retail stores, to give them
critical shelf space, are partly a function of pricing, terms and special
promotions offered by the Company and its competitors, over which the Company
has no control and which it cannot predict. See "Business--Marketing and
Distribution."
The Company also distributes certain of its products electronically through
the Internet. By distributing its products through the Internet, the Company
may decrease demand for its products and increase the likelihood of
unauthorized copying and use of its software. The Company has allowed and
intends to continue to allow customers to download certain of its products for
a free evaluation period. There can be no assurance that the Company will be
able to collect payment from users that retain copies of the Company's
software following the expiration of the evaluation period.
RISK OF SOFTWARE DEFECTS
Software developed and incorporated by the Company may contain significant
undetected errors when first released or as new versions are released.
Although the Company tests its software before commercial release, there can
be no assurance that errors in the software will not be found after customers
begin to use the software. Enhanced CU-SeeMe 2.1 for Windows, which the
Company expects to release in the third quarter of 1996, corrects a number of
such errors in Enhanced CU-SeeMe 2.0. The Company intends to ship Enhanced CU-
SeeMe 3.0, which the Company expects will support relevant Internet and
International Telecommunications Union standards and incorporate a number of
new features, in the first quarter of 1997. Any error in Enhanced CU-SeeMe
3.0, the White Pine Reflector or the Company's other products may result in
decreased revenue or increased expenses because of adverse publicity, reduced
orders, product returns, uncollectible accounts receivable, delays in
collecting accounts receivable, and additional and unexpected costs of further
product development to correct the errors. Any of these results could have a
material adverse effect on the Company's business, financial condition and
results of operations.
DEPENDENCE ON THIRD-PARTY SOFTWARE
In addition to Freeware CU-SeeMe and its related server, the Company depends
upon certain other software that it licenses from third parties, including
voice compression technology from Voxware, Inc., global Internet conferencing
"white pages" software from Four11 Corporation, video
compression/decompression software ("codec") from Crystal Net Corporation and
whiteboard software from Group Technologies, Inc. d/b/a Group Logic, Inc.
Certain of these licenses are for limited terms, have certain minimum royalty
obligations or may be terminated if the Company breaches the terms of the
license. There can be no assurance that these suppliers will
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continue to license this software to the Company on commercially reasonable
terms. Most of the Company's third-party licenses are non-exclusive and there
can be no assurance that the Company's competitors will not obtain licenses to
and utilize such software in competition with the Company. There can be no
assurance that vendors of software utilized in the Company's products will
continue to provide, enhance or support such software in the form utilized by
the Company, nor can there be any assurance that the Company will be able to
modify its own software to adapt to any changes in such software. In addition,
there can be no assurance that financial or other difficulties that may be
experienced by such third-party suppliers will not have a material adverse
effect on the availability, quality or support of software incorporated in the
Company's products, or that, if such software become unavailable, the Company
would be able to find suitable alternatives on a timely basis and on
commercially reasonable terms. The loss of or inability to maintain any of
these licenses could result in the discontinuation of, or delays or reductions
in, product shipments unless and until equivalent technology is identified,
licensed and integrated with the Company's software, and could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business--Proprietary Rights."
RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS
The Company may use a portion of the net proceeds of this offering to
acquire or invest in companies, technologies or products that complement the
Company's business or its product offerings. Any future acquisitions may
result in a potentially dilutive issuance of equity securities, the incurrence
of additional debt, the write-off of software development costs or the
amortization of expenses related to goodwill and other intangible assets, any
of which could have a material adverse effect on the Company's business,
financial condition and results of operations. Future acquisitions would
involve numerous additional risks, including difficulties in the assimilation
of the operations, services, products and personnel of any acquired company,
the diversion of management's attention from other business concerns, the
disruption of the Company's business, the entry into markets in which the
Company has little or no direct prior experience and the potential loss of key
employees of any acquired company. There can be no assurance that the Company
would be successful in overcoming these risks or any other problems
encountered in connection with any such acquisition. The Company is not
currently involved in negotiations with respect to, and has no agreement or
understanding regarding, any such acquisition or investment.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES
At present, there are few laws or regulations that specifically address
access to or commerce on the Internet. The increasing popularity and use of
the Internet, however, enhance the risk that the governments of the United
States and other countries in which the Company sells or expects to sell its
products will seek to regulate videoconferencing and the Internet with respect
to, among other things, user privacy, pricing, and the characteristics and
quality of products and services. Any such regulation could have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, because the Internet has only recently come into
widespread use, it is not yet clear how existing laws governing issues such as
libel, privacy and the ownership of intellectual property will apply to
communications over the Internet. The Company is unable to predict the impact,
if any, that existing or future legislation, legal decisions or regulations
may have on its business, financial condition or results of operations. The
Telecommunications Act of 1996, which was enacted in February 1996, purports
to impose criminal liability on (i) any person that sends or displays in a
manner available to minors indecent or patently offensive material on an
interactive computer service such as the Internet and (ii) any entity that
knowingly permits facilities under its control to be used for such activities.
In June 1996, a special three-judge panel in federal district court found
these provisions unconstitutional and issued a preliminary injunction against
their enforcement. The U.S. Department of Justice has appealed this decision
to the U.S. Supreme Court. If these provisions are upheld or if similar
provisions are enacted in the future, they may inhibit the growth or use of
the Internet, chill the development of Internet content and decrease the
demand for the Company's products or otherwise have a material adverse effect
on the Company's business, financial condition and results of operations. In
March 1996, the America's Carriers Telecommunication Association ("ACTA"), a
group of telecommunications common carriers, filed a petition (the "ACTA
Petition") with the Federal Communications Commission (the "FCC"), arguing
that providers (such as the Company) of computer
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software products that enable voice transmission over the Internet (Internet
"telephone" services) are operating as common carriers without complying with
various regulatory requirements and without paying certain charges required by
law. The ACTA Petition argues that the FCC has the authority to regulate both
the Internet and the providers of Internet "telephone" services and requests
that the FCC declare its authority over interstate and international
telecommunications services using the Internet, initiate rulemaking
proceedings to consider rules governing the use of the Internet for the
provision of telecommunications services, and order providers of Internet
"telephone" software to immediately cease the sale of such software pending
such rulemaking. Certain parties have filed comments with the FCC regarding
the ACTA Petition. The Company is unable to predict the outcome of this
proceeding. Any action by the FCC to grant the relief sought by ACTA or
otherwise to regulate use of the Internet as a medium of communication,
including any action to permit local exchange carriers to impose additional
charges for connections used for Internet access, could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business--Government Regulation."
FUTURE CAPITAL REQUIREMENTS
Expansion of the Company's business will require significant additional
expenditures for research and development, sales and marketing, capital
equipment and working capital. The Company expects that the net proceeds of
this offering and its current cash balances will be sufficient to fund its
operations for at least the next twelve months. The Company's capital
requirements will depend on many factors, including the progress of its
research and development efforts, the receipt of software license fees and
other product revenue, and the demand for the Company's products. There can be
no assurance that the Company will not need to raise additional funds through
public or private financings or that, if needed, such funds will be available
on acceptable terms. The inability of the Company to raise needed funds would
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
ABSENCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market will
develop or be sustained after the offering. The initial public offering price
of the Common Stock will be determined through negotiations between the
Company and the Representatives of the Underwriters and may not be indicative
of the market price of the Common Stock after the offering. For a description
of the factors to be considered in determining the initial public offering
price, see "Underwriting." Factors such as quarterly variations in the
Company's results of operations, announcements of technological innovations or
new products by the Company, its competitors and others, market conditions in
the industry and changes in financial estimates by public market analysts may
cause the market price of the Common Stock to fluctuate significantly. In
addition, the stock market in general has recently experienced substantial
price and volume fluctuations, which have affected the market prices of many
high technology companies, particularly Internet-related companies, and which
have often been unrelated to the operating performance of such companies.
These broad market fluctuations may materially and adversely affect the market
price of the Common Stock. Following periods of volatility in the market price
of a company's securities, securities class action litigation has often been
instituted against such a company. Any such litigation against the Company
could result in substantial costs and diversion of management's attention and
other resources, which could have a material adverse effect on the Company's
business, financial condition and results of operations.
SUBSTANTIAL INFLUENCE OF EXISTING STOCKHOLDERS
After the sale of the shares of Common Stock offered hereby, the Company's
executive officers, directors and five percent stockholders will beneficially
own an aggregate of approximately 48% of the outstanding shares of Common
Stock (approximately 46% if the Underwriters' over-allotment option is
exercised in full). As a result, these stockholders, if acting together, would
effectively be able to control most matters requiring the approval of
stockholders of the Company, including the election of directors or the
approval of significant corporate matters. This concentration of ownership by
existing stockholders may also have the effect of delaying or preventing a
change in control of the Company. See "Principal Stockholders."
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SHARES ELIGIBLE FOR FUTURE SALE; POSSIBLE ADVERSE EFFECT ON MARKET PRICE
Sales of substantial numbers of shares of Common Stock in the public market
following this offering could adversely affect the market price of the Common
Stock and could impair the Company's ability to raise capital through sales of
its equity securities. Upon completion of this offering, there will be
9,027,870 shares of Common Stock outstanding (assuming no exercise of options
outstanding after July 25, 1996), of which the 3,000,000 shares of Common
Stock sold in this offering (plus an additional 450,000 shares which will be
outstanding if the Underwriters' over-allotment option is exercised in full)
will be freely tradeable in the United States without restriction under the
Securities Act of 1933, as amended (the "Securities Act"), by persons other
than "affiliates" of the Company, as defined under the Securities Act. The
remaining 6,027,870 shares of Common Stock outstanding are "restricted
securities" as defined in Rule 144 under the Securities Act (the "Restricted
Shares"). Of the Restricted Shares, 5,747,102 shares are subject to lock-up
agreements, pursuant to which the holders of such shares have severally agreed
that, without the prior written consent of Cowen & Company, they will not
offer, sell, assign, transfer, encumber, contract to sell, grant an option,
right or warrant to purchase or otherwise dispose of any shares of Common
Stock or any securities convertible into, derivative of or exercisable or
exchangeable for Common Stock for 180 days commencing on the date of this
Prospectus, except for shares of Common Stock purchased in this offering or in
the public market pursuant to brokers' transactions. Cowen & Company may, in
its sole discretion and at any time without notice, release all or a portion
of the shares from the restrictions imposed by such agreements. Of the
Restricted Shares not subject to such lock-up agreements, 40,830 shares will
be eligible for immediate sale in the public market on the effective date of
the registration statement of which this Prospectus forms a part (the
"Effective Date") pursuant to Rule 144(k) under the Securities Act and an
additional 417 shares will first become eligible for sale in the public market
90 days after the Effective Date pursuant to Rule 144, subject in certain
cases to the volume limitations and other conditions imposed by Rule 144. Upon
the expiration of the lock-up agreements 180 days after the date of this
Prospectus, an additional 3,543,094 Restricted Shares will be eligible for
sale in the public market pursuant to Rule 144. The Securities and Exchange
Commission (the "Commission") has proposed certain amendments to Rule 144 that
would reduce by one year the holding periods required for shares to become
eligible for sale in the public market pursuant to Rule 144. Based on
securities outstanding as of July 25, 1996, it is expected that after the
closing of this offering the holders of 5,898,384 shares of Common Stock (plus
294,044 shares of Common Stock issuable upon exercise of outstanding options)
will have the right to cause the Company to register the sale of such shares
under the Securities Act. See "Description of Capital Stock--Registration
Rights." In addition, the Company intends to file one or more registration
statements on Form S-8 with respect to 1,615,207 shares of Common Stock issued
or issuable under its stock option plans, its employee stock purchase plan or
other outstanding options. Shares covered by any such registration statement
will be eligible for sale in the public market upon the effectiveness of such
registration statement. See "Management--Benefit Plans" and "Shares Eligible
for Future Sale."
MANAGEMENT'S DISCRETION AS TO USE OF UNALLOCATED NET PROCEEDS
The principal purposes of this offering are to increase the Company's equity
capital, to create a public market for the Common Stock and to facilitate
future access by the Company to public equity markets. As of the date of this
Prospectus, the Company has no specific plans for the use of a substantial
portion of the net proceeds of this offering. The Company expects to use such
proceeds to repay approximately $328,000 of indebtedness and to use the
remainder of such proceeds for general corporate purposes, including working
capital. Consequently, the Board of Directors and management of the Company
will have significant flexibility in applying the net proceeds of this
offering. See "Use of Proceeds."
ANTI-TAKEOVER EFFECT OF CHARTER PROVISIONS, BY-LAWS AND DELAWARE LAW
The Restated Charter and the Restated By-Laws contain provisions that could
discourage takeover attempts or make more difficult the acquisition of a
substantial block of the Common Stock. The Restated Charter provides that
stockholders may act only at meetings of stockholders and not by written
consent in lieu of a stockholders' meeting. The Restated By-Laws provide that
special meetings of the Company's stockholders may be called by the President
and must be called by the President or the Secretary at the written request of
a majority of the
16
<PAGE>
directors. The Restated By-Laws provide that nominations for directors may not
be made by a stockholder at any annual or special meeting thereof unless the
stockholder intending to make a nomination notifies the Company of its
intentions a specified number of days in advance of the meeting and furnishes
to the Company certain information regarding itself and the intended nominee.
The Restated By-Laws also require a stockholder to provide to the Secretary of
the Company advance notice of business to be brought by such stockholder
before any annual or special meeting of stockholders as well as certain
information regarding such stockholder and others known to support such
proposal and any material interest they may have in the proposed business.
These provisions could delay any stockholder actions that are favored by the
holders of a majority of the outstanding stock of the Company until the next
stockholders' meeting. These provisions may also discourage another person or
entity from making a tender offer for the Common Stock, because such person or
entity, even if it acquired a majority of the outstanding stock of the
Company, could only take action at a duly called stockholders' meeting and not
by written consent. In addition, the Board of Directors is authorized to issue
shares of Common Stock and Preferred Stock which, if issued, could dilute and
adversely affect various rights of the holders of Common Stock and, in
addition, could be used to discourage an unsolicited attempt to acquire
control of the Company.
Following this offering, the Company will become subject to the anti-
takeover provisions of Section 203 of the Delaware General Corporation Law,
which will prohibit the Company from engaging in a "business combination" with
an "interested stockholder" for a period of three years after the date of the
transaction in which the person becomes an interested stockholder, unless the
business combination is approved in a prescribed manner. The application of
Section 203 may limit the ability of stockholders to approve a transaction
that they may deem to be in their best interests. The foregoing and other
provisions of the Restated Charter and the Restated By-Laws and the
application of Section 203 of the Delaware General Corporation Law could deter
certain takeovers or tender offers or could delay or prevent certain changes
in control or management of the Company, including transactions in which
stockholders might otherwise receive a premium for their shares over then
current market prices. See "Description of Capital Stock."
ABSENCE OF DIVIDENDS
The Company has never declared or paid any cash dividends on its capital
stock and does not currently expect to pay any cash dividends in the
foreseeable future. In addition, the terms of the Company's existing bank line
of credit and term loan prohibit the Company from declaring or paying cash
dividends on the Common Stock. See "Dividend Policy."
IMMEDIATE AND SUBSTANTIAL DILUTION
Purchasers in the offering will experience immediate and substantial
dilution in the pro forma net tangible book value per share of the Common
Stock from the initial public offering price, in the amount of $6.73 per share
(assuming an initial public offering price of $10.00 per share, which
represents the highest price in the range of initial public offering prices
set forth on the front cover of this Prospectus). Additional dilution will
occur upon the exercise of outstanding stock options. See "Dilution" and
"Management--Benefit Plans."
17
<PAGE>
THE COMPANY
The Company was incorporated under the laws of Delaware in April 1992 under
the name Visual International, Inc. Visual International, Inc. served as a
holding company and held substantially all of the stock of Visual T.I., Inc.,
which developed, manufactured and marketed video terminals, including early X
Windows terminals, and related hardware and software.
In August 1993, Visual T.I., Inc. was merged into Visual International, Inc.
and, immediately thereafter, Visual International, Inc. acquired all of the
outstanding stock of White Pine Software, Inc., a New Hampshire corporation.
At the time of the acquisition, White Pine Software, Inc. developed,
manufactured and marketed X Windows and terminal emulation software products
for the Macintosh platform. In December 1993, White Pine Software, Inc. was
merged into Visual International, Inc. Visual International, Inc., as the
surviving corporation, changed its name to White Pine Software, Inc. as a part
of its plan to focus on software connectivity.
In April 1994, the Company extended its product lines by merging Grafpoint,
a California corporation, into the Company. Through this transaction, the
Company acquired Grafpoint's X Windows and terminal emulation software for
PCs. The Grafpoint transaction also provided the Company with an operating
office in California. Howard R. Berke, the Company's Chairman, President and
Chief Executive Officer, and Carl A. Koppel, the Vice President of Sales,
International, served as officers of Grafpoint prior to joining the Company.
Effective as of November 1, 1995, the Company acquired all of the
outstanding stock of ASC, a French corporation, and its wholly owned
subsidiary, About Software Corporation, a California corporation. ASC
developed the Company's 5PM line of terminal emulators, which are text-based
host connectivity software products that complement the graphical windowing
capabilities of certain of the Company's products. This acquisition also
provided the Company with an office in LaGaude, France that currently serves
as the Company's European headquarters for sales, research and development,
and technical support. Killko A. Caballero, the Company's Senior Vice
President of Research and Development and Chief Technology Officer, served as
an officer of ASC prior to joining the Company.
In June 1995, the Company and the Cornell Foundation entered into the
License Agreement, which granted the Company the exclusive worldwide right to
develop, modify, market, distribute and sublicense a commercial version of
Freeware CU-SeeMe and its related software-only multipoint conferencing
server. The License Agreement provides for royalty payments, including annual
minimum payments, by the Company to the Cornell Foundation based on the
Company's net revenue from Enhanced CU-SeeMe and the White Pine Reflector. The
Company began shipping Enhanced CU-SeeMe and the White Pine Reflector in March
1996 and May 1996, respectively.
References in this Prospectus to the "Company" and "White Pine" refer to
White Pine Software, Inc. and its subsidiaries. The Company's principal
executive offices are located at 40 Simon Street, Nashua, New Hampshire 03060,
its telephone number is (603) 886-9050 and its e-mail address is
[email protected].
18
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company of the sale of the shares of Common Stock
offered hereby at an assumed initial public offering price of $9.00 per share
are estimated to be $24,160,000 ($27,926,500 if the Underwriters' over-
allotment option is exercised in full), after deducting the estimated
underwriting discount and offering expenses. The Company also expects to
receive $60,000 on or before the closing of this offering from the exercise of
the Cornell Warrant, which will expire upon the closing of this offering. See
"Business--Proprietary Rights." The principal purposes of this offering are to
increase the Company's equity capital, to create a public market for the
Common Stock and to facilitate future access by the Company to the public
equity markets.
The Company intends to use a portion of the net proceeds of this offering to
repay all of the indebtedness outstanding at the time this offering is
completed under certain French franc-denominated loans from Credit Agricole
Mutual, Alpes-Maritimes Regional Division. At March 31, 1996, FF395,568
FF95,892 and FF1,150,366 (approximately $79,074, $19,169 and $229,958, based
upon foreign currency exchange rates as of July 25, 1996) were outstanding
under loans bearing interest at different variable rates (11.55%, 8.75% and
7.25%, respectively, at July 25, 1996). The loans mature on different dates
between March 1998 and October 1998.
The Company intends to use the remainder of the net proceeds of this
offering for working capital and other general corporate purposes. The Company
may use a portion of these net proceeds to acquire or invest in companies,
technologies or products that complement the Company's business or its product
offerings. While the Company from time to time may evaluate potential
acquisitions or investments, the Company is not currently involved in
negotiations with respect to, and has no agreement or understanding regarding,
any such acquisition or investment. Pending such uses, the Company intends to
invest the net proceeds in short-term, investment-grade, interest-bearing
securities. See "Risk Factors--Management's Discretion as to Use of
Unallocated Net Proceeds."
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock. The Company currently anticipates that it will retain future earnings,
if any, to fund the development and growth of its business and therefore does
not expect to pay any cash dividends in the foreseeable future. Payment of
future dividends, if any, will be at the discretion of the Company's Board of
Directors after taking into account various factors, including the Company's
financial condition, results of operations, current and anticipated cash
needs, and plans for expansion. The terms of the Company's existing bank line
of credit and term loan prohibit the Company from declaring or paying cash
dividends on Common Stock. See "Management's Discussion and Analysis of
Financial Condition and Results of Operation--Liquidity and Capital
Resources."
19
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1996 (i) on an actual basis and (ii) as adjusted to reflect the issuance
and sale of the shares of Common Stock offered hereby (at an assumed initial
public offering price of $9.00 per share, after deducting the estimated
underwriting discount and offering expenses), the application of the net
proceeds thereof, the conversion of all shares of $5.83 Stock outstanding at
March 31, 1996, the exercise of the Cornell Warrant to acquire 20,000 shares
of Common Stock and the filing of the Restated Charter. The following table
should be read in conjunction with the financial statements and notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt, less current portion..................... $ 358 $ 178
-------- --------
Stockholders' equity:
Preferred stock, $.01 par value; no shares authorized,
issued or outstanding, actual; 5,000,000 shares
authorized, no shares issued or outstanding, as
adjusted.............................................. -- --
Common stock, $.01 par value; 7,500,000 shares
authorized and 5,589,764 shares issued and
outstanding, actual; 30,000,000 shares authorized and
8,952,817 shares issued and outstanding, as
adjusted(1)........................................... 56 90
Common stock (redeemable), $5.83 par value; 500,000
shares authorized and 343,053 shares issued and
outstanding, actual; no shares authorized, issued or
outstanding, as adjusted.............................. 2,000 --
Additional paid-in capital............................. 12,616 38,802
Accumulated deficit.................................... (10,937) (10,937)
Currency translation adjustments....................... 62 62
-------- --------
Total stockholders' equity........................... 3,797 28,017
-------- --------
Total capitalization............................... $ 4,155 $ 28,195
======== ========
</TABLE>
- --------
(1) Excludes, as of March 31, 1996, 871,799 shares of Common Stock issuable
upon the exercise of options at a weighted average exercise price of $.99.
Between March 31, 1996 and July 25, 1996, the Company (i) rescinded the
authority to grant additional options under the stock option plans in
effect before July 18, 1996, (ii) adopted a successor incentive stock
option plan to replace such stock option plans, (iii) reserved 550,000
shares of Common Stock for issuance pursuant to the newly adopted plan,
(iv) granted options to purchase 103,250 shares of Common Stock, (v)
issued 23,595 shares of Common Stock upon the exercise of options, (vi)
canceled options to purchase 10,369 shares of Common Stock and (vii)
adopted an employee stock purchase plan and reserved 100,000 shares of
Common Stock for issuance pursuant to such plan. See "Management--Benefit
Plans."
20
<PAGE>
DILUTION
The pro forma net tangible book value of the Company as of March 31, 1996
was $2,354,231, or $.40 per share of Common Stock. Pro forma net tangible book
value per share represents the amount of the Company's tangible assets less
total liabilities, divided by the number of shares of Common Stock
outstanding, after giving effect to the conversion of the shares of $5.83
Stock outstanding as of March 31, 1996 and the exercise of the Cornell Warrant
upon the closing of this offering. After giving effect to the sale of the
shares of Common Stock offered hereby at an assumed initial public offering
price of $10.00 per share (which represents the highest price in the range of
initial public offering prices set forth on the front cover of this
Prospectus), after deducting the estimated underwriting discount and offering
expenses, and the application of the net proceeds thereof, the Company's pro
forma net tangible book value as of March 31, 1996 would have been $29,304,231
or $3.27 per share. This represents an immediate increase in pro forma net
tangible book value of $2.87 per share to existing stockholders and an
immediate dilution of $6.73 per share to investors purchasing shares of Common
Stock in this offering. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................... $10.00
Pro forma net tangible book value per share at March 31, 1996... $.40
Increase per share attributable to new investors................ 2.87
----
Pro forma net tangible book value per share after offering........ 3.27
------
Pro forma net tangible book value dilution per share to new
investors........................................................ $ 6.73
======
</TABLE>
The following table summarizes, on a pro forma basis as of March 31, 1996,
the number of shares of Common Stock purchased from the Company (after giving
effect to the conversion of the shares of $5.83 Stock outstanding as of March
31, 1996 and the exercise of the Cornell Warrant upon the closing of this
offering), the total consideration paid, and the average price per share paid
by existing stockholders and to be paid by the new investors, at an assumed
initial public offering price of $10.00 per share, before deducting the
estimated underwriting discount and offering expenses:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders....... 5,952,817 66.5% $14,731,963 32.9% $ 2.47
New investors............... 3,000,000 33.5 30,000,000 67.1 $10.00
--------- ----- ----------- ----- ------
Total..................... 8,952,817 100.0% $44,731,963 100.0%
========= ===== =========== =====
</TABLE>
The foregoing table assumes no exercise of options outstanding after March
31, 1996. To the extent that such options were exercised after such date or
are exercised in the future, there has been or will be further dilution to new
investors. See "Risk Factors--Immediate and Substantial Dilution" and
"Management--Benefit Plans."
21
<PAGE>
SELECTED FINANCIAL DATA
The following financial data of White Pine Software, Inc. (not including
About Software Corporation S.A., "WPS") for the fiscal year (nine months)
ended December 31, 1994 and the fiscal year ended December 31, 1995, and as of
December 31, 1995, and of About Software Corporation S.A. ("ASC") for the nine
months ended December 31, 1994 and the ten months ended October 31, 1995 have
been derived from their respective audited financial statements included
elsewhere in this Prospectus, which have been audited by Ernst & Young,
independent auditors. The following table also sets forth the unaudited pro
forma consolidated statement of operations data reflecting WPS's acquisition
of ASC effective as of November 1, 1995, as if such acquisition had occurred
on January 1, 1995. The following financial data for the three months ended
March 31, 1995 and 1996, and as of March 31, 1996, have been derived from
unaudited financial statements included elsewhere herein. In the opinion of
management, the unaudited interim financial data presented reflect all
adjustments, consisting only of normal, recurring adjustments, necessary for a
fair presentation of the financial data for each such period. Results of
operations for the three months ended March 31, 1996 are not necessarily
indicative of the results that may be expected for any other interim period or
for the fiscal year ending December 31, 1996. These financial data should be
read in conjunction with the financial statements and notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL CONSOLIDATED HISTORICAL
---------------------------------------------------------------- ---------------- ---------------------------
WPS ASC WPS & ASC WPS COMPANY
------------------------------ --------------------------------- ---------------- ------------- -------------
FISCAL YEAR
(NINE MONTHS) FISCAL YEAR NINE MONTHS TEN MONTHS FISCAL YEAR THREE MONTHS THREE MONTHS
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
DEC. 31, 1994(1) DEC. 31, 1995 DEC. 31, 1994(1) OCT. 31, 1995(2) DEC. 31, 1995(3) MAR. 31, 1995 MAR. 31, 1996
---------------- ------------- ---------------- ---------------- ---------------- ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Software license
fees........... $4,365 $ 6,018 $1,359 $1,780
Services and
other.......... 600 1,166 234 306
------ ------- ------ ------
Total revenue... 4,965 7,184 $1,331 $2,043 $ 9,227 1,593 2,086
Cost of revenue.. 655 1,247 150 226 1,473 169 373
------ ------- ------ ------ ------- ------ ------
Gross profit..... 4,310 5,937 1,181 1,817 7,754 1,424 1,713
------ ------- ------ ------ ------- ------ ------
Operating
expenses:
Sales and
marketing...... 1,637 2,517 592 688 3,205 596 1,311
Research and
development.... 1,301 1,866 684 780 2,725 482 824
General and
administrative
............... 1,106 2,000 552 1,020 3,220 351 487
------ ------- ------ ------ ------- ------ ------
Total operating
expenses....... 4,044 6,383 1,828 2,488 9,150 1,429 2,622
------ ------- ------ ------ ------- ------ ------
Income (loss)
from
operations...... 266 (446) (647) (671) (1,396) (5) (909)
------ ------- ------ ------ ------- ------ ------
Other income
(expense):
Write-off of
purchased
research
and development
costs.......... -- (3,200) -- -- -- -- --
Interest
income......... 66 82 (49) (52) 30 21 20
Other, net...... 80 68 71 157 225 25 (48)
------ ------- ------ ------ ------- ------ ------
146 (3,050) 22 105 255 46 (28)
------ ------- ------ ------ ------- ------ ------
Income (loss)
before provision
for income
taxes........... 412 (3,496) (625) (566) (1,141) 41 (937)
Provision for
income taxes.... 18 30 -- -- 30 3 25
------ ------- ------ ------ ------- ------ ------
Net income
(loss).......... $ 394 $(3,526) $ (625) $ (566) $(1,171) $ 38 $ (962)
====== ======= ====== ====== ======= ====== ======
Net income (loss)
per common and
common
equivalent
share........... $ .06 $ (.65) $ .01 $ (.16)
====== ======= ====== ======
Weighted average
number of common
and common
equivalent
shares
outstanding..... 6,085 5,451 6,104 5,900
====== ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
COMPANY
----------------------------
DEC. 31, 1995 MARCH 31, 1996
------------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......................... $1,774 $2,833
Working capital.................................... 782 1,868
Total assets....................................... 6,437 7,987
Long-term debt, less current portion............... 385 358
Total stockholders' equity(4)...................... 2,780 3,797
</TABLE>
- -------
(1) Effective as of April 1, 1994, WPS changed its fiscal year end from March
31 to December 31. Financial data for ASC are presented on a comparable
basis.
(2) ASC was acquired by WPS as of November 1, 1995.
(3) See Unaudited Pro Forma Consolidated Statement of Operations and Notes
thereto.
(4) The Company has never declared or paid cash dividends on its capital
stock.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
White Pine develops, markets and supports multiplatform desktop connectivity
software that facilitates worldwide video, audio and data communication across
the Internet, intranets and other IP-based networks.
In April 1994, the Company extended its product lines by merging Grafpoint,
a California corporation, into the Company. Through this transaction, the
Company acquired Grafpoint's X Windows and terminal emulation software for
PCs. The Grafpoint transaction also provided the Company with an operating
office on the west coast of the United States. In addition, Howard R. Berke,
the Company's Chairman, President and Chief Executive Officer, and Carl A.
Koppel, the Company's Vice President of Sales, International, served as
officers of Grafpoint prior to joining the Company.
The Company acquired ASC as a subsidiary effective as of November 1, 1995.
ASC developed the Company's 5PM line of terminal emulators, which are text-
based connectivity products that complement the graphical windowing
capabilities of the Company's other products. This acquisition also provided
the Company with a European headquarters in LaGaude, France for sales,
research and development, and technical support. In addition, Killko A.
Caballero, the Company's Senior Vice President of Research and Development and
Chief Technology Officer, served as an officer of ASC prior to joining the
Company.
In June 1995, as a part of its continuing plan to focus on software
connectivity products, the Company entered into the License Agreement with the
Cornell Foundation, which granted to the Company the exclusive worldwide right
to develop, modify, market, distribute and sublicense commercial versions of
Freeware CU-SeeMe and its related software-only multipoint conferencing
server. The Company commenced shipments of the initial commercial versions of
Enhanced CU-SeeMe and the White Pine Reflector in March 1996 and May 1996,
respectively. The Company anticipates that its revenue growth, if any, will
depend on increased sales of Enhanced CU-SeeMe and the White Pine Reflector
and on sales of new software connectivity products for the Internet and
intranets. Accordingly, the Company intends to devote a substantial portion of
its research and development and sales and marketing resources to technologies
related to the Internet and intranets.
The Company's revenue is derived from software license fees and fees for
services related to its software products, primarily software maintenance
fees. The Company recognizes revenue in accordance with the American Institute
of Certified Public Accountants Statement of Position No. 91-1, "Software
Revenue Recognition." Software license revenue is recognized upon execution of
a contract or purchase order and shipment of the software, net of allowances
for estimated future returns, provided that no significant obligations on the
part of the Company remain outstanding and collection of the related
receivable is deemed probable by management. An allowance for product returns
is recorded by the Company at the time of sale and is measured periodically to
adjust to changing circumstances, including increases in retail sales.
Software maintenance fees, which are generally payable in advance and are non-
refundable, are recognized ratably over the period of the maintenance
contract, typically twelve months. Revenue from training and consulting
services is recognized as services are provided. Software license fees,
consulting fees and training fees that have been prepaid or invoiced but that
do not yet qualify for recognition as revenue under the Company's policy, and
prepaid maintenance fees not yet recognized as revenue, are reflected as
deferred revenue.
Research and development expenses are charged to operations as incurred. 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," the Company capitalizes software development costs once the
technological feasibility of a product has been established, which the Company
considers to occur when a commercially viable working model of a product has
been produced and tested. As of December 31, 1995, the Company had capitalized
$250,000 of software development costs in accordance with SFAS No. 86, which
is principally
23
<PAGE>
attributable to the Company's acquisition of ASC. The total amount of
capitalized software development costs is included in other assets.
Effective April 1, 1994, the Company changed its fiscal year end from March
31 to December 31.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, line items from
the Company's statement of operations as a percentage of total revenue.
<TABLE>
<CAPTION>
FISCAL YEAR THREE MONTHS
(NINE MONTHS) FISCAL YEAR ENDED MARCH 31,
ENDED ENDED -----------------
DEC. 31, 1994 DEC. 31, 1995 1995 1996
------------- ------------- ------- -------
<S> <C> <C> <C> <C>
Revenue:
Software license fees........ 87.9 % 83.8 % 85.3 % 85.3 %
Services and other........... 12.1 16.2 14.7 14.7
----- ----- ------- -------
Total revenue............... 100.0 100.0 100.0 100.0
Cost of revenue............... 13.2 17.4 10.6 17.9
----- ----- ------- -------
Gross profit.................. 86.8 82.6 89.4 82.1
----- ----- ------- -------
Operating expenses:
Sales and marketing.......... 32.9 35.0 37.4 62.8
Research and development..... 26.2 26.0 30.3 39.5
General and administrative... 22.3 27.8 22.0 23.4
----- ----- ------- -------
Total operating expenses.... 81.4 88.8 89.7 125.7
----- ----- ------- -------
Income (loss) from
operations................... 5.4 (6.2) (0.3) (43.6)
Write-off of purchased
research and development
costs........................ -- (44.5) -- --
Interest income and other,
net.......................... 2.9 2.0 2.9 (1.3)
Provision for income taxes.... (0.4) (0.4) (0.2) (1.2)
----- ----- ------- -------
Net income (loss)............. 7.9 % (49.1)% 2.4 % (46.1)%
===== ===== ======= =======
</TABLE>
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31,
1995
The Company acquired ASC effective as of November 1, 1995 and accounted for
the acquisition as a purchase transaction. As a result, comparisons of the
Company's results of operations for the three months ended March 31, 1995 and
1996 are not necessarily meaningful.
Revenue
Total revenue increased by 31% to $2,086,000 in the three months ended March
31, 1996 from $1,593,000 in the three months ended March 31, 1995. This
increase resulted primarily from the acquisition of ASC effective as of
November 1, 1995 and the introduction of Enhanced CU-SeeMe in March 1996,
offset in part by a decrease in revenue from the Company's eXodus products.
Revenue from sales outside the United States comprised 30% and 20% of total
revenue for the three months ended March 31, 1996 and 1995, respectively. This
increase was directly related to the acquisition of ASC, which generates a
majority of its revenue from sales in Europe.
Cost of Revenue
Cost of revenue consists principally of costs of product media, manuals,
packaging materials, duplication and shipping, as well as royalties and
associated amortization of paid license fees relating to third-party software
included in the Company's products. In addition, cost of revenue includes a
warranty reserve, measured on a periodic basis, for the costs of upgrades and
services. Cost of revenue as a percentage of total revenue increased to 18%
for the three months ended March 31, 1996 as compared to 11% for the three
months ended March 31,
24
<PAGE>
1995. This percentage increase resulted primarily from the higher cost of
revenue attributable to the new Enhanced CU-SeeMe product line as compared to
the Company's other products. Certain third-party software incorporated in
Enhanced CU-SeeMe bears higher royalty rates than the software incorporated in
the Company's other product lines and also requires payment of upfront fees
that are amortized over the respective periods of the software licenses. The
Company intends to continue its strategy of improving the features and
functionality of its products, particularly Enhanced CU-SeeMe, through the
incorporation of third-party software and, as a result, the cost of revenue as
a percentage of total revenue may continue to fluctuate.
Sales and Marketing
Sales and marketing expense consists primarily of costs associated with
sales and marketing personnel, sales commissions, trade shows, advertising and
promotional materials. Sales and marketing expense increased by 120% to
$1,310,000 in the three months ended March 31, 1996 from $596,000 in the three
months ended March 31, 1995, and increased as a percentage of total revenue to
63% from 37%. The increase related to the launch of Enhanced CU-SeeMe, which
included increased advertising, trade show participation and other marketing-
related programs. In addition, in the second half of 1995 and the three months
ended March 31, 1996, the Company strengthened its sales and marketing
organization by hiring additional personnel for channel development, marketing
communication, technical support and sales.
Research and Development
Research and development expense consists primarily of costs of personnel
and equipment. Research and development expense increased by 71% to $824,000
in the three months ended March 31, 1996 from $482,000 in the three months
ended March 31, 1995. Research and development expense represented 40% and 30%
of total revenue for the three months ended March 31, 1996 and 1995,
respectively. The increase was principally attributable to the hiring of
additional personnel for the product development team for Enhanced CU-SeeMe.
The Company expects that research and development expense will increase in
dollar amount in future periods as the Company continues to enhance its
products, particularly Enhanced CU-SeeMe, and to introduce new products, such
as Web-enabled versions of its eXodus and 5PM products.
General and Administrative
General and administrative expense consists of expenses relating to the
Company's administrative, financial and general management activities,
including legal, accounting and other professional fees. General and
administrative expense increased by 39% to $487,000 in the three months ended
March 31, 1996 from $351,000 in the three months ended March 31, 1995 and
increased as a percentage of total revenue to 23% from 22%. The dollar and
percentage increases were attributable primarily to the administrative support
of the Company's new office in LaGaude, France as a result of the acquisition
of ASC and increased personnel and systems costs related to the improved
communications infrastructure for the Company's Internet and intranet access.
FISCAL YEAR ENDED DECEMBER 31, 1995 COMPARED TO FISCAL YEAR (NINE MONTHS)
ENDED DECEMBER 31, 1994
Effective April 1, 1994, the Company changed its fiscal year end from March
31 to December 31. As a result, comparisons of the Company's results of
operations for the fiscal years ended December 31, 1994 and 1995 are not
necessarily meaningful.
Revenue
Total revenue, consisting of revenues from eXodus and 5PM software
connectivity products and related services, increased by 45% to $7,184,000 in
the fiscal year ended December 31, 1995 from $4,965,000 in the fiscal year
ended December 31, 1994. The increase was principally due to the inclusion of
an additional three months of operations in the fiscal year ended December 31,
1995 and to the inclusion of two months of
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<PAGE>
operations of ASC in that fiscal year. The increase in total revenue also
reflected an increase in revenue from services and other fees attributable to
a contract for one customer; the Company does not expect to continue to
generate revenue from this customer at the same level in the future.
Revenue from sales outside the United States comprised 20% and 11% of total
revenue for the fiscal years ended December 31, 1995 and 1994, respectively.
During the fiscal years ended December 31, 1995 and 1994, Ingram Micro, Inc.
accounted for approximately 16% and 21%, respectively, of the Company's total
revenue.
Cost of Revenue
Cost of revenue as a percentage of total revenue increased to 17% for the
fiscal year ended December 31, 1995 as compared to 13% for the fiscal year
ended December 31, 1994. This percentage increase resulted primarily from the
amortization of royalties and other fees under the License Agreement for the
Enhanced CU-SeeMe product line incurred after the execution of the License
Agreement in June 1995, but prior to the commercial introduction of Enhanced
CU-SeeMe.
Sales and Marketing
Sales and marketing expense increased by 54% to $2,517,000 in the fiscal
year ended December 31, 1995 as compared to $1,637,000 in fiscal year ended
December 31, 1994 and increased as a percentage of total revenue to 35% from
33%. The percentage increase reflected increased trade show participation and
the inclusion of European sales and marketing expense after the acquisition of
ASC. The increase also resulted from the addition of sales and marketing
personnel, including staffing for channel development, technical publications,
technical support, marketing communication and sales, in anticipation of the
introduction of Enhanced CU-SeeMe.
Research and Development
Research and development expense increased by 43% to $1,866,000 in the
fiscal year ended December 31, 1995 as compared to $1,301,000 for the fiscal
year ended December 31, 1994 and represented 26% of total revenue in both
periods. The dollar increase was primarily attributable to additions to the
product development team for Enhanced CU-SeeMe.
General and Administrative
General and administrative expense increased by 81% to $2,001,000 in the
fiscal year ended December 31, 1995 as compared to $1,106,000 in the fiscal
year ended December 31, 1994 and increased as a percentage of total revenue to
28% from 22%. The dollar and percentage increases were attributable to the
administrative support of the Company's new office in LaGaude, France as a
result of the acquisition of ASC, increased personnel and other costs related
to the communications infrastructure for the Company's Internet and intranet
access, and higher professional fees.
Write-off of Purchased Research and Development Costs
The Company acquired ASC effective as of November 1, 1995 and accounted for
the acquisition as a purchase transaction. The assets acquired from ASC
included "in-process technology" with a fair value of approximately
$3,200,000. These costs were charged to operations upon consummation of the
acquisition, due to a determination that there was no future value to the
Company.
Provision for Income Taxes
The Company's provision for income taxes in the fiscal years ended December
31, 1995 and 1994 consisted of federal alternative minimum taxes and state and
foreign income taxes. The Company expects that its effective tax rate for the
foreseeable future will be lower than the combined federal and state statutory
rate primarily as a result of the realization of net operating loss
carryforwards. See Note 5 of Notes to the Company's Consolidated Financial
Statements.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company financed its operations from April 1, 1994 to December 31, 1995
primarily through internally generated funds from operating activities. During
the three months ended March 31, 1996, the Company financed its operations
primarily through the use of cash and other liquid assets and through a
private placement of equity securities.
The Company's operating activities generated $642,000 in the fiscal year
ended December 31, 1995 and used $133,000 in the fiscal year ended December
31, 1994. The Company's operating activities used cash of $732,000 in the
three months ended March 31, 1996, primarily as a result of increased sales
and marketing and research and development activities related to the release
of Enhanced CU-SeeMe in March 1996.
Cash used in investing activities has been primarily for the purchase of
third-party software licenses and for capital expenditures. In addition, the
Company incurred approximately $175,000 of acquisition costs for the purchase
of ASC effective as of November 1, 1995.
Cash provided by or used in financing activities was not material for either
of the fiscal years ended December 31, 1995 and 1994. The Company received
gross proceeds of $2,000,000 from a private placement of equity securities in
the three months ended March 31, 1996 and received additional gross proceeds
of $300,000 from another private placement of equity securities in April 1996.
Capital expenditures totalled $140,000, $330,000 and $185,000 for the three
months ended March 31, 1996 and the fiscal years ended December 31, 1995 and
1994, respectively. These expenditures consisted principally of purchases of
computer systems and office equipment.
On December 30, 1994, the Company entered into a commercial loan agreement
with Fleet Bank--NH (the "Bank") providing for a $1,000,000 revolving line of
credit. The commercial loan agreement was amended on August 29, 1995 to
include a term loan in the initial principal amount of $53,000. The revolving
line of credit expires on September 30, 1996, and the term loan is payable in
monthly installments from September 1995 through August 2000. Borrowings under
the line of credit and the term loan are secured by substantially all of the
Company's assets, including a $515,000 certificate of deposit and all of the
Company's computer software products (including all source code, object code,
copyrights, trademarks and patents (if any) relating thereto). Amounts
outstanding under the line of credit and the term loan bear interest at the
Bank's prime rate plus 0.5% (8.75% at March 31, 1996). The commercial loan
agreement requires that the Company provide the Bank with certain periodic
financial reports and comply with certain financial and other ratios,
including maintenance of a minimum net worth, a maximum ratio of total
liabilities to tangible net worth, a minimum ratio of current assets to
current liabilities and profitability determined on a rolling three-month
basis. On July 31, 1996, the Company obtained a waiver from the Bank with
respect to the Company's failure to satisfy the minimum ratio of current
assets to current liabilities as of December 31, 1995 and the profitability
covenant during the quarters ended December 31, 1995 and March 31, 1996; the
waiver also extends to any and all further violations of these covenants
occurring on or prior to the expiration of the line of credit on September 30,
1996. At December 31, 1995 and March 31, 1996, no borrowings were outstanding
under the revolving line of credit and $49,467 and $46,817 were outstanding
under the term loan, respectively.
At March 31, 1996, the Company had cash, cash equivalents and marketable
securities of $2,833,000 and working capital of $1,868,000. The Company
believes that the net proceeds of this offering, together with current cash,
cash equivalents and marketable securities and funds, if any, generated from
operations will be sufficient to fund the Company's operations and capital
expenditures for at least the next twelve months.
In the normal course of business, the Company evaluates acquisitions or
investments in companies, technologies or products that complement the
Company's business or product offerings. The Company is not currently involved
in negotiations with respect to, and has no agreement or understanding
regarding, any such acquisition or investment.
27
<PAGE>
INFLATION
Although certain of the Company's expenses increase with general inflation
in the economy, inflation has not had a material impact on the Company's
financial condition or results of operations to date.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of." SFAS No. 121 addresses the accounting for the impairment
of long-lived assets, certain identifiable intangible assets and goodwill when
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. The Company's adoption of SFAS No. 121 in 1996
is not expected to have a material impact on its results of operations or
financial condition.
In November 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation." SFAS No. 123 addresses the
financial accounting and reporting standards for stock-based employee
compensation plans. SFAS No. 123 permits an entity either to record the
effects of stock-based employee compensation plans in its financial statements
or to present pro forma disclosures in the notes to its financial statements.
In connection with its adoption of SFAS No. 123 during 1996, the Company
intends to elect to provide the appropriate disclosures in the notes to its
financial statements.
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<PAGE>
BUSINESS
White Pine develops, markets and supports multiplatform desktop connectivity
software that facilitates worldwide video, audio and data communication across
the Internet, intranets and other networks that use the Internet Protocol. The
Company's desktop videoconferencing software products, Enhanced CU-SeeMe and
the White Pine Reflector, create a client-server solution that allows users to
participate in real-time, multipoint videoconferences and data collaboration
over the Internet and intranets. White Pine also offers its eXodus line of
desktop X Windows software, which enables seamless interoperability between
local and remote environments, and its 5PM line of terminal emulation
software, which provides desktop access to data and applications residing on
enterprise legacy systems.
INDUSTRY BACKGROUND
As computer usage and functionality have grown over the last two decades,
businesses and other organizations have realized that they can greatly enhance
the value of their computing resources by increasing interconnectivity between
legacy host systems and networks of desktop personal computers ("PCs").
Terminal and X Windows emulation can be used within an enterprise to enable
desktop PCs to access data and applications residing in legacy systems. In the
1970s, connectivity across enterprise boundaries was further enhanced through
the development of the Internet Protocol ("IP"), a communications protocol
standard. In the 1990s, IP's networking potential has been more fully realized
with the emergence of the Internet as a mass communications medium capable of
transmitting text and graphics and, more recently, audio and video.
Organizations have also begun to use IP to establish intranets, which use the
Internet to connect information systems within an enterprise as well as
provide access to information systems of other enterprises.
Legacy System Connectivity
Terminal emulators were developed in the early 1980s to mimic "dumb"
terminals that linked users to mainframe computers through a variety of
proprietary communication protocols. As businesses' reliance on desktop PCs
grew during the 1980s, vendors developed cost-effective, software-only
products that enabled PCs to emulate text terminals for a variety of mainframe
platforms and to provide additional functionality in the form of desktop
applications. Later, vendors capitalized on the expanded graphical
capabilities of PCs by developing high-end, graphical software emulators,
often with improved feature sets. Software terminal emulation, which can now
be performed over the Internet through IP, continues to provide easier and
wider access to mission- critical data and applications residing on enterprise
legacy systems.
In 1984, software engineers at the Massachusetts Institute of Technology
broadly expanded enterprise connectivity by developing the X Window System ("X
Windows") for workstations and PCs. X Windows was designed as a standard
independent of platforms, networks and operating systems, and it became the
key underlying technology for the next generation of distributed computing. X
Windows, which is based on a client-server computing model, permits a user to
run multiple graphical applications simultaneously on a variety of platforms
from a single X Windows terminal. Since 1990, virtually all X Windows
applications have used IP networks to establish connectivity. As with terminal
emulation products, vendors soon developed software-only X servers for desktop
PCs, enabling large numbers of PCs to access data and applications across the
enterprise, regardless of the platform, network or operating system used by
the system on which the data or applications resided. An industry analyst has
estimated that worldwide sales of PC X servers will grow from $119 million in
1995 to $183 million in 1996.
Communication on the Internet and Intranets
Use of the Internet has exploded in the 1990s as a result of the growing
installed base of PCs and the emergence of the user-friendly World Wide Web
(the "Web"). The Internet, an interconnected network of numerous public and
private networks that links over 130 countries, is estimated by an industry
analyst to have been used by more than 38 million people in 1995. At its heart
lies IP, which allows for uniform, seamless
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<PAGE>
communications in a multi-vendor, multi-provider public network. Recognizing
that similar benefits can be realized by applying IP within an enterprise,
businesses and other organizations have begun to establish private intranets
that enable them to better distribute information to employees, connect
disparate equipment and protect their investment in computer resources, as
well as to share information with customers, vendors, partners and others.
The rapid growth of the Internet has been largely attributable to its use as
a communications medium. Initially, the Internet facilitated text-based
communication applications such as e-mail, special interest bulletin boards
and "chat." As multimedia PCs become commonplace, Internet usage is expanding
to take advantage of new multimedia capabilities for real-time communications
using one-way, on-demand "streamed" audio and video, Internet telephony and,
ultimately, videoconferencing.
Videoconferencing consists of real-time, one-way or two-way audio and video
communication. It enables users at remote locations to enjoy many of the
benefits of face-to-face meetings without the time and expense of travel. Like
the mainframe solutions that dominated the early years of the computer
industry, videoconferencing generally required expensive hardware-based
systems that communicated through proprietary protocols. Today, most
videoconferencing systems remain hardware-based and fit into three principal
classes: room-based systems priced at or above $40,000, "roll-about" systems
priced at less than $20,000, and hardware-based desktop systems priced as low
as $1,000. Although each of these systems requires certain proprietary
hardware, in recent years many vendors have been designing systems that comply
with emerging international industry standards intended to facilitate
interoperability among different vendors' videoconferencing systems. In the
early 1990s, the International Telecommunications Union (the "ITU") began to
establish standards for interactive audio, video and data communication over
digital networks. By 1992, a number of vendors had introduced, and
demonstrated interoperability among, videoconferencing systems that complied
with early ITU standards. While the implementation of emerging industry
standards and other technological improvements have helped to increase sales
of hardware-based videoconferencing systems in recent years, the relatively
high price and limited interoperability of these systems have impeded the
widespread adoption of videoconferencing as a mass communication medium.
In an effort to expand the availability of videoconferencing as a
communications tool, a number of developers commenced efforts to develop
software-based videoconferencing technology that did not require expensive
proprietary hardware. In 1992, Cornell Information Technologies, a research
institute at Cornell University, introduced freeware known as CU-SeeMe
("Freeware CU-SeeMe"). This real-time desktop videoconferencing software
enables users to communicate over the Internet, independent of computer
hardware and operating system. With Freeware CU-SeeMe, computer users around
the world could engage in real-time video and audio communication using low-
cost, easily available hardware, such as 28.8 kbps modems, standard
videocapture boards and video cameras.
Although Freeware CU-SeeMe lacks the reliability, functionality and features
that are necessary to succeed in today's commercial marketplace, its
popularity has demonstrated the potential market for a software-based
videoconferencing solution that is able to connect users through the Internet.
As industry standards for Internet-based videoconferencing emerge, a more
developed IP-based solution could transform the multimedia PCs already
installed in homes and offices into videoconferencing terminals at a fraction
of the price of today's hardware-based systems. Industry analysts have
estimated that shipments of desktop videoconferencing systems will grow from
approximately 100,000 units in 1995 to an estimated 21 million units in 2000.
A software solution for videoconferencing over the Internet and other IP-based
networks could not only provide videoconferencing capabilities at a lower
price but could also permit the addition of new features and the
implementation of emerging standards through easily installable software
upgrades.
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THE WHITE PINE SOLUTION
White Pine develops, markets and supports a variety of cross-platform
connectivity software products, many of which the Company designed by applying
its substantial IP connectivity experience. The Company seeks to develop
innovative, lower-priced, software alternatives to hardware connectivity
products and to enhance its software solutions through additional
functionality and features. White Pine has been a leader in developing
standards-based connectivity products that allow customers to access
information within and across enterprises through local area networks
("LANs"), wide area networks ("WANs"), the Internet and intranets.
The Company's videoconferencing products, Enhanced CU-SeeMe and the White
Pine Reflector, create a software-only client-server solution for real-time,
multipoint audio and video communication and data collaboration over the
Internet. By developing videoconferencing products that require no proprietary
hardware, White Pine is able to offer videoconferencing at a substantially
lower price than vendors of traditional hardware-based systems and thereby
encourage businesses and others to adopt it as a mass communication medium.
The Company's exclusive license agreement with Cornell Research Foundation,
Inc. (the "Cornell Foundation"), the technology licensing organization
associated with Cornell University, provided the Company with the underlying
technology for Enhanced CU-SeeMe and the White Pine Reflector and afforded the
Company brand name recognition, an installed base and a time-to-market
advantage over other vendors seeking to develop software videoconferencing
solutions.
Enhanced CU-SeeMe is available on multiple platforms and can be installed on
most multimedia PCs without any proprietary hardware. By operating over the
Internet, Enhanced CU-SeeMe substantially broadens the base of businesses,
organizations and individuals able to engage in videoconferencing. The White
Pine Reflector, the software-only server component of the Company's
videoconferencing solution, allows users of Enhanced CU-SeeMe to participate
in multipoint videoconferences with a nearly unlimited number of users. The
White Pine Reflector also solves the complex problem of enabling real-time
multipoint communication over the Internet between users operating at
different connection speeds without degrading the quality of the entire
conference to that of the slowest connection speed. Together, Enhanced CU-
SeeMe and the White Pine Reflector, with their low prices, cross-platform
capabilities and ease of use, enable corporations, government organizations,
educational institutions and individuals worldwide to interact in real time
without the time and expense of travel.
White Pine's eXodus and 5PM products allow users throughout an enterprise to
access mission-critical data and applications residing on legacy systems.
These software products are competitively priced and easy to use, and they
include a comprehensive set of features allowing for seamless integration with
existing enterprise systems and newer intranet applications.
STRATEGY
White Pine's principal business objective is to be a supplier of leading-
edge network connectivity solutions. The Company plans to build upon its
position as a leader in Internet-based videoconferencing and to offer
customers complete intranet solutions by continuing to expand its connectivity
product offerings. The key components of White Pine's strategy are as follows:
Maintain Technological and Time-to-Market Leadership. The Company's Enhanced
CU-SeeMe, introduced in March 1996, was the first commercially available
Internet-based videoconferencing product. The Company believes that Enhanced
CU-SeeMe's Internet-based videoconferencing technology, cross-platform
capabilities, software-only and hardware-independent architecture, and
scalability over a broad range of bandwidths provide significant competitive
advantages. Enhanced CU-SeeMe has been featured in a number of industry
publications and has won New Media Magazine's "1996 Hyper Award," Byte
Magazine's "Best of PC Expo '96 Winner," PC Computing's four-star rating in
its August 1996 issue and MacWorld's "Best of MacWorld" in December 1995. The
Company intends to extend its leadership position in Internet-based
videoconferencing by continuing to invest in research and development,
establishing relationships with leading providers of complementary
technologies and integrating Enhanced CU-SeeMe with products offered by third
parties. The Company believes that its extensive experience in developing
software connectivity products that give customers seamless access to
information located on complex, heterogeneous networks will assist it in
maintaining its technological leadership.
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Leverage Name Recognition and Installed Base of Freeware CU-SeeMe. The
Company plans to leverage the brand name recognition of its videoconferencing
product, Enhanced CU-SeeMe, and its predecessor, Freeware CU-SeeMe. The
Company believes that this installed base of Freeware CU-SeeMe represents a
significant competitive advantage for the Company in marketing Enhanced CU-
SeeMe and intends to promote Enhanced CU-SeeMe in part through continued
distribution and support of Freeware CU-SeeMe.
Leverage Strength of White Pine Reflector Technology. The Company believes
its success in the Internet-based videoconferencing market derives in part
from the capabilities of the White Pine Reflector, the Company's software-only
server technology for group videoconferencing. The Company intends to build
upon the core White Pine Reflector technology through on-going product
enhancements that will simplify Internet and intranet videoconferencing
through Enhanced CU-SeeMe. The Company expects that the next major version of
Enhanced CU-SeeMe, scheduled for release in the first quarter of 1997, will
include enhancements such as conference scheduling, video directory services,
video mail, video call forwarding, billing and improved conference security.
As industry standards develop, the Company intends to release standards-
compliant versions of the White Pine Reflector to permit end-users to take
advantage of its capabilities, regardless of whether they are using Enhanced
CU-SeeMe or a videoconferencing client system from another vendor.
Establish and Extend Strategic Relationships. The Company intends to
establish new strategic and original equipment manufacturer ("OEM")
relationships and extend existing relationships with multinational firms that
provide unique marketing or distribution opportunities or technological
capabilities for Enhanced CU-SeeMe. The Company has already established
marketing, distribution and technology relationships with companies such as
Ingram Micro, Inc., Tech Data Corporation, BBN Planet Corporation, Videolabs,
Inc. and Winnov, Inc. The Company also intends to use technology relationships
to accelerate the delivery of enhanced product features and services to the
Enhanced CU-SeeMe market. The Company has already established technology
relationships with Voxware, Inc. for voice compression technology, Four11
Corporation for global Internet conferencing "white pages," and Utopia Inc.
for Web and intranet integration services.
Lead Standards Implementation for Interoperability. The Company believes
that the continued adoption and implementation of industry standards for
interoperability are crucial to the growth of the videoconferencing market.
The Company is committed to implementing standards-based functionality into
upcoming releases of Enhanced CU-SeeMe and the White Pine Reflector. The
Company actively participates in key standards bodies, such as the
International Multimedia Teleconferencing Consortium, the Internet Engineering
Task Force and the X Consortium, and follows the development of standards by
the ITU. The Company also participates in industry efforts to develop
application frameworks, such as Netscape Communications Corporation's
LiveMedia framework and Microsoft Corporation's ActiveX framework, to create
interoperability among videoconferencing systems.
Increase Market Penetration Outside North America. The Company intends to
increase its international marketing activities for both the Company's
videoconferencing products and its legacy connectivity products by identifying
and engaging a recognized distributor in each major international market. The
Company believes that this strategy will enable it to leverage each
distributor's presence and experience in its local market. To that end, the
Company has already established distribution relationships in Australia,
France, Germany, Hong Kong, Japan, Korea and the United Kingdom. The Company
maintains a salesforce and a multilingual support team in France. The Company
also plans to introduce the first localized Internet-based videoconferencing
product in each major international market. The Company's distributors have
already introduced localized versions of Enhanced CU-SeeMe in Japan and Korea
and the Company is developing localized versions for France and Germany. The
Company believes that Asia will be the largest market for Internet-based
desktop videoconferencing outside North America and in the near term intends
to devote a significant portion of its international marketing resources to
Asian countries.
Extend Multiplatform Product Line to Web Browsers. Based upon the rapid
growth of the Internet and the Web, the Company believes that users will
increasingly rely less on computer operating systems, such as Microsoft
Windows and Macintosh OS, and more on Web browsers, such as Microsoft Internet
Explorer and Netscape Navigator, to access information and applications. As
businesses and other organizations increase their
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<PAGE>
use of the Internet and intranets, the Company intends to develop low-cost
Web-enabled versions of its legacy connectivity products for each major Web
browser. The Company also intends to continue to develop and introduce
versions of each of its products for each principal operating platform. The
Company currently ships versions of Enhanced CU-SeeMe, eXodus and 5PM for both
Windows and Macintosh platforms.
PRODUCTS
White Pine develops, markets and sells a variety of cross-platform software
connectivity products for use over the Internet, intranets and other IP-based
networks. The Company seeks to develop innovative, lower-priced software
alternatives to hardware solutions and to enhance its software solutions
through additional functionality and features. White Pine has been a leader in
developing standards-based connectivity products that allow customers to
access information within and across enterprises through LANs, WANs, the
Internet and intranets.
Videoconferencing
White Pine develops, markets and sells Enhanced CU-SeeMe and the White Pine
Reflector, which together create a software client-server videoconferencing
solution for businesses, educational institutions, government organizations
and individuals. These products enable a user to participate in live one-way,
two-way or multipoint audio and video communication and data collaboration
over the Internet and other IP networks at a significantly lower price than
traditional hardware-based videoconferencing solutions.
The following table sets forth the Company's videoconferencing products and
their respective platforms, dates of initial shipment, descriptions and
suggested retail prices.
<TABLE>
<CAPTION>
INITIAL
OPERATING SYSTEM SHIPMENT SUGGESTED
PRODUCT PLATFORMS DATE DESCRIPTION RETAIL PRICE
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Enhanced Windows 95 March 1996 Desktop client software for $99
CU-SeeMe Windows NT videoconferencing over IP
Windows for networks
Workgroups
Windows 3.1
- ------------------------------------------------------------------------------------
Enhanced Macintosh PowerPC June 1996 Desktop client software for $99
CU-SeeMe Mac 68000 videoconferencing over IP
networks
- ------------------------------------------------------------------------------------
White Windows NT May 1996 Server software for $395 and up
Pine Re- Windows 95 multipoint videoconferencing
flector set-up and control
- ------------------------------------------------------------------------------------
White UNIX April 1996 Server software for $395 and up
Pine Re- multipoint videoconferencing
flector set-up and control
</TABLE>
The Company also licenses Enhanced CU-SeeMe and the White Pine Reflector as
a bundled package and offers site licenses and volume discounts for larger
purchases.
Enhanced CU-SeeMe
Installed on a multimedia PC equipped with low-cost, easily available
hardware, such as a 28.8 kbps modem, a standard videocapture board and a video
camera, Enhanced CU-SeeMe enables real-time audio and video communication and
data collaboration over the Internet and other IP networks. Enhanced CU-SeeMe
has the following capabilities and features:
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<PAGE>
. simultaneous viewing of up to eight videoconferencing participants;
. data collaboration through the WhitePineBoard, a form of "whiteboard"
software;
. participation in live "cybercast" events;
. intuitive, dynamic windowing of videoconferencing participants through
the Participants List, which indicates presence by video, voice or chat;
. automatic call initiation for frequently called addresses stored in the
Phone Book;
. software functions equivalent to call-waiting and caller-ID;
. browser support for direct launch of Enhanced CU-SeeMe from any Web page;
. support for a wide range of graphics modes, from 4-bit grayscale to 24-
bit true color; and
. ""chat'' function.
Enhanced CU-SeeMe actively monitors the size and quality of each user's
connection and adjusts transmission accordingly. Enhanced CU-SeeMe allows
users to videoconference over bandwidths as low as 28.8 kbps and to improve
video resolution and frame rate by taking advantage of the wider bandwidths
provided by ISDN, LANs, cable modems and other technologies.
[Graphic: Two depictions of persons facing PCs equipped with video cameras,
together with a double-headed arrow between and pointing to the two
persons. The words "Internet or Intranet Connection" appear above
the arrow, and the words "28.8 kbps up to 10Mbps" appear below the
arrow.]
Enhanced CU-SeeMe incorporates a variety of audio and video
compression/decompression software ("codec") for use with different bandwidths
and allows a user to select the appropriate audio and video codecs for the
user's particular bandwidth. Its modular software architecture permits simple
upgrades for newly developed audio and video codecs. Enhanced CU-SeeMe is
easily installed as a result of its interoperability with most standard, non-
proprietary hardware configurations.
White Pine commenced shipments of Enhanced CU-SeeMe 2.0 for Windows 3.1,
Windows for Workgroups and Windows 95 in March 1996, and Enhanced CU-SeeMe 2.0
for the Macintosh PowerPC and Macintosh 68000 platforms in June 1996. The
Company intends to ship Enhanced CU-SeeMe 2.1 for Windows, which will provide
additional multicasting capability, improve audio performance and incorporate
directory services, in the third quarter of 1996; the Company expects to ship
Enhanced CU-SeeMe 2.1 for Macintosh in the fourth quarter of 1996. The Company
intends to release Enhanced CU-SeeMe 3.0 for Windows and Macintosh in the
first quarter of 1997. Version 3.0 will incorporate new features such as
enhanced directory services, firewall support and echo cancellation, as well
as general modifications to improve performance and ease of use. The Company
expects that Enhanced CU-SeeMe 3.0 will support relevant Internet and ITU
standards that enable interoperability among videoconferencing systems of
different vendors and will be compatible with ActiveX, LiveMedia, QuickTime
Conferencing and other application frameworks. The Company has also announced
its plans to provide interoperability between Enhanced CU-SeeMe and Microsoft
Corporation's NetMeeting communications and collaboration software.
Enhanced CU-SeeMe has been featured in a number of industry publications and
has won New Media Magazine's "1996 Hyper Award," Byte Magazine's "Best of PC
Expo '96 Winner," PC Computing's four-star rating in its August 1996 issue and
MacWorld's "Best of MacWorld" in December 1995.
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White Pine Reflector
The White Pine Reflector is software-only technology that allows users of
Enhanced CU-SeeMe to participate in multipoint videoconferences over the
Internet with a nearly unlimited number of users without proprietary hardware.
The White Pine Reflector solves the complex problem of enabling real-time
multipoint communication over the Internet between users operating at
different connection speeds without degrading the quality of the entire
conference to that of the slowest connection speed. The White Pine Reflector
has the following capabilities and features:
. capacity to accommodate up to an aggregate of 100 participants in one or
more simultaneous videoconferences on a single White Pine Reflector,
depending on the processing power of the computer on which the White Pine
Reflector is installed and the participants' connection speeds;
. videoconferencing with a nearly unlimited number of conference
participants through linkages to other White Pine Reflectors;
. ability to "cybercast" live events to large audiences through linkages to
other White Pine Reflectors;
. bandwidth management;
. ability to utilize multicast-capable networks;
. conference security through conference identification, password and IP
address verification;
. compatibility with multiple platforms, including Windows 95, Windows NT
and eleven versions of UNIX, including those offered by Sun Microsystems,
Inc., Digital Equipment Corporation, International Business Machines
Corporation, Hewlett-Packard Company and Santa Cruz Operations, as well
as Linux; and
. secure access through manual firewall configuration.
The following diagrams illustrate the use of Enhanced CU-SeeMe and the White
Pine Reflector in a simple group conference, an intranet group conference and
a cybercast.
Simple Group Conference
[Graphic: A depiction of a computer monitor containing the word "Reflector" (a
"Reflector Symbol") connected by four lines of various widths to
four depictions of persons facing PCs. Above each of the four lines,
in order of decreasing width, are the terms "LAN," "WAN" "ISDN" and
"28.8."]
The White Pine Reflector allows videoconferencing among users with different
connection speeds without having to use the lowest common bandwidth.
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Intranet Group Conference
[Graphic: Two Reflector Symbols connected by a thick line. The words "Intranet
or Corporate WAN" appear above the line. The Reflector Symbol on the
left is connected by two lines of different widths to three
depictions of persons facing PCs. The word "ISDN" appears above the
thinner line, and the word "LAN" appears above the thicker line. The
words "Home Office" appear below the Reflector Symbol on the left.
The Reflector Symbol on the right is connected by a line to three
depictions of persons facing PCs. The word "LAN" appears above the
line. The words "Remote Office" appear below the Reflector Symbol on
the right.]
Multiple White Pine Reflectors can work together to maximize conference
quality and minimize bandwidth use.
Cybercast Mode
[Graphic: A depiction of a person facing a PC connected by a line to a
Reflector Symbol, which in turn is
connected by lines to three other Reflector Symbols, two of which are
connected by lines to two
depictions of persons facing PCs and one of which is connected by lines to
three depictions of persons
facing PCs.]
White Pine Reflectors can be linked to reach a nearly unlimited number of
recipients.
The White Pine Reflector deploys software-only technology to allow users
with different connection speeds to conference with each other without
degrading the quality of the entire conference to that of the slowest
connection speed. For example, participants on a LAN can view dial-in users at
lower frame rates while viewing each other or ISDN-based participants at
higher frame rates. The White Pine Reflector manages streams and utilizes
multicasting, if available, to minimize bandwidth use. The White Pine
Reflector allows network providers to minimize the impact of videoconferencing
on LANs by limiting the number of simultaneous participants in a
videoconference or the speeds of participant connections.
The Company commenced shipments of White Pine Reflector 2.0 for UNIX in
April 1996 and White Pine Reflector 2.0 for Windows 95 and Windows NT in May
1996. The Company expects that White Pine Reflector 3.0 for Windows 95,
Windows NT and UNIX, scheduled for release in the first quarter of 1997, will
incorporate new conference management features for intranet and Internet
service provider ("ISP") customers, including conference scheduling, enhanced
data logging, user tracking and billing, call forwarding and transfer, and
directory services. The Company expects that White Pine Reflector 3.0 will
support relevant Internet and ITU standards, enabling multi-vendor
interoperability and thereby increasing the number of systems through which
users can videoconference.
The Company believes that, to date, most users of Enhanced CU-SeeMe take
advantage of publicly available White Pine Reflectors and freeware multipoint
conferencing servers for group conferencing and cybercasts, such as the White
Pine Reflectors maintained by the National Aeronautics and Space
Administration,
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the National Science Foundation and the Global Schoolhouse Project. The
Company expects that an increasing number of White Pine Reflectors will be
maintained by businesses and other enterprises to permit private
videoconferencing and cybercasting over LANs, WANs and intranets. Certain
ISPs, such as BBN Planet Corporation and Utopia Inc., also maintain White Pine
Reflectors for use by their respective subscribers.
Legacy Connectivity Products
The Company offers two lines of legacy connectivity products that allow
businesses and other organizations to access data and applications residing on
host workstations, mini-computers and mainframe computers from most widely-
used desktop operating systems. Because the Company believes that users will
increasingly rely less on computer operating systems and more on Web browsers
to access information and applications, the Company intends to develop Web-
enabled versions of its legacy connectivity products for major Web browsers.
Graphical Windowing
White Pine's eXodus products provide a comprehensive line of multiplatform X
Windows solutions that permit seamless interoperability between local and
remote environments. The Company's predecessor introduced the first eXodus
product in 1989, and the Company most recently introduced eXodus 6.0 for
Macintosh in April 1996. Each eXodus product incorporates an X server that
connects users of most widely used desktop operating systems to UNIX, Windows
NT, VMS and other multi-user computer platforms. These products permit users
to establish connections over high-speed LANs as well as over standard
telephone lines. The Company believes that eXodus for Macintosh, which won
MacWeek's "Editors' Choice Award" in May 1996, is the market leader in
providing X Windows solutions for Macintosh systems. At suggested retail
prices of $195 to $295, these products sell for substantially less than
competitive X Windows products. The Company intends to develop versions of
eXodus to operate with major Web browsers and expects to ship the first of
these products in the fourth quarter of 1996.
The Company's eXodus eXpress products, introduced in the second quarter of
1995, provide access to X-compliant applications through serial links, such as
ordinary telephone lines, for a suggested retail price of $195. These products
require a host-side component, eXodus eXpress/Host, which the Company offers
for a variety of host platforms at a suggested retail price of $195.
eXodusNFS, introduced in July 1996, provides the functionality of an NFS
client and UNIX-compatible network file access and remote printing for the
Windows 3.1 and Windows 95 platforms. The NFS client is integrated into the
Windows interface, permitting easier navigation around UNIX environments.
eXodusNFS permits users to access and use network drives from a Windows
desktop.
Graphical Host Connectivity
The Company offers ReGIS and Tektronix terminal emulation solutions for the
Windows, Macintosh and UNIX platforms. The Company's Mac320 and Mac340
products, first introduced by a predecessor of the Company in 1986, provide
complete emulation of the VT320 (text only) and VT340 (text and color
graphics) hardware terminals from Digital Equipment Corporation. Most
recently, the Company introduced Mac320 2.0.1 and Mac340 2.0.1 in September
1995. The Company believes that its Mac300 series products are the most widely
used terminal emulation products for the Macintosh platform. The Company
offers these products at suggested retail prices of $99 to $349. The Company's
TGRAF products, first introduced by a predecessor of the Company in 1984,
provide Tektronix terminal emulation for Windows, DOS, Macintosh, UNIX and VMS
platforms. The Company believes that TGRAF provides superior functionality to
the more expensive and cumbersome proprietary terminals offered by the
Company's competitors. The Company offers TGRAF, the most recent version of
which was introduced in November 1995, at suggested retail prices of $295 to
$595.
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<PAGE>
Text-based Host Connectivity
White Pine's 5PM products provide terminal emulation solutions to access
data and applications residing on a variety of platforms, including those
offered by Digital Equipment Corporation, International Business
Machines Corporation and Hewlett-Packard Company, as well as those offered by
Siemens AG and Unisys Corporation, whose host systems are widely used in
Europe. The Company offers 5PM Term, which provides full terminal emulation,
scripting, hot keys, network and serial connection software, file transfer
utilities, keyboard pallets and other features. The Company also offers 5PM
Pro, which allows organizations to customize the various 5PM Term emulations
for their particular applications. 5PM Pro permits users to create custom
graphical user interfaces that both simplify access to legacy applications and
provide more meaningful displays of data output. All 5PM products have an
identical interface regardless of platform, allowing customers with large
installed bases to purchase terminal emulation solutions from a single vendor
and thereby minimize support and training costs.
The Company introduced its first 5PM product in 1991 and most recently
introduced 5PM Term 3.1.4 in July 1996. The Company offers 5PM Term products
for each primary desktop operating system, including Windows 3.1, Windows 95,
Windows NT and Windows for Workgroups as well as Mac and Power Mac, at
suggested retail prices of $249 to $299 per terminal. The Company also bundles
5PM Term with a number of terminal tools and markets the package under the
name 5PM Term Office at a suggested retail price of $399. Version 3.1.3 of 5PM
Pro was introduced in February 1996 and is offered at a suggested retail price
of $799. The Company intends to develop versions of its 5PM products to
operate with major Web browsers and expects to ship the first of these
products in the fourth quarter of 1996.
RESEARCH AND DEVELOPMENT
The Company believes that its success to date has resulted from its
technological innovation in the X Windows and terminal emulation markets.
Since its inception, the Company has specialized in IP-based connectivity
solutions for corporate customers and now provides what it believes to be the
broadest line of multiplatform, software connectivity solutions in the market.
Over the past two years, the Company has successfully introduced new X server
and terminal emulation products for Windows and now offers competitive cross-
platform solutions. In June 1995, the Company secured from the Cornell
Foundation the exclusive worldwide rights to license the Freeware CU-SeeMe
videoconferencing software and has since focused its development efforts on
producing commercial versions of this software.
The Company's research and development expenditures totalled $1,301,000,
$1,866,000 and $824,000 in the fiscal years ended December 31, 1994 and 1995
and the three months ended March 31, 1996, respectively. The Company intends
to continue to devote substantial resources to research and development. As of
June 30, 1996, the Company employed 40 persons in engineering and research and
development, of which 28 were devoted to research and development for
Internet-based videoconferencing technologies. The Company intends to hire
additional research and development personnel in the near future to further
the Company's product development efforts. In addition, White Pine has
established an ongoing technical relationship with the Cornell Foundation
whereby the Cornell Foundation is contractually obligated to devote certain
minimum personnel resources to the continued development of the Freeware CU-
SeeMe technology and to supply all of the resulting improvements to the
Company.
Based upon the rapid growth of the Internet and the Web, the Company
believes that users will increasingly rely less on computer operating systems
and more on Web browsers to access information and applications. As a result,
the Company has redirected its X server and terminal emulation development
efforts towards Web-enabled and plug-in products that will integrate with Web
browsers such as Netscape Navigator and Microsoft Internet Explorer. The
Company expects to begin shipping these Web-enabled products during the fourth
quarter of 1996.
MARKETING AND DISTRIBUTION
The Company markets and sells its products through a combination of
distributors, OEMs and strategic partners, its direct sales organization and
over the Internet. The Company conducts marketing programs, including direct
mail, advertising, public relations, distribution of product literature and
other programs to
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<PAGE>
support each of the channels, in order to position and promote its products
and services. The Company maintains a Web site where prospective customers can
obtain information about the Company's products and services and download
certain software for evaluation. Marketing personnel provide price lists and
product descriptions and assist the direct sales force through lead generation
and sales training. The Company's primary strategy for marketing and
distributing its videoconferencing products is to establish new strategic and
OEM relationships and extend existing relationships with multinational firms
that provide unique marketing or distribution opportunities or technological
capabilities for Enhanced CU-SeeMe. The Company has already established
distribution relationships in Australia, France, Germany, Hong Kong, Japan,
Korea and the United Kingdom. The Company has also formed OEM or bundling
relationships in order to provide customers with turnkey solutions and to
facilitate product sales through distribution channels. The Company has
established such relationships with VideoLabs, Inc., a manufacturer of digital
cameras, and Digital Visions Inc. and Winnov, Inc., manufacturers of video
boards. In the first quarter of 1996, the Company began to employ distributors
to deliver Enhanced CU-SeeMe to consumers through retail channels. Enhanced
CU-SeeMe is available in store chains and superstores, such as Egghead
Software and RCS, and through catalogs, such as PC Compleat and Creative
Computers PC Mall.
The Company also sells Enhanced CU-SeeMe and the White Pine Reflector
directly from its Web site. The Company believes that, since the commercial
release of Enhanced CU-SeeMe 2.0 in March 1996, Enhanced CU-SeeMe has been
downloaded for evaluation from the Company's Web site more than 400,000 times
and that, since the commercial release of the White Pine Reflector in May
1996, the White Pine Reflector has been downloaded for evaluation more than
50,000 times.
The Company also promotes its videoconferencing products by actively
participating in major videoconferencing and other tradeshows such as the
National Association of Broadcasters, Networld+Interop, PC Expo, Comdex,
Internet World, Internet Expo and MacWorld. The Company periodically sponsors
special events, such as cybercasts of the Microsoft World Wide Live and
Developers Conference, a CompuServe Jimmy Buffett Concert and the Little
League 50th Anniversary World Series, in an effort to enhance the visibility
of the Company and its products.
The Company markets and sells its legacy connectivity products in the United
States through its direct sales force and distributors and in other countries
primarily through distributor relationships. The Company intends to continue
this method of marketing and distributing its legacy connectivity products for
the foreseeable future.
International sales represented 11% and 20% of total revenue in the fiscal
years ended December 31, 1994 and 1995, respectively, and 20% and 30% of total
revenue in the three months ended March 31, 1995 and 1996, respectively.
As of June 30, 1996, the Company had 38 employees in sales and marketing.
The Company's sales force is located in Nashua, New Hampshire, San Jose,
California and LaGaude, France.
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<PAGE>
CUSTOMERS
The Company's customers include businesses, government organizations,
educational institutions and individual consumers. The Company sells its
software to end users and to OEMs that bundle the Company's software with
other products. The following table sets forth certain customers of the
Company:
<TABLE>
<CAPTION>
OEMS, ISPS, DISTRIBUTORS AND
END USERS STRATEGIC PARTNERS
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
East Carolina Navistar BBN Planet Corporation
University International
General Electric Transportion Corp. Hyundai Information Technology
Capital Company Ltd.
Services, Inc. The Ohio State Ingram Micro, Inc.
University
VIDEOCONFERENCING MCI Communications SBC Communications Macnica, Inc.
Corp. Inc.
National U.S. Department of Tech Data Corporation
Aeronautics and Defense
Space University of Utah Utopia Inc.
Administration
VideoLabs, Inc.
Winnov Inc.
- ---------------------------------------------------------------------------------------------
Amgen Inc. Deere & Company Attachmate Corp.
Apple Computer, J.P. Morgan & Co. AT&T Paradyne Corp.
Inc.
AT&T Corp. Incorporated Diversified Computer Systems,
Inc.
CitiCorp Data Kredietbank N.V. E92 Plus Ltd.
Systems, Inc.
LEGACY CONNECTIVITY Corning Lockheed Martin EA Systems Inc.
Incorporated
Credit Lyonnais Corporation Flexcom, Inc.
S.A.
The Dow Chemical Motorola, Inc. Insignia Solutions Inc.
Company SNCF TCI
E.I. DuPont TRW Inc.
de Nemours & Universite de
Company Lausanne
Hughes Applied U.S. West Inc.
Information
</TABLE>
Sales to Ingram Micro, Inc. represented 21% and 16% of the Company's total
revenue in the fiscal years ended December 31, 1994 and 1995, respectively.
See Note 1 of Notes to the Company's Consolidated Financial Statements. The
loss of this customer could have a material adverse effect on the Company's
business, financial condition and results of operations. There can be no
assurance that any of the customers listed above will license software or
purchase services from the Company in the future.
CUSTOMER SERVICE AND SUPPORT
White Pine is committed to maintaining customer satisfaction and loyalty. As
of June 30, 1996, White Pine employed 17 technical customer representatives
located in New Hampshire, California and France to support and service its
customer base. In the future, the Company intends to hire additional technical
customer representatives to support the increasing installed base of Enhanced
CU-SeeMe. In the event demand for customer service outpaces the Company's
expectations, the Company may employ a third-party help-desk organization to
provide additional support. The Company believes that certain of its
distributors and OEM customers maintain separate customer support
organizations for their respective customers. The Company provides back-up
support to such organizations.
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<PAGE>
The Company maintains a technical support hotline to answer customer
inquiries and provides an on-line database of technical product information.
The Company's support staff also responds to e-mail inquiries and monitors
several e-mail mailing lists. Customer support specialists diagnose and solve
technical problems related not only to the Company's products but also to
other hardware and software with which the Company's products may interact.
The Company tracks all support requests, including current status reports and
historical customer interaction logs, using a series of customer databases.
The Company uses customer feedback as a source of ideas for product
improvements and enhancements.
The Company intends to provide maintenance for Enhanced CU-SeeMe through a
program of periodic technical upgrades. The price of the White Pine Reflector
includes one year of maintenance services. For a fee, the Company will provide
extended maintenance services to its White Pine Reflector customers and to
certain volume purchasers of Enhanced CU-SeeMe. Customers who purchase site
licenses for the White Pine Reflector are required to enter into a customer
support and maintenance agreement. The Company's X Windows and terminal
emulation customers can obtain service and support through the Company's
eXtend Support Program, which for a fee entitles customers to priority service
through a toll-free number and to free, automatic shipments of all
enhancements and upgrades for legacy connectivity products licensed from the
Company.
COMPETITION
The market for videoconferencing products and services is extremely
competitive, and the Company expects that competition will intensify in the
future. The Company believes that the principal competitive factors in the
videoconferencing industry are price, video and audio quality,
interoperability, functionality, reliability, service and support, hardware
platforms supported, and vendor and product reputation. The Company believes
that its ability to compete successfully will depend on a number of factors
both within and outside its control, including the adoption and evolution of
industry standards, the pricing policies of its competitors and suppliers, the
timing of the introduction of new software products and services by the
Company and others, the Company's ability to hire and retain employees, and
industry and general economic trends. The Company anticipates that in the near
future the videoconferencing market will experience intense competition in the
form of product bundling or significant price reductions. The Company
currently competes, or expects to compete, directly or indirectly with the
following categories of companies: (i) traditional hardware-based
videoconferencing companies, such as PictureTel Corporation, VTEL Corporation
and Compression Labs, Incorporated; (ii) emerging videoconferencing technology
companies, such as Cinecom Corporation, Connectix Corporation, Creative Labs,
Inc. and VDONet Corp.; (iii) vendors of operating systems and browsers such as
Microsoft Corporation, which recently introduced NetMeeting, a product that
enables point-to-point audio and data communication over the Internet, and
Netscape Communications Corporation, which recently acquired Insoft, Inc. and
its audio and videoconferencing technology; (iv) videoconferencing support
companies, such as VideoServer, Inc., Lucent Technologies, Inc. and Accord
Ltd.; and (v) other companies developing videoconferencing systems. PictureTel
Corporation and Intel Corporation each recently announced plans to license
products competitive with Enhanced CU-SeeMe to manufacturers of personal
computers and modems for inclusion in prepackaged multimedia and other
systems. In July 1996, Intel Corporation also announced a cross-licensing
agreement with Microsoft Corporation to share implementations of certain
industry standards and application frameworks, which the Company expects will
enhance the competitiveness of the products offered by both companies. In
addition, because the barriers to entry in the software market are relatively
low and the potential market is large, the Company anticipates continued
growth in the industry and the entrance of new competitors in the future.
Enhanced CU-SeeMe also competes with videoconferencing software that is
available on the Internet and can be downloaded by users for either no charge
or for extended evaluation. Freeware CU-SeeMe and its related server are
freely available over the Internet. See "Business--Proprietary Rights."
In the market for X Windows products, the Company faces significant direct
competition from a number of PC X server software vendors, including
Hummingbird Communications Ltd., NetManage, Inc., Network Computing Devices,
Inc. and Walker Richer and Quinn Inc., as well as indirect competition from
manufacturers of dedicated X terminals. The Company's principal competitor in
this market is Hummingbird Communications
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<PAGE>
Ltd., the largest supplier of X server software products for the PC platform.
To the extent that these and other companies introduce new or enhanced PC X
server software products, the Company will face increased competition.
In the terminal emulation market, the Company currently competes with the
following categories of companies: (i) vendors of International Business
Machines Corporation host connectivity products, including Attachmate Corp.
and Wall Data Incorporated; (ii) vendors of TCP/IP terminal emulation
products, including FTP Software, Inc. and NetManage, Inc.; and (iii) vendors
of Digital Equipment Corporation and Hewlett-Packard Company host connectivity
products, including Walker Richer and Quinn Inc.
Many of the Company's current and potential competitors, including
Hummingbird Communications Ltd., Intel Corporation, Microsoft Corporation,
Netscape Communications Corporation and PictureTel Corporation, have
significantly longer operating histories and/or significantly greater
managerial, financial, marketing, technical and other competitive resources,
as well as greater name recognition, than the Company. As a result, the
Company's competitors may be able to adapt more quickly to new or emerging
technologies and changes in customer requirements or may be able to devote
greater resources to the promotion and sale of their products and services.
There can be no assurance that the Company will be able to compete
successfully with existing or new competitors. In addition, competition could
increase if new companies enter the market or if existing competitors expand
their service offerings. An increase in competition could result in material
price reductions or loss of market share by the Company and could have a
material adverse effect on the Company's business, financial condition and
results of operations.
To remain competitive, the Company will need to continue to invest in
research and development and sales and marketing. There can be no assurance
that the Company will have sufficient resources to make such investments or
that the Company will be able to make the technological advances necessary to
remain competitive. In addition, current and potential competitors have
established or may in the future establish collaborative relationships among
themselves or with third parties, including third parties with whom the
Company has a relationship, to increase the visibility and utility of their
products and services. Accordingly, it is possible that new competitors or
alliances may emerge and rapidly acquire a significant market share. Such an
eventuality could have a material adverse effect on the Company's business,
financial condition and results of operations.
GOVERNMENT REGULATION
At present, there are few laws or regulations that specifically address
access to or commerce on the Internet. The increasing popularity and use of
the Internet, however, enhance the risk that the governments of the United
States and other countries in which the Company sells or expects to sell its
products will seek to regulate videoconferencing and the Internet with respect
to, among other things, user privacy, pricing, and the characteristics and
quality of products and services. Any such regulation could have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, because the Internet has only recently come into
widespread use, it is not yet clear how existing laws governing issues such as
libel, privacy and the ownership of intellectual property will apply to
communications over the Internet. The Company is unable to predict the impact,
if any, that existing or future legislation, legal decisions or regulations
may have on its business, financial condition or results of operations.
The Telecommunications Act of 1996, which was enacted in February 1996,
purports to impose criminal liability on (i) any person that sends or displays
in a manner available to minors indecent or patently offensive material on an
interactive computer service such as the Internet and (ii) any entity that
knowingly permits facilities under its control to be used for such activities.
In June 1996, a special three-judge panel in federal district court found
these provisions unconstitutional and issued a preliminary injunction against
their enforcement. The U.S. Department of Justice has appealed this decision
to the U.S. Supreme Court. If these provisions are upheld or if similar
provisions are enacted in the future, they may inhibit the growth or use of
the
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<PAGE>
Internet, chill the development of Internet content and decrease the demand
for the Company's products or otherwise have a material adverse effect on the
Company's business, financial condition and results of operations.
In March 1996, the America's Carriers Telecommunication Association
("ACTA"), a group of telecommunications common carriers, filed a petition (the
"ACTA Petition") with the Federal Communications Commission (the "FCC"),
arguing that providers (such as the Company) of computer software products
that enable voice transmission over the Internet (Internet "telephone"
services) are operating as common carriers without complying with various
regulatory requirements and without paying certain charges required by law.
The ACTA Petition argues that the FCC has the authority to regulate both the
Internet and the providers of Internet "telephone" services and requests that
the FCC declare its authority over interstate and international
telecommunications services using the Internet, initiate rulemaking
proceedings to consider rules governing the use of the Internet for the
provision of telecommunications services, and order providers of Internet
"telephone" software to immediately cease the sale of such software pending
such rulemaking. Certain parties have filed comments with the FCC regarding
the ACTA Petition. The Company is unable to predict the outcome of this
proceeding. Any action by the FCC to grant the relief sought by ACTA or
otherwise to regulate use of the Internet as a medium of communication,
including any action to permit local exchange carriers to impose additional
charges for connections used for Internet access, could have a material
adverse effect on the Company's business, financial condition and results of
operations.
PROPRIETARY RIGHTS
The Company's videoconferencing products, Enhanced CU-SeeMe and the White
Pine Reflector, are commercial versions of Freeware CU-SeeMe and its related
server. Freeware CU-SeeMe and its related server were developed by Cornell
Information Technologies, a research institute at Cornell University, and are
freely available on the Web. In June 1995, the Company and the Cornell
Foundation entered into an Exclusive Software License Agreement (the "License
Agreement") that granted to the Company the exclusive worldwide right to
develop, modify, market, distribute and sublicense commercial versions of
Freeware CU-SeeMe and its related server, as well as the rights to appoint
licensee distributors and to use the trademark "CU-SeeMe." The License
Agreement requires that the Company pay royalties based on the Company's net
revenue from its commercial versions of Freeware CU-SeeMe and its related
server (subject to certain minimum per-copy royalties) and share sublicensing
income with the Cornell Foundation. The License Agreement also requires that
the Company make certain annual minimum royalty payments, including minimum
payments based on royalties from sublicenses. There can be no assurance that
the Company will meet these obligations. Under the License Agreement, the
Company issued to the Cornell Foundation the Cornell Warrant, which is
exercisable to purchase 20,000 shares of Common Stock at an exercise price of
$3.00 per share. The License Agreement has an initial term expiring December
1, 1998 and renews automatically for periods of one year unless and until
terminated by either party for "cause" or by the Company for convenience. For
purposes of the License Agreement, "cause" means failure by the Company to pay
any amount due under the License Agreement, if not cured within 30 days of
written notice of such failure to pay, or any material breach of the License
Agreement by either party, if not cured within 90 days of written notice of
such breach. "Material breach" includes failure to exercise due diligence to
develop, manufacture and market commercial versions of Freeware CU-SeeMe and
its related server, failure to grant sublicenses as required by the License
Agreement, failure to maintain quality control over the Company's commercial
versions of Freeware CU-SeeMe and its related server, and failure to develop
and exploit the market to the extent necessary to meet the Company's minimum
royalty obligations under the License Agreement. The failure of the Company to
meet certain staffing, product introduction and sublicensing obligations will
permit the Cornell Foundation to terminate the exclusivity provisions of the
License Agreement.
As part of the License Agreement, the Cornell Foundation, acting through
Cornell Information Technologies, and the Company agreed to provide technical
support to each other to maintain the compatibility and interoperability of
Freeware CU-SeeMe and Enhanced CU-SeeMe and their respective servers. The
Cornell Foundation and Cornell University are entitled to use any portion of
the source code of the Company's commercial versions of Freeware CU-SeeMe and
its related server that may be necessary to maintain basic compatibility and
interoperability with Freeware CU-SeeMe and such server. The Company must
provide to the
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Cornell Foundation and Cornell University, at no cost, all information
required to maintain such compatibility and interoperability.
Under the terms of the License Agreement, the Company also agreed to offer
sublicenses to the source code of Freeware CU-SeeMe and its related server for
a nominal fee, provided that any sublicensee agrees (i) to distribute only
executable versions of Freeware CU-SeeMe and its related server, (ii) to
realize no profit or gain, either directly or indirectly, from the use or
distribution of Freeware CU-SeeMe or its related server, (iii) to grant each
of the Company and the Cornell Foundation, at no cost, a royalty-free,
perpetual, irrevocable, unrestricted license to use modifications and
enhancements to Freeware CU-SeeMe and its related server developed and
distributed by the sublicensee, as well as related documentation, and (iv) to
freely distribute on the Internet the executable code for Freeware CU-SeeMe
and its related server as modified by the sublicensee. Moreover, the Company
agreed to permit third parties to use unmodified source code of Freeware CU-
SeeMe and its related server for the development, manufacture and marketing of
commercial products in executable code form that incorporate unmodified or re-
engineered versions of Freeware CU-SeeMe or its related server, subject to
reasonable licensing terms.
Under the terms of the License Agreement, the Cornell Foundation retained
the right on behalf of Cornell University to issue licenses and maintenance
and other releases of Freeware CU-SeeMe and its related server to third
parties as not-for-profit freeware. The Cornell Foundation and Cornell
University may also use any portion of Freeware CU-SeeMe and its related
server to develop commercial products and services to be licensed to others,
provided that those products and services do not compete directly with the
Company's commercial versions of Freeware CU-SeeMe and its related server. See
"Risk Factors--Dependence Upon License Agreement; Limited Proprietary
Protection" and "--Dependence Upon Third-Party Software."
EMPLOYEES
At June 30, 1996, the Company had 117 employees, including 40 in research
and development, 38 in sales and marketing, 17 in technical support, 18 in
general and administrative and 4 in software manufacturing. Twenty-two of
these employees were located in France and, in accordance with applicable law,
were represented by a labor union. The Company's remaining employees were
located in the United States and were not represented by any labor
organization. The Company has experienced no work stoppages and believes that
its relations with its employees are good.
FACILITIES
The Company's principal offices are located in Nashua, New Hampshire. In May
1996, the Company entered into a five-year lease for different facilities in
Nashua, New Hampshire with approximately 27,000 square feet of office space.
The lease is effective as of August 1, 1996. The Company also leases office
space in San Jose, California and LaGaude, France. The Company believes that
after August 1, 1996, its facilities will be adequate for its needs and that
suitable additional or substitute space will be available as needed. The
Company also believes that its properties are adequately covered by insurance.
LEGAL PROCEEDINGS
The Company is a defendant in 13 lawsuits pending in New York federal and
state courts (the "RSI Suits") in which the plaintiffs claim to suffer from
carpal tunnel syndrome, or "repetitive stress injuries," as a result of having
used computer keyboards (the "Keyboards") that are alleged to have been
defectively designed. The Keyboards were supplied, and possibly designed and
manufactured, by Ontel Corporation. The assets of Ontel Corporation were
purchased in 1982 by Visual Technology, Inc. ("Visual"), a predecessor of
Visual T.I., Inc. ("VTI"), which in turn is a predecessor of the Company. See
"The Company." The RSI Suits, which seek money damages, were brought from
February 1992 to June 1996 by employees of New York Telephone, which purchased
the Keyboards from Lockheed Electronics Corporation. One or more of Visual,
Ontel Corporation, Lockheed Electronics Corporation and Key Tronics
Corporation, a subcontractor for certain of the Keyboards, are named as co-
defendants in certain
44
<PAGE>
of the RSI Suits. New York Telephone employees have also commenced 38 suits
that name as defendants only Visual and/or Ontel Corporation. The Company
could be named as a defendant in these cases. None of the RSI Suits has
reached trial and additional information detrimental to the Company could be
developed in the course of discovery.
In May 1993, VTI's product liability coverage terminated. Certain of the RSI
Suits appear to be based on claims that allegedly arose after May 1993, and
therefore may be uninsured. The insurers for VTI, the Company and others (the
"Insurers") are defending the RSI Suits under a reservation of rights. To
date, the Company's proportionate share of the defense costs of the RSI Suits
has not been material. There can be no assurance, however, that the Company
will not incur material legal expenses defending the RSI Suits. The Company
has established a reserve of approximately $300,000 in connection with the RSI
Suits, based upon the Company's belief that (i) certain of the RSI Suits are
covered by product liability insurance, (ii) the Company is contractually
indemnified by Lockheed Electronics Corporation and/or Key Tronics Corporation
against all or a portion of the damages to which the Company may be subject
and (iii) the Company has defenses to substantially all of the claims under
the RSI Suits. Although the Company believes that its reserve for the RSI
Suits is adequate, there can be no assurance that the Company's liabilities
under the RSI Suits will not substantially exceed that reserve. New York
Telephone and others may continue to use certain of the Keyboards and,
accordingly, there can be no assurance that additional product liability
claims will not be asserted against the Company in the future.
From time to time, the Company has received and may receive in the future
notice of claims of infringement of other parties' proprietary rights.
Although the Company believes that its products and technology do not infringe
the proprietary rights of others, there can be no assurance that additional
third parties will not assert infringement and other claims against the
Company or that any infringement claims will not be successful. See "Risk
Factors--Dependence Upon License Agreement; Limited Proprietary Protection."
From time to time, the Company may be exposed to litigation arising out of
its products, services and operations. As of the date of this Prospectus, the
Company is not engaged in any legal proceedings of a material nature, other
than the RSI Suits.
45
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company and their ages as of
July 25, 1996 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Howard R. Berke......... 41 Chairman, President, Chief Executive Officer and
Director
Richard M. Darer........ 43 Chief Financial Officer and Vice President of
Administration
Killko A. Caballero..... 36 Senior Vice President of Research and Development,
Chief Technology Officer and Director
Carl A. Koppel.......... 46 Vice President of Sales, International
Jack A. Dutzy........... 52 Vice President of Sales, Americas
David O. Bundy.......... 37 Vice President of Engineering
Arthur H. Bruno(1)(2)... 62 Director
Jonathan G. Morgan(1)... 42 Director
Pierre-Gabriel
Vallee(2).............. 54 Director
</TABLE>
- --------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
HOWARD R. BERKE has been the President and Chief Executive Officer of the
Company since January 1994 and has also served as the Chairman and a director
of the Company since February 1994. Mr. Berke served as the President and
Chief Executive Officer of Grafpoint, a software company, from April 1992 to
December 1993. Mr. Berke was a founder of Rehabilitation Technologies, Inc., a
medical products company, and served as its Executive Vice President from June
1988 to April 1992. Mr. Berke received an M.B.A. from the University of
Chicago and a B.A. from Yale University.
RICHARD M. DARER joined the Company in May 1996 as Chief Financial Officer
and Vice President of Administration. Mr. Darer served as Vice President,
Treasurer and Controller of Sequoia Systems, Inc., a computer systems company,
from January 1996 to May 1996, and Corporate Controller from July 1994 to
December 1995. From 1982 to 1994, Mr. Darer held several positions in
financial management at Computervision Corporation, a CAD/CAM software and
services company, the most recent of which was the Controller of the
Computervision Group. Mr. Darer received an M.B.A. from the Harvard Graduate
School of Business Administration, an M.S. from Northeastern University and a
B.S. from the Polytechnic Institute of Brooklyn.
KILLKO A. CABALLERO has been a director of the Company and has served as the
Company's Senior Vice President of Research and Development and Chief
Technology Officer since November 1995. Mr. Caballero was a co-founder of ASC
and served as its President, Chief Executive Officer and Chairman of the Board
from July 1991 until he joined the Company. Mr. Caballero received a B.A. in
computer science from the University of Geneva and a degree in mechanical
engineering from the Engineering School of Geneva, Switzerland.
CARL A. KOPPEL has served as the Company's Vice President of Sales,
International since July 1996. Mr. Koppel served as the Company's Vice
President of Sales from November 1995 to July 1996 and as Director of
International Sales from April 1994 to October 1995. Mr. Koppel served as Vice
President of International Sales and Marketing for Grafpoint from September
1992 until he joined the Company. Mr. Koppel served as President of U.S.
operations of JSB Corporation, a computer software company headquartered in
the United Kingdom, from July 1991 to September 1992. Mr. Koppel received a
B.Sc. in Electrical Engineering from the Strathclyde University in Scotland.
JACK A. DUTZY joined the Company in October 1995 as Vice President of
Marketing and Strategic Sales and was elected Vice President of Sales,
Americas in July 1996. Mr. Dutzy served as Director of Sales--
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<PAGE>
Americas of Proteon, Inc., a networking company, from January 1987 to July
1992 and as its Director of Sales and Marketing--Americas from April 1994 to
April 1995. From July 1992 to December 1992, Mr. Dutzy served as Vice
President of Sales and Marketing of Microtouch Systems, Inc., a touch screen
company. Mr. Dutzy received a B.S. in Physics from Michigan State University.
DAVID O. BUNDY has served as the Company's Vice President of Engineering
since January 1994. Mr. Bundy was the Vice President and Principal Engineer of
the Company (then known as Visual International, Inc.) from August 1993 to
December 1993, of Visual T.I., Inc. from September 1991 until it merged into
Visual International, Inc. in August 1993, and of Visual Technology, Inc. from
September 1988 until it merged with Visual T.I., Inc. in September 1991.
ARTHUR H. BRUNO has served as a director of the Company since February 1994.
Mr. Bruno is the Chairman, President and Chief Executive Officer of Castelle,
a networking and telecommunications company, positions that he has held since
October 1993. Since July 1991, Mr. Bruno has served as a Vice President of and
consultant to Hambrecht & Quist LLC, a venture capital company. From 1991 to
1993, Mr. Bruno served as the Company's Chairman and Chief Executive Officer.
JONATHAN G. MORGAN has served as a director of the Company since May 1996.
Since June 1993, Mr. Morgan has been Managing Director/Group Head of
Investment Banking-Technology of Prudential Securities Incorporated, an
investment banking firm. From June 1992 to June 1993, Mr. Morgan was Managing
Director/Group Head of Corporate Finance of the San Francisco office of Sutro
& Co., Inc., an investment banking firm. From January 1992 to June 1992, he
acted as an independent financial consultant and from May 1985 to January 1992
he served as the Managing Director/Head of Mergers and Acquisitions of
Montgomery Securities, an investment banking firm.
PIERRE-GABRIEL VALLEE has served as a director of the Company since May
1994. Since December 1994, Mr. Vallee has been acting as Managing Director of
Innolion SA, a subsidiary of the French bank Credit Lyonnais. From 1991 to
1993, Mr. Vallee was Chairman of Opindus/Speic, a group of companies in the
mechanical engineering field. Mr. Vallee holds degrees from L'Ecole Nationale
Superieure des Arts et Metiers, L'Institute d'Etudes Politiques Paris and
L'Institut de Haute Finance.
Executive officers of the Company are appointed by and serve at the
discretion of the Board of Directors. Directors of the Company are elected to
serve until the next annual meeting of stockholders (or special meeting in
lieu thereof) and until their successors are duly elected and qualified.
The Board of Directors has a Compensation Committee, which provides
recommendations concerning salaries and incentive compensation for directors,
officers and employees of and consultants to the Company, and an Audit
Committee, which reviews the results and scope of the audit and other services
provided by the Company's independent auditors.
The Company does not pay fees to members of the Board of Directors and
presently has no plans to pay directors' fees. On July 18, 1996, the Company
granted Mr. Morgan a nonqualified option to purchase 5,000 shares of Common
Stock at an exercise price of $6.00 per share.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation earned by the Company's Chief Executive Officer and the other two
executive officers whose compensation for services rendered in all capacities
to the Company was in excess of $100,000 for the fiscal year ended December
31, 1995 (collectively, the "Named Executive Officers").
47
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------
NAME AND PRINCIPAL POSITION(S) SALARY($) BONUS($)
- ------------------------------ ---------- ---------
<S> <C> <C>
Howard R. Berke....................................... $ 148,433 $ 50,000
President and Chief Executive Officer
David O. Bundy........................................ 109,661 20,000
Vice President of Engineering
Carl A. Koppel........................................ 104,616(1) 5,000
Vice President of Sales, International
</TABLE>
- --------
(1)Includes $46,843 earned as commissions.
BENEFIT PLANS
Option Grants
During the fiscal year ended December 31, 1995, the Company did not grant
any stock options to Named Executive Officers. In each of February 1996 and
May 1996, the Company granted Mr. Bundy options to purchase 5,000 shares of
Common Stock at exercise prices of $2.50 and $5.00 per share, respectively.
Option Exercises and Year-End Value Table
The following table sets forth certain information with respect to the
exercise of stock options by the Named Executive Officers during 1995 and the
number and value of unexercised options held by the Named Executive Officers
on December 31, 1995. No options were exercised by any of the Named Executive
Officers during the fiscal year ended December 31, 1995.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1995(#) DECEMBER 31, 1995($)(1)
------------------------- -------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------------------------- -------------------------
<S> <C> <C>
Howard R. Berke............. 139,378/ 69,689 $1,115,024/$557,512
David O. Bundy.............. 27,917/ 7,083 $ 233,336/$ 56,664
Carl A. Koppel.............. 23,432/ 7,955 $ 187,456/$ 63,640
</TABLE>
- --------
(1) There was no public trading market for the Common Stock on December 31,
1995. Accordingly, solely for purposes of this table, the values in these
columns have been calculated on the basis of an assumed initial public
offering price of $9.00 per share (rather than a determination of the fair
market value of the Common Stock on December 31, 1995), less the aggregate
exercise price of the options.
Stock Option Plans
In each of 1992, 1993, 1994, 1995 and 1996, the Board of Directors of the
Company adopted a Stock Option Plan (collectively, the "Prior Option Plans"),
each of which was approved by the stockholders of the Company. Options may no
longer be granted under the Prior Option Plans. In addition, in July 1996 the
Company's Board of Directors adopted, and its stockholders approved, the White
Pine Software, Inc. 1996 Incentive and Nonqualified Stock Option Plan (the
"1996 Option Plan"), under which a total of 550,000 shares of Common Stock
were reserved for issuance, provided that prior to the closing of this
offering the Board of Directors may
48
<PAGE>
not grant options to purchase more than 200,000 shares of Common Stock under
the 1996 Option Plan. As of July 25, 1996, options to purchase an aggregate of
941,085 shares of Common Stock having a weighted average exercise price of
$1.43 per share were outstanding under the Prior Option Plans, the 1996 Option
Plan or otherwise, and options to purchase 36,873 shares of Common Stock had
been exercised under the Prior Option Plans.
The 1996 Option Plan is administered by the Compensation Committee. Under
the 1996 Option Plan, the Compensation Committee selects the individuals to
whom options will be granted and determines the option exercise price and
other terms of each option, subject to the provisions of the 1996 Option Plan.
The 1996 Option Plan authorizes the grant of options to purchase Common
Stock intended to qualify as incentive stock options ("Incentive Options"), as
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), and the grant of options that do not so qualify ("Nonqualified
Options"). Under the 1996 Option Plan, Incentive Options may be granted only
to officers and other employees of the Company or a subsidiary, including
members of the Board of Directors who are also employees of the Company or a
subsidiary. Nonqualified Options may be granted to officers or other employees
of the Company or a subsidiary, to members of the Board of Directors or the
board of directors of a subsidiary, whether or not employees of the Company or
a subsidiary, and to consultants and other individuals providing services to
the Company or a subsidiary.
Payment of the exercise price for shares purchased upon exercise of options
under the 1996 Option Plan may be made (i) in cash or by check, bank draft or
money order payable to the Company, (ii) in certain circumstances, through the
delivery of shares of Common Stock (which, in the case of shares acquired from
the Company upon exercise of an option, have been outstanding for at least six
months) having a fair market value equal to the purchase price, (iii) by
delivery of an unconditional and irrevocable undertaking by a broker to
deliver promptly to the Company sufficient funds to pay the purchase price,
(iv) in certain circumstances, through the delivery of a promissory note or
(v) by any combination of these permissible forms of payment. In the event
that payment of the exercise price is made under (ii) above, the 1996 Option
Plan permits the Compensation Committee to grant an automatic reload option to
purchase the number of shares surrendered at an exercise price equal to the
fair market value of the Common Stock on the date of such surrender.
The 1996 Option Plan provides that, upon a reorganization, merger,
consolidation, liquidation or sale of substantially all of the assets of the
Company (each, a "Transaction"), the Compensation Committee may accelerate the
time for exercise of all unexercised and unexpired options to and after a date
prior to the effective date of the Transaction. Alternatively, the
Compensation Committee may cancel any outstanding options as of the effective
date of the Transaction, provided that the Compensation Committee shall have
accelerated the time for exercise of all unexercised and unexpired options
that it proposes to cancel and shall have given each optionholder notice of
and a right to exercise such options in full. If the Compensation Committee
does not take either of the foregoing actions, then after the effective date
of the Transaction unexercised options shall remain outstanding and shall be
exercisable for shares of Common Stock or, if applicable, shares of such stock
or other securities, cash or property as the holders of shares of Common Stock
shall have received in the Transaction.
The Prior Plans provide that the Board may provide for immediate vesting of
options in the event of a proposed sale of all or substantially all of the
assets of the Company, or a merger or consolidation of the Company with or
into another corporation, a liquidation, or a change in control. If the Board
of Directors determines that immediate vesting is not appropriate, then, if
the event is a merger or consolidation, the options must be assumed or an
equivalent option must be substituted by such successor corporation as a
condition to the completion of the transaction. In addition, if within 12
months after the completion of the transaction the optionee is terminated as a
result of actual or constructive discharge for any reason other than cause, as
defined in the Prior Plans, by the Company or its successor, such optionee's
option shall vest immediately and be fully exercisable (subject to certain
limitations for incentive stock options) for the shorter of (i) two years
(five years under the 1992 Stock Option Plan), in the case of a nonqualified
option, and 90 days, in the case of an incentive option, from the date of
termination or (ii) the remaining term of the option.
49
<PAGE>
Stock Purchase Plan
In July 1996, the Board of Directors adopted, and the Company's stockholders
approved, the Company's 1996 Employee Stock Purchase Plan (the "Stock Purchase
Plan"), under which up to 100,000 shares of Common Stock may be purchased by
employees of the Company. The Stock Purchase Plan will become effective upon
the closing of this offering.
During each six-month offering period under the Stock Purchase Plan,
participating employees are entitled to purchase shares through payroll
deductions. The maximum number of shares that may be purchased will be
determined on the first day of the offering period pursuant to a formula under
which a specific percentage of the employee's projected base pay for the
offering period is divided by 85% of the market value of one share of Common
Stock on the first day of the offering period, multiplied by two. During each
offering period, the price at which the employee will be able to purchase
shares of Common Stock will be 85% of the last trading price of the Common
Stock on the Nasdaq National Market on the date that the offering period
commences or the date the offering period concludes, whichever is lower.
The Stock Purchase Plan is administered by the Compensation Committee. All
employees who meet certain minimum criteria based on hours worked per week and
length of tenure with the Company are eligible to participate in the Stock
Purchase Plan. No employee may be granted an option under the Stock Purchase
Plan (i) if the employee is an officer who is a "highly compensated employee"
under the Code, (ii) if the option would permit the employee's rights to
purchase stock under the Stock Purchase Plan (and any similar plan of the
Company or a subsidiary) to exceed $25,000 of the fair market value of the
stock for each calendar year in which such option is outstanding or (iii) if,
immediately after the grant, the employee would own stock possessing three
percent or more of the total combined voting power or value of all classes of
stock of the Company or any subsidiary.
EMPLOYMENT AGREEMENTS
On January 3, 1994, the Company entered into an agreement with Howard R.
Berke, whereby Mr. Berke agreed to serve as the President and Chief Executive
Officer of the Company. The initial term of the agreement ended on January 3,
1996, but the agreement automatically renews for successive two-year periods
unless it is terminated by either party with at least 30 days' prior written
notice. Pursuant to the agreement, Mr. Berke receives a base salary of
$165,000, which is reviewed annually, and is entitled to receive an incentive
bonus of up to 50% of his base compensation, based upon goals established by
the Board of Directors and other performance measures determined in the
discretion of the Board of Directors. Pursuant to the agreement, Mr. Berke was
granted a stock option to purchase 209,067 shares of Common Stock at an
exercise price of $1.00 per share. If Mr. Berke's employment is terminated
without cause, Mr. Berke will be entitled to a pro rata portion of (i) his
incentive bonus earned though the termination date and (ii) his salary for six
months or until he becomes employed elsewhere, whichever occurs first; if his
new salary is lower than his base salary at the Company, however, the Company
will pay the difference for the balance of this six-month period. If his
employment is terminated with cause, he is entitled to receive 15 days'
salary. Pursuant to an amendment to the agreement, the Company reimbursed Mr.
Berke for $79,812 in moving and temporary accommodation expenses in December
1994. Mr. Berke is entitled to participate in all employee benefits, including
health, vision, dental and retirement plans, that the Company provides to its
employees generally. The agreement provides that Mr. Berke will not directly
or indirectly compete with the Company or solicit its employees, customers or
prospective customers on behalf of himself or any entity that engages in any
business involving the sale, distribution, development or research concerning
computer software in breach of the agreement during the term of the agreement
and for a period of one year following the date of the termination of his
employment.
The Company entered into a Nondisclosure and Noncompetition Agreement with
David O. Bundy dated February 15, 1996. Pursuant to the agreement, Mr. Bundy
agreed that while employed by the Company and for a period of 18 months
following the termination of his employment with the Company for any reason,
he will not, directly or indirectly, compete with the Company or solicit any
of the Company's employees, contractors,
50
<PAGE>
suppliers, existing customers or prospective customers on behalf of himself or
any other entity that engages in the sale, distribution or development of or
research concerning computer software and technology in breach of the
agreement. Either party may terminate the agreement by giving the other party
30 days' prior written notice. If Mr. Bundy's employment is terminated without
cause during the term of the agreement, he will be entitled to his base salary
for six months or until he becomes employed elsewhere, whichever occurs first;
provided, however, that if his new salary is lower than his base salary at the
Company, the Company will pay the difference for the balance of this six-month
period. Pursuant to the agreement, Mr. Bundy was granted a stock option to
purchase 5,000 shares of Common Stock at an exercise price of $2.50 per share.
On October 10, 1995, the Company entered into a two-year employment
agreement with Killko A. Caballero, whereby Mr. Caballero agreed to serve as
Senior Vice President of Product Development and Chief Technical Officer of
the Company. Pursuant to the agreement, Mr. Caballero receives a base salary
of $100,000, which is reviewed annually, and is eligible to receive an annual
fiscal year incentive bonus with a maximum annual amount of $20,000. During
the first year of the agreement, Mr. Caballero is guaranteed to receive one-
half of the incentive bonus. He is entitled to participate in all employee
benefits, including health, vision, dental and retirement plans, that the
Company provides to its employees generally. If Mr. Caballero's employment is
terminated without cause during the first two years of the term of the
agreement, Mr. Caballero will be entitled to (i) a pro rata portion of his
incentive bonus earned through the termination date and (ii) his salary for
six months or until he becomes employed elsewhere, whichever occurs first;
provided, however, that if his new salary is lower than his base salary at the
Company, the Company will pay the difference for the balance of this six-month
period. During the second year of the agreement, if Mr. Caballero's employment
is terminated without cause and (i) he is entitled to some payment of base
salary and incentive bonus and (ii) he is unable to secure employment in the
United States within ninety days and this results in his deportation, the
Company shall pay him $10,000 in relocation fees. The agreement provides that
Mr. Caballero will not directly or indirectly compete with the Company or
solicit its employees, customers or prospective customers on behalf of himself
or any entity that engages in any business involving the sale, distribution,
development or research concerning computer software in breach of the
agreement during the term of the agreement and for a period of one year
following the date of his termination.
51
<PAGE>
CERTAIN TRANSACTIONS
In December 1995, in connection with the Company's purchase of all of the
outstanding shares of ASC, the Company agreed to issue 403,325 shares of its
Common Stock to Killko A. Caballero, a director and the Senior Vice President
of Research and Development and Chief Technology Officer of the Company, in
exchange for 7,904 shares of ASC. In the same transaction, the Company agreed
to issue an aggregate of 766,286 shares of Common Stock to Sofinnova S.A.,
Sofinnova Capital FCPR, and CV Sofinnova Ventures Partners II (together, the
"Sofinnova Entities"), which own beneficially more than 5% of the outstanding
shares of Common Stock of the Company, in exchange for an aggregate of 15,017
shares of ASC. Approximately 10% of the shares issuable to each of Mr.
Caballero and the Sofinnova Entities have not been issued but are issuable on
or before December 15, 1996 upon the expiration of certain indemnification
arrangements under the Acquisition Agreement dated October 10, 1995.
Pursuant to a stock purchase agreement dated March 19, 1996, the Company
sold 343,053 shares of $5.83 Stock to six entities associated with Advent
International Corporation (the "Advent Group"), which own beneficially more
than 5% of the outstanding shares of Common Stock of the Company, for an
aggregate purchase price of approximately $2.0 million. Pursuant to the
Company's amended and restated certificate of incorporation, each share of
$5.83 Stock will automatically convert into one share of Common Stock upon the
closing of this offering.
In March 1996, all of the Company's stockholders who currently own
beneficially more than five percent of the outstanding shares of Common Stock,
Arthur H. Bruno, a director of the Company, and all of the current executive
officers of the Company other than Richard M. Darer entered into an agreement
with the Company and certain other stockholders of the Company (the
"Shareholders' Agreement") pursuant to which the parties to the agreement were
granted a right of participation in and a right of first refusal with respect
to certain sales of shares by certain management stockholders. The parties to
the Shareholders' Agreement were also granted a preemptive right to purchase
all or part of their pro rata shares of New Securities (as defined in the
Shareholders' Agreement) issued by the Company. In addition, the Advent Group
was given the right to have a representative attend all meetings of the
Company's Board of Directors in a non-voting capacity, provided that the
Advent Group continues to own at least 50% of the original number of shares of
the Company held by it as of the date of the agreement. The Shareholders'
Agreement was amended in July 1996 to provide that it shall terminate
immediately prior to the consummation of an underwritten public offering by
the Company in which the aggregate net proceeds to the Company equal at least
$12 million and in which the public offering price per share of Common Stock
equals or exceeds $6.00 (a "Qualified Public Offering").
Pursuant to the Shareholders' Agreement, the parties to the Shareholders'
Agreement entered into a Designation and Election of Directors agreement
whereby the parties agreed to vote all the shares of the Company's stock held
by them so as to fix the number of the directors of the Company at five and to
elect to the Board of Directors of the Company the following individuals: (i)
one member designated by certain affiliates of Hambrecht & Quist; (ii) the
President of the Company; (iii) one member designated by Innolion S.A. and
Land Free Investment; (iv) one member collectively elected by the former
stockholders of White Pine Software, Inc., a New Hampshire corporation, the
former Grafpoint stockholder and the former ASC stockholders pursuant to the
terms of a certain Election Procedures to Stockholders' Voting Agreement among
such stockholders dated October 10, 1995; and (v) one outside Board member
designated by the majority vote of the other four designated directors and the
Sofinnova Entities. The directors initially designated pursuant to this
agreement are Arthur H. Bruno, Howard R. Berke, Pierre-Gabriel Vallee and
Killko A. Caballero. A representative of the Sofinnova Entities served as the
fifth director until Jonathan G. Morgan, an outside director, was elected in
May 1996. In addition, the Sofinnova Entities were granted the right to have a
representative attend all meetings of the Company's Board of Directors in a
non-voting capacity as long as they hold at least 50% of the shares owned by
them as of December 15, 1995. This agreement terminates upon termination of
the Shareholders' Agreement.
On January 31, 1996, the Company entered into a Software License Agreement
with Voxware, Inc. ("Voxware"), whereby the Company licenses Voxware's voice
compression technology. The Advent Group, which owns beneficially more than 5%
of the outstanding Common Stock of the Company, owns beneficially
approximately 10% of the outstanding stock of Voxware.
For a description of certain employment and other arrangements between the
Company and its executive officers, see "Management--Executive Compensation"
and "--Employment Agreements." For a description of certain registration
rights agreements between the Company and certain executive officers and
stockholders, see "Description of Capital Stock--Registration Rights."
52
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock as of July 25, 1996, and as adjusted to
reflect the sale of the shares of Common Stock offered by this Prospectus, by
(i) each person (or group of affiliated persons) known by the Company to own
beneficially more than five percent of the outstanding shares of Common Stock,
(ii) each of the directors of the Company, (iii) each of the Named Executive
Officers and (iv) all directors and executive officers of the Company as a
group:
<TABLE>
<CAPTION>
SHARES PERCENT BENEFICIALLY OWNED(2)
BENEFICIALLY --------------------------------
NAME AND ADDRESS(1) OWNED PRIOR TO OFFERING AFTER OFFERING
- ------------------- ------------ ----------------- --------------
<S> <C> <C> <C>
Arthur H. Bruno(3).............. 1,540,358 25.2% 16.9%
Hambrecht & Quist Group(4)...... 1,405,234 23.3% 15.6%
One Bush Street
San Francisco, California 94104
Innolion/LandFree
Investment(5).................. 920,330 15.3% 10.2%
57 Rue Saint Roch
Paris, France 75001
Pierre-Gabriel Vallee(6)........ 920,330 15.3% 10.2%
Sofinnova Entities(7)........... 766,286 12.7% 8.5%
51 Rue Saint Georges
Paris, France 75009
Charles Lingel.................. 595,840 9.9% 6.6%
115 217th Avenue, NE
Redmond, Washington 98053
Killko A. Caballero(8).......... 403,325 6.7% 4.5%
Advent International
Corporation(9)................. 343,053 5.7% 3.8%
101 Federal Street
Boston, Massachusetts 02110
Howard R. Berke(10)............. 191,644 3.1% 2.1%
David O. Bundy(11).............. 34,338 * *
Carl A. Koppel(12).............. 25,971 * *
Jonathan G. Morgan.............. -- * *
All directors and executive
officers as a group (9
persons)(13)................... 3,126,938 49.2% 33.4%
</TABLE>
- --------
* Represents less than 1% of the outstanding shares of Common Stock.
(1) The address of all persons who are executive officers or directors of the
Company is in care of the Company, 40 Simon Street, Nashua, New Hampshire
03060.
(2) Unless otherwise noted, each person or group identified possesses sole
voting and investment power with respect to such shares, subject to
community property laws, where applicable. Shares not outstanding but
deemed beneficially owned by virtue of the right of a person or group to
acquire them within 60 days of July 25, 1996 are treated as outstanding
only for purposes of determining the amount and percentages beneficially
owned by such person or group. The number of shares of Common Stock
deemed outstanding prior to this offering consists of (i) 5,613,359
shares of Common Stock outstanding as of July 25, 1996, (ii) 394,511
shares of Common Stock issuable at the closing of this offering upon
conversion of 394,511 shares of $5.83 Stock outstanding as of July 25,
1996 and (iii) 20,000 shares of Common Stock expected to be issued upon
exercise of the Cornell Warrant on or before the closing of this
offering. Percentages beneficially owned after the offering assume no
exercise of the Underwriters' over-allotment option.
(footnotes continued on next page)
53
<PAGE>
(3) Includes 1,405,234 shares held by the Hambrecht & Quist Group as
described in Note 4 and 85,000 shares subject to stock options
exercisable within 60 days of July 25, 1996. Mr. Bruno is a Vice
President of and a consultant to Hambrecht & Quist LLC. Mr. Bruno
disclaims beneficial ownership of the shares held by the Hambrecht &
Quist Group.
(4) Consists of approximately 623,167 shares held by H & Q London Ventures,
6,271 shares held by Hambrecht & Quist Group, 206,917 shares held by
shares held by H & Q Ventures IV, 206,917 shares held by H & Q Ventures
International CV, 444 shares held by H & Q Venture Partners, 76,924
shares held by William Hambrecht, 1,000 shares held by Hambrecht & Quist,
208,844 shares held by the Hambrecht 1980 Revocable Trust, 16 shares held
by Hamquist and 74,734 shares held by Phoenix Venture (BVI), Ltd.
(5) Consists of 100,000 shares held by Innolion S.A. and 820,330 shares held
by Land Free Investment. Innolion S.A. and Land Free Investment are
affiliates of Credit Lyonnais.
(6) Consists of shares described in Note 5. Mr. Vallee is the Managing
Director of Innolion S.A.
(7) Consists of approximately 221,767 shares held by Sofinnova S.A., 337,499
shares held by Sofinnova Capital FCPR and 207,020 shares held by C.V.
Sofinnova Ventures Partners II, of which approximately 23,285, 35,437 and
21,737 shares, respectively, are being held in escrow until December 15,
1996 pursuant to an acquisition agreement dated October 10, 1995 between
the Company and the former ASC stockholders. See "Certain Transactions."
Sofinnova S.A., a management and direct investment company, manages the
funds of Sofinnova Capital FCPR, and its wholly-owned subsidiary manages
the funds of C.V. Sofinnova Venture Partners II.
(8) 42,349 of the shares held by Mr. Caballero are being held in escrow until
December 15, 1996 pursuant to an acquisition agreement dated October 10,
1995 between the Company and the former ASC stockholders. See "Certain
Transactions."
(9) Consists of 42,882 shares held by Adwest Limited Partnership, 102,916
shares held by Adtel Limited Partnership, 17,153 shares held by ADVENTACT
Limited Partnership, 144,082 shares held by Golden Gate Development and
Investment Limited Partners, 857 shares held by Advent International
Investors II Limited Partnership and 35,163 shares held by Advent
Partners Limited Partnership. Advent International Limited Partnership is
the general partner of Adwest Limited Partnership, Adtel Limited
Partnership, ADVENTACT Limited Partnership and Golden Gate Development
and Investment Limited Partners. Advent International Corporation is the
general partner of Advent International Limited Partnership. Advent
International Corporation is the general partner of Advent International
Investors II Limited Partnership and Advent Partners Limited Partnership.
(10) Includes 171,644 shares subject to stock options exercisable within 60
days of July 25, 1996.
(11) Includes 33,333 shares subject to stock options exercisable within 60
days of July 25, 1996.
(12) Represents 25,971 shares subject to stock options exercisable within 60
days of July 25, 1996.
(13) Includes 326,920 shares subject to stock options exercisable within 60
days of July 25, 1996.
54
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 15,000,000 shares of
Common Stock and 500,000 shares of $5.83 Stock. As of July 25, 1996 there were
outstanding 5,613,359 shares of Common Stock held by 147 holders of record and
394,511 shares of $5.83 Stock, held by seven holders of record. Effective upon
the closing of this offering, each share of $5.83 Stock will automatically
convert into one share of Common Stock.
Based on securities outstanding as of July 25, 1996, it is expected that
immediately after the closing of this offering, 9,027,870 shares of Common
Stock will be outstanding, together with options to acquire 941,085 additional
shares. The Restated Charter, which will eliminate references to the $5.83
Stock, will be filed immediately after the closing of this offering, and the
Restated By-Laws will become effective upon the closing of this offering. Upon
the effectiveness of the Restated Charter, the authorized capital stock of the
Company will consist of 30,000,000 shares of Common Stock and 5,000,000 shares
of preferred stock, $.01 par value per share ("Preferred Stock"). The
description set forth below gives effect to the filing of the Restated Charter
and the adoption of the Restated By-Laws.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share for each share
held of record on all matters submitted to a vote of stockholders. Holders of
the Common Stock do not have cumulative voting rights, and therefore the
holders of a majority of the shares of Common Stock voting for the election of
directors may elect all of the Company's directors standing for election.
Subject to preferences that may be applicable to the holders of outstanding
shares of Preferred Stock, if any, the holders of Common Stock are entitled to
receive such lawful dividends as may be declared by the Board of Directors. In
the event of a liquidation, dissolution or winding up of the affairs of the
Company, whether voluntary or involuntary, and subject to the rights of the
holders of outstanding shares of Preferred Stock, if any, the holders of
shares of Common Stock shall be entitled to receive pro rata all of the
remaining assets of the Company available for distribution to its
stockholders. The Common Stock has no preemptive, redemption, conversion or
subscription rights. All outstanding shares of Common Stock are, and the
shares of Common Stock to be issued pursuant to this offering will be, fully
paid and non-assessable. The issuance of Common Stock or of rights to purchase
Common Stock could have the effect of making it more difficult for a third
party to acquire, or of discouraging a third party from attempting to acquire,
a majority of the outstanding voting stock of the Company.
PREFERRED STOCK
The Board is authorized, subject to any limitations prescribed by Delaware
law, to provide for the issuance of Preferred Stock in one or more series, to
establish from time to time the number of shares to be included in each such
series, to fix the voting powers, designations, preferences and relative,
participating, optional or other special rights (and the qualifications,
limitations or restrictions thereof) of the shares of each such series and to
increase (but not above the total number of authorized shares of Preferred
Stock) or decrease (but not below the number of shares of such series then
outstanding) the number of shares of any such series without further vote or
action by the stockholders. The Board is authorized to issue Preferred Stock
with voting, conversion and other rights and preferences that could adversely
affect the voting power or other rights of the holders of Common Stock.
Although the Company has no current plans to issue such shares, the issuance
of Preferred Stock or of rights to purchase Preferred Stock could have the
effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, a majority of the
outstanding voting stock of the Company.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE RESTATED CHARTER AND BY-LAWS AND OF
DELAWARE LAW
Restated Charter and By-Laws
The Restated Charter and the Restated By-Laws contain certain provisions
that could discourage potential takeover attempts and make more difficult the
acquisition of a substantial block of the Common Stock. The
55
<PAGE>
Restated Charter authorizes the directors to issue, without stockholder
approval, shares of Preferred Stock in one or more series and to fix the
voting powers, designations, preferences and relative, participating, optional
or other special rights (and the qualifications, limitations or restrictions
of such preferences and rights) of the shares of each such series. The
Restated Charter provides that stockholders may act only at meetings of
stockholders and not by written consent in lieu of a stockholders' meeting.
The Restated By-Laws provide that special meetings of the Company's
stockholders may be called by the President and must be called by the
President or the Secretary at the written request of a majority of the
directors. The Restated By-Laws also provide that nominations for directors
may not be made by stockholders at any annual or special meeting thereof
unless the stockholder intending to make a nomination notifies the Company of
its intentions a specified number of days in advance of the meeting and
furnishes to the Company certain information regarding itself and the intended
nominee. The Restated By-Laws also require a stockholder to provide to the
Secretary of the Company advance notice of business to be brought by such
stockholder before any annual or special meeting of stockholders as well as
certain information regarding such stockholder and others known to support
such proposal and any material interest they may have in the proposed
business. These provisions could delay stockholder actions that are favored by
the holders of a majority of the outstanding stock of the Company until the
next stockholders' meeting. These provisions may also discourage another
person or entity from making a tender offer for the Company's Common Stock,
because such person or entity, even if it acquired a majority of the
outstanding stock of the Company, could only take action at a duly called
stockholders' meeting and not by written consent.
Delaware Anti-Takeover Statute
The Company is subject to Section 203 of the Delaware General Corporation
Law which, subject to certain exceptions, prohibits a Delaware corporation
from engaging in any business combination with any interested stockholder for
a period of three years following the date that such stockholder became an
interested stockholder, unless (i) prior to such date, the board of directors
of the corporation approved either the business combination or the transaction
which resulted in the stockholder becoming an interested stockholder; (ii)
upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number of
shares outstanding those shares owned (x) by persons who are directors and
also officers and (y) by employee stock plans in which employee participants
do not have the right to determine confidentially whether shares held subject
to the plan will be tendered in a tender or exchange offer; or (iii) on or
subsequent to such date, the business combination is approved by the board of
directors and authorized at an annual or special meeting of stockholders, and
not by written consent, by the affirmative vote of at least two-thirds of the
outstanding voting stock which is not owned by the interested stockholder. The
application of Section 203 may limit the ability of stockholders to approve a
transaction that they may deem to be in their best interests.
Section 203 defines "business combination" to include (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii)
any sale, transfer, pledge or other disposition of 10% or more of the assets
of the corporation to or with the interested stockholder; (iii) subject to
certain exceptions, any transaction which results in the issuance or transfer
by the corporation of any stock of the corporation to the interested
stockholder; (iv) any transaction involving the corporation which has the
effect of increasing the proportionate share of the stock of any class or
series of the corporation beneficially owned by the interested stockholder; or
(v) 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
associated with, affiliated with or controlling or controlled by such entity
or person.
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Restated Charter provides that no director of the Company shall be
personally liable to the Company or to any stockholder for monetary damages
arising out of such director's breach of fiduciary duty, except to the
56
<PAGE>
extent that the elimination or limitation of liability is not permitted by the
Delaware General Corporation Law. The Delaware General Corporation Law, as
currently in effect, permits charter provisions eliminating the liability of
directors for breach of fiduciary duty, except that such provisions do not
eliminate or limit the liability of directors for (i) any breach of the
director's duty of loyalty to a corporation or its stockholders, (ii) any acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) any payment of a dividend or approval of a
stock purchase that is illegal under Section 174 of the Delaware General
Corporation Law or (iv) any transaction from which the director derived an
improper personal benefit. A principal effect of this provision of the
Restated Charter is to limit or eliminate the potential liability of the
Company's directors for monetary damages arising from any breach of their duty
of care, unless the breach involves one of the four exceptions described in
(i) through (iv) above.
The Restated Charter and the Restated By-Laws further provide for the
indemnification of the Company's directors and officers to the fullest extent
permitted by Section 145 of the Delaware General Corporation Law, including
circumstances in which indemnification is otherwise discretionary. Insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended (the "Securities Act"), may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
REGISTRATION RIGHTS
In connection with prior issuances of shares of the Company's Common Stock
and $5.83 Stock, the Company granted certain rights with respect to the
registration under the Securities Act of the shares of outstanding Common
Stock and the shares of Common Stock issuable upon the conversion or exercise
of any other securities owned by certain stockholders of the Company on the
date of this Prospectus. Based on securities outstanding as of July 25, 1996,
it is expected that immediately after the closing of this offering, such
stockholders will hold (i) an aggregate of 5,898,384 shares of Common Stock,
consisting of (A) 5,503,873 shares of outstanding Common Stock and (B) 394,511
shares of Common Stock (the "Registrable Converted Shares") issuable upon
conversion of outstanding shares of $5.83 Stock, and (ii) options to purchase
an aggregate of 294,044 shares of Common Stock (collectively, the "Registrable
Shares").
The holders of more than 50% of the then-outstanding Registrable Converted
Shares are entitled, at any time after 120 days following the date of this
Prospectus, to request that the Company file a registration statement under
the Securities Act covering the sale of some or all of the Registrable
Converted Shares then held by such holders, provided that (i) the Company is
not required to effect more than one such demand registration, (ii) the
effective date of such registration statement shall not occur prior to the one
hundred eighty-first day after the date of this Prospectus and (iii) the
aggregate market value of the Registrable Converted Shares registered pursuant
to such request shall not exceed $2,300,000. The holders of more than 50% of
the then-outstanding Registrable Shares are entitled, at any time after 180
days following the date of this Prospectus, to request that the Company file a
registration statement under the Securities Act covering the sale of some or
all of the Registrable Shares then held by such holders, provided that the
Company is not required to effect more than one such demand registration.
Within 75 days of receipt of any such request, the Company must file a
Registration Statement with respect to such Registrable Converted Shares or
Registrable Shares, as the case may be, and must use its best efforts to cause
the offering of such shares to be registered under the Securities Act. The
underwriters (if any) of any offering of such shares have the right, subject
to certain conditions, to limit the number of Registrable Shares included in
the registration. Moreover, the Company must use its best efforts to qualify
for registration on Form S-3 (or any comparable or successor form). Once the
Company has qualified to use Form S-3 to register securities under the
Securities Act, the holders of Registrable Converted Shares shall have the
right to request an unlimited number of registrations on Form S-3, provided
that the Company is not required to register Registrable Shares having an
aggregate market value less than $1,000,000. The Company is not required to
register any Registrable Shares if in the opinion of its counsel such shares
may be sold without registration under the Securities Act in the manner and in
the quantity in which such shares were proposed to be sold.
57
<PAGE>
Each holder of Registrable Shares has agreed that, upon the request of the
Company and the managing underwriter of an offering by the Company of Common
Stock or other securities of the Company pursuant to a registration statement,
such holder shall agree not to sell publicly or otherwise transfer or dispose
of any Registrable Shares or other securities of the Company for up to 180
days following the effective date of such registration statement, provided
that all holders of Registrable Shares holding not less than the number of
shares of Common Stock held by such holder (including shares of Common Stock
issuable upon exercise or conversion of other securities) and all officers and
directors of the Company shall enter into similar agreements.
In general, all fees, costs and expenses of such registrations (other than
underwriting discounts, selling commissions and certain fees and expenses of
counsel to the selling stockholders) will be borne by the Company. The Company
and the holders of Registrable Shares have agreed to indemnify each other from
certain liabilities relating to any registration in which any Registrable
Shares are included, including liabilities arising under the Securities Act.
The Company has also undertaken that, upon the request of the underwriter of
any offering of Registrable Shares, the Company shall agree to customary
contribution provisions on the part of the Company.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Boston EquiServe
L.P.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the closing of this offering, the Company will have 9,027,870 shares of
Common Stock outstanding (assuming no exercise of options outstanding after
July 25, 1996), of which the 3,000,000 shares of Common Stock sold in this
offering (plus an additional 450,000 shares which will be outstanding if the
Underwriters' over-allotment option is exercised in full) will be freely
tradeable in the United States without restriction under the Securities Act by
persons other than "affiliates" of the Company, as defined under the
Securities Act. The remaining 6,027,870 shares of Common Stock outstanding are
"restricted securities" as defined in Rule 144 under the Securities Act (the
"Restricted Shares"). Restricted securities generally may be sold in the
public market only if registered under the Securities Act or sold in
compliance with Rule 144. Based on securities outstanding as of July 25, 1996,
it is expected that after the closing of this offering the holders of
5,898,384 shares of Common Stock (plus 294,044 shares of Common Stock issuable
upon exercise of outstanding options) will have the right to cause the Company
to register the sale of such shares under the Securities Act. See "Description
of Capital Stock--Registration Rights."
SALES OF RESTRICTED SHARES
Of the Restricted Shares, 5,747,102 shares are subject to the lock-up
agreements described below. Of the Restricted Shares not subject to such lock-
up agreements, 40,830 shares will be eligible for immediate sale in the public
market on the Effective Date pursuant to Rule 144(k) under the Securities Act
and an additional 417 shares will first become eligible for sale in the public
market 90 days after the Effective Date pursuant to Rule 144, subject in
certain cases to the volume limitations and other conditions imposed by Rule
144. Upon the expiration of the lock-up agreements, 180 days after the date of
this Prospectus, an additional 3,543,094 Restricted Shares will be eligible
for sale in the public market pursuant to Rule 144. The remaining 2,423,529
Restricted Shares will become eligible for sale subject to the restrictions of
Rule 144 at later dates.
In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated), who has beneficially owned restricted securities
for at least two years is entitled to sell, within any three-month period, a
number of such securities that does not exceed the greater of 1% of the then-
outstanding shares of the Common Stock (approximately 90,271) shares, based on
the number of shares to be outstanding after this offering) or the average
weekly trading volume in the public market during the four calendar weeks
preceding the filing of the seller's Form 144, provided certain requirements
concerning availability of public information concerning the Company, manner
of sale and notice of sale are satisfied. A person who is not an affiliate,
has not been an affiliate
58
<PAGE>
within three months prior to the sale and has beneficially owned the
restricted securities for at least three years is entitled to sell such shares
under Rule 144(k) without regard to any of the other limitations described
above. Rule 144 also provides that affiliates who are selling shares that are
not restricted securities must nonetheless comply with the same restrictions
applicable to restricted securities with the exception of the holding period
requirement. The two- and three-year holding periods described above do not
begin to run until the full purchase price or other consideration is paid by
the person acquiring the restricted securities from the issuer or an affiliate
of the issuer and may include the holding period of a prior owner who is not
an affiliate of the issuer. The Commission has proposed certain amendments to
Rule 144 that would reduce by one year the holding periods required for shares
to become eligible for sale in the public market pursuant to Rule 144. This
proposal, if adopted, would increase the number of shares of Common Stock
eligible for sale in the public market.
Based on securities outstanding as of July 25, 1996, it is expected that
after the closing of this offering the holders of 5,898,384 Restricted Shares
(plus 294,044 shares of Common Stock issuable upon exercise of outstanding
options) will have the right to cause the Company to register the sale of such
shares under the Securities Act. If such holders exercise their registration
rights, they will be able to sell the registered shares in the public market
upon the effectiveness of the registration statement covering such shares. See
"Description of Capital Stock--Registration Rights."
The Company intends to file one or more registration statements on Form S-8
with respect to 1,515,207 shares of Common Stock issued or issuable under the
1996 Option Plan, the Prior Option Plans and otherwise and 100,000 shares of
Common Stock issued or issuable under the Stock Purchase Plan. See
"Management--Benefit Plans." The registration statements are expected to be
filed as soon as practicable after the date of this Prospectus and will become
effective immediately upon filing. Shares covered by any such registration
statement will be eligible for sale in the public market upon the
effectiveness of such registration statement, subject to the limitations of
Rule 144 that are applicable to affiliates and to the lock-up agreements
described below, if applicable.
Prior to this offering there has been no public market for the Common Stock
of the Company and no prediction can be made as to the effect, if any, that
market sales or the availability for sale of such shares will have on the
market price of the Common Stock prevailing from time to time. Nevertheless,
sales of substantial numbers of shares of Common Stock in the public market
could adversely affect the market price of the Common Stock and could impair
the Company's ability to raise capital through sales of its equity securities.
See "Risk Factors--Absence of Public Market; Possible Volatility of Stock
Price."
LOCK-UP AGREEMENTS
The Company, the Company's executive officers and directors, and certain
other persons that, upon the closing of this offering, will beneficially own
an aggregate of 5,747,102 shares of Common Stock and options to purchase
600,431 shares of Common Stock, have entered into agreements pursuant to which
they have severally agreed that, without the prior written consent of Cowen &
Company, they will not offer, sell, assign, transfer, encumber, contract to
sell, grant an option, right or warrant to purchase or otherwise dispose of
any shares of Common Stock held by them (including any shares of Common Stock
that may be deemed to be beneficially owned by them in accordance with the
rules and regulations of the Commission) or any securities convertible into,
derivative of or exercisable or exchangeable for Common Stock for 180 days
commencing on the date of this Prospectus, except for shares of Common Stock
purchased in this offering or in the public market pursuant to brokers'
transactions. Cowen & Company may, in its sole discretion and at any time
without notice, release all or a portion of the shares from the restrictions
imposed by such agreements. Cowen & Company has advised the Company that it
has no present intention of releasing any of the Company's stockholders or
optionholders from such lock-up agreements until the expiration of such 180-
day period.
59
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the Underwriters named below, and each
of the Underwriters, for whom Cowen & Company, Oppenheimer & Co., Inc. and
Volpe, Welty & Company are acting as Representatives (the "Representatives"),
has severally agreed to purchase from the Company, the respective number of
shares of Common Stock set forth opposite the name of such Underwriter below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITER COMMON STOCK
----------- ------------
<S> <C>
Cowen & Company.................................................
Oppenheimer & Co., Inc..........................................
Volpe, Welty & Company..........................................
---------
Total....................................................... 3,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters are
committed to purchase all of the shares of Common Stock offered hereby (other
than those covered by the over-allotment option described below), if any of
such shares are purchased.
The Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain dealers at such price
less a concession not in excess of $ per share. The Underwriters may allow,
and such dealers may re-allow, a concession not in excess of $ per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may from time
to time be varied by the Representatives.
The Company has granted the Underwriters an option exercisable for up to 30
days after the date of this Prospectus to purchase up to an aggregate of
450,000 additional shares of Common Stock to cover over-allotments, if any. If
the Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them as shown in the foregoing table bears to the 3,000,000 shares of Common
Stock offered hereby. The Underwriters may exercise such option only to cover
over-allotments made in connection with the sale of the Common Stock offered
hereby.
The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act and to contribute
to payments the Underwriters may be required to make in respect thereof.
The Company, the Company's executive officers and directors, and certain
other stockholders and optionholders of the Company have entered into
agreements pursuant to which they have severally agreed that, without the
prior written consent of Cowen & Company, they will not offer, sell, assign,
transfer, encumber, contract to sell, grant an option, right or warrant to
purchase or otherwise dispose of any shares of Common Stock or any securities
convertible into, derivative of or exercisable or exchangeable for Common
Stock for 180 days commencing on the date of this Prospectus, except for
shares of Common Stock purchased in this offering or in the public market
pursuant to brokers' transactions. Cowen & Company may, in its sole discretion
and at
60
<PAGE>
any time without notice, release all or a portion of the shares from the
restrictions imposed by such agreements. Cowen & Company has advised the
Company that it has no present intention of releasing any of the Company's
stockholders or optionholders from such lock-up agreements until the
expiration of such 180-day period. See "Shares Eligible for Future Sale."
The Representatives have advised the Company that the Underwriters do not
intend to confirm sales in excess of five percent of the shares offered hereby
to any account over which they exercise discretionary authority.
Based on securities outstanding as of July 25, 1996, it is expected that
after the closing of this offering the holders of 5,898,384 Restricted Shares
(plus 294,044 shares of Common Stock issuable upon exercise of outstanding
options) will have the right to cause the Company to register the sale of such
shares under the Securities Act. If such holders exercise their registration
rights, they will be able to sell the registered shares in the public market
upon the effectiveness of the registration statement covering such shares. See
"Description of Capital Stock--Registration Rights."
Prior to this offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price of the Common Stock
will be determined by negotiation between the Company and the Representatives.
Among the factors to be considered in such negotiations are the prevailing
market conditions, the results of operations of the Company in recent periods,
the market capitalization and stage of development of other companies that the
Company and the Representatives believe to be comparable to the Company,
estimates of the business potential of the Company, the present state of the
Company's development and other factors deemed relevant. The estimated initial
public offering price range set forth on the cover hereof is subject to change
as a result of market conditions and other factors.
61
<PAGE>
LEGAL MATTERS
The validity of the shares offered hereby will be passed upon for the
Company by Foley, Hoag & Eliot LLP, Boston, Massachusetts. Mark L. Johnson, a
partner at Foley, Hoag & Eliot LLP, is the Secretary of the Company. Certain
legal matters will be passed upon for the Underwriters by Skadden, Arps,
Slate, Meagher & Flom, Boston, Massachusetts.
EXPERTS
The Consolidated Financial Statements of the Company as of December 31,
1995, and for the nine months ended December 31, 1994 and the year ended
December 31, 1995, appearing in this Prospectus and Registration Statement,
and the Consolidated Financial Statements of About Software Corporation S.A.
for the nine months ended December 31, 1994 and the ten months ended October
31, 1995, appearing in this Prospectus and Registration Statement, have been
audited by Ernst & Young, independent auditors, as set forth in their reports
thereon appearing elsewhere herein, and are included in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.
CHANGE IN INDEPENDENT AUDITORS
On March 28, 1996, ASC appointed Ernst & Young Audit as the independent
auditor of certain financial statements to be submitted to the Company for
group reporting purposes. Ernst & Young Audit serves simultaneously with ASC's
local statutory auditor, who serves until the expiration of his six-year
appointment. This co-appointment of independent auditors was recommended by
the board of directors of ASC. Ernst & Young Audit audited the financial
statements of ASC for the nine months ended December 31, 1994 and the ten
months ended October 31, 1995 and its report on such financial statements,
which were prepared in accordance with generally accepted accounting
principles in the United States, is included elsewhere in this Prospectus.
ASC's statutory auditor did not audit the financial statements of ASC
included elsewhere in this Prospectus and, accordingly, did not issue any
report on such statements. ASC's statutory auditor reported on the statutory
financial statements of ASC as of December 31, 1994 and 1995 and for the years
then ended, which were prepared in accordance with generally accepted
accounting practice in France (and not the United States). Neither ASC's
statutory financial statements nor the statutory auditor's reports thereon are
included herein. Such reports contained no adverse opinion or disclaimer of an
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principles. Since January 1, 1994, there have been no disagreements
between ASC and its statutory auditor on any matter of accounting principles
or practices, financial statement disclosure or auditing scope or procedure,
which, if not resolved to such auditor's satisfaction, would have caused him
to make reference to the subject matter of the disagreement in connection with
his reports.
Prior to retaining Ernst & Young Audit as independent auditors for group
reporting purposes, ASC had not consulted with Ernst & Young Audit regarding
accounting principles, the type of audit opinion that might have been rendered
on ASC's financial statements, or any matter that was the subject of
discussion with ASC's statutory auditor.
62
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
SB-2 under the Securities Act with respect to the Common Stock offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the Common Stock, reference is
made to such Registration Statement and the exhibits and schedules filed as a
part thereof. Statements contained in this Prospectus as to the contents of
any contract or any other document referred to are not necessarily complete,
and, in each instance, if such contract or document is filed as an exhibit,
reference is made to the copy of such contract or document filed as an exhibit
to the Registration Statement, each such statement being qualified in all
respects by such reference to such exhibit. The Registration Statement,
including exhibits and schedules thereto, may be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Regional Offices of the Commission at Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661 and 7 World Trade Center, Thirteenth Floor, New York,
New York 10048. Copies also may be obtained from the Public Reference Section
of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington D.C. 20549, at prescribed rates. The Commission maintains a Web
site (http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding issuers that file electronically
with the Commission.
63
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
INDEX TO FINANCIAL STATEMENTS
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY:
<TABLE>
<S> <C>
Report of Independent Auditors.......................................... F-2
Consolidated Balance Sheet as of December 31, 1995...................... F-3
Consolidated Statements of Operations for the nine months ended December
31, 1994 and the year ended December 31, 1995.......................... F-4
Consolidated Statements of Stockholders' Equity for the nine months
ended December 31, 1994 and the year ended December 31, 1995........... F-5
Consolidated Statements of Cash Flows for the nine months ended December
31, 1994 and the year ended December 31, 1995.......................... F-6
Notes to Consolidated Financial Statements.............................. F-7
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY (UNAUDITED):
Unaudited Condensed Consolidated Balance Sheet as of March 31, 1996..... F-15
Unaudited Condensed Consolidated Statements of Operations for the three
months ended March 31, 1995 and 1996................................... F-16
Unaudited Condensed Consolidated Statements of Cash Flows for the three
months ended March 31, 1995 and 1996................................... F-17
Notes to Unaudited Condensed Consolidated Financial Statements.......... F-18
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS:
Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the year ended December 31, 1995....................................... F-20
ABOUT SOFTWARE CORPORATION S.A. AND SUBSIDIARY:
Report of Independent Auditors.......................................... F-21
Consolidated Statements of Operations for the nine months ended December
31, 1994 and the ten months ended October 31, 1995..................... F-22
Consolidated Statements of Stockholders' Equity (Deficit) for the nine
months ended December 31, 1994 and the ten months ended October 31,
1995................................................................... F-23
Consolidated Statements of Cash Flows for the nine months ended December
31, 1994 and the ten months ended October 31, 1995..................... F-24
Notes to Consolidated Financial Statements.............................. F-25
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
White Pine Software, Inc.
We have audited the accompanying consolidated balance sheet of White Pine
Software, Inc. and subsidiary as of December 31, 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows
for the nine months ended December 31, 1994 and for the year ended December
31, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of White Pine
Software, Inc. and subsidiary at December 31, 1995, and the consolidated
results of their operations and their cash flows for the nine months ended
December 31, 1994 and for the year ended December 31, 1995, in conformity with
generally accepted accounting principles.
Ernst & Young LLP
June 28, 1996, except for
Note 3 as to which
the date is July 31, 1996
F-2
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER
31, 1995
-----------
<S> <C>
ASSETS (NOTE 3)
Current assets:
Cash and cash equivalents......................................... $ 1,773,855
Accounts receivable, less allowance of $116,449................... 1,438,528
Inventories....................................................... 178,546
Prepaid expenses.................................................. 149,607
Other current assets.............................................. 19,210
-----------
Total current assets........................................... 3,559,746
Property and equipment:
Computer equipment................................................ 1,429,560
Furniture and fixtures............................................ 371,189
Software.......................................................... 330,972
Equipment......................................................... 105,204
Leasehold improvements............................................ 25,175
-----------
2,262,100
Accumulated depreciation and amortization......................... (1,648,839)
-----------
613,261
Other assets:
Third-party licenses, less accumulated amortization of $241,529... 765,983
Goodwill, less accumulated amortization of $39,750................ 1,152,768
Other assets...................................................... 345,650
-----------
2,264,401
-----------
Total assets....................................................... $ 6,437,408
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................. $ 465,924
Accrued expenses and other accrued liabilities (Note 4)........... 1,648,260
Deferred revenue.................................................. 445,786
Current portion of long-term debt (Note 3)........................ 217,986
-----------
Total current liabilities...................................... 2,777,956
Long-term debt, less current portion (Note 3)...................... 385,017
Long-term portion of accrued third-party licenses.................. 494,074
Commitments (Note 7)
Stockholders' equity (Notes 8 and 9):
Common stock, $.01 par value:
Authorized shares--7,500,000
Issued and outstanding shares--5,589,764......................... 55,898
Additional paid-in capital........................................ 12,637,430
Accumulated deficit............................................... (9,974,900)
Currency translation adjustments.................................. 61,933
-----------
Total stockholders' equity..................................... 2,780,361
-----------
Total liabilities and stockholders' equity......................... $ 6,437,408
===========
</TABLE>
See accompanying notes.
F-3
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
----------------- ------------
<S> <C> <C>
Revenue:
Software license fees.......................... $4,364,458 $ 6,017,710
Services and other............................. 600,304 1,166,035
---------- -----------
Total revenue............................... 4,964,762 7,183,745
Cost of revenue................................. 654,996 1,247,094
---------- -----------
Gross profit.................................... 4,309,766 5,936,651
Operating expenses:
Sales and marketing............................ 1,636,786 2,516,604
Research and development....................... 1,301,259 1,865,830
General and administrative..................... 1,105,620 2,000,521
---------- -----------
Total operating expenses.................... 4,043,665 6,382,955
---------- -----------
Income (loss) from operations................... 266,101 (446,304)
Other income (expense):
Write-off of purchased research and development
costs (Note 2)................................ -- (3,200,000)
Interest income................................ 65,785 82,212
Other, net..................................... 79,809 68,131
---------- -----------
145,594 (3,049,657)
---------- -----------
Income (loss) before provision for income tax-
es............................................. 411,695 (3,495,961)
Provision for income taxes (Note 5)............. 18,000 30,024
---------- -----------
Net income (loss)............................... $ 393,695 $(3,525,985)
========== ===========
Net income (loss) per common and common equiva-
lent share..................................... $ .06 $ (.65)
========== ===========
Weighted average number of common and common
equivalent
shares outstanding............................. 6,084,775 5,450,884
========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CURRENCY TOTAL
---------------------- PAID-IN ACCUMULATED TRANSLATION STOCKHOLDERS'
SHARES PAR VALUE CAPITAL DEFICIT ADJUSTMENT EQUITY
----------- --------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances at April 1,
1994, as previously
reported............... 29,946,898 $29,947 $ 8,644,919 $(6,787,058) -- $1,887,808
Adjustment in
connection with a
business combination
accounted for as a
pooling-of-interests
(Note 2).............. 5,958,400 5,958 28,258 (55,552) (21,336)
----------- ------- ----------- ----------- ------- ----------
Balances at April 1,
1994, as restated...... 35,905,298 35,905 8,673,177 (6,842,610) -- 1,866,472
Net income............. 393,695 393,695
Common Stock issued
upon exercise of stock
options (Note 8)...... 4,167 4 414 418
Repurchase and
cancellation of 50,000
shares of Common
Stock................. (50,000) (50) (4,950) (5,000)
----------- ------- ----------- ----------- ------- ----------
Balances at December 31,
1994................... 35,859,465 35,859 8,668,641 (6,448,915) -- 2,255,585
Net loss............... (3,525,985) (3,525,985)
Adjustment for one-for-
ten reverse stock
split (Note 9)........ (32,273,518) -- --
Common stock issued in
connection with a
business combination
accounted for as a
purchase (Note 2)..... 1,990,956 19,910 3,962,002 3,981,912
Common stock issued
upon exercise of stock
options (Note 8)...... 12,861 129 6,787 6,913
Currency translation
adjustment............ $61,933 61,933
----------- ------- ----------- ----------- ------- ----------
Balances at December 31,
1995................... 5,589,764 $55,898 $12,637,430 $(9,974,900) $61,933 $2,780,361
=========== ======= =========== =========== ======= ==========
</TABLE>
See accompanying notes.
F-5
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss).................................... $ 393,695 $(3,525,985)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization...................... 181,700 550,731
Write-off of purchased research and development
costs............................................. -- 3,200,000
Other.............................................. (34,066) (48,316)
Changes in operating assets and liabilities:
Accounts receivable............................... (246,425) 64,435
Inventories....................................... (52,132) 9,730
Prepaid expenses.................................. (84,906) 45,161
Other assets...................................... 19,994 (35,623)
Accounts payable.................................. (44,321) 148,170
Accrued expenses and other accrued liabilities.... (312,815) 211,369
Deferred revenue.................................. 46,701 22,149
---------- -----------
Net cash provided by (used in) operating
activities..................................... (132,575) 641,821
INVESTING ACTIVITIES
Purchase of property and equipment, net.............. (184,696) (329,510)
Purchase of third party licenses, net................ -- (377,438)
Acquisition costs incurred in a business combination
accounted for as a purchase......................... -- (175,000)
Cash acquired in a business combination accounted for
as a purchase....................................... -- 117,532
Other................................................ (20,181) (73,095)
---------- -----------
Net cash used in investing activities........... (204,877) (837,511)
FINANCING ACTIVITIES
Proceeds from long-term debt......................... -- 53,000
Principal payments on long-term debt................. (55,118) (23,336)
Proceeds from exercise of stock options.............. 418 6,916
Repurchase of Common Stock........................... (5,000) --
---------- -----------
Net cash provided by (used in) financing
activities..................................... (59,700) 36,580
Currency translation effect on cash and cash
equivalents......................................... -- 61,933
---------- -----------
Net decrease in cash and cash equivalents............ (397,152) (97,177)
Cash and cash equivalents at beginning of period..... 2,268,184 1,871,032
---------- -----------
Cash and cash equivalents at end of period........... $1,871,032 $ 1,773,855
========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest............................... $ 299 $ 8,713
========== ===========
Cash paid for taxes.................................. $ 2,763 $ 18,596
========== ===========
</TABLE>
See accompanying notes.
F-6
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. ACCOUNTING POLICIES
Nature of Business
White Pine Software, Inc. (the Company) develops, markets and supports
multiplatform desktop connectivity software that facilitates worldwide video
and audio communication and data collaboration across the Internet, intranets
and other networks. The Company's desktop videoconferencing software products
allow users to participate in real-time, multipoint videoconferences over the
Internet and intranets. The Company also offers desktop X Windows and terminal
emulation software. The Company's customers include businesses, government
organizations, educational institutions and individual consumers. The Company
markets and sells its products in the United States, Europe and the Pacific
Rim through distributors, a combination of strategic partners and OEMs, and
its direct sales organization, as well as over the Internet. The Company,
formerly known as Visual International, Inc., was incorporated in April 1992.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned foreign subsidiary, About Software Corporation, S.A.
(ASC), and ASC's wholly-owned subsidiary. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Fiscal Year
Effective April 1, 1994, the Company changed its fiscal year end from March
31 to December 31.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of cash, cash equivalents and
accounts receivable. Cash and cash equivalents include cash on deposit in
checking accounts, commercial paper, and certificates-of-deposit. These cash
and cash equivalents are maintained with high credit quality financial
institutions.
To date, accounts receivable have been primarily derived from revenue earned
from customers located in the United States. The Company performs ongoing
credit evaluations of its customers and generally requires no collateral. The
Company maintains reserves for potential credit losses; historically, such
losses have not been material and have been within management's expectations.
At December 31, 1995, one customer accounted for approximately 14% of accounts
receivable.
During the nine months ended December 31, 1994 and the year ended December
31, 1995, one customer accounted for approximately 21% and 16%, respectively,
of the Company's total revenue.
Included in the Company's balance sheet at December 31, 1995 are the assets
of the Company's foreign subsidiary, ASC, of which approximately $663,000 of
tangible assets are located in France.
The Company's sales by geographic locations are summarized in the table
below:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
------------ ------------
<S> <C> <C>
United States.................................... $4,404,000 $5,713,000
Europe........................................... 312,000 976,000
Pacific Rim...................................... 249,000 495,000
---------- ----------
$4,965,000 $7,184,000
========== ==========
</TABLE>
F-7
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. ACCOUNTING POLICIES (CONTINUED)
Fair Value of Financial Instruments
The carrying amount of the Company's financial instruments, including
accounts receivable and long-term debt, approximates fair value.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
Property and Equipment
Property and equipment are stated at cost and are being depreciated using
the straight-line and accelerated methods over the estimated useful lives of
two to seven years. Leasehold improvements are stated at cost and are being
amortized over the lesser of the term of the lease or the estimated useful
life of the asset.
Third-Party Licenses
The cost of agreements entered into with third parties for the right to use
the third parties' technology in the Company's products is amortized on a
straight-line basis over the lives of the agreements.
Income Taxes
Deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
Revenue Recognition
Software License Fees:
The Company recognizes software license fee revenue in accordance with the
provisions of AICPA Statement of Position No. 91-1, Software Revenue
Recognition. Software license fees represent revenue derived from the license
of the Company's proprietary software. License revenue is typically recognized
upon shipment, net of allowances for estimated future returns. However,
license revenue under certain license agreements is recognized upon
fulfillment of contractual obligations based upon achievement of specified
milestones, which may include delivery, installation, and final acceptance.
Services and Other:
Maintenance is recognized ratably over the term of the agreement.
Professional and technical service revenue is recognized as the services are
performed.
Research and Development
Statement of Financial Accounting Standards No. 86, Accounting for the Costs
of Computer Software to be Sold, Leased or Otherwise Marketed, requires
capitalization of certain software development costs subsequent to the
establishment of technological feasibility. Based upon the Company's product
development process, technological feasibility is established upon completion
of a commercially viable working model. Costs incurred by the Company between
completion of the commercially viable working model and the point at which the
product is ready for general release have been capitalized. Such amounts,
approximating $250,000, are included in other assets and are being amortized
over a three-year period; these amounts are principally attributable to the
Company's acquisition of ASC.
F-8
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. ACCOUNTING POLICIES (CONTINUED)
Foreign Currency Translation
The financial statements of the Company's foreign subsidiary have been
translated into U.S. dollars in accordance with Statement of Financial
Accounting Standards No. 52, Foreign Currency Translation. All balance sheet
amounts have been translated using the exchange rates in effect at the balance
sheet date. Statement of operations amounts have been translated using average
exchange rates. The gains and losses resulting from the changes in exchange
rates from the date of acquisition (see Note 2) to December 31, 1995 have been
reported separately as a component of stockholders' equity.
The aggregate transaction gains and losses were insignificant for all
periods presented.
Advertising Costs
All costs related to advertising the Company's products are expensed in the
period incurred. Amounts charged to expense were $314,000 and $518,000 during
the nine months ended December 31, 1994 and the year ended December 31, 1995,
respectively.
Net Income (Loss) Per Common and Common Equivalent Share
Net income (loss) per common and common equivalent share is computed using
the weighted average number of shares of common stock and dilutive common
equivalent shares outstanding during the period. All shares, options and
warrants issued within 12 months of the filing date are treated as if they
were outstanding for all periods presented using the treasury stock method
(assumed initial public offering price of $9.00 per share). Common equivalent
shares consist of the incremental common shares issuable upon the exercise of
stock options and warrants using the treasury stock method.
Stock Based Compensation
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of
grant. The Company accounts for stock option grants in accordance with
Accounting Principles Board Statement No. 25, Accounting for Stock Issued to
Employees, and, accordingly, recognizes no compensation expense for options
granted.
Recent Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of, which establishes
criteria for the recognition and measurement of impairment loss associated
with long-lived assets. The Company will be required to adopt this standard in
the first quarter of 1996. Based on the Company's initial evaluation, adoption
is not expected to have a material impact on the Company's financial position
or results of operations.
Reclassifications
Certain amounts for the nine months ended December 31, 1994 have been
reclassified to conform to the 1995 presentation.
F-9
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. BUSINESS COMBINATIONS
On November 1, 1995, the Company acquired all of the outstanding common
stock of ASC, a French developer of connectivity software, and its wholly-
owned subsidiary, About Software Corporation, a California corporation. The
acquisition was made with the issuance of 1,990,956 shares of the Company's
common stock, valued at $2.00 per share (exclusive of approximately $175,000
of acquisition costs). Approximately 10% of the shares issued are being held
in escrow pursuant to the terms of the Acquisition Agreement.
The acquisition has been accounted for using the purchase method of
accounting and, accordingly, the results of operations of ASC are included in
the financial statements since the date of acquisition. In connection with the
acquisition, the Company acquired assets with a fair market value of
approximately $4,234,000 and assumed liabilities of approximately $1,270,000.
Included in assets acquired is purchased research and development costs ("in-
process technology") with a fair value of approximately $3,200,000, which was
charged to operations upon consummation of the acquisition, due to a
determination that there was no future value to the Company. The excess of the
purchase price over the fair market value of net assets acquired of
approximately $1,193,000 has been allocated to goodwill and is being amortized
on a straight-line basis over 5 years.
The following unaudited pro forma information presents a summary of
operating results of the Company and ASC as if the acquisition had been made
as of April 1, 1994:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
------------ ------------
<S> <C> <C>
Pro forma revenue................................ $6,296,000 $ 9,227,000
Pro forma net loss............................... $ (566,000) $(1,171,000)
Pro forma net loss per common and common
equivalent share................................ $ (.09) $ (.21)
</TABLE>
These pro forma results are for illustrative purposes only and include
certain adjustments, such as additional amortization expense as a result of
goodwill and other intangible assets. They do not purport to be indicative of
the actual operating results which would have occurred had the transaction
been consummated as of those earlier dates, nor are they indicative of results
of operations which may occur in the future.
On April 1, 1994, the Company acquired all of the outstanding common stock
of Grafpoint, a developer of connectivity software, in exchange for 595,840
shares of the Company's common stock, in a business combination accounted for
as a pooling-of-interests.
3. INDEBTEDNESS
Line-of-Credit
The Company has a line-of-credit with a financial institution which provides
for maximum available borrowings of $1,000,000. Interest on the line is
payable monthly at the bank's prime rate plus .5% (9% at December 31, 1995).
Borrowings under the line are due on demand and are secured by substantially
all assets of the Company, including a $515,000 certificate-of-deposit. This
agreement expires on September 30, 1996. At December 31, 1995, there were no
amounts outstanding under the line-of-credit.
The line-of-credit agreement contains various restrictive covenants, the
most significant of which include the maintenance of a minimum net worth, a
maximum ratio of total liabilities to tangible net worth, a minimum ratio of
current assets to current liabilities, and profitability on a rolling three-
month basis. At December 31, 1995, the Company was not in compliance with the
minimum ratio of current assets to current liabilities and the profitability
covenant. On July 31, 1996, the Company obtained a waiver from the financial
institution for both of these covenants through September 30, 1996.
F-10
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. INDEBTEDNESS (CONTINUED)
Long-term Debt
<TABLE>
<S> <C>
Secured term bank loans, due in monthly installments of $615 to
$7,237, which includes interest ranging from 7.25% to 11.55%, with
final installments due from March 1998 to October 1998............ $344,155
Secured, non-interest bearing, term bank loan from a foreign
governmental agency, due in annual installments of $48,381, with
the final installment due in September 1999....................... 179,596
Note payable, due in monthly installments of $883 plus interest at
9.5%, with remaining balances due August 2000..................... 49,467
Other.............................................................. 29,785
--------
603,003
Less current portion............................................... 217,986
--------
$385,017
========
</TABLE>
Aggregate maturities on long-term debt for the next five years are as follows:
<TABLE>
<S> <C>
1996................................................................ $217,986
1997................................................................ 195,997
1998................................................................ 136,899
1999................................................................ 45,053
2000................................................................ 7,068
--------
$603,003
========
</TABLE>
Total interest expense for the nine months ended December 31, 1994 and year
ended December 31, 1995 was approximately $0 and $7,000, respectively, and is
included in other expense.
4. ACCRUED EXPENSES AND OTHER ACCRUED LIABILITIES
Accrued expenses and other accrued liabilities consisted of the following at
December 31, 1995:
<TABLE>
<S> <C>
Accrued compensation expense and related benefits............. $ 684,328
Pending litigation............................................ 292,907
Third-party licenses.......................................... 136,000
Accrued acquisition costs..................................... 125,119
Other accruals................................................ 409,906
----------
$1,648,260
==========
</TABLE>
The Company is a co-defendant in various lawsuits filed in federal and state
courts in New York. The lawsuits seek damages for alleged injuries sustained
while using products which the plaintiffs assert were designed and
manufactured by a predecessor of the Company. Although the Company is
defending these claims, exposure is partially limited by insurance and
indemnification by the primary contractor. Management has established, based
upon its best estimate, an accrual of approximately $293,000 for legal fees
and potential losses which could arise from such claims.
5. INCOME TAXES
Included in the accompanying balance sheet are the following deferred tax
balances as of December 31, 1995:
<TABLE>
<S> <C>
Deferred tax assets....................... $ 2,700,000
Valuation allowance for deferred tax as-
sets..................................... (2,700,000)
-----------
--
Deferred tax liabilities.................. --
-----------
Net deferred tax asset.................... $ --
===========
</TABLE>
F-11
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. INCOME TAXES (CONTINUED)
Deferred tax assets consist primarily of net operating and capital loss
carryforwards and accrued liabilities.
The Company recorded a valuation allowance of $2,700,000 against its
deferred tax assets since it is believed to be more likely than not that the
net operating loss carryforwards and other temporary differences will not
provide a future tax benefit.
At December 31, 1995, the Company has cumulative federal net operating loss
carryforwards of approximately $5,700,000 for income tax purposes. The
availability of the net operating loss carryforwards to offset future taxable
income is subject to significant annual limitations. The amount available for
fiscal 1996 to reduce future federal income taxes payable is limited to
approximately $480,000. The loss carryforwards will expire at various dates
beginning in 1996.
6. PROFIT SHARING PLAN
The Company has a Profit Sharing Plan (the "Plan") under Section 401(k) of
the Internal Revenue Code for all employees meeting age and service
requirements. Eligible employees may elect to contribute up to 16% of their
compensation, subject to limitations established by the Internal Revenue Code.
The Company may elect to contribute a discretionary amount to the Plan which
would be allocated to the employees based upon the employees' contributions to
the Plan. There have been no discretionary contributions to date.
7. LEASE COMMITMENTS
Operating Leases
The Company leases its office facilities under various operating leases
expiring at various times through fiscal 1998.
Future minimum annual rental commitments under the lease agreements for the
years ending December 31 are as follows:
<TABLE>
<S> <C>
1996.......................................... $332,416
1997.......................................... 47,550
1998.......................................... 25,685
--------
$405,651
========
</TABLE>
Total rent expense for the nine months ended December 31, 1994 and the year
ended December 31, 1995 was approximately $200,000 and $292,000, respectively,
and is included in general and administrative expenses.
8. STOCKHOLDERS' EQUITY
Stock Option Plan
The Company has various stock option plans which provide for the issuance of
incentive and non-qualified stock options. The Board of Directors, which
administers the plans, has the authority to determine to whom options may be
granted, period of exercise, the option price at the date of grant, and what
other restrictions, if any, should apply. In connection with the acquisition
of ASC on November 1, 1995, the Board of Directors increased the number of
authorized shares reserved under the plans to 970,000 shares and granted
104,500 options to certain ASC employees. The options provide for vesting
schedules and allow for special vesting opportunities in the case of job loss
due to merger activities.
F-12
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. STOCKHOLDERS' EQUITY (CONTINUED)
Information with respect to the plans is summarized as follows:
<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE
SHARES PER SHARE
--------- ------------
<S> <C> <C>
Balance at April 1, 1994.............................. 383,342 $ .50--1.00
Granted............................................. 338,664 1.00--1.50
Exercised........................................... (417) 1.00
Cancelled........................................... --
-------
Balance at December 31, 1994.......................... 721,589 .50--1.50
Granted............................................. 207,548 1.50--2.00
Exercised........................................... (12,861) .50--1.50
Cancelled........................................... (33,527) .50--1.50
-------
Balance at December 31, 1995.......................... 882,749 .50--2.00
=======
</TABLE>
Options to purchase 630,964 shares were exercisable at December 31, 1995.
Warrants
In June 1995, in connection with the execution of an exclusive software
license, the Company became obligated to issue a warrant to purchase 20,000
shares of Common Stock at an exercise price of $3.00 per share. The warrant
has an expiration date which is the earlier of June 1, 1999, or the closing
date of the Company's initial public offering.
9. SUBSEQUENT EVENTS
Recapitalization
In September 1995, the Company's Board of Directors declared a one-for-ten
reverse stock split of the Company's Common Stock that became effective March
18, 1996. All per share amounts and number of shares in the accompanying
financial statements have been retroactively adjusted to reflect the reverse
stock split.
On February 29, 1996, the Board of Directors and the stockholders approved
an amendment to the Company's charter to authorize 500,000 shares of $5.83 par
value common stock and to decrease the number of authorized shares of $.01 par
value common stock to 7,500,000 shares. The $5.83 par value common stock
carries liquidation preferences, antidilutive protection and redeemable rights
over the Company's $.01 par value common stock. Each share of $5.83 par value
common stock will automatically convert into one share of common stock on the
closing date of the Company's initial public offering.
Stock Purchase Agreements
On March 19, 1996, the Company entered into a Stock Purchase Agreement with
certain investors whereby, for consideration of $2,000,000, the Company issued
343,053 shares of $5.83 par value common stock.
On April 17, 1996, the Company entered into a Stock Purchase Agreement with
an additional investor whereby, for consideration of $300,000, the Company
issued 51,458 shares of $5.83 par value common stock.
F-13
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. SUBSEQUENT EVENTS (CONTINUED)
Office Lease
On May 15, 1996, the Company entered into an operating lease for office
space to be utilized as its corporate headquarters. In connection with the
execution of this operating lease, the Company arranged for the termination of
its prior lease agreement (see Note 7) effective October 31, 1996. Future
minimum annual rental commitments under the new lease agreement for the years
ending December 31 are as follows:
<TABLE>
<S> <C>
1996.......................................... $ 31,086
1997.......................................... 112,403
1998.......................................... 117,974
1999.......................................... 130,454
2000.......................................... 142,933
--------
$534,850
========
</TABLE>
F-14
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, 1996
--------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................... $ 2,832,507
Accounts receivable, less allowance of $127,875................ 1,769,827
Inventories.................................................... 186,178
Prepaid expenses............................................... 368,507
Other current assets........................................... 34,365
-----------
Total current assets.......................................... 5,191,384
Property and equipment:
Computer equipment............................................. 1,558,372
Furniture and fixtures......................................... 378,273
Software....................................................... 331,298
Equipment...................................................... 107,705
Leasehold improvements......................................... 26,297
-----------
2,401,945
Accumulated depreciation and amortization...................... (1,740,177)
-----------
661,768
Other assets:
Third-party licenses, less accumulated amortization of
$363,984...................................................... 688,528
Goodwill, less accumulated amortization of $99,375............. 1,093,143
Other assets................................................... 352,518
-----------
2,134,189
-----------
Total assets.................................................... $ 7,987,341
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................... $ 414,965
Accrued expenses and other accrued liabilities................. 1,700,840
Deferred revenue............................................... 965,117
Current portion of long-term debt.............................. 242,008
-----------
Total current liabilities..................................... 3,322,930
Long-term debt, less current portion............................ 358,345
Long-term portion of accrued third-party licenses............... 509,074
Stockholders' equity:
Common stock, $.01 par value:
Authorized shares--7,500,000
Issued and outstanding shares--5,589,764...................... 55,898
Common stock, $5.83 par value:
Authorized shares--500,000
Issued and outstanding shares--343,053........................ 2,000,000
Additional paid-in capital..................................... 12,616,065
Accumulated deficit............................................ (10,936,904)
Currency translation adjustments............................... 61,933
-----------
Total stockholders' equity.................................... 3,796,992
-----------
Total liabilities and stockholders' equity...................... $ 7,987,341
===========
</TABLE>
See accompanying notes.
F-15
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1995 1996
------------ ------------
<S> <C> <C>
Revenue:
Software license fees.............................. $1,358,855 $1,780,476
Services and other................................. 233,803 305,814
---------- ----------
Total revenue..................................... 1,592,658 2,086,290
Cost of revenue..................................... 169,185 373,407
---------- ----------
Gross profit........................................ 1,423,473 1,712,883
Operating expenses:
Sales and marketing................................ 595,968 1,310,386
Research and development........................... 482,091 823,961
General and administrative......................... 350,665 487,184
---------- ----------
Total operating expenses.......................... 1,428,724 2,621,531
---------- ----------
Loss from operations................................ (5,251) (908,648)
Other income (expense):
Interest income.................................... 21,473 20,413
Other, net......................................... 24,987 (48,565)
---------- ----------
46,460 (28,152)
---------- ----------
Income (loss) before provision for income taxes..... 41,209 (936,800)
Provision for income taxes.......................... 3,212 25,204
---------- ----------
Net income (loss)................................... $ 37,997 $ (962,004)
========== ==========
Net income (loss) per common and common equivalent
share.............................................. $ .01 $ (.16)
========== ==========
Weighted average number of common and common
equivalent shares outstanding...................... 6,103,873 5,900,118
========== ==========
</TABLE>
See accompanying notes.
F-16
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1995 1996
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss)................................... $ 37,997 $ (962,004)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization..................... 49,366 292,487
Changes in operating assets and liabilities:
Accounts receivable.............................. 96,077 (331,299)
Inventories...................................... (8,191) (7,632)
Prepaid expenses................................. 14,432 (218,900)
Other assets..................................... -- (41,092)
Accounts payable................................. (8,057) (50,959)
Accrued expenses and other accrued liabilities... (122,543) 67,580
Deferred revenue................................. 65,867 519,331
---------- ----------
Net cash provided by (used in) operating activ-
ities......................................... 124,948 (732,488)
INVESTING ACTIVITIES
Purchase of property and equipment, net............. (59,239) (139,845)
Purchase of third-party licenses, net............... -- (45,000)
Other............................................... (2,767) --
---------- ----------
Net cash used in investing activities.......... (62,006) (184,845)
FINANCING ACTIVITIES
Proceeds from long-term debt........................ -- 19,781
Principal payments on long-term debt................ -- (22,431)
Proceeds from sale of common stock, net............. -- 1,978,635
---------- ----------
Net cash provided by financing activities...... -- 1,975,985
---------- ----------
Net increase in cash and cash equivalents........... 62,942 1,058,652
Cash and cash equivalents at beginning of period.... 1,871,032 1,773,855
---------- ----------
Cash and cash equivalents at end of period.......... $1,933,974 $2,832,507
========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest.............................. -- $ 7,329
========== ==========
Cash paid for taxes................................. $ 15,698 $ 11,518
========== ==========
</TABLE>
See accompanying notes.
F-17
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION
The information contained in these unaudited condensed consolidated
financial statements is condensed from that which would appear in the
Company's annual consolidated financial statements. Accordingly, the unaudited
condensed consolidated financial statements included herein should be reviewed
in conjunction with the consolidated financial statements and related notes
included elsewhere in this Prospectus. The unaudited condensed consolidated
financial statements as of March 31, 1995 and 1996 and for the quarterly
periods then ended include all adjustments (consisting of normal, recurring
adjustments) considered necessary for a fair presentation. The results of
operations for interim periods are not necessarily indicative of the results
which may be expected for the entire year. The preparation of financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results
could differ from those estimates.
2. NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
Net income (loss) per common and common equivalent share is computed using
the weighted average number of shares of common stock and dilutive common
equivalent shares outstanding during the period. All shares, options and
warrants issued within 12 months of the filing date are treated as if they
were outstanding for all periods presented using the treasury stock method
(assumed initial public offering price of $9.00 per share). Common equivalent
shares consist of the incremental common shares issuable upon the exercise of
stock options and warrants using the treasury stock method.
F-18
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
The accompanying unaudited condensed consolidated pro forma statement of
operations of White Pine Software, Inc. and Subsidiary (the Company) for the
year ended December 31, 1995 is derived from the Company's historical
statement of operations for that year, and gives pro forma effect to the
acquisition of About Software Corporation S.A. and Subsidiary as if the
acquisition occurred on January 1, 1995.
The unaudited pro forma condensed consolidated statement of operations does
not necessarily represent actual results that would have been achieved had the
companies been together since January 1, 1995, nor may they be indicative of
future operations. This unaudited pro forma condensed consolidated statement
of operations should be read in conjunction with the companies' respective
historical financial statements and notes thereto.
F-19
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
WHITE PINE ABOUT SOFTWARE
SOFTWARE, INC. CORP. S.A. PRO FORMA
AND SUBSIDIARY AND SUBSIDIARY COMBINED ADJUSTMENTS PRO FORMA
-------------- -------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenue................. 7,183,745 2,043,413 9,227,158 -- 9,227,158
Cost of revenue......... 1,247,094 226,444 1,473,538 -- 1,473,538
----------- --------- ----------- ---------- -----------
Gross profit............ 5,936,651 1,816,969 7,753,620 -- 7,753,620
Operating expenses:
Sales and marketing.... 2,516,604 687,844 3,204,448 -- 3,204,448
Research and
development........... 1,865,830 779,928 2,645,758 $ 79,757(1) 2,725,515
General and
administrative........ 2,000,521 1,020,756 3,021,277 198,754(2) 3,220,031
----------- --------- ----------- ---------- -----------
Total operating
expenses........... 6,382,955 2,488,528 8,871,483 278,511 9,149,994
----------- --------- ----------- ---------- -----------
Loss from operations.... (446,304) (671,559) (1,117,863) (278,511) (1,396,374)
Other income (expense):
Write-off of purchased
research and
development costs..... (3,200,000) -- (3,200,000) 3,200,000(3) --
Interest income........ 82,212 (51,732) 30,480 -- 30,480
Other, net............. 68,131 156,951 225,082 -- 225,082
----------- --------- ----------- ---------- -----------
(3,049,657) 105,219 (2,944,438) 3,200,000 255,562
----------- --------- ----------- ---------- -----------
Loss before provision
for income taxes....... (3,495,961) (566,340) (4,062,301) 2,921,489 (1,140,812)
Provision for income
taxes.................. 30,024 -- 30,024 -- 30,024
----------- --------- ----------- ---------- -----------
Net loss................ $(3,525,985) $(566,340) $(4,092,325) $2,921,489 $(1,170,836)
=========== ========= =========== ========== ===========
</TABLE>
The following is a summary of adjustments reflected in the accompanying
unaudited pro forma condensed consolidated statement of operations for the year
ended December 31, 1995:
(1) Represents the adjustment to give effect to a full year of capitalized
software amortization.
(2) Represents the adjustment to give effect to a full year of goodwill
amortization.
(3) Represents the one-time adjustment to reflect the write-off of purchased
research and development costs.
F-20
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
About Software Corporation S.A. and Subsidiary
(formerly known as Advanced Software Concepts S.A.)
We have audited the accompanying consolidated statements of operations,
stockholders' equity (deficit), and cash flows of About Software Corporation
S.A. and subsidiary for the nine months ended December 31, 1994 and the ten
months ended October 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated results of operations and cash flows
of About Software Corporation S.A. and subsidiary for the nine months ended
December 31, 1994 and for the ten months ended October 31, 1995 in conformity
with generally accepted accounting principles.
ERNST & YOUNG Audit
/s/ Jacques Fournier
Jacques Fournier
Nice, FRANCE, July 26, 1996
F-21
<PAGE>
ABOUT SOFTWARE CORPORATION S.A. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS TEN MONTHS
ENDED ENDED
DECEMBER 31, OCTOBER 31,
1994 1995
------------ -----------
<S> <C> <C>
Revenue............................................... $1,331,114 $2,043,413
Cost of revenue....................................... 150,362 226,444
---------- ----------
Gross profit.......................................... 1,180,752 1,816,969
Operating expenses:
Sales and marketing.................................. 591,719 687,844
Research and development............................. 684,119 779,928
General and administrative........................... 551,890 1,020,756
---------- ----------
Total operating expenses.......................... 1,827,728 2,488,528
---------- ----------
Loss from operations.................................. (646,976) (671,559)
Other income (expense):
Interest expense..................................... (49,266) (51,732)
Other, net........................................... 70,747 156,951
---------- ----------
21,481 105,219
---------- ----------
Net loss.............................................. $ (625,495) $ (566,340)
========== ==========
</TABLE>
See accompanying notes.
F-22
<PAGE>
ABOUT SOFTWARE CORPORATION S.A. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CURRENCY TOTAL
---------------- PAID-IN ACCUMULATED TRANSLATION STOCKHOLDERS'
SHARES PAR VALUE CAPITAL DEFICIT ADJUSTMENT EQUITY (DEFICIT)
------ --------- ---------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Balances at April 1, 1994...... 3,288 $597,113 -- $ (526,547) $35,246 $ 105,812
Net loss...................... (625,495) (625,495)
Issuance of common stock...... 1,724 30,192 $144,925 175,117
Currency translation
adjustment................... 1,837 1,837
----- -------- -------- ----------- ------- ---------
Balances at December 31, 1994.. 5,012 627,305 144,925 (1,152,042) 37,083 (342,729)
Net loss...................... (566,340) (566,340)
Conversion of long-term notes
payable to common stock...... 4,413 87,594 473,009 560,603
Currency translation
adjustment................... (3,088) (3,088)
----- -------- -------- ----------- ------- ---------
Balances at October 31, 1995... 9,425 $714,899 $617,934 $(1,718,382) $33,995 $(351,554)
===== ======== ======== =========== ======= =========
</TABLE>
See accompanying notes.
F-23
<PAGE>
ABOUT SOFTWARE CORPORATION S.A. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS TEN MONTHS
ENDED ENDED
DECEMBER 31, OCTOBER 31,
1994 1995
------------ -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss............................................. $(625,495) $(566,340)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization...................... 147,262 162,201
Other.............................................. 24,815 49,180
Accrued interest on stockholder loan converted to
equity............................................ -- 14,921
Changes in operating assets and liabilities:
Accounts receivable............................... (170,352) 150,503
Inventories....................................... (23,389) 20,692
Prepaid expenses.................................. 3,950 4,661
Other assets...................................... (25,123) 32,691
Accounts payable.................................. 42,056 73,777
Accrued expenses and other accrued liabilities.... 95,717 (3,453)
Deferred revenue.................................. 99,559 132,774
--------- ---------
Net cash provided by (used in) operating
activities..................................... (431,000) 71,607
INVESTING ACTIVITIES
Purchase of property and equipment, net.............. (68,387) (38,278)
Increase in capitalized software costs............... (92,092) (97,431)
Proceeds from sale of property and equipment......... 27,026 --
--------- ---------
Net cash used in investing activities........... (133,453) (135,709)
FINANCING ACTIVITIES
Proceeds from research and development loans......... 158,507 --
Proceeds from stockholder loans...................... 111,359 220,333
Proceeds from long-term debt......................... -- 107,308
Principal payments on long-term debt................. (51,694) (163,921)
Proceeds from sale of common stock................... 175,117 --
--------- ---------
Net cash provided by financing activities....... 393,289 163,720
Currency translation effect on cash and cash
equivalents......................................... 4,430 702
--------- ---------
Net increase (decrease) in cash and cash
equivalents......................................... (166,734) 100,320
Cash and cash equivalents at beginning of period..... 184,010 17,276
--------- ---------
Cash and cash equivalents at end of period........... $ 17,276 $ 117,596
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest............................... $ 40,231 $ 52,222
========= =========
Non-cash items affecting financing activities:
Conversion of long-term notes payable to common
stock............................................... $ 560,603 --
========= =========
</TABLE>
See accompanying notes.
F-24
<PAGE>
ABOUT SOFTWARE CORPORATION S.A. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1995
1. ACCOUNTING POLICIES
Nature of Business
About Software Corporation S.A. (the Company) develops and provides
connectivity tools for enterprise-wide systems. The Company was founded in
1988 as a Societe A Responsabilite Limitee (S.A.R.L.) under the name Advanced
Software Concepts S.A.R.L. and opened its U.S. headquarters in late 1993 in
California. In 1992, the status of the Company was changed from an S.A.R.L. to
a Societe Anonyme (S.A.). In June 1995, the Company changed its name to About
Software Corporation S.A.
Reporting Requirements
The Company is incorporated in France. Under financial reporting standards
applicable in France, the Company must maintain its financial statements in
French francs and is not required to prepare consolidated financial
statements.
The amounts in these financial statements have been derived from the French
franc financial statements, after allowing for the consolidation of its U.S.
subsidiary company.
Appropriate adjustments have been made, where necessary, to incorporate any
significant measurement and reporting differences between French reporting
requirements and generally accepted accounting principals in the United States
of America (U.S.).
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, About Software Corporation. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Fiscal Year
The Company's fiscal year end is December 31.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Concentration of Credit Risk
Financial investments that potentially subject the Company to significant
concentrations of credit risk consist primarily of cash, cash equivalents and
accounts receivable. Cash and cash equivalents include cash on deposit in
checking accounts.
F-25
<PAGE>
ABOUT SOFTWARE CORPORATION S.A. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. ACCOUNTING POLICIES (CONTINUED)
To date, accounts receivable have been primarily derived from revenue earned
from customers located in Europe and the U.S. The Company performs ongoing
credit evaluations of its customers and generally requires no collateral. The
Company maintains reserves for potential credit losses; historically, such
losses have not been material and have been within management's expectations.
At October 31, 1995, seven customers accounted for approximately 51.4% of
accounts receivable.
During the nine months ended December 31, 1994, two customers accounted for
approximately 30.1% of the Company's total revenue and for the ten months
ended October 31, 1995, one customer accounted for approximately 6.5% of the
Company's total revenue.
Fair Value of Financial Instruments
The carrying amount of the Company's financial instruments, including
accounts receivable and long-term debt, approximates fair value.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
Property and Equipment
Property and equipment are stated at cost and are being depreciated using
the straight-line and accelerated methods over the estimated useful lives of
one to ten years. Leasehold improvements are stated at cost and are being
amortized over the lesser of the term of the lease or estimated useful life of
the asset.
Income Taxes
Deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
Revenue Recognition
Software License Fees:
The Company recognizes revenue in accordance with the provisions of AICPA
Statement of Position No. 91-1, Software Revenue Recognition. Software license
fees represent revenue derived from the license of the Company's proprietary
software. License revenue is typically recognized upon shipment, net of
allowances for estimated future returns. However, license revenue under
certain license agreements is recognized upon fulfillment of contractual
obligations based upon achievement of specified milestones, which may include
delivery, installation, and final acceptance.
Services and Other:
Maintenance is recognized ratably over the term of the agreement.
Professional and technical service revenue is recognized as the services are
performed.
Research and Development
Statement of Financial Accounting Standards No. 86, Accounting for the Costs
of Computer Software to be Sold, Leased or Otherwise Marketed, requires
capitalization of certain software development costs subsequent to
F-26
<PAGE>
ABOUT SOFTWARE CORPORATION S.A. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. ACCOUNTING POLICIES (CONTINUED)
the establishment of technological feasibility. Based upon the Company's
product development process, technological feasibility is established upon
completion of a commercially viable working model. Costs incurred by the
Company between completion of the commercially viable working model and the
point at which the product is ready for general release have been capitalized.
Under French financial reporting standards, all development costs can be
capitalized up until the point at which a product is available for commercial
release, providing there is a reasonable chance of commercial success for the
product being developed. This reporting standard is less stringent with regard
to the capitalization of software development costs than that used in the U.S.
Management estimates that in order to satisfy generally accepted accounting
principles in the U.S., only 12.75% of such capitalizations made for French
reporting purposes should be capitalized for U.S. reporting purposes.
Accordingly, these financial statements reflect the appropriate adjustments to
record capitalized software development costs at 12.75% of those
capitalizations made for French financial reporting purposes.
Such amounts are being amortized over a period of one to eight years.
Foreign Currency Translation
The financial statements of the Company are denominated in French francs and
have been translated into U.S. dollars in accordance with Statement of
Financial Accounting Standards No. 52, Foreign Currency Translation. Statement
of operations amounts have been translated using average exchange rates. The
gains and losses resulting from the changes in exchange rates have been
reported separately as a component of stockholders' equity.
The aggregate transaction gains and losses were insignificant for all
periods presented.
Recent Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of, which establishes
criteria for the recognition and measurement of impairment loss associated
with long-lived assets. The Company will be required to adopt this standard in
the first quarter of 1996 for U.S. reporting purposes. Based on the Company's
initial evaluation, adoption is not expected to have a material impact on the
Company's financial position or results of operations.
2. INDEBTEDNESS
Line-of-Credit
The Company has a line-of-credit with a financial institution which provides
for maximum available borrowings of $20,000 (100,000FF). Interest on the line
is payable monthly at the bank's prime rate plus 4.6% (12.8% at October 31,
1995). Borrowings under the line are due on demand and are secured by all
assets of the Company. At October 31, 1995, there were no amounts outstanding
under the line-of-credit.
The Company also had a temporary line-of-credit with a financial institution
which provided for maximum available borrowings of $40,000 (200,000FF).
Interest on the line was payable monthly at the bank's prime rate plus 4.6%
(12.8% at October 31, 1995). Borrowings under the line were due on demand and
were secured by all assets of the Company. This agreement expired November 15,
1995. At October 31, 1995, there were no amounts outstanding under the line-
of-credit.
F-27
<PAGE>
ABOUT SOFTWARE CORPORATION S.A. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. INDEBTEDNESS (CONTINUED)
Long-term Debt
<TABLE>
<S> <C>
Secured term bank loans, due in monthly installments of $615 to
$7,237, which includes interest ranging from 7.25% to 11.55%, with
final installments due from March 1998 to October 1998............ $363,919
Secured, non-interest bearing, term bank loan from a French
governmental agency, due in annual installments of $48,381, with
the final installment due in September 1999....................... 179,596
Other.............................................................. 29,785
--------
573,300
Less current portion............................................... 214,912
--------
$358,388
========
</TABLE>
Total interest expense for the nine months ended December 31, 1994 and for
the ten months ended October 31, 1995 was approximately $49,000 and $52,000,
respectively.
3. INCOME TAXES
Deferred income taxes reflect the tax effects of temporary differences
between the financial statement basis and tax basis of the Company's assets
and liabilities.
The Company has no significant temporary differences, other than the
accounting for capitalized software costs for French and U.S. reporting
purposes and operating loss carryforwards, under French or U.S. taxation law
which could give rise to deferred tax assets or liabilities.
At October 31, 1995, the Company has cumulative net operating loss
carryforwards of approximately $437,000 for French income tax purposes. The
availability of the net operating loss carryforwards to offset future taxable
income is subject to significant limitations. The loss carryforward will
expire at various dates beginning in 1999. The Company also has approximately
$150,000 of cumulative net operating losses for U.S. income tax purposes that
expire at various dates beginning in 2004.
No deferred tax asset has been recorded as it is believed to be more likely
than not that there will be no future tax benefits from temporary differences.
4. LEASE COMMITMENTS
The Company leases its office facilities under various operating leases
expiring at various times through fiscal 1998.
Future minimum annual rental commitments under the lease agreements for the
periods ending December 31 are as follows:
<TABLE>
<S> <C>
1995................................................................ $ 17,694
1996................................................................ 98,139
1997................................................................ 47,550
1998................................................................ 25,685
--------
$189,068
========
</TABLE>
Total rent expense for the nine months ended December 31, 1994 and the ten
months ended October 31, 1995 was approximately $122,000 and $132,000,
respectively.
F-28
<PAGE>
ABOUT SOFTWARE CORPORATION S.A. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. SUBSEQUENT EVENT
On November 1, 1995, the Company was acquired by White Pine Software, Inc.,
a developer and distributor of desktop video conferencing software for the
Internet and intranets, as well as X Windows and terminal emulation software.
White Pine Software, Inc. is located in the U.S.
The acquisition was effected by the issuance of 1,990,956 shares of White
Pine Software, Inc.'s common stock to the shareholders of the Company.
F-29
<PAGE>
[Graphic: Picture of North America and surrounding area]
[Graphic: White Pine Software, Inc. pine tree logo] White Pine
[Graphic: Personal computer monitor displaying Enhanced CU-SeeMe windows,
together with digital camera]
[Graphic: Enhanced CU-SeeMe logo] Enhanced CU-SeeMe Desktop Videoconferencing
White Pine's Enhanced CU-SeeMe provides a software solution for desktop
videoconferencing over the Internet and intranets. Enhanced CU-SeeMe offers
full-color video, audio, chat window and whiteboard group collaboration to
businesses, educational institutions, government organizations and individuals
around the world.
[Graphic: Personal computer monitor displaying eXodus windows]
[Graphic: eXodus logo] eXodus X Server Software
White Pine's eXodus products provide a comprehensive line of desktop X
Windows solutions that permit seamless interoperability between local and
remote environments. eXodus incorporates an X server that enables Windows and
Macintosh users to access and share applications on any UNIX, VMS or Windows
NT host.
[Graphic: Personal computer monitor displaying 5PM screen]
[Graphic: 5PM logo] 5PM Terminal Emulation
White Pine's 5PM products provide desktop terminal emulation solutions for
enterprise legacy systems. 5PM enables Windows and Macintosh users to access
data and applications residing on IBM mainframe, AS/400, UNIX, VAX and HP
hosts.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS NOT CONTAINED
HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY
OF THE UNDERWRITERS OR ANY OTHER PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER
THAN THE SHARES OF COMMON STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY, TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO
MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
The Company.............................................................. 18
Use of Proceeds.......................................................... 19
Dividend Policy.......................................................... 19
Capitalization........................................................... 20
Dilution................................................................. 21
Selected Financial Data.................................................. 22
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 23
Business................................................................. 29
Management............................................................... 46
Certain Transactions..................................................... 52
Principal Stockholders................................................... 53
Description of Capital Stock............................................. 55
Shares Eligible for Future Sale.......................................... 58
Underwriting............................................................. 60
Legal Matters............................................................ 62
Experts.................................................................. 62
Change in Independent Auditors........................................... 62
Additional Information................................................... 63
Index to Financial Statements............................................ F-1
</TABLE>
------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIRE-
MENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3,000,000 SHARES
[Graphic: White Pine Software, Inc. pine tree logo]
COMMON STOCK
------------------
PROSPECTUS
------------------
COWEN & COMPANY
OPPENHEIMER & CO., INC.
VOLPE, WELTY & COMPANY
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law affords a Delaware
corporation the power to indemnify its present and former directors and
officers under certain conditions. Article SEVENTH of the Restated Charter
provides that the Company shall indemnify each person who at any time is, or
shall have been, a director or officer of the Company, and is threatened to be
or is made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he is, or was, a director or officer of the Company,
or is or was serving at the request of the Company as a director, officer,
employee, trustee, or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement incurred in connection
with any such action, suit or proceeding to the maximum extent permitted by
the Delaware General Corporation Law.
Section 102(b)(7) of the Delaware General Corporation Law gives a Delaware
corporation the power to adopt a charter provision eliminating or limiting the
personal liability of directors to the corporation or its stockholders for
breach of fiduciary duty as directors, provided that such provision may not
eliminate or limit the liability of directors for (i) any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) any
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) any payment of a dividend or approval of a
stock purchase that is illegal under Section 174 of the Delaware Corporation
Law or (iv) any transaction from which the director derived an improper
personal benefit. Article NINTH of the Restated Charter provides that to the
maximum extent permitted by the General Corporation Law of the State of
Delaware, no director of the Company shall be personally liable to the Company
or to any of its stockholders for monetary damages arising out of such
director's breach of fiduciary duty as a director of the Company. No amendment
to or repeal of the provisions of Article NINTH shall apply to or have any
effect of the liability or the alleged liability of any director of the
Corporation with respect to any act or failure to act of such director
occurring prior to such amendment or repeal. A principal effect of such
Article NINTH is to limit or eliminate the potential liability of the
Company's directors for monetary damages arising from breaches of their duty
of care, unless the breach involves one of the four exceptions described in
(i) through (iv) above.
Section 145 of the Delaware General Corporation Law also affords a Delaware
corporation the power to obtain insurance on behalf of its directors and
officers against liabilities incurred by them in those capacities. The Company
intends to procure a directors' and officers' liability and company
reimbursement liability insurance policy that will (a) insure directors and
officers of the Company against losses (above a deductible amount) arising
from certain claims made against them by reason of certain acts done or
attempted by such directors or officers and (b) insure the Company against
losses (above a deductible amount) arising from any such claims, but only if
the Company is required or permitted to indemnify such directors or officers
for such losses under statutory or common law or under provisions of the
Restated Charter or the Restated By-Laws.
Reference is also made to Section 6 of the Underwriting Agreement between
the Company and the Underwriters, filed as Exhibit 1.1 to this Registration
Statement, for a description of indemnification arrangements between the
Company and the Underwriters.
II-1
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses to be paid by the
Company in connection with the issuance and distribution of the securities
being registered, other than the underwriting discount. All amounts shown are
estimates except for amounts of filing and listing fees.
<TABLE>
<S> <C>
Filing fee of Securities and Exchange Commission................... $ 11,897
Filing fee of National Association of Securities Dealers, Inc...... 3,950
Listing fee of Nasdaq Stock Market, Inc............................ 40,070
Premium for directors' and officers' insurance..................... 125,000
Accounting fees and expenses....................................... *
Blue sky fees and expenses (including related legal fees).......... 20,000
Legal fees and expenses............................................ *
Printing and engraving expenses.................................... *
Transfer agent fees................................................ *
Miscellaneous...................................................... *
--------
Total.......................................................... $950,000
========
</TABLE>
- --------
* To be completed by amendment.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The following information is furnished with regard to all securities sold by
the Company within the past three years which were not registered under the
Securities Act.
(a) On the dates set forth below the Company issued and sold the number of
shares of its Common Stock indicated upon exercise of stock options held by
certain of its employees.
<TABLE>
<CAPTION>
NUMBER OF EXERCISE PRICE
DATE OF SALE SHARES ISSUED PER SHARE
------------ ------------- --------------
<S> <C> <C>
October 28, 1994 167 $1.00
December 27, 1994 250 $1.00
May 26, 1995 694 $1.00
June 30, 1995 1,944 $0.50
July 12, 1995 56 $1.50
July 12, 1995 167 $1.00
July 13, 1995 10,000 $0.50
April 25, 1996 1,300 $1.00
April 25, 1996 330 $1.50
June 14, 1996 333 $1.50
June 14, 1996 83 $2.00
July 12, 1996 20,000 $1.00
July 16, 1996 1,549 $2.00
</TABLE>
(b) On August 31, 1993, the Company issued 403,847 shares of Common Stock to
the stockholders of White Pine Software, Inc., a New Hampshire corporation, in
exchange for all of the outstanding capital stock of such corporation.
(c) On April 1, 1994, the Company issued 595,840 shares of Common Stock to
the stockholder of Grafpoint in connection with the merger of Grafpoint into
the Company.
(d) On December 15, 1995, the Company issued 1,781,906 shares of Common
Stock to the stockholders of About Software Corporation S.A. as partial
consideration for the outstanding stock of About Software Corporation S.A.
II-2
<PAGE>
(e) On March 19, 1996, the Company issued 343,053 shares of $5.83 Stock to
affiliates of Advent International Corporation for an aggregate purchase price
of $2,000,000.
(f) On April 17, 1996, the Company issued 51,458 shares of $5.83 Stock to a
stockholder of the Company for an aggregate purchase price of $300,000.
(g) On July 31, 1996, pursuant to an exclusive software license agreement
with Cornell Research Foundation, Inc., the Company issued to the Cornell
Research Foundation, Inc. a warrant to purchase 20,000 shares of Common Stock
at a price of $3.00 per share.
The issuances described in Item 26(a) were made in reliance upon the
exemptions from registration set forth in Rule 701 under the Securities Act
and Section 4(2) of the Securities Act relating to sales by an issuer not
involving any public offering. The issuances described in Items 15(b), (c),
(d), (e), (f) and (g) were made in reliance upon the exemption from
registration set forth in Section 4(2) of the Securities Act relating to sales
by an issuer not involving any public offering. None of the foregoing
transactions involved a distribution or public offering. No underwriters were
engaged in connection with the foregoing issuances of securities, and no
underwriting commissions or discounts were paid.
ITEM 27. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1.1* Form of Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation of the Company
3.2 Proposed form of Amended and Restated Certificate of Incorporation
of the Company to become effective immediately following the
offering
3.3 By-Laws of the Company, as amended
3.4 Proposed form of Amended and Restated By-Laws of the Company to
become effective upon the closing of the offering
4.1* Specimen certificate for common stock, $.01 par value, of the
Company
5.1* Opinion of Foley, Hoag & Eliot LLP
10.1 Visual International, Inc. Stock Option Plan (1992), as amended
10.2 White Pine Software, Inc. Stock Option Plan (1993), as amended
10.3 White Pine Software, Inc. Stock Option Plan (1994)
10.4 White Pine Software, Inc. Stock Option Plan (1995), as amended
10.5 White Pine Software, Inc. Stock Option Plan (1996)
10.6 White Pine Software, Inc. 1996 Incentive and Nonqualified Stock
Option Plan
10.7 White Pine Software, Inc. 1996 Employee Stock Purchase Plan
10.8 Employment Agreement dated January 3, 1994 with Howard R. Berke,
as amended
10.9 Employment Agreement dated October 10, 1995 with Killko A.
Caballero
10.10 Nondisclosure and Noncompetition Agreement dated February 15, 1996
with David O. Bundy
10.11+ Exclusive Software License Agreement dated June 1, 1996 between
Cornell Research Foundation, Inc. and the Company
10.12 Common Stock Purchase Warrant of the Company dated July 31, 1996,
issued to Cornell Research Foundation, Inc.
10.13 Commercial Loan Agreement dated December 30, 1994 between Fleet
Bank--NH and the Company, as amended
10.14 $1,000,000 Revolving Line of Credit Promissory Note of the Company
dated December 30, 1994, issued to Fleet Bank--NH, as amended
10.15 Security Agreement dated December 30, 1994 between Fleet Bank--NH
and the Company
10.16 Collateral Assignment and Security Agreement dated December 30,
1994 between Fleet Bank--NH and the Company, as amended
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.17 $53,000 Commercial Promissory Note of the Company dated August 25,
1995, issued to Fleet Bank--NH
10.18 Loan Contract from Credit Agricole, Alpes-Maritimes Regional
Division to About Software Corporation S.A. in the principal
amount of FF 800,000
10.19 Loan Contract from Credit Agricole, Alpes-Maritimes Regional
Division to About Software Corporation S.A. in the principal
amount of FF 1,800,000
10.20 Loan Contract from Credit Agricole, Alpes-Maritimes Regional
Division to About Software Corporation S.A. in the principal
amount of FF 180,000
10.21* Stock Purchase Agreement dated March 19, 1996 among certain
investors and the Company, as amended
10.22 Stock Purchase Agreement dated April 17, 1996 between J.F. Shea,
Co., Inc. and the Company, as amended
10.23* Amended and Restated Registration Rights Agreement dated March 19,
1996 among certain stockholders of the Company and the Company, as
amended
10.24 Acquisition Agreement dated October 10, 1995 among former
stockholders of About Software Corporation S.A. and the Company
10.25 Indenture of Lease dated May 15, 1996 by Nash-Tamposi Limited
Partnership, Five N Associates, Ballinger Properties, L.L.C. and
the Company
11.1 Statement re computation of per share earnings
21.1 List of subsidiaries of the Company
23.1 Consent of Ernst & Young LLP
23.2 Consent of Ernst & Young Audit
23.3* Consent of Foley, Hoag & Eliot LLP (included in Exhibit 5.1)
24.1 Power of Attorney (contained on page II-6 of this Registration
Statement)
27.1 Financial Data Schedules for fiscal year ended December 31, 1995
and three months ended March 31, 1996
</TABLE>
- --------
+ Filed under application for confidential treatment.
* To be filed by amendment.
ITEM 28. UNDERTAKINGS.
The small business issuer will provide to the underwriters at the closing
specified in the underwriting agreement certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the small business issuer of expenses
incurred or paid by a director, officer or controlling person of the small
business issuer in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with
the securities being registered, the small business issuer will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-4
<PAGE>
If the small business issuer relies on Rule 430A under the Securities Act,
the small business issuer will:
(1) for determining any liability under the Securities Act, treat 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 small business issuer under Rule 424(b)(1), or
(4), or 497(h) under the Securities Act as part of this registration
statement as of the time the Commission declared it effective; and
(2) for determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial
bona fide offering of those securities.
II-5
<PAGE>
SIGNATURES
IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS
ALL OF THE REQUIREMENTS FOR FILING ON FORM SB-2 AND AUTHORIZED THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, IN THE
CITY OF NASHUA, NEW HAMPSHIRE ON AUGUST 1, 1996.
White Pine Software, Inc.
/s/ Howard R. Berke
By: _________________________________
HOWARD R. BERKE
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
POWER OF ATTORNEY
WE, THE UNDERSIGNED OFFICERS AND DIRECTORS OF WHITE PINE SOFTWARE, INC.,
HEREBY SEVERALLY CONSTITUTE AND APPOINT HOWARD R. BERKE, RICHARD M. DARER AND
MARK L. JOHNSON, AND EACH OF THEM SINGLY, OUR TRUE AND LAWFUL ATTORNEYS WITH
FULL POWER TO THEM, AND EACH OF THEM SINGLY, TO SIGN FOR US AND IN OUR NAMES
IN THE CAPACITIES INDICATED BELOW, THE REGISTRATION STATEMENT ON FORM SB-2
FILED HEREWITH AND ANY AND ALL PRE-EFFECTIVE AND POST-EFFECTIVE AMENDMENTS TO
SAID REGISTRATION STATEMENT, AND ANY SUBSEQUENT REGISTRATION STATEMENT FOR THE
SAME OFFERING WHICH MAY BE FILED UNDER RULE 462(B) UNDER THE SECURITIES ACT OF
1933 AND GENERALLY TO DO ALL SUCH THINGS IN OUR NAMES AND ON OUR BEHALF IN OUR
CAPACITIES AS OFFICERS AND DIRECTORS TO ENABLE WHITE PINE SOFTWARE, INC. TO
COMPLY WITH THE PROVISIONS OF THE SECURITIES ACT OF 1933 AND ALL REQUIREMENTS
OF THE SECURITIES AND EXCHANGE COMMISSION, HEREBY RATIFYING AND CONFIRMING OUR
SIGNATURES AS THEY MAY BE SIGNED BY OUR SAID ATTORNEYS, OR ANY OF THEM, TO
SAID REGISTRATION STATEMENT AND ANY AND ALL AMENDMENTS THERETO OR TO ANY
SUBSEQUENT REGISTRATION STATEMENT FOR THE SAME OFFERING WHICH MAY BE FILED
UNDER SAID RULE 462(B).
IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON AUGUST 1, 1996.
SIGNATURE TITLE
--------- -----
/s/ Howard R. Berke President, Chief Executive Officer and
- ------------------------------------- Director (Principal Executive
HOWARD R. BERKE Officer)
/s/ Richard M. Darer Chief Financial Officer and Vice
- ------------------------------------- President of Administration
RICHARD M. DARER (Principal Financial and Accounting
Officer)
/s/ Killko A. Caballero Director
- -------------------------------------
KILLKO A. CABALLERO
/s/ Arthur H. Bruno Director
- -------------------------------------
ARTHUR H. BRUNO
/s/ Jonathan G. Morgan Director
- -------------------------------------
JONATHAN G. MORGAN
/s/ Pierre-Gabriel Vallee Director
- -------------------------------------
PIERRE-GABRIEL VALLEE
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
<C> <S> <C>
1.1* Form of Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation of the
Company
3.2 Proposed form of Amended and Restated Certificate of
Incorporation of the Company to become effective
immediately following the offering
3.3 By-Laws of the Company, as amended
3.4 Proposed form of Amended and Restated By-Laws of the
Company to become effective upon the closing of the
offering
4.1* Specimen certificate for common stock, $.01 par value, of
the Company
5.1* Opinion of Foley, Hoag & Eliot LLP
10.1 Visual International, Inc. Stock Option Plan (1992), as
amended
10.2 White Pine Software, Inc. Stock Option Plan (1993), as
amended
10.3 White Pine Software, Inc. Stock Option Plan (1994)
10.4 White Pine Software, Inc. Stock Option Plan (1995), as
amended
10.5 White Pine Software, Inc. Stock Option Plan (1996)
10.6 White Pine Software, Inc. 1996 Incentive and Nonqualified
Stock Option Plan
10.7 White Pine Software, Inc. 1996 Employee Stock Purchase Plan
10.8 Employment Agreement dated January 3, 1994 with Howard R.
Berke, as amended
10.9 Employment Agreement dated October 10, 1995 with Killko A.
Caballero
10.10 Nondisclosure and Noncompetition Agreement dated February
15, 1996 with David O. Bundy
10.11+ Exclusive Software License Agreement dated June 1, 1996
between Cornell Research Foundation, Inc. and the Company
10.12 Common Stock Purchase Warrant of the Company dated July 31,
1996, issued to Cornell Research Foundation, Inc.
10.13 Commercial Loan Agreement dated December 30, 1994 between
Fleet Bank--NH and the Company, as amended
10.14 $1,000,000 Revolving Line of Credit Promissory Note of the
Company dated December 30, 1994, issued to Fleet Bank--NH,
as amended
10.15 Security Agreement dated December 30, 1994 between Fleet
Bank--NH and the Company
10.16 Collateral Assignment and Security Agreement dated December
30, 1994 between Fleet Bank--NH and the Company, as amended
10.17 $53,000 Commercial Promissory Note of the Company dated
August 25, 1995, issued to Fleet Bank--NH
10.18 Loan Contract from Credit Agricole, Alpes-Maritimes
Regional Division to About Software Corporation S.A. in the
principal amount of FF 800,000
10.19 Loan Contract from Credit Agricole, Alpes-Maritimes
Regional Division to About Software Corporation S.A. in the
principal amount of FF 1,800,000
10.20 Loan Contract from Credit Agricole, Alpes-Maritimes
Regional Division to About Software Corporation S.A. in the
principal amount of FF 180,000
10.21* Stock Purchase Agreement dated March 19, 1996 among certain
investors and the Company, as amended
10.22 Stock Purchase Agreement dated April 17, 1996 between J.F.
Shea, Co., Inc. and the Company, as amended
10.23* Amended and Restated Registration Rights Agreement dated
March 19, 1996 among certain stockholders of the Company
and the Company, as amended
10.24 Acquisition Agreement dated October 10, 1995 among former
stockholders of About Software Corporation S.A. and the
Company
10.25 Indenture of Lease dated May 15, 1996 by Nash-Tamposi
Limited Partnership, Five N Associates, Ballinger
Properties, L.L.C. and the Company
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
<C> <S> <C>
11.1 Statement re computation of per share earnings
21.1 List of subsidiaries of the Company
23.1 Consent of Ernst & Young LLP
23.2 Consent of Ernst & Young Audit
23.3* Consent of Foley, Hoag & Eliot LLP (included in Exhibit
5.1)
24.1 Power of Attorney (contained on page II-6 of this
Registration Statement)
27.1 Financial Data Schedules for fiscal year ended December 31,
1995 and three months ended March 31, 1996
</TABLE>
- --------
+ Filed under application for confidential treatment.
* To be filed by amendment.
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
WHITE PINE SOFTWARE, INC.
White Pine Software, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware, does hereby
certify:
1. The Corporation filed its original Certificate of Incorporation with
the Secretary of State of the State of Delaware on April 1, 1992 under the name
Visual International, Inc. The Certificate of Incorporation was amended by a
Certificate of Amendment filed on August 31, 1993, a Certificate of Merger of
Visual T.I., Inc. (a Delaware corporation) into the Corporation filed on August
31, 1993, a Certificate of Merger of White Pine Software, Inc. (a New Hampshire
corporation) into the Corporation filed on December 28, 1993, a Certificate of
Amendment filed on March 10, 1994, a Certificate of Merger of Grafpoint (a
California corporation) into the Corporation filed on March 10, 1994, a
Certificate of Correction filed on July 5, 1994, a Certificate of Amendment
filed on October 12, 1995, and a Certificate of Amendment filed on March 18,
1996.
2. By written action of the Board of Directors of the Corporation in lieu
of a meeting, a resolution was duly adopted, pursuant to Sections 141(f) and 245
of the General Corporation Law of the State of Delaware, setting forth a
proposed Amended and Restated Certificate of Incorporation of the Corporation
and declaring the proposed Amended and Restated Certificate of Incorporation
advisable. The stockholders of the Corporation duly approved and adopted the
proposed Amended and Restated Certificate of Incorporation by written consent in
accordance with Sections 228, 242, and 245 of the General Corporation Law of the
State of Delaware, and written notice of such consent has been given to all
stockholders who have not consented in writing to such amendment and
restatement. The resolution setting forth the Amended and Restated Certificate
of Incorporation is as follows:
Resolved: That the Certificate of Incorporation of the Corporation, as amended,
be and hereby is amended and restated in its entirety so that the
same shall read as follows:
<PAGE>
FIRST: The name of this Corporation is White Pine Software, Inc.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street in the City of Wilmington, County of New
Castle, and the name of its registered agent at that address is The Corporation
Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 15,500,000 shares, consisting of
(i) 15,000,000 shares of Common Stock, $.01 par value per share ("$.01 par
Common Stock"), and (ii) 500,000 shares of Common Stock, $5.83 par value per
share ("$5.83 par Common Stock" and together with the $.01 par Common Stock,
"Common Stock"). The following is a statement of the voting powers and the
designations, preferences and other special rights, and the qualifications,
limitations or restrictions in respect of each class of stock of the
Corporation.
Section 1. Voting. The holders of the Common Stock are entitled to
--------- ------
one vote for each share held at all meetings of stockholders (and written
action in lieu of meetings). There shall be no cumulative voting.
Section 2. Dividends. Dividends may be declared and paid on the
--------- ---------
Common Stock from funds lawfully available therefor as and when determined
by the Board of Directors.
Section 3. Liquidation, Dissolution or Winding-Up.
--------- --------------------------------------
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, each holder of outstanding
shares of Common Stock shall be entitled to be paid out of the assets of
the Corporation available for distribution to stockholders, whether such
assets are capital, surplus, or earnings as follows: (i) first, to the
holders of the $5.83 par Common Stock, an amount equal to $5.83 per share
(adjusted appropriately for stock splits, stock dividends and the like)
together with any declared but unpaid dividends to which the holders of
outstanding shares of $5.83 par Common Stock are entitled pursuant to
Section 2 hereof, before any payment shall be made to the holders of $.01
par Common Stock or of any other stock ranking on liquidation junior to the
$5.83 par Common Stock; provided, however, that if, upon any liquidation,
dissolution or winding up of the Company, the amounts payable with respect
to the $5.83 par Common Stock as described in this clause (i) are not paid
in full, then the holders of the $5.83 par Common Stock shall share ratably
in any distribution of assets in proportion to the full respective
preferential amounts to which they are entitled; and (ii) second, all
holders of outstanding shares of Common Stock, taken together as a single
class, shall share ratably in the distribution of the assets remaining for
distribution to stockholders, whether such assets are capital, surplus or
earnings.
(b) Whenever a distribution provided for in this Section 3 is payable
in property other than in cash, the value of such distribution shall be the
fair market value of such property as determined in good faith by the
Corporation's Board of Directors.
-2-
<PAGE>
Section 4. Redemption.
--------- ----------
(a) Election to be redeemed. At the election of at least a majority
-----------------------
of the holders of the $5.83 par Common Stock made at any time on or after
March 1, 2001, the Company shall redeem from all holders of $5.83 par
Common Stock, and the Qualified Holders (as defined below) electing
redemption pursuant to Section 4(d) below, shares of $5.83 par Common Stock
and $.01 par Common Stock, as the case may be, pro rata based on the
percentage of shares of Common Stock held by such persons, with funds
legally available therefor.
(b) Redemption Price. The redemption price (the "Redemption Price")
----------------
for each share of Common Stock redeemed pursuant to this Section 4 shall be
the fair market value thereof (taking into account all relevant facts and
circumstances, without deduction for minority discounts), as determined (x)
by the mutual agreement of (1) a majority of the members of the
Corporation's Board of Directors and (2) the holders of a majority of the
then-outstanding shares of $5.83 par Common Stock or, if such parties
cannot agree on the fair market value, (y) then, by an independent
investment banking firm of national reputation expert in the valuation of
privately held companies (an "Appraiser") which is selected by the mutual
agreement of (1) a majority of the members of the Corporation's Board of
Directors and (2) the holders of a majority of the then-outstanding shares
---
of $5.83 par Common Stock. The fees and expenses of any Appraiser shall be
paid 50% by the holders of Common Stock being redeemed and 50% by the
Corporation. Each redemption of shares of Common Stock shall be made so
that the number of shares of Common Stock held by each holder requesting
redemption of its shares shall be reduced in an amount which shall bear the
same ratio to the total number of shares of Common Stock being so redeemed
as the number of shares of Common Stock then held by such holder requesting
redemption bears to the aggregate number of shares of Common Stock then
outstanding.
(c) Redemption Notice. If an election is made pursuant to Section
-----------------
4(a) hereof, written notice of such election shall be mailed, postage
prepaid, to the Corporation, not later than 180 days prior to the date on
which such redemption is requested (hereinafter referred to as the
"Redemption Date"). If such election is made and appropriate notice is
given then, at least sixty days prior to the Redemption Date, written
notice (the "Redemption Notice") shall be mailed by the Corporation,
postage prepaid, to each holder of record of shares of $5.83 par Common
Stock and each Qualified Holder, at such holder's address shown on the
records of the Corporation; provided, however, that the Corporation's
failure to give such Redemption Notice shall in no way affect its
obligation to redeem the shares of Common Stock as provided in Section 4(a)
hereof. The Redemption Notice shall state the following information:
(i) the number of shares of $5.83 par Common Stock that
holders thereof have requested to be redeemed;
(ii) the Redemption Date and the Redemption Price;
(iii) the amount of funds the Corporation has legally
available for such redemption;
(iv) a statement that, if a Qualified Holder so elects, the
Corporation will redeem a pro rata portion of shares
of $.01 par Common Stock held by such Qualified
Holder; and
-3-
<PAGE>
(v) a statement that, if the holder elects to have the
Corporation redeem shares of Common Stock, the holder
is to surrender to the Corporation, at the place
designated in the Redemption Notice, its certificate
or certificates representing the shares of Common
Stock to be redeemed.
(d) Qualified Holder Acceptance. Within fifteen days after delivery
---------------------------
of the Redemption Notice, any holder of shares of $.01 par Common Stock
(each, a "Qualified Holder") that elects to accept the Corporation's offer
of redemption shall provide the Corporation with written notice of such
holder's acceptance of the redemption offer, which notice shall specify the
number of shares requested to be redeemed. All notices hereunder shall be
deemed to have been delivered if personally delivered, sent by facsimile
transmission, prepaid overnight courier, or first class, certified or
registered mail. In the event that Qualified Holders and holders of $5.83
par Common Stock request that the Corporation redeem a greater number of
shares than the Corporation may legally redeem as of such Redemption Date,
the requests of each such holder shall be reduced pro rata in proportion to
the number of shares of Common Stock then held by each so as to reduce the
number of shares of Common Stock with respect to which acceptance notices
were received to equal the number of shares of Common Stock to be redeemed
as of such Redemption Date.
(e) Surrender of Certificates. Each holder of shares of Common Stock
-------------------------
to be redeemed shall surrender the certificate(s) representing such shares
to the Corporation at the place designated in the Redemption Notice, and
thereupon the Redemption Price for such shares as set forth in this Section
4 shall be paid to the order of the person whose name appears on such
certificate(s) and each surrendered certificate shall be canceled and
retired. In the event some but not all of the shares of Common Stock
represented by a certificate(s) surrendered by a holder are being redeemed,
the Corporation shall execute and deliver to or on the order of the holder,
at the expense of the Corporation, a new certificate representing the
number of shares of Common Stock which were not redeemed.
(f) Payment of Redemption Price. The aggregate Redemption Price
---------------------------
shall, at the option of the Corporation, be payable in up to twenty-four
monthly installments beginning on the Redemption Date, from funds legally
available therefor. In the event that the Corporation shall elect to pay
the aggregate Redemption Price in installments to the stockholders electing
redemption, the Corporation and such stockholders shall enter into an
agreement on the Redemption Date setting forth the Corporation's obligation
to pay the aggregate Redemption Price within twenty-four months of the
Redemption Date.
(g) Insufficient Funds. If the funds of the Corporation legally
------------------
available for redemption of shares of Common Stock which shall have been
requested on a Redemption Date are insufficient to redeem the total number
of shares of Common Stock submitted for redemption, those funds which are
legally available will be used to redeem the maximum possible number of
whole shares ratably among the holders of such shares in proportion to the
amounts which such holders of Common Stock would otherwise have been
entitled to receive if all amounts payable on or with respect to such
Common Stock had been paid in full. The shares of Common Stock not redeemed
shall remain outstanding and entitled to all rights and preferences
provided herein.
-4-
<PAGE>
Section 5. Anti-dilution.
--------- -------------
(a) Upon Sale of Common Stock. If the Corporation shall, while there
-------------------------
are any shares of $5.83 par Common Stock outstanding, issue or sell shares
of its Common Stock at a price per share less than the Applicable Purchase
Price (as hereinafter defined) in effect immediately prior to such sale or
issuance (the "Dilutive Sale Price"), then the Corporation shall issue to
the holders of $5.83 par Common Stock, for no additional consideration,
additional shares of $5.83 par Common Stock so that the then-outstanding
number of shares of $5.83 par Common Stock shall equal (i) the total
consideration paid to the Company by the holders of $5.83 par Common Stock
for the purchase thereof, divided by (ii) the Dilutive Sale Price. The
initial Applicable Purchase Price is $5.83. Following any issuance of
shares as described in this Section 5(a), the Applicable Purchase Price
shall equal the Dilutive Sale Price, provided, however, that the Applicable
Purchase Price shall in no event be less than $2.91 (such amount subject to
appropriate adjustment in the event of any stock dividend, stock split,
combination or other similar recapitalization).
(b) Upon Issuance of Warrants, Options and Rights to Common Stock.
-------------------------------------------------------------
(i) For the purposes of Section 5(a), the issuance of any
warrants, options, subscriptions, or purchase rights with respect to shares
of Common Stock and the issuance of any securities convertible into or
exchangeable for shares of Common Stock (or the issuance of any warrants,
options or any rights with respect to such convertible or exchangeable
securities) shall be deemed an issuance of such Common Stock at such time
if the Net Consideration Per Share (as hereinafter determined) which may be
received by the Corporation for such Common Stock shall be less than the
Applicable Purchase Price. Any obligation, agreement or undertaking to
issue warrants, options, subscriptions, or purchase rights at any time in
the future shall be deemed to be an issuance at the time such obligation,
agreement or undertaking is made or arises. No issuance of shares of Common
Stock shall be made under Section 5(a) upon the issuance of any shares of
Common Stock which are issued pursuant to the exercise of any warrants,
options, subscriptions, or purchase rights or pursuant to the exercise of
any conversion or exchange rights in any convertible securities if any
issuance shall previously have been made or deemed not required hereunder,
upon the issuance of any such warrants, options, or subscription or
purchase rights or upon the issuance of any convertible securities (or upon
the issuance of any warrants, options or any rights therefor) as above
provided.
Should the Net Consideration Per Share (as hereinafter defined)
of any such warrants, options, subscriptions, purchase rights or
convertible securities be decreased from time to time, then, upon the
effectiveness of each such change, the Corporation shall issue shares of
$5.83 par Common Stock as set forth in Section 5(a) as would have obtained
(1) had the issuance of shares of $5.83 par Common Stock made upon the
issuance of such warrants, options, rights or convertible securities been
made upon the basis of the decreased Net Consideration Per Share of such
securities, and (2) had issuances of shares of $5.83 par Common Stock made
since the date of issuance of such securities been made as adjusted
pursuant to (1) above. Any issuances made with respect to this paragraph
which relate to warrants, options, subscriptions, purchase rights or
convertible securities with respect to shares of Common Stock shall be
disregarded (and such shares shall be transferred by the holders thereof to
the Corporation for no consideration and shall thereafter be canceled and
retired) if, as, when and to the extent such warrants, options,
subscriptions, purchase rights or convertible securities expire or are
canceled without being exercised or converted, so that the
-5-
<PAGE>
number of shares of $5.83 par Common Stock outstanding effective
immediately upon such cancellation or expiration shall be equal to the
number of shares of $5.83 par Common Stock outstanding at the time of the
issuance of the expired or canceled warrants, options, subscriptions,
purchase rights or convertible securities with such additional issuances as
would have been made had the expired or canceled warrants, options,
subscriptions, purchase rights or convertible securities not been issued.
(ii) For purposes of this paragraph, the "Net Consideration Per
Share" which may be received by the Corporation shall be determined as
follows:
(A) The "Net Consideration Per Share" shall mean
the amount equal to the total amount of consideration, if
any, received by the Corporation for the issuance of such
warrants, options, subscriptions, purchase rights or
convertible or exchangeable securities, plus the minimum
amount of consideration, if any, payable to the Corporation
upon exercise or conversion thereof, divided by the
aggregate number of shares of Common Stock that would be
issued if all such warrants, options, subscriptions,
purchase rights or convertible or exchangeable securities
were exercised, exchanged or converted.
(B) The Net Consideration Per Share which may be
received by the Corporation shall be determined in each
instance as of the date of issuance of warrants, options,
subscriptions, purchase rights or convertible or
exchangeable securities without giving effect to any
possible future upward price adjustments or rate adjustments
which may be applicable with respect to such warrants,
options, subscriptions, purchase rights or convertible or
exchangeable securities.
(c) Consideration Other than Cash. For purposes of this Section 5,
-----------------------------
if a part or all of the consideration received by the Corporation in
connection with the issuance of shares of Common Stock or the issuance of
any of the securities described in Section 5(b) consists of property other
than cash, such consideration shall be deemed to have a fair market value
as is reasonably determined in good faith by the Board of Directors of the
Corporation.
(d) Exceptions. This Section 5 shall not apply to (i) options (and
----------
the shares issuable upon exercise thereof) to purchase shares of Common
Stock (including options outstanding on the date hereof) as determined and
granted by the Board of Directors, (ii) any shares of any class or series
of capital stock (including warrants, options, subscriptions or purchase
rights with respect thereto) approved in writing as being excepted
hereunder by the holders of 51% of the Common Stock at the time
outstanding, (iii) any shares of $.01 par Common Stock issued pursuant to
the escrow provisions of a certain Acquisition Agreement dated October 10,
1995 by and between the Corporation and the other parties thereto and (iv)
a certain warrant dated July 31, 1996 (and the shares issuable upon
exercise thereof) to purchase 20,000 shares of $.01 par Common Stock. The
number of shares in this Section 5(d) shall be proportionately adjusted to
reflect any stock dividend, stock split or other form of recapitalization
occurring after March 18, 1996.
(e) Reorganization, Merger or Sale of Assets. If at any time or from
----------------------------------------
time to time the Corporation shall agree to (i) a merger or consolidation
of the Corporation with or into another corporation, (ii) the sale of all
or substantially all of the Corporation's properties and assets
-6-
<PAGE>
to any other person, or (iii) a transaction or series of related
transactions in which more than 51% of the voting power of the Corporation
is transferred, pursuant to which, in any such case, the holders of Common
Stock are entitled to receive proceeds of less than the then Applicable
Purchase Price per share of Common Stock (any of which events is herein
referred to as a "Reorganization"), then, immediately prior to the
consummation of the transactions contemplated by such Reorganization, the
Corporation shall issue to holders of $5.83 par Common Stock, for no
additional consideration, additional shares of $5.83 par Common Stock so
that the then-outstanding number of shares of $5.83 par Common Stock shall
equal (i) the total consideration paid to the Company by the holders of
$5.83 par Common Stock for the purchase thereof, divided by (ii) the per
share value of the proceeds to be received by the holders of Common Stock
pursuant to such Reorganization; provided, however, that if the per share
-------- -------
value referred to in clause (ii) above is less than $2.91 (such amount
subject to appropriate adjustment in the event of any stock dividend, stock
split, combination or other similar recapitalization), it shall be deemed
for all purposes of this Section 5(c) to equal $2.91.
Section 6. Mandatory Conversion. If at any time the Corporation
--------- --------------------
shall effect a firm commitment underwritten public offering of shares of
$.01 par Common Stock in which (i) the aggregate price paid for such shares
by the public shall be at least $12,000,000 and (ii) the price paid by the
public for such shares shall be at least $6.00 per share (appropriately
adjusted to reflect any stock dividend, stock split, combination or other
similar recapitalization), then effective upon the closing of the sale of
such shares pursuant to such public offering (A) each and every outstanding
share of $5.83 par Common Stock shall automatically and without any further
action on the part of the Corporation convert into one share of $.01 par
Common Stock and (B) the provisions of Sections 3, 4 and 5 of this Article
FOURTH shall have no further force or effect.
Section 7. No Reissuance of $5.83 par Common Stock. No share of the
--------- ---------------------------------------
$5.83 par Common Stock acquired by the Corporation 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
Corporation shall be authorized to issue. The Corporation may from time to
time take such appropriate corporate action as may be necessary to reduce
the authorized number of shares of the $5.83 par Common Stock accordingly.
Section 8. Other Rights. Except as otherwise provided in this
--------- ------------
Certificate of Incorporation, each share of $5.83 par Common Stock and each
share of $.01 par Common Stock shall be identical in all respects, shall
have the same powers, preferences and rights, without preferences of any
such class or share over any other such class or share, and shall be
treated as a single class of stock for all purposes.
FIFTH: No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for any breach of fiduciary
duty by such a director as a director. Notwithstanding the foregoing sentence, a
director shall be liable to the extent provided by applicable law (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the
General Corporation Law of the State of Delaware, or (iv) for any transaction
from which such director derived an improper personal benefit. No amendment to
or repeal of this Article shall apply to or have any effect on the liability or
alleged liability of any director of the Corporation for or with respect to any
acts or omissions of such director occurring prior to such amendment or repeal.
-7-
<PAGE>
SIXTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred on
stockholders herein are granted subject to this reservation.
* * *
In Witness Whereof, the Corporation has caused its corporate seal to be
affixed hereto and this Amended and Restated Certificate of Incorporation to be
signed by its President this 1 day of August , 1996.
------------ ---------
White Pine Software, Inc.
By: /s/ Mark L. Johnson
-----------------------------------
Mark L. Johnson, Secretary
-8-
<PAGE>
Exhibit 3.2
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
WHITE PINE SOFTWARE, INC.
White Pine Software, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, does hereby
certify:
1. The Corporation filed its original Certificate of Incorporation with the
Secretary of State of the State of Delaware on April 1, 1992 under the name
Visual International, Inc. An Amended and Restated Certificate of Incorporation
was filed on July 25, 1996.
2. By action of the Board of Directors of the Corporation at a meeting held
on July 18, 1996, a resolution was duly adopted, pursuant to Sections 141(f) and
245 of the General Corporation Law of the State of Delaware, setting forth a
proposed Amended and Restated Certificate of Incorporation of the Corporation
and declaring the proposed Amended and Restated Certificate of Incorporation
advisable. The stockholders of the Corporation duly approved and adopted the
proposed Amended and Restated Certificate of Incorporation by written consent in
accordance with Sections 228, 242, and 245 of the General Corporation Law of the
State of Delaware, and written notice of such consent has been given to all
stockholders who have not consented in writing to such amendment and
restatement. The resolution setting forth the Amended and Restated Certificate
of Incorporation is as follows:
Resolved: That the Certificate of Incorporation of the Corporation, as amended,
be and hereby is amended and restated in its entirety so that the
same shall read as follows:
FIRST: The name of the corporation (the "Corporation") is White Pine
-----
Software, Inc.
SECOND: The address of the registered office of the Corporation in the
------
State of Delaware is 1209 Orange Street, Wilmington, County of New Castle, and
the name of its registered agent at such address is The Corporation Trust
Company.
THIRD: The purpose for which the Corporation is organized is to engage in
-----
any lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
<PAGE>
FOURTH: The total number of shares of all classes of capital stock that the
------
Corporation has authority to issue is 35,000,000 shares, consisting of (i)
30,000,000 shares of common stock, $.01 par value per share ("Common Stock"),
and (ii) 5,000,000 shares of preferred stock, $.01 par value per share
("Preferred Stock"). The following is a statement of the designations and the
powers, privileges and rights, and the qualifications, limitations or
restrictions thereof, in respect of each class of stock of the Corporation:
A. Common Stock
1. General. The voting, dividend and liquidation rights of the holders
of the Common Stock are subject to and qualified by the rights of the holders
of the Preferred Stock of any series as may be designated by the Board of
Directors of the Corporation upon any issuance of the Preferred Stock of any
series.
2. Voting. The holders of Common Stock are entitled to one vote for
each share on all matters to be voted on by the stockholders of the
Corporation. There shall be no cumulative voting. The number of authorized
shares of Common Stock may be increased or decreased (but not below the
number of shares thereof then outstanding) by the affirmative vote of the
holders of a majority of the stock entitled to vote, irrespective of the
provisions of Section 242(b)(2) of the General Corporation Law of the State
of Delaware.
3. Dividends. Dividends may be declared and paid on the Common Stock
from funds lawfully available therefor as and when determined by the Board of
Directors of the Corporation and subject to any preferential dividend rights
of any then-outstanding Preferred Stock.
4. Liquidation. Upon the dissolution or liquidation of the Corporation,
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential liquidation rights of any then-
outstanding Preferred Stock.
B. Preferred Stock
Preferred Stock may be issued from time to time in one or more series,
each of such series to have such terms as stated or expressed herein and in
the resolution or resolutions providing for the issue of such series adopted
by the Board of Directors of the Corporation as hereinafter provided. Any
shares of Preferred Stock that are redeemed, purchased or acquired by the
Corporation may be reissued except as otherwise provided by law. Different
series of Preferred Stock shall not be construed to constitute different
classes of shares for the purposes of voting by classes unless expressly
provided herein, in any such resolution or resolutions, or by law.
Authority is hereby expressly granted to the Board of Directors of the
Corporation from time to time to issue the Preferred Stock in one or more
series, and in connection with the creation of any such series, by resolution
or resolutions providing for the issue of the shares thereof, to determine
and fix such voting powers, full or limited, or no voting powers, and such
designations, preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions thereof,
including (without limitation) dividend rights, conversion rights, redemption
privileges and liquidation preferences, as shall be stated and expressed in
such resolutions, all to the full extent now or hereafter permitted by the
General
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Corporation Law of the State of Delaware. Without limiting the generality of
the foregoing, the resolutions providing for issuance of any series of
Preferred Stock may provide that such series shall be superior or rank
equally or be junior to the Preferred Stock of any other series to the extent
permitted by law. Except as otherwise provided in this Amended and Restated
Certificate of Incorporation, no vote of the holders of the Preferred Stock
or Common Stock shall be a prerequisite to the issuance of any shares of any
series of the Preferred Stock authorized by and complying with the conditions
of the Amended and Restated Certificate of Incorporation, the right to have
such vote being expressly waived by all present and future holders of the
capital stock of the Corporation.
FIFTH: In furtherance of and not in limitation of powers conferred by
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statute, it is further provided that:
(a) Subject to the limitations and exceptions, if any, contained
in the by-laws of the Corporation, the by-laws may be adopted, amended or
repealed by the Board of Directors of the Corporation.
(b) Elections of directors need not be by written ballot.
(c) Subject to any applicable requirements of law, the books of
the Corporation may be kept outside the State of Delaware at such location as
may be designated by the Board of Directors of the Corporation or in the by-
laws of the Corporation.
SIXTH: The Corporation shall have a perpetual existence.
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SEVENTH: The Corporation shall indemnify each person who at any time is, or
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shall have been, a director or officer of the Corporation, and is threatened to
be or is made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he or she is, or was, a director or officer of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee, trustee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement incurred in connection with any
such action, suit or proceeding to the maximum extent permitted by the General
Corporation Law of the State of Delaware. The foregoing right of
indemnification shall in no way be exclusive of any other rights of
indemnification to which any such director or officer may be entitled under any
by-law, agreement, vote of directors or stockholders, or otherwise. No
amendment to or repeal of the provisions of this paragraph shall deprive a
person of the benefit of this paragraph with respect to any act or failure to
act of such director occurring prior to such amendment or repeal.
EIGHTH: Whenever a compromise or arrangement is proposed between the
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Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be, to
be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, agree to any compromise
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or arrangement and to any reorganization of the Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders of the Corporation, as the case
may be, and also on the Corporation.
NINTH: To the maximum extent permitted by the General Corporation Law of
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the State of Delaware, no director of the Corporation shall be personally liable
to the Corporation or to any of its stockholders for monetary damages arising
out of such director's breach of fiduciary duty as a director of the
Corporation. No amendment to or repeal of the provisions of this paragraph shall
apply to or have any effect on the liability or the alleged liability of any
director of the Corporation with respect to any act or failure to act of such
director occurring prior to such amendment or repeal.
TENTH: The Corporation reserves the right to amend, alter, change or
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repeal any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute and this
Amended and Restated Certificate of Incorporation, and all rights conferred upon
stockholders herein are granted subject to this reservation.
* * *
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Amended and Restated Certificate of Incorporation to be
signed by its President this __________ day of ___________, 1996.
WHITE PINE SOFTWARE, INC.
By: ______________________________
President
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Exhibit 3.3
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BY-LAWS
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OF
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VISUAL INTERNATIONAL, INC.
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A DELAWARE CORPORATION
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ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of Visual
International, Inc. (the "Corporation") in the State of Delaware shall be at
1209 Orange Street in the City of Wilmington, County of New Castle, and the name
of the registered agent in charge thereof shall be The Corporation Trust
Company.
SECTION 2. PRINCIPAL OFFICES. The Board of Directors shall fix the
location of the principal executive office of the Corporation at any place
within or outside the State of Delaware. If the principal executive office is
located outside this state, and the Corporation has one or more business offices
in this state, the Board of Directors shall fix and designate a principal
business office in the State of Delaware.
SECTION 3. OTHER OFFICES. The Board of Directors or officers of the
Corporation may at any time establish branch or subordinate offices at any place
or places wherein such Board or officers shall deem advisable.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 1. PLACE OF MEETINGS. Meetings of shareholders shall be held at
any place within or without the State of Delaware as may from time to time be
designated by the Board of Directors. In the absence of any such designation,
shareholders' meetings shall be held at the principal executive office of the
Corporation.
SECTION 2. ANNUAL MEETING. The annual meeting of shareholders shall be
held each year on a date and at a time designated by the Board of Directors. At
each annual meeting directors shall be elected, and any other proper business
may be transacted.
SECTION 3. SPECIAL MEETING. Special meetings of the shareholders may be
called at any time by the Board of Directors, the Chairman of the Board, the
President, the Secretary, any person authorized to do so by the Board, or by one
or more shareholders holding shares in the aggregate entitled to cast not less
than 10% of the votes at that meeting. Business transacted
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at any special meeting of stockholders shall be limited to matters relating to
the purpose or purposes stated in the notice of meeting.
SECTION 4. NOTICE OF SHAREHOLDERS' MEETINGS. All notices of meetings of
shareholders shall be sent or otherwise given in accordance with Section 5 of
this Article II not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each shareholder entitled to vote at such meeting. The
notice shall specify the place, date and hour of the meeting and (i) in the case
of a special meeting, the general nature of the business to be transacted, or
(ii) in the case of the annual meeting, those matters which the Board of
Directors, at the time of giving the notice, intends to present for action by
the shareholders. The notice of any meeting at which directors are to be elected
shall include the name of any nominee or nominees whom, at the time of the
notice, management intends to present for election.
SECTION 5. MANNER OF GIVING NOTICE. Notice of any meeting of shareholders
given shall be given either personally or by first class mail or telegraphic,
facsimile, or other written communication, charges prepaid, addressed to the
shareholder at the address of that shareholder appearing on the books of the
Corporation or given by the shareholder to the Corporation for the purpose of
notice. If no such address appears on the Corporation's books or is given,
notice shall be deemed to have been given if sent to that shareholder by first-
class mail or telegraphic, facsimile, or other written communication to the
Corporation's principal executive office,, or if published at least once in a
newspaper of general circulation in the county where that office is located.
Notice shall be deemed to have been given at the time when delivered personally
or when deposited in the mail or sent by telegram, facsimile, or other means of
written communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the Corporation is returned to the
Corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the shareholder
at that address, all future notices or reports shall be deemed to have been
given without further mailing if these shall be available to the shareholder on
written demand of the shareholder at the principal executive office of the
Corporation for a period of one year from the date of the giving of the notice.
SECTION 6. QUORUM. The presence in person or by proxy of the holders of a
majority of the shares of the Corporation entitled to vote at any meeting of
shareholders shall constitute a quorum for the transaction of business. The
shareholders present at a duly called or held meeting at which a quorum is
present may continue to do business until adjournment,
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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.
SECTION 7. ADJOURNED MEETING; NOTICE. Any shareholders' meeting, annual or
special, whether or not a quorum is present, may be adjourned from time to time
by the vote of the majority of the shares represented at that meeting, either in
person or by proxy, or, if no shareholder is present, by any officer entitled to
preside at or to act as secretary of such meeting.
When any meeting of shareholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place are announced at a meeting at which the
adjournment is taken, unless a new record date for the adjourned meeting is
fixed, or unless the adjournment is for more than thirty (30) days from the date
set for the original meeting, or if after adjournment a new record date is fixed
for the adjourned meeting, in which cases a notice of the adjourned meeting
shall be given to each shareholder of record entitled to vote at the adjourned
meeting. Notice of any such adjourned meeting shall be given to each
shareholder of record entitled to vote at the adjourned meeting in accordance
with the provisions of Sections 4 and 5 of this Article II. At any adjourned
meeting the Corporation may transact any business which might have been
transacted at the original meeting.
SECTION 8. VOTING.
(a) Each shareholder shall, at each meeting of the shareholders, be
entitled to vote in person or by proxy each share of the stock of the
Corporation having voting rights on the matter in question and which shall have
been held by him and registered in his name on the books of the Corporation:
(i) on the date fixed pursuant to Article II, Section 11 of these
By-Laws as the record date for the determination of shareholders entitled
to notice of and to vote at such meeting, or
(ii) if no such record date shall have been so fixed, then (a) at
the close of business on the day preceding the day on which notice of the
meeting shall be given or (b) if notice of the meeting shall be waived, at
the close of business on the day preceding the day on which the meeting
shall be held.
(b) Shares of its own stock belonging to the Corporation or to
another corporation, if a majority of the shares entitled to vote in the
election of directors in such
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other corporation is held, directly or indirectly, by the Corporation, shall
neither be entitled to vote nor be counted for quorum purposes. Persons holding
stock of the Corporation in a fiduciary capacity shall be entitled to vote such
stock. Any person whose stock is pledged shall be entitled to vote, unless in
the transfer by the pledgor on the books of the Corporation he shall have
expressly empowered the pledgee to vote thereon, in which case only the pledgee,
or his proxy, may represent such stock and vote thereon. Stock having voting
power standing of record in the names of two or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety or otherwise, or with respect to which two or more persons have
the same fiduciary relationship, shall be voted in accordance with the
provisions of the General Corporation Law of the State of Delaware.
(c) Any such voting rights may be exercised by the shareholder
entitled thereto in person or by his proxy appointed by an instrument in
writing, subscribed by such shareholder or by his attorney thereunto authorized
and delivered to the secretary of the meeting; provided, however, that no proxy
shall be voted or acted upon after three years from its date unless said proxy
shall provide for a longer period. The attendance at any meeting of a
shareholder who has previously given a proxy shall not have the effect of
revoking such proxy unless he shall in writing so notify the secretary of the
meeting prior to the voting of the proxy. At any meeting of the shareholders
all matters shall be decided by the vote of a majority in voting interest of the
shareholders present in person or by proxy and entitled to vote thereat and
thereon, a quorum being present, except that all elections of directors shall be
by written ballot. The vote at any meeting of the shareholders on any question
need not be by ballot, unless so directed by the chairman of the meeting. On a
vote by ballot, each ballot shall be signed by the shareholder voting or by his
proxy and it shall state the number of shares voted.
SECTION 9. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS. The
transactions of any meeting of shareholders, either annual or special, however
called and noticed, and wherever held, shall be as valid as though conducted at
a meeting duly held after regular call and notice, if a quorum be present either
in person or by proxy, and if, either before or after the meeting, each person
entitled to vote, who was not present in person or by proxy, signs a written
waiver of notice or a consent to a holding of the meeting, or an approval of the
minutes. All such waivers, consents or approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of that meeting, except when the person objects, at the beginning of the
meeting, to the
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transaction of any business because the meeting is not lawfully called or
convened, and except that attendance at a meeting is not a waiver of any right
to object to the consideration of matters not included in the notice of the
meeting if that objection is expressly made at the meeting.
SECTION 10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. 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, is signed by the holders of outstanding
shares having not less than the minimum number of votes that would be necessary
to authorize or take that action at a meeting at which all shares entitled to
vote on that action were present and voted, and delivered to the Corporation by
delivery to its registered office in Delaware, its principal place of business,
or to an officer or agent of the corporation having custody of the book in which
proceedings of stockholders are recorded, by hand or by certified or registered
mail, return receipt requested, provided such consents are dated within sixty
(60) days of each other. In the case of election of directors, such a consent
shall be effective only if signed by the holders of all outstanding shares
entitled to vote for the election of directors; provided, however, that a
director may be elected at any time to fill a vacancy on the Board of Directors
that has not been filled by a majority of the outstanding shares entitled to
vote for the election of directors. All such consents shall be filed with the
secretary of the Corporation and shall be maintained in the corporate records.
Any shareholder giving a written consent, or the shareholders' proxy holders, 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 received by
the secretary of the Corporation before written consents of the number of shares
required to authorize the proposed action have been filed with the secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing, and if the unanimous written consent of all such
shareholders shall not have been received, the secretary shall give prompt
notice of the corporate action approved by the shareholders without a meeting to
those shareholders who have not consented in writing. This notice shall be
given in the manner specified in Section 5 of this Article II.
SECTION 11. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING, AND GIVING
CONSENTS. For purposes of determining the shareholders entitled to notice of
any meeting, to vote at such meeting or entitled to give consent (or to dissent)
to corporate action in writing without a meeting, the Board of Directors shall
fix, in advance, a record date, which shall be (i) not more than sixty (60) days
nor less than ten (10) days before the date of any such
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meeting, or (ii) not more than sixty (60) days before any such action without a
meeting, or (iii) for the purpose of determining the shareholders entitled to
consent to corporate action in writing without a meeting, not more than ten (10)
days after the date upon which the resolution fixing the record date is adopted
by the Board. Only shareholders of record on the date so fixed are entitled to
notice and to vote or to give consents, as the case may be, notwithstanding any
transfer of any shares on the books of the Corporation after the record date,
except as otherwise provided in the Delaware General Corporation Law.
If the Board of Directors does not so fix a record date:
(a) The record date for determining shareholders entitled to notice
of or to vote at a meeting of shareholders shall be at the close of business on
the business day preceding the day on which notice is given or, if notice is
waived, at the close of business on the business day preceding the day on which
the meeting is held.
(b) The record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, (i) when no prior
action by the Board has been taken, shall be the day on which the first written
consent is given, or (ii) when prior action of the Board has been taken, shall
be at the close of business on the day on which the Board adopts the resolution
relating to that action, or the sixtieth (60th) day before the date of such
other action, whichever is later.
A determination of shareholders of record entitled to notice of or to
vote at a meeting of shareholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record day for the
adjourned meeting.
SECTION 12. PROXIES. Every person entitled to vote for directors or on
any other matter shall have the right to do so either in person or by one or
more agents authorized by a written proxy signed by the person and filed with
the Secretary of the Corporation. A proxy shall be deemed signed if the
shareholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic or facsimile transmission, or otherwise) by the
shareholder or the shareholder's attorney in fact. A validly executed proxy
which does not state that it is irrevocable shall continue in full force and
effect unless (i) revoked by the person executing it, before the vote pursuant
to that proxy, by a writing delivered to the Corporation stating that the proxy
is revoked, or by a subsequent proxy executed by, or attendance at the meeting
and voting in person by, the person executing the proxy; or (ii) written notice
of the death or incapacity of the maker of that proxy is received by the
Corporation before the vote pursuant to that proxy is counted;
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provided, however, that no proxy shall be valid after the expiration of three
(3) years from the date of the proxy, unless otherwise provided in the proxy.
SECTION 13. INSPECTORS OF ELECTION. Before any meeting of shareholders,
the Board of Directors may appoint any persons other than nominees for office to
act as inspectors of election at the meeting or its adjournment. 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 (1) or three (3) . 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 (1) or three
(3) 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;
(f) Do any other acts that may be proper to conduct the election or
vote with fairness to all shareholders.
ARTICLE III
DIRECTORS
SECTION 1. POWERS. Subject to the provisions of the Delaware General
Corporation Law and any limitations in the Certificate of Incorporation and
these By-Laws relating to the action required to be approved by the shareholders
or by the outstanding shares, the business and affairs of the Corporation shall
be managed and all corporate powers shall be exercised by or under the direction
of the Board of Directors.
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SECTION 2. NUMBER OF DIRECTORS; TERM OF OFFICE. The authorized number of
directors of the Corporation shall initially be six (6). Such number of
directors may be changed from time to time by a duly adopted resolution of the
Board of Directors, if permitted by the Certificate of Incorporation, or by the
stock holders, but such number shall not be less than three (3). Directors need
not be shareholders. Each of the directors shall hold office until the next
annual meeting and until his successor shall have been duly elected and shall
qualify, or until his earlier death, resignation, or removal.
SECTION 3. ELECTION OF DIRECTORS. The directors shall be elected by the
shareholders of the Corporation, and at each election the persons receiving the
greater number of votes, up to the number of directors then to be elected, shall
be the persons then elected. The election of directors is subject to any
provisions of the Certificate of Incorporation relating thereto.
SECTION 4. VACANCIES; RESIGNATION. Vacancies in the Board of Directors may
be filled by a majority of the remaining directors, though less than a quorum,
or by a sole remaining director, except that a vacancy created by the removal of
a director by the vote or written consent of the shareholders or by court order
may be filled only by the vote of a majority of the shares entitled to vote
represented at a duly held meeting at which a quorum is present, or by the
written consent of holders of a majority of the outstanding shares entitled to
vote. A director elected to fill a vacancy shall be elected for the unexpired
term of his predecessor in office, and a director chosen to fill a position
resulting from an increase in the number of directors shall hold office until
the next annual meeting of stockholders and until his successor is elected and
qualified, or until his earlier death, resignation or removal.
A vacancy or vacancies in the Board of Directors shall be deemed to
exist in the event of the death, resignation, or removal of any director, or if
the Board of Directors by resolution declares vacant the office of a director
who has been declared of unsound mind by an order of court or convicted of a
felony, or if the authorized number of directors is increased, or if the
shareholders fail, at any meeting of shareholders at which any director or
directors are elected, to elect the number of directors to be voted for at that
meeting. In the event of a vacancy in the Board of Directors, the remaining
directors, except as otherwise provided by law, may exercise the powers of the
full Board until the vacancy is filled.
The shareholders may by written consent elect a director or directors
at any time to fill any vacancy or vacancies not filled by the directors, but
any such election shall require the consent of a majority of the outstanding
shares entitled to vote.
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Any director may resign effective on giving written notice to the
chairman of the Board, the President, the Secretary, or the Board of Directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a director is effective at a future time, the
Board of Directors may elect a successor to take office when the resignation
becomes effective.
No reduction of the authorized number of directors shall have the
effect of removing any director before the director's term of office expires.
SECTION 5. PLACE OF AND PRESENCE AT MEETINGS. Regular meetings of the
Board of Directors may be held at any place within or outside the State of
Delaware that has been designated from time to time by resolution of the Board.
In the absence of such designation, regular meetings shall be held at the
principal executive office of the Corporation. Special meetings of the Board
shall be held at any place within or outside the State of Delaware that has been
designated in the notice of the meeting or, if not stated in the notice or there
is no notice, at the principal executive office of the Corporation. Directors
may participate in any meeting, regular or special, by conference telephone or
similar communication equipment, so long as all directors participating in the
meeting can hear one another, and all such directors shall be deemed to be
present in person at the meeting.
SECTION 6. ANNUAL MEETING. Immediately following each annual meeting of
shareholders, the Board of Directors shall hold a regular meeting for the
purpose of organization, any desired election of officers, and the transaction
of other business. Notice of this meeting shall not be required.
SECTION 7. OTHER REGULAR MEETINGS. Other regular meetings of the Board of
Directors shall be held without call at such time and at such place as shall
from time to time be fixed by the Board of Directors. Such regular meetings may
be held without notice.
SECTION 8. SPECIAL MEETINGS. Special meetings of the Board of Directors
for any purpose or purposes may be called at any time by the Chairman of the
Board, the President, the Secretary, or any two or more directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone or facsimile to each director or sent by first-class
mail or telegram, charges prepaid, addressed to each director at that director's
address as it is shown on the records of the Corporation. In case the notice is
mailed, it shall be deposited in the United States mail at least four (4) days
before the time of the holding of the
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meeting. In case notice is delivered personally, or by telephone, facsimile, or
telegram, it shall be delivered personally by telephone or facsimile or to the
telegraph company at least forty-eight (48) hours before the time of the holding
of the meeting. Any oral notice given personally or by telephone, or written
notice delivered by facsimile, may be communicated either to the director or to
a person at the office of the director who the person giving the notice has
reason to believe will promptly communicate it to the director. The notice need
not specify the purpose of the meeting nor the place if the meeting is to be
held at the principal executive office of the Corporation.
SECTION 9. QUORUM. A majority of the authorized number of directors shall
constitute a quorum for the transaction of business, except to adjourn as
provided in Section 11 of this Article III. In the event one or more of the
directors shall be disqualified from voting at any meeting, then the required
quorum shall be reduced by one for each such director so disqualified; provided,
however, that in no case shall less than one-third (1/3) of the number so fixed
constitute a quorum, except as otherwise provided by law. Every act or decision
done or made by a majority of the directors present at a meeting duly held at
which a quorum is present shall be regarded as the act of the Board of
Directors. A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
SECTION 10. WAIVER OF NOTICE. 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 the meeting, or
an approval of the minutes. The waiver of notice or consent need not specify
the purpose of the meeting. All such waivers, consents, and approvals shall be
filed with the corporate records or made a part of the minutes of the meeting.
Notice of a meeting shall also be deemed given to any director who attends the
meeting without protesting, before or at its commencement, the lack of notice to
that director.
SECTION 11. ADJOURNMENT; NOTICE OF ADJOURNMENT. A majority of the
directors present, whether or not constituting a quorum, may adjourn any meeting
to another time and place.
Notice of the time and place of holding an adjourned meeting need not
be given, unless the meeting is adjourned for more than twenty-four (24) hours,
in which case notice of the time and place shall be given before the time of the
adjourned
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meeting in the manner specified in Section 8 of this Article III to the
directors who were not present at the time of adjournment.
SECTION 12. ACTION WITHOUT MEETING. Any action required or permitted to
be taken by the Board of Directors may be taken without a meeting, if all
members of the Board shall individually or collectively consent in writing to
that action. Such action by written consent shall have the same force and
effect as an unanimous vote of the Board of Directors. Such written consent or
consents shall be filed with the minutes of the proceedings of the Board.
SECTION 13. COMPENSATION OF DIRECTORS. Directors and members of
committees may receive such compensation, if any, for their services, and
reimbursement of expenses, as may be fixed or determined by resolution of the
Board of Directors. This Section 13 shall not be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise, and receiving compensation for those services.
SECTION 14. COMMITTEES OF DIRECTORS. The Board of Directors may, by
resolution adopted by a majority of the authorized number of directors,
designate one or more committees, each consisting of one or more directors, to
serve at the pleasure of the Board. The Board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members of the
committee present at any meeting and not disqualified from voting, whether or
not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any absent or
disqualified member. Any committee, to the extent provided in the resolution of
the Board, and subject to the provisions of Delaware law, shall have and may
exercise all the authority of the Board in the management of the business and
affairs of the Corporation, except with respect to:
(a) the approval of any action which, under the Delaware General
Corporation Law, also requires shareholders' 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 or on any committee;
(d) the amendment or repeal of By-Laws or the adoption of new By-
Laws;
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(e) the amendment or repeal of any resolution of the board of
directors which by its express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the corporation, except
at a rate or in a periodic amount or within a price range determined by the
board of directors; or
(g) the appointment of any other committees of the board of
directors or the members of these committees.
Meetings and action of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these By-Laws with
such changes in the context as are necessary to substitute the committee and its
members for the Board of Directors and its members, except that the time of
regular meetings of committees may be determined either by resolution of the
Board of Directors or by resolution of the committee; special meetings of
committees may also be called by resolution of the Board of Directors; and
notice of special meetings of committees shall also be given to all alternate
members, who shall have the right to attend all meetings of the committee. Each
committee shall keep minutes and make such reports as the Board of Directors
may from time to time request. Except as the Board of Directors may otherwise
determine, any committee may make rules for the conduct of its business, but
unless otherwise provided by the directors or in such rules, its business shall
be conducted as nearly as possible in the same manner as is Provided in these
ByLaws for the Board of Directors.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. The officers of the Corporation shall be a Chairman
of the Board, a President, a Secretary, and a Chief Financial officer. The
Corporation may also have, at the discretion of the Board of Directors, a Chief
Executive Officer, a Chief Operating officer, one or more Vice Presidents (the
number thereof, if any, and their respective titles to be determined by the
Board), one or more Assistant Secretaries, one or more Assistant Treasurers, and
such other officers as may be appointed by the Board. Officers shall have such
powers and duties as may be specified by, or in accordance with, resolutions of
the Board. In the absence of any contrary determination by the Board, the
President shall, subject to the power and authority of the Board, have general
supervision, direction, and control of the officers, employees, and affairs of
the Corporation.
SECTION 2. ELECTION OF OFFICERS. The officers of the Corporation, except
such officers as may be appointed in accordance with the provisions of Section 3
or Section 5 of this
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Article IV, shall be chosen annually by the Board of Directors, and each shall
serve at the pleasure of the Board, subject to the rights, if any, of an officer
under any contract of employment. No officer need be a shareholder. Any number
of offices may be held by the same person. Each officer shall hold office until
his successor is duly elected and qualified, or until his earlier death,
resignation, or removal.
SECTION 3. SUBORDINATE OFFICERS. The Board of Directors may appoint, and
may empower the President to appoint, such other officers as the business of the
Corporation may require, each of whom shall hold office for such period, have
such authority and perform such duties as are provided in the By-Laws or as the
Board of Directors may from time to time determine.
SECTION 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights, if
any, of any officer under any contract of employment, any officer may be
removed, either with or without cause, by majority vote of the Board of
Directors, at any regular or special meeting of the Board, or, except in case of
an officer chosen by the Board of Directors, by any officer of the Corporation
or committee of the Board upon whom such power of removal may be conferred by
the Board.
Any officer may resign at any time by giving written notice to the
Corporation. Any resignation shall take effect at the date of receipt of that
notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the Corporation under any contract to which the officer is a
party.
SECTION 5. VACANCIES IN OFFICES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled for
the unexpired portion of the term thereof in the manner prescribed in these By-
Laws for regular appointments to that office.
SECTION 6. CHAIRMAN OF THE BOARD. The chairman of the Board, if such
officer be elected, shall, if present, preside at meeting of the Board of
Directors and exercise and perform such other powers and duties as may from time
to time be assigned to him by the Board of Directors or prescribed by the By-
Laws. If there is no president or chief executive officer, the Chairman of the
Board shall act as Chief Executive Officer of the Corporation and shall have the
powers and duties prescribed in Section 7 of this Article IV.
SECTION 7. PRESIDENT. Subject to any supervisory powers, if any, as may be
given by the Board of Directors to the Chairman of the Board and/or Chief
Executive Officer, if there be such an
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officer or officers, the President shall, subject to the control of the Board of
Directors, have general supervision, direction, and control of the business and
the affairs of the Corporation. In the absence of the Chairman of the Board, or
if there be none, the President shall preside at all meetings of the
shareholders and at all meetings of the Board of Directors. He 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 the ByLaws.
SECTION 8. VICE PRESIDENTS. In the absence or disability of the Chairman
of the Board, the Chief Executive Officer and the President, the Vice
President(s) , if any, in order of their rank as fixed by the Board of Directors
or, if not ranked, a Vice President designated by the Board of Directors, shall
perform all the duties of such officers, and when so acting shall have all the
powers of, and be subject to all the restrictions upon, such officers. The Vice
President(s) shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the Board of Directors,
the Chairman of the Board, or the President.
SECTION 9. SECRETARY. The Secretary shall keep or cause to be kept, at the
principal executive office or such other place as the Board of Directors may
direct, a book of minutes of all meetings and action of the directors,
committees of directors, and shareholders, with those minutes specifying the
time and place of holding, whether regular or special (and, if special, how
authorized), the notice given, the names of those present at directors' meetings
or committee meetings, the number of shares present or represented at
shareholders' meetings, and the proceedings thereof.
The Secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the Board of Directors required by the By-Laws or by
law to be given, and he shall keep the seal of the Corporation, if one be
adopted, in safe custody, and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors or by the By-Laws.
SECTION 10. CHIEF FINANCIAL OFFICER; TREASURER. The Chief Financial
Officer, or, if there be none, the Treasurer, shall keep and maintain, or cause
to be kept and maintained, adequate and correct books and records of accounts of
the properties and business transactions of the Corporation, including accounts
of its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
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The Chief Financial Officer (or the Treasurer) shall deposit all
moneys and other valuables in the name and to the credit of the Corporation with
such depositories as may be designated by the Board of Directors. He shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, shall render to the Chairman of the Board, the Chief Executive
Officer, the President and Board of Directors, whenever they request it, an
account of all of his transactions as Chief Financial Officer (or Treasurer) and
of the financial condition of the Corporation, and shall have other powers and
perform such other duties as may be prescribed by the Board of Directors or the
ByLaws.
Should there be no one serving in the capacity of Chief Financial
Officer, the Treasurer (or, in his absence, the Assistant Treasurer) shall
exercise all of the duties and assume all of the responsibilities of the Chief
Financial Officer.
SECTION 11. SALARIES. Officers of the Corporation shall be entitled to
such salaries, compensation, or reimbursement as shall be fixed or allowed form
time to time by the Board of Directors.
ARTICLE V
INDEMNIFICATION
SECTION 1. SCOPE OF INDEMNIFICATION. To the fullest extent provided under
Delaware law, the Corporation shall indemnify, defend and hold harmless any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding by or in the right
of the Corporation to procure a judgment in its favor, or otherwise, by reason
of the fact that he is or was a director, officer, employee, or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses (including attorneys'
fees) , judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit, or proceeding, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful,
except that no indemnification shall be made in respect of any claim,, issue, or
matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the
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Court of Chancery or such other court shall deem proper. The termination of any
action, suit, or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
ARTICLE VI
RECORDS AND REPORTS
SECTION 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. A complete list
of shareholders entitled to vote at any meeting of shareholders, arranged in
alphabetical order for each class of stock and showing the address of each such
shareholder and the number of shares registered in his or her name, shall be
open to the examination of any such shareholder, for any purpose germane to the
meeting, during ordinary business hours for a period of at least ten (10) days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting, or if not
so specified, at the place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during
the whole time thereof and shall be open to the examination of any such
shareholder who is present. This list shall presumptively determine the
identity of the shareholders entitled to vote at the meeting and the number of
shares held by each of them.
Any shareholder of the Corporation, upon written demand under oath
stating the proper purpose thereof, may (i) inspect and copy the records of the
shareholders' names and addresses and shareholdings during usual business hours
on five (5) days' prior written demand on the Corporation and (ii) obtain from
the transfer agent of the Corporation, on written demand and on the tender of
such transfer agent's usual charges for such list, a list of the shareholders,
names and addresses, who are entitled to vote for the election of directors, and
their shareholdings, as to the most recent record date for which that list has
been compiled or as of a date specified by the shareholder after the date of
demand. This list shall be made available to any shareholder by the transfer
agent on or before the later of five (5) days after the demand and statement of
a proper purpose is received or the date specified in the demand as the date as
of which the list is to be compiled. A proper purpose shall mean a purpose
reasonably related to such person's interest as a shareholder. Any inspection
and copying under this Section 1 may
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be made in person or by an agent or attorney of the shareholder or holder of a
voting trust certificate making the demand.
SECTION 2. MAINTENANCE AND INSPECTION OF BY-LAWS. The Corporation shall
keep at its principal executive office the original or a copy of the By-Laws as
amended to date, which shall be open to inspection by the shareholders at all
reasonable times during normal office hours. If the principal executive office
of the Corporation is outside the State of Delaware, the Secretary shall, upon
the written request of any shareholder, furnish to that shareholder a copy of
the By-Laws as amended to date.
SECTION 3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS. The
accounting books and records and minutes of proceedings of the shareholders and
the Board of Directors and any committee or committees of the Board of Directors
shall be kept at such place or places designated by the Board of Directors, or,
in the absence of such designation, at the principal executive office of the
Corporation. The minutes shall be kept in written form and the accounting books
and records shall be kept either in written form or in any form capable of being
converted into written form. The minutes and accounting books and records shall
be open to inspection upon the written demand of any shareholder or holder of a
voting trust certificate, at any reasonable time during usual business hours,
for a purpose reasonably related to the holder's interest as a shareholder or as
the holder of a voting trust certificate. The inspection may be made in person
or by an agent or attorney, and shall include the right to copy and make
extracts. These rights of inspection shall extend to the records of each
subsidiary corporation of the Corporation.
SECTION 4. INSPECTION BY DIRECTORS. Every director shall have the absolute
right at any reasonable time to inspect all books, records, and documents of
every kind and the physical properties of the Corporation and each of its
subsidiary corporations. This inspection by a director may be made in person
or by an agent or attorney and the right of inspection includes the right to
copy and make extracts of documents.
ARTICLE VII
GENERAL CORPORATE POWERS
SECTION 1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING. For
purposes of determining the shareholders entitled to receive payment of any
dividend or other distribution or allotment of any rights or entitled to
exercise any rights in respect of any other lawful action (other than action by
shareholders by written consent without a meeting), the Board of Directors may
fix, in advance, a record date, which shall not be more than sixty (60) days
before any such action, and in that
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case only shareholders of record on the date so fixed are entitled 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
Corporation after the record date so fixed, except as otherwise provided in the
Delaware General Corporation Law.
If the Board of Directors does not so fix a record date, the record
date for determining shareholders for any such purpose shall be at the close of
business on the day on which the Board adopts the applicable resolution or the
sixtieth (60th) day before the date of that action, whichever is later.
SECTION 2. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS. All checks, drafts,
or other orders for payment of money, notes, or other evidences of indebtedness,
issued in the name of or payable to the Corporation, shall be signed or endorsed
by such person or persons and in such manner as, from time to time, shall be
determined by resolution of the Board of Directors.
SECTION 3. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The Board
of Directors, except as otherwise provided in these ByLaws, may authorize any
director or its officers, agent or agents, to enter into any contract or execute
any instrument in the name of and on behalf of the Corporation, and this
authority may be general or confined to specific instances; and, unless so
authorized or ratified by the Board of Directors or within the agency power of
an officer, no officer, agent, or employee shall have any power or authority to
bind the Corporation by any contract or engagement or to pledge its credit or to
render it liable for any purpose or for any amount.
SECTION 4. CERTIFICATE FOR SHARES. A certificate or certificates for
shares of the capital stock of the Corporation shall be issued to each
shareholder when any of these shares are fully paid, and the Board of Directors
may authorize the issuance of certificates or shares as partly paid provided
that these certificates shall state the amount of the consideration to be paid
for them and the amount paid. All certificates shall be signed in the name of
the Corporation by the Chairman or Vice Chairman of the Board, or the President
or Vice President, and by the Chief Financial Officer or an Assistant Treasurer,
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
on a certificate shall have ceased to be that officer, transfer agent, or
registrar before that certificate is issued, it may be issued by the Corporation
with the same effect as if that person were an officer, transfer agent, or
registrar at the date of issue.
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Each certificate for shares of stock which are subject to any
restrictions on transfer pursuant to the Corporation's Certificate of
Incorporation, the By-Laws, applicable securities law or any agreement among any
number of shareholders or among such holders and the Corporation shall have
conspicuously noted on the face or back of the certificate either the full text
of the restriction or a statement of the existence of such restriction.
SECTION 5. LOST, STOLEN, OR DESTROYED CERTIFICATES. Except as provided in
this Section 5, no new certificates for shares shall be issued to replace an old
certificate unless the latter is surrendered to the Corporation and cancelled at
the same time. The Board of Directors may, in case any share certificate or
certificate for any other security is alleged to be lost, stolen, or destroyed,
authorize the issuance of a replacement certificate on such terms and conditions
as the Board may require, including provision for indemnification of the
Corporation secured by a bond or other adequate security sufficient to protect
the Corporation against any claim that may be made against it, including any
expense or liability, on account of the alleged loss, theft, or destruction of
the certificate or the issuance of the replacement certificate.
SECTION 6. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The chairman of
the Board, the president, or any vice president, or any other person authorized
by resolution of the Board of Directors or by any of the foregoing designated
officers, is authorized to vote on behalf of the Corporation any and all shares
of any other corporation or corporations, foreign or domestic, standing in the
name of the Corporation. The authority granted to these officers to vote or
represent on behalf of the Corporation any and all shares held by the
corporation in any other corporation or corporations may be exercised by any of
these officers in person or by any person authorized to do so by a proxy duly
executed by these officers.
SECTION 7. TRANSACTIONS WITH INTERESTED PARTIES. No contract or
transaction between the corporation and one or more of the directors or
officers, or between the corporation and any other corporation, partnership,
association, or other organization in which one or more of the directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or a
committee of the Board of Directors which authorizes the contract or transaction
or solely because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or
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are known to the Board of Directors or the committee, and the Board or committee
in good faith authorizes the contract or transaction by the affirmative votes of
a majority of the disinterested directors, even though the disinterested
directors be less than a quorum;
(2) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation as
of the time it is authorized, approved or ratified, by the Board of Directors, a
committee of the Board of Directors, or the stockholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
SECTION 8. CONSTRUCTION AND DEFINITIONS. Unless the context requires
otherwise, the general provisions, rules of construction, and definitions in the
Delaware General corporation Law shall govern the construction of these By-Laws.
Without limiting the generality of this provision, the singular number includes
the plural, the plural number includes the singular, and the term "person"
includes both a corporation and a natural person.
ARTICLE VIII
AMENDMENTS
SECTION 1. AMENDMENTS. Except as otherwise provided herein or in the
Certificate of Incorporation, these By-Laws, or any of them, may be altered,
amended, repealed, or rescinded and new By Laws may be adopted by (a) the Board
(other than a By-Law or an amendment of a By-Law changing the authorized number
of directors), or (b) the shareholders, at any annual meeting of shareholders,
or at any special meeting of shareholders, provided that notice of such proposed
amendment, modification, repeal, or adoption is given in the notice of meeting.
The affirmative vote of the holders of not less than a majority of the then-
outstanding Common Stock of the Corporation, voting together as a single class,
shall be required for any amendment, modification, repeal, or adoption.
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Amendment No. 1
to Bylaws of Visual International, Inc.
--------------------------------------
The By-Laws of Visual International, Inc. are hereby amended by deleting
Article III, Section 9 in its entirety and substituting in its place the
following:
SECTION 9. QUORUM. Eighty percent of the authorized number of directors
shall constitute a quorum for the transaction of business, except to adjourn as
provided in Section 11 of this Article III. Common or interested directors may
be counted in determining the presence of a quorum. Every act or decision done
or made by a majority of the directors present at a meeting duly held at which a
quorum is present shall be regarded as the act of the Board of Directors. A
meeting at which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of directors, if any action taken is approved by
at least a majority of the required quorum for that meeting.
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Exhibit 3.4
WHITE PINE SOFTWARE, INC.
AMENDED AND RESTATED BY-LAWS
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 1. Certificate of Incorporation and By-Laws................................. 1
1.1. Conflicts................................................................ 1
1.2. References............................................................... 1
Section 2. Offices.................................................................. 1
2.1. Registered Office........................................................ 1
2.2. Other Offices............................................................ 1
Section 3. Stockholders............................................................. 1
3.1. Location of Meetings..................................................... 1
3.2. Annual Meeting........................................................... 1
3.3. Special Meeting in Place of Annual Meeting............................... 1
3.4. Notice of Annual Meeting................................................. 1
3.5. Other Special Meetings................................................... 2
3.6. Notice of Special Meeting................................................ 2
3.7. Notice of Stockholder Business at Annual Meeting......................... 2
3.8. Stockholder List......................................................... 3
3.9. Quorum of Stockholders................................................... 3
3.10. Adjournment.............................................................. 3
3.11. Proxy Representation..................................................... 4
3.12. Inspectors............................................................... 4
3.13. Action by Vote........................................................... 4
3.14. No Action by Consent..................................................... 4
Section 4. Directors................................................................ 4
4.1. Number................................................................... 4
4.2. Tenure................................................................... 5
4.3. Powers................................................................... 5
4.4. Vacancies................................................................ 5
4.5. Nomination of Directors.................................................. 5
4.6. Committees............................................................... 6
4.7. Regular Meeting.......................................................... 7
4.8. Special Meetings......................................................... 7
4.9. Notice................................................................... 7
4.10. Quorum................................................................... 7
4.11. Action by Vote........................................................... 7
4.12. Action Without a Meeting................................................. 7
4.13. Participation in Meetings by Conference Telephone........................ 7
4.14. Compensation............................................................. 7
4.15. Interested Directors and Officers........................................ 8
4.16. Resignation or Removal of Directors...................................... 8
</TABLE>
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<TABLE>
<S> <C>...................................................................... <C>
Section 5. Notices.................................................................. 9
5.1. Form of Notice........................................................... 9
5.2. Waiver of Notice......................................................... 9
Section 6. Officers and Agents...................................................... 9
6.1. Enumeration; Qualification............................................... 9
6.2. Powers................................................................... 9
6.3. Election................................................................. 9
6.4. Tenure................................................................... 9
6.5. President and Vice Presidents............................................ 10
6.6. Treasurer and Assistant Treasurers....................................... 10
6.7. Secretary and Assistant Secretaries...................................... 10
6.8. Resignation and Removal.................................................. 11
6.9. Vacancies................................................................ 11
Section 7. Capital Stock............................................................ 11
7.1. Stock Certificates....................................................... 11
7.2. Lost Certificates........................................................ 11
Section 8. Transfer of Shares of Stock.............................................. 11
Section 9. General Provisions....................................................... 12
9.1. Record Date.............................................................. 12
9.2. Dividends................................................................ 12
9.3. Payment of Dividends..................................................... 12
9.4. Checks................................................................... 13
9.5. Fiscal Year.............................................................. 13
9.6. Seal..................................................................... 13
Section 10. Indemnification.......................................................... 13
Section 11. Amendments............................................................... 13
11.1. By the Board of Directors................................................ 13
11.2. By the Stockholders...................................................... 13
</TABLE>
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SECTION 1. CERTIFICATE OF INCORPORATION AND BY-LAWS
----------------------------------------
1.1. Conflicts. In the event of any conflict between the provisions of
---------
these by-laws and the provisions of the certificate of incorporation of White
Pine Software, Inc. (the "Corporation"), the provisions of the certificate of
incorporation shall govern.
1.2. References. In these by-laws, references to the certificate of
----------
incorporation and by-laws mean the provisions of the certificate of
incorporation of the Corporation and these by-laws, respectively, as are from
time to time in effect.
SECTION 2. OFFICES
-------
2.1. Registered Office. The registered office of the Corporation shall
-----------------
be in the City of Wilmington, County of New Castle, State of Delaware.
2.2. Other Offices. The Corporation may also have offices at such other
-------------
places within or without the State of Delaware as the board of directors may
from time to time determine or the business of the Corporation may require.
SECTION 3. STOCKHOLDERS
------------
3.1. Location of Meetings. All meetings of stockholders shall be held at
--------------------
such places within or without the State of Delaware as shall be designated from
time to time by the board of directors. Any adjourned session of any meeting
shall be held at the place designated in the vote of adjournment.
3.2. Annual Meeting. The annual meeting of stockholders shall be held at
--------------
10 A.M. on the last Wednesday in July in each year (unless that day shall be a
legal holiday at the location where the meeting is to be held, in which case the
meeting shall be held at 10 A.M. on the next succeeding day that is not a legal
holiday) (the "Specified Date") or at such other time and date as shall be
designated from time to time by the board of directors, at which the
stockholders shall elect a board of directors and transact such other business
as may be required by law or these by-laws or as may otherwise properly come
before the meeting.
3.3. Special Meeting in Place of Annual Meeting. If the election of
------------------------------------------
directors shall not be held on the day designated by these by-laws, the
directors shall cause the election to be held as soon thereafter as convenient.
To that end, if the annual meeting is not held on the day provided in Section
3.2 or if the election of directors is not held at the annual meeting, a special
meeting of the stockholders may be held in place of such omitted meeting or
election and any business transacted or election held at such special meeting
shall have the same effect as if transacted or held at the annual meeting. In
such case all references in these by-laws to the annual meeting of the
stockholders, or to the annual election of directors, shall be deemed to refer
to or include such special meeting. Any such special meeting shall be called,
and the purposes thereof shall be specified in the call, as provided in Section
3.4.
3.4. Notice of Annual Meeting. Written notice of the annual meeting
------------------------
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the meeting. Such notice may specify the business
to be transacted and actions to be taken at such meeting. No action shall be
taken at such meeting unless such
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notice is given, or unless waiver of such notice is given by the holders of
outstanding stock having not less than the minimum number of votes necessary to
take such action at a meeting at which all shares entitled to vote thereon were
voted. Prompt notice of all actions taken in connection with such waiver of
notice shall be given to all stockholders not present or represented at such
meeting.
3.5. Other Special Meetings. Unless otherwise prescribed by law or by
----------------------
the certificate of incorporation, special meetings of the stockholders may be
called for any purpose or purposes by the president and shall be called by the
president or secretary at the request in writing of a majority of the board of
directors. Such request shall state the purpose or purposes of the proposed
meeting and the business to be transacted thereat. Business transacted at any
special meeting of stockholders shall be limited to matters relating to the
purpose or purposes stated in the notice of meeting.
3.6. Notice of Special Meeting. Written notice of a special meeting
-------------------------
stating the place, date and hour of the meeting and the purpose or purposes for
which the meeting is called shall be given not less than ten nor more than sixty
days before the date of the meeting to each stockholder entitled to vote at such
meeting. No action shall be taken at such meeting unless such notice is given,
or unless waiver of such notice is given by the holders of outstanding stock
having not less than the minimum number of votes necessary to take such action
at a meeting at which all shares entitled to vote thereon were voted. Prompt
notice of all actions taken in connection with such waiver of notice shall be
given to all stockholders not present or represented at such meeting.
3.7. Notice of Stockholder Business at Annual Meeting. The following
------------------------------------------------
provisions of this Section 3.7 shall apply to the conduct of business at any
annual meeting of the stockholders. (As used in this Section 3.7, the term
annual meeting shall include a special meeting in lieu of an annual meeting.)
(a) At any annual meeting of the stockholders, only such business
shall be conducted as shall have been brought before the meeting (i)
pursuant to the Corporation's notice of meeting, (ii) by or at the
direction of the board of directors or (iii) by any stockholder of the
Corporation who is a stockholder of record at the time of giving of the
notice provided for in Section 3.7(b), who is entitled to vote at such
meeting and who has complied with the notice procedures set forth in
Section 3.7(b).
(b) For business to be properly brought before any annual meeting
of the stockholders by a stockholder pursuant to clause (iii) of 3.7(a),
the stockholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of
the Corporation not less than sixty days prior to the date for such annual
meeting, regardless of any postponements, deferrals or adjournments of that
meeting to a later date; provided, however, that if the annual meeting of
stockholders is to be held on a date prior to the Specified Date, and if
less than seventy days' notice or prior public disclosure of the date of
such annual or special meeting is given or made, notice by the stockholder
to be timely must be so delivered or received not later than the close of
business on the tenth day following the earlier of the date on which notice
of the date of such meeting was mailed or the day on which public
disclosure was made of the date of such meeting. A stockholder's notice to
the Secretary shall set forth as to each matter the stockholder proposes to
bring before the annual meeting (i) a brief description of the business
desired to be brought before the meeting and the reasons for conducting
such business at the meeting, (ii) the name and address, as they appear on
the Corporation's books, of the stockholder proposing such business, the
name and address of the beneficial owner, if any, on whose behalf the
proposal
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is made, and the name and address of any other stockholders or beneficial
owners known by such stockholder to be supporting such proposal, (iii) the
class and number of shares of the Corporation that are owned beneficially
and of record by such stockholder of record, by the beneficial owner, if
any, on whose behalf the proposal is made and by any other stockholders or
beneficial owners known by such stockholder to be supporting such proposal,
and (iv) any material interest of such stockholder of record and/or of the
beneficial owner, if any, on whose behalf the proposal is made, in such
proposed business and any material interest of any other stockholders or
beneficial owners known by such stockholder to be supporting such proposal
in such proposed business, to the extent known by such stockholder.
(c) Notwithstanding anything in these by-laws to the contrary, no
business shall be conducted at an annual meeting except in accordance with
the procedures set forth in this Section 3.7. The person presiding at the
annual meeting shall, if the facts warrant, determine that business was not
properly brought before the meeting and in accordance with the procedures
prescribed by these by-laws, and if such person should so determine, he or
she shall so declare at the meeting and any such business not properly
brought before the meeting shall not be transacted. Notwithstanding the
foregoing provisions of this Section 3.7, a stockholder shall also comply
with all applicable requirements of the Securities Exchange Act of 1934, as
amended (or any successor provision), and the rules and regulations
thereunder with respect to the matters set forth in this Section 3.7.
(d) This provision shall not prevent the consideration and approval
or disapproval at an annual meeting of reports of officers, directors and
committees of the board of directors, but, in connection with such reports,
no new business shall be acted upon at such meeting unless properly brought
before the meeting as herein provided.
3.8. Stockholder List. The officer who has charge of the stock record
----------------
books of the Corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
3.9. Quorum of Stockholders. The holders of a majority of the stock
----------------------
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise required by
law, the certificate of incorporation or these by-laws. Except as otherwise
provided by law, no stockholder present at a meeting may withhold shares owned
by such stockholder from the quorum count by declaring those shares to be absent
from the meeting.
3.10. Adjournment. Any meeting of stockholders may be adjourned from time
-----------
to time to any other time and place at which a meeting of stockholders may be
held under these by-laws, which time and place shall be announced at the
meeting, by a majority of votes cast upon the question, whether or not a quorum
is present. If a quorum shall be present or represented at any adjourned
meeting, any business
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may be transacted that might have been transacted at the original meeting. If
the adjournment is for more than thirty days or if a new record date is fixed
for the adjourned meeting after the adjournment, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
3.11. Proxy Representation. Any stockholder may authorize another person
--------------------
or persons to act for such stockholder by proxy in all matters in which the
stockholder is entitled to participate, whether by waiving notice of any
meeting, objecting to or voting or participating at a meeting, or expressing
consent or dissent without a meeting. Every proxy must be signed by the
stockholder or the stockholder's attorney-in-fact. No proxy shall be voted or
acted upon after three years from its date unless such proxy provides for a
longer period. Except as provided by law, a revocable proxy shall be deemed
revoked if the stockholder is present at the meeting for which the proxy was
given. A duly executed proxy shall be irrevocable if it states that it is
irrevocable and, if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the Corporation generally. The
authorization of a proxy may but need not be limited to specified action,
provided, however, that if a proxy limits its authorization to a meeting or
meetings of stockholders, unless otherwise specifically provided such proxy
shall entitle the holder thereof to vote at any adjourned session but shall not
be valid after the final adjournment thereof.
3.12. Inspectors. The directors or the person presiding at the meeting
----------
may, but need not, appoint one or more inspectors of election and any substitute
inspectors to act at the meeting or any adjournment thereof. Before entering
upon the discharge of the duties of inspector, each inspector shall take and
sign an oath to execute faithfully the duties of inspector at such meeting with
strict impartiality and according to the best of the inspector's ability. The
inspectors, if any, shall (a) determine the number of shares of stock
outstanding and the voting power of each, the shares of stock represented at the
meeting, the existence of a quorum and the validity and effect of proxies, and
(b) receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the result, and do such acts as are proper
to conduct the election or vote with fairness to all stockholders. On request
of the person presiding at the meeting, the inspectors shall make a report in
writing of any challenge, question or matter determined by them and execute a
certificate of any fact found by them.
3.13. Action by Vote. When a quorum is present at any meeting, whether an
--------------
original or adjourned session, a plurality of the votes properly cast for
election to any office shall elect to such office and a majority of the votes
properly cast upon any question other than an election to an office shall decide
such question, except when a larger vote is required by law, the certificate of
incorporation or these by-laws. No ballot shall be required for any election
unless requested by a stockholder present or represented at the meeting and
entitled to vote in the election.
3.14. No Action by Consent. Any action required or permitted to be taken
--------------------
by the stockholders of the Corporation must be effected at a duly constituted
annual or special meeting of such stockholders and may not be effected by any
consent in writing by such stockholders.
SECTION 4. DIRECTORS
---------
4.1. Number. The number of directors constituting the whole board of
------
directors shall not be less than five nor more than seven. Within the foregoing
limits, the number of directors shall be determined by resolution of the board
of directors and may be increased or decreased at any time or from time to
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time by the directors by vote of a majority of directors then in office, except
that any such decrease by vote of the directors shall only be made to eliminate
vacancies existing by reason of the death, resignation or removal of one or more
directors. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 4.4 of these by-laws. Directors
need not be stockholders.
4.2. Tenure. Except as otherwise provided by law, the certificate of
------
incorporation or these by-laws, each director shall hold office until the next
annual meeting and until a successor is elected and qualified, or until such
director sooner dies, resigns, is removed or becomes disqualified.
4.3. Powers. The business of the Corporation shall be managed by or
------
under the direction of the board of directors, which shall have and may exercise
all the powers of the Corporation and do all such lawful acts and things as are
not by law, the certificate of incorporation or these by-laws directed or
required to be exercised or done by the stockholders.
4.4. Vacancies. Newly created directorships resulting from any
---------
increase in the number of directors and other vacancies may be filled by vote of
the stockholders at a meeting called for the purpose, or by a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. When one or more directors shall resign from the board of directors,
effective at a future date, a majority of the directors then in office,
including those who have resigned, shall have power to fill such vacancy or
vacancies, the vote or action by writing thereon to take effect when such
resignation or resignations shall become effective. A director elected to fill a
vacancy shall hold office until the next election of the class for which such
director has been chosen, subject to the election and qualification of his
successor and to his earlier death, resignation or removal. The directors shall
have and may exercise all their powers notwithstanding the existence of one or
more vacancies in their number, subject to any requirements of law or of the
certificate of incorporation or of these by-laws as to the number of directors
required for a quorum or for any vote or other actions.
4.5. Nomination of Directors. The provisions of this Section 4.5 shall
-----------------------
apply to the nomination of persons for election to the board of directors at any
annual meeting or special meeting of stockholders.
(a) Nominations of persons for election to the board of directors
of the Corporation at any annual meeting or special meeting of stockholders
may be made (i) by or at the direction of the board of directors or (ii) by
any stockholder of the Corporation who is a stockholder of record at the
time of giving of notice provided for in Section 4.5(b), who is entitled to
vote for the election of directors at the meeting and who has complied with
the notice procedures set forth in Section 4.5(b).
(b) Nominations by stockholders shall be made pursuant to timely
notice in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation, not less than sixty days
prior to the date for the annual meeting, regardless of any postponements,
deferrals or adjournments of that meeting to a later date; provided,
however, that if the annual meeting of stockholders or a special meeting in
lieu thereof is to be held on a date prior to the Specified Date, and if
less than seventy days' notice or prior public disclosure of the date of
such annual or special meeting is given or made, notice by the stockholder
to be timely must be so delivered or received not later than the close of
business on the tenth day following the earlier of the day on which notice
of the date of such annual or special meeting was mailed or the day on
which public disclosure was made of the date of such annual or special
meeting. Such stockholder's notice shall set forth (i) as to each person
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whom the stockholder proposes to nominate for election or reelection as a
director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is
otherwise required, pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended, or pursuant to any other then existing
statute, rule or regulation applicable thereto (including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a director if elected); (ii) as to the stockholder giving the
notice (A) the name and address, as they appear on the Corporation's books,
of such stockholder and (B) the class and number of shares of the
Corporation which are beneficially owned by such stockholder and also which
are owned of record by such stockholder; and (iii) as to the beneficial
owner, if any, on whose behalf the nomination is made, (A) the name and
address of such person and (B) the class and number of shares of the
Corporation which are beneficially owned by such person. The Corporation
may require any proposed nominee to furnish such other information as may
reasonably be required by the Corporation to determine the eligibility of
such proposed nominee as a director. At the request of the board of
directors, any person nominated by the board of directors for election as a
director shall furnish to the Secretary of the Corporation that information
required to be set forth in a stockholder's notice of nomination which
pertains to the nominee.
(c) No person shall be eligible for election as a director of the
Corporation at any annual meeting or special meeting of stockholders unless
nominated in accordance with the procedures set forth in this Section 4.5.
The person presiding at the meeting shall, if the facts warrant, determine
that a nomination was not made in accordance with the procedures prescribed
by these by-laws, and if such person should so determine, he or she shall
so declare to the meeting and the defective nomination shall be
disregarded. Notwithstanding the foregoing provisions of this Section 4.5,
a stockholder shall also comply with all applicable requirements of the
Securities Exchange Act of 1934, as amended (or any successor provision),
and the rules and regulations thereunder with respect to the matters set
forth in this Section 4.5.
4.6. Committees. The board of directors may, by vote of a majority of
----------
the whole board, (a) designate, change the membership of or terminate the
existence of any committee or committees, each committee to consist of one or
more of the directors; (b) designate one or more directors as alternate members
of any such committee who may replace any absent or disqualified member at any
meeting of the committee; and (c) determine the extent to which each such
committee shall have and may exercise the powers and authority of the board of
directors in the management of the business and affairs of the Corporation,
including the power to authorize the seal of the Corporation to be affixed to
all papers that require it and the power and authority to declare dividends or
to authorize the issuance of stock; excepting, however, such powers that by law,
the certificate of incorporation or these by-laws they are prohibited from so
delegating. In the absence or disqualification of any member of such committee
and such member's alternate, if any, the member or members thereof present at
any meeting and not disqualified from voting, whether or not constituting a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in the place of any such absent or disqualified member. Except as
the board of directors may otherwise determine, any committee may make rules for
the conduct of its business, but unless otherwise provided by the board or such
rules, its business shall be conducted as nearly as may be in the same manner as
is provided by these by-laws for the conduct of business by the board of
directors. Each committee shall keep regular minutes of its meetings and report
the same to the board of directors upon request.
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<PAGE>
4.7. Regular Meeting. Regular meetings of the board of directors may be
---------------
held without call or notice at such place within or without the State of
Delaware and at such times as the board may from time to time determine,
provided that notice of the first regular meeting following any such
determination shall be given to absent directors. A regular meeting of the
directors may be held without call or notice immediately after and at the same
place as the annual meeting of the stockholders.
4.8. Special Meetings. Special meetings of the board of directors may be
----------------
held at any time and at any place within or without the State of Delaware
designated in the notice of the meeting, when called by the president, or by
one-third or more in number of the directors, reasonable notice thereof being
given to each director by the secretary or by the president or by any one of the
directors calling the meeting.
4.9. Notice. It shall be reasonable and sufficient notice to a director
------
to send notice by mail at least forty-eight hours or by telegram at least
twenty-four hours before the meeting, addressed to the director at the
director's usual or last known business or residence address or to give notice
to the director in person or by telephone at least twenty-four hours before the
meeting. Notice of a meeting need not be given to any director if a written
waiver of notice, executed by the director before or after the meeting, is filed
with the records of the meeting, or to any director who attends the meeting
without protesting prior thereto or at its commencement the lack of notice to
the director. Neither notice of a meeting nor a waiver of a notice need specify
the purposes of the meeting.
4.10. Quorum. Except as may be otherwise provided by law, the certificate
------
of incorporation or these by-laws, at any meeting of the directors a majority of
the directors then in office shall constitute a quorum. In the event one or
more of the directors shall be disqualified to vote at any meeting, then the
required quorum shall be reduced by one for each director so disqualified,
provided that a quorum shall not in any case be less than one-third of the total
number of directors constituting the whole board. Any meeting may be adjourned
from time to time by a majority of the votes cast upon the question, whether or
not a quorum is present, and the meeting may be held as adjourned without
further notice.
4.11. Action by Vote. Except as may be otherwise provided by law, the
--------------
certificate of incorporation or these by-laws, when a quorum is present at any
meeting the vote of a majority of the directors present shall be the act of the
board of directors.
4.12. Action Without a Meeting. Unless otherwise restricted by the
------------------------
certificate of incorporation or these by-laws, any action required or permitted
to be taken at any meeting of the board of directors or of any committee thereof
may be taken without a meeting if all the members of the board or of such
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the records of the meetings of the board or of such
committee. Such consent shall be treated for all purposes as the act of the
board or of such committee, as the case may be.
4.13. Participation in Meetings by Conference Telephone. Unless otherwise
-------------------------------------------------
restricted by the certificate of incorporation or these by-laws, members of the
board of directors or of any committee thereof may participate in a meeting of
such board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Such participation shall constitute presence in
person at such meeting.
4.14. Compensation. Unless otherwise restricted by the certificate of
------------
incorporation or these by-laws, the board of directors shall have the authority
to fix from time to time the compensation of directors. The directors may be
paid their expenses, if any, of attendance at each meeting of the board
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of directors and the performance of their responsibilities as directors and may
be paid a fixed sum for attendance at each meeting of the board of directors
and/or a stated salary as director. No such payment shall preclude any director
from serving the Corporation or its parent or subsidiary Corporations in any
other capacity and receiving compensation therefor. The board of directors may
also allow compensation for members of special or standing committees for
service on such committees.
4.15. Interested Directors and Officers.
---------------------------------
(a) No contract or transaction between the Corporation and one or
more of its directors or officers, or between the Corporation and any other
Corporation, partnership, association or other organization in which one or
more of the Corporation's directors or officers are directors or officers
or have a financial interest, shall be void or voidable solely for this
reason, or solely because the director or officer is present at or
participates in the meeting of the board or committee thereof that
authorizes the contract or transaction, or solely because the vote of any
such person is counted for such purpose, if:
(b) the material facts as to the relationship or interest of the
director or officer and the contract or transaction are disclosed or known
to the board of directors or the committee, and the board or committee in
good faith authorizes the contract or transaction by the affirmative vote
of a majority of the disinterested directors, even though the disinterested
directors do not constitute a quorum;
(c) the material facts as to the relationship or interest of the
director or officer and as to the contract or transaction are disclosed or
are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the
stockholders; or
(d) the contract or transaction is fair as to the Corporation as of
the time it is authorized, approved or ratified, by the board of directors,
a committee thereof, or the stockholders.
(e) Common or interested directors may be counted in determining
the presence of a quorum at a meeting of the board of directors or of a
committee that authorizes the contract or transaction.
4.16. Resignation or Removal of Directors. Directors of the Corporation
-----------------------------------
may be removed only for cause by the affirmative vote of the holders of at least
two-thirds of the shares of the capital stock of the Corporation issued and
outstanding and entitled to vote at an election of directors. Any director may
resign at any time by delivering a resignation in writing to the president or
the secretary or to a meeting of the board of directors. Such resignation shall
be effective upon receipt unless specified to be effective at some other time;
and without in either case the necessity of its being accepted unless the
resignation shall so state. No director resigning and (except where a right to
receive compensation shall be expressly provided in a duly authorized written
agreement with the Corporation) no director removed shall have any right to
receive compensation as such director for any period following the director's
resignation or removal, or any right to damages on account of such removal,
whether the director's compensation be by the month or by the year or otherwise;
unless in the case of a resignation, the directors, or in the case of removal,
the body acting on the removal, shall in their or its discretion provide for
compensation.
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SECTION 5. NOTICES
-------
5.1. Form of Notice. Whenever, under the provisions of law, or of the
--------------
certificate of incorporation or of these by-laws, notice is required to be given
to any director or stockholder, such notice may be given by mail, addressed to
such director or stockholder, at the director's or stockholder's address as it
appears on the records of the Corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Unless written notice by mail is required
by law, written notice may also be given by telegram, cable, facsimile,
commercial delivery service, telex or similar means, addressed to such director
or stockholder at the address thereof as such address appears on the records of
the Corporation, in which case such notice shall be deemed to be given when
delivered into the control of the persons charged with effecting such
transmission, the transmission charge to be paid by the Corporation or the
person sending such notice and not by the addressee. Oral notice or other in-
hand delivery (in person or by telephone) shall be deemed given at the time it
is actually given.
5.2. Waiver of Notice. Whenever notice is required to be given under the
----------------
provisions of law, the certificate of incorporation or these by-laws, a written
waiver thereof, signed by the person entitled to notice, whether before or after
the time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any meeting of the stockholders, directors or members of a
committee of the board of directors need be specified in any written waiver of
notice.
SECTION 6. OFFICERS AND AGENTS
-------------------
6.1. Enumeration; Qualification. The officers of the Corporation shall
--------------------------
be a president, a treasurer, a secretary and such other officers, if any, as the
board of directors from time to time may in its discretion elect or appoint,
including without limitation one or more vice presidents. Any officer may be,
but none need be, a director or stockholder. Any two or more offices may be
held by the same person. Any officer may be required by the board of directors
to secure the faithful performance of the officer's duties to the Corporation by
giving bond in such amount and with sureties or otherwise as the board of
directors may determine.
6.2. Powers. Subject to law, the certificate of incorporation and these
------
by-laws, each officer shall have, in addition to the duties and powers herein
set forth, such duties and powers as are commonly incident to the officer's
office and such additional duties and powers as the board of directors may from
time to time designate.
6.3. Election. The board of directors at its first meeting after each
--------
annual meeting of stockholders shall choose a president, a secretary and a
treasurer. Other officers may be appointed by the board of directors at such
meeting, at any other meeting or by written consent. At any time or from time
to time, the directors may delegate to any officer their power to elect or
appoint any other officer or any agents.
6.4. Tenure. Each officer shall hold office until the first meeting of
------
the board of directors following the next annual meeting of the stockholders and
until a successor is elected and qualified unless a shorter period shall have
been specified in terms of the officer's election or appointment, or in each
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case until the officer sooner dies, resigns, is removed or becomes disqualified.
Each agent of the Corporation shall retain authority at the pleasure of the
directors, or the officer by whom the agent was appointed or by the officer who
then holds agent appointive power.
6.5. President and Vice Presidents.
-----------------------------
(a) The president shall be the chief executive officer and shall
have direct and active charge of all business operations of the Corporation
and shall have general supervision of the entire business of the
Corporation, subject to the control of the board of directors. The
president shall preside at all meetings of the stockholders and of the
board of directors at which he or she is present, except as otherwise voted
by the board of directors.
(b) The president or treasurer shall execute bonds, mortgages and
other contracts requiring a seal, under the seal of the Corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated
by the board of directors to some other officer or agent of the
Corporation.
(c) Any vice presidents shall have such duties and powers as shall
be designated from time to time by the board of directors or the president.
6.6. Treasurer and Assistant Treasurers.
----------------------------------
(a) The treasurer shall be the chief financial officer of the
Corporation and shall be in charge of its funds and valuable papers, and
shall have such other duties and powers as may be assigned to the treasurer
from time to time by the board of directors or the president.
(b). Any assistant treasurers shall have such duties and powers as
shall be designated from time to time by the board of directors, the
president or the treasurer.
6.7. Secretary and Assistant Secretaries.
-----------------------------------
(a) The secretary shall record all proceedings of the stockholders,
the board of directors and committees of the board of directors in a book
or series of books to be kept therefor and shall file therein all writings
of, or related to, action by stockholder or director consent. In the
absence of the secretary from any meeting, an assistant secretary, or if
there is none or each assistant secretary is absent, a temporary secretary
chosen at the meeting, shall record the proceedings thereof. Unless a
transfer agent has been appointed, the secretary shall keep or cause to be
kept the stock and transfer records of the Corporation, which shall contain
the names and record addresses of all stockholders and the number of shares
registered in the name of each stockholder. The secretary shall have such
other duties and powers as may from time to time be designated by the board
of directors or the president.
(b) Any assistant secretaries shall have such duties and powers as
shall be designated from time to time by the board of directors, the
president or the secretary.
-10-
<PAGE>
6.8. Resignation and Removal. Any officer may resign at any time by
-----------------------
delivering a resignation in writing to the president, the secretary or a meeting
of the board of directors. Such resignation shall be effective upon receipt
unless specified to be effective at some other time, and without in any case the
necessity of its being accepted unless the resignation shall so state. The
board of directors may at any time remove any officer either with or without
cause. The board of directors may at any time terminate or modify the authority
of any agent. No officer resigning and (except where a right to receive
compensation shall be expressly provided in a duly authorized written agreement
with the Corporation) no officer removed shall have any right to any
compensation as such officer for any period following the officer's resignation
or removal, or any right to damages on account of such removal, whether the
officer's compensation be by the month or by the year or otherwise; unless in
the case of a resignation, the directors, or in the case of removal, the body
acting on the removal, shall in their or its discretion provide for
compensation.
6.9. Vacancies. If the office of the president or the treasurer or the
---------
secretary becomes vacant, the directors may elect a successor by vote of a
majority of the directors then in office. If the office of any other officer
becomes vacant, any person or body empowered to elect or appoint that office may
choose a successor. Each such successor shall hold office for the unexpired
term of the predecessor, and in the case of the president, the treasurer and the
secretary until a successor is chosen and qualified, or in each case until such
officer sooner dies, resigns, is removed or becomes disqualified.
SECTION 7. CAPITAL STOCK
-------------
7.1. Stock Certificates. Each stockholder shall be entitled to a
------------------
certificate stating the number and the class and the designation of the series,
if any, of the shares held by the stockholder, in such form as shall, in
conformity to law, the certificate of incorporation and the by-laws, be
prescribed from time to time by the board of directors. Such certificate shall
be signed by (a) the president or a vice-president and (b) the treasurer, an
assistant treasurer, the secretary or an assistant secretary. Any of the
signatures on the certificate may be facsimiles. In case an officer, transfer
agent or registrar who has signed or whose facsimile signature has been placed
on such certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the Corporation
with the same effect as if the signatory were such officer, transfer agent, or
registrar at the time of its issue.
7.2. Lost Certificates. The board of directors may direct a new
-----------------
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or such owner's legal representative, to advertise the same in
such manner as it shall require and/or to give the Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
SECTION 8. TRANSFER OF SHARES OF STOCK
---------------------------
Subject to any restrictions with respect to the transfer of shares of
stock, shares of stock may be transferred on the books of the Corporation by the
surrender to the Corporation or its transfer agent of the certificate therefor
properly endorsed or accompanied by a written assignment and power of attorney
-11-
<PAGE>
properly executed, with necessary transfer stamps affixed, and with such proof
of the authenticity of signature as the board of directors or the transfer agent
of the Corporation may reasonably require. Except as may be otherwise required
by law, the certificate of incorporation or these by-laws, the Corporation shall
be entitled to treat the record holder of stock as shown on its books as the
owner of such stock for all purposes, including the payment of dividends and the
right to receive notice and to vote or to give any consent with respect thereto
and to be held liable for such calls and assessments, if any, as may lawfully be
made thereon, regardless of any transfer, pledge or other disposition of such
stock until the shares have been properly transferred on the books of the
Corporation.
It shall be the duty of each stockholder to notify the Corporation of the
stockholder's post office address.
SECTION 9. GENERAL PROVISIONS
------------------
9.1. Record Date. In order that the Corporation may determine the
-----------
stockholders entitled to notice of or to vote at any meeting of stockholders or
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty days nor less than ten days before the date
of such meeting, nor more than sixty days prior to any other action to which
such record date relates. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the board of directors may fix a new
record date for the adjourned meeting. If no record date is fixed:
(a) the record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the
day on which the meeting is held;
(b) the record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no
prior action by the board of directors is necessary, shall be the day on
which the first written consent is expressed; and
(c) the record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating to such purpose.
9.2. Dividends. Dividends upon the capital stock of the Corporation may
---------
be declared by the board of directors at any regular or special meeting or by
written consent, pursuant to law. Dividends may be paid in cash, property or
shares of the capital stock, subject to the provisions of the certificate of
incorporation.
9.3. Payment of Dividends. Before payment of any dividend, there may be
--------------------
set aside out of any funds of the Corporation available for dividends such sum
or sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as
-12-
<PAGE>
the directors shall think conducive to the interest of the Corporation, and the
directors may modify or abolish any such reserve in the manner in which it was
created.
9.4. Checks. All checks or demands for money and notes of the
------
Corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
9.5. Fiscal Year. The fiscal year of the Corporation shall begin on the
-----------
first of January in each year and shall end on the last day of December next
following, unless otherwise determined by the board of directors.
9.6. Seal. The board of directors may, by resolution, adopt a corporate
----
seal. The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the word "Delaware." The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise. The seal may be altered from time to time by the board
of directors.
SECTION 10. INDEMNIFICATION
---------------
It being the intent of the Corporation to provide maximum protection
available under the law to its officers and directors, the Corporation shall
indemnify its officers and directors to the full extent the Corporation is
permitted or required to do so by the General Corporation Law of Delaware.
SECTION 11. AMENDMENTS
----------
11.1. By the Board of Directors. These by-laws may be altered, amended or
-------------------------
repealed or new by-laws may be adopted by the affirmative vote of a majority of
the directors present at any regular or special meeting of the board of
directors at which a quorum is present.
11.2. By the Stockholders. Notwithstanding any other provision of these
-------------------
by-laws, and notwithstanding the fact that a lesser percentage may be specified
by law, these by-laws may be altered, amended or repealed or new by-laws may be
adopted by the affirmative vote of the holders of at least seventy-five percent
of the shares of the capital stock of the corporation issued and outstanding and
entitled to vote at any regular or special meeting of stockholders, provided
notice of such alteration, amendment, repeal or adoption of new by-laws shall
have been stated in the notice of such regular or special meeting.
-13-
<PAGE>
EXHIBIT 10.1
VISUAL INTERNATIONAL INC.
-------------------------
STOCK OPTION PLAN (1992)
------------------------
1. PURPOSE OF THE PLAN.
--------------------
The Visual International, Inc. Stock Option Plan (1992) ("Stock Option Plan
(1992)") is intended to promote the growth of the Company by attracting and
motivating directors, officers, employees, consultants, independent contractors,
vendors, suppliers and other persons whose efforts are deemed worthy of
encouragement through the incentive effects of stock options.
2. DEFINITIONS.
------------
As used herein, the following definitions shall apply:
(A) "BOARD" shall mean the Committee if one has been appointed or, if no
-----
Committee has been appointed, the Board of Directors of the Company.
(B) "CODE" shall mean the Internal Revenue Code, the rules and regulations
----
promulgated thereunder and the interpretations thereof, all as from time to time
in effect.
(C) "COMMITTEE" shall mean the Committee appointed by the Board of
---------
Directors in accordance with Section 3 (a) below, if one is appointed.
(D) "COMMON STOCK" shall mean the Common Stock of the Company.
------------
(E) "COMPANY" shall mean visual International, Inc., a Delaware
-------
corporation.
(F) "CONSULTANT" shall mean any person who is engaged by the Company or
----------
any Parent or Subsidiary of the Company to render consulting or advisory
services, whether or not compensation is paid to such individual.
(G) "CONTINUOUS STATUS" shall mean the absence of any interruption or
-----------------
termination of service as an Employee, Consultant or other person providing
services on a regular basis to the Company or its Parent or any Subsidiary.
Continuous Status shall not be considered interrupted in the case of sick leave,
military leave, or any other leave of absence approved by the Board, provided
that either such leave is for a period of not more than ninety (90) days or
reemployment upon the expiration of such leave is provided or guaranteed by
contract or statute.
(H) "DIRECTOR"shall mean any person serving on the Board of Directors.
--------
<PAGE>
(I) "EMPLOYEE" shall mean any person, including Officers and Directors,
--------
employed by the Company or its Parent or any subsidiary of the Company.
(J) "FAIR MARKET VALUE"shall mean the average of the closing bid and asked
-----------------
prices of a share of Common Stock, as reported by The Wall Street Journal (or,
if not reported, as otherwise quoted by the National Association of securities
Dealers through NASDAQ) , on the date of the grant of the option, or, if the
Common Stock is listed on the NASDAQ National Market System or is listed on a
national stock exchange, the closing price on such System or such exchange on
the date of the grant of the Option, as reported in The Wall Street Journal. In
the event the Common Stock is not traded publicly, the Fair Market Value of a
share of Common Stock on the date of the grant of the Option shall be
determined, in good faith, by the Board or the Committee and such determination
shall be conclusive for all purposes. The Board or Committee shall take into
account such factors affecting value as it, in its sole and absolute discretion,
may deem relevant.
(K) "OFFICER" shall mean any person, which may include Directors, employed
-------
by the Company or its Parent or any Subsidiary of the Company who has been
elected an officer by the respective Board of Directors.
(L) "OPTIONS" shall mean stock options issued pursuant to the Plan.
-------
Options may be either "Incentive Options, which are defined as Options intended
-----------------
to meet the requirements of Section 422 of the Code, or "Nonqualified options,"
-----------------------
which are defined as Options not intended to meet such requirements of the Code.
(M) "OPTION AGREEMENT"shall mean the written agreement setting forth the
----------------
terms and conditions of an Option.
(N) "OPTIONED STOCK" shall mean the Common Stock subject to an option.
----------------
(O) "OPTIONEE" shall mean a person who receives an option.
----------
(P) "PARENT" shall mean a "parent corporation," whether now or hereafter
--------
existing, as defined in Section 425(e) of the Code.
(Q) "PARTICIPANT" shall mean a person to whom an option has been granted.
------------
(R) "PLAN" shall mean the Visual International, Inc. Stock Option Plan
------
(1992).
(S) "SHARE" shall mean a share of Common Stock of the Company, as may be
-------
adjusted in accordance with Section 6 below.
-2-
<PAGE>
(T) "SUBSIDIARY" shall mean a "subsidiary corporation" of the Company,
-----------
whether now or hereafter existing, as defined in Section 425(f) of the Code.
3. ADMINISTRATION OF THE PLAN.
---------------------------
(A) BY THE BOARD OF DIRECTORS OR BY THE COMMITTEE. The Plan shall be
---------------------------------------------
administered by the Board of Directors or, if appointed by the Board, by a
Committee; provided, however, if the Company shall have registered a class of
equity securities pursuant to Section 12 of the Securities Exchange Act of 1934,
then the Plan shall be administered by the Board of Directors or, if appointed,
by a Committee of two or more directors, all of which shall be "disinterested"
as defined in Rule 16b-3 under the Securities Exchange Act of 1934. The Board
and the Committee shall have full authority to administer the Plan, including
authority to interpret and construe any provision of the Plan and to adopt such
rules and regulations for administering the Plan as it may deem necessary in
order to comply with the requirements of the Plan, or in order that any Option
that is intended to be an Incentive Option will be classified as an incentive
stock option under the Code, or in order to conform to any regulation or to any
change in any law or regulation applicable thereto. The Board of Directors may
reserve to itself any of the authority granted to the Committee as set forth
herein, and it may perform and discharge all of the functions and
responsibilities of the Committee at any time that a duly constituted Committee
is not appointed and serving.
(B) ACTIONS OF THE BOARD AND THE COMMITTEE. All actions taken and all
--------------------------------------
interpretations and determinations made by the Board or by the Committee in good
faith (including determinations of Fair Market Value) shall be final and binding
upon all Participants, the Company and all other interested persons. No member
of the Board or the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan, and
all members of the Board or the Committee shall, in addition to their rights as
directors, be fully protected by the Company with respect to any such action,
determination or interpretation.
(C) POWERS OF THE BOARD AND THE COMMITTEE. Subject to the provisions of
--------------------------------------
the Plan, the Board and, if appointed, the Committee shall have the authority,
in their discretion:
(i) to determine, upon review of the relevant information, the Fair
Market Value of the Common Stock; (ii) to determine the persons to whom
Options shall be granted, the time or times at which Options shall be
granted, the number of shares to be represented by each Option and the
exercise price per share; (iii) to interpret the Plan; (iv) to prescribe,
amend, and rescind rules and regulations relating
-3-
<PAGE>
to the Plan; (v) to determine whether an Option granted shall be an
Incentive Option or a Nonqualified Option and to determine the terms and
provisions of each option granted (which need not be identical) and, with
the consent of the holder thereof, to modify or amend each Option,
including reductions in the exercise price thereof; (vi) to accelerate or
defer (with the consent of the Optionee) the exercise date of any option;
(vii) to authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option previously granted
by the Board; and (viii) to make all other determinations deemed necessary
or advisable for the administration of the Plan.
4. ELIGIBILITY AND PARTICIPATION.
------------------------------
(A) ELIGIBILITY. Grants of Options may be made to any Employee or
-----------
Consultant (which may include Officers and/or Directors) of the Company or of
its Parent or subsidiary, or any independent contractor, vendor, supplier or any
other person providing services to the Company or a Parent or Subsidiary whose
efforts are deemed worthy of encouragement by the Board; provided, however, an
Incentive Option may only be granted to an Employee.
(B) PARTICIPATION BY DIRECTOR. Members of the Board who are either
-------------------------
eligible for Options or have been granted Options may vote on any matters
affecting the administration of the Plan or the grant of any Options pursuant to
the Plan, except that no such member shall act upon the granting of an Option to
himself, but any such member may be counted in determining the existence of a
quorum at any meeting of the Board and may be counted as part of an action by
unanimous written consent during or with respect to which action is taken to
grant options to him.
5. EXERCISE PRICE; CONSIDERATION; AND FORM OF OPTION AGREEMENT.
------------------------------------------------------------
(A) EXERCISE PRICE. The exercise price of any Incentive Option shall be
--------------
not less than one hundred percent (100%) of the Fair Market Value of a share of
Common Stock on the date of the grant of the Option. The exercise price of a
non-qualified option shall be determined in the sole discretion of the Board of
Directors and may be at less than the Fair Market Value on the date of the grant
of the option. If an Incentive option is granted to an Optionee who then owns
stock possessing more than 10% of the total combined voting power of all classes
of stock of the Company or its Parent or any Subsidiary, the exercise price of
such incentive Option shall be at least one hundred ten percent (110%) of the
Fair Market Value of the Company's Common Stock on the date of the grant of such
Option.
(B) CONSIDERATION. The exercise price shall be paid in full, at the time
-------------
of exercise of the Option, by personal or bank
-4-
<PAGE>
cashier's check or in such other form of lawful consideration as the Board of
Directors or the Committee may approve from time to time, including, without
limitation, the transfer of outstanding shares of Common Stock as provided in
Section 7 (c) or the Optionee's promissory note in form satisfactory to the
Company and bearing interest at a rate of not less than 6% per annum.
(C) FORM OF OPTION AGREEMENT. Each Option shall be evidenced by an Option
------------------------
Agreement specifying the number of shares which may be purchased upon exercise
of the option and containing such terms and provisions as the Board or the
Committee may determine, subject to the provisions of the Plan.
6. SHARES OF COMMON STOCK SUBJECT TO THE PLAN.
-------------------------------------------
(A) NUMBER. The aggregate number of shares of Common Stock subject to
------
options which may be granted under the Plan shall be 5,226,727 subject to
adjustment as hereinbelow provided. To the extent any Option granted under the
Plan shall expire or terminate unexercised or for any reason become
unexercisable, the shares subject to such Option shall thereafter be available
for future grants under the Plan.
(B) CAPITAL CHANGES. Except as hereinafter provided, no adjustment shall
---------------
be made in the number of shares of Common Stock issued to a Participant, or in
any other rights of the Participant upon exercise of an option, by reason of any
dividend, distribution or other right granted to stockholders for which the
record date is prior to the date of exercise of the Participant's Option. In
the event any change is made to the shares of Common Stock (whether by reason of
a merger, consolidation, reorganization, recapitalization, stock dividend, stock
split, combination of shares, exchange of shares, change in corporate structure
or otherwise) , appropriate adjustments shall be made in: (i) the number of
shares of Common Stock theretofore made subject to Options, and in the exercise
price of such shares; and (ii) the aggregate number of shares which may be made
subject to Options. If any of the foregoing adjustments shall result in a
fractional share, the fraction shall be disregarded, and the Company shall have
no obligation to make any cash or other payment with respect to such a
fractional share.
7. EXERCISE OF STOCK OPTIONS.
--------------------------
(A) TIME OF EXERCISE. Subject to the provisions of the Plan, including
----------------
without limitation Section 7(d) and Section 8, the Board or the Committee, in
its discretion, shall determine the time when an option, or a portion of an
Option, shall become exercisable, and the time when an Option, or a portion of
an option, shall expire; provided, however, that (i) an Incentive Option shall
expire, to the extent not exercised, no later than the tenth anniversary of the
date on which it was granted; and
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<PAGE>
(ii) any Incentive Option granted to any person who owns shares possessing more
than 10% of the total combined voting power or value of all classes of stock of
the Company or of its Parent or a Subsidiary shall have a term of not to exceed
five (5) years. Such time or times shall be set forth in the Option Agreement
evidencing such Option.
(B) NOTICE OF EXERCISE. An Optionee electing to exercise an Option shall
------------------
give written notice to the Company, as specified by the Option Agreement, of
his/her election to purchase a specified number of shares, such notice shall be
accompanied by the instrument evidencing such option and any other documents
required by the Company, and shall tender the exercise price of the shares
he/she has elected to purchase. If the notice of election to exercise is given
by the executor or administrator of a deceased Participant, or by the person or
persons to whom the Option has been transferred by the participant's will or the
applicable laws of descent and distribution, the Company will be under no
obligation to deliver shares pursuant to such exercise unless and until the
Company is satisfied that the person or persons giving such notice is or are
entitled to exercise the option.
(C) EXCHANGE OF OUTSTANDING STOCK. The Board, in its sole discretion, may
------------------------------
permit an Optionee to surrender to the Company shares of Common Stock previously
acquired by the Optionee at least six (6) months prior to such surrender as part
or full payment for the exercise of an Option. Such surrendered shares shall be
valued at their Fair Market Value on the date of exercise of the Option.
(D) TERMINATION OF CONTINUOUS STATUS BEFORE EXERCISE. If a Participant's
------------------------------------------------
Continuous Status with the Company or its Parent or any Subsidiary shall cease
for any reason (other than the Participant Is death, retirement or disability
as provided below), any Option then held' by the Participant or his/her estate,
to the extent then exercisable, shall remain exercisable after such cessation of
the Continuous Status for a period of thirty (30) days commencing upon the date
of such cessation (or such longer period as the Board may allow, either in the
form of Option Agreement or by Board action). If the Option is not exercised
during this period it shall be deemed to have been forfeited and be of no
further force or effect. Notwithstanding the exercise period hereinabove
described, if the holder of an Option (i) is terminated for "cause" (as
hereinafter defined) , (ii) is terminated due to his expropriation of, or after
termination is believed to have wrongfully taken or expropriated, Company
property (including trade secrets or other proprietary rights) , the Board shall
have the authority, by notice to the holder of an Option, to immediately
terminate such Option, effective on the date of termination, and such Option
shall no longer be exercisable to any extent whatsoever. As used herein,
"cause"
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<PAGE>
shall mean that the holder of an Option has willfully and intentionally engaged
in material misconduct, gross neglect of duties or grossly negligent failure to
act which materially and adversely affects the business or affairs of the
Company, or has committed any act of fraud or any act not approved by the Board
involving any material conflict of interest or self-dealing adverse to the
Company, or has been convicted of a felony, or has unreasonably failed to comply
with any reasonable direction from the Board or its Chairman with respect to a
major policy decision affecting the Company, issued pursuant to its authority
under the By-Laws of the Company.
(E) DEATH. If a Participant dies at a time when he is entitled to
-----
exercise an Option, then at any time or times within twelve (12) months after
his/her death (or such further period as the Board may allow) such option may be
exercised, as to all or any of the shares which the Participant was entitled to
purchase immediately prior to his/her death (i) by his/her executor or
administrator or the person(s) to whom the Option is transferred by will or the
applicable laws of descent and distribution or (ii) his designated beneficiary,
and except as so exercised such Option will expire at the end of such period. In
no event, however, may any Option be exercised after the expiration of its term.
(F) RETIREMENT AND DISABILITY. If a Participant retires from service at
--------------------------
age 65 or older or retires at less than age 65 with the consent of the Board of
Directors or becomes disabled (within the meaning of Section 105 (d) (4) of the
Code) at a time when he is entitled to exercise an Option, then, at any time or
times within thirty (30) days of the date of such retirement or within twelve
(12) months of the date of such disability, he may exercise such Option as to
all or any of the shares which he was entitled to purchase under such Option
immediately prior to such retirement or disability. Except as so exercised, such
Option shall expire at the end of such period. In no event, however, may any
Option be exercised after the expiration of its term.
(G) DISPOSITION OF TERMINATED STOCK OPTIONS. Any shares of Common Stock
---------------------------------------
subject to Options which have been terminated as provided above shall not
thereafter be eligible for purchase by the Participant but shall again be
available for grant by the Board to other Participants.
8. SPECIAL PROVISIONS RELATING TO INCENTIVE OPTIONS.
-------------------------------------------------
The Company shall not grant Incentive Options under the Plan to any
Optionee to the extent that the aggregate Fair Market Value (determined as of
the date of grant) of the Common Stock covered by such Incentive Options which
are exercisable for the first time during any calendar year, when combined with
the aggregate Fair Market Value of all stock covered by Incentive
-7-
<PAGE>
Options granted to such Optionee after December 31, 1986 by the Company, its
Parent or a Subsidiary thereof which are exercisable for the first time during
the same calendar year, exceeds $100,000. Incentive Options shall be granted
only to persons who, on the date of grant, are Employees of the Company or its
Parent or a Subsidiary of the Company.
9. NO CONTRACT OF EMPLOYMENT.
--------------------------
Unless otherwise expressed in a writing signed by an authorized officer of
the Company, all Employees of the Company are hired for an unspecified period of
time and are considered to be "at-will employees." Nothing in this Plan shall
confer upon any Participant the right to continue in the employ of the Company,
its Parent or any Subsidiary, nor shall it limit or restrict in any way the
right of the Company, its Parent or any such Subsidiary to discharge the
Participant at any time for any reason whatsoever, with or without cause.
10. NO RIGHTS AS A STOCKHOLDER.
---------------------------
A Participant shall have no rights as a stockholder with respect to any
shares of Common Stock subject to an Option.
11. NONTRANSFERABILITY OF OPTIONS; DEATH OF PARTICIPANT.
----------------------------------------------------
No Option acquired by a Participant under the Plan shall be assignable or
transferable by a Participant, other than by will or the laws of descent and
distribution, and such Options are exercisable, during his lifetime, only by
Optionee; provided, however, that (i) a transfer may be made pursuant to a
qualified domestic relations order (as defined in the Code or as permitted by
Title I of the Employee Retirement Income Security Act ("ERISA") or the rules
thereunder) and (ii) any option agreement issued under the Plan may provide for
the designation of a beneficiary of the Optionee (which may be an individual or
trustee) who may exercise the option after the optionee's death and enjoy the
economic benefits thereof, subject to the consent of optionee's spouse where
required by law. Subject to Section 7(e), in the event of Optionee's death, the
Option may be exercised by the personal representative of the Participant's
estate or, if no personal representative has been appointed, by the successor(s)
in interest determined under the Participant's will or under the applicable laws
of descent and distribution.
12. LIQUIDATION OR MERGER OF THE COMPANY.
------------------------------------
(A) LIQUIDATION. In the event of a proposed dissolution or liquidation of
------------
the Company, the option shall terminate immediately prior to the consummation of
such proposed action, unless otherwise provided by the Board. The Board may, in
the exercise of its sole discretion in such instances, declare that
-8-
<PAGE>
any Option shall terminate as of a date fixed by the Board and give each
Optionee the right to exercise his Option as to all or any part of the Shares
covered by an option, including Shares as to which the Option would not
otherwise be exercisable.
(B) SALE OF ASSETS, MERGER OR CONSOLIDATION OR CHANGE OF CONTROL. In the
-------------------------------------------------------------
event of a proposed sale of all or substantially all of the assets of the
Company, or a merger or consolidation of the Company with or into another
corporation, a liquidation, or a "change of control" (as defined below), the
Board of Directors may elect to immediately vest all options and allow such
options to be fully exercised without regard to the normal vesting schedule of
such options; provided, however, that if the Board determine that such immediate
vesting is not appropriate, the options, if the event is a merger or
consolidation, shall be assumed or an equivalent option shall be substituted by
such successor corporation (or a parent or subsidiary of such successor
corporation) as a condition to the completion of such transaction.
Notwithstanding anything contained herein to the contrary, in the event of a
merger, consolidation or a change of control, in which the options do not become
immediately fully exercisable, the following shall apply: If within twelve (12)
months after such triggering event, the Optionee is terminated as a result of an
actual or constructive discharge (as defined below) by the Company or the
successor corporation for any reason or no reason (other than for "Cause", as
defined below), each Optionee's Option shall vest immediately and may be fully
exercised without regard to the normal vesting schedule for a period of five (5)
years commencing upon the date of such actual or construction discharge or for
the balance of the original remaining term of the Option, whichever period is
shorter in duration. For purposes of this Plan, the Company or its successor
shall be deemed to have constructively discharged an Optionee if such Optionee
resigns employment after a reduction in compensation, a meaningful reduction of
employment benefits, a demotion, a material reduction or change in the duties,
responsibilities, titles or status of the Optionee as an employee with the
Company as in effect on the date of the triggering event, or a material change
in the location (for example, more than 35 miles) where Optionee's employment
responsibilities are currently performed. optionee's termination of employment
as a result of death or disability shall not be deemed to be an actual or
constructive discharge by the Company or its successor. The term "Cause" shall
be limited to the occurrence of any of the following events: (a) Optionee has
misappropriated any funds or property of the Company or its successor; (b)
Optionee has been convicted of a misdemeanor or a felony which impairs his
ability to perform services for the Company or would cause the Company or its
successor adverse publicity; (c) Optionee fails to perform his normal duties and
obligations after a prior written warning by the Company or its successor; or
(d) Optionee has disclosed or personally utilized for his or others' benefit the
Company's or
-9-
<PAGE>
the successor's trade secrets or other confidential information. The term
"Change in Control" shall be deemed to have occurred if (1) any "person" or
"group" (as defined in or as pursuant to Section 13 (d) and (14) d of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") ) , becomes a
"beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange Act)
, directly or indirectly, of securities of the Company representing thirty (30)
percentage or more of the combined voting power of the Common and Preferred
Stock outstanding which votes generally for the election of directors; or (2)
the Company or any of its subsidiaries sell, in one or more transactions, other
than in the ordinary course of business, assets constituting in the aggregate
all or substantially all of the assets of the Company and its subsidiaries on a
consolidated basis.
13. AMENDMENTS; DISCONTINUATION OF PLAN.
-----------------------------------
The Board may from time to time alter, amend, suspend or discontinue the
Plan, including, where applicable, any modifications or amendments as it shall
deem advisable for any reason, including satisfying the requirements of any law
or regulation or any change thereof; provided, however, that no such action
shall adversely affect the rights and obligations with respect to Options at any
time outstanding under the Plan; and provided further, that no such action
shall, without the approval of the stockholders of the Company, (a) materially
increase the maximum number of shares of Common Stock that may be made subject
to Options (unless necessary to effect the adjustments required by Section 6 (b)
) , (b) materially increase the benefits accruing to Participants under the
Plan, or (c) materially lessen the requirements as to eligibility for
participation in the Plan. No such amendment shall materially adversely affect
the rights of any Participant under any Option previously granted without such
Participant's prior consent.
14. REGISTRATION OF OPTIONED SHARES.
-------------------------------
The Options shall not be exercisable unless the purchase of such Optioned
Shares is pursuant to an applicable effective registration statement under the
Securities Act of 1933, as amended, or unless, in the opinion of counsel to the
Company, the proposed purchase of such Optioned Shares would be exempt from the
registration requirements of the Securities Act of 1933, as amended.
15. WITHHOLDING TAXES; SATISFIED BY WITHHOLDING OPTIONED SHARES.
-----------------------------------------------------------
(A) GENERAL. The Company, its Parent or any Subsidiary may take such steps
-------
as it may deem necessary or appropriate for the withholding of any taxes which
the Company, its Parent or any
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<PAGE>
Subsidiary is required by law or regulation of any governmental authority,
whether Federal, state or local, domestic or foreign, to withhold in connection
with any Option including, but not limited to, requiring the Optionee to pay
such tax at the time of exercise or the withholding of issuance of shares of
Common Stock to be issued upon the exercise of any Option until the Participant
reimburses the Company for the amount the Company is required to withhold with
respect to such taxes, or, at the Company's sole discretion, cancelling any
portion of such issuance of Common Stock in any amount sufficient to reimburse
itself for the amount it is required to so withhold.
(B) SATISFYING TAXES BY WITHHOLDING OPTIONED SHARES. Option Agreements
-----------------------------------------------
under the Plan may, at the discretion of the Board, contain a provision to the
effect that all Federal and state taxes required to be withheld or collected
from an Optionee upon exercise of an option may be satisfied by the withholding
of a sufficient number of exercised Option Shares which, valued at Fair Market
Value on the date or exercise, would be equal to the total withholding
obligation of the Optionee for the exercise of such Option; provided, however,
that if the Company is a public reporting corporation, no person who is an
"officer" of the Company as such term is defined in Rule 3b-2 under the
Securities Exchange Act of 1934 may elect to satisfy the withholding of Federal
and state taxes upon the exercise of an Option by the withholding of Optioned
Shares unless such election is made either (i) at least six months prior to the
date that the exercise of the Option becomes a taxable event or (ii) during any
of the periods beginning on the third business day following the date on which
the Company issues a news release containing the operating results of a fiscal
quarter or fiscal year and ending on the twelfth business day following such
date. Such election shall be deemed made upon receipt of notice thereof by an
officer of the Company, by mail, personal delivery or by facsimile message, and
shall (unless notice to the contrary is provided to the Company) be operative
for all Option exercises. which occur during the twelve-month period following
election.
16. EFFECTIVE DATE AND TERM OF PLAN.
-------------------------------
The Plan is effective as of the date of adoption by the Board and Options
may be granted at any time on or after such date; provided, however, that the
Plan shall terminate if the stockholders of the Company do not approve and adopt
it within
-11-
<PAGE>
twelve (12) months of such date. No Options shall be granted subsequent to ten
years after the effective date of the Plan; however, options outstanding
subsequent to ten years after the effective date of the Plan shall continue to
be governed by the provisions of the Plan until exercised or terminated in
accordance with the Plan or the respective Option Agreements.
-12-
<PAGE>
FIRST AMENDMENT TO
VISUAL INTERNATIONAL, INC.
STOCK OPTION PLAN (1992)
BY
WHITE PINE SOFTWARE, INC.
This First Amendment to the Visual International, Inc. Stock Option Plan
(1992) dated this 2nd day of June, 1994.
WITNESSETH
WHEREAS, White Pine Software, Inc., a Delaware corporation (the
"Corporation"), is successor by merger to Visual International, Inc., a Delaware
corporation; and
WHEREAS, the Visual International, Inc. Stock Option Plan (1992) (the "1992
Plan"), as currently in effect, has total authorized options convertible into
5,226,727 shares of common stock $.001 par value per share. As of the date
hereof, 3,631,500 options have been granted and issued and remain outstanding;
and
WHEREAS, the Board of Directors of the Corporation deem it to be in the
best interest of the Corporation to adopt The White Pine Software, Inc. Stock
Option Plan (1994) (the "1994 Plan"); and
WHEREAS, that in adopting the 1994 Plan, the Board of Directors desires to
maintain the existing authorized combined number of shares subject to option
under the 1992 Plan and the White Pine Software, Inc. Stock Option Plan (1993)
(the "1993 Plan"), namely options exercisable into 8,500,000 shares of $.001 par
value common stock; and
WHEREAS, the Board of Directors desire to amend the 1992 Plan to reduce the
total number of shares of common stock subject to option which may be granted
under such plan from 5,226,727 shares to 3,631.500 and to allocate the 1,595,227
authorized but unissued options under the 1992 Plan to the 1994 Plan; and
WHEREAS, the Board of Directors desire to confirm the 3,631,500 options
previously granted under the 1992 Plan.
NOW THEREFORE, the 1992 Plan is hereby amended as follows:
1. The shares of $.001 par value common stock subject to options which
may be granted under the 1992 Plan under Section 6(a) of the 1992 Plan shall be
reduced from 5,226,727 shares to 3,631,500 shares.
2. No further options shall be issued under the 1992 Plan.
<PAGE>
3. This amendment confirms the previous issuance of the 3,631,500 options
under the 1992 Plan and the related Stock Option Agreements previously executed
by and between the Corporation and each of the optionees under the 1992 Plan.
4. That the foregoing amendments to the 1992 Plan have been made pursuant
to Section 13 of the 1992 Plan.
IN WITNESS WHEREOF, the President of the Corporation has executed this
First Amendment to Visual International, Inc. Stock Option Plan (1992) on the
day and year hereinbefore first written.
White Pine Software, Inc.
By: /s/ Howard R. Berke
--------------------------------
Howard R. Berke, duly authorized
President
-2-
<PAGE>
EXHIBIT 10.2
WHITE PINE SOFTWARE, INC.
-------------------------
STOCK OPTION PLAN (1993)
------------------------
1. PURPOSE OF THE PLAN.
--------------------
The White Pine Software, Inc. Stock Option Plan (1993) ("Stock Option Plan
(1993)") is intended to promote the growth of the Company by attracting and
motivating directors, officers, employees, consultants, independent contractors,
vendors, suppliers and other persons whose efforts are deemed worthy of
encouragement through the incentive effects of stock options.
2. DEFINITIONS.
-----------
As used herein, the following definitions shall apply:
(A) "BOARD" shall mean the Committee if one has been appointed or, if no
Committee has been appointed, the Board of Directors of the Company.
(B) "CODE" shall mean the Internal Revenue Code of 1986, as amended, the
rules and regulations promulgated thereunder and the interpretations thereof,
all as from time to time in effect.
(C) "COMMITTEE" shall mean the Committee appointed by the Board in
accordance with Section 3(a) below, if one is appointed.
(D) "COMMON STOCK" shall mean the Common Stock of the Company.
(E) "COMPANY" shall mean White Pine Software, Inc., a Delaware
corporation.
(F) "CONSULTANT" shall mean any person who is engaged by the Company or
any Parent or Subsidiary of the Company to render consulting or advisory
services, whether or not compensation is paid to such individual.
(G) "CONTINUOUS STATUS" shall mean the absence of any interruption or
termination of service as an Employee, Consultant or other person providing
services on a regular basis to the Company or its Parent or any Subsidiary.
Continuous Status shall not be considered interrupted in the case of sick leave,
military leave, or any other leave of absence approved by the Board, provided
that either such leave is for a period of not more than ninety (90) days or
reemployment upon the expiration of such leave is provided or guaranteed by
contract or statute.
(H) "DIRECTOR" shall mean any person serving on the Board.
<PAGE>
(I) "EMPLOYEE" shall mean any person, including Officers and Directors,
employed by the Company or its Parent or any Subsidiary of the Company.
(J) "FAIR MARKET VALUE" shall mean the average of the closing bid and
asked prices of a share of Common Stock, as reported by The Wall Street Journal
(or, if not reported, as otherwise quoted by the National Association of
securities Dealers through NASDAQ), on the date of the grant of the Option, or,
if the Common Stock is listed on the NASDAQ National Market System or is listed
on a national stock exchange, the closing price on such System or such exchange
on the date of the grant of the Option, as reported in The Wall Street Journal.
In the event the Common Stock is not traded publicly, the Fair Market Value of a
share of Common Stock on the date of the grant of the Option shall be
determined, in good faith, by the Board or the Committee and such determination
shall be conclusive for all purposes. The Board or Committee shall take into
account such factors affecting value as it, in its sole and absolute discretion,
may deem relevant.
(K) "OFFICER" shall mean any person, which may include Directors, employed
by the Company or its Parent or any Subsidiary of the Company who has been
elected an officer by the respective Board of Directors.
(L) "OPTIONS" shall mean stock options issued pursuant to the Plan.
Options may be either "Incentive Options," which are defined as options intended
--------------------
to meet the requirements of Section 422 of the Code, or "Nonqualified options,"
-----------------------
which are defined as Options not intended to meet such requirements of the Code.
(M) "OPTION AGREEMENT" shall mean the written agreement setting forth the
terms and conditions of an option.
(N) "OPTIONED STOCK" shall mean the Common Stock subject to an option.
(O) "OPTIONEE" shall mean a person who receives an option.
(P) "PARENT" shall mean a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(Q) "PARTICIPANT" shall mean a person to whom an option has been granted.
(R) "PLAN" shall mean the White Pine Software, Inc. Stock Option Plan
(1993).
(S) "SHARE" shall mean a share of Common Stock of the Company, as may be
adjusted in accordance with Section 6 below.
-2-
<PAGE>
(T) "SUBSIDIARY" shall mean a "subsidiary corporation" of the Company,
whether now or hereafter existing, as defined in Section 424(f) of the Code.
3. ADMINISTRATION OF THE PLAN.
---------------------------
(A) BY THE BOARD OR BY THE COMMITTEE. The Plan shall be administered by
--------------------------------
the Board or, if appointed by the Board, by a Committee; provided, however, if
the Company shall have registered a class of equity securities pursuant to
Section 12 of the Securities Exchange Act of 1934, then the Plan shall be
administered by the Board or, if appointed, by a Committee of two or more
directors, all of which shall be "disinterested" as defined in Rule 16b-3 under
the Securities Exchange Act of 1934. The Board and the Committee shall have
full authority to administer the Plan, including authority to interpret and
construe any provision of the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary in order to comply with the
requirements of the Plan, or in order that any Option that is intended to be an
Incentive Option will be classified as an incentive stock option under the Code,
or in order to conform to any regulation or to any change in any law or
regulation applicable thereto. The Board may reserve to itself any of the
authority granted to the Committee as set forth herein, and it may perform and
discharge all of the functions and responsibilities of the Committee at any time
that a duly constituted Committee is not appointed and serving.
(B) ACTIONS OF THE BOARD AND THE COMMITTEE. All actions taken and all
--------------------------------------
interpretations and determinations made by the Board or by the Committee in good
faith (including determinations of Fair Market Value) shall be final and binding
upon all Participants, the Company and all other interested persons. No member
of the Board or the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan, and
all members of the Board or the Committee shall, in addition to their rights as
directors, be fully protected by the Company with respect to any such action,
determination or interpretation.
(C) POWERS OF THE BOARD AND THE COMMITTEE. Subject to the provisions of
--------------------------------------
the Plan, the Board and, if appointed, the Committee shall have the authority,
in their discretion:
(i) to determine, upon review of the relevant information, the Fair
Market Value of the Common Stock; (ii) to determine the persons to whom
Options shall be granted, the time or times at which Options shall be
granted, the number of shares to be represented by each Option and the
exercise price per share; (iii) to interpret the Plan; (iv) to prescribe,
amend, and rescind rules and regulations relating to the Plan; (v) to
determine whether an Option granted shall be an Incentive option or a
Nonqualified option and to determine the terms and provisions of each
-3-
<PAGE>
option granted (which need not be identical) and, with the consent of the
holder thereof, to modify or amend each Option, including reductions in the
exercise price thereof; (vi) to accelerate or defer (with the consent of
the Optionee) the exercise date of any Option; (vii) to authorize any
person to execute on behalf of the Company any instrument required to
effectuate the grant of an Option previously granted by the Board; and
(viii) to make all other determinations deemed necessary or advisable for
the administration of the Plan.
4. ELIGIBILITY AND PARTICIPATION.
-----------------------------
(A) ELIGIBILITY. Grants of Options may be made to any Employee or
-----------
Consultant (which may include Officers and/or Directors) of the Company or of
its Parent or Subsidiary, or any independent contractor, vendor, supplier or any
other person providing services to the Company or a Parent or Subsidiary whose
efforts are deemed worthy of encouragement by the Board; provided, however, an
Incentive Option may only be granted to an Employee.
(B) PARTICIPATION BY DIRECTOR. Members of the Board who are either
-------------------------
eligible for options or have been granted Options may vote on any matters
affecting the administration of the Plan or the grant of any Options pursuant to
the Plan, except that no such member shall act upon the granting of an Option to
himself, but any such member may be counted in determining the existence of a
quorum at any meeting of the Board and may be counted as part of an action by
unanimous written consent during or with respect to which action is taken to
grant Options to him.
5. EXERCISE PRICE; CONSIDERATION; AND FORM OF OPTION AGREEMENT.
------------------------------------------------------------
(A) EXERCISE PRICE. The exercise price of any Incentive Option shall be
--------------
not less than one hundred percent (100%) of the Fair Market Value of a share of
Common Stock on the date of the grant of the Option. The exercise price of a
non-qualified Option shall be determined in the sole discretion of the Board and
may be at less than the Fair Market Value on the date of the grant of the
Option. If an Incentive Option is granted to an Optionee who then owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or its Parent or any Subsidiary, then the exercise price of
such Incentive option shall be at least one hundred ten percent (110%) of the
Fair Market Value of the Company's Common Stock on the date of the grant of such
option.
(B) CONSIDERATION. The exercise price shall be paid in full, at the time
-------------
of exercise of the option, by personal or bank cashier's check or in such other
form of lawful consideration as the Board or the Committee may approve from time
to time, including, without limitation, the transfer of outstanding shares of
Common Stock as provided in Section 7(c) or the Optionee's
-4-
<PAGE>
promissory note in form satisfactory to the Company and bearing interest at a
rate of not less than 6% per annum.
(C) FORM OF OPTION AGREEMENT. Each Option shall be evidenced by an Option
------------------------
Agreement specifying the number of shares which may be purchased upon exercise
of the Option and containing such terms and provisions as the Board or the
Committee May determine, subject to the provisions of the Plan.
6. SHARES OF COMMON STOCK SUBJECT TO THE PLAN.
-------------------------------------------
(A) NUMBER. The aggregate number of shares of Common Stock subject to
------
Options which may be granted under the Plan shall be 3,273,273 subject to
adjustment as hereinbelow provided. To the extent any option granted under the
Plan shall expire or terminate unexercised or for any reason become
unexercisable, the shares subject to such Option shall thereafter be available
for future grants under the Plan.
(B) CAPITAL CHANGES. Except as hereinafter provided, no adjustment shall
---------------
be made in the number of shares of Common Stock issued to a Participant, or in
any other rights of the Participant upon exercise of an Option, by reason of any
dividend, distribution or other right granted to stockholders for which the
record date is prior to the date of exercise of the Participant's option. In
the event any change is made to the shares of Common Stock (whether by reason of
a merger, consolidation, reorganization, recapitalization, stock dividend, stock
split, combination of shares, exchange of shares, change in corporate structure
or otherwise), appropriate adjustments shall be made in: (i) the number of
shares of Common Stock theretofore made subject to Options, and in the exercise
price of such shares; and (ii) the aggregate number of shares which may be made
subject to Options. If any of the foregoing adjustments shall result in a
fractional share, the fraction shall be disregarded, and the Company shall have
no obligation to make any cash or other payment with respect to such a
fractional share.
7. EXERCISE OF STOCK OPTIONS.
-------------------------
(A) TIME OF EXERCISE. Subject to the provisions of the Plan, including
----------------
without limitation Section 7(d) and Section 8, the Board or the Committee, in
its discretion, shall determine the time when an option, or a portion of an
option, shall become exercisable, and the time when an option, or a portion of
an Option, shall expire; provided, however, that (i) an Incentive Option shall
expire, to the extent not exercised, no later than the tenth (10th) anniversary
of the date on which it was granted; and (ii) any Incentive Option granted to
any person who owns shares possessing more than 10% of the total combined voting
power or value of all classes of stock of the Company or of its Parent or a
Subsidiary shall have a term of not to exceed five (5) years. Such time or
times shall be set forth in the Option Agreement evidencing such Option.
-5-
<PAGE>
(B) NOTICE OF EXERCISE. An Optionee electing to exercise an Option shall
------------------
give written notice to the Company, as specified by the option Agreement, of
his/her election to purchase a specified number of shares, such notice shall be
accompanied by the instrument evidencing such Option and any other documents
required by the Company, and shall tender the exercise price of the shares
he/she has elected to purchase. If the notice of election to exercise is given
by the executor or administrator of a deceased Participant, or by the person or
persons to whom the Option has been transferred by the participant's will or the
applicable laws of descent and distribution, the Company will be under no
obligation to deliver shares pursuant to such exercise unless and until the
company is satisfied that the person or persons giving such notice is or are
entitled to exercise the Option.
(C) EXCHANGE OF OUTSTANDING STOCK. The Board, in its sole discretion, may
-----------------------------
permit an Optionee to surrender to the Company shares of Common Stock previously
acquired by the Optionee at least six (6) months prior to such surrender as part
or full payment for the exercise of an option. Such surrendered shares shall be
valued at their Fair Market Value on the date of exercise of the option.
(D) TERMINATION OF CONTINUOUS STATUS BEFORE EXERCISE. If a Participant's
------------------------------------------------
Continuous Status with the Company or its Parent or any Subsidiary shall cease
for any reason (other than the Participant's death, retirement or disability as
provided below), any Option then held by the Participant or his/her estate, to
the extent then exercisable, shall remain exercisable after such cessation of
the Continuous Status for a period of thirty (30) days commencing upon the date
of such cessation (or such longer period as the Board may allow, either in the
form of Option Agreement or by Board action). If the Option is not exercised
during this period it shall be deemed to have been forfeited and be of no
further force or effect. Notwithstanding the exercise period hereinabove
described, if the holder of an Option (i) is terminated for "cause" (as
hereinafter defined), (ii) is terminated due to his expropriation of, or after
termination is believed to have wrongfully taken or expropriated, Company
property (including trade secrets or other proprietary rights), the Board shall
have the authority, by notice to the holder of an Option, to immediately
terminate such Option, effective on the date of termination, and such Option
shall no longer be exercisable to any extent whatsoever. As used herein,
"cause" shall mean that the holder of an Option has willfully and intentionally
engaged in material misconduct, gross neglect of duties or grossly negligent
failure to act which materially and adversely affects the business or affairs of
the Company, or has committed any act of fraud or any act not approved by the
Board involving any material conflict of interest or self-dealing adverse to the
Company, or has been convicted of a felony, or has unreasonably failed to comply
with any reasonable direction from the Board or its Chairman with respect to a
major policy decision
-6-
<PAGE>
affecting the Company, issued pursuant to its authority under the By-Laws of the
Company.
(E) DEATH. If a Participant dies at a time when he is entitled to
-----
exercise an Option, then at any time or times within twelve (12) months after
his/her death (or such further period as the Board may allow) such Option may be
exercised, as to all or any of the shares which the Participant was entitled to
purchase immediately prior to his/her death (i) by his/her executor or
administrator or the person(s) to whom the option is transferred by will or the
applicable laws of descent and distribution or (ii) his designated beneficiary,
and except as so exercised such Option will expire at the end of such period. In
no event, however, may any option be exercised after the expiration of its term.
(F) RETIREMENT AND DISABILITY. If a Participant retires from service at
-------------------------
age 65 or older or retires at less than age 65 with the consent of the Board or
becomes "disabled" (as hereinafter defined) at a time when he is entitled to
exercise an Option, then, at any time or times within thirty (30) days of the
date of such retirement or within twelve (12) months of the date of such
disability, he may exercise such Option as to all or any of the shares which he
was entitled to purchase under such Option immediately prior to such retirement
or disability. Except as so exercised, such Option shall expire at the end of
such period. In no event, however, may any option be exercised after the
expiration of its term. As used herein, "disabled" shall mean that the
Participant is permanently and totally disabled so as to be unable to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or which
has lasted or can be expected to last for a continuous period of not less than
twelve (12) months.
(G) DISPOSITION OF TERMINATED STOCK OPTIONS. Any shares of Common Stock
---------------------------------------
subject to options which have been terminated as provided above shall not
thereafter be eligible for purchase by the Participant but shall again be
available for grant by the Board to other Participants.
8. SPECIAL PROVISIONS RELATING TO INCENTIVE OPTIONS.
------------------------------------------------
The Company shall not grant Incentive Options under the Plan to any
Optionee to the extent that the aggregate Fair Market Value (determined as of
the date of grant) of the Common Stock covered by such Incentive Options which
are exercisable for the first time during any calendar year, when combined with
the aggregate Fair Market Value of all stock covered by Incentive Options
granted to such Optionee after December 31, 1986 by the Company, its Parent or a
Subsidiary thereof which are exercisable for the first time during the same
calendar year, exceeds $100,000. Incentive Options shall be granted only to
persons
-7-
<PAGE>
who, on the date of grant, are Employees of the Company or its Parent or a
Subsidiary of the Company.
9. NO CONTRACT OF EMPLOYMENT.
-------------------------
Unless otherwise expressed in a writing signed by an authorized officer of
the Company, all Employees of the Company are hired for an unspecified period of
time and are considered to be "at-will employees." Nothing in this Plan shall
confer upon any Participant the right to continue in the employ of the Company,
its Parent or any Subsidiary, nor shall it limit or restrict in any way the
right of the Company, its Parent or any such Subsidiary to discharge the
Participant at any time for any reason whatsoever, with or without cause.
10. NO RIGHTS AS A STOCKHOLDER.
---------------------------
A Participant shall have no rights as a stockholder with respect to any
shares of Common Stock subject to an option.
11. NONTRANSFERABILITY OF OPTIONS: DEATH OF PARTICIPANT.
----------------------------------------------------
No Option acquired by a Participant under the Plan shall be assignable or
transferable by a Participant, other than by will or the laws of descent and
distribution, and such options are exercisable, during his lifetime, only by
Optionee; provided, however, that (i) a transfer may be made pursuant to a
qualified domestic relations order (as defined in the Code or as permitted by
Title I of the Employee Retirement Income Security Act ("ERISA") or the rules
thereunder) and (ii) any Option Agreement issued under the Plan may provide for
the designation of a beneficiary of the Optionee (which may be an individual or
trustee) who may exercise the Option after the Optionee's death and enjoy the
economic benefits thereof, subject to the consent of Optionee's spouse where
required by law. Subject to Section 7(e), in the event of optionee's death, the
Option may be exercised by the personal representative of the Participant's
estate or, if no personal representative has been appointed, by the successor(s)
in interest determined under the Participant's will or under the applicable laws
of descent and distribution.
12. LIQUIDATION OR MERGER OF THE COMPANY.
------------------------------------
(A) LIQUIDATION. In the event of a proposed dissolution or liquidation of
-----------
the Company, the Option shall terminate immediately prior to the consummation of
such proposed action, unless otherwise provided by the Board. The Board may, in
the exercise of its sole discretion in such instances, declare that any Option
shall terminate as of a date fixed by the Board and give each Optionee the right
to exercise his Option as to all or any part of the Shares covered by an option,
including Shares as to which the Option would not otherwise be exercisable.
-8-
<PAGE>
(B) SALE OF ASSETS, MERGER OR CONSOLIDATION OR CHANGE OF CONTROL. The
------------------------------------------------------------
Board may provide for immediate vesting of any or all Options, and allow such
Options to be fully exercised without regard to the normal vesting schedule of
such options, in the event of a proposed sale of all or substantially all of the
assets of the Company, or a merger or consolidation of the Company with or into
another corporation, a liquidation, or a "change of control" (as defined below);
provided, however, that if the Board determines that such immediate vesting is
not appropriate, then the Options, if the event is a merger or consolidation,
shall be assumed or an equivalent option shall be substituted by such successor
corporation (or a parent or subsidiary of such successor corporation) as a
condition to the completion of such transaction. Notwithstanding anything
contained herein to the contrary, in the event of a merger, consolidation or a
change of control, in which the Options do not become immediately fully
exercisable, the following shall apply: If within twelve (12) months after such
triggering event, the Optionee is terminated as a result of an actual or
constructive discharge (as defined below) by the Company or the successor
corporation for any reason or no reason (other than for "Cause", as defined
below), such Optionee's Option shall vest immediately and may be fully exercised
without regard to the normal vesting schedule for a period of two (2) years
commencing upon the date of such actual or constructive discharge or for the
balance of the original remaining term of the Option, whichever period is
shorter in duration; provided, however, that if such Option is an Incentive
option, then such option shall only vest to the extent provided in Section 8
hereof and shall only be exercisable for a period of ninety (90) days commencing
with such actual or constructive discharge. For purposes of this Plan, the
Company or its successor shall be deemed to have constructively discharged an
Optionee if such Optionee resigns employment after a reduction in compensation,
a meaningful reduction of employment benefits, a demotion, a material reduction
or change in the duties, responsibilities, titles or status of the Optionee as
an employee with the Company as in effect on the date of the triggering event,
or a material change in the location (for example, more than 35 miles) where
Optionee's employment responsibilities are currently performed. Optionee's
termination of employment as a result of death or disability shall not be deemed
to be an actual or constructive discharge by the Company or its successor. The
term "Cause" shall be limited to the occurrence of any of the following events:
(a) Optionee has misappropriated any funds or property of the Company or its
successor; (b) Optionee has been convicted of a misdemeanor or a felony which
impairs his ability to perform services for the Company or would cause the
Company or its successor adverse publicity; (c) Optionee fails to perform his
normal duties and obligations after a prior written warning by the Company or
its successor; or (d) Optionee has disclosed or personally utilized for his or
others' benefit the Company's or the successor's trade secrets or other
confidential information. The term "Change in Control" shall be deemed to have
occurred if (1) any "person" or
-9-
<PAGE>
"group" (as defined in or as pursuant to section 13(d) and (14)d of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), becomes a
"beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange
Act), directly or indirectly, of securities of the Company representing thirty
(30) percentage or more of the combined voting power of the Common and Preferred
Stock outstanding which votes generally for the election of directors; or (2)
the Company or any of its Subsidiaries sell, in one or more transactions, other
than in the ordinary course of business, assets constituting in the aggregate
all or substantially all of the assets of the Company and its Subsidiaries on a
consolidated basis.
13. AMENDMENTS: DISCONTINUATION OF PLAN.
-----------------------------------
The Board may from time to time alter, amend, suspend or discontinue the
Plan, including, where applicable, any, modifications or amendments as it shall
deem advisable for any reason, including satisfying the requirements of any law
or regulation or any change thereof; provided, however, that no such action
shall adversely affect the rights and obligations with respect to Options at any
time outstanding under the Plan; and provided further, that no such action
shall, without the approval of the stockholders of the Company, (a) materially
increase the maximum number of shares of Common Stock that may be made subject
to Options (unless necessary to effect the adjustments required by Section
6(b)), (b) materially increase the benefits accruing to Participants under the
Plan, or (c) materially lessen the requirements as to eligibility for
participation in the Plan. No such amendment shall materially adversely affect
the rights of any Participant under any option previously granted without such
Participant's prior consent.
14. REGISTRATION OF OPTIONED SHARES.
-------------------------------
The Options shall not be exercisable unless the purchase of such Optioned
Shares is pursuant to an applicable effective registration statement under the
Securities Act of 1933, as amended, or unless, in the opinion of counsel to the
Company, the proposed purchase of such Optioned Shares would be exempt from the
registration requirements of the Securities Act of 1933, as amended.
15. WITHHOLDING TAXES; SATISFIED BY WITHHOLDING OPTIONED SHARES.
-----------------------------------------------------------
(A) GENERAL. The Company, its Parent or any Subsidiary may take such
-------
steps as it may deem necessary or appropriate for the withholding of any taxes
which the Company, its Parent or any Subsidiary is required by law or regulation
of any governmental authority, whether Federal, state or local, domestic or
foreign, to withhold in connection with any Option including, but not limited
to, requiring the Optionee to pay such tax at the time of exercise or the
withholding of issuance of shares of Common Stock to be issued upon the exercise
of any option until the
-10-
<PAGE>
Participant reimburses the Company for the amount the Company is required to
withhold with respect to such taxes, or, at the Company's sole discretion,
cancelling any portion of such issuance of common Stock in any amount sufficient
to reimburse itself for the amount it is required to so withhold.
(B) SATISFYING TAXES BY WITHHOLDING OPTIONED SHARES. Option Agreements
-----------------------------------------------
under the Plan may, at the discretion of the Board, contain a provision to the
effect that all Federal and state taxes required to be withheld or collected
from an Optionee upon exercise of an Option may be satisfied by the withholding
of a sufficient number of exercised option Shares which, valued at Fair Market
Value on the date or exercise, would be equal to the total withholding
obligation of the Optionee for the exercise of such Option; provided, however,
that if the Company is a public reporting corporation, no person who is an
"officer" of the Company as such term is defined in Rule 3b-2 under the
Securities Exchange Act of 1934 may elect to satisfy the withholding of Federal
and state taxes upon the exercise of an option by the withholding of Optioned
Shares unless such election is made either (i) at least six (6) months prior to
the date that the exercise of the Option becomes a taxable event or (ii) during
any of the periods beginning on the third business day following the date on
which the Company issues a news release containing the operating results of a
fiscal quarter or fiscal year and ending on the twelfth business day following
such date. Such election shall be deemed made upon receipt of notice thereof by
an officer of the Company, by mail, personal delivery or by facsimile message,
and shall (unless notice to the contrary is provided to the Company) be
operative for all option exercises which occur during the twelve-month period
following election.
16. EFFECTIVE DATE AND TERM OF PLAN.
-------------------------------
The Plan is effective as of the date of adoption by the Board and Options
may be granted at any time on or after such date; provided, however, that the
Plan shall terminate if the stockholders of the Company do not approve and adopt
it within twelve (12) months of such date. No Options shall be granted
subsequent to ten years after the effective date of the Plan; however, options
outstanding subsequent to ten years after the effective date of the Plan shall
continue to be governed by the
-11-
<PAGE>
provisions of the Plan until exercised or terminated in accordance with the Plan
or the respective Option Agreements.
-12-
<PAGE>
FIRST AMENDMENT
---------------
TO
--
WHITE PINE SOFTWARE, INC.
-------------------------
STOCK OPTION PLAN (1993)
------------------------
WHEREAS, the Board of Directors of White Pine Software, Inc., a Delaware
corporation, (the "Company") adopted the White Pine Software, Inc. Stock Option
Plan (1993) (the "Plan") on February 22, 1994 and the Stockholders of the
Company approved the Plan on March 8, 1994; and
WHEREAS, the Board of Directors of the Company and the Stock Option
Committee of the Company deem it appropriate and in the best interest of the
Company to require an initial period of six (6) months service before an
individual is eligible to be granted stock options under the Plan; and
WHEREAS, the Board of Directors of the Company and the Stock Option
Committee of the Company deem it appropriate and in the best interest of the
Company to require a minimum vesting period of three (3) years, on a monthly
basis, for all stock options granted under the Plan.
NOW, therefore, the Plan is hereby amended as follows:
1. ELIGIBILITY REQUIREMENT. Section 4(a) of the Plan is hereby deleted in its
-----------------------
entirety and is replaced with the following:
4. ELIGIBILITY AND PARTICIPATION.
-----------------------------
(A) ELIGIBILITY. Grants of Options may be made to any Employee or
-----------
Consultant (which may include Officers and/or Directors) of the Company or
of its Parent or Subsidiary, or any independent contractor, vendor,
supplier or any other person providing services to the Company or a Parent
or Subsidiary whose efforts are deemed worthy of encouragement by the
Board; provided, however, that such Optionee shall have maintained
Continuous Status for a period of at least six (6) months immediately prior
to the grant of such Option; and further provided, that an Incentive Option
may only be granted to an Employee.
2. VESTING SCHEDULE. Section 7(a) of the Plan is hereby deleted in its
----------------
entirety and is replaced with the following:
<PAGE>
7. EXERCISE OF STOCK OPTIONS.
-------------------------
(A) TIME OF EXERCISE. Subject to the provisions of the Plan,
----------------
including without limitation Section 7(d) and Section 8, the Board of the
Committee, in its discretion, shall determine the time when an Option, or a
portion of an Option, shall become exercisable, and the time when an
Option, or a portion of an Option, shall expire; provided, however, that
(i) Options shall become exercisable no earlier than at a rate of 1/36th
the total number of optioned stock, on a monthly basis commencing no
earlier than the date on which such Option is authorized to be issued by
the Board of the Committee; (ii) an Incentive Option shall expire, to the
extent not exercised, no later than the tenth (10th) anniversary of the
date on which it was granted; and (iii) any Incentive Option granted to any
person who owns shares possessing more than 10% of the total combined
voting power or value of all classes of stock of the Company or of its
Parent or a Subsidiary shall have a term of not to exceed five (5) years.
Notwithstanding the foregoing, the Board shall have the authority to
provide for Options to become exercisable at such time and at such rate as
they deem appropriate in their sole and absolute discretion. Such time or
times shall be set forth in the Option Agreement evidencing such Option.
3. EFFECTIVE TIME. This First Amendment to White Pine Software, Inc. Stock
--------------
Option Plan (1994) is effective as of the date of adoption by the Board of
Directors of the Company.
<PAGE>
EXHIBIT 10.3
WHITE PINE SOFTWARE, INC.
-------------------------
STOCK OPTION PLAN (1994)
------------------------
1. PURPOSE OF THE PLAN.
--------------------
The White Pine Software, Inc. Stock Option Plan (1994) ("Stock Option Plan
(1994)") is intended to promote the growth of the Company by attracting and
motivating directors, officers, employees, consultants, independent contractors,
vendors, suppliers and other persons whose efforts are deemed worthy of
encouragement through the incentive effects of stock options.
2. DEFINITIONS.
------------
As used herein, the following definitions shall apply:
(a) "BOARD" shall mean the Committee if one has been appointed or, if no
Committee has been appointed, the Board of Directors of the Company.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as amended, the
rules and regulations promulgated thereunder and the interpretations thereof,
all as from time to time in effect.
(c) "COMMITTEE" shall mean the Committee appointed by the Board in
accordance with Section 3(a) below, if one is appointed.
(d) "COMMON STOCK" shall mean the Common Stock of the Company.
(e) "COMPANY" shall mean White Pine Software, Inc., a Delaware
corporation.
(f) "CONSULTANT" shall mean any person who is engaged by the Company or
any Parent or Subsidiary of the Company to render consulting or advisory
services, whether or not compensation is paid to such individual.
(g) "CONTINUOUS STATUS" shall mean the absence of any interruption or
termination of service as an Employee, Consultant or other person providing
services on a regular basis to the Company or its Parent or any Subsidiary.
Continuous Status shall not be considered interrupted in the case of sick leave,
military leave, or any other leave of absence approved by the Board, provided
that either such leave is for a period of not more than ninety (90) days or
reemployment upon the expiration of such leave is provided or guaranteed by
contract or statute.
(h) "DIRECTOR" shall mean any person serving on the Board.
<PAGE>
(i) "EMPLOYEE" shall mean any person, including officers and Directors,
employed by the Company or its Parent or any Subsidiary of the Company.
(j) "FAIR MARKET VALUE" shall mean the average of the closing bid and
asked prices of a share of Common Stock, as reported by The Wall Street Journal
(or, if not reported, as otherwise quoted by the National Association of
Securities Dealers through NASDAQ), on the date of the grant of the Option, or,
if the Common Stock is listed on the NASDAQ National Market System or is listed
on a national stock exchange, the closing price on such System or such exchange
on the date of the grant of the Option, as reported in The Wall Street Journal.
In the event the Common Stock is not traded publicly, the Fair Market Value of a
share of Common Stock on the date of the grant of the Option shall be
determined, in good faith, by the Board or the Committee and such determination
shall be conclusive for all purposes. The Board or Committee shall take into
account such factors affecting value as it, in its sole and absolute discretion,
may deem relevant.
(k) "OFFICER" shall mean any person, which may include Directors, employed
by the Company or its Parent or any Subsidiary of the Company who has been
elected an officer by the respective Board of Directors.
(l) "OPTIONS" shall mean stock options issued pursuant to the Plan.
Options may be either "Incentive Options," which are defined as options intended
--------------------
to meet the requirements of Section 422 of the Code, or "Nonqualified Options,"
-----------------------
which are defined as Options not intended to meet such requirements of the Code.
(m) "OPTION AGREEMENT" shall mean the written agreement setting forth the
terms and conditions of an Option.
(n) "OPTIONED STOCK" shall mean the Common Stock subject to an option.
(o) "OPTIONEE" shall mean a person who receives an option.
(p) "PARENT" shall mean a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(q) "PARTICIPANT" shall mean a person to whom an Option has been granted.
(r) "PLAN" shall mean the White Pine Software, Inc. Stock Option Plan
(1994).
(s) "SHARE" shall mean a share of Common Stock of the Company, as may be
adjusted in accordance with Section 6 below.
-2-
<PAGE>
(t) "SUBSIDIARY" shall mean a "subsidiary corporation" of the Company,
whether now or hereafter existing, as defined in Section 424(f) of the Code.
3. ADMINISTRATION OF THE PLAN.
---------------------------
(a) BY THE BOARD OR BY THE COMMITTEE. The Plan shall be administered by
--------------------------------
the Board or, if appointed by the Board, by a Committee; provided, however, if
the Company shall have registered a class of equity securities pursuant to
Section 12 of the Securities Exchange Act of 1934, then the Plan shall be
administered by the Board or, if appointed, by a Committee of two or more
directors, all of which shall be "disinterested" as defined in Rule 16b-3 under
the Securities Exchange Act of 1934. The Board and the Committee shall have
full authority to administer the Plan, including authority to interpret and
construe any provision of the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary in order to comply with the
requirements of the Plan, or in order that any Option that is intended to be an
Incentive Option will be classified as an incentive stock option under the Code,
or in order to conform to any regulation or to any change in any law or
regulation applicable thereto. The Board may reserve to itself any of the
authority granted to the Committee as set forth herein, and it may perform and
discharge all of the functions and responsibilities of the Committee at any time
that a duly constituted Committee is not appointed and serving.
(b) ACTIONS OF THE BOARD AND THE COMMITTEE. All actions taken and all
---------------------------------------
interpretations and determinations made by the Board or by the Committee in good
faith (including determinations of Fair Market Value) shall be final and binding
upon all Participants, the Company and all other interested persons. No member
of the Board or the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan, and
all members of the Board or the Committee shall, in addition to their rights as
directors, be fully protected by the Company with respect to any such action,
determination or interpretation.
(c) POWERS OF THE BOARD AND THE COMMITTEE. Subject to the provisions of
-------------------------------------
the Plan, the Board and, if appointed, the Committee shall have the authority,
in their discretion:
(i) to determine, upon review of the relevant information, the Fair
Market Value of the Common Stock; (ii) to determine the persons to whom
Options shall be granted, the time or times at which Options shall be
granted, the number of shares to be represented by each Option and the
exercise price per share; (iii) to interpret the Plan; (iv) to prescribe,
amend, and rescind rules and regulations relating to the Plan; (v) to
determine whether an Option
-3-
<PAGE>
granted shall be an Incentive Option or a Nonqualified option and to
determine the terms and provisions of each Option granted (which need not
be identical) and, with the consent of the holder thereof, to modify or
amend each Option, including reductions in the exercise price thereof; (vi)
to accelerate or defer (with the consent of the Optionee) the exercise date
of any Option; (vii) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an Option
previously granted by the Board; and (viii) to make all other
determinations deemed necessary or advisable for the administration of the
Plan.
4. ELIGIBILITY AND PARTICIPATION.
-----------------------------
(a) ELIGIBILITY. Grants of Options may be made to any Employee or
-----------
Consultant (which may include Officers and/or Directors) of the Company or of
its Parent or Subsidiary, or any independent contractor, vendor, supplier or any
other person providing services to the Company or a Parent or Subsidiary whose
efforts are deemed worthy of encouragement by the Board; provided, however, that
such Optionee shall have maintained Continuous Status for a period of at least
six (6) months immediately prior to the grant of such Option; and further
provided, that an Incentive Option may only be granted to an Employee.
(b) PARTICIPATION BY DIRECTOR. Members of the Board who are either
-------------------------
eligible for Options or have been granted Options may vote on any matters
affecting the administration of the Plan or the grant of any Options pursuant to
the Plan, except that no such member shall act upon the granting of an Option to
himself, but any such member may be counted in determining the existence of a
quorum at any meeting of the Board and may be counted as part of an action by
unanimous written consent during or with respect to which action is taken to
grant Options to him.
5. EXERCISE PRICE; CONSIDERATION; AND FORM OF OPTION AGREEMENT.
------------------------------------------------------------
(a) EXERCISE PRICE. The exercise price of any Incentive Option shall be
--------------
not less than one hundred percent (100%) of the Fair Market Value of a share of
Common Stock on the date of the grant of the Option. The exercise price of a
non-qualified Option shall be determined in the sole discretion of the Board and
may be at less than the Fair Market Value on the date of the grant of the
Option. If an Incentive Option is granted to an Optionee who then owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or its Parent or any Subsidiary, then the exercise price of
such Incentive Option shall be at least one hundred ten
-4-
<PAGE>
percent (110%) of the Fair Market Value of the Company's Common Stock on the
date of the grant of such Option.
(b) CONSIDERATION. The exercise price shall be paid in full at the time of
-------------
exercise of the Option, by personal or bank cashier's check or in such other
form of lawful consideration as the Board or the Committee may approve from time
to time, including, without limitation, the transfer of outstanding shares of
Common Stock as provided in Section 7(c) or the Optionee's promissory note in
form satisfactory to the Company and bearing interest at a rate of not less than
6% per annum.
(c) FORM OF OPTION AGREEMENT. Each Option shall be evidenced by an Option
--------------------------
Agreement specifying the number of shares which may be purchased upon exercise
of the Option and containing such terms and provisions as the Board or the
Committee may determine, subject to the provisions of the Plan.
6. SHARES OF COMMON STOCK SUBJECT TO THE PLAN.
------------------------------------------
(a) NUMBER. The aggregate number of shares of Common Stock subject to
------
Options which may be granted under the Plan shall be 1,595,227 subject to
adjustment as hereinbelow provided. To the extent any Option granted under the
Plan shall expire or terminate unexercised or for any reason become
unexercisable, the shares subject to such Option shall thereafter be available
for future grants under the Plan.
(b) CAPITAL CHANGES. Except as hereinafter provided, no adjustment shall
---------------
be made in the number of shares of Common Stock issued to a Participant, or in
any other rights of the Participant upon exercise of an option, by reason of any
dividend, distribution or other right granted to stockholders for which the
record date is prior to the date of exercise of the Participant's Option. In
the event any change is made to the shares of Common Stock (whether by reason of
a merger, consolidation, reorganization, recapitalization, stock dividend, stock
split, combination of shares, exchange of shares, change in corporate structure
or otherwise), appropriate adjustments shall be made in: (i) the number of
shares of Common Stock theretofore made subject to Options, and in the exercise
price of such shares; and (ii) the aggregate number of shares which may be made
subject to Options. If any of the foregoing adjustments shall result in a
fractional share, the fraction shall be disregarded, and the Company shall have
no obligation to make any cash or other payment with respect to such a
fractional share.
7. EXERCISE OF STOCK OPTIONS.
-------------------------
(a) TIME OF EXERCISE. Subject to the provisions of the Plan, including
----------------
without limitation Section 7(d) and Section 8, the Board or the Committee, in
its discretion, shall determine
-5-
<PAGE>
the time when an Option, or a portion of an Option, shall become exercisable,
and the time when an Option, or a portion of an Option, shall expire; provided,
however, that (i) Options shall become exercisable no earlier than at a rate of
1/36th the total number of Optioned Stock, on a monthly basis commencing no
earlier than the date on which such Option is authorized to be issued by the
Board or the Committee; (ii) an Incentive Option shall expire, to the extent not
exercised, no later than the tenth (10th) anniversary of the date on which it
was granted; and (iii) any Incentive Option granted to any person who owns
shares possessing more than 10% of the total combined voting power or value of
all classes of stock of the Company or of its Parent or a Subsidiary shall have
a term of not to exceed five (5) years. Notwithstanding the foregoing, the
Board shall have the authority to provide for Options to become exercisable at
such time and at such rate as they deem appropriate in their sole and absolute
discretion. Such time or times shall be set forth in the Option Agreement
evidencing such Option.
(b) NOTICE OF EXERCISE. An Optionee electing to exercise an Option shall
------------------
give written notice to the Company, as specified by the Option Agreement, of
his/her election to purchase a specified number of shares, such notice shall be
accompanied by the instrument evidencing such option and any other documents
required by the Company, and shall tender the exercise price of the shares
he/she has elected to purchase. If the notice of election to exercise is given
by the executor or administrator of a deceased Participant, or by the person or
persons to whom the Option has been transferred by the participant's will or the
applicable laws of descent and distribution, the Company will be under no
obligation to deliver shares pursuant to such exercise unless and until the
Company is satisfied that the person or persons giving such notice is or are
entitled to exercise the Option.
(c) EXCHANGE OF OUTSTANDING STOCK. The Board, in its sole discretion, may
-----------------------------
permit an Optionee to surrender to the Company shares of Common Stock previously
acquired by the Optionee at least six (6) months prior to such surrender as part
or full payment for the exercise of an Option. Such surrendered shares shall be
valued at their Fair Market Value on the date of exercise of the Option.
(d) TERMINATION OF CONTINUOUS STATUS BEFORE EXERCISE. If a Participant's
------------------------------------------------
Continuous Status with the Company or its Parent or any Subsidiary shall cease
for any reason (other than the Participant's death, retirement or disability as
provided below), any Option then held by the Participant or his/her estate, to
the extent then exercisable, shall remain exercisable after such cessation of
the Continuous Status for a period of thirty (30) days commencing upon the date
of such cessation (or such longer period as the Board may allow, either in the
form of Option
-6-
<PAGE>
Agreement or by Board action). If the Option is not exercised during this
period it shall be deemed to have been forfeited and be of no further force or
effect. Notwithstanding the exercise period hereinabove described, if the
holder of an Option (i) is terminated for "cause" (as hereinafter defined), (ii)
is terminated due to his expropriation of, or after termination is believed to
have wrongfully taken or expropriated, Company property (including trade secrets
or other proprietary rights), the Board shall have the authority, by notice to
the holder of an Option, to immediately terminate such Option, effective on the
date of termination, and such Option shall no longer be exercisable to any
extent whatsoever. As used herein, "cause" shall mean that the holder of an
Option has willfully and intentionally engaged in material misconduct, gross
neglect of duties or grossly negligent failure to act which materially and
adversely affects the business or affairs of the Company, or has committed any
act of fraud or any act not approved by the Board involving any material
conflict of interest or self-dealing adverse to the Company, or has been
convicted of a felony, or has unreasonably failed to comply with any reasonable
direction from the Board or its Chairman with respect to a major policy decision
affecting the Company, issued pursuant to its authority under the By-Laws of the
Company.
(e) DEATH. If a Participant dies at a time when he is entitled to exercise
-----
an Option, then at any time or times within twelve (12) months after his/her
death (or such further period as the Board may allow) such Option may be
exercised, as to all or any of the shares which the Participant was entitled to
purchase immediately prior to his/her death (i) by his/her executor or
administrator or the person(s) to whom the Option is transferred by will or the
applicable laws of descent and distribution or (ii) his designated beneficiary,
and except as so exercised such Option will expire at the end of such period.
In no event, however, may any Option be exercised after the expiration of its
term.
(f) RETIREMENT AND DISABILITY. If a Participant retires from service at
-------------------------
age 65 or older or retires at less than age 65 with the consent of the Board or
becomes "disabled" (as hereinafter defined) at a time when he is entitled to
exercise an Option, then, at any time or times within thirty (30) days of the
date of such retirement or within twelve (12) months of the date of such
disability, he may exercise such Option as to all or any of the shares which he
was entitled to purchase under such Option immediately prior to such retirement
or disability. Except as so exercised, such Option shall expire at the end of
such period. In no event, however, may any Option be exercised after the
expiration of its term. As used herein, "disabled" shall mean that the
Participant is permanently and totally disabled so as to be unable to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which
-7-
<PAGE>
can be expected to result in death or which has lasted or can be expected to
last for a continuous period of not less than twelve (12) months.
(g) DISPOSITION OF TERMINATED STOCK OPTIONS. Any shares of Common Stock
---------------------------------------
subject to Options which have been terminated as provided above shall not
thereafter be eligible for purchase by the Participant but shall again be
available for grant by the Board to other Participants.
8. SPECIAL PROVISIONS RELATING TO INCENTIVE OPTIONS.
------------------------------------------------
The Company shall not grant Incentive Options under the Plan to any
Optionee to the extent that the aggregate Fair Market Value (determined as of
the date of grant) of the Common Stock covered by such Incentive Options which
are exercisable for the first time during any calendar year, when combined with
the aggregate Fair Market Value of all stock covered by Incentive Options
granted to such Optionee after December 31, 1986 by the Company, its Parent or a
Subsidiary thereof which are exercisable for the first time during the same
calendar year, exceeds $100,000. Incentive Options shall be granted only to
persons who, on the date of grant, are Employees of the Company or its Parent or
a Subsidiary of the Company.
9. NO CONTRACT OF EMPLOYMENT.
-------------------------
Unless otherwise expressed in a writing signed by an authorized officer of
the Company, all Employees of the Company are hired for an unspecified period of
time and are considered to be "at-will employees." Nothing in this Plan shall
confer upon any Participant the right to continue in the employ of the Company,
its Parent or any Subsidiary, nor shall it limit or restrict in any way the
right of the Company, its Parent or any such Subsidiary to discharge the
Participant at any time for any reason whatsoever, with or without cause.
10. NO RIGHTS AS A STOCKHOLDER.
---------------------------
A Participant shall have no rights as a stockholder with respect to any
shares of Common Stock subject to an Option.
11. NONTRANSFERABILITY.
------------------
No Option acquired by a Participant under the Plan shall be assignable or
transferable by a Participant, other than by will or the laws of descent and
distribution, and such Options are exercisable, during his lifetime, only by
Optionee; provided, however, that (i) a transfer may be made pursuant to a
qualified domestic relations order (as defined in the Code or as permitted by
Title I of the Employee Retirement Income Security Act ("ERISA") or the rules
thereunder) and (ii) any Option Agreement
-8-
<PAGE>
issued under the Plan may provide for the designation of a beneficiary of the
Optionee (which may be an individual or trustee) who may exercise the option
after the optionee's death and enjoy the economic benefits thereof, subject to
the consent of Optionee's spouse where required by law. Subject to Section
7(e), in the event of Optionee's death, the Option may be exercised by the
personal representative of the Participant's estate or, if no personal
representative has been appointed, by the successor(s) in interest determined
under the Participant's will or under the applicable laws of descent and
distribution.
12. LIQUIDATION OR MERGER OF THE COMPANY.
------------------------------------
(a) LIQUIDATION. In the event of a proposed dissolution or liquidation of
-----------
the Company, the Option shall terminate immediately prior to the consummation of
such proposed action, unless otherwise provided by the Board. The Board may, in
the exercise of its sole discretion in such instances, declare that any Option
shall terminate as of a date fixed by the Board and give each Optionee the right
to exercise his Option as to all or any part of the Shares covered by an Option,
including Shares as to which the Option would not otherwise be exercisable.
(b) SALE OF ASSETS, MERGER OR CONSOLIDATION OR CHANGE OF CONTROL. The
-------------------------------------------------------------
Board may provide for immediate vesting of any or all Options, and allow such
Options to be fully exercised without regard to the normal vesting schedule of
such Options, in the event of a proposed sale of all or substantially all of the
assets of the Company, or a merger or consolidation of the Company with or into
another corporation, a liquidation, or a "change of control" (as defined below);
provided, however, that if the Board determines that such immediate vesting is
not appropriate, then the Options, if the event is a merger or consolidation,
shall be assumed or an equivalent Option shall be substituted by such successor
corporation (or a parent or subsidiary of such successor corporation) as a
condition to the completion of such transaction. Notwithstanding anything
contained herein to the contrary, in the event of a merger, consolidation or a
change of control, in which the Options do not become immediately fully
exercisable, the following shall apply: If within twelve (12) months after such
triggering event, the Optionee is terminated as a result of an actual or
constructive discharge (as defined below) by the Company or the successor
corporation for any reason or no reason (other than for "Cause", as defined
below), such Optionee's option shall vest immediately and may be fully exercised
without regard to the normal vesting schedule for a period of two (2) years
commencing upon the date of such actual or constructive discharge or for the
balance of the original remaining term of the Option, whichever period is
shorter in duration; provided, however, that if such Option is an Incentive
Option, then such Option shall only vest to the extent provided in Section 8
hereof and shall only be exercisable for a period of ninety (90) days commencing
with such actual or
-9-
<PAGE>
constructive discharge. For purposes of this Plan, the Company or its successor
shall be deemed to have constructively discharged an Optionee if such Optionee
resigns employment after a reduction in compensation, a meaningful reduction of
employment benefits, a demotion, a material reduction or change in the duties,
responsibilities, titles or status of the Optionee as an employee with the
Company as in effect on the date of the triggering event, or a material change
in the location (for example, more than 35 miles) where Optionee's employment
responsibilities are currently performed. Optionee's termination of employment
as a result of death or disability shall not be deemed to be an actual or
constructive discharge by the Company or its successor. The term "Cause" shall
be limited to the occurrence of any of the following events: (a) Optionee has
misappropriated any funds or property of the Company or its successor; (b)
Optionee has been convicted of a misdemeanor or a felony which impairs his
ability to perform services for the Company or would cause the Company or its
successor adverse publicity; (c) Optionee fails to perform his normal duties and
obligations after a prior written warning by the Company or its successor; or
(d) Optionee has disclosed or personally utilized for his or others' benefit the
Company's or the successor's trade secrets or other confidential information.
The term "Change in Control" shall be deemed to have occurred if (1) any
"person" or "group" (as defined in or as pursuant to section 13(d) and (14)d of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), becomes a
"beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange
Act), directly or indirectly, of securities of the Company representing thirty
(30) percentage or more of the combined voting power of the Common and Preferred
Stock outstanding which votes generally for the election of directors; or (2)
the Company or any of its Subsidiaries sell, in one or more transactions, other
than in the ordinary course of business, assets constituting in the aggregate
all or substantially all of the assets of the Company and its Subsidiaries on a
consolidated basis.
13. AMENDMENTS; DISCONTINUATION OF PLAN.
-----------------------------------
The Board may from time to time alter, amend, suspend or discontinue the
Plan, including, where applicable, any modifications or amendments as it shall
deem advisable for any reason, including satisfying the requirements of any law
or regulation or any change thereof; provided, however, that no such action
shall adversely affect the rights and obligations with respect to Options at any
time outstanding under the Plan; and provided further, that no such action
shall, without the approval of the stockholders of the Company, (a) materially
increase the maximum number of shares of Common Stock that may be made subject
to Options (unless necessary to effect the adjustments required by Section
6(b)), (b) materially increase the benefits accruing to Participants under the
Plan, or (c) materially lessen the
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<PAGE>
requirements as to eligibility for participation in the Plan. No such amendment
shall materially adversely affect the rights of any Participant under any Option
previously granted without such Participant's prior consent.
14. REGISTRATION OF OPTIONED SHARES.
--------------------------------
The Options shall not be exercisable unless the purchase of such Optioned
Shares is pursuant to an applicable effective registration statement under the
Securities Act of 1933, as amended, or unless, in the opinion of counsel to the
Company, the proposed purchase of such Optioned Shares would be exempt from the
registration requirements of the Securities Act of 1933, as amended.
15. WITHHOLDING TAXES; SATISFIED BY WITHHOLDING OPTIONED SHARES.
-------------------------------------------------------------
(a) GENERAL. The Company, its Parent or any Subsidiary may take such steps
-------
as it may deem necessary or appropriate for the withholding of any taxes which
the Company, its Parent or any Subsidiary is required by law or regulation of
any governmental authority, whether Federal, state or local, domestic or
foreign, to withhold in connection with any Option including, but not limited
to, requiring the Optionee to pay such tax at the time of exercise or the
withholding of issuance of shares of Common Stock to be issued upon the exercise
of any Option until the Participant reimburses the Company for the amount the
Company is required to withhold with respect to such taxes, or, at the Company's
sole discretion, canceling any portion of such issuance of Common Stock in any
amount sufficient to reimburse itself for the amount it is required to so
withhold.
(b) SATISFYING TAXES BY WITHHOLDING OPTIONED SHARES. Option Agreements
-----------------------------------------------
under the Plan may, at the discretion of the Board, contain a provision to the
effect that all Federal and state taxes required to be withheld or collected
from an Optionee upon exercise of an Option may be satisfied by the withholding
of a sufficient number of exercised Option Shares which, valued at Fair Market
Value on the date or exercise, would be equal to the total withholding
obligation of the Optionee for the exercise of such Option; provided, however,
that if the Company is a public reporting corporation, no person who is an
"officer" of the Company as such term is defined in Rule 3b-2 under the
Securities Exchange Act of 1934 may elect to satisfy the withholding of Federal
and state taxes upon the exercise of an option by the withholding of Optioned
Shares unless such election is made either (i) at least six (6) months prior to
the date that the exercise of the Option becomes a taxable event or (ii) during
any of the periods beginning on the third business day following the date on
which the Company issues a news release containing the operating results of a
fiscal quarter or fiscal year and ending
-11-
<PAGE>
on the twelfth business day following such date. Such election shall be deemed
made upon receipt of notice thereof by an officer of the Company, by mail,
personal delivery or by facsimile message, and shall (unless notice to the
contrary is provided to the Company) be operative for all option exercises which
occur during the twelve-month period following election.
16. EFFECTIVE DATE AND TERM OF PLAN.
-------------------------------
The Plan is effective as of the date of adoption by the Board and Options
may be granted at any time on or after such date; provided, however, that the
Plan shall terminate if the stockholders of the Company do not approve and adopt
it within twelve (12) months of such date. No Options shall be granted
subsequent to ten years after the effective date of the Plan; however, Options
outstanding subsequent to ten years after the effective date of the Plan shall
continue to be governed by the provisions of the Plan until exercised or
terminated in accordance with the Plan or the respective Option Agreements.
-12-
<PAGE>
Exhibit 10.4
WHITE PINE SOFTWARE, INC.
-------------------------
STOCK OPTION PLAN (1995)
------------------------
1. PURPOSE OF THE PLAN.
--------------------
The White Pine Software, Inc. Stock Option Plan (1995) ("Stock Option Plan
(1995)") is intended to promote the growth of the Company by attracting and
motivating directors, officers, employees, consultants, independent contractors,
vendors, suppliers and other persons whose efforts are deemed worthy of
encouragement through the incentive effects of stock options.
2. DEFINITIONS.
------------
As used herein, the following definitions shall apply:
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as amended, the
rules and regulations promulgated thereunder and the interpretations thereof,
all as from time to time in effect.
(c) "COMMITTEE" shall mean the Committee appointed by the Board in
accordance with Section 3(a) below, if one is appointed.
(d) "COMMON STOCK" shall mean the Common Stock of the Company.
(e) "COMPANY" shall mean White Pine Software, Inc., a Delaware
corporation.
(f) "CONSULTANT" shall mean any person who is engaged by the Company or
any Parent or Subsidiary of the Company to render consulting or advisory
services, whether or not compensation is paid to such individual.
(g) "CONTINUOUS STATUS" shall mean the absence of any interruption or
termination of service as an Employee, Consultant or other person providing
services on a regular basis to the Company or its Parent or any Subsidiary.
Continuous Status shall not be considered interrupted in the case of sick leave,
military leave, or any other leave of absence approved by the Board, provided
that either such leave is for a period of not more than ninety (90) days or
reemployment upon the expiration of such leave is provided or guaranteed by
contract or statute.
(h) "DIRECTOR" shall mean any person serving on the Board.
<PAGE>
White Pine Software, Inc.
Stock Option Plan (1995)
(i) "EMPLOYEE" shall mean any person, including Officers and Directors,
employed by the Company or its Parent or any Subsidiary of the Company.
(j) "FAIR MARKET VALUE" shall mean the value of a share of Common Stock on
the date of the grant of the Option as determined, in good faith, by the Board
or the Committee and such determination shall be conclusive for all purposes.
The Board or the Committee shall take into account such factors affecting value
as it, in its sole and absolute discretion, may deem relevant.
(k) "OFFICER" shall mean any person, which may include Directors, employed
by the Company or its Parent or any Subsidiary who has been elected an officer
by the respective Board of Directors.
(l) "OPTIONS" shall mean stock options issued pursuant to the Plan.
Options may be either "Incentive Options," which are defined as options intended
-----------------
to meet the requirements of Section 422 of the Code, or "Nonqualified Options,"
--------------------
which are defined as Options not intended to meet such requirements of the Code.
(m) "OPTION AGREEMENT" shall mean the written agreement setting forth the
terms and conditions of an Option.
(n) "OPTIONED STOCK" shall mean the Common Stock subject to an Option.
(o) "PARENT" shall mean a "parent corporation," whether now
or hereafter existing, as defined in Section 424(e) of the Code.
(p) "PARTICIPANT" shall mean a person to whom an Option has been granted.
(q) "PLAN" shall mean the White Pine Software, Inc. Stock Option Plan
(1995).
(r) "SHARE" shall mean a share of Common Stock of the Company, as may be
adjusted in accordance with Section 6 hereof.
(s) "SUBSIDIARY" shall mean a "subsidiary corporation" of the Company,
whether now or hereafter existing, as defined in Section 424(f) of the Code.
2
<PAGE>
White Pine Software, Inc.
Stock Option Plan (1995)
3. ADMINISTRATION OF THE PLAN.
---------------------------
(a) BY THE BOARD OR BY THE COMMITTEE. The Plan shall be administered by
--------------------------------
the Board or, if appointed by the Board, by a Committee; provided, however, if
the Company shall have registered a class of equity securities pursuant to
Section 12 of the Securities Exchange Act of 1934, then the Plan shall be
administered by the Board or, if appointed, by a Committee of two or more
directors, all of which shall be "disinterested" as defined in Rule 16b-3 under
the Securities Exchange Act of 1934. The Board and the Committee shall have
full authority to administer the Plan, including authority to interpret and
construe any provision of the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary in order to comply with the
requirements of the Plan, or in order that any Option that is intended to be an
Incentive Option will be classified as an incentive stock option under the Code,
or in order to conform to any regulation or to any change in any law or
regulation applicable thereto. The Board may reserve to itself any of the
authority granted to the Committee as set forth herein, and it may perform and
discharge all of the functions and responsibilities of the Committee at any time
that a duly constituted Committee is not appointed and serving.
(b) ACTIONS OF THE BOARD AND THE COMMITTEE. All actions taken and all
--------------------------------------
interpretations and determinations made by the Board or by the Committee in good
faith (including determinations of Fair Market Value) shall be final and binding
upon all Participants, the Company and all other interested persons. No member
of the Board or the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan, and
all members of the Board or the Committee shall, in addition to their rights as
Directors, be fully protected by the Company with respect to any such action,
determination or interpretation.
(c) POWERS OF THE BOARD AND THE COMMITTEE. Subject to the provisions of
-------------------------------------
the Plan, the Board and, if appointed, the Committee shall have the authority,
in their sole discretion:
(i) to determine, upon review of the relevant information, the Fair
Market Value of the Common Stock; (ii) to determine the persons to whom
Options shall be granted, the time or times at which Options shall be
granted, the number of shares to be represented by each Option and the
exercise price per share; (iii) to interpret the Plan; (iv) to prescribe,
amend and rescind rules and regulations relating to the Plan; (v) to
determine whether an Option granted shall be an Incentive Option or a
Nonqualified Option and to determine the terms and provisions of each
Option granted (which need not be identical) and, with the consent of the
holder thereof, to modify or amend each Option, including reductions in the
exercise price thereof; (vi) to accelerate or defer
3
<PAGE>
White Pine Software, Inc.
Stock Option Plan (1995)
(with the consent of the Participant) the exercise date of any Option; (vii)
to authorize any person to execute on behalf of the Company any instrument
required to effectuate the grant of an Option previously granted by the
Board or the Committee; and (viii) to make all other determinations deemed
necessary or advisable for the administration of the Plan.
4. ELIGIBILITY AND PARTICIPATION.
-----------------------------
(a) ELIGIBILITY. Grants of Options may be made to any Employee or
-----------
Consultant (which may include Officers and Directors) of the Company or of its
Parent or Subsidiary, or any independent contractor, vendor, supplier or any
other person providing services to the Company or a Parent or Subsidiary whose
efforts are deemed worthy of encouragement by the Board or the Committee;
provided, however, that such Participant shall have maintained Continuous Status
for a period of at least six (6) months immediately prior to the grant of such
Option; and further provided, that an Incentive Option may only be granted to an
Employee.
(b) PARTICIPATION BY DIRECTOR. Members of the Board or the Committee who
-------------------------
are either eligible for Options or have been granted Options may vote on any
matters affecting the administration of the Plan or the grant of any Options
pursuant to the Plan, except that no such member shall act upon the granting of
an Option to himself or herself, but any such member may be counted in
determining the existence of a quorum at any meeting of the Board or the
Committee and may be counted as part of an action by unanimous written consent
during or with respect to which action is taken to grant Options to him or her.
5. EXERCISE PRICE; CONSIDERATION; AND FORM OF OPTION AGREEMENT.
-----------------------------------------------------------
(a) EXERCISE PRICE. The exercise price of any Incentive Option shall be
--------------
not less than one hundred percent (100%) of the Fair Market Value of a Share on
the date of the grant of the Option. The exercise price of a Nonqualified
Option shall be determined in the sole discretion of the Board or the Committee
and may be at less than the Fair Market Value on the date of the grant of the
Option. If an Incentive Option is granted to a Participant who then owns stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or its Parent or any Subsidiary, then the
exercise price of such Incentive Option shall be at least one hundred ten
percent (110%) of the Fair Market Value of a Share on the date of the grant of
such Option.
(b) CONSIDERATION. The exercise price shall be paid in full, at the time
-------------
of exercise of the Option, by personal or bank cashier's check or in such other
form of lawful consideration
4
<PAGE>
White Pine Software, Inc.
Stock Option Plan (1995)
as the Board or the Committee may approve from time to time including, without
limitation, the transfer of outstanding Shares as provided in Section 7(c)
hereof or the Participant's promissory note in form satisfactory to the Company
and bearing interest at a rate of not less than six percent (6%) per annum.
(c) FORM OF OPTION AGREEMENT. Each Option shall be evidenced by an Option
------------------------
Agreement specifying the number of Shares which may be purchased upon exercise
of the Option and containing such terms and provisions as the Board or the
Committee may determine, subject to the provisions of the Plan.
6. SHARES OF COMMON STOCK SUBJECT TO THE PLAN.
------------------------------------------
(a) NUMBER. The aggregate number of Shares of Common Stock subject to
------
Options which may be granted under the Plan shall be One Million, Two Hundred
Thousand (1,200,000), subject to adjustment as hereinbelow provided. To the
extent that any Option granted under the Plan shall expire or terminate
unexercised or for any reason become unexercisable, the Shares subject to such
Option shall thereafter be available for future grants under the Plan.
(b) CAPITAL CHANGES. Except as hereinafter provided, no adjustment shall
---------------
be made in the number of Shares of Common Stock issued to a Participant, or in
any other rights of the Participant upon exercise of an Option, by reason of any
dividend, distribution or other right granted to stockholders for which the
record date is prior to the date of exercise of the Participant's Option. In
the event any change is made to the Shares (whether by reason of a merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
combination of Shares, exchange of Shares, change in corporate structure or
otherwise), appropriate adjustments shall be made in: (i) the number of Shares
theretofore made subject to Options, and in the exercise price of such Shares;
and (ii) the aggregate number of Shares which may be made subject to Options.
If any of the foregoing adjustments shall result in a fractional Share, the
fraction shall be disregarded, and the Company shall have no obligation to make
any cash or other payment with respect to such a fractional Share.
7. EXERCISE OF STOCK OPTIONS.
-------------------------
(a) TIME OF EXERCISE. Subject to the provisions of the Plan, including
----------------
without limitation Section 7(d) and Section 8 hereof, the Board or the
Committee, in its sole discretion, shall determine the time when an Option, or a
portion of an Option, shall become exercisable, and the time when an Option, or
a portion of an Option, shall expire; provided, however, that (i) Options shall
become exercisable no earlier than at a rate of 1/36th the total
5
<PAGE>
White Pine Software, Inc.
Stock Option Plan (1995)
number of Optioned Stock, on a monthly basis commencing no earlier than the date
on which such Option is authorized to be issued by the Board or the Committee;
(ii) an Incentive Option shall expire, to the extent not exercised, no later
than the tenth (10th) anniversary of the date on which it was granted; and (iii)
any Incentive Option granted to any person who owns Shares possessing more than
ten percent (10%) of the total combined voting power or value of all classes of
stock of the Company or of its Parent or a Subsidiary shall have a term not to
exceed five (5) years. Notwithstanding the foregoing, the Board shall have the
authority to provide for Options to become exercisable at such time and at such
rate as they deem appropriate in their sole and absolute discretion. Such time
or times shall be set forth in the Option Agreement evidencing such Option.
(b) NOTICE OF EXERCISE. A Participant electing to exercise an Option
------------------
shall give written notice to the Company, as specified by the Option Agreement,
of his or her election to purchase a specified number of Shares, such notice
shall be accompanied by the instrument evidencing such Option and any other
documents required by the Company, and shall tender the exercise price of the
Shares he or she has elected to purchase. If the notice of election to exercise
is given by the executor or administrator of a deceased Participant, or by the
person or persons to whom the Option has been transferred by the Participant's
will or the applicable laws of descent and distribution, then the Company will
be under no obligation to deliver Shares pursuant to such exercise unless and
until the Company is satisfied that the person or persons giving such notice is
or are entitled to exercise the Option.
(c) EXCHANGE OF OUTSTANDING STOCK. The Board or the Committee, in its
-----------------------------
solE discretion, may permit a Participant to surrender to the Company Shares of
Common Stock previously acquired by the Participant at least six (6) months
prior to such surrender as part or full payment for the exercise of an Option.
Such surrendered shares shall be valued at their Fair Market Value on the date
of exercise of the Option.
(d) TERMINATION OF CONTINUOUS STATUS BEFORE EXERCISE. If a Participant's
------------------------------------------------
Continuous Status with the Company or its Parent or any Subsidiary shall cease
for any reason (other than the Participant's death, retirement or disability as
provided below), any Option then held by the Participant or his or her estate,
to the extent then exercisable, shall remain exercisable after such cessation of
the Continuous Status for a period of thirty (30) days commencing upon the date
of such cessation (or such longer period as the Board or the Committee may
allow, either in the form of Option Agreement or by Board or Committee action).
If the Option is not exercised during this period, then it shall be deemed to
have been forfeited and be of no further force or effect. Notwithstanding the
exercise period hereinabove described, if the holder of an Option (i) is
terminated for "cause" (as hereinafter defined), (ii) is terminated due to his
or her expropriation of, or after termination is believed
6
<PAGE>
White Pine Software, Inc.
Stock Option Plan (1995)
to have wrongfully taken or expropriated, Company property (including trade
secrets or other proprietary rights), the Board or the Committee shall have the
authority, by notice to the holder of an Option, to immediately terminate such
Option, effective on the date of termination, and such Option shall no longer be
exercisable to any extent whatsoever. As used herein, "cause" shall mean that
the holder of an Option has willfully and intentionally engaged in material
misconduct, gross neglect of duties or grossly negligent failure to act which
materially and adversely affects the business or affairs of the Company, or has
committed any act of fraud or any act not approved by the Board involving any
material conflict of interest or self-dealing adverse to the Company, or has
been convicted of a felony, or has unreasonably failed to comply with any
reasonable direction from the Board or its Chairman with respect to a major
policy decision affecting the Company, issued pursuant to its authority under
the By-Laws of the Company.
(e) DEATH. If a Participant dies at a time when he or she is entitled to
-----
exercise an Option, then at any time or times within twelve (12) months after
his or her death (or such further period as the Board may allow) such Option may
be exercised, as to all or any of the shares which the Participant was entitled
to purchase immediately prior to his or her death (i) by his or her executor or
administrator or the person(s) to whom the Option is transferred by will or the
applicable laws of descent and distribution or (ii) his or her designated
beneficiary, and except as so exercised, such Option will expire at the end of
such period. In no event, however, may any Option be exercised after the
expiration of its term.
(f) RETIREMENT AND DISABILITY. If a Participant retires from service at
-------------------------
age 65 or older or retires at less than age 65 with the consent of the Board or
the Committee or becomes "disabled" (as hereinafter defined) at a time when he
is entitled to exercise an Option, then, at any time or times within thirty (30)
days of the date of such retirement or within twelve (12) months of the date of
such disability, he or she may exercise such Option as to all or any of the
shares which he was entitled to purchase under such Option immediately prior to
such retirement or disability. Except as so exercised, such Option shall expire
at the end of such period. In no event, however, may any Option be exercised
after the expiration of its term. As used herein, "disabled" shall mean that
the Participant is permanently and totally disabled so as to be unable to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or which
has lasted or can be expected to last for a continuous period of not less than
twelve (12) months.
(g) DISPOSITION OF TERMINATED STOCK OPTIONS. Any Shares of Common Stock
---------------------------------------
subject to Options which have been terminated as provided above shall not
thereafter be eligible for
7
<PAGE>
White Pine Software, Inc.
Stock Option Plan (1995)
purchase by the Participant but shall again be available for grant by the Board
or the Committee to other Participants.
8. SPECIAL PROVISIONS RELATING TO INCENTIVE OPTIONS.
------------------------------------------------
The Company shall not grant Incentive Options under the Plan to any
Participant to the extent that the aggregate Fair Market Value (determined as of
the date the Option is granted) of the Common Stock covered by such Incentive
Options which are exercisable for the first time during any calendar year, when
combined with the aggregate Fair Market Value of all stock covered by all other
Incentive Options granted to such Participant after December 31, 1986 by the
Company, its Parent or a Subsidiary thereof which are exercisable for the first
time during the same calendar year, exceeds One Hundred Thousand Dollars
($100,000). Incentive Options shall be granted only to persons who, on the date
of grant, are Employees of the Company or its Parent or a Subsidiary.
9. NO CONTRACT OF EMPLOYMENT.
--------------------------
Unless otherwise expressed in a writing signed by an authorized Officer of
the Company, all Employees of the Company are hired for an unspecified period of
time and are considered to be "at-will employees." Nothing in this Plan shall
confer upon any Participant the right to continue in the employ of the Company,
its Parent or any Subsidiary, nor shall it limit or restrict in any way the
right of the Company, its Parent or any such Subsidiary to discharge the
Participant at any time for any reason whatsoever, with or without cause.
10. NO RIGHTS AS A STOCKHOLDER.
---------------------------
A Participant shall have no rights as a stockholder with respect to any
Optioned Stock.
11. NONTRANSFERABILITY OF OPTIONS; DEATH OF PARTICIPANT.
----------------------------------------------------
No Option acquired by a Participant under the Plan shall be assignable or
transferable by a Participant, other than by will or the laws of descent and
distribution, and such Options are exercisable, during his or her lifetime, only
by Participant; provided, however, that (i) a transfer may be made pursuant to a
qualified domestic relations order (as defined in the Code or as permitted by
Title I of the Employee Retirement Income Security Act ("ERISA") or the rules
thereunder) and (ii) any Option Agreement issued under the Plan may provide for
the designation of a beneficiary of the Participant (which may be an individual
or trustee) who may exercise the Option after the Participant's death and enjoy
the economic benefits thereof, subject to the consent of Participant's spouse
where required by law. Subject to Section 7(e),
8
<PAGE>
White Pine Software, Inc.
Stock Option Plan (1995)
in the event of Participant's death, the Option may be exercised by the personal
representative of the Participant's estate or, if no personal representative has
been appointed, by the successor(s) in interest determined under the
Participant's will or under the applicable laws of descent and distribution.
12. LIQUIDATION OR MERGER OF THE COMPANY.
------------------------------------
(a) LIQUIDATION. In the event of a proposed dissolution or liquidation of
-----------
the Company, the Option shall terminate immediately prior to the consummation of
such proposed action, unless otherwise provided by the Board or the Committee.
The Board or the Committee may, in the exercise of its sole discretion in such
instances, declare that any Option shall terminate as of a date fixed by the
Board or the Committee and give each Participant the right to exercise his or
her Option as to all or any part of the Shares covered by an Option, including
Shares as to which the Option would not otherwise be exercisable.
(b) SALE OF ASSETS, MERGER OR CONSOLIDATION OR CHANGE OF CONTROL. The
------------------------------------------------------------
Board or the Committee may provide for immediate vesting of any or all Options,
and allow such Options to be fully exercised without regard to the normal
vesting schedule of such Options, in the event of a proposed sale of all or
substantially all of the assets of the Company, or a merger or consolidation of
the Company with or into another corporation, a liquidation or a "change in
control" (as defined hereinafter); provided, however, that if the Board or the
Committee determines that such immediate vesting is not appropriate, then the
Options, if the event is a merger or consolidation, shall be assumed or an
equivalent option shall be substituted by such successor corporation (or a
parent or subsidiary of such successor corporation) as a condition to the
completion of such transaction. Notwithstanding anything contained herein to
the contrary, in the event of a merger, consolidation or a change of control, in
which the Options do not become immediately fully exercisable, the following
shall apply: If within twelve (12) months after such triggering event, the
Participant is terminated as a result of an actual or constructive discharge (as
defined below) by the Company or the successor corporation for any reason or no
reason (other than for "Cause", as defined below), such Participant's Option
shall vest immediately and may be fully exercised without regard to the normal
vesting schedule for a period of two (2) years commencing upon the date of such
actual or constructive discharge or for the balance of the original remaining
term of the Option, whichever period is shorter in duration; provided, however,
that if such Option is an Incentive Option, then such Option shall only vest to
the extent provided in Section 8 hereof and shall only be exercisable for a
period of ninety (90) days commencing with such actual or constructive
discharge. For purposes of this Plan, the Company or its successor shall be
deemed to have constructively discharged a Participant if such Participant
resigns employment after a reduction in compensation, a meaningful
9
<PAGE>
White Pine Software, Inc.
Stock Option Plan (1995)
reduction of employment benefits, a demotion, a material reduction or change in
the duties, responsibilities, titles or status of the Participant as an employee
with the Company as in effect on the date of the triggering event, or a material
change in the location (for example, more than 35 miles) where Participant's
employment responsibilities are currently performed. Participant's termination
of employment as a result of death or disability shall not be deemed to be an
actual or constructive discharge by the Company or its successor. The term
"Cause" shall be limited to the occurrence of any of the following events: (a)
Participant has misappropriated any funds or property of the Company or its
successor; (b) Participant has been convicted of a misdemeanor or a felony which
impairs his or her ability to perform services for the Company or would cause
the Company or its successor adverse publicity; (c) Participant fails to perform
his or her normal duties and obligations after a prior written warning by the
Company or its successor; or (d) Participant has disclosed or personally
utilized for his or her or others' benefit the Company's or the successor's
trade secrets or other confidential information. The term "change in control"
shall be deemed to have occurred if (1) any "person" or "group" (as defined in
or as pursuant to section 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")), becomes a "beneficial owner" (as defined
in Rule 13d-3 promulgated under the Exchange Act)), directly or indirectly, of
securities of the Company representing thirty percent (30%) or more of the
combined voting power of the Common and preferred Stock outstanding which votes
generally for the election of Directors; or (2) the Company or any of its
Subsidiaries sell, in one or more transactions, other than in the ordinary
course of business, assets constituting in the aggregate all or substantially
all of the assets of the Company and its Subsidiaries on a consolidated basis.
13. AMENDMENTS; DISCONTINUATION OF PLAN.
-----------------------------------
The Board or the Committee may from time to time alter, amend, suspend or
discontinue the Plan, including, where applicable, any modifications or
amendments as it shall deem advisable for any reason, including satisfying the
requirements of any law or regulation or any change thereof; provided, however,
that no such action shall adversely affect the rights and obligations with
respect to Options at any time outstanding under the Plan; and provided further,
that no such action shall, without the approval of the stockholders of the
Company, (a) materially increase the maximum number of Shares of Common Stock
that may be made subject to Options (unless necessary to effect the adjustments
required by Section 6(b) hereof), (b) materially increase the benefits accruing
to Participants under the Plan, or (c) materially lessen the requirements as to
eligibility for participation in the Plan. No such amendment shall materially
adversely affect the rights of any Participant under any Option previously
granted without such Participant's prior consent.
10
<PAGE>
White Pine Software, Inc.
Stock Option Plan (1995)
14. REGISTRATION OF OPTIONED SHARES.
-------------------------------
The Options shall not be exercisable unless the purchase of such Optioned
Shares is pursuant to an applicable effective registration statement under the
Securities Act of 1933, as amended, or unless, in the opinion of counsel to the
Company, the proposed purchase of such Optioned Shares would be exempt from the
registration requirements of the Securities Act of 1933, as amended.
15. WITHHOLDING TAXES; SATISFIED BY WITHHOLDING OPTIONED SHARES.
-----------------------------------------------------------
(a) GENERAL. The Company, its Parent or any Subsidiary may take such
-------
steps as it may deem necessary or appropriate for the withholding of any taxes
which the Company, its Parent or any Subsidiary is required by law or regulation
of any governmental authority, whether federal, state or local, domestic or
foreign, to withhold in connection with any Option including, but not limited
to, requiring the Participant to pay such tax at the time of exercise or the
withholding of issuance of Shares of Common Stock to be issued upon the exercise
of any Option until the Participant reimburses the Company for the amount the
Company is required to withhold with respect to such taxes, or, at the Company's
sole discretion, canceling any portion of such issuance of Common Stock in any
amount sufficient to reimburse itself for the amount it is required to so
withhold.
(b) SATISFYING TAXES BY WITHHOLDING OPTIONED SHARES. Option Agreements
-----------------------------------------------
under the Plan may, at the discretion of the Board or the Committee, contain a
provision to the effect that all federal and state taxes required to be withheld
or collected from a Participant upon exercise of an Option may be satisfied by
the withholding of a sufficient number of exercised Optioned Stock which, valued
at Fair Market Value on the date or exercise, would be equal to the total
withholding obligation of the Participant for the exercise of such Option;
provided, however, that if the Company is a public reporting corporation, no
person who is an "officer" of the Company as such term is defined in Rule 3b-2
under the Securities Exchange Act of 1934 may elect to satisfy the withholding
of federal and state taxes upon the exercise of an option by the withholding of
Optioned Stock unless such election is made either (i) at least six (6) months
prior to the date that the exercise of the Option becomes a taxable event or
(ii) during any of the periods beginning on the third (3rd) business day
following the date on which the Company issues a news release containing the
operating results of a fiscal quarter or fiscal year and ending on the twelfth
(12th) business day following such date. Such election shall be deemed made
upon receipt of notice thereof by an Officer of the Company, by mail, personal
delivery or by facsimile message, and shall (unless notice to the contrary is
provided to the Company) be operative for all Option exercises which occur
during the twelve (12) month period following election.
11
<PAGE>
White Pine Software, Inc.
Stock Option Plan (1995)
16. EFFECTIVE DATE AND TERM OF PLAN.
-------------------------------
The Plan is effective as of the date of adoption by the Board and Options
may be granted at any time on or after such date; provided, however, that the
Plan shall terminate if the stockholders of the Company do not approve and adopt
it within twelve (12) months of such date. No Options shall be granted
subsequent to ten (10) years after the effective date of the Plan; however,
Options outstanding subsequent to ten (10) years after the effective date of the
Plan shall continue to be governed by the provisions of the Plan until exercised
or terminated in accordance with the Plan or the respective Option Agreements.
ADOPTED BY THE BOARD OF DIRECTORS
ON SEPTEMBER 12, 1995
APPROVED BY THE STOCKHOLDERS
ON DECEMBER 15, 1995
Attest:
/s/ Steven Cohen
- ----------------
Secretary
12
<PAGE>
FIRST AMENDMENT TO
------------------
WHITE PINE SOFTWARE, INC.
-------------------------
STOCK OPTION PLAN (1995)
------------------------
WHEREAS, White Pine Software, Inc. (the "Company") adopted the White Pine
Software, Inc. Stock Option Plan (1995) (the "Plan") on or about September 29,
1995; and
WHEREAS, the Board of Directors of the Company (the "Board") desires to
amend the Plan to allow for eligibility of Participants prior to the completion
of six (6) months of Continuous Status on the condition that no vesting of
Options occur prior to such Participants achieving six (6) months of Continuous
Status.
NOW THEREFORE, the Board has adopted the following amendments to the Plan:
1. ELIGIBILITY. Section 4(a) of the Plan is hereby deleted in its
------------
entirety and the following new Section 4(a) is hereby adopted:
(A) ELIGIBILITY. Grants of Options may be mae to any employee or
------------
Consultant (which may include Officers and Directors) of the Company or of
its Parent or Subsidiary, or any independent contractor, vendor, supplier
or any other person providing services to the Company or a Parent or
Subsidiary whose efforts are deemed worthy of encouragement by the Board or
the Committee,provided,however, that either (i) such Participant shall have
maintained Continuous Status for a period of at least six (6) months
immediately prior to the grant of such Optionor (ii) such Option shall not
begin to become exercisable as provided in Section 7(a) hereof until such
Participant shall have maintained Continuous Status for a period of six (6)
months immediately after the grant of such Option; and further provided,
that an Incentive Option may only be granted to an Employee.
2. EXERCISABILITY. Section 7(a) of the Plan is hereby deleted in its
---------------
entirety and the following new Section 7(a) is hereby adopted:
(A) TIME OF EXERCISE. Subject to the provisions of the
-----------------
Plan,including without limitation Section 7(d) and Section 8 hereof, the
Board or the Committee, in its sole discretion, shall determine the time
when an Option, or a portion of an Option, shall become exercisable, and
the time when an Option, or a portion of an Option, shall expire; provided,
however, that (i) Options shall become exercisable no earlier than at a
rate of 1/36th the total number of Optioned Stock, on a monthly basis
commencing no earlier than the date on which such Option is authorized to
be issued by the Board or the Committee; (ii) an Incentive Option shall
expire, to the extent not exercised, no later than the tenth (10th
anniversary of the date on which it was granted; (iii) any
<PAGE>
Incentive Option granted to any person who owns Shares possessing more than
ten percent (10%) of the total combined voting power or value of all
classes of stock of the Company or of its Parent or a Subsidiary shall have
a term not to exceed five (5) years, and (iv) Options granted to a
Participant prior to the Participant maintaining six (6) months Continuous
Status shall not begin to become exercisable pursuant to clause (i) above
until such Participant has maintained Continuous Status for a six (6) month
period. Notwithstanding the foregoing, the Board shall have the authority
to provide for Options to become exercisable at such time and at such rate
as they deem appropriate in their sole and absolute discretion. Such time
or times shall be set forth in the Option Agreement evidencing such Option.
3. AMENDMENT AND EFFECTIVE TIME. This First Amendment to the Plan is
-----------------------------
made pursuant to the provisions for amendment of the Plan as set forth in
Section 13 of the Plan. This First Amendment to the Plan is effective as of the
date of adoption by the Board, provided, however, that this First Amendment to
the Plan shall terminate if the stockholders of the Company do not approve and
adopt it within twelve (12) months of such date.
<PAGE>
Exhibit 10.5
WHITE PINE SOFTWARE, INC.
-------------------------
STOCK OPTION PLAN (1996)
------------------------
1. PURPOSE OF THE PLAN.
-------------------
The White Pine Software, Inc. Stock Option Plan (1996) ("Stock Option Plan
(1996)") is intended to promote the growth of the Company by attracting and
motivating directors, officers, employees, consultants, independent contractors,
vendors, suppliers and other persons whose efforts are deemed worthy of
encouragement through the incentive effects of stock options.
2. DEFINITIONS.
-----------
As used herein, the following definitions shall apply:
(A) "BOARD" shall mean the Board of Directors of the Company.
(B) "CODE" shall mean the Internal Revenue Code of 1986, as amended, the
rules and regulations promulgated thereunder and the interpretations thereof,
all as from time to time in effect.
(C) "COMMITTEE" shall mean the Committee appointed by the Board in
accordance with Section 3(a) below, if one is appointed.
(D) "COMMON STOCK" shall mean the Common Stock of the Company.
(E) "COMPANY" shall mean White Pine Software, Inc., a Delaware
corporation.
(F) "CONSULTANT" shall mean any person who is engaged by the Company or
any Parent or Subsidiary of the Company to render consulting or advisory
services, whether or not compensation is paid to such individual.
(G) "CONTINUOUS STATUS" shall mean the absence of any interruption or
termination of service as an Employee, Consultant or other person providing
services on a regular basis to the Company or its Parent or any Subsidiary.
Continuous Status shall not be considered interrupted in the case of sick leave,
military leave, or any other leave of absence approved by the Board, provided
that either such leave is for a period of not more than ninety (90) days or
reemployment upon the expiration of such leave is provided or guaranteed by
contract or statute.
(H) "DIRECTOR" shall mean any person serving on the Board.
<PAGE>
White Pine Software, Inc.
Stock Option Plan (1996)
(I) "EMPLOYEE" shall mean any person, including Officers and Directors,
employed by the Company or its Parent or any Subsidiary of the Company.
(J) "FAIR MARKET VALUE" shall mean the value of a share of Common Stock on
the date of the grant of the Option as determined, in good faith, by the Board
or the Committee and such determination shall be conclusive for all purposes.
The Board or the Committee shall take into account such factors affecting value
as it, in its sole and absolute discretion, may deem relevant.
(K) "OFFICER" shall mean any person, which may include Directors, employed
by the Company or its Parent or any Subsidiary who has been elected an officer
by the respective Board of Directors.
(L) "OPTIONS" shall mean stock options issued pursuant to the Plan.
Options may be either "Incentive Options," which are defined as options intended
-----------------
to meet the requirements of Section 422 of the Code, or "Nonqualified Options,"
--------------------
which are defined as Options not intended to meet such requirements of the Code.
(M) "OPTION AGREEMENT" shall mean the written agreement setting forth the
terms and conditions of an Option.
(N) "OPTIONED STOCK" shall mean the Common Stock subject to an Option.
(O) "PARENT" shall mean a "parent corporation," whether now
or hereafter existing, as defined in Section 424(e) of the Code.
(P) "PARTICIPANT" shall mean a person to whom an Option has been granted.
(Q) "PLAN" shall mean the White Pine Software, Inc. Stock Option Plan
(1996).
(R) "SHARE" shall mean a share of Common Stock of the Company, as may be
adjusted in accordance with Section 6 hereof.
(S) "SUBSIDIARY" shall mean a "subsidiary corporation" of the Company,
whether now or hereafter existing, as defined in Section 424(f) of the Code.
2
<PAGE>
White Pine Software, Inc.
Stock Option Plan (1996)
3. ADMINISTRATION OF THE PLAN.
--------------------------
(A) BY THE BOARD OR BY THE COMMITTEE. The Plan shall be administered by
--------------------------------
the Board or, if appointed by the Board, by a Committee; provided, however, if
the Company shall have registered a class of equity securities pursuant to
Section 12 of the Securities Exchange Act of 1934, then the Plan shall be
administered by the Board or, if appointed, by a Committee of two or more
directors, all of which shall be "disinterested" as defined in Rule 16b-3 under
the Securities Exchange Act of 1934. The Board and the Committee shall have
full authority to administer the Plan, including authority to interpret and
construe any provision of the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary in order to comply with the
requirements of the Plan, or in order that any Option that is intended to be an
Incentive Option will be classified as an incentive stock option under the Code,
or in order to conform to any regulation or to any change in any law or
regulation applicable thereto. The Board may reserve to itself any of the
authority granted to the Committee as set forth herein, and it may perform and
discharge all of the functions and responsibilities of the Committee at any time
that a duly constituted Committee is not appointed and serving.
(B) ACTIONS OF THE BOARD AND THE COMMITTEE. All actions taken and all
--------------------------------------
interpretations and determinations made by the Board or by the Committee in good
faith (including determinations of Fair Market Value) shall be final and binding
upon all Participants, the Company and all other interested persons. No member
of the Board or the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan, and
all members of the Board or the Committee shall, in addition to their rights as
Directors, be fully protected by the Company with respect to any such action,
determination or interpretation.
(C) POWERS OF THE BOARD AND THE COMMITTEE. Subject to the provisions of
-------------------------------------
the Plan, the Board and, if appointed, the Committee shall have the authority,
in their sole discretion:
(i) to determine, upon review of the relevant information, the Fair
Market Value of the Common Stock; (ii) to determine the persons to whom
Options shall be granted, the time or times at which Options shall be
granted, the number of shares to be represented by each Option and the
exercise price per share; (iii) to interpret the Plan; (iv) to prescribe,
amend and rescind rules and regulations relating to the Plan; (v) to
determine whether an Option granted shall be an Incentive Option or a
Nonqualified Option and to determine the terms and provisions of each
Option granted (which need not be identical) and, with the consent of the
holder thereof, to modify or amend each Option, including reductions in the
exercise price thereof; (vi) to accelerate or defer
3
<PAGE>
White Pine Software, Inc.
Stock Option Plan (1996)
(with the consent of the Participant) the exercise date of any Option;
(vii) to authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option previously granted
by the Board or the Committee; and (viii) to make all other determinations
deemed necessary or advisable for the administration of the Plan.
4. ELIGIBILITY AND PARTICIPATION.
-----------------------------
(A) ELIGIBILITY. Grants of Options may be made to any Employee or
-----------
Consultant (which may include Officers and Directors) of the Company or of its
Parent or Subsidiary, or any independent contractor, vendor, supplier or any
other person providing services to the Company or a Parent or Subsidiary whose
efforts are deemed worthy of encouragement by the Board or the Committee;
provided, however, that either (i) such Participant shall have maintained
Continuous Status for a period of at least six (6) months immediately prior to
the grant of such Option or (ii) such Option shall not begin to become
exercisable as provided in Section 7(a) hereof until such Participant shall have
maintained Continuous Status for a period of six (6) months immediately after
the grant of such Option; and further provided, that an Incentive Option may
only be granted to an Employee.
(B) PARTICIPATION BY DIRECTOR. Members of the Board or the Committee who
-------------------------
are either eligible for Options or have been granted Options may vote on any
matters affecting the administration of the Plan or the grant of any Options
pursuant to the Plan, except that no such member shall act upon the granting of
an Option to himself or herself, but any such member may be counted in
determining the existence of a quorum at any meeting of the Board or the
Committee and may be counted as part of an action by unanimous written consent
during or with respect to which action is taken to grant Options to him or her.
5. EXERCISE PRICE; CONSIDERATION; AND FORM OF OPTION AGREEMENT.
-----------------------------------------------------------
(A) EXERCISE PRICE. The exercise price of any Incentive Option shall be
--------------
not less than one hundred percent (100%) of the Fair Market Value of a Share on
the date of the grant of the Option. The exercise price of a Nonqualified
Option shall be determined in the sole discretion of the Board or the Committee
and may be at less than the Fair Market Value on the date of the grant of the
Option. If an Incentive Option is granted to a Participant who then owns stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or its Parent or any Subsidiary, then the
exercise price of such Incentive Option shall be at least one hundred ten
percent (110%) of the Fair Market Value of a Share on the date of the grant of
such Option.
4
<PAGE>
White Pine Software, Inc.
Stock Option Plan (1996)
(B) CONSIDERATION. The exercise price shall be paid in full, at the time
-------------
of exercise of the Option, by personal or bank cashier's check or in such other
form of lawful consideration as the Board or the Committee may approve from time
to time including, without limitation, the transfer of outstanding Shares as
provided in Section 7(c) hereof or the Participant's promissory note in form
satisfactory to the Company and bearing interest at a rate of not less than six
percent (6%) per annum.
(C) FORM OF OPTION AGREEMENT. Each Option shall be evidenced by an Option
------------------------
Agreement specifying the number of Shares which may be purchased upon exercise
of the Option and containing such terms and provisions as the Board or the
Committee may determine, subject to the provisions of the Plan.
6. SHARES OF COMMON STOCK SUBJECT TO THE PLAN.
------------------------------------------
(A) NUMBER. The aggregate number of Shares of Common Stock subject to
------
Options which may be granted under the Plan shall be Two Hundred Thousand
(200,000), subject to adjustment as hereinbelow provided. To the extent that
any Option granted under the Plan shall expire or terminate unexercised or for
any reason become unexercisable, the Shares subject to such Option shall
thereafter be available for future grants under the Plan.
(B) CAPITAL CHANGES. Except as hereinafter provided, no adjustment shall
---------------
be made in the number of Shares of Common Stock issued to a Participant, or in
any other rights of the Participant upon exercise of an Option, by reason of any
dividend, distribution or other right granted to stockholders for which the
record date is prior to the date of exercise of the Participant's Option. In
the event any change is made to the Shares (whether by reason of a merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
combination of Shares, exchange of Shares, change in corporate structure or
otherwise), appropriate adjustments shall be made in: (i) the number of Shares
theretofore made subject to Options, and in the exercise price of such Shares;
and (ii) the aggregate number of Shares which may be made subject to Options.
If any of the foregoing adjustments shall result in a fractional Share, the
fraction shall be disregarded, and the Company shall have no obligation to make
any cash or other payment with respect to such a fractional Share.
7. EXERCISE OF STOCK OPTIONS.
-------------------------
(A) TIME OF EXERCISE. Subject to the provisions of the Plan, including
----------------
without limitation Section 7(d) and Section 8 hereof, the Board or the
Committee, in its sole discretion, shall determine the time when an Option, or a
portion of an Option, shall become exercisable, and the time when an Option, or
a portion of an Option, shall expire; provided,
5
<PAGE>
White Pine Software, Inc.
Stock Option Plan (1996)
however, that (i) Options shall become exercisable no earlier than at a rate of
1/36th the total number of Optioned Stock, on a monthly basis commencing no
earlier than the date on which such Option is authorized to be issued by the
Board or the Committee; (ii) an Incentive Option shall expire, to the extent not
exercised, no later than the tenth (10th) anniversary of the date on which it
was granted; (iii) any Incentive Option granted to any person who owns Shares
possessing more than ten percent (10%) of the total combined voting power or
value of all classes of stock of the Company or of its Parent or a Subsidiary
shall have a term not to exceed five (5) years, and (iv) Options granted to a
Participant prior to the Participant maintaining six (6) months Continuous
Status shall not begin to become exercisable pursuant to clause (i) above until
such Participant has maintained Continuous Status for a six (6) month period.
Notwithstanding the foregoing, the Board shall have the authority to provide for
Options to become exercisable at such time and at such rate as they deem
appropriate in their sole and absolute discretion. Such time or times shall be
set forth in the Option Agreement evidencing such Option.
(B) NOTICE OF EXERCISE. A Participant electing to exercise an Option
------------------
shall give written notice to the Company, as specified by the Option Agreement,
of his or her election to purchase a specified number of Shares, such notice
shall be accompanied by the instrument evidencing such Option and any other
documents required by the Company, and shall tender the exercise price of the
Shares he or she has elected to purchase. If the notice of election to exercise
is given by the executor or administrator of a deceased Participant, or by the
person or persons to whom the Option has been transferred by the Participant's
will or the applicable laws of descent and distribution, then the Company will
be under no obligation to deliver Shares pursuant to such exercise unless and
until the Company is satisfied that the person or persons giving such notice is
or are entitled to exercise the Option.
(C) EXCHANGE OF OUTSTANDING STOCK. The Board or the Committee, in its
-----------------------------
sole discretion, may permit a Participant to surrender to the Company Shares of
Common Stock previously acquired by the Participant at least six (6) months
prior to such surrender as part or full payment for the exercise of an Option.
Such surrendered shares shall be valued at their Fair Market Value on the date
of exercise of the Option.
(D) TERMINATION OF CONTINUOUS STATUS BEFORE EXERCISE. If a Participant's
------------------------------------------------
Continuous Status with the Company or its Parent or any Subsidiary shall cease
for any reason (other than the Participant's death, retirement or disability as
provided below), any Option then held by the Participant or his or her estate,
to the extent then exercisable, shall remain exercisable after such cessation of
the Continuous Status for a period of thirty (30) days commencing upon the date
of such cessation (or such longer period as the Board or the Committee may
allow, either in the form of Option Agreement or by Board or Committee
6
<PAGE>
White Pine Software, Inc.
Stock Option Plan (1996)
action). If the Option is not exercised during this period, then it shall be
deemed to have been forfeited and be of no further force or effect.
Notwithstanding the exercise period hereinabove described, if the holder of an
Option (i) is terminated for "cause" (as hereinafter defined), (ii) is
terminated due to his or her expropriation of, or after termination is believed
to have wrongfully taken or expropriated, Company property (including trade
secrets or other proprietary rights), the Board or the Committee shall have the
authority, by notice to the holder of an Option, to immediately terminate such
Option, effective on the date of termination, and such Option shall no longer be
exercisable to any extent whatsoever. As used herein, "cause" shall mean that
the holder of an Option has willfully and intentionally engaged in material
misconduct, gross neglect of duties or grossly negligent failure to act which
materially and adversely affects the business or affairs of the Company, or has
committed any act of fraud or any act not approved by the Board involving any
material conflict of interest or self-dealing adverse to the Company, or has
been convicted of a felony, or has unreasonably failed to comply with any
reasonable direction from the Board or its Chairman with respect to a major
policy decision affecting the Company, issued pursuant to its authority under
the By-Laws of the Company.
(E) DEATH. If a Participant dies at a time when he or she is entitled to
-----
exercise an Option, then at any time or times within twelve (12) months after
his or her death (or such further period as the Board may allow) such Option may
be exercised, as to all or any of the shares which the Participant was entitled
to purchase immediately prior to his or her death (i) by his or her executor or
administrator or the person(s) to whom the Option is transferred by will or the
applicable laws of descent and distribution or (ii) his or her designated
beneficiary, and except as so exercised, such Option will expire at the end of
such period. In no event, however, may any Option be exercised after the
expiration of its term.
(F) RETIREMENT AND DISABILITY. If a Participant retires from service at
-------------------------
age 65 or older or retires at less than age 65 with the consent of the Board or
the Committee or becomes "disabled" (as hereinafter defined) at a time when he
is entitled to exercise an Option, then, at any time or times within thirty (30)
days of the date of such retirement or within twelve (12) months of the date of
such disability, he or she may exercise such Option as to all or any of the
shares which he was entitled to purchase under such Option immediately prior to
such retirement or disability. Except as so exercised, such Option shall expire
at the end of such period. In no event, however, may any Option be exercised
after the expiration of its term. As used herein, "disabled" shall mean that
the Participant is permanently and totally disabled so as to be unable to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or which
has lasted or can be expected to last for a continuous period of not less than
twelve (12) months.
7
<PAGE>
White Pine Software, Inc.
Stock Option Plan (1996)
(G) DISPOSITION OF TERMINATED STOCK OPTIONS. Any Shares of Common Stock
---------------------------------------
subject to Options which have been terminated as provided above shall not
thereafter be eligible for purchase by the Participant but shall again be
available for grant by the Board or the Committee to other Participants.
8. SPECIAL PROVISIONS RELATING TO INCENTIVE OPTIONS.
------------------------------------------------
The Company shall not grant Incentive Options under the Plan to any
Participant to the extent that the aggregate Fair Market Value (determined as of
the date the Option is granted) of the Common Stock covered by such Incentive
Options which are exercisable for the first time during any calendar year, when
combined with the aggregate Fair Market Value of all stock covered by all other
Incentive Options granted to such Participant after December 31, 1986 by the
Company, its Parent or a Subsidiary thereof which are exercisable for the first
time during the same calendar year, exceeds One Hundred Thousand Dollars
($100,000). Incentive Options shall be granted only to persons who, on the date
of grant, are Employees of the Company or its Parent or a Subsidiary.
9. NO CONTRACT OF EMPLOYMENT.
-------------------------
Unless otherwise expressed in a writing signed by an authorized Officer of
the Company, all Employees of the Company are hired for an unspecified period of
time and are considered to be "at-will employees." Nothing in this Plan shall
confer upon any Participant the right to continue in the employ of the Company,
its Parent or any Subsidiary, nor shall it limit or restrict in any way the
right of the Company, its Parent or any such Subsidiary to discharge the
Participant at any time for any reason whatsoever, with or without cause.
10. NO RIGHTS AS A STOCKHOLDER.
--------------------------
A Participant shall have no rights as a stockholder with respect to any
Optioned Stock.
11. NONTRANSFERABILITY OF OPTIONS; DEATH OF PARTICIPANT.
---------------------------------------------------
No Option acquired by a Participant under the Plan shall be assignable or
transferable by a Participant, other than by will or the laws of descent and
distribution, and such Options are exercisable, during his or her lifetime, only
by Participant; provided, however, that (i) a transfer may be made pursuant to a
qualified domestic relations order (as defined in the Code or as permitted by
Title I of the Employee Retirement Income Security Act ("ERISA") or the rules
thereunder) and (ii) any Option Agreement issued under the Plan may provide for
the designation of a beneficiary of the Participant (which may be an individual
or trustee) who
8
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White Pine Software, Inc.
Stock Option Plan (1996)
may exercise the Option after the Participant's death and enjoy the economic
benefits thereof, subject to the consent of Participant's spouse where required
by law. Subject to Section 7(e), in the event of Participant's death, the
Option may be exercised by the personal representative of the Participant's
estate or, if no personal representative has been appointed, by the successor(s)
in interest determined under the Participant's will or under the applicable laws
of descent and distribution.
12. LIQUIDATION OR MERGER OF THE COMPANY.
------------------------------------
(A) LIQUIDATION. In the event of a proposed dissolution or liquidation of
-----------
the Company, the Option shall terminate immediately prior to the consummation of
such proposed action, unless otherwise provided by the Board or the Committee.
The Board or the Committee may, in the exercise of its sole discretion in such
instances, declare that any Option shall terminate as of a date fixed by the
Board or the Committee and give each Participant the right to exercise his or
her Option as to all or any part of the Shares covered by an Option, including
Shares as to which the Option would not otherwise be exercisable.
(B) SALE OF ASSETS, MERGER OR CONSOLIDATION OR CHANGE OF CONTROL. The
------------------------------------------------------------
Board or the Committee may provide for immediate vesting of any or all Options,
and allow such Options to be fully exercised without regard to the normal
vesting schedule of such Options, in the event of a proposed sale of all or
substantially all of the assets of the Company, or a merger or consolidation of
the Company with or into another corporation, a liquidation or a "change in
control" (as defined hereinafter); provided, however, that if the Board or the
Committee determines that such immediate vesting is not appropriate, then the
Options, if the event is a merger or consolidation, shall be assumed or an
equivalent option shall be substituted by such successor corporation (or a
parent or subsidiary of such successor corporation) as a condition to the
completion of such transaction. Notwithstanding anything contained herein to
the contrary, in the event of a merger, consolidation or a change of control, in
which the Options do not become immediately fully exercisable, the following
shall apply: If within twelve (12) months after such triggering event, the
Participant is terminated as a result of an actual or constructive discharge (as
defined below) by the Company or the successor corporation for any reason or no
reason (other than for "Cause", as defined below), such Participant's Option
shall vest immediately and may be fully exercised without regard to the normal
vesting schedule for a period of two (2) years commencing upon the date of such
actual or constructive discharge or for the balance of the original remaining
term of the Option, whichever period is shorter in duration; provided, however,
that if such Option is an Incentive Option, then such Option shall only vest to
the extent provided in Section 8 hereof and shall only be exercisable for a
period of ninety (90) days commencing with such actual or constructive
discharge. For purposes of this Plan, the
9
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White Pine Software, Inc.
Stock Option Plan (1996)
Company or its successor shall be deemed to have constructively discharged a
Participant if such Participant resigns employment after a reduction in
compensation, a meaningful reduction of employment benefits, a demotion, a
material reduction or change in the duties, responsibilities, titles or status
of the Participant as an employee with the Company as in effect on the date of
the triggering event, or a material change in the location (for example, more
than 35 miles) where Participant's employment responsibilities are currently
performed. Participant's termination of employment as a result of death or
disability shall not be deemed to be an actual or constructive discharge by the
Company or its successor. The term "Cause" shall be limited to the occurrence
of any of the following events: (a) Participant has misappropriated any funds
or property of the Company or its successor; (b) Participant has been convicted
of a misdemeanor or a felony which impairs his or her ability to perform
services for the Company or would cause the Company or its successor adverse
publicity; (c) Participant fails to perform his or her normal duties and
obligations after a prior written warning by the Company or its successor; or
(d) Participant has disclosed or personally utilized for his or her or others'
benefit the Company's or the successor's trade secrets or other confidential
information. The term "change in control" shall be deemed to have occurred if
(1) any "person" or "group" (as defined in or as pursuant to section 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
becomes a "beneficial owner" (as defined in Rule 13d-3 promulgated under the
Exchange Act)), directly or indirectly, of securities of the Company
representing thirty percent (30%) or more of the combined voting power of the
Common and preferred Stock outstanding which votes generally for the election of
Directors; or (2) the Company or any of its Subsidiaries sell, in one or more
transactions, other than in the ordinary course of business, assets constituting
in the aggregate all or substantially all of the assets of the Company and its
Subsidiaries on a consolidated basis.
13. AMENDMENTS; DISCONTINUATION OF PLAN.
-----------------------------------
The Board or the Committee may from time to time alter, amend, suspend or
discontinue the Plan, including, where applicable, any modifications or
amendments as it shall deem advisable for any reason, including satisfying the
requirements of any law or regulation or any change thereof; provided, however,
that no such action shall adversely affect the rights and obligations with
respect to Options at any time outstanding under the Plan; and provided further,
that no such action shall, without the approval of the stockholders of the
Company, (a) materially increase the maximum number of Shares of Common Stock
that may be made subject to Options (unless necessary to effect the adjustments
required by Section 6(b) hereof), (b) materially increase the benefits accruing
to Participants under the Plan, or (c) materially lessen the requirements as to
eligibility for
10
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White Pine Software, Inc.
Stock Option Plan (1996)
participation in the Plan. No such amendment shall materially adversely affect
the rights of any Participant under any Option previously granted without such
Participant's prior consent.
14. REGISTRATION OF OPTIONED SHARES.
-------------------------------
The Options shall not be exercisable unless the purchase of such Optioned
Shares is pursuant to an applicable effective registration statement under the
Securities Act of 1933, as amended, or unless, in the opinion of counsel to the
Company, the proposed purchase of such Optioned Shares would be exempt from the
registration requirements of the Securities Act of 1933, as amended.
15. WITHHOLDING TAXES; SATISFIED BY WITHHOLDING OPTIONED SHARES.
-----------------------------------------------------------
(A) GENERAL. The Company, its Parent or any Subsidiary may take such
-------
steps as it may deem necessary or appropriate for the withholding of any taxes
which the Company, its Parent or any Subsidiary is required by law or regulation
of any governmental authority, whether federal, state or local, domestic or
foreign, to withhold in connection with any Option including, but not limited
to, requiring the Participant to pay such tax at the time of exercise or the
withholding of issuance of Shares of Common Stock to be issued upon the exercise
of any Option until the Participant reimburses the Company for the amount the
Company is required to withhold with respect to such taxes, or, at the Company's
sole discretion, canceling any portion of such issuance of Common Stock in any
amount sufficient to reimburse itself for the amount it is required to so
withhold.
(B) SATISFYING TAXES BY WITHHOLDING OPTIONED SHARES. Option Agreements
-----------------------------------------------
under the Plan may, at the discretion of the Board or the Committee, contain a
provision to the effect that all federal and state taxes required to be withheld
or collected from a Participant upon exercise of an Option may be satisfied by
the withholding of a sufficient number of exercised Optioned Stock which, valued
at Fair Market Value on the date or exercise, would be equal to the total
withholding obligation of the Participant for the exercise of such Option;
provided, however, that if the Company is a public reporting corporation, no
person who is an "officer" of the Company as such term is defined in Rule 3b-2
under the Securities Exchange Act of 1934 may elect to satisfy the withholding
of federal and state taxes upon the exercise of an option by the withholding of
Optioned Stock unless such election is made either (i) at least six (6) months
prior to the date that the exercise of the Option becomes a taxable event or
(ii) during any of the periods beginning on the third (3rd) business day
following the date on which the Company issues a news release containing the
operating results of a fiscal quarter or fiscal year and ending on the twelfth
(12th) business day following such date. Such election shall be deemed made
upon receipt of notice thereof by
11
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White Pine Software, Inc.
Stock Option Plan (1996)
an Officer of the Company, by mail, personal delivery or by facsimile message,
and shall (unless notice to the contrary is provided to the Company) be
operative for all Option exercises which occur during the twelve (12) month
period following election.
16. EFFECTIVE DATE AND TERM OF PLAN.
-------------------------------
The Plan is effective as of the date of adoption by the Board and Options
may be granted at any time on or after such date; provided, however, that the
Plan shall terminate if the stockholders of the Company do not approve and adopt
it within twelve (12) months of such date. No Options shall be granted
subsequent to ten (10) years after the effective date of the Plan; however,
Options outstanding subsequent to ten (10) years after the effective date of the
Plan shall continue to be governed by the provisions of the Plan until exercised
or terminated in accordance with the Plan or the respective Option Agreements.
12
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White Pine Software, Inc.
Stock Option Plan (1996)
13
<PAGE>
Exhibit 10.6
WHITE PINE SOFTWARE, INC.
1996 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN
SECTION 1. PURPOSE
This 1996 Incentive and Nonqualified Stock Option Plan (the "Plan") is
intended as a performance incentive for officers and employees of White Pine
Software, Inc., a Delaware corporation (the "Company"), or its Subsidiaries (as
hereinafter defined) and for certain other individuals providing services to or
acting as directors of the Company or its Subsidiaries, to enable the persons to
whom options are granted (an "Optionee" or "Optionees") to acquire or increase a
proprietary interest in the Company and its success. The Company intends that
this purpose will be effected by the granting of incentive stock options
("Incentive Options") as defined in Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), and other stock options ("Nonqualified Options")
under the Plan. The term "Subsidiaries" means any corporations in which stock
possessing fifty percent or more of the total combined voting power of all
classes of stock of such corporation or corporations is owned directly or
indirectly by the Company.
SECTION 2. OPTIONS TO BE GRANTED AND ADMINISTRATION
2.1. OPTIONS TO BE GRANTED. Options granted under the Plan may be either
Incentive Options or Nonqualified Options. If an option is intended to be an
Incentive Option, and if for any reason such option (or any portion thereof)
shall not qualify as an Incentive Option, then, to the extent of such
nonqualification, such option (or portion thereof) shall be regarded as a
Nonqualified Option appropriately granted under the Plan provided that such
option (or portion thereof) otherwise meets the Plan's requirements relating to
Nonqualified Options. The Board may, as a condition of grant, require the
Optionee to execute a confidentiality and noncompetition agreement with the
Company.
2.2. ADMINISTRATION.
This Plan shall be administered by the Compensation Committee or any other
committee of the Board of Directors of the Company (the "Board"), consisting of
two or more "Outside Directors" (such committee may hereinafter be referred to
as the "Plan Administrator"). As used herein, the term "Outside Director" means
any director who: (i) is not an employee of the Company or of any "affiliated
group" (as such term is defined in Section 1504(a) of the Code) which includes
the Company (an "Affiliate"); (ii) is not a former employee of the Company or
any Affiliate who is receiving compensation for prior services (other than
benefits under a tax-qualified retirement plan) during the Company's or any
Affiliate's taxable year; (iii) has not been an officer of the Company or any
Affiliate; and (iv) does not receive remuneration from the Company or any
Affiliate, either directly or indirectly, in any capacity other than as a
director.
Except as specifically reserved to the Board under the terms of the Plan,
the Plan Administrator shall have full and final authority to operate, manage
and administer the Plan on behalf of the Company. This authority includes, but
is not limited to: (i) the power to grant options conditionally or
unconditionally; (ii) the power to prescribe the form or forms of the
instruments evidencing options granted under this Plan; (iii) the power to
interpret the Plan; (iv) the power to provide regulations for the operation of
the incentive features of the Plan, and otherwise to prescribe regulations for
interpretation,
<PAGE>
management and administration of the Plan; (v) the power to delegate to other
persons the responsibility for performing ministerial acts in furtherance of the
Plan's purpose; (vi) the power to make, in its sole discretion, changes to any
outstanding option granted under the Plan, including the power to reduce the
exercise price, to accelerate the vesting schedule, or to extend the expiration
date; and (vii) the power to engage the services of persons or organizations in
furtherance of the Plan's purpose, including but not limited to banks, insurance
companies, brokerage firms and consultants.
In addition, as to each option, the Plan Administrator shall have full and
final authority, in its sole discretion: (i) to determine the number of shares
subject to each option; (ii) to determine the time or times at which options
will be granted; (iii) to determine the conditions on which options will be
granted or may be exercised; (iv) to determine the option price for the shares
subject to each option, which price shall be subject to the applicable
requirements, if any, of Section 5.1(c); and (v) to determine the time or times
when each option shall become exercisable and the duration of the exercise
period, which shall not exceed the limitations specified in Section 5.1(a).
No member of the committee serving as Plan Administrator shall be liable
for any action or determination made in good faith with respect to the Plan or
any option granted thereunder.
2.3. APPOINTMENT AND PROCEEDINGS OF COMMITTEE. The Board may, from time
to time, appoint members of the committee serving as Plan Administrator in
substitution for, or in addition to, members previously appointed and may fill
vacancies, however caused, in such committee; provided, however, that each such
appointee will be an Outside Director, as described in Section 2.2. The
committee serving as Plan Administrator shall hold its meetings at such times
and places as it shall deem advisable. A majority of its members shall
constitute a quorum, and all actions of such committee shall require the
affirmative vote of a majority of its members. Any action may be taken by a
written instrument signed by all of the members, and any action so taken shall
be as fully effective as if it had been taken by a vote of a majority of the
members at a meeting duly called and held.
SECTION 3. STOCK
3.1. SHARES SUBJECT TO PLAN. The stock subject to the options granted
under the Plan shall be shares of the Company's authorized but unissued common
stock, par value $.01 per share ("Common Stock"), or shares of the Company's
Common Stock held in treasury. The total number of shares that may be issued
pursuant to options granted under the Plan shall not exceed an aggregate of
550,000 shares of Common Stock, provided that prior to the closing of the
initial public offering of Common Stock, options may be granted under the Plan
to purchase only up to an aggregate of 200,000 shares of Common Stock. Such
numbers of shares shall be subject to adjustment as provided in Section 7.
3.2. LAPSED OR UNEXERCISED OPTIONS. Whenever any outstanding option
under the Plan expires, is canceled or is otherwise terminated (other than by
exercise), the shares of Common Stock allocable to the unexercised portion of
such option shall be restored to the Plan and shall again become available for
the grant of other options under the Plan.
3.3. LIMITATION ON GRANTS. In no event may any Plan participant be
granted options with respect to more than 500,000 shares of Common Stock in any
fiscal year. The number of shares of Common Stock issuable pursuant to an option
granted to a Plan participant in a fiscal year that is subsequently forfeited,
cancelled or otherwise terminated shall continue to count toward the foregoing
limitation in such fiscal year. In addition, if the exercise price of an option
is subsequently reduced, the transaction shall be deemed a cancellation of the
original option and the grant of a new one so that both
-2-
<PAGE>
transactions shall count toward the maximum shares issuable in the fiscal year
of each respective transaction.
SECTION 4. ELIGIBILITY
4.1. ELIGIBLE OPTIONEES. Incentive Options may be granted only to
officers and other employees of the Company or its Subsidiaries, including
members of the Board who are also employees of the Company or a Subsidiary.
Nonqualified Options may be granted to officers or other employees of the
Company or its Subsidiaries, to members of the Board or the board of directors
of any Subsidiary whether or not employees of the Company or such Subsidiary,
and to consultants and other individuals providing services to the Company or
its Subsidiaries.
4.2. LIMITATIONS ON TEN PERCENT STOCKHOLDERS. No Incentive Option shall
be granted to an individual who, at the time the Incentive Option is granted,
owns (including ownership attributed pursuant to Section 424(d) of the Code)
more than ten percent of the total combined voting power of all classes of stock
of the Company or any parent or Subsidiary of the Company (a "greater-than-10%
stockholder"), unless such Incentive Option provides that (i) the purchase price
per share shall not be less than 110% of the fair market value of the Common
Stock at the time such Incentive Option is granted, and (ii) that such Incentive
Option shall not be exercisable to any extent after the expiration of five years
from the date on which it is granted.
4.3. LIMITATION ON EXERCISABLE OPTIONS. The aggregate fair market value
(determined at the time the Incentive Option is granted) of the Common Stock
with respect to which Incentive Options are exercisable for the first time by
any person during any calendar year under the Plan and under any other option
plan of the Company (or a parent or subsidiary as defined in Section 424 of the
Code) shall not exceed $100,000. Any option granted in excess of the foregoing
limitation shall be specifically designated as being a Nonqualified Option.
SECTION 5. TERMS OF THE OPTION AGREEMENTS
5.1. MANDATORY TERMS. Each option agreement shall contain such
provisions as the Plan Administrator shall from time to time deem appropriate.
Option agreements need not be identical, but each option agreement by
appropriate language shall include the substance of all of the following
provisions:
(a) EXPIRATION. Notwithstanding any other provision of the Plan or
of any option agreement, each option shall expire on the date specified in
the option agreement, which date shall not be later than the tenth
anniversary of the date on which the option was granted (fifth anniversary
in the case of an Incentive Option granted to a greater-than-10%
stockholder).
(b) EXERCISE. Each option shall be exercisable in full or in
installments (which need not be equal) and at such times as designated by
the Plan Administrator. To the extent not exercised, installments shall
accumulate and be exercisable, in whole or in part, at any time after
becoming exercisable, but not later than the date the option expires.
(c) PURCHASE PRICE. The purchase price per share of the Common
Stock under each Incentive Option shall be not less than the fair market
value of the Common Stock on the date the option is granted (110% of the
fair market value in the case of a greater-than-10% stockholder). The price
at which shares may be purchased pursuant to
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<PAGE>
Nonqualified Options shall be specified by the Plan Administrator at the
time the option is granted, and may be equal to or greater than the fair
market value of the shares of Common Stock on the date such Nonqualified
Option is granted, but shall not be less than the par value of shares of
Common Stock. For the purpose of the Plan, the fair market value of the
Common Stock shall be the closing price per share on the date of grant of
the option as reported by a nationally recognized stock exchange, or, if the
Common Stock is not listed on such an exchange, as reported by the Nasdaq
Stock Market, Inc. ("Nasdaq"), or, if the Common Stock is not quoted on
Nasdaq, the fair market value as determined by the Plan Administrator.
(d) TRANSFERABILITY OF OPTIONS. Options granted under the Plan and
the rights and privileges conferred thereby may not be transferred,
assigned, pledged or hypothecated in any manner (whether by operation of law
or otherwise) other than by will or by applicable laws of descent and
distribution, and shall not be subject to execution, attachment or similar
process. Upon any attempt so to transfer, assign, pledge, hypothecate or
otherwise dispose of any option under the Plan or any right or privilege
conferred hereby, contrary to the provisions of the Plan, or upon the sale
or levy or any attachment or similar process upon the rights and privileges
conferred hereby, such option shall thereupon terminate and become null and
void.
(e) TERMINATION OF EMPLOYMENT OR DISABILITY OR DEATH OF OPTIONEE.
Except as may be otherwise expressly provided in the terms and conditions of
the option granted to an Optionee:
(i) Options granted hereunder shall terminate on the earliest
to occur of:
(A) the date of expiration thereof;
(B) thirty days after the date of termination
of the Optionee's employment with or
performance of services for the Company
(other than as a result of death or
permanent and total disability of the
Optionee), including upon the Optionee's
retirement; or
(C) twelve months after the date of
termination of the Optionee's employment
with or performance of services for the
Company as a result of the death or
permanent and total disability of an
Optionee under the then established rules
of the Company.
(ii) In the event of the termination of an Optionee's
employment with or performance of services for the Company by the
Company (other than as a result of death or permanent and total
disability of the Optionee) or upon the Optionee's retirement, the
Optionee's option shall be exercisable during the thirty-day post-
termination period described in Section 5.1(e)(i)(B) to the extent that
it was exercisable at the time of such termination of employment or
performance of services. In the event of the
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<PAGE>
termination of the Optionee's employment with or performance
of services for the Company as a result of the permanent and
total disability of an Optionee, the Optionee's option shall
be exercisable during the twelve-month post-termination
period referred to in Section 5.1(e)(i)(C) to the extent that
it was exercisable at the time of such termination of
employment or performance of services. In the event of the
termination of the Optionee's employment with or performance
of services for the Company as a result of the death of the
Optionee, the Optionee's executor, administrator or any
person or persons to whom his option may be transferred by
will or by laws of descent and distribution shall have the
right at any time during the twelve-month post-termination
period referred to in Section 5.1(e)(i)(C) to exercise such
option, to the extent the Optionee was entitled to exercise
such option at the time of such termination of employment or
performance of services. Should such termination for reason
of permanent disability or death occur after the first
anniversary of the date at which the Optionee was first
employed or otherwise began to serve the Company, then at the
Board's discretion, the Option may be exercised for up to the
greater of (A) fifty percent of all Option shares (and such
shares shall be deemed vested) or (B) the number of shares
that had vested as of the date of such death or such
retirement. After the death of the Optionee, his executors,
administrators or any person or persons to whom his Option
may be transferred by will or by the laws of descent and
distribution, shall have the right to exercise the Option.
(iii) An employment or consulting relationship
between the Company and the Optionee shall be deemed to exist
during any period in which the Optionee is employed in any
capacity by the Company or by any Subsidiary or providing
services to the Company, as the case may be. Whether
authorized leave of absence or absence on military or
government service shall constitute termination of the
employment relationship between the Company and the Optionee
shall be determined by the Plan Administrator at the time
thereof.
(f) RIGHTS OF OPTIONEES. No Optionee shall be deemed for any
purpose to be the owner of any shares of Common Stock subject to any
option unless and until (i) the option shall have been exercised with
respect to such shares pursuant to the terms thereof, and (ii) the
Company shall have issued and delivered a certificate representing such
shares. Thereupon, the Optionee shall have full voting, dividend and
other ownership rights with respect to such shares of Common Stock.
5.2. CERTAIN OPTIONAL TERMS. The Plan Administrator may in its discretion
provide, upon the grant of any option hereunder, that the Company shall have an
option to repurchase all or any number of shares purchased upon exercise of such
option. The repurchase price per share payable by the Company shall be such
amount or be determined by such formula as is fixed by the Plan Administrator at
the time the option for the shares subject to repurchase was granted. The Plan
Administrator may also provide that the Company shall have a right of first
refusal with respect to the transfer or proposed transfer of any shares
purchased upon exercise of an option granted hereunder. In the event the Plan
Administrator shall grant options subject to the Company's repurchase rights or
rights of first refusal, the certificate or certificates representing the shares
purchased pursuant to the exercise of such option shall carry a legend
satisfactory to counsel for the Company referring to such rights.
-5-
<PAGE>
SECTION 6. METHOD OF EXERCISE; PAYMENT OF PURCHASE PRICE
6.1. NOTICE OF EXERCISE. Any option granted under the Plan may be
exercised by the Optionee by delivering to the Company on any business day a
written notice specifying the number of shares of Common Stock the Optionee then
desires to purchase and specifying the address to which the certificates for
such shares are to be mailed, accompanied by payment for such shares.
6.2. MEANS OF PAYMENT AND DELIVERY. Common Stock purchased on exercise
of an option must be paid for as follows: (a) in cash or by check (acceptable to
the Company in accordance with guidelines established for this purpose), bank
draft or money order payable to the order of the Company, (b) if so permitted by
the instrument evidencing the option (or in the case of a Nonqualified Option,
by the Plan Administrator on or after grant of the option), through the delivery
of shares of Common Stock (which in the case of shares acquired from the Company
upon exercise of an option, have been outstanding for at least six months)
having a fair market value on the last business day preceding the date of
exercise equal to the purchase price, (c) by delivery of an unconditional and
irrevocable undertaking by a broker to deliver promptly to the Company
sufficient funds to pay the exercise price, (d) if so permitted by the
instrument evidencing the option (or in the case of a Nonqualified Option, by
the Plan Administrator on or after grant of the option), by delivery of a
promissory note of the Optionee to the Company, payable on such terms as are
specified by the Plan Administrator, or (e) by any combination of the
permissible forms of payment; provided that if the Common Stock delivered upon
exercise of the option is an original issue of authorized Common Stock, at least
so much of the exercise price as represents the par value of such Common Stock
must be paid other than by the Optionee's promissory note or personal check. In
the event that payment of the option price is made as contemplated by (b) above,
the Plan Administrator may provide that the Optionee be granted an additional
option covering the numbers of shares surrendered, at an exercise price equal to
the fair market value of a share of Common Stock on the date of surrender. For
the purpose of this Section, the fair market value of the shares of Common Stock
so delivered to the Company shall be determined in the manner specified in
Section 5.1(c). As promptly as practicable after receipt of such written
notification and payment, the Company shall deliver to the Optionee certificates
for the number of shares with respect to which such Option has been so
exercised, issued in the Optionee's name; provided, however, that such delivery
shall be deemed effected for all purposes when the Company or a stock transfer
agent of the Company shall have deposited such certificates in the United States
mail, addressed to the Optionee, at the address specified pursuant to Section
6.1.
SECTION 7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
7.1 NO EFFECT OF OPTIONS UPON CERTAIN CORPORATE TRANSACTIONS. The
existence of outstanding options shall not affect in any way the right or power
of the Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or any
issue of Common Stock, or any issue of bonds, debentures, preferred or prior
preference stock ahead of or affecting the Common Stock or the rights thereof,
or the dissolution or liquidation of the Company, or any sale or transfer of all
or any part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
7.2 STOCK DIVIDENDS, RECAPITALIZATIONS, ETC. If at any time after the
effective date of the Plan the Company shall effect a subdivision or
consolidation of shares or other capital readjustment, the payment of a stock
dividend, or other increase or reduction of the number of shares of the Common
Stock outstanding, without receiving compensation therefor in money, services or
property, then: (i) the number, class and per share price of shares of stock
subject to outstanding options hereunder shall be
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appropriately adjusted in such a manner as to entitle an Optionee to receive
upon exercise of an option, for the same aggregate cash consideration, the same
total number and class of shares that the owner of an equal number of
outstanding shares of Common Stock would own as a result of the event requiring
the adjustment; and (ii) the number and class of shares with respect to which
options may be granted under the Plan shall be adjusted by substituting for the
total number of shares of Common Stock then reserved for issuance under the Plan
that number and class of shares of stock that the owner of an equal number of
outstanding shares of Common Stock would own as the result of the event
requiring the adjustment.
7.3 DETERMINATION OF ADJUSTMENTS. Adjustments under this Section 7
shall be determined by the Plan Administrator and such determinations shall be
conclusive. The Plan Administrator shall have the discretion and power in any
such event to determine and to make effective provision for acceleration of the
time or times at which any option or portion thereof shall become exercisable.
No fractional shares of Common Stock shall be issued under the Plan on account
of any adjustment specified above.
7.4 NO ADJUSTMENT IN CERTAIN CASES. Except as hereinbefore expressly
provided, the issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property
or for labor or services, either upon direct sale or upon the exercise of rights
or warrants to subscribe therefor, or upon conversion of shares or obligations
of the Company convertible into such shares or other securities, shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock then subject to outstanding options.
SECTION 8. EFFECT OF CERTAIN TRANSACTIONS
If the Company is a party to a reorganization or merger with one or more
other corporations, whether or not the Company is the surviving or resulting
corporation, or if the Company consolidates with or into one or more other
corporations, or if the Company is liquidated or sells or otherwise disposes of
substantially all of its assets to another corporation (each hereinafter
referred to as a "Transaction"), in any such event while unexercised options
remain outstanding under the Plan, then: (i) subject to the provisions of clause
(iii) below, after the effective date of such Transaction unexercised options
shall remain outstanding and shall be exercisable in shares of Common Stock, or,
if applicable, shares of such stock or other securities, cash or property as the
holders of shares of Common Stock received pursuant to the terms of such
Transaction; (ii) the Plan Administrator may accelerate the time for exercise of
all unexercised and unexpired options to and after a date prior to the effective
date of such Transaction; or (iii) any outstanding options may be cancelled by
the Plan Administrator as of the effective date of such Transaction, provided
that: (x) notice of such cancellation shall be given to each holder of an
option; (y) the Plan Administrator shall have accelerated the time for exercise
of all unexercised and unexpired options that it proposes to cancel; and (z)
each holder of an option shall have the right to exercise such option in full.
SECTION 9. AMENDMENT OR TERMINATION OF THE PLAN
The Board may terminate the Plan at any time, and may amend the Plan at any
time and from time to time, subject to the limitation that, except as provided
in Sections 7 and 8, no amendment shall be effective unless approved by the
stockholders of the Company in accordance with applicable law and regulations,
at an annual or special meeting held within twelve months before or after the
date of adoption of such amendment, in any instance in which such amendment
would: (i) increase the number of shares of Common Stock as to which options
may be granted under the Plan; or (ii) change in substance the provisions of
Section 4 relating to eligibility to participate in the Plan.
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Except as provided in Sections 7 and 8, rights and obligations under any
option granted before termination or amendment of the Plan shall not be altered
or impaired by such termination or amendment except with the consent of the
Optionee.
SECTION 10. NON-EXCLUSIVITY OF THE PLAN; NON-UNIFORM DETERMINATIONS
Neither the adoption of the Plan by the Board nor the approval of the Plan
by the stockholders of the Company shall be construed as creating any
limitations on the power of the Board to adopt such other incentive arrangements
as it may deem desirable, including without limitation the granting of stock
options otherwise than under the Plan, and such arrangements may be either
applicable generally or only in specific cases.
The Plan Administrator's determinations under the Plan need not be uniform
and may be made by it selectively among persons who receive or are eligible to
receive options under the Plan (whether or not such persons are similarly
situated). Without limiting the generality of the foregoing, the Plan
Administrator shall be entitled, among other things, to make non-uniform and
selective determinations, and to enter into non-uniform and selective option
agreements, as to (i) the persons to receive options under the Plan, (ii) the
terms and provisions of options, (iii) the exercise by the Plan Administrator of
its discretion in respect of the exercise of options pursuant to the terms of
the Plan, and (iv) the treatment of leaves of absence pursuant to Section
5.1(e).
SECTION 11. GOVERNMENT AND OTHER REGULATIONS; GOVERNING LAW; WITHHOLDING TAXES
The obligation of the Company to sell and deliver shares of Common Stock
with respect to options granted under the Plan shall be subject to all
applicable laws, rules and regulations, including all applicable federal and
state securities laws, and the obtaining of all such approvals by government
agencies as may be deemed necessary or appropriate by the Plan Administrator.
All shares sold under the Plan shall bear appropriate legends. The Company may,
but shall in no event be obligated to, register or qualify any shares covered by
options under applicable federal and state securities laws; and in the event
that any shares are so registered or qualified the Company may remove any legend
on certificates representing such shares. The Company shall not be obligated to
take any other affirmative action in order to cause the exercise of an option or
the issuance of shares pursuant thereto to comply with any law or regulation of
any governmental authority. The Plan shall be governed by and construed in
accordance with the laws of the State of New Hampshire.
Whenever under the Plan shares are to be delivered upon exercise of an
option, the Company shall be entitled to require as a condition of delivery that
the Optionee remit an amount sufficient to satisfy all federal, state and other
governmental withholding tax requirements related thereto. An employee may elect
to have such tax withholding obligation satisfied, in whole or in part, by: (i)
authorizing the Company to withhold from shares of Common Stock to be issued
pursuant to the exercise of a Nonqualified Option a number of shares with an
aggregate fair market value (as defined in Section 5.1(c) determined as of the
date the withholding is effected) that would satisfy the withholding amount due
with respect to such exercise; or (ii) transferring to the Company shares of
Common Stock owned by the employee with an aggregate fair market value (as
defined in Section 5.1(c) determined as of the date the withholding is effected)
that would satisfy the withholding amount due.
SECTION 12. "LOCKUP" AGREEMENT
The Plan Administrator may in its discretion specify upon granting an
option that the Optionee shall agree, for a period of time (not to exceed 180
days) from the effective date of any registration of
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securities of the Company, upon request of the Company or the underwriter or
underwriters managing any underwritten offering of the Company's securities, not
to sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any shares issued pursuant to the exercise of such option,
without the prior written consent of the Company or such underwriter or
underwriters, as the case may be.
SECTION 13. EFFECTIVE DATE AND DURATION OF PLAN
The Plan shall become effective upon the closing of the Company's initial
public offering of shares of Common Stock provided that the stockholders of the
Company shall have approved the Plan within twelve months prior to or following
the adoption of the Plan by the Board. No option may be granted under the Plan
after the tenth anniversary of the effective date. The Plan shall terminate (i)
when the total amount of the Stock with respect to which options may be granted
shall have been issued upon the exercise of options or (ii) by action of the
Board pursuant to Section 9, whichever shall first occur.
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Exhibit 10.7
WHITE PINE SOFTWARE, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
SECTION 1. PURPOSE AND EFFECTIVE DATE
This White Pine Software, Inc. 1996 Employee Stock Purchase Plan (the
"Plan") is intended to provide a method whereby employees of White Pine
Software, Inc. (the "Company") will have an opportunity to acquire ownership
interests (or increase their existing ownership interests) in the Company
through the purchase of shares of common stock, $.01 par value, of the Company
("Common Stock"). It is the intention of the Company that the Plan qualify as an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code of
1986, as amended (the "Code"), and the provisions of the Plan shall be construed
so as to extend and limit participation in a manner consistent with the
requirements of Section 423 of the Code. The Plan shall become effective upon
the closing of the Company's initial public offering of shares of Common Stock.
SECTION 2. DEFINITIONS
As used herein, the following terms shall have the indicated meanings:
(a) "Board" means the Board of Directors of the Company.
(b) "Committee" means the Compensation Committee of the Board.
(c) "Company" means White Pine Software, Inc., as well as any
Subsidiary designated as a participant in the Plan by the
Board, unless the context otherwise requires.
(d) "Compensation" means, for the purpose of any Offering pursuant
to the Plan, base pay in effect as of the Offering Commencement
Date, provided that "Compensation" shall not include any
deferred compensation other than contributions by an individual
through a salary reduction agreement to a cash or deferred plan
pursuant to Section 401(k) of the Code or to a cafeteria plan
pursuant to Section 125 of the Code.
(e) "Employee" means any person who is customarily employed by the
Company for more than twenty hours per week and more than five
months in any calendar year.
(f) "Offering," "Offering Commencement Date" and "Offering
Termination Date" have the respective meanings set forth in
Section 4.
(g) "Subsidiary" means any present or future corporation that is or
would constitute a "subsidiary corporation" of White Pine
Software, Inc., as that term is defined in Section 424(f) of
the Code.
<PAGE>
SECTION 3. ELIGIBILITY
(a) Participation in the Plan is completely voluntary. Participation in
any one or more of the Offerings under the Plan shall neither limit nor require
participation in any other Offering.
(b) Each employee of the Company shall be eligible to participate in the
Plan on the first Offering Commencement Date, as hereinafter defined, following
the completion of six months of continuous service with the Company.
Notwithstanding the foregoing, no employee shall be granted an option under the
Plan:
(i) if, immediately after the grant, such employee would own
stock, and/or hold outstanding options to purchase stock, possessing three
percent or more of the total combined voting power or value of all classes
of stock of the Company or any Subsidiary (it being understood that, for
purposes of this Section, the rules of Section 424(d) of the Code shall
apply in determining the stock ownership of any employee);
(ii) that permits his rights to purchase stock under all Section
423 employee stock purchase plans of the Company and its Subsidiaries to
exceed $25,000 of the fair market value of the stock (determined at the
time such option is granted) for each calendar year in which such option is
outstanding (it being understood that, for purposes of this Section, the
rules of Section 423(b)(8) of the Code shall apply; or
(iii) if such employee is an officer of the Company, but only if
such employee is a "highly compensated employee" within the meaning of
Section 414(q) of the Code.
SECTION 4. OFFERING DATES
The right to purchase stock hereunder shall be made available by a series
of six-month offerings (each an "Offering" and collectively "Offerings") to
employees eligible in accordance with Section 3. The Committee will, in its
discretion, determine the applicable date of commencement ("Offering
Commencement Date") and termination date ("Offering Termination Date") for each
Offering. Participation in any one or more of the Offerings shall neither limit
nor require participation in any other Offering.
SECTION 5. PARTICIPATION
Any eligible employee may become a participant in one or more Offerings by
completing a payroll deduction authorization form provided by the Company and
filing it with the Treasurer of the Company twenty days prior to each applicable
Offering Commencement Date, as determined by the Committee pursuant to Section
4.
SECTION 6. PAYROLL DEDUCTIONS
(a) At the time a participant files a payroll deduction authorization
form with respect to an Offering, the participant shall elect to have deductions
made from the participant's pay on each payday during the Offering in which he
or she is a participant, at a specified percentage of the participant's
Compensation as determined on the applicable Offering Commencement Date. The
specified percentage shall be in increments of one percent up to a maximum
percentage of six percent.
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(b) Payroll deductions for a participant shall commence on the Offering
Commencement Date when the applicable authorization for a payroll deduction
becomes effective and shall end on the Offering Termination Date of the Offering
to which such authorization is applicable, unless sooner terminated by the
participant as provided in Section 9.
(c) All payroll deductions made for a participant shall be credited to
the participant's account under the Plan. A participant may not make any
separate cash payment into such account.
SECTION 7. GRANTING OF OPTION
(a) On the Offering Commencement Date of each Offering, a participating
employee shall be deemed to have been granted an option to purchase a maximum
number of shares of the Common Stock determined as follows: (i) 85% of the
market value per share of the Common Stock (determined as provided in Section
7(b)(i)) on the applicable Offering Commencement Date shall be divided into the
percentage of the employee's Compensation which the employee has elected to have
withheld (multiplied by the employee's Compensation over the Offering Period),
multiplied by (ii) two.
(b) The option price of the Common Stock purchased with payroll
deductions made during each such Offering for a participant therein shall be the
lower of:
(i) 85% of the average of the bid and asked prices as reported by
Nasdaq Stock Market, Inc. in The Wall Street Journal, or, if the Common
Stock is designated as a Nasdaq National Market security, the last trading
price of the Common Stock as reported on the Nasdaq National Market in The
Wall Street Journal, or, if the Common Stock is listed on an exchange, the
closing price of the Common Stock on the exchange on the Offering
Commencement Date applicable to such Offering (or on the next regular
business date on which shares of the Common Stock shall be traded, in the
event that no shares of the Common Stock have been traded on the Offering
Commencement Date); or if the Common Stock is not quoted by Nasdaq Stock
Market, Inc., not designated as a Nasdaq National Market security and not
listed on an exchange, 85% of the fair market value on the Offering
Commencement Date as determined by the Committee; and
(ii) 85% of the average of the bid and asked prices as reported by
Nasdaq Stock Market, Inc. in The Wall Street Journal, or, if the Common
Stock is designated as a Nasdaq National Market security, the last trading
price of the Common Stock as reported by the Nasdaq National Market in The
Wall Street Journal, or, if the Common Stock is listed on an exchange, the
closing price of the Common Stock on the exchange on the Offering
Termination Date applicable to such Offering (or on the next regular
business date on which shares of the Common Stock shall be traded, in the
event that no shares of the Common Stock shall have been traded on the
Offering Termination Date); or if the Common Stock is not quoted by Nasdaq
Stock Market, Inc., not designated as a Nasdaq National Market security and
not listed on an exchange, 85% of the fair market value on the Offering
Termination Date as determined by the Committee.
SECTION 8. EXERCISE OF OPTION
(a) Unless a participant gives written notice to the Treasurer of the
Company as hereinafter provided, the participant's option for the purchase of
Common Stock with payroll deductions made during any Offering will be deemed to
have been exercised automatically on the Offering Termination Date applicable to
such Offering for the purchase of the number of full shares of Common Stock
which the
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accumulated payroll deductions in the participant's account at that time will
purchase at the applicable option price (but not in excess of the number of
shares for which options have been granted to the participant pursuant to
Section 7(a)), and any excess in the participant's account at that time will be
returned to the participant, without interest.
(b) Fractional shares will not be issued under the Plan and any
accumulated payroll deductions that would have been used to purchase fractional
shares shall be automatically carried forward to the next Offering unless the
participant elects, by written notice to the Treasurer of the Company, to have
the excess cash returned to the participant.
SECTION 9. WITHDRAWAL AND TERMINATION
(a) Prior to the Offering Termination Date for an Offering, any
participant may withdraw the payroll deductions credited to the participant's
account for such Offering under the Plan by giving written notice to the
Treasurer of the Company. All of the participant's payroll deductions credited
to such account will be paid to the participant promptly after receipt of notice
of withdrawal, without interest, and no future payroll deductions will be made
from the participant's pay during such Offering. The Company will treat any
attempt to borrow by a participant on the security of accumulated payroll
deductions as an election to withdraw such deductions.
(b) A participant's election not to participate in, or withdrawal from,
any Offering will not have any effect upon the participant's eligibility to
participate in any succeeding Offering or in any similar plan which may
hereafter be adopted by the Company.
(c) Upon termination of the participant's employment for any reason,
including retirement but excluding death, the payroll deductions credited to the
participant's account will be returned to the participant, or, in the case of
the participant's death, to the person or persons entitled thereto under Section
13.
(d) Upon termination of the participant's employment because of death,
the participant's beneficiary (as designated pursuant to Section 13) shall have
the right to elect, by written notice given to the Treasurer of the Company
prior to the expiration of a period of ninety days commencing with the date of
the death of the participant, either:
(i) to withdraw all of the payroll deductions credited to the
participant's account under the Plan; or
(ii) to exercise the participant's option for the purchase of stock
on the Offering Termination Date next following the date of the
participant's death for the purchase of the number of full shares which the
accumulated payroll deductions in the participant's account at the date of
the participant's death will purchase at the applicable option price
(subject to the limitation contained in Section 7(a), and any excess in
such account will be returned to said beneficiary. In the event that no
such written notice of election shall be duly received by the office of the
Treasurer of the Company, the beneficiary shall automatically be deemed to
have elected to withdraw the payroll deductions credited to the
participant's account at the date of the participant's death and the same
will be paid promptly to said beneficiary.
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SECTION 10. INTEREST
No interest will be paid or allowed on any money paid into the Plan or
credited to the account of any participating employee.
SECTION 11. STOCK
(a) The maximum number of shares of Common Stock available for issuance
and purchase by employees under the Plan, subject to adjustment upon changes in
capitalization of the Company as provided in Section 16, shall be 100,000
shares. If the total number of shares for which options are exercised on any
Offering Termination Date in accordance with Section 8 exceeds the number of
shares that remain available for issuance and purchase by employees under the
Plan, the Company shall make a pro rata allocation of the shares available for
delivery and distribution in an equitable manner, with the balances of payroll
deductions credited to the account of each participant under the Plan returned
to each participant.
(b) The participant will have no interest in the stock covered by the
participant's option until such option has been exercised.
SECTION 12. ADMINISTRATION
The Plan shall be administered by the Committee. The interpretation and
construction of any provision of the Plan and adoption of rules and regulations
for administering the Plan shall be made by the Committee. Determinations made
by the Committee with respect to any matter or provision contained in the Plan
shall be final, conclusive and binding upon the Company and upon all
participants, their heirs or legal representatives. Any rule or regulation
adopted by the Committee shall remain in full force and effect unless and until
altered, amended or repealed by the Committee.
SECTION 13. DESIGNATION OF BENEFICIARY
A participant shall file with the Treasurer of the Company a written
designation of a beneficiary who is to receive any Common Stock and/or cash
under the Plan. Such designation of beneficiary may be changed by the
participant at any time by written notice. Upon the death of a participant and
upon receipt by the Company of proof of the identity and existence of a
beneficiary validly designated by the participant under the Plan, the Company
shall deliver such Common Stock and/or cash to such beneficiary. In the event of
the death of a participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such participant's death,
the Company shall deliver such Common Stock and/or cash to the executor or
administrator of the estate of the participant. No beneficiary shall, prior to
the death of the participant by whom he or she has been designated, acquire any
interest in the Common Stock and/or cash credited to the participant under the
Plan.
SECTION 14. TRANSFERABILITY
Neither payroll deductions credited to a participant's account nor any
rights with regard to the exercise of an option or to receive Common Stock under
the Plan may be assigned, transferred, pledged or otherwise disposed of in any
way by the participant other than by will or the laws of descent and
distribution. Any such attempted assignment, transfer, pledge or other
disposition shall be without effect, except that the Company may treat such act
as an election to withdraw funds in accordance with Section 9(a).
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SECTION 15. USE OF FUNDS
All payroll deductions received or held by the Company under the Plan may
be used by the Company for any corporate purpose, and the Company shall not be
obligated to segregate such payroll deductions.
SECTION 16. EFFECT OF CHANGES OF COMMON STOCK
If at any time after the effective date of the Plan the Company shall
subdivide or reclassify the Common Stock which has been or may be optioned under
the Plan, or shall declare thereon any dividend payable in shares of such Common
Stock, or shall take any other action of a similar nature affecting such Common
Stock, then the number and class of shares of Common Stock which may thereafter
be optioned (in the aggregate and to any participant) shall be adjusted
accordingly and in the case of each option outstanding at the time of any such
action, the number and class of shares which may thereafter be purchased
pursuant to such option and the option price per share shall be adjusted to such
extent as may be determined by the Committee, following consultation with the
Company's independent public accountants and counsel, to be necessary to
preserve the rights of the holder of such option.
SECTION 17. AMENDMENT OR TERMINATION
The Board may at any time terminate or amend the Plan. No such termination
shall affect options previously granted, nor may an amendment make any change in
any option theretofore granted which would adversely affect the rights of any
participant holding options under the Plan.
SECTION 18. NOTICES
All notices or other communications by a participant to the Company under
or in connection with the Plan shall be deemed to have been duly given when
received by the Treasurer of the Company.
SECTION 19. MERGER OR CONSOLIDATION
If the Company shall at any time merge into or consolidate with another
corporation, the holder of each option then outstanding will thereafter be
entitled to receive at the next Offering Termination Date, upon the exercise of
such option and for each share as to which such option shall be exercised, the
securities or property which a holder of one share of the Common Stock was
entitled to upon and at the time of such merger or consolidation. In accordance
with this Section and Section 16, the Committee shall determine the kind and
amount of such securities or property which such holder of an option shall be
entitled to receive. A sale of all or substantially all of the assets of the
Company shall be deemed a merger or consolidation for the foregoing purposes.
SECTION 20. APPROVAL OF STOCKHOLDERS
The Plan is subject to the approval of the stockholders of the Company by
written consent or at their next annual meeting or at any special meeting of the
stockholders for which one of the purposes of such a special meeting shall be to
act upon the Plan.
SECTION 21. GOVERNMENTAL AND OTHER REGULATIONS
The Plan, and the grant and exercise of the rights to purchase shares
hereunder, and the Company's obligation to sell and deliver shares upon the
exercise of rights to purchase shares, shall be subject to all
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applicable federal, state and foreign laws, rules and regulations, and to such
approvals by any regulatory or governmental agency as may, in the opinion of
counsel for the Company, be required. The Plan shall be governed by, and
construed and enforced in accordance with, the provisions of Sections 421, 423
and 424 of the Code and the substantive laws of the State of New Hampshire. In
the event of any inconsistency between such provisions of the Code and any such
laws, said provisions of the Code shall govern to the extent necessary to
preserve the favorable federal income tax treatment afforded employee stock
purchase plans under Section 423 of the Code.
* * *
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EXHIBIT 10.8
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement") dated the 3rd day of January, 1994,
by and between White Pine Software, Inc., a Delaware corporation having its
principal place of business at 40 Simon Street, Suite 201, Nashua, New Hampshire
03060-3043 (the "Employer"), and Howard Berke, an individual residing in Soquel,
California (the "Employee").
W I T N E S S E T H :
WHEREAS, the Employer is engaged in the business of creating, developing,
selling, supplying, marketing, promoting and distributing computer software and
related goods, accessories, equipment and furnishings to customers located both
within and outside of the State of New Hampshire; and
WHEREAS, the Employee possesses the experience necessary in administration
and general and active supervision and direction of the daily operations of a
business in order to fulfill the responsibilities as President and Chief
Executive Officer of the Employer; and
WHEREAS, the Employer and Grafpoint, Inc., a California corporation
("Grafpoint"), have entered into an Agreement-In-Principle dated December 21,
1993 (the "Effective Date") relating to the acquisition of Grafpoint by the
Employer (the "Agreement-In-Principle" and the "Acquisition", respectively), and
which provides for the employment of the Employee by the Employer; and
WHEREAS, the Employer desires to employ the Employee, and the Employee
desires to be employed by the Employer, all in accordance with the terms and
provisions of this Agreement.
NOW, THEREFORE, in consideration of the covenants and promises hereinafter
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Employer and the Employee
represent, covenant and agree as follows:
1. Employment. The Employer hereby employs the Employee to serve as
----------
President and Chief Executive Officer of the Employer in accordance with the
terms and provisions of this Agreement, and the Employee hereby accepts such
employment with the Employer.
2. Term. The initial term of this Agreement shall commence on the
----
Effective Date and shall continue for a period of two (2) years thereafter
unless or until this Agreement is terminated as hereinafter provided. After the
initial term, this Agreement shall be automatically renewed for successive two
(2) year terms unless or until this Agreement is terminated as hereinafter
provided.
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The initial term of this Agreement shall consist of two (2) periods of
time. The "Acquisition Period" shall commence on the Effective Date and shall
continue until the date on which the Acquisition is completed, terminated or
abandoned. The "Operation Period" shall commence on the day immediately
subsequent to the conclusion of the Acquisition Period and shall continue until
the conclusion of the initial term.
3. Compensation. As compensation for all services rendered by the
------------
Employee to the Employer pursuant to this Agreement, the Employer shall pay to
the Employee the following amounts during the term of this Agreement:
(a) Base Compensation. The Employer shall pay to the Employee base
-----------------
compensation at the rate set forth on Schedule A attached hereto and herein
incorporated by reference (the "Base Compensation"). The Base Compensation
shall be payable in semi-monthly installments. The Base Compensation shall be
reviewed by the Board of Directors of the Employer annually and changes in the
Base Compensation, if any, shall be evidenced by the updating and initialing of
Schedule A by both parties hereto.
(b) Incentive Bonus. In addition to the Base Compensation, the Employee
---------------
shall be eligible to receive an annual fiscal year incentive bonus with a
maximum annual amount equal to fifty percent (50%) of the then current Base
Compensation (the "Incentive Bonus"). Payment of the Incentive Bonus will be
based upon accomplishment of goals provided to the Employee by the Board of
Directors of the Employer from time to time and based upon revenue growth,
profitability and cash flow. The Incentive Bonus shall be prorated during the
initial term of this Agreement.
(c) Incentive Stock Option Plan. Upon the commencement of the Operation
---------------------------
Period, the Employee shall be provided with an option to purchase shares of the
Employer's stock representing five percent (5%) of the fully diluted shares of
the Employer after taking into account the Acquisition of Grafpoint, provided
that the Acquisition occurs. In the event that the Acquisition does not occur,
then the number of shares subject to such option shall be determined without
regard to the shares of Grafpoint. Such option shall be issued to the Employee
pursuant to a Stock Option Plan, and the Employer shall take such steps as may
be necessary to qualify such options as Incentive Stock Options as defined in
Section 422 of the Internal Revenue Code of 1986, as amended. The exercise
price of such options shall be determined by the Board of Directors of the
Employer. The Employee's rights to exercise such option shall vest on a monthly
basis over a thirty-six (36) month period in accordance with the terms of an
Incentive Stock Option Agreement to be delivered to the Employee and to be
executed by the Employer and the Employee. Said Incentive Stock Option
Agreement shall provide for an automatic acceleration of any unvested Employee
options in the event of any merger, acquisition or sale of the Employer (other
than a merger, acquisition or sale with respect to which a majority of the
members of the Board of Directors of the Employer (post Grafpoint Acquisition)
prior to the merger, acquisition or sale continue to be a majority of the Board
of Directors of the resulting corporation after such merger, acquisition or
sale.) In the event that the Employer issues additional shares of its common
stock to the White Pine Stockholders (as defined in a certain Agreement and Plan
of Merger dated August 31, 1993 by and among Visual International, Inc., a
Delaware corporation, WP Acquisition Corp., a
-2-
<PAGE>
New Hampshire corporation and White Pine Software, Inc., a New Hampshire
corporation) in accordance with Sections 4.1 and 4.3 of such Agreement and Plan
of Merger, then the number of shares of stock of the Employer which are subject
to the option to be granted to the Employee pursuant to this Subsection 3(c)
shall be increased to represent five percent (5%) of the fully diluted shares of
the Employer's stock after taking into account the additional issuance of its
shares to the White Pine Stockholders.
(d) Moving Expenses. The Employer shall reimburse the Employee for
---------------
reasonable moving expenses incurred by the Employee in relocating his family and
him to New Hampshire from California. In addition, the Employer agrees to pay
to the Employee reasonable relocation fees in connection with establishing
temporary housing in New Hampshire. The amounts payable to the Employee
pursuant to this subsection (d) shall not exceed $75,000. The Employee's
relocation to New Hampshire shall be consummated by July 15, 1994.
4. Vacation and Employee Benefits. The Employee shall be entitled to an
------------------------------
annual paid vacation equal to the greater of: (a) four (4) weeks, or (b) such
vacation as is determined to be in accordance with the Employer's vacation
policy as applicable to all of its employees generally. The Employee shall be
credited with three (3) weeks of accrued vacation time representing accrued
vacation time from the Employee's employment with Grafpoint and shall be
entitled to use such accrued vacation time in accordance with the Employer's
vacation policy. Vacation shall be taken upon reasonable advance notice to the
Employer, and at such times, so as not to interfere with the proper operation of
the Employer's business.
The Employee shall be entitled to receive and participate in such employee
benefits including, but not limited to, health, vision, dental and retirement
plans, as the Employer shall from time to time determine to provide to its
employees generally.
5. Description of Duties. During the term of this Agreement, the Employee
---------------------
shall be the President and Chief Executive Officer of the Employer and shall::
(a) Devote on a full time basis all necessary time, best efforts,
professional skills, attention and energies to overseeing and administering all
daily operations and activities of the Employer including, but not limited to,
management of product distribution, inventory control, development of the
internal operating systems of the Employer, and accomplishment of the goals
provided by the Board of Directors of the Employer to the Employee from time to
time;
(b) Regularly and periodically interact with the Employer's bankers,
accountants, attorneys and any other professionals which the Employer may
engage;
(c) Review all financial reports and such other information as the Board of
Directors of the Employer may request from time to time;
-3-
<PAGE>
(d) Oversee the preparation and review of managerial and operational
reports and such other information as the Board of Directors of the Employer may
request from time to time;
(e) Set, track and implement performance budgets and inventory management
controls;
(f) Manage the procurement of all printed materials, brochures and company
literature;
(g) Act in accordance herewith, and in all accounts be responsible and
responsive to, the Board of Directors of the Employer; and
(h) Generally perform such services as may be expected of a President and
Chief Executive Officer.
Notwithstanding the above, during the Acquisition Period the Employee shall
have broad discretion in allocating his time between the Employer and Grafpoint.
6. General Services. During the term of this Agreement, the Employee
----------------
shall:
(a) Observe the Employer's policies and standards of conduct, as well as
customary standards of business conduct, including any standards prescribed by
law or regulation;
(b) Perform his duties hereunder in a manner that preserves and protects
the Employer's business reputation; and
(c) Do all things and render such services as may be necessary or
beneficial in carrying out any of the foregoing.
7. Non-Disclosure of Proprietary or Confidential Information and
-------------------------------------------------------------
Confidential Communications. The Employee recognizes and acknowledges that the
- ---------------------------
names, addresses and purchasing history of the Employer's customers, the names
and other pertinent data concerning the persons responsible for purchasing for
such customers, the particular needs and application of such customers for
computer hardware and software programs, the names and addresses of the
Employer's suppliers, the Employer's purchasing history with its suppliers, the
names and other pertinent data concerning the persons employed by the Employer's
suppliers who are responsible for supplying the Employer with products and
services, the Employer's proprietary computer software programs, trade secrets
and any other confidential and proprietary information concerning the business
or affairs of the Employer (including marketing and business plans and
strategies, pricing lists and policies, and cost information) (hereinafter
collectively referred to as the "Confidential Information") constitute a
valuable, proprietary, special and unique asset of the Employer's business. The
Employee further recognizes and acknowledges that any communications, whether
written, oral or otherwise, that the Employer or any of the Employer's employees
has with the
-4-
<PAGE>
Employer's existing or prospective customers and clients are extremely
confidential (hereinafter the "Confidential Communications"). The term
"Confidential Information" shall exclude any information that has been made
public through no fault of the Employee.
The Employee shall not, for any reason whatsoever, during or after the
termination of his employment with the Employer, use, disclose or allow access
to, for his own benefit or for that of another, the Confidential Information or
the Confidential Communications (or any part thereof) to any person, firm,
corporation, association or other entity for any reason or for any purpose
whatsoever. Notwithstanding the above, the Employee shall be entitled to
disclose Confidential Information and Confidential Communications in connection
with the proposed merger of Grafpoint with and into the Employer pursuant to the
provisions of the Agreement-In-Principle.
In the event of a breach or threatened breach by the Employee of the
provisions of this Section, the Employer shall be entitled to an injunction
restraining the Employee from so using, disclosing or allowing access to, in
whole or in part, the Confidential Information and the Confidential
Communications or from rendering any services to any person, firm, corporation,
association or other entity to whom the Confidential Information or the
Confidential Communications, in whole or in part, have been disclosed or are
threatened to be disclosed. Nothing herein shall be construed as prohibiting
the Employer from pursuing any other remedies available to the Employer for such
breach or threatened breach, including, but not limited to, the recovery of
damages and reasonable attorneys' fees from the Employee. Notwithstanding the
foregoing, the Employee is explicitly authorized to disclose, solely on a need-
to-know basis, Confidential Information and Confidential Communications during
the Acquisition Period to Grafpoint, its officers, directors, employees and
agents.
Upon termination of this Agreement by either party for any reason, the
Employee shall return to the Employer any of the Confidential Information,
Confidential Communications, charts, company literature, reports, Employer
credit cards or other proprietary materials of the Employer then in the
Employee's possession and all other materials of the Employer which the Board of
Directors of the Employer requests the Employee to so return.
This Section shall in all respects survive any termination of this
Agreement and shall remain in full force and effect thereafter. In the event
that any provision of this Section 7 shall conflict with any term or condition
of any other confidentiality agreement between the Employer and the Employee,
then the more restrictive provision shall be deemed to apply in order to
accomplish the purposes of this Section 7 and such other agreements; that being
to protect the Employer's Confidential Information and Confidential
Communications.
8. Covenant Not to Compete; Non-solicitation of Employees and Customers.
--------------------------------------------------------------------
The Employee agrees that while employed by the Employer and for a continuous
period of one (1) year following the date of the termination of his employment
with the Employer for any reason whatsoever (the "Restricted Period"), he shall
not (without the express prior written consent of the Board of Directors of the
Employer), directly or indirectly, compete
-5-
<PAGE>
with the Employer. In construing the foregoing prohibition, the Employee shall
be deemed to be competing with the Employer if he shall become self-employed in,
or accept employment with, consult with, render services to or become associated
with, own, manage, operate, join, control, or participate in the ownership,
management, operation, or control of, or be connected in any material manner
with, or directly or indirectly enter into the employment of, or make a
substantial investment in, any corporation, partnership, proprietorship or other
type of business organization or entity which engages in, any business involving
the sale, distribution, development or research concerning computer software
which directly and materially competes with the computer software of the
Employer or any other software product lines in or with which the Employer is
then currently involved.
The Employee further agrees that, during his employment with the Employer
and during the Restricted Period, he shall not solicit any of the Employer's
employees, existing customers or prospective customers (of which the Employee is
then currently aware) on behalf of himself, any corporation, partnership,
proprietorship or any other type of business organization or entity which
engages in any business involving the sale, distribution, development or
research concerning computer software in breach of this Agreement, whether
retail or wholesale.
This Section shall in all respects survive any termination of this
Agreement and shall remain in full force and effect thereafter.
9. Restricted Activities. During the initial term and any renewal term of
---------------------
this Agreement, the Employee shall not engage in any business activities or
ventures outside of the business activities of the Employer without the express
prior written consent of the Employer's Board of Directors. Notwithstanding the
foregoing, the Employee shall be permitted to serve as the President/CEO of
Grafpoint during the Acquisition Period and shall have broad discretion in
allocating his time between the two (2) companies during the Acquisition Period.
10. Termination.
-----------
(a) Termination Without Cause. Notwithstanding anything herein to the
-------------------------
contrary, this Agreement may be terminated by either the Employer (by act of its
Board of Directors) or the Employee, at any time, without cause; provided,
however that the party desirous of terminating this Agreement shall give the
other party at least thirty (30) days' prior written notice of such termination.
In either event, the Employer retains the right to designate the Employee's
final day of employment hereunder. The date specified in any notice of
termination as the Employee's final day of employment shall be referred to
herein as the "Termination Date."
(i) In the event of the Employee's voluntary termination, then the
Employee shall, at the request of the Board of Directors of the Employer,
continue as an employee of the Employer for an additional thirty (30) day
period after the Termination Date for the purpose of assisting the Employer
in locating and training a suitable replacement for the Employee. During
such additional period, the Employee
-6-
<PAGE>
shall be entitled to full compensation and benefits and the Employee shall
continue to be bound by all of the terms contained herein.
(ii) In the event of the Employee's voluntary termination without a
request to continue employment pursuant to paragraph (i) above, then the
Employee shall be entitled to no compensation or other benefits of any kind
whatsoever for any period after the Termination Date as set forth in the
notice of termination given by the Employee to the Employer.
(iii) In the event that the Employer (by act of its Board of
Directors) terminates this Agreement without cause pursuant to this
subsection (a) during the first year of the initial term of this Agreement,
then the Employee shall be entitled to receive a pro rata entitlement to any
Incentive Bonus earned through the Termination Date and the Base
Compensation for a period of nine (9) months from the Termination Date (the
"Post Termination Period"), or until the Employee becomes employed
elsewhere, whichever occurs first; provided, however, that if the Employee
becomes employed elsewhere at a base compensation rate lower than his Base
Compensation rate at the Termination Date, then the Employer shall pay the
Employee the difference between his Base Compensation rate as of the
Termination Date and the base compensation rate of his new employment during
the applicable Post Termination Period. The Employer also agrees to make
available to the Employee, at the Employee's sole cost and expense, such
benefits as may be then provided to the Employee by the Employer.
(iv) In the event that the Employer (by act of its Board of
Directors) terminates this Agreement without cause pursuant to this
subsection (a) after the first year of the initial term of this Agreement,
then the Employee shall be entitled to receive a pro rata entitlement to any
Incentive Bonus earned through the Termination Date and the Base
Compensation for a period of six (6) months from the Termination Date (the
"Post Termination Period"), or until the Employee becomes employed
elsewhere, whichever occurs first; provided, however, that if the Employee
becomes employed elsewhere at a base compensation rate lower than his Base
Compensation rate at the Termination Date, then the Employer shall pay the
Employee the difference between his Base Compensation rate as of the
Termination Date and the base compensation rate of his new employment during
the applicable Post Termination Period. The Employer also agrees to make
available to the Employee, at the Employee's sole cost and expense, such
benefits as may be then provided to the Employee by the Employer.
(b) Termination With Cause. The Employer (by act of its Board of
----------------------
Directors) may terminate this Agreement immediately for cause by giving written
notice to the Employee. Termination for cause shall be limited to any willful
breach of his duties by the Employee in the course of his employment hereunder,
or in case of his habitual neglect of his duties or his continued incapacity to
perform his duties hereunder. In the event that this Agreement is terminated
pursuant to this subsection (b), the Employee shall be entitled to fifteen (15)
days severance pay beginning with the Termination Date and will not be entitled
to any further
-7-
<PAGE>
compensation, other benefits or bonus of any kind whatsoever for any period
after the Termination Date set forth in the notice given by the Employer to the
Employee.
(c) No Right to Continuing Employment. The Employee agrees that nothing
---------------------------------
contained in this Agreement shall be construed to give the Employee a right to
continuing employment beyond the Termination Date.
11. No Assignment. The Employee acknowledges that the services to be
-------------
rendered by him pursuant to this Agreement are unique. Accordingly, the
Employee shall not assign any of his rights or delegate any of his duties or
obligations under this Agreement.
12. Severability. Subject only to the reformation of time, geographical
------------
and occupational limitations as set forth in Section 13 hereof, all of the terms
and provisions contained in this Agreement are severable and, in the event that
any of them shall be deemed unenforceable or invalid by a court of competent
jurisdiction, then this Agreement shall be interpreted as if such unenforceable
or invalid term or provision were not contained herein.
13. Reformation of Time, Geographical and Occupational Limitations. In the
--------------------------------------------------------------
event that any provision in this Agreement is held to be unenforceable by a
court of competent jurisdiction because it exceeds the maximum time,
geographical or occupational limitations permitted by applicable law, then such
provision(s) shall be and hereby are reformed to the maximum time, geographical
and occupational limitations as may be permitted by applicable law.
14. Specific Performance. Both parties recognize that the services to be
--------------------
rendered under this Agreement by the Employee are special, unique and of an
extraordinary character, and that in the event of a breach by the Employee of
the terms or conditions of this Agreement to be performed by him, the Employer
shall be entitled, if it so elects, to institute and prosecute proceedings in
any court of competent jurisdiction, either at law or in equity, to obtain
damages for any breach of this Agreement or to enforce the specific performance
thereof by the Employee, or to enjoin the Employee from engaging in such
activity, but nothing contained herein shall be construed to prevent such other
remedy in the courts, in case of any breach of this Agreement by the Employee,
as the Employer may elect to invoke.
15. New Hampshire Law; Choice of Forum. This Agreement shall be governed,
----------------------------------
construed and interpreted by, and in accordance with, the laws of the State of
New Hampshire. Any actions concerning enforcement of this Agreement or in any
way relating to the subject matter of this Agreement shall be litigated only in
New Hampshire state or federal courts of proper jurisdiction and venue. Each
party hereto expressly agrees to submit to such jurisdiction and venue for the
purposes of this Agreement. Notwithstanding the foregoing, the Employer may
seek to enforce the Employee's covenants described in Sections 7, 8 and 9 hereof
in any jurisdiction and venue in which the Employee then resides, breaches or
threatens to breach such covenants.
-8-
<PAGE>
16. Entire Agreement. This Agreement constitutes the entire agreement of
----------------
the parties hereto, and replaces all prior agreements, promises, representations
and understandings between the Employer and the Employee whatsoever concerning
the limited subject matter hereof. There are no other agreements, conditions or
representations, oral or written, express or implied, which form the basis for
this Agreement.
17. Modification. No waiver or modification of this Agreement or of any
------------
covenant, condition, or limitation contained herein shall be valid unless in a
writing of subsequent date hereto and duly executed by the party to be charged
therewith and no evidence of any waiver or modification shall be offered or
received in evidence in any proceeding, arbitration, or litigation between the
parties hereto arising out of or affecting this Agreement, or the rights or
obligations of the parties hereunder, unless such waiver or modification is in
writing, duly executed as aforesaid. The parties further agree that the
provisions of this Section may not be waived except as herein set forth.
18. Section Headings. The section headings contained in this Agreement are
----------------
for convenience only, and shall in no manner be construed as part of this
Agreement.
19. Waiver of Breach. The waiver by either party of a breach or violation
----------------
of any provision of this Agreement shall not operate as, or be construed to be,
a waiver of any subsequent breach thereof.
20. Notices. Any and all notices required or permitted to be given under
-------
this Agreement shall be sufficient if furnished in writing, sent by certified or
registered mail, return receipt requested to the party's address set forth in
the Prologue of this Agreement, or to such other address as such party may
specify in writing.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year hereinbefore first written.
WHITE PINE SOFTWARE, INC.
(the "Employer")
/s/ Robert Putman By: /s/ Forrest W. Milkowski
- ---------------------- ---------------------------------
Witness Forrest W. Milkowski
Duly Authorized
/s/ Robert Putman /s/ Howard Berke
- ---------------------- --------------------------------
Witness Howard Berke
(the "Employee")
-9-
<PAGE>
SCHEDULE A
----------
Base Compensation
-----------------
<TABLE>
<CAPTION>
Annual Rate of Agreed to by Agreed to by
Initial Term Base Compensation Employee Employer
- ---------------- ------------------ ------------ ------------
<S> <C> <C> <C>
Acquisition $120,000* x x
Period
Operation $145,000 x x
Period
<CAPTION>
Annual Rate of Agreed to by Agreed to by
Renewal Terms Base Compensation Employee Employer
- ------------- ----------------- ------------ -------------
<S> <C> <C> <C>
x x
</TABLE>
<vt=20>
*The Employer and the Employee expressly agree and understand that the
Employer shall only be responsible for one-half (1/2) of the Base Compensation
during the Acquisition Period and that the remaining one-half (1/2) of the Base
Compensation shall be reimbursed by, and be the sole responsibility of,
Grafpoint. In the event that Grafpoint actually pays more than one-half (1/2)
of the Employee's Base Compensation during the Acquisition Period, then the
Employer shall reimburse Grafpoint to such extent such that each company has
paid one-half (1/2) of the Employee's Base Compensation during the Acquisition
Period.
-10-
<PAGE>
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
This First Amendment to Employment Agreement is dated November 1, 1994, but
to be effective as of october 3, 1994, by and between White Pine Software, Inc.,
a Delaware corporation (the "Employer"), with a principal place of business at
40 Simon Street, Nashua, New Hampshire 03060 and Howard Berke, residing in
Nashua, New Hampshire (hereinafter referred to as the "Employee").
WHEREAS, the Employer and the employee entered into an Employment Agreement
dated January 3, 1994 by which the Employer employed the Employee to render
certain services (the "Employment Agreement"); and
WHEREAS, the Employer and the Employee desire to amend the Employment
Agreement as hereinafter provided.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Employer and the Employee
hereby agree as follows:
1. Section 3(d) of the Employment Agreement is hereby deleted in
its entirety and is replaced with the following new Section 3(d):
"(d). Moving Expenses. The Employer shall reimburse the Employee for
---------------
reasonable moving expenses incurred by the Employee in relocating his family and
him to New Hampshire from California. In addition, the Employer agrees to pay
to the Employee reasonable relocation fees in connection with establishing
temporary housing in New Hampshire. The amounts payable to the Employee
pursuant to this subsection (d) shall not exceed $75,000. The Employee's
relocation to New Hampshire shall be consummated by December 31, 1994."
2. Ratification. The Employer and the Employee acknowledge and agree that
-------------
this First Amendment to Employment Agreement is made in accordance with Section
17 of the Employment Agreement, is binding upon the Employer and the Employee as
of the date hereof and that, except as amended herein, the Employment Agreement
is hereby ratified and remains in full force and effect.
-11-
<PAGE>
IN WITNESS WHEREOF, the Employer and the Employee have executed this First
Amendment to Employment Agreement as of the day and year hereinbefore first
written.
WHITE PINE SOFTWARE, INC.
(the "Employer")
By: /s/Forrest W. Milkowski
---------------------------------
Forrest W. Milkowski
Duly Authorized
/s/Howard Berke
--------------------------------
Howard Berke
(the "Employee")
-12-
<PAGE>
JBSPARKMAN/6696/24794/AD8
WHITE PINE SOFTWARE, INC. - EMPLOYMENT AGT - HOWARD BERKE
final version 1/21/94
-13-
<PAGE>
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement") dated the 10th day of October,
1995, by and between White Pine Software, Inc., a Delaware corporation having
its principal place of business at 40 Simon Street, Suite 201, Nashua, New
Hampshire 03060-3043 (the "Employer"), and Killko Caballero, an individual
residing at Cupertino, California, 10350 San Fernando Ave. (the "Employee").
W I T N E S S E T H :
WHEREAS, the Employer is engaged in the business of creating, developing,
selling, supplying, marketing, promoting and distributing computer software and
related goods, accessories, equipment and furnishings to customers located both
within and outside of the State of New Hampshire; and
WHEREAS, the Employee possesses the experience necessary to fulfill the
responsibilities as Senior Vice President of Product Development and Chief
Technical Officer of the Employer; and
WHEREAS, the Employer and the Employee's current employer, About Software
Corporation, a California corporation ("ASC"), have entered into an acquisition
agreement related to the acquisition of ASC and its French parent corporation by
the Employer (the "Acquisition Agreement" and the "Acquisition", respectively),
and which provides for the employment of the Employee by the Employer; and
WHEREAS, the Employer desires to employ the Employee, and the Employee
desires to be employed by the Employer, all in accordance with the terms and
provisions of this Agreement.
NOW, THEREFORE, in consideration of the covenants and promises hereinafter
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Employer and the Employee
represent, covenant and agree as follows:
1. Employment. The Employer hereby employs the Employee to serve as
----------
Senior Vice President of Product Development and Chief Technical Officer of the
Employer in accordance with the terms and provisions of this Agreement, and the
Employee hereby accepts such employment with the Employer.
2. Term. The term of this Agreement shall commence on the Effective Date
----
and shall continue for a period of two (2) years thereafter unless or until this
Agreement is sooner terminated as hereinafter provided.
<PAGE>
3. Compensation. As compensation for all services rendered by the
------------
Employee to the Employer pursuant to this Agreement, the Employer shall pay to
the Employee the following amounts during the term of this Agreement:
(a) Base Compensation. The Employer shall pay to the Employee base
-----------------
compensation at the rate set forth on Schedule A attached hereto and herein
----------
incorporated by reference (the "Base Compensation"). The Base Compensation
shall be payable in semi-monthly installments. The Base Compensation shall be
reviewed by the Board of Directors of the Employer annually and changes in the
Base Compensation, if any, shall be evidenced by the updating and initialing of
Schedule A by both parties hereto.
- ----------
(b) Incentive Bonus. In addition to the Base Compensation, the Employee
---------------
shall be eligible to receive an annual fiscal year incentive bonus with a
maximum annual amount as set forth on Schedule A attached hereto (the "Incentive
----------
Bonus"). In the first year of the term of this Agreement, one-half of the
amount of the Incentive Bonus is guaranteed to be paid to the Employee. Payment
of the Incentive Bonus at the end of a fiscal year of the Employer will be based
upon accomplishment of goals provided to the Employee by the President of the
Employer from time to time.
4. Vacation and Employee Benefits. The Employee shall be entitled to an
------------------------------
annual paid vacation determined in accordance with the Employer's vacation
policy as applicable to all of its employees generally. In computing the
Employee's vacation benefit, the Employee's tenure of employment with ASC will
be considered as employment with the Employer.
The Employee shall be entitled to carryover the number of vacation days
which he actually accrued as an employee of ASC as of the date of the closing of
the Acquisition, provided, however, that such number of vacation days shall be
reduced in the same proportion that his salary has been increased as an employee
of the Employer as compared with his salary as an employee of ASC. The intent
of this reduction in accrued vacation time is to provide the Employee with the
same economic value of his accrued vacation time after the Acquisition as it was
before the Acquisition.
The Employee shall be entitled to receive and participate in such employee
benefits including, but not limited to, health, vision, dental and retirement
plans, as the Employer shall from time to time determine to provide to its
employees generally.
5. Description of Duties. During the term of this Agreement, the Employee
---------------------
shall be the Senior Vice President of Product Development and Chief Technical
Officer of the Employer and shall perform the duties described on Schedule B
----------
attached hereto and herein incorporated by reference.
-2-
<PAGE>
6. General Services. During the term of this Agreement, the Employee
----------------
shall:
(a) Observe the Employer's policies and standards of conduct, as well as
customary standards of business conduct, including any standards prescribed by
law or regulation;
[Remainder of page intentionally left blank]
-3-
<PAGE>
(b) Perform his duties hereunder in a manner that preserves and protects
the Employer's business reputation; and
(c) Do all things and render such services as may be necessary or
beneficial in carrying out any of the foregoing.
7. Non-Disclosure of Proprietary or Confidential Information and
-------------------------------------------------------------
Confidential Communications. The Employee recognizes and acknowledges that the
- ---------------------------
names, addresses and purchasing history of the Employer's customers, the names
and other pertinent data concerning the persons responsible for purchasing for
such customers, the particular needs and application of such customers for
computer hardware and software programs, the names and addresses of the
Employer's suppliers, the Employer's purchasing history with its suppliers, the
names and other pertinent data concerning the persons employed by the Employer's
suppliers who are responsible for supplying the Employer with products and
services, the Employer's proprietary computer software programs, trade secrets
and any other confidential and proprietary information concerning the business
or affairs of the Employer (including marketing and business plans and
strategies, pricing lists and policies, and cost information) (hereinafter
collectively referred to as the "Confidential Information") constitute a
valuable, proprietary, special and unique asset of the Employer's business. The
Employee further recognizes and acknowledges that any communications, whether
written, oral or otherwise, that the Employer or any of the Employer's employees
has with the Employer's existing or prospective customers and clients are
extremely confidential (hereinafter the "Confidential Communications"). The
term "Confidential Information" shall exclude any information that has been made
public through no fault of the Employee.
The Employee shall not, for any reason whatsoever, during or after the
termination of his employment with the Employer, use, disclose or allow access
to, for his own benefit or for that of another, the Confidential Information or
the Confidential Communications (or any part thereof) to any person, firm,
corporation, association or other entity for any reason or for any purpose
whatsoever.
In the event of a breach or threatened breach by the Employee of the
provisions of this Section, the Employer shall be entitled to an injunction
restraining the Employee from so using, disclosing or allowing access to, in
whole or in part, the Confidential Information and the Confidential
Communications or from rendering any services to any person, firm, corporation,
association or other entity to whom the Confidential Information or the
Confidential Communications, in whole or in part, have been disclosed or are
threatened to be disclosed. Nothing herein shall be construed as prohibiting
the Employer from pursuing any other remedies available to the Employer for such
breach or threatened breach, including, but not limited to, the recovery of
damages and reasonable attorneys' fees from the Employee.
Upon termination of this Agreement by either party for any reason, the
Employee shall return to the Employer any of the Confidential Information,
Confidential Communications, charts, company literature, reports, Employer
credit cards or other proprietary materials of the Employer then in the
Employee's possession and all other
-4-
<PAGE>
materials of the Employer which the President of the Employer requests the
Employee to so return.
This Section shall in all respects survive any termination of this
Agreement and shall remain in full force and effect thereafter. In the event
that any provision of this Section 7 shall conflict with any term or condition
of any other confidentiality agreement between the Employer and the Employee,
then the more restrictive provision shall be deemed to apply in order to
accomplish the purposes of this Section 7 and such other agreements; that being
to protect the Employer's Confidential Information and Confidential
Communications.
8. Covenant Not to Compete; Non-solicitation of Employees and Customers.
--------------------------------------------------------------------
The Employee agrees that while employed by the Employer and for a continuous
period of one (1) year following the date of the termination of his employment
with the Employer for any reason whatsoever (the "Restricted Period"), he shall
not (without the express prior written consent of the Board of Directors of the
Employer), directly or indirectly, compete with the Employer. In construing the
foregoing prohibition, the Employee shall be deemed to be competing with the
Employer if he shall become self-employed in, or accept employment with, consult
with, render services to or become associated with, own, manage, operate, join,
control, or participate in the ownership, management, operation, or control of,
or be connected in any material manner with, or directly or indirectly enter
into the employment of, or make a substantial investment in, any corporation,
partnership, proprietorship or other type of business organization or entity
which engages in, any business involving the sale, distribution, development or
research concerning computer software which directly and materially competes
with the computer software of the Employer or any other software product lines
in or with which the Employer is then currently involved.
The Employee further agrees that, during his employment with the Employer
and during the Restricted Period, he shall not solicit any of the Employer's
employees, existing customers or prospective customers (of which the Employee is
then currently aware) on behalf of himself, any corporation, partnership,
proprietorship or any other type of business organization or entity which
engages in any business involving the sale, distribution, development or
research concerning computer software in breach of this Agreement, whether
retail or wholesale.
This Section shall in all respects survive any termination of this
Agreement and shall remain in full force and effect thereafter.
9. Restricted Activities. During the term of this Agreement, the Employee
---------------------
shall not engage in any business activities or ventures outside of the business
activities of the Employer without the express prior written consent of the
Employer's Board of Directors.
10. Termination.
-----------
(a) Termination Without Cause. Notwithstanding anything herein to the
-------------------------
contrary, this Agreement may be terminated by either the Employer or the
Employee, at any time, without cause; provided, however that the party desirous
of terminating this Agreement shall
-5-
<PAGE>
give the other party at least thirty (30) days' prior written notice of such
termination. In either event, the Employer retains the right to designate the
Employee's final day of employment hereunder. The date specified in any notice
of termination as the Employee's final day of employment shall be referred to
herein as the "Termination Date."
(i) In the event of the Employee's voluntary termination, then the
Employee shall, at the request of the President of the Employer, continue as
an employee of the Employer for an additional thirty (30) day period after
the Termination Date for the purpose of assisting the Employer in locating
and training a suitable replacement for the Employee. During such
additional period, the Employee shall be entitled to full compensation and
benefits and the Employee shall continue to be bound by all of the terms
contained herein.
(ii) In the event of the Employee's voluntary termination without a
request to continue employment pursuant to paragraph (i) above, then the
Employee shall be entitled to no compensation or other benefits of any kind
whatsoever for any period after the Termination Date as set forth in the
notice of termination given by the Employee to the Employer.
(iii) In the event that the Employer terminates this Agreement without
cause pursuant to this subsection (a) during the first year of the term of
this Agreement, then the Employee shall be entitled to receive a pro rata
entitlement to any Incentive Bonus earned through the Termination Date and
the Base Compensation for a period of six (6) months from the Termination
Date (the "Post Termination Period"), or until the Employee becomes employed
elsewhere, whichever occurs first; provided, however, that if the Employee
becomes employed elsewhere at a base compensation rate lower than his Base
Compensation rate at the Termination Date, then the Employer shall pay the
Employee the difference between his Base Compensation rate as of the
Termination Date and the base compensation rate of his new employment during
the applicable Post Termination Period. The Employer also agrees to make
available to the Employee, at the Employee's sole cost and expense, such
benefits as may be then provided to the Employee by the Employer.
(iv) In the event that the Employer terminates this Agreement without
cause pursuant to this subsection (a) during the second year of the term of
this Agreement, then the Employee shall be entitled to receive a pro rata
entitlement to any Incentive Bonus earned through the Termination Date and
the Base Compensation for a period of six (6) months from the Termination
Date (the "Post Termination Period"), or until the Employee becomes employed
elsewhere, whichever occurs first; provided, however, that if the Employee
becomes employed elsewhere at a base compensation rate lower than his Base
Compensation rate at the Termination Date, then the Employer shall pay the
Employee the difference between his Base Compensation rate as of the
Termination Date and the base compensation rate of his new employment during
the applicable Post Termination Period. The Employer also agrees to make
available to the Employee, at the Employee's sole cost and expense, such
benefits as may be then provided to the Employee by the Employer.
-6-
<PAGE>
(v) In the event that the Employee is entitled to some amount of
Incentive Bonus and Base Compensation pursuant to paragraph (iv) above, and
in the further event that the Employee is unable to secure employment in the
United States within ninety (90) days after the Termination Date, which
inability results in his deportation from the United States by the United
States Immigration and Naturalization Service, then the Employer shall pay
to the Employee the sum of $10,000 in order to assist the Employee's
relocation to France.
(vi) In the event that the Employer terminates this Agreement without
cause pursuant to this subsection (a) at any time after the second year of
the term of this Agreement, then the Employee shall be entitled to no
compensation, other benefits or bonus of any kind whatsoever for any period
after the Termination Date as set forth in the notice of termination given
by the Employer to the Employee.
(b) Termination With Cause. The Employer may terminate this Agreement
----------------------
immediately for cause by giving written notice to the Employee. Termination for
cause shall include any willful breach of his duties by the Employee in the
course of his employment hereunder, or in case of his habitual neglect of his
duties or his continued incapacity to perform his duties hereunder. In the
event that this Agreement is terminated pursuant to this subsection (b), the
Employee shall be entitled to no compensation, other benefits or bonus of any
kind whatsoever for any period after the Termination Date set forth in the
notice given by the Employer to the Employee.
(c) No Right to Continuing Employment. The Employee agrees that nothing
---------------------------------
contained in this Agreement shall be construed to give the Employee a right to
continuing employment beyond the Termination Date.
11. No Assignment. The Employee acknowledges that the services to be
-------------
rendered by him pursuant to this Agreement are unique. Accordingly, the
Employee shall not assign any of his rights or delegate any of his duties or
obligations under this Agreement.
12. Severability. Subject only to the reformation of time, geographical
------------
and occupational limitations as set forth in Section 13 hereof, all of the terms
and provisions contained in this Agreement are severable and, in the event that
any of them shall be deemed unenforceable or invalid by a court of competent
jurisdiction, then this Agreement shall be interpreted as if such unenforceable
or invalid term or provision were not contained herein.
13. Reformation of Time, Geographical and Occupational Limitations. In the
--------------------------------------------------------------
event that any provision in this Agreement is held to be unenforceable by a
court of competent jurisdiction because it exceeds the maximum time,
geographical or occupational limitations permitted by applicable law, then such
provision(s) shall be and hereby are reformed to the maximum time, geographical
and occupational limitations as may be permitted by applicable law.
14. Specific Performance. Both parties recognize that the services to be
--------------------
rendered under this Agreement by the Employee are special, unique and of an
extraordinary character,
-7-
<PAGE>
and that in the event of a breach by the Employee of the terms or conditions of
this Agreement to be performed by him, the Employer shall be entitled, if it so
elects, to institute and prosecute proceedings in any court of competent
jurisdiction, either at law or in equity, to obtain damages for any breach of
this Agreement or to enforce the specific performance thereof by the Employee,
or to enjoin the Employee from engaging in such activity, but nothing contained
herein shall be construed to prevent such other remedy in the courts, in case of
any breach of this Agreement by the Employee, as the Employer may elect to
invoke.
15. New Hampshire Law; Choice of Forum. This Agreement shall be governed,
----------------------------------
construed and interpreted by, and in accordance with, the laws of the State of
New Hampshire. Any actions concerning enforcement of this Agreement or in any
way relating to the subject matter of this Agreement shall be litigated only in
New Hampshire state or federal courts of proper jurisdiction and venue. Each
party hereto expressly agrees to submit to such jurisdiction and venue for the
purposes of this Agreement. Notwithstanding the foregoing, the Employer may
seek to enforce the Employee's covenants described in Sections 7, 8 and 9 hereof
in any jurisdiction and venue in which the Employee then resides, breaches or
threatens to breach such covenants.
16. Entire Agreement. This Agreement constitutes the entire agreement of
----------------
the parties hereto, and replaces all prior agreements, promises, representations
and understandings between the Employer and the Employee whatsoever concerning
the limited subject matter hereof. There are no other agreements, conditions or
representations, oral or written, express or implied, which form the basis for
this Agreement.
17. Modification. No waiver or modification of this Agreement or of any
------------
covenant, condition, or limitation contained herein shall be valid unless in a
writing of subsequent date hereto and duly executed by the party to be charged
therewith and no evidence of any waiver or modification shall be offered or
received in evidence in any proceeding, arbitration, or litigation between the
parties hereto arising out of or affecting this Agreement, or the rights or
obligations of the parties hereunder, unless such waiver or modification is in
writing, duly executed as aforesaid. The parties further agree that the
provisions of this Section may not be waived except as herein set forth.
18. Section Headings. The section headings contained in this Agreement are
----------------
for convenience only, and shall in no manner be construed as part of this
Agreement.
19. Waiver of Breach. The waiver by either party of a breach or violation
----------------
of any provision of this Agreement shall not operate as, or be construed to be,
a waiver of any subsequent breach thereof.
20. Notices. Any and all notices required or permitted to be given under
-------
this Agreement shall be sufficient if furnished in writing, sent by certified or
registered mail, return receipt requested to the party's address set forth in
the Prologue of this Agreement, or to such other address as such party may
specify in writing.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year hereinbefore first written.
WHITE PINE SOFTWARE, INC.
(the "Employer")
/s/Kathleen Standish By: /s/Howard Berke
- ----------------------- --------------------------------------------
Witness Howard Berke, President
Duly Authorized
[Illegible signature] /s/Killko Caballero
- ----------------------- -------------------------------------------
Witness Killko Caballero
(the "Employee")
-9-
<PAGE>
SCHEDULE A
----------
Compensation
------------
<TABLE>
<CAPTION>
Annual Rate Fiscal Year-end
of Base Incentive Agreed to Agreed to
Compensation Bonus by Employee by Employer
- ---------------- --------------- ----------- -----------
<S> <C> <C> <C>
$90,000 $20,000 X X
</TABLE>
-10-
<PAGE>
SCHEDULE B
----------
Duties
------
Usual and customary duties correspondent to the Employee's position as
Senior Vice President of Product Development and Chief Technical Officer of the
Employer.
/s/
-11-
<PAGE>
WHITE PINE SOFTWARE, INC. - EMPLOYMENT AGT - KILLKO CABALLERO
-12-
<PAGE>
EXHIBIT 10.10
NON-DISCLOSURE AND NON-COMPETITION AGREEMENT
NON-DISCLOSURE AND NON-COMPETITION AGREEMENT (this "Agreement") dated the
15 day of February, 1996 by and between White Pine Software, Inc., a Delaware
corporation having its principal place of business at 40 Simon Street, Suite
201, Nashua, New Hampshire 03060-3043 (the "Employer"), and David Bundy, an
individual residing at 71 Bartemus Trail, Nashua, NH 03603 (the "Employee").
WITNESSETH:
WHEREAS, the Employer is engaged in the business of creating, developing,
selling, supplying, marketing, promoting and distributing computer software and
related goods, accessories, equipment and furnishings to customers located both
within and outside of the State of New Hampshire; and
WHEREAS, pursuant to the Employee's employment with the Employer, the
Employer has access to confidential and proprietary information of the Employer
which the Employer and the Employee desire to protect for the benefit of the
Employer; and
WHEREAS, in exchange for the Employee's covenants pursuant to this
Agreement the Employer is providing the Employee with certain severance benefits
as provided herein and contemporaneously herewith is granting the Employee
options to purchase certain stock of the Employer pursuant to the terms of a
Stock Option Agreement by and between the Employer and the Employee.
NOW, THEREFORE, in consideration of the covenants and promises hereinafter
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Employer and the Employee
represent, covenant and agree as follows:
1. Non-Disclosure of Proprietary or Confidential Information and
-------------------------------------------------------------
Confidential Communications. The Employee recognizes and acknowledges that the
- ---------------------------
names, addresses and purchasing history of the Employer's customers, the names
and other pertinent data concerning the persons responsible for purchasing for
such customers, the particular needs and application of such customers for
computer hardware and software programs, the names and addresses of the
Employer's suppliers and technology licensors (collectively, "Suppliers"), the
Employer's purchasing history with its Suppliers, the names and other pertinent
data concerning the persons employed by the Employer's Suppliers who are
responsible for supplying the Employer with products, services and software, the
Employer's proprietary computer software programs, technology, trade secrets and
any other confidential and proprietary information concerning the business or
affairs of the Employer (including marketing and business plans and strategies,
pricing lists and policies, and cost information) (hereinafter collectively
referred to as the "Confidential Information") constitute a valuable,
proprietary, special and unique asset of the Employer's business. The Employee
further recognizes and acknowledges that any communications, whether written,
oral or otherwise, that the Employer or any of the Employer's employees has with
the Employer's existing or
<PAGE>
prospective customers and Suppliers are extremely confidential (hereinafter the
"Confidential Communications"). The term "Confidential Information" shall
exclude any information that has been made public through no fault of the
Employee.
The Employee shall not, for any reason whatsoever, during the term or after
the termination of his employment with the Employer, use, disclose or allow
access to, for his own benefit or for that of another, the Confidential
Information or the Confidential Communications (or any part thereof) to any
person, firm, corporation, association or other entity for any reason or for any
purpose whatsoever.
In the event of a breach or threatened breach by the Employee of the
provisions of this Section, the Employer shall be entitled to an injunction
restraining the Employee from so using, disclosing or allowing access to, in
whole or in part, the Confidential Information and the Confidential
Communications or from rendering any services to any person, firm, corporation,
association or other entity to whom the Confidential Information or the
Confidential Communications, in whole or in part, have been disclosed or are
threatened to be disclosed. Nothing herein shall be construed as prohibiting
the Employer from pursuing any other remedies available to the Employer for such
breach or threatened breach, including, but not limited to, the recovery of
damages and reasonable attorneys' fees from the Employee.
Upon termination of this Agreement by either party for any reason, the
Employee shall return to the Employer any of the Confidential Information,
Confidential Communications, charts, company literature, reports, computer
hardware, software and peripherals belonging to the Employer, Employer credit
cards or other proprietary materials and other property of the Employer then in
the Employee's possession and all other materials of the Employer which the
President of the Employer requests the Employee to so return.
This Section shall in all respects survive any termination of this
Agreement and shall remain in full force and effect thereafter. In the event
that any provision of this Section 1 shall conflict with any term or condition
of any other confidentiality agreement between the Employer and the Employee,
then the more restrictive provision shall be deemed to apply in order to
accomplish the purposes of this Section 1 and such other agreements; that being
to protect the Employer's Confidential Information and Confidential
Communications.
2. Covenant Not to Compete; Non-solicitation of Employees and Customers.
--------------------------------------------------------------------
The Employee agrees that while employed by the Employer and for a continuous
period of eighteen (18) months following the date of the termination of his
employment with the Employer for any reason whatsoever (the "Restricted
Period"), he shall not (without the express prior written consent of the Board
of Directors of the Employer), directly or indirectly, compete with the
Employer. In construing the foregoing prohibition, the Employee shall be deemed
to be competing with the Employer if he shall become self-employed in, or accept
employment with, consult with, render services to or become associated with,
own, manage, operate, join, control, or participate in the ownership,
management, operation, or control of, or be
-2-
<PAGE>
connected in any material manner with, or directly or indirectly enter into the
employment of, or make a substantial investment in, any corporation, limited
liability company, partnership, proprietorship or other type of business
organization or entity which engages in, any business involving the sale,
distribution, development or research concerning computer software and
technology which directly and materially competes with the computer software and
technology of the Employer or any other software product lines and technology in
or with which the Employer is then currently involved.
The Employee further agrees that, during his employment with the Employer
and during the Restricted Period, he shall not solicit any of the Employer's
employees, contractors, Suppliers, existing customers or prospective customers
(of which the Employee is then currently aware) on behalf of himself, any
corporation, limited liability company, partnership, proprietorship or any other
type of business organization or entity which engages in any business involving
the sale, distribution, development or research concerning computer software and
technology in breach of this Agreement, whether retail or wholesale.
This Section shall in all respects survive any termination of this
Agreement and shall remain in full force and effect thereafter.
3. Restricted Activities. During the term of this Agreement, the Employee
---------------------
shall not engage in any business activities or ventures outside of the business
activities of the Employer without the express prior written consent of the
Employer's Board of Directors.
4. Termination.
-----------
(a) Termination Without Cause. Notwithstanding anything herein to the
-------------------------
contrary, this Agreement may be terminated by either the Employer or the
Employee, at any time, without cause; provided, however that the party desirous
of terminating this Agreement shall give the other party at least thirty (30)
days' prior written notice of such termination . In either event, the Employer
retains the right to designate the Employee's final day of employment hereunder.
Such date as specified by the Employer or, if none, the date specified in any
notice of termination as the Employee's final day of employment shall be
referred to herein as the "Termination Date."
(i) In the event of the Employee's voluntary termination, then the
Employee shall, at the request of the President of the Employer, continue
as an employee of the Employer for an additional thirty (30) day period
after the Termination Date for the purpose of assisting the Employer in
locating and training a suitable replacement for the Employee. During such
additional period, the Employee shall be entitled to full compensation and
benefits and the Employee shall continue to be bound by all of the terms
contained herein.
(ii) In the event of the Employee's voluntary termination without a
request to continue employment pursuant to paragraph (i) above, then the
Employee shall be
-3-
<PAGE>
entitled to no compensation or other benefits of any kind whatsoever for
any period after the Termination Date.
(iii) In the event that the Employer terminates this Agreement
without cause pursuant to this subsection (a), then the Employee shall be
entitled to receive his then current base compensation ("Base
Compensation") for a period of six (6) months from the Termination Date
(the "Post Termination Period"), or until the Employee becomes employed
elsewhere or self-employed, whichever occurs first; provided, however, that
if the Employee becomes employed elsewhere at a base compensation rate
lower than his Base Compensation rate at the Termination Date, then the
Employer shall pay the Employee the difference between his Base
Compensation rate as of the Termination Date and the base compensation rate
of his new employment during the applicable Post Termination Period. The
Employer also agrees to make available to the Employee, at the Employee's
sole cost and expense, such benefits as may be then provided to the
Employee by the Employer.
(b) Termination With Cause The Employer may terminate this Agreement
----------------------
immediately for cause by giving written notice to the Employee. Termination for
cause shall include, but not be limited to, any willful breach of his duties by
the Employee in the course of his employment hereunder, or in case of his
habitual neglect of his duties or his continued incapacity to perform his duties
hereunder to the satisfaction of the Employer. In the event that this Agreement
is terminated pursuant to this subsection (b), the Employee shall be entitled to
no compensation, other benefits or bonus of any kind whatsoever for any period
after the Termination Date set forth in the notice given by the Employer to the
Employee.
(c) No Right to Continuing Employment. The Employee agrees that nothing
---------------------------------
contained in this Agreement shall be construed to give the Employee a right to
continuing employment beyond the Termination Date. Notwithstanding the
provisions of this Agreement in general, and this Section 4 in particular, the
Employee agrees that he is an employee at will and may be terminated at any
time, with or without cause and with or without notice.
5. No Assignment. The Employee acknowledges that the services to be
-------------
rendered by him pursuant to this Agreement are unique and personal.
Accordingly, the Employee shall not assign any of his rights or delegate any of
his duties or obligations under this Agreement.
6. Severability. Subject only to the reformation of time, geographical
------------
and occupational limitations as set forth in Section 7 hereof, all of the terms
and provisions contained in this Agreement are severable and, in the event that
any of them shall be deemed unenforceable or invalid by a court of competent
jurisdiction, then this Agreement shall be interpreted as if such unenforceable
or invalid term or provision were not contained herein.
-4-
<PAGE>
7. Reformation of Time, Geographical and Occupational Limitations. In
--------------------------------------------------------------
the event that any provision in this Agreement is held to be unenforceable by a
court of competent jurisdiction because it exceeds the maximum time,
geographical or occupational limitations permitted by applicable law, then such
provision(s) shall be and hereby are reformed to the maximum time, geographical
and occupational limitations as may be permitted by applicable law.
8. Specific Performance. Both parties recognize that the services to be
--------------------
rendered under this Agreement by the Employee are special, unique and of an
extraordinary character, and that in the event of a breach by the Employee of
the terms or conditions of this Agreement to be performed by him, the Employer
shall be entitled, if it so elects, to institute and prosecute proceedings in
any court of competent jurisdiction, either at law or in equity, to obtain
damages for any breach of this Agreement or to enforce the specific performance
thereof by the Employee, or to enjoin the Employee from engaging in such
activity, but nothing contained herein shall be construed to prevent such other
remedy in the courts, in case of any breach of this Agreement by the Employee,
as the Employer may elect to invoke.
9. New Hampshire Law; Choice of Forum. This Agreement shall be governed,
----------------------------------
construed and interpreted by, and in accordance with, the laws of the State of
New Hampshire. Any actions concerning enforcement of this Agreement or in any
way relating to the subject matter of this Agreement shall be litigated only in
New Hampshire state or federal courts of proper jurisdiction and venue. Each
party hereto expressly agrees to submit to such jurisdiction and venue for the
purposes of this Agreement. Notwithstanding the foregoing, the Employer may
seek to enforce the Employee's covenants described in Sections 1, 2 and 3 hereof
in any jurisdiction and venue in which the Employee then resides, breaches or
threatens to breach such covenants.
10. Prior Agreements. This Agreement does not, and shall not be
----------------
interpreted to, supersede, replace or terminate any prior agreement between the
parties hereto relating to the Employee's obligations of confidentiality, non-
competition and inventions. The provisions of Section 4 hereof are the entire
agreement of the parties regarding termination of the Employee's employment with
the Employer, and there are no other agreements between the parties regarding
such matters.
11. Modification. No waiver or modification of this Agreement or of any
------------
covenant, condition, or limitation contained herein shall be valid unless in a
writing of subsequent date hereto and duly executed by the party to be charged
therewith and no evidence of any waiver or modification shall be offered or
received in evidence in any proceeding, arbitration, or litigation between the
parties hereto arising out of or affecting this Agreement, or the rights or
obligations of the parties hereunder, unless such waiver or modification is in
writing, duly executed as aforesaid. The parties further agree that the
provisions of this Section may not be waived except as herein set forth.
-5-
<PAGE>
12. Section Headings. The section headings contained in this Agreement
----------------
are for convenience only, and shall in no manner be construed as part of this
Agreement.
13. Waiver of Breach. The waiver by either party of a breach or violation
----------------
of any provision of this Agreement shall not operate as, or be construed to be,
a waiver of any subsequent breach thereof.
14. Notices. Any and all notices required or permitted to be given under
-------
this Agreement shall be sufficient if furnished in writing, sent by certified or
registered mail, return receipt requested to the party's address set forth in
the Prologue of this Agreement, or to such other address as such party may
specify in writing.
15. ACKNOWLEDGEMENT OF CONSIDERATION. THE EMPLOYEE HEREBY ACKNOWLEDGES
--------------------------------
AND AGREES THAT THE PROVISIONS OF SECTION 4 HEREOF AND THE GRANT OF ADDITIONAL
STOCK OPTIONS TO PURCHASE STOCK OF THE EMPLOYER ARE GOOD AND ADEQUATE
CONSIDERATION FOR HIS COVENANTS HEREIN AND WHICH HE HAS RECEIVED
CONTEMPORANEOUSLY WITH HIS EXECUTION OF THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year hereinbefore first written.
WHITE PINE SOFTWARE, INC.
(the "Employer")
/s/ Robert Putman By: /s/ Howard Berke
- ----------------------- ----------------------------
Witness Howard Berke, President
Duly Authorized
/s/ Robert Putman /s/ David Bundy
- ------------------------ --------------------------------
Witness David Bundy (the "Employee")
-6-
<PAGE>
EXHIBIT 10.11
EXCLUSIVE SOFTWARE LICENSE AGREEMENT
------------------------------------
THIS SOFTWARE LICENSE AGREEMENT ("Agreement") is made and entered into as
of June 1, 1995, ("Effective Date") by and between CORNELL RESEARCH FOUNDATION,
INC. (hereinafter "FOUNDATION"), a corporation incorporated under the laws of
the State of New York having its principal place of business at 20 Thornwood
Drive, Suite 105, Ithaca, New York 14850, and WHITE PINE SOFTWARE, INC.
(hereinafter "LICENSEE") a corporation incorporated under the laws of the State
of Delaware having its principal place of business at 40 Simon Street, Suite
201, Nashua, New Hampshire 03060-3043.
W I T N E S S E T H T H A T:
------------------------------
WHEREAS, certain computer software, referred to herein as "University
--------
Software" and also known as "CU-SeeMe," which provides the user with desk-top
video conferencing capability was developed at Cornell University by the Cornell
Information Technologies ("CIT") organization and in which Cornell University
has intellectual property rights including copyright and trademark rights; and
WHEREAS, FOUNDATION represents that it is assignee of the above-identified
--------
intellectual property rights and has the right to grant licenses under said
rights; and
WHEREAS, FOUNDATION intends to distribute the University Software to the
--------
public in various ways, including licensing for the purpose of developing a
commercial, revenue generating version of the University Software; and
WHEREAS, LICENSEE is desirous of securing an exclusive license for the
--------
purpose of the commercial development of the University Software through both
the development and
-1-
<PAGE>
CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE TERM "[REDACT]" DENOTES
SUCH OMISSIONS.
sale of end user software and the development, sublicensing and support of a
version of the University Software to enable other companies to produce end user
software; and
WHEREAS, FOUNDATION is willing to grant a license in said intellectual
--------
property to LICENSEE upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the covenants and obligations
---------------
hereinafter set forth, the Parties hereto hereby agree as follows:
SECTION 1
DEFINITIONS
-----------
The following definitions will apply throughout this agreement:
1.1 "University Software" shall mean the computer software code, developed
---------------------
at Cornell University known as CU-SeeMe and described in Exhibit "A" attached
-----------
hereto, in both source code and executable code forms and all Documentation
relating thereto.
1.2 "Licensed Commercial Product" shall mean any software product sold by
-----------------------------
LICENSEE or a sublicensee which incorporates University Software, either
unmodified or reengineered by LICENSEE.
1.3 "Licensed Trademark" shall mean CU-SeeMe, including applications or
--------------------
registrations thereof covered by Licensed Commercial Product.
1.4 "Licensed End User Software" shall mean any Licensed Commercial
----------------------------
Product which is a proprietary software program in executable code form,
developed and commercialized by LICENSEE and/or its sublicensees.
-2-
<PAGE>
CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE TERM "[REDACT]" DENOTES
SUCH OMISSIONS.
1.5 "Documentation" shall mean any written materials, including, without
---------------
limitation, reference manuals, network accessible information, release notes and
help files, which FOUNDATION may provide from time to time relating to the
University Software.
1.6 "License Year" shall mean the twelve (12) month period beginning on
--------------
December 1 of each successive year. The first License Year shall be the
extended year ending November 31, 1996.
1.7 "Major Release" shall mean a major enhancement of the University
---------------
Software or Licensed Commercial Product, which shall be identified with an
integer version number e.g., "Release 2.0."
1.8 "Maintenance Release" shall mean an update to an existing Major
---------------------
Release that corrects documented problems or adds minor features and is
identified by a decimal integer appended to the Major Release number, e.g.,
"Release 2.1."
1.9 "LICENSEE" shall mean the above named company and any of its
----------
affiliates in which it owns or controls at least 50% of the voting stock.
1.10 "Net Sales Price" shall mean the gross amount of money billed by
-----------------
LICENSEE to its customers and actually collected by Licensee on sale, lease or
use of Licensed Commercial Product and/or product which employs the Licensed
Trademark, less: (1) domestic or foreign sales, use, personal property or
similar taxes, (2) export and import duties, agents' fees and freight, (3) trade
and/or quantity discounts; (4) returns and allowances; and (5) retroactive price
reductions.
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1.11 "Licensee Distributors" shall mean third parties placed as agents of
and under contract by LICENSEE to market, distribute, sell and support, on
behalf of LICENSEE, Licensed Commercial Products to end users.
SECTION 2
SOFTWARE AND KNOW HOW LICENSE GRANT
-----------------------------------
2.1 Rights in University Software Copyright. Subject to the terms and
---------------------------------------
conditions of this Agreement, FOUNDATION hereby grants to LICENSEE an exclusive
(even as to FOUNDATION), worldwide license under its copyright rights in the
University Software for the purpose of developing, modifying, supporting,
marketing, distributing, copying, making or having made, selling and
sublicensing Licensed Commercial Products, and to appoint Licensee Distributors.
LICENSEE's right to issue sublicenses is contingent on a continuing substantive
effort by LICENSEE to introduce its own Licensed End User Software as well as a
Licensed Commercial Product as evidenced by LICENSEE'S introduction and
maintenance in the marketplace of a Licensed Commercial Product.
2.2 Know-How. FOUNDATION agrees to furnish to LICENSEE technical know-how
--------
in FOUNDATION's possession relevant to the University Software and the
manufacture of Licensed Commercial Product. Any appropriate documentation
relating to that know-how in FOUNDATION's possession will be provided to
LICENSEE, subject to the provisions herein below relating to confidentiality.
(See 6.1 "Confidentiality"). Foundation hereby grants to LICENSEE an exclusive,
worldwide license to use such know-how for purposes of developing, enhancing,
supporting and manufacturing Licensed Commercial Products.
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2.3 University Rights in LICENSEE Products. LICENSEE agrees to provide
--------------------------------------
and hereby grants to FOUNDATION and Cornell University a royalty free,
perpetual, irrevocable, unrestricted license to those portions of the
reengineered Licensed Commercial Product source code only as may be required to
maintain basic compatibility and interoperability with the University Software.
LICENSEE agrees to provide FOUNDATION and Cornell University with royalty
free site licenses for the use of all LICENSEE Licensed End User Software on
Cornell University campuses. Such Licensed End User Software and its
Maintenance and Major Releases shall be delivered to CIT by transfer over the
Internet or by disk within thirty (30) days of the first commercial shipment of
the Licensed End User Software. LICENSEE agrees to provide to FOUNDATION and
Cornell University, copies of all product documentation related to such Licensed
End User Software at LICENSEE's cost; or, at FOUNDATION's option, the machine
readable sources required to produce such documentation locally.
2.4 Proprietary Rights. LICENSEE agrees that the University Software is
------------------
and shall remain the sole property of and proprietary to FOUNDATION. Except for
the rights granted LICENSEE herein, nothing in this Agreement shall diminish or
extinguish these rights and no title to or ownership of the University Software
is transferred to LICENSEE hereby. FOUNDATION agrees that all modifications,
enhancements and alterations made by LICENSEE to the University Software shall
be and remain the sole property of and proprietary to LICENSEE. Except for the
rights granted FOUNDATION and Cornell University herein, nothing in the
Agreement shall diminish or extinguish these rights and no
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title to or ownership of such modifications, enhancements and alterations are
granted hereby to FOUNDATION.
2.5 Retained Rights. Subject to the notification requirements in Section
---------------
4.3 ("Maintenance and Major Releases") below, FOUNDATION reserves the right on
behalf of Cornell University to issue licenses, Maintenance Releases and Major
Releases of the University Software to third parties as not-for-profit
"freeware," as illustrated in Exhibit "B". At FOUNDATION's sole discretion,
-----------
software received from third parties by CIT may be incorporated into University
Software. Provided no obligation of FOUNDATION or Cornell University to a third
party would be violated, such software incorporated into the University Software
shall be provided to LICENSEE in the course of future Maintenance Releases or
Major Releases.
Nothing in this Agreement shall prohibit Cornell University from using
significant portions of the University Software in future projects and
activities which may result in commercial products or services separate and
distinct from University Software which may be licensed by FOUNDATION to third
parties, provided that such products or services are no directly competitive
with any Licensed Commercial Product. FOUNDATION agrees to provide LICENSEE
with prior written notice of each such usage of the University Software.
SECTION 3
TRADEMARK LICENSE GRANT
-----------------------
AND
---
RELATED LICENSEE OBLIGATIONS
----------------------------
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3.1 Rights in Licensed Trademark. FOUNDATION hereby grants to LICENSEE
----------------------------
the right to use the Licensed Trademark in relation to Licensed Commercial
Products, and Licensed End User Software and to sublicense Licensee Distributors
the same right to use the Licensed Trademark but only so long as this Agreement
remains in force and LICENSEE is in good standing thereunder and further
provided that Licensed Commercial Product is manufactured and packaged in
accordance with the standards, specifications, and instructions approved by
FOUNDATION; distributed consistently with sales promotion procedures; and
utilizes materials satisfactory to FOUNDATION. A sample of each item of
Licensed Commercial Product, as well as all of the packaging and promotional
material to be utilized therewith, will be sent to FOUNDATION, or otherwise made
available to FOUNDATION, in accordance with its instructions, prior to
distribution. If the sample is not approved of by FOUNDATION, then FOUNDATION
will use reasonable efforts to notify LICENSEE to that effect in writing within
five (5) business days following receipt of the item and LICENSEE will forthwith
make corrections to correspond with changes in construction, quality, or design
suggested by FOUNDATION. FOUNDATION's failure to so respond within such five
(5) day period shall not be deemed approval for purposes of the submission in
question.
3.2 Exclusivity. The Licensed Trademark shall be used by LICENSEE and
-----------
Licensee Distributors only in connection with the sale and distribution of
Licensed Commercial Product, and on no other merchandise and for no other
purpose.
3.3 Restrictions. LICENSEE hereby agrees that it will not manufacture,
------------
sell, or distribute Licensed Commercial Product except under the Licensed
Trademark. The Parties
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agree that the Licensed Trademark shall not be used with products based on
portions of Licensed Commercial Product which are not capable of providing
desktop videoconferencing capability. LICENSEE will also be permitted to use
its house mark in relation to Licensed Commercial Products, including use on
packaging and promotional material, provided that its use does not diminish the
distinctiveness of the Licensed Trademark, and provided further that all forms
of its use receive the prior written approval of FOUNDATION, which approval will
not be unreasonably withheld. LICENSEE will submit proposed packaging and
promotional material to FOUNDATION for approval. FOUNDATION shall make
reasonable efforts to notify LICENSEE in writing within five (5) business days
following receipt of the item. FOUNDATION's failure to so notify Licensee
within such five (5) business day period shall not be deemed approval for
purposes of the submission in question.
3.4 Limitations. FOUNDATION hereby grants to LICENSEE only those rights
-----------
as FOUNDATION now or may in the future have to the Licensed Trademark and
FOUNDATION makes no representation hereunder with respect to the ownership of
the Licensed Trademark. Any use by LICENSEE of the Licensed Trademark will
inure to the benefit of FOUNDATION.
3.5 Proprietary Rights. LICENSEE will not acquire any rights to the use
------------------
of the Licensed Trademark, or any variation thereof, or any other means of
selling, or distributing Licensed Commercial Products through the use by
LICENSEE during the terms of this Agreement of the Licensed Trademark alone or
in combination with any other trademark, design, or name. LICENSEE agrees that
upon termination or expiration of the term of this Agreement, or termination or
expiration of any extension thereof, for any reason whatsoever,
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LICENSEE will forthwith discontinue use of the Licensed Trademark; thereafter,
LICENSEE will no longer use, or have the right to use, the Licensed Trademark or
any confusingly similar variation thereof, or any other means of identification
used by FOUNDATION or Cornell University, whether in trademarks, names, designs,
or otherwise, or whether alone or in combination with any other trademark,
design, or name whatsoever in a manner which infringes the trademark rights of
FOUNDATION or Cornell University. LICENSEE agrees that it does not acquire,
under this Agreement or otherwise, the right to use the Licensed Trademark, or
any trademark rights, or any other rights in or to the Licensed Trademark,
except as specifically granted in this Agreement.
3.6 Sublicenses. Where LICENSEE sublicenses a third party to manufacture
-----------
Licensed End User Software, FOUNDATION will grant and agrees to not
unreasonably withhold from such sublicensee a reasonable trademark license
sufficient to accomplish the purposes of the sublicense agreement.
3.7 Foreign Trademarks. FOUNDATION shall seek, at its own expense,
------------------
trademark registration of the Licensed Trademark in the United States, United
Kingdom, France, Germany and Japan. FOUNDATION shall provide LICENSEE with
copies of all applications, office actions and correspondence relating to such
registrations. FOUNDATION agrees to cause applications for registrations of the
Licensed Trademark to be filed in the aforementioned countries with sixty (60)
days following execution of this Agreement. LICENSEE shall seek, at its own
expense and in the name of FOUNDATION, trademark protection in any country,
other than those described herein above, in which LICENSEE develops,
manufactures, markets, sells, or sublicenses Licensed Commercial
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Product and in which the Parties agree that sufficient business reasons exist to
warrant seeking trademark protection.
SECTION 4
SUPPORT AND DEVELOPMENT
-----------------------
4.1 Basic Support Service. The Parties will maintain parallel engineering
---------------------
efforts; by FOUNDATION through CIT to enhance University Software and by
LICENSEE to enhance Licensed Commercial Product. Each Party shall provide
technical support to the other to maintain the compatibility and
interoperability of University Software and Licensed Commercial Product.
Support will be provided through telephone and electronic consultation during
the normal business hours of the Party providing support, and shall be conducted
so as to cause minimum disruption of the Party providing support. Each party
shall bear its own expenses in complying with this Section.
4.2 Continued Development. The Parties agree to maintain the respective
---------------------
commitments to continued development and support of University Software and
Licensed Commercial Product, in accordance to the Staffing Commitments described
in Exhibit "C". Neither Party shall have responsibility for or control of the
-----------
projects and priorities of the other Party. Each Party agrees to submit to the
other on a semi-annual basis a written report, via electronic mail, of the
status of its staffing commitment. The format of said semi-annual written
report shall be developed by LICENSEE and the report submitted to CIT within six
(6) months of the Effective Date of this Agreement. Within thirty (30) days of
the receipt of said report, CIT shall provide a similar report in the same
format to LICENSEE.
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Each Party agrees, whenever possible, to provide ninety (90) days written notice
of an anticipated failure to meet its commitment. Each Party further agrees to
notify the other in writing within thirty (30) days of the occurrence of an
event that is anticipated to have a major impact on the development schedule,
such as a long term reduction in staffing.
4.3 Maintenance and Major Releases. The Parties agree that Maintenance
------------------------------
and Major Releases will be engineered so as to maintain compatibility and
interoperability between University Software and Licensed Commercial Product.
Each Party agrees to provide to the other, at no cost, all information required
to maintain such compatibility and interoperability. Each Party agrees to use
reasonable efforts to notify the other in advance of all Maintenance and Major
Releases. LICENSEE agrees to provide to CIT, in advance of distribution to any
third party, the executable code for all Maintenance and Major Releases of
Licensed Commercial Product which may affect compatibility and interoperability
with University Software. LICENSEE agrees to use reasonable efforts to assist
CIT in testing Maintenance and Major Releases of Licensed Commercial Product.
FOUNDATION agrees to provide to LICENSEE all executable code and source code for
Maintenance and Major Releases of University Software.
SECTION 5
PAYMENTS
--------
5.1 License Fee. LICENSEE agrees to pay FOUNDATION a non-refundable
--- -----------
license fee, due upon signing, of [redact]. This license fee shall be
considered an initial payment as consideration for an exclusive license and not
an advance against future royalties.
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5.2 Royalties and Fees.
------------------
A. LICENSEE Products
-----------------
In each License Year, LICENSEE agrees to pay a royalty of: [redact] of the
Net Sales Price actually collected by LICENSEE on sale of the first [redact]
copies of LICENSEE's Licensed Commercial Product; [redact] of the Net Sales
Price actually collected by LICENSEE on the next [redact] copies of LICENSEE's
Licensed Commercial Product; and [redact] of the Net Sales Price actually
collected by LICENSEE on all additional copies of LICENSEE's Licensed Commercial
Product. The royalties stated in this Section 5.2A apply only to LICENSEE
branded product sold under a commercial end user license directly to end users
by LICENSEE or Licensee Distributors.
B. Sharing of Sublicensing Income
------------------------------
1. Royalties - Where LICENSEE issues a sublicense to manufacture Licensed
Commercial Product, LICENSEE will pay FOUNDATION [redact] of royalties actually
collected by LICENSEE. The royalties stated in this Section 5.2B apply only to
all copies of Licensed Commercial Product sold other than those described in
Section 5.2A above.
2. Initial Fees - Initial fees from a sublicensee shall be [redact]
between FOUNDATION and LICENSEE, with the exception of payments received by
LICENSEE for engineering services performed to meet a sublicensee's
specifications. Such payments shall be retained by LICENSEE and shall not be
subject to the sharing provisions of this Agreement. Refer to Section 5.6
("Accounting and Payment Schedule").
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3. Other Considerations - Engineering or other non-monetary
considerations, such as the rights to proprietary software, received from a
sublicensee shall be provided to FOUNDATION under the same terms as to LICENSEE.
C. Annual Minimum Royalty
----------------------
1. Royalties - LICENSEE agrees to make annual minimum royalty payments to
FOUNDATION as follows:
License Year Minimum Royalty
------------ ---------------
1 [redact]
2 [redact]
3 and subsequent [redact]
Such payments shall be per License Year and shall be cumulative from quarter to
quarter, but not from year to year. In any final year, the minimum royalty
payments shall be prorated for the fraction of the Licensed Year the Agreement
was in existence.
2. Sublicense Royalties - The annual minimum royalty payments listed above
shall include an amount derived from sublicenses which shall be no less than the
following:
License Year Minimum From Sublicenses
------------ ------------------------
1 [redact]
2 [redact]
3 and subsequent [redact]
D. Minimum Royalty per Copy
------------------------
Notwithstanding anything set forth hereinabove, FOUNDATION's royalty
income per copy of Licensed End User Software shall never be less than [redact]
on sales of Licensed Commercial Product made under Section 5.2A above. No
minimum royalty per copy shall apply to sales made under the provisions of
section 5.2B above.
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5.3 Stock Warrant. In addition to the initial monetary consideration,
-------------
subject to the approval and acceptance process described immediately below,
FOUNDATION will receive a common stock warrant in White Pine Software, Inc., in
the amount of two hundred thousand (200,000) shares with a strike price of $.30
per share. The warrant will have an expiration date which is the earlier of (a)
four (4) years from the Effective Date of this Agreement, or (b) the date of
acceptance for registration of White Pine common shares for a public sale.
FOUNDATION and LICENSEE each have a right respectively to "put" or "call" the
redemption of the warrant for one hundred thousand dollars ($100,000) after
ninety (90) days written notice to the other Party at any time after eighteen
(18) months from the Effective Date of this Agreement; provided FOUNDATION may
exercise the warrant at any time during the 90-day period, if LICENSEE calls the
warrant. The stock warrant shall not be registered for public sale or trade. The
warrant will contain no antidilution provisions except in the event of a forward
or reverse stock split.
Equity positions held by FOUNDATION must be approved by at least the
Executive Committee of FOUNDATION's Board of Directors, after completion of any
conflict of interest review process deemed appropriate by Cornell University.
Within six (6) months after the Effective Date of this Agreement, FOUNDATION may
elect to receive payment of twenty-five thousand dollars ($25,000) in lieu of
the stock warrant. Such payment shall be payable to FOUNDATION within thirty
(30) days of FOUNDATION's written notice to LICENSEE of its election.
FOUNDATION's right to elect alternative payment in lieu of the stock warrant
shall expire six (6) months from the Effective Date of this Agreement.
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5.4 Product Discounts. During the term of this Agreement, LICENSEE agrees
-----------------
to provide FOUNDATION and Cornell University with all White Pine software
products not related to Licensed Commercial Product at [redact] discount from
the published list price when ordered by a single, designated representative of
Cornell University.
5.5 Reduction of Minimums. In the event that FOUNDATION fails to meet its
---------------------
staffing commitment described in Exhibit "C", the annual minimum royalty
----------
described in Section 5.2 ("Royalties and Fees") shall be reduced at the rate of
[redact] per person-year, pro-rated. In accordance with section 4.2 above,
FOUNDATION shall notify LICENSEE of staffing reductions.
5.6 Accounting and Payment Schedule. Payment, reporting and financial
-------------------------------
accounting shall be on a quarterly basis. LICENSEE's royalty reporting and
payment obligations shall begin six (6) months after the Effective Date of this
Agreement and continue as long as royalties are generated. Royalty reports and
payments shall be made within thirty (30) days of the beginning of each quarter
after the initiation of LICENSEE's royalty reporting and payment obligations.
Each royalty payment shall be the greater of: [redact] of the annual minimum
royalty for the current License Year, or [redact]. Notwithstanding the
preceding sentence, if total actual royalties paid to FOUNDATION during a
License Year equal or exceed the annual minimum royalty for that License Year,
then LICENSEE shall pay the actual royalty amount. LICENSEE quarterly reports
shall include a written report of the sales of Licensed Commercial Product
(including a negative report if appropriate) and will accompany an appropriate
payment of royalty or minimum royalty due for such period.
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LICENSEE will keep accurate records, certified by it, showing the
information by which LICENSEE arrived at a royalty determination and will permit
a person appointed by FOUNDATION and acceptable to LICENSEE (the "Auditor") to
make such inspection of said records as may be necessary to verify royalty
reports made by LICENSEE. LICENSEE approval of FOUNDATION's choice of the
Auditor shall not be unreasonably withheld and shall be considered to have been
granted if LICENSEE does not respond with an objection within ten (10) business
days of receipt of the name of a prospective Auditor. In the event that the
Auditor's inspection reveals an overpayment of royalties, such overpayment shall
be returned to LICENSEE within thirty (30) business days or credited toward the
next scheduled payment(s) of royalties, at LICENSEE's option. In the event of
an underpayment of royalties of five per cent (5%) or less, the amount of the
underpayment shall be paid to FOUNDATION within thirty (30) business days or
added to the next scheduled royalty payment, at FOUNDATION's option. In the
event of underpayment greater than five percent (5%), LICENSEE agrees to also
pay to FOUNDATION the reasonable fees of the Auditor and interest at the prime
rate as published in The Wall Street Journal "Money Rates" column plus four (4%)
percent.
-----------------------
from the original royalty due date.
Conversion from foreign currencies, if any, shall be based upon the
conversion rate averaged over the period the royalty is due.
5.7 General Payment Terms. FOUNDATION reserves the right to charge
---------------------
interest on past due amounts at an annual rate equal to the prime rate as
published in The Wall Street Journal, plus four (4%) percent. In the event that
-----------------------
FOUNDATION is required to take legal action to collect unpaid amounts and
FOUNDATION is successful in such action,
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LICENSEE shall reimburse all costs and reasonable attorneys' fees incurred by
FOUNDATION in such collection.
5.8 Taxes. Prices and fees are exclusive of, and LICENSEE is responsible
-----
for, all applicable sales, use, personal property, excise or similar taxes or
export and import taxes, duties and charges, however designated. Consequently,
in addition to the payments due hereunder, the amount of any present or future
sales, use, personal property, or similar tax and export and import taxes,
duties and charges which become due based on the transactions provided for in
this Agreement shall be paid directly by LICENSEE or reimbursed by the LICENSEE
to FOUNDATION, as necessary.
SECTION 6
OTHER MATTERS
-------------
6.1 Confidentiality. Each Party hereto covenants that it will keep
---------------
confidential any identified and properly marked confidential information
disclosed in writing and accepted by the designated representative of the
recipient Party, relating to University Software or Licensed Commercial Product
or to the other business, finances, marketing or technical information of the
other Party, or any part thereof. The recipient Party agrees to take the same
degree of care in protecting such confidential information as it uses to protect
its own confidential information from any use, disclosure or copying, except for
use, disclosure or copying for the following purposes: (i) developing Licensed
End User Software, (ii) obtaining any necessary governmental approvals, or (iii)
otherwise exercising its rights or satisfying its obligations as contemplated by
this Agreement. Confidential information of a
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Party shall not include information which (a) is or becomes available to the
public through no fault of the other Party, (b) is disclosed to the other Party
by a third party who had lawfully obtained such information and without a breach
of such third party's confidentiality obligations, (c) is developed
independently by the other Party, (d) the Party has given written permission to
the other Party to not keep confidential, or (e) is requested or required to be
disclosed by a court or governmental agency or authority, provided the recipient
will provide the disclosing party with written notice of such request(s) or
order(s) so the disclosing party may seek a protective order or other
appropriate remedy.
6.2 Injunctive Relief. In the event of a breach of any of the provisions
-----------------
of Section 6.1 ("Confidentiality") hereof, the breaching Party agrees that the
non-breaching Party will not have an adequate remedy at law, and accordingly the
Parties hereto agree that, in addition to any other available legal or equitable
remedies, the non-breaching Party is entitled to seek injunctive relief against
such breach.
6.3 Duty of Diligence. LICENSEE shall exercise due diligence for the
-----------------
duration of the term of this Agreement to develop, manufacture and market its
own Licensed Commercial Product and Licensed End User Software and to sublicense
third parties to manufacture and market Licensed End User Software in accordance
with this Agreement and illustrated in Exhibit "B". LICENSEE further agrees to
-----------
maintain quality control over Licensed Commercial Product and generally attend
to proper, safe, fair, lawful and reasonable development and exploitation of the
market to the extent required to meet the annual minimum royalty described in
Section 5.2 ("Royalties and Fees"). Failure of
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LICENSEE to comply with the provisions of this section shall be considered a
material breach of this Agreement.
6.4 Reporting on Diligence. As an attachment to each quarterly report,
----------------------
LICENSEE agrees to provide FOUNDATION with an abstract of each sublicense
agreement concluded since the last such report. Upon written request, LICENSEE
agrees to provide FOUNDATION with a copy of each sublicense agreement. LICENSEE
agrees to provide FOUNDATION with a written report at the end of each License
Year, stating the progress made against meeting its obligations of duty of
diligence, and its plans and goals for advancement in the next License Year.
6.5 Copyright Protection. LICENSEE shall not publish or distribute
--------------------
University Software in a manner which would jeopardize or preclude protection
thereof under applicable copyright laws, or would materially adversely affect
the trade secret status of University Software or Licensed Commercial Product;
provided that LICENSEE shall have no obligation to procure copyright
registration or other intellectual property registrations for the benefit of the
FOUNDATION.
6.6 Reverse Compiling. LICENSEE shall not permit others to attempt to
-----------------
create, by reverse compiling or disassembling or otherwise, any part of the
source program for University Software from the object code or from other
information made available to LICENSEE.
6.7 Copies. LICENSEE may make machine-readable copies of University
------
Software and copies of the Documentation and other documents as necessary for
the use authorized in this Agreement. All copies, whether in machine readable,
printed, or other
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form, are part of University Software and LICENSEE must include on all such
material FOUNDATION'S notice of its proprietary rights in the form set forth in
University Software as delivered to LICENSEE.
6.8 Arbitration and Jurisdiction. All disputes over the meaning and
----------------------------
interpretation of this Agreement shall be resolved by conciliation and mediation
and, if mediation is unsuccessful, then disputes shall be finally settled by an
Arbitrator selected by FOUNDATION and LICENSEE. If FOUNDATION and LICENSEE
cannot agree on an Arbitrator, then disputes shall be resolved by an Arbitration
Panel comprising one arbitrator appointed by FOUNDATION, one arbitrator
appointed by LICENSEE, and a Chairman of the Arbitration Panel appointed by the
first two arbitrators. Any such arbitration proceeding shall be conducted in
accordance with generally accepted arbitration rules; shall be held in the State
of New York, unless otherwise agreed by the Parties; and judgment upon the
arbitration award may be entered in any court having jurisdiction.
In order to initiate procedures for dispute resolution by conciliation,
mediation and arbitration either Party may give written notice to the other of
intention to resolve a dispute, and absent satisfactory resolution, then to
arbitrate. Such notice shall contain a statement setting forth the nature of
the dispute and the resolution sought. If, within thirty (30) days of such
notice a resolution, by conciliation between the Parties themselves or by
mediation, has not been achieved to the satisfaction of both Parties, then
within sixty (60) days from said written notice an Arbitrator or Arbitration
Panel shall be appointed with an arbitration schedule satisfactory to both
Parties.
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FOUNDATION reserves the right and power to proceed with direct judicial
remedies against LICENSEE without conciliation, mediation or arbitration for
breach of the royalty payment and sales reporting provisions of this Agreement
after giving written notice of such beach to LICENSEE followed by an opportunity
period of thirty (30) days in which to cure such breach. In collecting overdue
royalty payments and securing compliance with reporting obligations, FOUNDATION
may use all judicial remedies.
6.9 Publicity. It is anticipated that the existence of this Agreement
---------
will be reasonably announced and that LICENSEE wishes to advertise the existence
of this Agreement, that LICENSEE has been licensed to and will sublicense the
rights to University Software, and that LICENSEE will sublicense and support
Licensed Commercial Product. LICENSEE agrees that the appropriate copyright
notices and trademark designations, as supplied by FOUNDATION, will be included
within all distributions of Licensed Commercial Product. LICENSEE agrees to use
only the name "CU-SeeMe" and the associated logo to identify University Software
and Licensed Commercial Product in accordance with the terms of the trademark
provisions of this Agreement, but may include LICENSEE's name and marks as
provided in Section 3. LICENSEE agrees that it will not use the indicia or
names of FOUNDATION or of Cornell University or any of their personnel in
advertising, promotion, or labeling of products or the raising of capital,
privately or publicly, without prior written approval of FOUNDATION. LICENSEE
shall submit all affected advertising copy or other material to FOUNDATION.
FOUNDATION shall endeavor to respond to LICENSEE's request within five (5)
business days. If the item is not approved by FOUNDATION, then LICENSEE shall
be so notified in writing within
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such five (5) day period. FOUNDATION's failure to so notify LICENSEE within
such five (5) day period shall not be deemed approval for purposes of the
submission in question. The Parties agree that neither Party will represent
itself as the agent of the other. Nothing in this agreement shall be construed
as a requirement on either Party to advertise.
6.10 University Software License. LICENSEE agrees to offer sublicenses to
---------------------------
University Software in source code form under a "Nominal-Cost NonCommercial
Redistribution License," software to be supplied to sublicensees by FOUNDATION,
by which the source code shall be provided under the following terms: (i) only
executable software will be distributed by the sublicensee, (ii) the sublicensee
shall agree to realize no profit or gain, either direct or indirect, from the
use or distribution of University Software, (iii) modifications and enhancements
and related documentation developed and distributed by the sublicensee will be
returned to FOUNDATION and LICENSEE under a no cost, royalty free, perpetual,
irrevocable, unrestricted license, (iv) the sublicensee shall agree to freely
distribute, via the Internet the executable code for the University Software as
modified by the sublicensee; and (v) LICENSEE shall be entitled to charge
sublicensees a reasonable annual administrative charge not to exceed [redact] in
connection with granting such sublicenses. Such charge shall be exclusively for
covering administrative expenses and shall not be subject to the royalty or fee
sharing provisions of this Agreement, and shall not be considered to be customer
support or service. LICENSEE further agrees to monitor the sublicensee's
compliance with the above terms and to report to FOUNDATION any failure of a
sublicensee to comply. Additionally, LICENSEE may, at its own expense, enforce
the
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provisions of all such sublicenses and FOUNDATION agrees to cooperate wherever
possible with LICENSEE in any enforcement action taken by LICENSEE.
LICENSEE further agrees to offer to third parties sublicenses for the use
of unmodified University Software source code for the development, manufacture
and marketing of Licensed End User Software. Such sublicenses shall be offered
under reasonable terms and LICENSEE agrees to use the same care and
consideration in negotiating such sublicenses as it uses in sublicensing
Licensed Commercial Product. (See Exhibit "B".)
-----------
6.11 Delivery of University Software. LICENSEE agrees to accept
-------------------------------
University Software, currently in its possession under an existing No Cost
Limited Internal Use Only License agreement, as delivery of University Software
under the terms of this Agreement. From time to time, FOUNDATION shall deliver
to LICENSEE University Software (by file transfer over the Internet) and such
other diskettes, tapes, manuals, routines, development materials and other
information related to University Software, as FOUNDATION deems appropriate for
the purposes of this Agreement.
SECTION 7
FOUNDATION'S REPRESENTATIONS AND WARRANTIES
-------------------------------------------
7.1 FOUNDATION's Warranty. FOUNDATION hereby represents and warrants to
---------------------
LICENSEE that, to the best of FOUNDATION's present knowledge, FOUNDATION is the
owner of the University Software, Documentation, Know-How and Licensed
Trademark, or otherwise has the full right to grant to LICENSEE the license to
use the University Software, Documentation, Know-How and Licensed Trademark as
set forth in
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this Agreement without violating any rights of any third party, including
without limitation, the University of Illinois or the National Science
Foundation (or any person claiming by, through or under either such party), and
there is currently no actual or threatened suit or claim by any such third party
based on an alleged violation of any right by FOUNDATION.
SECTION 8
WARRANTY
--------
8.1 EXCLUSION OF IMPLIED WARRANTIES. EXCEPT AS MAY BE SPECIFICALLY
-------------------------------
PROVIDED FOR IN THIS AGREEMENT, ANY AND ALL OTHER WARRANTIES AS TO THE PRODUCT
AND THE DOCUMENTATION, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE OR USE, ARE SPECIFICALLY EXCLUDED, WAIVED AND
NEGATED. FOUNDATION MAKES NO WARRANTIES AS TO THE ACCURACY OR COMPLETENESS OF
THE DOCUMENTATION OR THAT THE PRODUCT IS ERROR FREE.
8.2 LIMITATION OF LIABILITY.
-----------------------
(a) NEITHER FOUNDATION NOR ANYONE ELSE WHO HAS BEEN INVOLVED IN THE
CREATION, PRODUCTION OR DELIVERY OF UNIVERSITY SOFTWARE SHALL BE LIABLE FOR ANY
INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, SUCH AS, BUT NOT LIMITED TO, LOSS
OF ANTICIPATED PROFITS OR BENEFITS, LOSS RESULTING FROM THE USE OF UNIVERSITY
SOFTWARE OR ARISING OUT OF ANY BREACH OF ANY
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WARRANTY. FOUNDATION SHALL HAVE NO LIABILITY FOR ANY INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES FOR ANY CLAIM OF ANY KIND OR NATURE, INCLUDING, BUT NOT
LIMITED TO, FOUNDATION'S NEGLIGENCE, ARISING OUT OF OR IN ANY WAY RELATED TO
THIS AGREEMENT, OR IN CONNECTION WITH ANY USE OR OTHER EMPLOYMENT OF ANY
UNIVERSITY SOFTWARE LICENSED TO LICENSEE HEREUNDER, WHETHER SUCH LIABILITY
ARISES FROM ANY CLAIM BASED UPON CONTRACT, WARRANTY, OR OTHERWISE, WHICH MAY BE
ASSERTED BY LICENSEE.
(b) FOUNDATION'S LIABILITY TO LICENSEE FOR DIRECT LOSS OR DAMAGE WHETHER IN
NEGLIGENCE, CONTRACT OR OTHERWISE ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT, OR THE OPERATION OR FAILURE TO OPERATE OF UNIVERSITY SOFTWARE, SHALL
IN ANY EVENT BE LIMITED TO THE SUM OF THE MONIES AND THE VALUE OF THE OTHER
CONSIDERATION DESCRIBED IN SECTION 5.3 HEREOF PAID TO FOUNDATION BY LICENSEE
UNDER THIS AGREEMENT. (See 8.4 below).
8.3 Notification. Each Party shall notify the other in writing of any
------------
claim or other legal proceeding involving University Software or Licensed
Commercial Product, promptly after it becomes aware of any such claim or
proceeding. Each Party will also report promptly to the other all claimed or
suspected failures of University Software or Licensed Commercial Product to
conform to the Documentation promptly after becoming aware of any such claimed
or suspected failure.
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8.4 Exclusive Remedies. LICENSEE'S exclusive remedies for any claims
------------------
against FOUNDATION arising out of this Agreement shall be limited to the
following, at the option of FOUNDATION: (a) replacement by FOUNDATION of
University Software with software that functions in a manner to avoid said
claims; (b) repair by FOUNDATION of University Software, by patch or work
around, so that it functions in a manner to avoid said claims; or (c) refund by
FOUNDATION of the monies and the value of the other consideration described in
Section 5.3 hereof paid by LICENSEE and received by FOUNDATION in respect of
University Software. LICENSEE acknowledges that this Section 8.4 limits its
remedies in the event that FOUNDATION has breached any of its obligations to
LICENSEE. WITHOUT LIMITING THE FOREGOING, FOUNDATION AND LICENSEE AGREE THAT IF
ANY REMEDY HEREUNDER IS DETERMINED TO HAVE FAILED OF ITS ESSENTIAL PURPOSE, ALL
LIMITATIONS AND EXCLUSIONS OF LIABILITY SET FORTH HEREIN SHALL REMAIN IN EFFECT.
SECTION 9
Term and Termination
--------------------
9.1 Term; Termination for Convenience. This Agreement shall take effect
---------------------------------
on the Effective Date and continue in effect for an initial term of three (3)
years and six (6) months, and automatically renew thereafter from year to year,
unless and until terminated by the either Party for cause, or by LICENSEE for
convenience on ninety days written notice prior to the next renewal date.
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9.2 Termination for Cause. The occurrence of any of the following events
---------------------
shall constitute a default under the terms of this Agreement:
(a) The default by LICENSEE in the payment of any amount due hereunder, if
any, after written notice of a thirty (30) day grace period to allow LICENSEE to
cure such default; or
(b) Any material breach of this Agreement by either party, after written
notice of a ninety (90) day grace period to allow the breaching party to cure
such breach, if such breach can be cured.
In the event that LICENSEE (i) fails to meet its staffing commitment
described in Exhibit "C", or (ii) fails to realize product introduction of a
-----------
Licensed Commercial Product within first eighteen (18) months after the
Effective Date of this Agreement, or (iii) fails to achieve the sublicense
minimums set forth in Section 5.2(C)(2), then FOUNDATION, at its option, shall
have the right to convert this Agreement to a non-exclusive agreement, provided
that such right of conversion shall be in lieu of termination of this Agreement.
9.3 Effect of Termination. If this Agreement is terminated: (i) the
---------------------
license granted hereunder shall be terminated; (ii) LICENSEE'S right to
distribute University Software and Licensed Commercial Product shall end ninety
(90) days after the termination date to enable LICENSEE to attempt to exhaust
its inventory of Licensed Commercial Products.
Notwithstanding any provisions herein to the contrary, following any
termination of this Agreement and for so long as thereafter (but not to exceed
twenty-four (24) months) as is necessary for LICENSEE to satisfy, and solely to
satisfy, its then existing contractual
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obligations for maintenance services to its end users, LICENSEE shall have a
limited license to use University Software solely for such purposes.
None of LICENSEE'S existing sublicenses to its end users for University
Software in the LICENSEE'S proprietary computer software application(s) shall be
affected by any termination of this Agreement and shall remain in full force and
effect until the end of their respective terms.
In addition to the injunctive relief of Section 6.2, ("Injunctive Relief")
should FOUNDATION willfully breach the provisions of Section 6.1,
("Confidentiality") , or should Licensee exercise its right to terminate this
Agreement for cause under Section 9.2(b) hereof, then in either such event, the
stock warrant provisions of Section 5.3 ("Stock Warrant"), if unexercised, shall
be automatically null and void.
After any termination, the fees and royalties set forth herein shall
continue to be paid by LICENSEE so long as revenues continue to result from
Licensed Commercial Product or Licensed Trademark.
9.4 No Damages for Termination. Except as expressly provided herein,
--------------------------
neither FOUNDATION nor LICENSEE shall be liable to the other for damage of any
kind, including, but not limited to, lost profits or incidental, punitive or
consequential damages, relative to termination of this Agreement.
9.5 Survival. Section 6.1, ("Confidentiality"), Section 7 ("FOUNDATION's
--------
Representations and Warranty") as well as LICENSEE'S obligations to pay
FOUNDATION all sums due hereunder, shall survive termination or expiration of
this Agreement, together with any other provisions necessary to implement the
overall intent of this Agreement.
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SECTION 10
Miscellaneous Provisions
------------------------
10.1 Headings. Headings in this Agreement are included solely for
--------
convenience of reference and are not to be considered part of this Agreement.
10.2 No Joint Venture. This is an Agreement between separate legal
----------------
entities and neither is the agent or employee of the other for any purpose
whatsoever.
10.3 Waiver. The failure of either Party to exercise any of its
------
rights under this Agreement or to require the performance of any term or
provision of this Agreement, or the waiver by either Party of such breach of
this Agreement, shall not prevent a subsequent exercise or enforcement of such
rights or be deemed a waiver of any subsequent breach of the same or any other
term or provision of this Agreement.
10.4 Validity. If any of the terms and provisions of this Agreement
--------
are invalid or unenforceable, such terms or provisions shall not invalidate the
rest of the Agreement which shall remain in full force and effect as if such
invalidated or unenforceable terms or provisions had not been made a part of
this Agreement. In the event this section becomes operative, the Parties hereto
agree to attempt to negotiate a settlement that carry out the economic intent of
the term(s) found invalid or unenforceable.
10.5 Force Majeure. If circumstances beyond the control of the
-------------
Parties shall temporarily make it impossible for either or both of them to
perform their agreements hereunder, then the principles of force majeure shall
apply and the rights and obligations of the Parties shall be temporarily
suspended during the force majeure period to the extent that such performance is
reasonably affected thereby.
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10.6 Notices. All notices, consents, waivers, approvals and other
-------
communications herein provided for shall be sent by receipted delivery service,
such as Federal Express, or delivered personally to the Parties at their
respective addresses as set forth on the first page of this Agreement or to such
other address as either Party shall give to the other Party in the manner
provided herein for giving notice.
10.7 Assignment. Neither Party may assign this Agreement without the
----------
written consent of the other Party, which consent shall not be unreasonably
withheld. Notwithstanding the preceding sentence, either Party may assign this
Agreement to any Party that acquires substantially all of such Party's stock or
assets relating to that portion of such Party's business that is related to the
subject matter of this Agreement.
10.8 Modification or Amendment. This Agreement contains the whole
-------------------------
Agreement between the Parties hereto concerning the subject matter hereof. Any
modification or amendment of any provision of this Agreement must be in writing,
signed by the Parties hereto and dated subsequent to the date hereof.
10.9 Laws Governing Agreement. This Agreement shall be construed
------------------------
in accordance with the laws of the State of New York.
10.10 Attorneys' Fees. In the event of any lawsuit or arbitration
---------------
proceeding arising under this Agreement, the prevailing Party in such proceeding
shall be entitled to recover from the losing Party, its reasonable costs and
attorneys' fees, whether or not such proceeding is prosecuted to judgment.
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IN WITNESS WHEREOF, the Parties hereto have duly executed this Software License
Agreement as of the Effective Date.
FOUNDATION
- ----------
CORNELL RESEARCH FOUNDATION, INC.
A New York Corporation
By:/s/ H. Walter Haeussler Date: June 8, 1995
-------------------------------- --------------
H. Walter Haeussler, Director
Patents & Technology Marketing
LICENSEE
- --------
WHITE PINE SOFTWARE, INC.
A Delaware Corporation
By: /s/ Howard R. Berke Date: June 13, 1995
-------------------------------- --------------
Howard Berke, President/
Chief Executive Officer
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Exhibit "A"
-----------
DESCRIPTION OF CU-SeeMe
"UNIVERSITY SOFTWARE"
CU-SeeMe was developed at Cornell University by the Cornell Information
Technologies (CIT) organization, partially under a cooperative agreement from
the National Science Foundation (NSF), and incorporating software from the
University of Illinois for processing audio information. The purpose of CU-
SeeMe is to make low cost desktop video conferencing available to Internet
users. NSF requested CIT to further develop the functionality to support
another NSF project, the Global Schoolhouse, an internationally recognized
demonstration project on the use of the Internet in K-12 education. The result
is a robust video conferencing system that provides interactive communication
between widely dispersed participants at a very modest price.
The software consists of two parts, desktop or client software and
reflector or server software. Currently there are two versions of the client,
one written for Apple's Macintosh operating system and one for Windows. The
reflector software runs on a Unix workstation. Both the desktop system and the
reflector system must be connected through an IP (Internet Protocol) network
such as a campus network or the Internet. The desktop system sends the audio
and video information to the reflector which makes the appropriate number of
copies and sends them out to the receiving desktop systems. The reflector may
also send this information to another reflector that, in turn, sends it to the
desktop systems involved in a conference. Currently, a reflector, or multiple
reflectors networked together, will support only one conference at a time.
Detailed information about CU-SeeMe is available over the Internet in
readme files accessible at:
ftp://cu-seeme.cornell.edu/pub/cu-seeme/....
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Exhibit "B"
-----------
METHODS OF DISTRIBUTION
OF
CU-SeeMe SOFTWARE
The following description is keyed to the Letter Labels (circled) in the
Illustration below. This description is intended to clarify the diagram and
does not supersede any term or condition of the Agreement itself.
A. Freeware Executables. FOUNDATION will continue to develop and distribute
--------------------
freeware executable versions of CU-SeeMe, by anonymous ftp via the Internet.
Permission to use or copy for any purpose and to redistribute the binary
executable (whole and unmodified) will be included in the copyright and
permissions notice on the software and in the documentation. Also included will
be the provision that no profit or gain, either director or indirect, shall be
realized from such redistribution.
B. PlugIn Software Development Kit (SDK). FOUNDATION will soon release an SDK
-------------------------------------
for CU-SeeMe PlugIn's for the Macintosh (a few months later for the PC).
PlugIn's are separately developed code modules that add functionality to CU-
SeeMe using a defined interface and linked into the application at load time.
The kit will be provided at no cast to developers, under Cornell copyright with
permission notices sufficient to enable PlugIn development. The SDK will
include documentation and example programs in source.
C. Ownership of PlugIn's. PlugIn's developed using the SDK will be the
---------------------
property of the developers, to do with what they will. Cornell will disclaim
all responsibility whatsoever for third-party PlugIn's.
D. No Cost Limited Internal Use Only License. FOUNDATION will grant a no cost
-----------------------------------------
license to source code of University Software for internal use only with limited
(up to 25 copies) internal-only binary distribution and use. FOUNDATION shall
notify LICENSEE in writing on a quarterly basis as to the identity of persons
who have been granted such licenses. Those who develop an enhancement to CU-
SeeMe under this license and want it generally distributed can give rights to
FOUNDATION who may, at its sole discretion, make it part of the University
Software. Alternatively, such software can be offered to LICENSEE on any basis
agreeable to LICENSEE and the offering party.
E. Nominal Cost Limited Redistribution License (NRL). LICENSEE will grant, a
-------------------------------------------------
license (supplied by FOUNDATION) to obtain University Software in source code,
to modify source and redistribute modified executables, shown at F, to all via
the Internet, for non-commercial purposes only, as further provided in Section
6.10 of the Agreement.
F. Redistribution of Licensed Software. Executable code of the software
-----------------------------------
developed under a Nominal Cost Limited Redistribution License will be made
freely available
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G. Commercial License to University Software. LICENSEE will offer a royalty
-----------------------------------------
bearing commercial sublicense for the binary or source code of the University
Software, not enhanced or modified by LICENSEE. The source code license will
provide for development and marketing of enhanced executables, but not for
further sublicensing of sources to University Software.
H. Commercial License to Enhanced or Modified Versions. LICENSEE will offer a
---------------------------------------------------
royalty bearing sublicense to sources to commercially enhanced versions of the
University Software. The license will provide for development and marketing of
enhanced executables, but not for further sublicensing.
I. Commercial Executable Products - Licensed End User Software. LICENSEE and
-----------------------------------------------------------
its commercial sublicensees will offer executable (binary) versions of CU-SeeMe
or of other products including CU-SeeMe technology under a variety of royalty
bearing arrangements, such as shrink-wrap distribution, site licensing, and any
appropriate commercial means.
Other Products. Though not diagrammed in the illustration, LICENSEE may, within
- --------------
the terms of this Agreement, choose to offer, or to sublicense others to offer a
variety of hybrid or other products, such as a commercial PlugIn SDK, an
Audio/Video engine, customized source/object packages with specialized API's,
and others.
B-2
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Illustration - "Licensing and Distribution of CU-SeeMe Software" (Exhibit B)
[Graphic: SCHEMATIC OF RELATIONSHIPS DESCRIBED IN EXHIBIT B ABOVE]
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Exhibit "C"
-----------
STAFFING COMMITMENTS
White Pine Software, Inc.
- -------------------------
For the duration of this Agreement, White Pine Software shall commit to the
assignment of the equivalent of six (6) full time software development
professionals to the development and support of CU-SeeMe. This commitment shall
include qualified software development professionals assigned to engineering,
product support and product marketing for Macintosh, Windows and Unix systems.
LICENSEE agrees to provide FOUNDATION with a list identifying each person
comprising its development team, and shall promptly provide FOUNDATION with
written notice of any change in such personnel, in accordance with the
provisions of section 4.2 of this Agreement.
Cornell Information Technologies
- --------------------------------
For the two year period from the Effective Date of this Agreement, Cornell
Information Technologies (CIT) will commit to the assignment of software
development professionals to the continued development of University Software
equivalent to eight person-years (average 4 people for 2 years). Equivalent
commitment shall include work contracted for, as well as the assignment of
personnel employed by CIT. FOUNDATION agrees to provide LICENSEE with a list
identifying each person comprising its development team, and shall promptly
provide LICENSEE with written notice of any change in such personnel, in
accordance with the provisions of section 4.2 of this Agreement.
C-1
<PAGE>
Exhibit 10.12
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK FOR WHICH THIS WARRANT IS
EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR QUALIFIED
UNDER THE SECURITIES LAWS OF ANY JURISDICTION. NONE OF SUCH SECURITIES MAY BE
SOLD, PLEDGED, HYPOTHECATED, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
WHITE PINE SOFTWARE, INC.
Stock Purchase Warrant
Number W-1 Right to Purchase 20,000 Shares of
Date of Issuance: July 31, 1996 Common Stock (subject to adjustment)
1. Warrant. For value received, CORNELL RESEARCH FOUNDATION, INC. (or
-------
registered assigns) is entitled, subject to the terms and conditions hereinafter
set forth, after the date hereof and prior to the Expiration Time (as defined in
Section 5), but not thereafter, to purchase 20,000 shares of Common Stock, $.01
par ("Common Stock"), of White Pine Software, Inc., a Delaware corporation (the
"Company"), from the Company for a purchase price of $3.00 per share, subject to
adjustment as provided for herein (the "Exercise Price").
2. Exercise.
--------
2.1. Exercise Period. The purchase rights represented by this Warrant
---------------
are exercisable at the option of the registered owner hereof in whole at any
time, or in part from time to time, within the period stated above; provided
that such purchase rights shall not be exercisable with respect to a fraction of
a share. The Company will not close its books for the transfer of this Warrant
or of any share of Common Stock issued or issuable upon the exercise of this
Warrant in any manner which interferes with the timely exercise of this Warrant.
2.2. Exercise Procedure.
------------------
(a) This Warrant will be deemed to have been exercised upon surrender
of this Warrant to the Company together with a completed and duly executed
subscription in the form attached hereto, and payment of the purchase price
for each share purchased either in cash or by certified or bank cashier's
check payable to the order of the Company (the "Exercise Date").
Certificates representing the shares so purchased shall be delivered to the
holder within ten days following the Exercise Date.
(b) In case of the purchase of less than all of the shares purchasable
under this Warrant, the Company shall cancel this Warrant upon the surrender
hereof and shall execute and deliver a new warrant of like tenor and date for
the balance of the shares purchasable hereunder. The date the Company
initially issues this Warrant will be deemed to be the "Date of Issuance" of
this Warrant regardless of the number of times new certificates representing
the unexpired and unexercised rights formerly represented by this Warrant are
issued.
(c) The Common Stock issuable upon the exercise of this Warrant will
be deemed to have been issued to the Purchaser on the Exercise Date, and the
Purchaser will be deemed for all purposes to have become the record holder of
such Common Stock on the Exercise Date.
<PAGE>
(d) The Company covenants and agrees that all shares to be delivered
upon the exercise of this Warrant will, upon delivery, be free from all
taxes, liens, and charges with respect to the purchase thereof hereunder.
3. Adjustment.
----------
3.1. Subdivision or Combination of Common Stock and Stock Dividends. In
--------------------------------------------------------------
order to prevent dilution of the rights granted under this Warrant, in the event
that the Company shall at any time after the Date of Issuance:
(a) issue any shares of Common Stock or any rights to purchase Common
Stock as a dividend upon the Common Stock;
(b) issue any shares of Common Stock in subdivision of outstanding
shares of Common Stock by reclassification or otherwise; or
(c) combine outstanding shares of Common Stock, by reclassification
or otherwise;
then in each of said cases the Exercise Price which would apply if purchase
rights hereunder were being exercised immediately prior to such action by the
Company shall be adjusted by multiplying it by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such dividend, subdivision or combination and the denominator of which
shall be the number of shares of Common Stock outstanding immediately after such
dividend, subdivision or combination, and in such case the number of shares
which would be purchasable hereunder if purchase rights hereunder were being
exercised immediately prior to such action by the Company shall be adjusted by
multiplying it by a fraction which is the reciprocal of the fraction by which
the Exercise Price shall be adjusted.
3.2. Notice of Adjustment. Immediately upon any adjustment of the
--------------------
Exercise Price or increase or decrease in the number of shares of Common Stock
purchasable upon exercise of this Warrant, the Company will send written notice
thereof to the holders, stating the adjusted Exercise Price, the increased or
decreased number of shares purchasable upon exercise of this Warrant and the
calculation for such adjustment and increase or decrease. When appropriate,
such notice may be given in advance and included as part of any notice required
to be given pursuant to Section 4 below.
4. Prior Notice of Certain Events. In case at any time:
------------------------------
(a) the Company shall pay any dividend upon its Common Stock or make
any distribution to the holders of its Common Stock (including dividends or
distributions payable in shares of the Company's stock);
(b) the Company shall offer for subscription pro rata to the holders
of its Common Stock any additional shares of stock of any class or any other
rights;
(c) there shall be any reorganization or reclassification of the
capital stock of the Company, or consolidation or merger of the Company with
another corporation or a sale or deposition of all or substantially all its
assets; or
(d) there shall be a voluntary or involuntary dissolution, liquidation
or winding up of the Company;
2
<PAGE>
then, in each of said cases, the Company shall give prior written notice to the
holder hereof of the date on which (i) the books of the Company shall close or a
record shall be taken for such dividend, distribution or subscription rights or
(ii) such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up shall take place, as the case may be.
Such notice shall also specify the date as of which the holders of distribution
or subscription rights or shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be. Such written notice shall be given at least
twenty days prior to the action in question and not less than twenty days prior
to the record date or the date on which the Company's transfer books are closed
in respect thereto.
5. Expiration Time. As used herein, the term "Expiration Time" shall mean
---------------
the earlier to occur of (i) 5 P.M., Eastern daylight savings time, on June 1,
1999 and (ii) the time of the closing of the Company's initial public offering
of Common Stock.
6. Restrictions on Transfers.
-------------------------
6.1. Neither this Warrant nor any rights hereunder are transferable by
the registered owner hereof, except with the prior written consent of the
Company. The Company may deem and treat the registered owner of this Warrant at
any time as the absolute owner hereof for all purposes.
6.2. The holder of this Warrant acknowledges that neither this Warrant
nor the shares of Common Stock for which this Warrant is exercisable have been
registered under the Securities Act of 1933, as amended, or qualified under the
securities laws of any jurisdiction. The undersigned agrees not to sell,
pledge, hypothecate, transfer or otherwise dispose of this Warrant or any Common
Stock issued upon its exercise in the absence of (i) an effective registration
statement as to this Warrant or such Common Stock under such Act (or any similar
statute then in effect) or (ii) an opinion of counsel satisfactory to the
Company to the effect that such registration is not required.
7. No Further Rights. This Warrant shall not entitle the holder hereof to
-----------------
any voting rights or other rights as a stockholder of the Company, or to any
other rights whatsoever except the rights herein expressed, and no dividends
shall be payable or accrue in respect of this Warrant or the interest
represented hereby or the shares purchasable hereunder until or unless, and
except to the extent that, this Warrant shall be exercised.
8. Reservation of Shares. The Company agrees at all times to reserve and
---------------------
hold available for issuance a sufficient number of authorized but unissued
shares of Common Stock as will be sufficient to permit the exercise in full of
this Warrant, and upon such issuance all such shares of Common Stock will be
validly issued, fully paid and nonassessable and not in violation of the
preemptive rights of any person.
9. General.
-------
9.1. Any notices required to be sent to the holder hereof will be
delivered to the address of such holder shown on the books of the Company. All
notices referred to herein will be delivered in person or sent by first class
mail, postage prepaid, and will be deemed to have been given when so delivered
or sent.
9.2. This Warrant shall be binding upon and inure to the benefit of both
parties hereto and their respective successors and assigns. If any provision of
this Warrant shall be held to be invalid or unenforceable, in whole or in part,
neither the validity nor the enforceability of the remainder hereof shall in any
way be affected.
9.3. The headings in this Agreement are included only for convenience and
shall not affect the meaning or interpretation of this Agreement. The words
"herein" and "hereof" and other words of similar import
3
<PAGE>
refer to this Agreement as a whole and not to any particular part of this
Agreement. The word "including" as used herein shall not be construed so as to
exclude any other thing not referred to or described.
9.4. This Warrant shall be governed by the laws of the State of New
Hampshire.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
duly authorized officer and its corporate seal to be affixed hereto.
WHITE PINE SOFTWARE, INC.
By: /s/ Richard M. Darer
----------------------------------
Richard M. Darer
Chief Financial Officer and Vice
President of Administration
4
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
TO: WHITE PINE SOFTWARE, INC.
The undersigned, the holder of the within Warrant, hereby irrevocably elects
to exercise the purchase rights represented by such Warrant for, and to purchase
thereunder, ______________ shares of common stock of White Pine Software, Inc.
and herewith makes payment of $____________ therefor. If such shares shall not
be all of the shares purchasable hereunder, a new Warrant of like tenor for the
balance of the shares purchasable hereunder shall be delivered to the
undersigned. The undersigned hereby confirms the representation set forth in
Section 6.2 of the Warrant with respect to the shares purchased pursuant to this
subscription.
Dated:
--------------------
------------------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of the
Warrant)
5
<PAGE>
EXHIBIT 10.13
FLEET BANK - NH
COMMERCIAL LOAN AGREEMENT
-------------------------
BORROWER'S NAME AND ADDRESS: DESCRIPTION OF LOANS.
[Check Applicable Boxes]
White Pine Software, Inc. [XX] Revolving Line of Credit:
$1,000,000.00
40 Simon Street, Suite 201
Nashua, NH 03060 [ ] Line of Credit:
DATE OF THIS AGREEMENT: [ ] Term Loan:
December 30, 1994 $
- --------------------- ------------------------------------------
REVOLVING LINE OF CREDIT REVIEW DATE: September 30, 1995
------------------
APPLICABLE OPTIONAL PROVISIONS OF SCHEDULE A:
[Check Applicable Boxes Below]
[XX] SCHEDULE A [XX] SCHEDULE B
-------------------------------------------
THIS COMMERCIAL LOAN AGREEMENT (the "Agreement"), is made as of the date set
forth above, between the above named Borrower (the "BORROWER") and FLEET BANK -
NH, a Bank organized under the laws of the State of New Hampshire with a
principal place of business at One Indian Head Plaza, Nashua, New Hampshire
03060 (the "BANK"). The BANK has agreed to extend to BORROWER, at the
BORROWER's request, the loan(s) described above, and may, from time to time
hereafter extend other loans to BORROWER (individually, a "Loan" and,
collectively, the "Loans"). All of the Loans are, together with all other
debts, liabilities and obligations of BORROWER to the BANK, direct or indirect,
absolute or contingent, now existing or hereafter arising, hereinafter sometimes
referred to as the "Obligations". Each Loan is or shall be evidenced by a
Commercial Promissory Note (individually a "Note" and collectively the "Notes")
and each Loan and all of the other Obligations are secured pursuant to a
Security Agreement between BORROWER and the BANK (the "Security Agreement").
The characterization of each Loan as either a Revolving Line of Credit, Line of
Credit, or Term Loan shall be as set forth in the Note evidencing such Loan
and/or the BANK's commitment letter (if any) with respect to the same. In
connection with the Loans, the BORROWER may execute certain other documents,
certificates and agreements, all of which are, together with this Agreement, the
Notes, and the Security Agreement, sometimes collectively referred to herein as
the "Loan Documents". Each Loan, whether now existing or hereafter arising, is
made upon and subject to the terms and conditions set forth in the Note
evidencing such Loan, the Security Agreement, the other Loan Documents, and this
Agreement. The terms, conditions, representations, warranties, and covenants
set forth in this Agreement are in addition to, and not in limitation of, the
terms, conditions, representations, warranties, and covenants set forth in the
other Loan Documents. In the event of any conflict
<PAGE>
between the terms, conditions, representations, warranties and covenants
contained in the Loan Documents, the term, condition, representation, warranty,
or covenant which confers the greatest benefit upon the BANK shall control. The
determination as to which term, condition, representation, warranty, or covenant
is more beneficial shall be made by the BANK in its sole discretion and shall be
binding upon the BORROWER.
IN CONSIDERATION OF the Loans made or to be made by BANK to the BORROWER, and of
all other Obligations of the BORROWER to the BANK, BORROWER and BANK hereby
agree as follows:
I. REVOLVING LINE OF CREDIT. Each Revolving Line of Credit Loan made
available by the BANK to the BORROWER shall be upon and subject to the terms and
conditions set forth in the Revolving Line of Credit Note evidencing such Loan,
the other Loan Documents, and this Agreement.
A. Maximum Available Amount. The maximum amount available to the BORROWER
------------------------
under any Revolving Line of Credit Loan shall be the lesser of (1) the amount
------
set forth in the Note evidencing such Revolving Line of Credit Loan, or (2) if
the provisions of Schedule A attached hereto concerning the maximum available
amount are completed, an amount equal to the aggregate of the applicable
percentage of the sum of BORROWER's Acceptable Accounts and the applicable
---
percentage of the value of BORROWER's Acceptable Inventory, all as set forth and
defined on said Schedule A.
B. Advances and Repayment. Each Revolving Line of Credit Loan shall be
----------------------
disbursed, advanced, readvanced, and repaid as provided in the applicable
Revolving Line of Credit Note and this Agreement. BORROWER may request advances
orally or in writing from time to time in an amount such that the aggregate
amounts outstanding under the Revolving Line of Credit Loan does not, exceed
the maximum available amount as determined under Paragraph A of this Section I
above. BANK reserves the right to determine in its sole discretion whether to
make any particular advance or readvance requested by BORROWER. At the time of
each advance and readvance under a Revolving Line of Credit Loan the BORROWER
shall immediately become indebted to the BANK for the amount thereof. Each such
advance or readvance may be credited by the BANK to any deposit account of
BORROWER with the BANK, be paid to the BORROWER, or applied to any Obligation,
as the BANK may in each instance elect. BORROWER authorizes the BANK to charge
any account which the BORROWER maintains with the BANK for any payments which
the BORROWER may or must make, or customarily makes, to the BANK from time to
time.
C. Review. The Revolving Line of Credit Loan described on the first page of
------
this Agreement shall be subject to review and, at the sole option of the BANK,
renewal on the Revolving Line of Credit Review Date set forth on the first page
of this Agreement (the "Review Date") and, if renewed, upon each subsequent
anniversary of the Review Date. IF SAID REVOLVING LINE OF CREDIT LOAN IS NOT
RENEWED BY THE BANK AS AFORESAID ON ANY SUCH DATE, THE ENTIRE AMOUNT OF
PRINCIPAL AND ACCRUED INTEREST OUTSTANDING THEREUNDER SHALL BE DUE AND PAYABLE
BY BORROWER ON SUCH DATE. Any other Revolving Line of Credit Loan outstanding
shall be subject to review by the BANK and be renewed or repaid as aforesaid on
the Review Date and each annual anniversary thereof, unless another date is
specified by the BANK. NOTWITHSTANDING THE FOREGOING, OR ANY PROVISION OF ANY
REVOLVING LINE OF CREDIT NOTE, ANY LOAN DOCUMENT OR HEREIN TO THE CONTRARY, EACH
REVOLVING LINE OF CREDIT LOAN SHALL BE A DEMAND OBLIGATION OF THE BORROWER.
D. Revolving Line of Credit Management. Set forth on Schedule A are
-----------------------------------
additional terms and conditions relating to the management of each Revolving
Line of Credit Loan. Such additional terms and conditions shall apply with
respect to all outstanding Revolving Line of Credit Loans only if Schedule A is
completed to indicate the same.
<PAGE>
II. LINE OF CREDIT. Each Line of Credit Loan made available by the BANK to the
BORROWER shall be upon and subject to the terms and conditions set forth in the
Line of Credit Note evidencing such Loan, the other Loan Documents and this
Agreement.
A. Maximum Available Amount. The maximum amount available to the BORROWER
------------------------
under any Line of Credit Loan shall be the amount set forth in the Note
evidencing such Line of Credit Loan.
B. Repayment. Each Line of Credit Loan shall be disbursed, advanced, and
---------
repaid as provided in the applicable Line of Credit Note or Notes (if more than
one is executed with respect to any such Line of Credit Loan) and in this
Agreement.
III. TERM LOAN. Each Term Loan made to the BORROWER shall be upon and subject
to the terms and conditions set forth in the Term Loan Note evidencing such Term
Loan, the other Loan Documents and this Agreement. Each Term Loan shall be
repaid as set forth in the applicable Term Loan Note and this Agreement.
IV. FEES. In addition to such other fees as are provided in this Agreement and
in the other Loan Documents, BORROWER agrees to pay the BANK the periodic fees
set forth on Schedule B with respect to the maintenance of each Revolving Line
of Credit Loan, Line of Credit Loan and Term Loan as is outstanding from time to
time.
V. PAYMENTS. All payments made by the BORROWER of principal and interest on
the Loans, and other sums and charges payable under the Loan Documents, shall be
made to the BANK in accordance with the terms of the respective Loan Documents
in immediately available, lawful United States of America currency at its office
set forth above, or by the debiting by the BANK of the demand deposit account(s)
in the name of the BORROWER at the BANK, or in such other reasonable manner as
may be designated by the BANK in writing to the BORROWER, and in any event shall
be made in immediately available funds. The BORROWER authorizes the BANK
automatically to debit the BORROWER's demand deposit account as described above.
VI. SECURITY. Each of the Loans and all other Obligations of the BORROWER to
the BANK, whether now existing or hereafter arising, shall at all times be
secured by first priority perfected security interests in the Collateral (as
hereinafter defined), which security interests shall continue until payment in
full of all amounts outstanding under said Loans and the other Obligations. If
this Agreement is executed below by a guarantor or guarantors (collectively, the
"Guarantors', then the full and punctual payment and performance of the Loans
and all other Obligations or BORROWER shall be guaranteed by the Guarantors
pursuant to one or more guaranty agreements (collectively, the "Guaranty"). The
term "Collateral" as used herein shall be deemed to include all property and
assets of the BORROWER and Guarantors secured, mortgaged, pledged, assigned, or
otherwise encumbered or covered by any of the Loan Documents, including, but not
limited to the Security Agreement. The BORROWER and the Guarantor covenant and
agree to take such further actions and to execute such additional documents as
may be necessary from time to time to enable the BANK to obtain and maintain the
security interests and liens arising under the Loan Documents. If the
Collateral includes accounts and account receivables of BORROWER, then, in
addition to such other rights and remedies as are provided the BANK under the
Loan Documents, the BORROWER agrees that BANK may communicate with account
debtors, with a two week advance notice to BORROWER prior to direct notification
of account debtors, in order to verify the existence, amount, and terms of any
such accounts and account receivables. BANK may notify account debtors of the
BANK's security interest and require that payments on accounts and account
receivables be made directly to BANK, and upon the request of BANK, BORROWER
shall notify account debtors and indicate on all billings that payments and
returns are to be made directly to BANK. In furtherance of the foregoing,
BORROWER hereby appoints BANK, upon an event of default, as attorney irrevocable
with full power to collect, compromise, endorse, sell, or otherwise deal with
the BORROWER's accounts and account receivables
<PAGE>
or proceeds thereof and to perform the terms of any contract in order to create
accounts and account receivables in BANK's name or in the name of BORROWER.
VII. SUBORDINATION AND STANDBY OF DEBT. The BORROWER and Guarantors covenant
and agree that all existing debt of BORROWER to Guarantors and all future debt
if permitted hereunder from BORROWER to Guarantors, shall be and hereby is,
without need for further writing, made subject and subordinate to the prior
payment and performance of all the Loans and other Obligations of BORROWER. The
Guarantors further covenant and agree that any claims against tie BORROWER (or
against each other or any other guarantor of the Loans), individually or
jointly, to which the Guarantors may become entitled (including, without
limitation, claims by subrogation or otherwise by reason of any payment or
performance by the Guarantors, individually or jointly, in satisfaction and
discharge, in whole or in part, of his or their obligations under the Guaranty)
shall be and hereby are, without need for further writing, subject and
subordinate to the payment and performance in full of all of the Loans and other
Obligations due the BANK. In furtherance of the foregoing, the BORROWER and
Guarantors shall provide such subordinations, certificates, and other documents,
and shall mark its corporate books, records, stock certificates, and ledgers, as
the BANK may reasonable request from time to time, in form and substance
satisfactory to BANK and BANK's counsel, evidencing the subordination of all
debt of BORROWER to Guarantors, whether now existing or hereafter arising, in
accordance with the covenants of BORROWER and Guarantors hereunder.
VIII. CONTINUING REPRESENTATIONS AND WARRANTIES. The BORROWER and the
Guarantors, as the case may be, jointly and severally warrant and represent to
the BANK that so long as any of the Obligations are outstanding:
A. Good Standing. BORROWER, if other than a natural person, is duly
-------------
organized, validly existing, and in good standing under the laws of its state of
organization. BORROWER has the power to own its properties and to carry on its
business as now being conducted.
B. Authority. BORROWER and Guarantors have full power and authority to enter
---------
into this Agreement and to borrow under the Loan Documents, to execute and
deliver the Loan Documents and to incur the obligations provided for herein and
in the Loan Documents, all of which have been duly authorized by all proper and
necessary corporate or other action. The persons executing the Loan Documents
on behalf of the BORROWER and the Guarantors have been duly authorized to do so.
C. Binding Agreement. This Agreement and the Loan Documents constitute the
-----------------
valid and legally binding obligations of the BORROWER and Guarantors,
enforceable in accordance with their terms.
D. Litigation. Except as disclosed on Schedule VIII D attached hereto, there
----------
are no suits or proceedings of any kind or nature pending or, to the knowledge
of the BORROWER and Guarantors, threatened against or affecting the BORROWER or
the Guarantors or their assets which, if adversely determined, would have a
material adverse effect on the financial condition or business of the BORROWER
or the Guarantors and which have not been disclosed in writing to the BANK.
E. Conflicting Agreements; Consents. There is no charter, bylaw, preference
-------------------------------
stock, or trust provision of the BORROWER or the Guarantors, and no provision(s)
of any existing mortgage, indenture, contract or agreement binding on the
BORROWER or the Guarantors or affecting their property, which would conflict
with, have a material adverse effect upon, or in any way prevent the execution,
delivery, or performance of the terms of this Agreement or the Loan Documents.
Neither the BORROWER nor the Guarantors is required to obtain any order,
consent, approval, authorization of any person, entity, or governmental
authority in connection with or as a condition to the execution, delivery, and
performance of this Agreement or the Loan Documents or the granting of the
security interests and liens in the Collateral.
<PAGE>
F. Financial Condition. The financial statements delivered to the BANK by the
-------------------
BORROWER and the Guarantors have been and shall be prepared in accordance with
generally accepted accounting principals, consistently applied, are and will be
completed and correct, and fairly present the financial condition and results of
the BORROWER and the Guarantors. Other than those liabilities disclosed in
writing to the BANK, there are no liabilities, direct or indirect, fixed or
contingent, or the BORROWER or the Guarantors which are not reflected in the
financial statements or in the notes thereto which would be required to be
disclosed therein and there has been no material adverse change in the financial
condition or operations of the BORROWER or the Guarantors since the date of such
financial statements.
G. Taxes. BORROWER and Guarantors have filed all federal, state and local
-----
income tax returns required to be filed by them and have paid all taxes shown by
such returns to be due and payable on or before the due dates thereof.
H. Solvency. The present fair saleable value of the BORROWER's assets is
--------
greater than the amount required to pay its total liabilities; the amount of
the BORROWER's capital is adequate in view of the type of business in which it
is engaged.
I. Full Disclosure. None of the information with respect to the BORROWER or
---------------
the Guarantors which has been furnished to the BANK in connection with the
transactions contemplated hereby is false or misleading with respect to any
material fact, or omits to state any material fact necessary in order to make
the statements therein not misleading.
J. Employee Benefit Plans. The BORROWER has not incurred any material
---------------- -----
accumulated funding deficiency within the meaning of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), has not incurred any material
liability to the Pension Benefit Guaranty Corporation established under ERISA
(or any successor thereto) in connection with any profit sharing, group
insurance, bonus, deferred compensation, percentage compensation, stock option,
severance pay, insurance, pension or retirement plan or other oral or written
agreement or commitment relating to employment or fringe benefits or perquisites
for employees, officers or directors of the BORROWER (an "Employee Benefit
Plan", and no Employee Benefit Plan which is subject to ERISA had, as of its
latest valuation date, accrued benefits (whether or not vested) the present
value of which exceeded the value of the assets of such Employee Benefit Plan,
based upon actuarial assumptions utilized for such Plan.
K. Location of Records. All of the books and records are true and complete
-------------------
copies thereof relating to the accounts and contracts of the BORROWER are and
will be kept at BORROWER's principal place of business located at the address
first set forth above (the "Premises").
L. Compliance with Laws. The BORROWER and the Guarantors are in compliance in
--------------- ----
all material respects with all laws and governmental rules and regulations
applicable to the Collateral and to their businesses, properties and assets.
M. Hazardous Waste. To the best of BORROWER'S knowledge, no Hazardous Waste
---------------
(as hereinafter defined) has been generated, stored or treated on the Premises
except in compliance with all applicable laws. No Hazardous Waste has ever
been, is being, is intended to be, or is threatened to be spilled, released,
discharged, disposed, placed or otherwise caused to be found in the soil or
water in, under, or upon the Premises. The BORROWER and the Guarantors agree to
indemnify and hold the BANK harmless from and against any claims, damages,
liabilities (whether joint or several), losses and expenses (including, without
limitation, attorneys' fees) incurred by the BANK as a result of the breach of
these representations. For the purpose of this Agreement, the term "Hazardous
Waste" means "hazardous waste", "hazardous material", "hazardous substance", and
"oil" as presently defined in the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the
Hazardous Material Transportation Act, the Federal Water Pollution Control Act,
and corresponding state and local statutes, ordinances, and regulations, as such
statutes, ordinances
<PAGE>
and regulations may be amended, or as defined in any federal or state regulation
adopted pursuant to such acts.
N. Title to Collateral. BORROWER and the Guarantors have and will at all
-------------------
times have good and marketable title to the Collateral, free and clear from any
liens, security interests, mortgages, encumbrances, pledges or other right,
title or interest of any other person or entity, except those arising under the
Loan Documents or disclosed to the BANK in the Security Agreement ("Permitted
Encumbrances").
0. Employees. BORROWER has complied with all laws relating to the employment
---------
of labor, including any provisions thereof relating to ERISA, wages, hours,
collective bargaining, the payment of social security and similar taxes, equal
employment opportunity, employment discrimination and occupational safety and
health, and is not liable for any arrears of wages or any taxes or penalties for
failure to comply with any of the foregoing.
IX. AFFIRMATIVE COVENANTS. Until payment in full of all indebtedness under the
Loans and the other Obligations, the BORROWER and the Guarantors, as the case
may be, jointly and severally agree that, unless the BANK shall otherwise
consent in writing, they will:
A. Prompt Payment. Pay promptly, subject to any applicable cure or grace
--------------
period, when due all amounts due and owing to the BANK.
B. Use of Proceeds. Use the proceeds of the Loans only for business purposes
---------------
and will furnish the BANK with such evidence as it may reasonably require with
respect to such use.
C. Financial Statements. Furnish the BANK with such financial statements of
--------------------
BORROWER as are described on Schedule B attached hereto. All such statements
shall be prepared on a consistent basis in a format reasonably acceptable to the
BANK.
D. Maintenance of Existence. Take all necessary action to maintain BORROWER's
-------------- ---------
legal existence.
E. Maintenance of Business. Do or cause to be done all things necessary to
-------------- --------
maintain and preserve BORROWER's business.
F. Maintenance of Insurance. Keep all of BORROWER's properties (specifically
-------------- ---------
including, but not limited to, the Collateral) adequately insured against loss
or damage by fire and such other casualties and hazards as the BANK may specify
from time to time; maintain adequate Workman's Compensation Insurance under
applicable laws and Comprehensive General Public Liability Insurance; and
maintain adequate insurance covering such other risks as the BANK may reasonably
specify from time to time hereafter. All insurance required hereunder shall be
effected by valid and enforceable policies issued by insurers of recognized
responsibility authorized to transact business within the State of New Hampshire
and shall, inter alia,(1) name the BANK as an additional insured and/or loss
----------
payee, (2) provide that no action of the BORROWER shall void any such policy as
to the BANK, and (3) provide that the BANK shall be notified in writing of any
proposed cancellation of such policy at least ten (10) days in advance thereof
and will have the opportunity to correct any deficiencies justifying such
proposed cancellation. For the purposes of this Paragraph, an insurance policy
shall be deemed to be "adequate" if it provides coverage against such risks and
in such amounts as is customarily carried by owners of similar businesses and
properties.
G. Inspection by the BANK. Upon prior reasonable notice (other than in
------------- --------
emergencies when no notice shall be required) and during normal business hours,
permit any person designated by the BANK to inspect any of its properties,
including its books, records, and accounts (and including the making of copies
thereof and extracts therefrom).
<PAGE>
H. Prompt Payment of Taxes. Accrue its tax liability (including withholdings
-------------- --------
for employee taxes and social security) in accordance with usual accounting
practice and pay or discharge (or cause to be paid or discharged) as they become
due all taxes, assessments, and government charges upon its property,
operations, income and products (as well as all claims for labor, materials or
supplies), which, if unpaid might become a lien upon any of its property;
provided, that the BORROWER shall, prior to payment thereof, have the right to
contest such taxes, assessments and charges in good faith by appropriate
proceedings so long as the BANK's interests are protected by bond, letter of
credit, escrowed funds or other appropriate security.
I. Notification of Default Under This and Other Loan or Financing
--------------------------------------------------------------
Arrangements. Promptly notify the BANK in writing of the occurrence of any
- ------------
Event of Default under this Agreement or any other loan or financing
arrangement.
J. Notification of Litigation. Promptly notify the BANK in writing of any
--------------------------
litigation that has been instituted or is pending or threatened which might have
a material adverse effect on its continued operations or financial condition.
K. Notification of Governmental Action. Promptly notify the BANK in writing
-----------------------------------
of any governmental investigation or proceeding that has been instituted or is
pending or threatened, including without limitation, matters relating to the
federal or state tax returns of the BORROWER or the Guarantors, compliance with
the Occupational Safety and Health Act, or proceedings by the Treasury
Department, Labor Department, or Pension Benefit Guaranty Corporation with
respect to matters affecting employee welfare, benefit or retirement programs.
L. Preservation of the Collateral. Take all reasonably necessary steps to
------------------------------
preserve, protect and defend the Collateral and keep it in good operating
condition and repair (reasonable wear and tear excepted) and free of unpermitted
liens and give BANK access to and permit it to inspect the Collateral during all
business hours and other reasonable times.
M. Maintenance of Records. Keep adequate records and books of account, in
-------------- -------
which complete entries will be made in a manner reasonably acceptable to the
BANK and consistently applied, reflecting all financial transactions of the
BORROWER.
N. Compliance With Laws. Comply in all material respects with all applicable
--------------- ----
laws, rules, regulations, and orders, such compliance to include, without
limitation, paying before the same become delinquent all taxes, assessments, and
governmental charges imposed upon it or upon its property; provided, however,
-------- -------
that BORROWER shall be entitled to contest the same in good faith so long as
such action, in the BANK's sole opinion, does not have an adverse effect upon
the BANK's rights hereunder or the Collateral.
0. Accounts, Deposits, and Balances. BORROWER shall maintain its primary
--------------------------------
operating and deposit accounts with the BANK. BORROWER shall maintain at all
times during which amounts are outstanding under any of the Loans, a minimum
balance in a demand deposit account with the BANK of fully collected funds which
are not subject to any claims, liens or setoffs (other than those of the BANK)
at least in the amount set forth on Schedule B attached hereto.
P. Notification of Material Adverse Changes. Promptly notify the BANK in
----------------------------------------
writing of any conditions or circumstances which might have a material adverse
effect on BORROWER's continued operations or financial condition.
Q. Additional Financial and Other Covenants. Comply with the additional
------------------------------ ---------
financial and other covenants set forth on Schedule B attached hereto.
<PAGE>
X. NEGATIVE COVENANTS. Until payment in full of all indebtedness under the
Loans and the other Obligations, the BORROWER and the Guarantors jointly and
severally covenant that the BORROWER and the Guarantors will not, without the
express prior written consent of the BANK:
A. Nature and Scope of Business. Enter into any type of business other than
----------------------------
that in which it is presently engaged, or otherwise significantly change the
scope or nature of its business.
B. Additional Indebtedness. Incur indebtedness in excess of $100,000.00 for
-----------------------
borrowed money (or issue or sell any of its bonds, debentures, notes or similar
obligations) except: (1) borrowings under the Loans; (2) other Obligations to
the BANK; and (3) borrowings used to prepay in full the Obligations.
C. Liens and Mortgages. Incur, create, assume or suffer to exist any
-------------------
mortgage, pledge, lien, attachment, charge or other encumbrance of any nature
whatsoever on any of the Collateral, now or hereafter owned, other than (1) the
security interests or liens granted to the BANK pursuant to the Loan Documents;
(2) deposits under Workmen's Compensation, Unemployment Insurance and Social
Security laws; (3) lines imposed by law, such as carriers, warehousemen's or
mechanic's liens incurred in good faith in the ordinary course of business, and
which do not in the aggregate have a material adverse effect on the BORROWER's
financial condition or the Collateral; and (4) the Permitted Encumbrances.
D. Capital Structure; Acquisition of Stock. Alter or amend the BORROWER's
---------------------------------------
capital structure or purchase, redeem or otherwise acquire for value any of its
outstanding capital stock.
E. Ownership Management. Change the current ownership by more than 40%, or in
--------------------
the event that Howard Berke is no longer Chief Executive Officer, change current
ownership by more than 20% of BORROWER.
F. Places of Business; Location of Collateral. Maintain or relocate to, open
-------------------------------------------
or close, any other place of business or move any of the Collateral from the
Premises, other than California, except upon thirty (30) days prior written
notice to the BANK.
XI. CONDITIONS PRECEDENT TO MAKING OF LOANS. The obligation of the BANK to
make any Loan and make disbursements of the proceeds of the same to the BORROWER
is subject to the satisfaction by the BORROWER or its representatives of the
following conditions precedent with respect to such Loan: (1) the BORROWER and
the Guarantors have executed and delivered all of the Loan Documents deemed
appropriate and necessary by the BANK, in form and substance satisfactory to the
BANK; (2) the BORROWER's and Guarantors' warranties and representations as
contained herein and in the Loan Documents shall be accurate and complete and
the BANK has received satisfactory evidence of the same, including, at BANK's
option, an opinion of BORROWER's legal counsel in form satisfactory to BANK; and
(3) the BORROWER and Guarantors shall not be in default under any of the
covenants, warranties, representations, terms, or conditions contained in this
Agreement or in the Loan Documents as of the date of entering into such Loan and
as of the date of each disbursement thereunder.
XII. EVENTS OF DEFAULT; ACCELERATION. The occurrence of any one or more of the
following events shall constitute a default under this Agreement, each of the
Loan Documents, and the Obligations (collectively, "Events of Default"): (1) if
any statement, representation or warranty made by the BORROWER or Guarantors in
this Agreement or in any of the Loan Documents, or in connection with any of the
same, or if any financial statement, report, schedule, or certificate furnished
by the BORROWER or Guarantors or any of its officers or accountants to the BANK,
shall prove to have been false or misleading when made, or subsequently becomes
false or misleading, in any material respect (as determined in the BANK's sole
discretion); (2) default by the BORROWER in payment on its due date of any
principal or interest called for under any of the Loans or the Loan Documents,
or of other amounts due under any other of the Obligations, or other event of
default under the Loan Documents
<PAGE>
or the other Obligations, provided such default is not cured within any
applicable grace period thereunder; (3) default by the BORROWER in the
performance or observance of any of the provisions, terms, conditions,
warranties of covenants of this Agreement, the Loan Documents, or any other of
the Obligations; (4) the dissolution, termination of existence, merger or
consolidation which would change ownership by 40% or more (cumulative) of the
BORROWER or a sale of BORROWER's business or the Collateral not in the ordinary
course of business; (5) the BORROWER or the Guarantors shall (a) apply for or
consent to the appointment of a receiver, trustee or liquidator of it or any of
its property, (b) make a general assignment for the benefit of creditors, (c) be
adjudicated as bankrupt or insolvent, (d) file a voluntary petition in
bankruptcy, or a petition or an answer seeking reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation under any law or
statute, or an answer admitting the material allegations of a petition filed
against it in any proceeding under any such law or statute, or (e) offer or
enter into any composition, extension or arrangement seeking relief or extension
of its debts; (6) proceedings shall be commenced or an order, judgment or decree
shall be entered, without the application, approval or consent of the BORROWER,
in or by any court of competent jurisdiction, relating to the bankruptcy,
dissolution, liquidation, reorganization or the appointment of a receiver,
trustee or liquidator of the BORROWER or Guarantors, or of all or a substantial
part of its assets, and such proceedings, order, judgment or decree shall
continue undischarged or unstayed for a period of sixty (60) days; (7)
BORROWER's inability to pay its debts as they mature or other insolvency,
however defined and determined by the BANK in its sole discretion; or (8) a
judgment for the payment of money shall be rendered against the BORROWER and the
same shall remain undischarged for a period of thirty (30) days, during which
period execution shall not be effectively stayed.
Upon the occurrence of any monetary Event of Default or five days after the
occurrence of any non-monetary Event of Default, the BANK's commitment to make
further Loans under the Loan Documents or any other agreement with the BORROWER
shall immediately cease and terminate and, at the election of the BANK, all of
the Obligations of the BORROWER to the BANK, either under this Agreement, the
Loan Documents, or otherwise, will immediately become due and payable without
further demand, notice or protest, all of which are hereby expressly waived.
Thereafter, the BANK may proceed to protect and enforce its rights, at law, in
equity, or otherwise, against the BORROWER, the Guarantors, and any other
endorser or guarantor of the BORROWER's Obligations, either jointly or
severally, and may proceed to liquidate and realize upon any of its Collateral
in accordance with the rights of a secured party under the Uniform Commercial
Code, under any Loan Documents, under any other agreement between the BORROWER
and the BANK, or under any agreement between any guarantor or endorser of the
BORROWER's Obligations to the BANK, and to apply the proceeds thereof to payment
of the Obligations of the BORROWER to the BANK in such order and in such manner
as the BANK, in its sole discretion, deems appropriate.
XIII. MISCELLANEOUS PROVISIONS.
A. Entire Agreement; Waivers. This Agreement, the Schedules hereto, and the
-------------------------
Loan Documents together constitute the entire agreement between the BORROWER,
the Guarantors and the BANK and no covenant, term, condition or other provision
thereof nor any default in connection therewith may be waived except by an
instrument in writing, signed by the BANK and delivered to the BORROWER. The
BANK's failure to exercise or enforce any of its rights, powers or privileges
under this Agreement or the Loan Documents shall not operate as a waiver
thereof. In the event of any conflict between the terms, covenants, conditions
and restrictions contained in the Loan Documents, the term, covenant, condition
or restriction which confers the greatest benefit upon the BANK shall control.
The determination as to which term, covenant, condition or restriction is more
beneficial shall be made by the BANK in its sole discretion, in a commercially
reasonable manner.
<PAGE>
B. Remedies Cumulative. All remedies provided under this Agreement and the
-------------------
Loan Documents or afforded by law shall be cumulative and available to the BANK
until all of the BORROWER's Obligations to the BANK have been paid in full.
C. Survival of Covenants. All covenants, agreements, representations and
---------------------
warranties made in this Agreement and in the Loan Documents shall be deemed to
be material and to have been relied on by the BANK, notwithstanding any
investigation made by the BANK or in its behalf, and shall survive the execution
and delivery of its Agreement and the Loan Documents. All such covenants,
agreements, representations and warranties shall bind and inure to the benefit
of the BORROWER's, the Guarantors', and the BANK's successors and assigns,
whether so expressed or not.
D. Governing Law; Jurisdiction. This Agreement and the Loan Documents shall
-------------- ------------
be construed and their provisions interpreted under and in accordance with the
laws of the State of New Hampshire. The BORROWER and the Guarantors, to the
extent they may legally do so, hereby consent to the jurisdiction of the courts
of the State of New Hampshire and the United States District Court for the State
of New Hampshire for the purpose of any suit, action or other proceeding arising
out of any of their obligations hereunder or with respect to the transactions
contemplated hereby, and expressly waive any and all objections they may have to
venue in any such courts.
E. Assurance of Execution and Delivery of Additional Instruments. The
-------------------------------------------------------------
BORROWER and Guarantors agree to execute and deliver, or to cause to be executed
and delivered, to the BANK all such further instruments, and to do or cause to
be done all such further acts and things, as the BANK may reasonably request or
as may be necessary or desirable to effect further the purposes of this
Agreement and the Loan Documents.
F. Waivers and Assents. The BORROWER, the Guarantors, and any other guarantor
-------------------
or endorser of the BORROWER's Obligations to the BANK, hereby waive, to the
fullest extent permitted by law, demand, notice, protest, notice of acceptance
of this Agreement and the Loan Documents, notice of Leans made, credit extended,
Collateral received or delivered or other action taken in reliance hereon and
all other demands and notices of any description with respect both to the Loan
Documents and the Collateral. The BORROWER and Guarantors assent to any
extension or postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of Collateral, to the addition or release of
any party or person primarily or secondarily liable, to the acceptance of
partial payments thereon and the settlement, compromising or adjusting of any
thereof, all in such manner and at such time or times as the BANK may deem
advisable. Any demand upon or notice to the BORROWER or Guarantors that the
BANK may be required or may elect to give shall be mailed by registered or
certified mail, return receipt requested, postage prepaid and shall be effective
on the date of the first attempted delivery thereof by the U.S. Postal Service,
as shown on the registered or certified mail return receipt for such notice
addressed to the BORROWER at its address set forth at the beginning of this
Agreement or to the Guarantors at the address set forth hereinbelow.
G. No Duty of the BANK With Respect to the Collateral. The BANK shall have no
--------------------------------------- ----------
duty as to the collection or protection of Collateral or any income thereon, nor
as to the preservation of rights against prior parties, nor as to the
preservation of any rights pertaining thereto, beyond the safe custody thereof.
H. Election of the BANK. The BANK may exercise its rights with respect to
--------------- ----
Collateral without resorting or regard to other collateral or sources of
reimbursement for the Obligations of BORROWER to the BANK.
I. Assignment. If at any time, by assignment or otherwise, the BANK transfers
----------
its rights in any of the BORROWER's or Guarantors' Obligations and its rights in
Collateral therefor, in whole or in part, such transfer shall Garry with it the
powers and rights of the BANK under this Agreement, the Loan Documents, and the
Collateral so transferred and the transferee shall become vested with such
powers
<PAGE>
and rights whether or not they are specifically referred to in the instrument
evidencing the transfer. If, and to the extent that the BANK retains such
rights and Collateral, the BANK shall continue to have the rights and powers
herein set forth with respect thereto. This Agreement and the Loan Documents
shall be binding upon and inure to the benefit of the BANK, the BORROWER and the
Guarantors, their successors, assigns, heirs and personal representatives;
provided, however, the rights and obligations of the BORROWER and the Guarantors
are not assignable, delegable or transferable without the consent of the BANK.
All of the rights of the BANK under this Agreement and the Loan Documents shall
inure to the benefit of any participating bank or banks and its or their
successors and assigns.
J. Expenses: Proceeds of Collateral. The BORROWER and the Guarantors covenant
--------------------------------
and agree that they shall pay to the BANK, on demand, any and all reasonable
out-of-pocket expenses, including reasonable attorneys' fees, court costs,
sheriffs' fees, and other expenses incurred or paid by the BANK in protecting
and enforcing its rights under this Agreement, the Loan Documents and the other
Obligations, including the costs of preparation of this Agreement and the Loan
Documents, and any amendments, modifications, consents, or waivers in respect
thereof, and all filing, auditing, accounting, and appraisal fees. After
deducting all of said expenses and the reasonable expenses of retaking, holding,
preparing for sale, selling and the like, the residue of any proceeds of
collections or sale of Collateral shall be applied to the payment of principal
of or interest on Obligations of the BORROWER to the BANK in such order or
preference as the BANK may determine, and any excess shall be returned to the
BORROWER (subject to the provisions of the Uniform Commercial Code) and the
BORROWER shall remain liable for any deficiency.
K. The BANK's Right to Offset. The BORROWER and the Guarantors hereby grant
--------------------------
the BANK a continuing security interest in, and the right to set off against,
any deposits or other sums at any time credited or due from the BANK to the
BORROWER or the Guarantors, and any securities or other property of the BORROWER
or Guarantors which at any time are in the possession of the BANK, for the
payment of any Obligations due the BANK. The BANK may apply or set off such
deposits or other sums against the BORROWER's Obligations whether or not the
Collateral is considered by the BANK to be adequate. The BORROWER and the
Guarantors expressly grant to the BANK the right to set off and apply such
deposits and sums without having to resort to recourse to any other Collateral
in which the BANK has a security interest.
L. Notices. All notices, requests, demands and other communications provided
-------
for hereunder shall be in writing (including telegraphic communication) and
shall be either mailed by certified mail, return receipt requested, or delivered
by overnight courier service, to the applicable party at the addresses set forth
in this Agreement.
M. Savings Clause. Any provision of this Agreement or any of the Loan
--------------
Documents which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or thereof
or affecting the validity or enforceability of such provision in any other
jurisdiction.
N. Term of this Agreement. This Agreement shall remain in full force and
----------------------
effect until all of the Obligations have been paid in full and all of the terms,
conditions and covenants under the Loan Documents have been performed.
IN WITNESS WHEREOF, the BANK and the BORROWER have executed this Agreement all
as of the day and year first above written.
WITNESS: FLEET BANK - NH
/s/ Robert Putman By: /s/ Kenneth R. Sheldon V.P.
- ------------------------- ----------------------------
<PAGE>
Kenneth R. Sheldon, Vice President
WITNESS: BORROWER:
WHITE PINE SOFTWARE, INC.
/s/ Robert Putman /s/ Howard Berke
- ------------------------- By:---------------------------------------
Howard Berke, President
<PAGE>
FLEET BANK - NH
COMMERCIAL LOAN AGREEMENT
SCHEDULE A
----------
Revolving Line of Credit
I. Percentages and Definitions for Maximum Available Amount under Section
1. A.
______________________ [BORROWER's Initials if This Section I is Applicable]
Applicable Percentage of Acceptable Accounts: __________ %
Applicable Percentage of Acceptable Inventory: __________ %
Definition of Acceptable Accounts: The term "Acceptable Accounts" means those of
the BORROWER's accounts and accounts receivable as the BANK determines to be
satisfactory, in the BANK's sole discretion. Subject to the foregoing,
"Acceptable Accounts" shall not include any service charges or sales or other
taxes and shall be accounts of the BORROWER: (i) which arise in the ordinary
course of BORROWER's business from BORROWER's performance of services or sale of
goods which have been performed or sold; (ii) which are not more than ____
[complete] days old from date of invoice (in the event that twenty percent [20%]
of the accounts receivable from a particular account debtor are over____
[complete] days old, all of the accounts receivable from that particular account
debtor shall be excluded from Acceptable Accounts); (iii) which are not
evidenced by a promissory note or other instrument; (iv) which are payable in
U.S. Dollars; (v) which are owed by any customer whose principal place of
business is within the United States or any foreign accounts which are FCIA-
insured; (vi) which are owed by any corporation or other entity other than one
which is related to the BORROWER, or is of common ownership with the BORROWER,
or could be treated as a member of the same controlled group of corporations of
which the BORROWER is a member; (vii) which constitute valid, binding, and
enforceable obligations of account debtors which are not subject to any claim,
counterclaim, set off, credit, allowance, or chargeback; (viii) as to which the
BORROWER has received no notice and has no knowledge as to whether the account
debtor (or any guarantor or endorser thereof), is bankrupt or insolvent, or any
other facts which make the collection of the account doubtful; (ix) which are
not owed by any person employed by, or salesman of, the BORROWER; (x) which do
not arise out of the sale by the BORROWER of goods consigned or delivered to the
BORROWER on "sell or return" terms (whether or not compliance has been made with
Section 2-326 of the UCC); and (xi) which do not arise out of any sale made on a
"bill and hold", dating, or delayed shipping basis. Accounts payable by BORROWER
to any account debtor shall be netted against accounts due from such debtor.
Definition of Acceptable Inventory: The term "Acceptable Inventory" shall mean
BORROWER's inventory, other than floor plan items or consignments, at such
locations and of such types and qualities as the BANK in its sole discretion may
determine acceptable.
BORROWER shall furnish the BANK on a _________________ [complete] basis with a
reconciliation of accounts, accounts receivable and inventory in a form
reasonably acceptable to the BANK, and furnish the BANK within ten (10) days
after the end of each calendar month with an aging report of all accounts and
accounts receivable in a form reasonably acceptable to the BANK.
<PAGE>
The acceptance of or characterization by the BANK of any account as an
Acceptable Account or inventory as Acceptable Inventory shall not be deemed a
determination by the BANK as to its actual value nor in any way obligate BANK to
accept any account arising subsequently from such debtor to be, or to continue
to deem such account to be, an Acceptable Accounts. All accounts and inventory
of BORROWER whether Acceptable Inventory, or not, shall constitute Collateral
under the Security Agreement.
II. Additional Terms and Conditions for Management of Revolving Line of
Credit Loans.
- -------------------- [BORROWER's Initials if This Section I is Applicable]
With respect to each Revolving Line of Credit Loan:
A. BORROWER desires to use its loan account which indicates the
BORROWER's current indebtedness under the Revolving Line of Credit Loan and its
demand deposit account with the BANK to manage BORROWER's funds and to maintain
a desired target balance in BORROWER'S demand deposit account. BORROWER shall
from time to time inform the BANK of the target balance which BORROWER desires
to maintain, which shall in no event be less than any minimum balance required
under this Agreement. To maintain the desired target balance in BORROWER's
demand deposit account, BORROWER hereby authorizes and directs BANK to charge
BORROWER's demand deposit account to make payments to reduce the debit balance
of BORROWER's loan account and to make advances under the Revolving Line of
Credit Loan increasing the debit balance in BORROWER's loan account and credit
the same to BORROWER's demand deposit account. BORROWER acknowledges and agrees
that the target balance is only a desired goal based upon estimates and that the
BANK shall have no responsibility for variance from the target balance as long
as all charges, advances and credits are made in good faith. All credits
against the BORROWER's indebtedness indicated in the loan account shall be
conditional upon final payment to the BANK of the items giving rise to such
credits. The amount of any item credited against the BORROWER's loan account
which is not paid or which is charged back against the BANK for any reason may
be charged as a debit to the loan account or may be charged back against any
demand deposit account of the BORROWER, and shall be an Obligation in each
instance whether or not the item so charged back or not paid is returned. Any
item received in payment towards the BORROWER's outstanding indebtedness
reflected in the loan account which requires clearance or payment shall not be
considered to have been credited to the loan account until two (2) days after
receipt by the BANK of such item.
B. The BORROWER shall deliver to the BANK as and when received by the
BORROWER and in the same form as so received, all checks, drafts, cash and other
remittances in payment of BORROWER's accounts and account receivables and any
proceeds and collections of the Collateral, each of which checks, drafts, and
other items shall be endorsed to the BANK or as the BANK may otherwise specify
from time to time, and all of which shall be accompanied by such schedules with
respect thereto as the BANK may specify from time to time.
<PAGE>
FLEET BANK - NH
COMMERCIAL LOAN AGREEMENT
SCHEDULE B
----------
ADDITIONAL TERMS AND CONDITIONS
I. Periodic Fees Payable by BORROWER
Revolving Line of Credit Loan: $.50% per annum of the daily average of
-----
unadvanced amounts under the Line of Credit Loan based upon the noncash
collateralized portion thereof ($500,000.00), determined and payable quarterly
in arrears.
Line of Credit Loan:
Term Loan:$ per
-------------------------------------- ----------------- ,
II. Description of Financial Statements to be Delivered:
---------------------------------------------------
oMonthly management prepared financial statements submitted within 20
days of month end.
oAnnual review quality accountant prepared financial statements submitted
within 120 days of fiscal year end.
III. Minimum Balance in Demand Deposit Account to be Maintained:
----------------------------------------------------------
$
------------------------------
IV. Description of Additional Financial and other Covenants
-------------------------------------------------------
oDuring each calendar year, Borrower shall reduce outstanding
principal under the Line of Credit Loan to not more than $500,000 for
at least thirty (30) consecutive days.
oThe Borrower must be profitable on a rolling 3 month basis.
oMaximum ratio of total liabilities(exclusive of deferred
income)/tangible net worth of 1.25:1 at all times.
oMinimum Net worth of $1,600,000 plus 50% of annual net income on a
cumulative basis
oMinimum ratio of current assets/current liabilities (exclusive of
deferred income) of 1.75:1
<PAGE>
AMENDMENT TO COMMERCIAL LOAN AGREEMENT
This agreement (the "Agreement") is made as of this 29th day of August, 1995, by
and among White Pine Software, Inc. (the "Borrower"), and Fleet Bank-NH, a bank
organized under the laws of the State of New Hampshire with its principal place
of business at One Indian Head Plaza, Nashua, New Hampshire 03060 (the "Bank").
WITNESSETH
WHEREAS, The Commercial Loan Agreement dated December 30, 1994, is amended as
follows:
(1) DESCRIPTION OF LOANS: The Commercial Loan Agreement will include a Term
--------------------
Loan in the amount of $53,000.00 dated August 29, 1995. The Term Loan made
to the Borrower shall be upon and subject to the terms and conditions set
forth in the Commercial Promissory Note of even date evidencing such Term
Loan, the other Loan Documents and this Agreement. The Term Loan shall be
repaid as set forth in the Commercial Promissory Note and this Agreement.
(2) REVOLVING LINE OF CREDIT REVIEW DATE of September 30, 1995 is hereby changed
------------------------------------
to June 30, 1996.
In all other respects, the Commercial Loan Agreement and the Loan Documents
shall remain in full force and effect and unmodified.
IN WITNESS WHEREOF, this Agreement has been executed this 29th day of August,
1995.
BORROWERS:
----------
White Pine Software, Inc.
[ILLEGIBLE SIGNATURE] By: /s/ Howard Berke
- ----------------------------- --------------------------------------
Witness Its: President
FLEET BANK-NH
-------------
[ILLEGIBLE SIGNATURE] By: /s/ Kenneth R. Sheldon
- ----------------------------- --------------------------------------
Witness Kenneth R. Sheldon
Its: Vice President
<PAGE>
Exhibit 10.14
REVOLVING LINE OF CREDIT PROMISSORY NOTE
----------------------------------------
$1,000,000.00 U.S. Nashua, NH December 30, 1994
--
FOR VALUE RECEIVED, the undersigned, White Pine Software, Inc., a Delaware
corporation with a principal place of business at 40 Simon Street, Suite 201,
Nashua, New Hampshire (the "Borrower"), promises to pay to the order of FLEET
BANK - NH, a bank organized under the laws of the State of New Hampshire with a
principal place of business at One Indian Head Plaza, Nashua, New Hampshire
03060 (the "Bank"), at such address, or such other place or places as the
holder hereof may designate in writing from time to time hereafter, the maximum
principal sum of ONE MILLION DOLLARS ($1,000,000.00) or so much thereof as
may be advanced or readvanced by the Bank to the Borrower from time to time
hereafter (such amounts defined as the "Debit Balance" below), together with
interest as provided for hereinbelow, in lawful money of the United States of
America.
The Borrower's "Debit Balance" shall mean the debit balance in an account
on the books of the Bank, maintained in the form of a ledger card, computer
records or otherwise in accordance with the Bank's customary practice and
appropriate accounting procedures wherein there shall be recorded the principal
amount of all advances and readvances made by the Bank to the Borrower, all
principal payments made by the Borrower to the Bank hereunder, and all other
appropriate debits and credits. The Bank shall render to the Borrower a
statement of account with respect thereto on a monthly basis. Such statement
shall indicate the Borrower's then current Debit Balance and any interest
amounts due and payable from the Borrower to Bank. The statement shall be
considered correct and be considered accepted by the Borrower, and shall
conclusively bind the Borrower, unless Borrower notifies the Bank to the
contrary within thirty (30) days after the date of mailing.
The Bank agrees to lend to the Borrower, and the Borrower may borrow, up
to the maximum principal sum provided for in this Note in accordance with and
subject to the limitations, terms and conditions of this Note and the
Commercial Loan Agreement of even date entered into by and between the Borrower
and the Bank, as the same may be amended from time to time (the "Loan
Agreement"). The holder of this Note is entitled to all of the benefits and
rights of the Bank under the Loan Agreement. However, neither this reference
to the Loan Agreement nor any provision thereof shall impair the absolute and
unconditional obligation of the Borrower to pay the principal and interest of
this Note as herein provided. Terms not otherwise defined herein shall have the
meanings ascribed to them in the Loan Agreement.
The Borrower agrees that the Bank may deliver all advances and readvances
under this Note by direct deposit to any designated accounts of the Borrower
with the Bank or in such other reasonable manner as may be designated in writing
by the Bank to the Borrower, and that all such advances shall represent binding
obligations of the Borrower.
<PAGE>
The Borrower acknowledges that this Note is to evidence the Borrower's
obligation to pay its Debit Balance, plus interest and any other applicable
charges as determined from time to time, and that it shall continue to do so
despite the occurrence of intervals when no Debit Balance exists because the
Borrower has paid the previously existing Debit Balance in full.
Interest shall be calculated and charged daily, based on the actual days
elapsed over a three hundred sixty (360) day banking year, on the unpaid
principal balance outstanding hereunder from time to time at a variable rate
equal to the Bank's Base Rate, so called, plus one half percent (0.50%) per
annum. The Base Rate shall be the Base Rate of the Bank as established and
changed by the Bank from time to time whether or not such rate shall be
otherwise published. Each time the Base Rate changes, the interest rate
hereunder shall change contemporaneously with such change in the Base Rate.
The Bank shall extend the Revolving Line of Credit from the date hereof
through and until September 30, 1995 (the "Credit Expiration Date"), whereupon
all outstanding principal and accrued and unpaid interest under this Note, and
any other charges provided for hereunder, shall be due and payable in full.
Pending the Credit Expiration Date or acceleration or demand as hereinafter
provided, interest shall be payable monthly in arrears commencing thirty (30)
days from the date hereof (or on any day within the thirty (30) days of the date
hereof agreed to by the Borrower and the Bank to provide for a convenient
payment date) and continuing on the same date of each month thereafter.
NOTWITHSTANDING THE FOREGOING, to the extent the Debit Balance hereunder exceeds
at any time the maximum available amount which may be advanced hereunder in
accordance with the provisions of the Loan Agreement, the amount of the Debit
Balance which exceeds such maximum available amount is payable to Bank ON
DEMAND.
The Borrower may prepay this Note in whole or in part at any time without
the payment of any penalty, premium or charge of any nature whatsoever. In the
event that any such prepayment shall be made by the Borrower, the amount
thereof shall be applied first to accrued interest and thereafter to principal.
This Note is being executed and delivered in accordance with the terms of
the Loan Agreement and the documents defined therein as the "Loan Documents".
The payment and performance of the obligations contained in the Loan Documents
are secured by the collateral granted to the Bank therein (the "Collateral") and
the security granted to the Bank in the Loan Documents.
At the option of the Bank, this Note shall become immediately due and
payable in full, without further demand or notice, in the event that any
payments of principal or interest are not made when due hereunder or upon the
occurrence of an Event of Default under the terms of the Loan Agreement or under
the terms of any of the other Loan Documents.
<PAGE>
The holder may impose upon the Borrower a delinquency charge of five
percent (5%) of the amount of the interest not paid on or before the tenth
(10th) day after such installment is due. The entire principal balance hereof,
together with accrued interest, shall after maturity, whether by demand,
acceleration or otherwise, bear interest at the contract rate of this Note plus
an additional five percent (5%) per annum.
The Borrower agrees that any other property upon or in which the Borrower
has granted or hereafter grants the holder a mortgage or security interest,
securing the payment and performance of any other liability of the Borrower to
the holder, shall also constitute Collateral. As additional Collateral, the
Borrower grants (1) a security interest in, or pledges, assigns and delivers to
the holder, as appropriate, all deposits, credits and other property now or
hereafter due from the holder to the Borrower; and (2) the right to set off and
apply (and a security interest in said right), from time to time hereafter and
without demand or notice of any nature, all, or any portion, of such deposits,
credits and other property, against the indebtedness evidenced by this Note
whether the other Collateral, if any, is deemed adequate or not.
The Borrower, and each endorser or guarantor of this Note, jointly and
severally, agree to pay on demand all reasonable out-of-pocket costs of
collection hereof, including reasonable attorneys' fees, whether or not any
foreclosure or other action is instituted by the holder in its discretion.
No delay or omission on the part of the holder in exercising any right,
privilege or remedy shall impair such right, privilege or remedy or be
construed as a waiver thereof or of any other remedy or any amendment to this
Note shall be effective unless made in writing and signed by the holder. Under
no circumstances shall an effective waiver of any right, privilege or remedy on
any one occasion constitute or be construed as a bar to the exercise of or a
waiver of such right, privilege or remedy on any future occasion.
The acceptance by the holder hereof of any payment after any default
hereunder shall not operate to extend the time of payment of any amount then
remaining unpaid hereunder or constitute a waiver of any rights of the holder
hereof under this Note.
All rights and remedies of the holder, whether granted herein or otherwise,
shall be cumulative and may be exercised singularly or concurrently, and the
holder shall have, in addition to all other rights and remedies, the rights
and remedies of a secured party under the Uniform Commercial Code of New
Hampshire. The holder shall have no duty as to the collection or protection of
the Collateral or of any income thereon, or as to the preservation of any
rights pertaining thereto beyond the safe custody thereof in a commercially
reasonable manner. Surrender of this Note, upon payment or otherwise, shall
not affect the right of the holder to retain the Collateral as security for the
payment and performance of any other liability of the Borrower to the holder.
<PAGE>
The Borrower, and every maker, endorser, or guarantor of this Note,
hereby jointly waive, to the fullest extent permitted by law, presentment,
notice, protest and all other demands and notices and assents (1) to any
extension of the time of payment or any other indulgence, (2) to any
substitution, exchange or release of Collateral, and (3) to the release of any
other person primarily or secondarily liable for the obligations evidenced
hereby.
This Note and the provisions, hereof shall be binding upon the Borrower
and the Borrower's successors, legal representatives and assigns and shall inure
to the benefit of the holder, the holder's heirs, administrators, executors,
successors, legal representatives and assigns.
The word "holder" as used herein shall mean the payee or endorsee of this
Note who is in possession of it, or the bearer, if this Note is at the time
payable to the bearer.
This Note may not be amended, changed or modified in any respect except by
a written document which has been executed by each party. This Note
constitutes a New Hampshire contract to be governed by the laws of such state
and to be paid and performed therein.
Dated this 30th day of December, 1994.
---- -------- --
WHITE PINE SOFTWARE, INC.
/s/ Robert Putman By: /s/ Howard Berke
- --------------------------------- ----------------------------------
Witness Howard Berke, President
STATE OF NEW HAMPSHIRE
COUNTY OF HILLSBOROUGH
On this the 30th day of December, 1994, before me, the undersigned notary
---- -------- --
or justice, personally appeared Howard Berke, who acknowledged himself to be the
President of White Pine Software, Inc., a corporation, and that he, as such
authorized officer, being authorized so to do, executed the foregoing instrument
for the purposes therein contained, by signing the name of the corporation by
himself as such authorized officer.
/s/ [SIGNATURE APPEARS HERE]
----------------------------------
Justice of the Peace
<PAGE>
NOTE MODIFICATION AGREEMENT
1. Bank:
FLEET BANK - NH, One Indian Head Plaza, Nashua, New Hampshire 03060
2. A. Borrower(s):
(Include all obligors): White Pine Software, Inc.
-------------------------------------------------------
2. B. Guarantor(s):
________________________________________________________________________________
3. The "Note":
Promissory Note dated December 30, 1994, by Borrower to Bank in the original
----------- --
face amount of $1,000,000.00
------------
4. The "Mortgage":
Mortgage by Borrower, as mortgagor, in favor of Bank, as mortgagee, dated_____,
19___, recorded in________Country Registry of Deeds in Book___, Page_____.
5. The "Security Agreement":
Security Agreement from Borrower, as grantor, to Bank, as secured party, dated
December 30, 1994, and perfected by the filing of UCC-1 Financing Statements
- ------------ --
with the NH/MA/CA Secretary of State and the City/Town Clerk of Nashua and
-------- ----------
Plainville.
- ----------
6. The "Loan Documents":
Refers to the Note and Mortgage and Security Agreement as defined above together
with any and all other related documents, contracts or agreements by and between
the Borrower and the Bank arising from or otherwise related to the loan from
Bank to Borrower evidenced by the Note, including, but not limited to, any prior
modification agreements.
For valuable consideration, Borrower and Bank hereby agree as follows:
a) The Note, as defined above, is hereby amended as follows (CHECK ONE OR
MORE):
[X] Extension of Maturity - The original maturity date of September 30,
------------
1995 under the Note dated December 30, 1994 is hereby extended to
---- ----------- --
June 30, 1996.
------- --
[ ] Change of Interest Rate - The original interest rate of ____________
as stated in the Note is hereby changed to _____________. Said
change is effective with respect to all outstanding balances of the
Note, commencing on _______________, 19__. A Rate based on the Base
Rate of the Bank will change each time and as of the date the Base
Rate of the Bank changes.
[ ] Change in Periodic Payment - The original periodic payment stated in
the Note, of $_____________, per ________, commencing on ________,
19__, and continuing thereafter on the same day of each successive
_________ until maturity, is hereby changed to $ __________ per
___________, commencing on __________, 19__, and continuing on the
same day of each successive _________ until maturity.
[ ] Principal Re-advance - The outstanding balance of the Note on the
date of this Agreement is $_________ of principal, plus accrued
interest (and other proper changes, if any). Bank is readvancing the
additional sum of $_________ * to be added to the principal balance
under the Note and shall be subject to all of the terms and
conditions of the Note including any modifications set forth above.
Borrower hereby acknowledges receipt of said additional funds and
agrees to repay said amount in accordance with all of the terms and
conditions of the Note as may be modified by this Agreement.
*(Note to Bank officer: This additional amount when added to the
outstanding balance of the Note, should not exceed the original face
amount of the Note.)
b) The Mortgage and/or Security Agreement, as defined above, together with all
of the Loan Documents shall remain in full force and effect and shall
continue to secure the Note as amended by this Agreement.
c) In all other respects, the Loan Documents shall remain in full force and
effect and unmodified.
d) The Guarantors, if any, by signing below, accept and expressly agree to the
terms of this Agreement.
e) If the terms set forth herein are inconsistent with any prior modifications
or Loan Documents, the parties agree that the terms set forth herein shall
govern.
Executed this 29th day of August , 1995.
----- ------- --
WITNESS: BORROWER: White Pine Software, Inc.
/s/ Kenneth R. Sheldon VP /s/ Howard R. Berke President
- -------------------------------- --------------------------------------
By: By: Its:
BORROWER:
/s/ Howard R. Berke
- -------------------------------- --------------------------------------
By: By:
GUARANTOR
- -------------------------------- --------------------------------------
By: By:
GUARANTOR:
- -------------------------------- --------------------------------------
By: By:
FLEET BANK - NH
By: /s/ Kenneth R. Sheldon VP
-----------------------------
By:
-----------------------------
<PAGE>
NOTE MODIFICATION AGREEMENT
1. Bank:
FLEET BANK - NH, One Indian Head Plaza, Nashua, New Hampshire 03060
2. A. Borrower(s):
(Include all obligors): White Pine Software, Inc.
------------------------------------------------------
2. B. Guarantor(s):
- -------------------------------------------------------------------------------
3. The "Note":
Promissory Note dated December 30, 1994, by Borrower to Bank in the original
----------- --
face amount of $1,000,000.00
------------
4. The "Mortgage":
Mortgage by Borrower, as mortgagor, in favor of Bank, as mortgagee, dated ,
-----
19 , recorded in Country Registry of Deeds in Book , Page .
--- -------- ----- ------
5. The "Security Agreement":
Security Agreement from Borrower, as grantor, to Bank, as secured party, dated
____________, 19__, and perfected by the filing of UCC-1 Financing Statements
with the NH/MA/CA Secretary of State and the City/Town Clerk of Nashua and
-------- ----------
Plainville.
- ----------
6. The "Loan Documents":
Refers to the Note and Mortgage and Security Agreement as defined above together
with any and all other related documents, contracts or agreements by and between
the Borrower and the Bank arising from or otherwise related to the loan from
Bank to Borrower evidenced by the Note, including, but not limited to, any prior
modification agreements.
For valuable consideration, Borrower and Bank hereby agree as follows:
a) The Note, as defined above, is hereby amended as follows
(CHECK ONE OR MORE):
[X] Extension of Maturity - The original maturity date of September 30,
------------
1995 under the Note dated December 30, 1994 is hereby extended to
---- ----------- --
September 30, 1996.
------------ --
[ ] Change of Interest Rate - the original interest rate of________as
stated in the Note is hereby changed to____________. Said change is
effective with respect to all outstanding balances of the Note,
commencing on_________, 19__. A Rate based on the Base Rate of the
Bank will change each time and as of the date that the Base Rate of
the Bank changes.
[ ] Change in Periodic Payment - The original periodic payment stated in
the Note, of $ ________________,per _________, commmencing on
________, 19___, and continuing thereafter on the same day of each
successive _______ until maturity, is hereby changed to $ __________
per _______, commencing on ________, 19__, and continuing on the same
day of each successive___________ until maturity.
[ ] Principal Re-advance - The outstanding balance of the Note on the
date of this Agreement is $__________ of principal, plus accrued
interest (and other proper charges, if any). Bank is readvancing the
additional sum of $_________* to be added to the principal balance
under the Note and shall be subject to all of the terms and
conditions of the Note including any modifications set forth above.
Borrower hereby acknowledges receipt of said additional funds and
agrees to repay said amount in accordance with all of the terms and
conditions of the Note including any modifications set forth above.
Borrower hereby acknowledges receipt of said additional funds and
agrees to repay said amount in accordance with all of the terms and
conditions of the Note as may be modified by this Agreement.
*(Note to Bank officer: This additional amount when added to the
outstanding balance of the Note, should not exceed the original face
amount of the Note.)
b) The Mortgage and/or Security Agreement, as defined above, together with all
of the Loan Documents shall remain in full force and effect and shall
continue to secure the Note as amended by this Agreement.
c) In all other respects, the Loan Documents shall remain in full force and
effect and unmodified.
d) The Guarantors, if any, by signing below, accept and expressly agree to the
terms of this Agreement.
e) If the terms set forth herein are inconsistent with any prior modifications
or Loan Documents, the parties agree that the terms set forth herein shall
govern.
Executed this 24th day of June , 1996.
----- ------- --
WITNESS: BORROWER: White Pine Software, Inc.
By: /s/ Howard R. Berke
- -------------------------------- --------------------------------------
By: Duly Authorized
BORROWER:
- -------------------------------- --------------------------------------
By:
GUARANTOR:
- -------------------------------- --------------------------------------
By:
GUARANTOR:
- -------------------------------- --------------------------------------
By:
FLEET BANK - NH SEE ATTACHED ACKNOWLEDGEMENT PAGE
By:/s/ Kenneth R. Sheldon
-----------------------------
By:
-----------------------------
<PAGE>
State of New Hampshire
County of Hillsborough
On this the 24th day of June, 1996, before me, Robert Putman, the undersigned
notary or justice, personally appeared Howard Berke, President, White Pine
Software, Inc. [person or persons acknowledging instrument], known to me or
satisfactorily proven to be the person or persons whose name is or names are
subscribed to the within instrument and acknowledged that he/she/they executed
the same for the purposes therein contained.
/s/ Robert Putman
---------------------------------------
Notary Public
My commission expires on
August 23 ,1996
--------------------------------- --
<PAGE>
EXHIBIT 10.15
SECURITY AGREEMENT
THIS AGREEMENT, made this 30th day of December, 1994, by and between Fleet
Bank-NH, a bank incorporated under the laws of the state of New Hampshire, with
its principal place of business at One Indian Head Plaza, Nashua, New Hampshire
(hereinafter "Bank") and White Pine Software, Inc. with a principal place of
business at 40 Simon Street, Suite 201, Nashua, NH (hereinafter "Borrower").
In consideration of one or more loans, Letters of Credit, or the financial
accommodations made, or to be made, from Bank to Borrower, the parties hereto
agree as follows:
1. Grant of Security Interest; Collateral.
1.01 The Borrower, in exchange for good and valuable consideration, the
receipt whereof is hereby acknowledged, does hereby expressly grant to Bank a
continuing security interest in the following (hereinafter collectively called
the "Collateral") (check appropriate box(es)):
[XX] All accounts, accounts receivable, demand deposits, "cash
collateral" (as defined in 11 U.S.C. Section 363(a)), contracts,
contract rights, notes, bills, drafts, chattel paper, acceptances,
choses in action, tax refunds, insurance proceeds, and all other
debts, obligations, and liabilities in whatever form, owing to
Borrower from any person or entity, the rights of reclamation and
stoppage in transit, and all rights of an unpaid seller of goods or
services whether now existing or subsequently arising, acquired, or
created, together with the proceeds thereof ("Accounts").
[XX] All goods, merchandise, inventory, raw materials (in place or on
order), all work-in-process, and all finished goods, and all other
tangible property held for sale or lease or furnished or to be
furnished under contracts of service, or used or consumed in
Borrower's business, or consigned to others or held by others for
return to Borrower, whether now owned or subsequently acquired or
manufactured and wherever located, all the products thereof, and all
cash or non-cash proceeds of the foregoing, including insurance
proceeds ("Inventory").
[XX] All machinery, equipment, office equipment, furniture, fixtures
(including automotive equipment), along with all other parts, tools,
trade-ins, repairs, accessories, accessions, modifications and
replacements, whether now owned or subsequently acquired, constructed,
or attached or added to, or placed in, the foregoing, together with
all cash or non-cash proceeds, including insurance proceeds
("Equipment and Fixtures").
[XX] All general intangibles, including, but not limited to, all
leases and rents, corporate names, trade names, trademarks, trade
secrets, books and records, customer lists, blueprints and plans,
computer programs, tapes and related electronic data processing
software, and all corporate ledgers, whether now owned or subsequently
acquired, together with the proceeds thereof ("General Intangibles").
[_] A purchase money security interest in
----------------------------
----------------------------------------------------------------------
along with all parts, tools, trade-ins, repairs, accessories,
accessions, modifications and replacements, whether now owned or
subsequently acquired, constructed or attached or added to, or placed
in, the foregoing together with all cash or non-cash proceeds,
including insurance proceeds.
[XX] A security interest in see Addendum A to Security Agreement
------------------------------------------
attached hereto and made a part hereof.
----------------------------------------------------------------------
along with all parts, tools, trade-ins, repairs, accessories,
accessions, modifications and replacements, whether now owned or
subsequently acquired, constructed or attached or added to, or placed
in, the foregoing together with all cash or non-cash proceeds,
including insurance proceeds.
1.02 The security interest granted hereby is to secure punctual payment and
faithful performance of all debts, liabilities and obligations of Borrower
to Bank hereunder and also any and all other debts, liabilities and
obligations of Borrower to Bank of every kind and description, direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, including but not limited to any debt, liability or
obligation of Borrower to others which Bank may have obtained by assignment
or otherwise, and further including, without limitation, all debts,
interest, fees, charges and expenses (all hereinafter called
"Obligations").
2. Representations, Warranties, and Covenants.
Borrower hereby warrants, represents, and covenants:
2.01. That the Collateral is and, if acquired hereafter, will be, lawfully
owned by Borrower, free and clear of all other liens, encumbrances and
security interests, except as may be disclosed to Bank on Schedule A, and
Borrower will warrant and defend title to the same against the claims and
demands of all persons.
2.02. That Borrower has not granted, and will not grant, to anyone other
than Bank, and security interest in the Collateral, and no Financing
Statement or other instrument bearing the signature of, or otherwise
authorized by Borrower, is on file in any public filing office.
2.03. That the Collateral is and shall be retained in Borrower's
possession at its principal place of business located at the address set
forth above, including San Jose, California and Plainville, Massachusetts.
2.04. That the Collateral is, or will be, used primarily for business
purposes.
2.05. That the Borrower has no other business location(s) except as may be
disclosed to Bank on Schedule B.
2.06. That Borrower will give Bank prompt written notice of removal from,
discontinuance of, or change in, the business address shown above.
2.07. That if a corporation, partnership or trust, the Borrower's full and
complete legal name is White Pine Software, Inc.; the Borrower has been
duly organized and is existing under the laws of the State of Delaware; and
the Borrower utilizes no tradenames in the conduct of its business except
as may be disclosed to Bank on Schedule C, and shall
<PAGE>
not conduct its business hereafter under any other tradenames or trade
style except upon seven (7) days' prior written notice to Bank.
2.08. That no litigation, administrative action or other proceeding is
either threatened, contemplated or pending which will materially or
adversely affect Borrower's financial condition, and Borrower is not a
party to, or bound by, any contract, agreement, order or decree which (a)
would require the consent of any party as a condition precedent hereto; or
(b) will or may have a material adverse impact on the business of Borrower
or the rights of Bank hereunder.
3. Additional Representations, Warranties, and Covenants.
Borrower hereby further warrants, represents, and covenants to and with
Bank:
3.01. That, at Borrower's own expense, the Borrower will: (i) keep the
Collateral fully insured against such hazards as Bank may require, by
insurers and in amounts approved by Bank, for the benefit of Borrower and
Bank; (ii) promptly deliver the insurance policies or certificates thereof
to Bank and such policies shall contain provisions that no such insurance
may be cancelled or decreased without ten (10) days' prior written notice
to Bank; and (iii) keep the Collateral in good condition at all times and
maintain the same in accordance with all manufacturer's specifications and
requirements.
3.02. That, upon any failure of Borrower to comply with its obligations
pursuant to (S)3.01 above, Bank may, at its option, and without affecting
any of its other rights or remedies herein or as a secured party under the
Uniform Commercial Code, procure the insurance protection it deems
necessary and/or cause repairs or modifications to be made to the
Collateral, the cost of either or both of which shall be a lien against the
Collateral added to the amount of the indebtedness secured hereby and
payable on demand with interest at a per annum rate computed on the same
basis as the Obligations.
3.03. That Borrower hereby assigns to Bank any and all moneys which may
become due and payable under any policy insuring the Collateral, including
return of unearned premiums, and directs any such insurance company to make
payment directly to Bank, and authorizes Bank to apply such moneys in
payment on account of the indebtedness secured hereby, whether or not due,
or, at the sole option of Bank, toward replacement of the Collateral, and
to remit any surplus to Borrower.
3.04. That Borrower will not use the Collateral in violation of any
statute or ordinance or applicable insurance policy and will promptly pay
all taxes and assessments levied against the Collateral.
3.05. That Borrower will not permit any lien, charge, encumbrance, or
security interest of any kind whatsoever to exist more than twenty (20)
days after it accrues upon or attaches to, as the case may be, the
Collateral.
3.06. That Borrower will not remove the Collateral from its present
location(s) as set forth above without the prior written consent of Bank,
except in the normal course of business.
3.07. That Borrower will not sell, transfer, change the registration, if
any, dispose of, attempt to dispose of, substantially modify, or abandon
the Collateral or any part thereof, without the prior written consent of
Bank, provided that Borrower may sell or otherwise dispose of obsolete or
worn out Collateral no longer used or useful in its business if Borrower
shall first or substantially simultaneously with such sale or disposition
replace the same with new property of substantially equal value which shall
forthwith become subject to the security interest provided for herein.
3.08. That Borrower will not assert against Bank any claim or defense
which Borrower may have against any seller of the Collateral or any part
thereof, or against any other person with respect to the Collateral or any
part thereof .
3.09. That Borrower will indemnify and hold Bank harmless from and against
any loss, liability, damage, costs, and expenses whatsoever arising from
the use, operation, ownership, or possession of the Collateral or any part
thereof.
3.10. That Borrower will furnish Bank, *prior to delivery of major items
of Collateral to Borrower, copies of the shipping orders with respect to
such Collateral which will specify the name of the manufacturer, a
description of such items, and the serial numbers thereof. *upon request of
Bank
3.11. That Borrower will sign and deliver to Bank such Financing
Statements, Amendment Statements, Continuation Statements, and other
related documents in form acceptable to Bank, as Bank may, from time to
time, reasonably request, or as are necessary, in the opinion of Bank, to
establish and maintain a valid perfected security interest in the
Collateral, and Borrower will pay any related filing fees or costs with
respect thereto and any fees for prior lien searches.
3.12. That Bank is authorized to file any such Financing Statement,
Amendment Statement or Continuation Statement without the signature of
Borrower to the full extent permitted by law.
3.13. Borrower shall furnish to Bank within ninety (90) days after the
last day of each fiscal year of Borrower a financial statement, including,
but not limited to, a balance sheet, statement of income, retained
earnings, and changes in financial position and other supporting schedules,
each prepared in accordance with generally accepted accounting principles
consistently applied with a report signed by an independent certified
public accountant satisfactory to Bank. Additionally, Borrower shall
promptly, and in a form satisfactory to Bank, furnish to Bank such other
information concerning Borrower's business or any guarantor as Bank may
reasonably request from time to time.
<PAGE>
3.14 Borrower shall permit Bank, through its authorized attorneys,
accountants, and representatives, to inspect and examine the Collateral and
the books, accounts, records, ledgers, and assets of every kind and
description of Borrower with respect thereto at all reasonable times, in
accordance with the Commercial Loan Agreement.
3.15. If Borrower shall now or hereafter maintain an employee benefit plan
covered by Sec. 4021(a) of the Employee Retirement Income Security Act of
1974 (hereinafter referred to as "ERISA") relating to plan termination
insurance, it shall promptly:
A. Notify Bank of filing of notice with the Pension Benefit Guaranty
Corporation ("PBGC") pursuant to Sec. 4041 of ERISA that the plan is to
be terminated; and
B. Notify Bank of the institution of proceedings by PBGC under Sec.
4042 of ERISA.
3.16. Borrower shall not: (a.) pay any dividends, either in cash or kind,
on any class of its capital stock nor make any distribution on account of
its stock, nor redeem, purchase or otherwise acquire, directly or
indirectly, any of its stock; (b) make any loans or advances to any
individual, firm or corporation including without limitation its officers
and employees; (c) invest in or purchase any stock or securities of any
individual, firm or corporation; (d) merge or consolidate or be merged or
consolidated with or into any other corporation; or (e.) enter into any
agreements of guaranty of the obligations of any individual, firm or
corporation, including without limitation affiliate or subsidiary
corporations (except as may be requested by the Bank) without the prior
written consent of Bank. Notwithstanding the foregoing, Borrower may effect
items b & c above to an aggregate total of no greater than $150,000.00.
4. Remedies.
Borrower agrees that (i) in the case of the breach by Borrower of any of
the representations, warranties, or covenants contained in this Agreement,
or if any representations, oral or written, or warranties, shall prove to
have been materially false when made, (ii) upon the occurrence of an Event
of Default as defined herein or in any of the Obligations, or (iii) if the
Collateral or any part thereof be seized or levied upon under legal
process, then, and in any such event:
4.01. Bank shall have the rights and remedies of a Secured Party under the
Uniform Commercial Code and, in addition, the rights and remedies provided
herein.
4.02. Bank is hereby authorized and empowered, with the aid and assistance
of any person or persons, to enter any premises where the Collateral or any
part thereof is, or may be placed, and to assemble, disassemble, dismantle,
and/or remove the same and/or to render it unusable, and to sell or
otherwise dispose of such Collateral at public or private sale upon at
least five (5) days' prior written notice to Borrower of the date on, or
after which, such sale may be conducted and Borrower expressly agrees that
said notice shall constitute fair and reasonable notice to Borrower, that
said notice may be given regardless of whether or not the Bank has taken
actual possession of the Collateral, and that at the expiration of said
notice period all rights of redemption in the Collateral shall be deemed
waived by Borrower. The proceeds of each such sale shall first be applied
by Bank toward the payment of all expenses of retaking, including but not
limited to payment by Bank for storage, preparing for such sale,
advertising, selling, and all related charges and disbursements in
connection therewith including attorney's fees, and then any surplus may be
applied by Bank to the payment of any or all of the Obligations secured
hereby then existing and whether due or not due; but, should the proceeds
of any such sale be insufficient to fully pay all of the Obligations,
Borrower hereby covenants and agrees to remain liable for any deficiency.
Bank may require Borrower to assemble the Collateral and to make it
available to Bank at a place to be designated by Bank which is reasonably
convenient to both parties. Bank may, without any payment or hindrance,
enter upon any real property where the Collateral or any part thereof may
be located and, in connection with the enforcement of any right, remedy,
power or privilege conferred upon Bank hereunder, may store the Collateral
or any part thereof on such real property without liability for any rent or
other payment in connection herewith.
4.03. Bank shall have the right of set-off, without notice to Borrower or
any guarantor, against any and all deposits or other sums at any time or
times credited by or due from Bank to Borrower or any guarantor, whether in
a special account or other account represented by a certificate of deposit
(whether or not matured), which deposits and other sums shall, at all
times, constitute additional security for the Obligations and may be set
off against all or any part of the Obligations at any time.
5. Rights and Remedies Cumulative.
Borrower hereby further warrants, represents, and agrees that all rights
and remedies contained in this Agreement, and any other instrument or
agreement between the parties hereto, are cumulative and not exclusive and
that a waiver by Bank of any breach by Borrower of the terms, covenants,
and conditions hereof shall not constitute a waiver of future breaches or
defaults, and no failure or delay in the exercise of any options, powers,
rights, or remedies, or partial or single exercise thereof, shall
constitute a waiver thereof.
6. Power of Attorney; Waiver of Trial by Jury.
Borrower does hereby irrevocably appoint Bank as attorney-in-fact, * with
full power of substitution, to execute proofs of claim, to endorse any
draft or other instrument for the payment of money, to execute releases, to
negotiate settlements, to cancel any insurance referred to herein, and to
do all other things necessary or required to effect a settlement under any
insurance policy. Bank and Borrower upon advice of counsel and for the
purpose of expediting the complete resolution of any disputes do hereby
irrevocably waive all right to trial by jury in any action, proceeding or
counterclaim, arising out of or relating to any part of this Agreement, the
Collateral, the Obligations or the action of Bank in the enforcement
thereof. *upon an Event of Default,
<PAGE>
7. General Provisions.
7.01. This Agreement may not be changed, modified, or discharged, in whole
or in part, and no right or remedy of Bank hereunder or as a Secured Party
under the Uniform Commercial Code, may be waived by Bank unless such
change, modification, discharge, or waiver is in writing and signed on
behalf of Bank by a duly authorized officer. Invalidity of any provision of
this Agreement shall not affect the balance thereof.
7.02. The rights and benefits of Bank hereunder shall inure to the benefit
of its successors and assigns and shall be binding upon the successors and
assigns of Borrower.
7.03. This Agreement and the rights and obligations of Bank and Borrower
hereunder shall be governed by and construed in accordance with the laws of
the State of New Hampshire. Any action hereon or relating hereto may be
maintained in a court of competent jurisdiction located in that State, and
the undersigned hereby consent(s) to the jurisdiction of any such court for
all purposes connected herewith.
7.05. Borrower agrees that the amount by which the value of the Collateral
may exceed, from time to time, the outstanding Obligations of Borrower to
Bank ("Equity Cushion") shall not, under any circumstances, be deemed to be
adequate protection for the Bank in the event of any insolvency proceeding
under 11 U.S.C. Sec. 101 et seq. Borrower acknowledges that the Equity
Cushion may exist solely for the benefit of Bank to ensure the repayment in
full of all obligations hereunder, and Borrower expressly acknowledges that
any Equity Cushion that may exist represents a benefit bargained for and
acquired by the Bank in exchange for full and adequate consideration.
7.06. In the event Bank is at any time required to turn over, disgorge, or
repay (whether to the undersigned, a Trustee in Bankruptcy, or to third
parties) any payments previously received by Bank with respect to the
Obligations (whether received from the undersigned or third parties), then
the amount of the Obligations secured by the Collateral shall be increased
by the amount so turned over or disgorged by Bank, plus reasonable expenses
incurred by Bank in the process, to the same extent as if the amount in
question, and expenses, had been advanced by the Bank at the inception of
the Obligations and had remained unpaid since that date, whether or not all
Obligations had otherwise been paid at the date of turn over, all of which
shall be payable immediately, without demand. If the Obligations had
previously been paid in full, this Agreement (notwithstanding any of the
terms hereof) shall be deemed revived and in full effect with respect to
such payments.
7.07. The descriptive headings of the several sections of this Agreement
are inserted for convenience only and shall not be deemed to affect the
meaning or construction of any of the provisions hereof.
8. Events of Default.
In the case of a happening of any of the following events or conditions
with respect to the Borrower (individually and collectively herein an
"Event of Default"):
8.01. Any representation or warranty made herein or in any report,
certificate, financial statement or other instrument furnished in
connection with this Agreement or the Obligations shall prove to be false
or misleading in any material respect; or
8.02. Failure to pay the principal of, or interest on, the Obligations or
any other indebtedness of the Borrower to the Bank, within ten (10) days
from the date the same or any installment thereof shall become due and
payable, whether at the due date thereof or at a date fixed for prepayment
or by acceleration or otherwise; or
8.03. Default in the due observance or performance of any other covenant,
condition or agreement contained in this Agreement and such other default
shall remain unremedied for ten (10) days; or
8.04. The acceleration of the maturity of any of the Borrower's
indebtedness other than to the Bank; or
8.05. Involvement in financial difficulties as evidenced by:
(i) and attachment made on the property or assets which remains
unreleased for a period in excess of forty-five (45) days; or
(ii) the inability to pay its debts generally as they become due; or
(iii) the appointment or authorization of a custodian as defined in the
Bankruptcy Code; provided, however, that in the case of the appointment
of a receiver in an involuntary proceeding such appointment continues
in effect and undischarged for a period of thirty (30) days; or
(iv) the entry of an order for relief in a voluntary case under any
chapter of the Bankruptcy Code; or
(v) the filing of an involuntary petition under any chapter of the
Bankruptcy Code, which petition remains undismissed for a period of
thirty (30) days; or
(vi) any other modification or adjustment of the rights of Borrower's
creditors.
8.06. Any transfer to any person who is not presently a shareholder of a
corporate Borrower or the wife or child of a shareholder of a corporate
Borrower of any voting capital stock, except any transfers of such shares
upon the death of a shareholder either by will or by intestacy; or such
transfer of a partnership interest of a partnership Borrower;
notwithstanding the foregoing, Borrower may issue stock under the
established stock option policy; or
8.07. The suspension of business for a cause, other than strike, casualty
or other cause beyond such entity's control and in the event of such
suspension for cause beyond entity's control, failure to resume operations
as soon as possible; or
8.08. Dissolution of a corporate, trust or partnership Borrower or death
of an individual Borrower.
<PAGE>
IN WITNESS WHEREOF, Borrower has caused this Agreement to be duly executed
and delivered as of the day and year first written above.
White Pine Software, Inc. Borrower
/s/ Robert Putman By: /s/ Howard Berke
- --------------------------- ------------------------------------------
Witness
(By:) Title: Howard Berke, President
Borrower
---------------------------------
By:
- --------------------------- ------------------------------------------
Witness
(By:) Title:
---------------------------------------
ACCEPTED:
FLEET BANK - NH
By: /s/ Kenneth R. Sheldon By:
------------------------ ------------------------------------------
Title: Kenneth R. Sheldon, Title:
---------------------------------------
Vice President
SCHEDULE A
OTHER LIENS (2.01)
NONE
SCHEDULE B
BUSINESS LOCATIONS (2.05)
Plainville, MA
SCHEDULE C
TRADENAMES (2.07)
NONE
<PAGE>
ADDENDUM TO SECURITY AGREEMENT
THIS ADDENDUM made as of this 30th day of December 1994 is to a certain
Security Agreement of even date herewith (the "Security Agreement") by and
between FLEET BANK - NH, a bank organized under the laws of the State of New
Hampshire with its principal place of business at One Indian Head Plaza, Nashua,
New Hampshire 03060 (hereinafter "Bank") and WHITE PINE SOFTWARE, INC., a
Delaware corporation with a principal place of business at 40 Simon Street,
Suite 201, Nashua, New Hampshire (hereinafter "Borrower"). All capitalized
terms not otherwise defined herein shall have the meanings ascribed to them in
the Security Agreement. The Bank and the Borrower agree that the following
shall be and hereby is made a part of Section 1.01 of the Security Agreement.
In order to secure the payments of the Obligations, the Borrower hereby
pledges, assigns, and grants to the Bank a continuing security interest and lien
on all present and future rights, title and interest in and to all computer
software products owned by the Borrower, including without limitation, all
source code, object code, copyright and copyright registrations throughout the
world, all tangible property embodying or incorporating such copyrights, all
trademarks, and all patents relating to or arising with respect to such
software, and all products and proceeds thereof. The software currently owned
by the Borrower, and all copyrights and copyright registrations with respect
thereto are listed hereinbelow.
Description of Software Registration Number
----------------------- -------------------
eXodus for Macintosh
eXodus for Windows
eXodus for DOS
Mac 320
Mac 340
PC 320/340
TGRAF for PC
TGRAF for Windows
TGRAF for Macintosh
TGRAF X
VT Xpress
IN WITNESS WHEREOF, the Borrower and the Bank have executed this Addendum
as of the date first set forth above.
FLEET BANK - NH
/s/ Robert Putman By: /s/ Kenneth R. Sheldon VP
- ---------------------------- ---------------------------------------
Kenneth R. Sheldon, Vice President
WHITE PINE SOFTWARE, INC.
/s/ Robert Putman By: /s/ Howard Berke
- ---------------------------- ---------------------------------------
Howard Berke, President
<PAGE>
EXHIBIT 10.16
COLLATERAL ASSIGNMENT OF COPYRIGHTS,
LICENSES, TRADENAMES AND TRADEMARKS
AND SECURITY AGREEMENT
THIS COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT (this "Agreement"), is
made this 30th of December, 1994, by and between WHITE PINE SOFTWARE, INC., a
Delaware corporation, with a principal place of business at 40 Simon Street,
Suite 201, Nashua, New Hampshire 03060 (the "Borrower") and FLEET BANK - NH, a
bank organized under the laws of the State of New Hampshire with a principal
place of business at One Indian Head Plaza, Nashua, New Hampshire 03060 (the
"Bank").
WITNESSETH:
-----------
WHEREAS, the Bank has this day extended to Borrower a certain Revolving
Line of Credit Loan in the principal amount of up to One Million Dollars
($1,000,000.00) (the "Loan"), pursuant to and in accordance with a certain
Commercial Loan Agreement of even date herewith between Borrower and Bank (the
"Loan Agreement"), a certain Revolving Line of Credit Promissory Note of even
date herewith made by Borrower payable to the order of the Bank (said note, as
the same may be amended, renewed, extended, and modified, the "Note"), and
related loan documents between the Borrower and the Bank as defined in the Loan
Agreement as the "Loan Documents";
WHEREAS, the Borrower is the owner of all proprietary rights in and to
certain computer software products which are described on Schedule A attached
hereto (collectively, the "Software"), all copyrights with respect to the
Software, including, but not limited to, those of the Borrower's copyrights
which have been registered with the United States Copyright Office and which are
described on Schedule B attached hereto (collectively, the "Copyrights"), all
licenses granted to third party licensees of the Software (collectively, the
"Licenses"), and all trademarks and tradenames used in connection with the
Software as are described on Schedule C attached hereto (collectively, the
"Trademarks"); and
WHEREAS, the obligation of the Bank to make the Loan to the Borrower is
subject to the condition, among others, that the Borrower shall execute and
deliver this Agreement to Bank. Capitalized terms not otherwise defined herein
shall have the meanings ascribed to them in the Loan Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Borrower and Bank do hereby
covenant and agree as follows:
<PAGE>
1. Assignment and Security Interest. To secure the obligations described
--------------------------------
in Section 2 below, Borrower hereby assigns, transfers and sets over, and grants
a security interest in, to Bank all of the Software, Copyrights, Licenses, and
Trademarks, and all Borrower's right, title and interest in and to all computer
software products, and all copyrights, licenses, tradenames and trademarks with
respect thereto, hereafter owned, developed, or acquired by Borrower and used in
connection with or useful to Borrower's business, and all products and proceeds
of the foregoing (all of foregoing are hereinafter collectively referred to as
the "Collateral").
2. Secured Obligations. The following obligations and instruments are
-------------------
secured by this Agreement: (i) payment of all indebtedness of Borrower to Bank
evidenced by the Note; (ii) payment and performance of all liabilities and
obligations of Borrower under the Loan Agreement and the Loan Documents; and
(iii) performance of all conditions and obligations contained in this Agreement.
The aforesaid obligations, agreements and instruments shall be collectively
referred to herein as the "Secured Obligations and Instruments".
3. Terms and Conditions. This Agreement is made and accepted upon the
--------------------
following terms and conditions:
a. So long as no event of default on the part of Borrower shall exist
under the Secured Obligations and Instruments or under this Agreement,
Borrower shall have all the rights as the owner of the Collateral as may be
lawfully permitted.
b. Immediately upon the occurrence of any event of default on the
part of Borrower under any of the Secured Obligations and Instruments or
under this Agreement, which delinquency shall not have been cured within the
grace period, if any, provided by the applicable Secured Obligation and
Instrument, the rights described in the foregoing paragraph a hereof shall
cease and terminate, and in such event, Bank is hereby expressly and
irrevocably authorized, but not required, to exercise every right, option,
power or authority inuring to Borrower with respect to the Collateral as
fully as Borrower could itself. Further, and without limitation of the
foregoing remedies, upon the occurrence of any such event of default, Bank
shall have the rights and remedies of a secured party under the Uniform
Commercial Code with respect to the Collateral, in addition to the rights
and remedies otherwise provided for by law or in equity, in any of the Loan
Documents, or in any other agreement between the parties or under any
guarantee of Borrower's obligations. Bank shall give Borrower ten (10) ten
days' prior written notice of the time and place of any public sale of any
Collateral or the time after which any private sale or any other
<PAGE>
intended disposition is to be made. After deducting all expenses incurred in
connection with the enforcement of its rights hereunder, Bank shall cause
the proceeds of the Collateral to be applied to the payment of principal and
interest on Borrower's indebtedness to Bank in such order as Bank may
determine and Borrower shall remain liable for any deficiency.
c. Borrower hereby irrevocably directs each licensee under, and each
contracting party to, each of the Licenses, upon demand and after notice
from Bank to such licensee of Borrower's default under any of the Secured
Obligations and Instruments or under this Agreement, to recognize and accept
Bank as the owner of such License for any and all purposes as fully as it
would recognize and accept Borrower thereunder.
d. Borrower hereby agrees to indemnify and hold Bank harmless against
and from all liability, loss, damage and expense, including reasonable
attorneys' fees, which it may or shall incur by reason of this Agreement, or
by reason of any action taken in good faith by Bank hereunder, but not in
any event by reason of any acts of gross negligence or wilfull misconduct of
the Bank, and against and from any and all claims and demands whatsoever
which may be asserted against Bank by reason of any alleged obligation or
undertaking on its part to perform or discharge any of the terms, covenants
and conditions contained in any of the Licenses. Should Bank incur any
such liability, loss, damage or expense, the amount thereof, together with
interest thereon at the rate of interest applicable from time to time under
the Note, shall be payable by Borrower to Bank immediately upon demand, or
at the option of Bank, Bank may reimburse itself therefor out of any fees,
income or profits from the Collateral collected by Bank before the
application of such fees, income or profits to any other obligation of
Borrower hereunder or under the Secured Obligations and Instruments.
e. Nothing contained herein shall operate or be construed to obligate
Bank to perform any of the terms, covenants or conditions contained in any
of the Licenses, or otherwise to impose any obligation upon Bank with
respect to any of the Collateral prior to written notice by Bank to Borrower
hereunder of Bank's election to assume Borrower's rights and obligations
with respect to the Collateral, and then only to the extent the Bank
specifically assumes such rights and obligations. Prior to said election
this Agreement shall not operate to place upon Bank any responsibility for
the payment, performance or observance of any obligations, requirement or
condition under any of the Licenses or under any agreement in respect to the
Software, and the execution of this Agreement by Borrower shall constitute
conclusive evidence that
<PAGE>
all responsibility for the payment, performance or observance of any
obligation, requirement or condition under any of the Licenses or otherwise
with respect to the Software is and shall be that of Borrower, prior to such
election.
f. Borrower represents and warrants that it is the lawful owner to
the best of its knowledge of all right, title and interest in and to the
Collateral, has the right to assign its interest in and under the
Collateral, and has not sold, assigned, transferred, mortgaged or pledged
any such right or interest in the Collateral to any person other than Bank
and that Borrower will not, without the prior written consent to Bank, sell,
assign, transfer, mortgage or pledge any of the Collateral or any such right
or interest under any of the Collateral other than to non-exclusive licenses
of the Software to licensees in the ordinary course of business. Borrower
shall exercise all reasonable efforts to enforce or secure the performance
of each and every obligation, covenant, condition and agreement to be
performed by the licensee or other contracting party under the Licenses.
Borrower further represents and warrants that the Software constitutes all
of the computer software products licensed by Borrower to third party
licensees in the ordinary course of Borrower's business, that the copyrights
described on Schedule B constitute all of the registered copyrights with
respect to the Software, the Trademarks constitute all of the tradenames and
trademarks with respect to the Software, and that no patents have been
applied for or granted with respect to any of the Software.
g. Borrower agrees to execute and deliver to Bank, at any time or
times during which this Agreement shall be in effect, such further
instruments as Bank may deem necessary to make effective this Agreement, the
security interest created hereby and the several covenants of Borrower
herein contained. To evidence such security interest, at the request of
Bank, Borrowers shall, in a form satisfactory to Bank, join with Bank in
executing one or more financing statements, and any continuation thereof,
pursuant to the provisions of the Uniform Commercial Code, and shall pay the
cost for filing thereof.
h. Failure of Bank to avail itself of any of the terms, covenants and
conditions of this Agreement for any period of time or at any time or times,
shall not be construed or deemed to be a waiver of any of its rights
hereunder. The rights and remedies of Bank under this instrument are
cumulative and are not in lieu of but are in addition to any other rights
and remedies which Bank shall have under or by virtue of the Secured
Obligations and Instruments. The rights and remedies of Bank hereunder may
be exercised from time to time and
<PAGE>
as often as such exercise is deemed expedient by Bank.
i. Upon full payment and performance of the obligations and
liabilities contained in the Secured Obligations and Instruments, this
Agreement shall become and be void and of no effect and, in the event, upon
the request of Borrower, Bank covenants to execute and deliver to Borrower
instruments effective to evidence the termination of this Agreement and the
reassignment to Borrower of the Collateral and the rights, title, interest,
power and authority assigned herein, provided, however, that as to Borrower,
any affidavit, certificate or other written statement of any officer of
Bank, stating that any part of said indebtedness remains unpaid, shall be
and constitute conclusive evidence of the then validity, effectiveness and
continuing force of this Agreement and any person, firm, or corporation
receiving any such affidavit, certificate or statement may, and is hereby
authorized to rely thereon.
j. Borrower agrees to provide Bank with copies of any and all notices
received by Borrower which allege, either directly or indirectly, that
Borrower is delinquent or deficient in the performance of the terms of any
obligations of Borrower under any of the Licenses and of any claim that may
materially adversely affect the rights of the Borrower in any of the
Collateral.
k. No change, amendment, modification, cancellation or discharge
hereof, or of any part hereof, shall be valid unless the Bank shall have
consented thereto in writing, such consent not to be unreasonably withheld
or delayed.
l. All notices, requests, demands and other communications provided
for hereunder shall be in writing (including telegraphic communication) and
shall be made in the manner set forth in the Loan Agreement.
m. The terms, covenants and conditions contained herein shall be
binding upon Borrower and Bank, their respective successors and assigns, and
shall insure to the benefit of Bank and its successors and assigns.
n. The Bank is hereby appointed the attorney-in-fact, with full power
of substitution, of the Borrower for the purpose of carrying out the
provisions of this Agreement and taking any action and executing any
instruments (including, without limitation, financing or continuation
statements, conveyances, assignments, and transfers) which the Bank may deem
necessary or advisable to accomplish the purposes
<PAGE>
hereof, which appointment as attorney-in-fact is coupled with an interest
and is irrevocable. The Borrower shall indemnify and hold harmless the Bank
from and against any liability or damage which it may incur in the exercise
and performance, in good faith, of the Bank's powers and duties specifically
set forth herein.
o. This Agreement is being executed and delivered in Nashua, New
Hampshire, and is to be construed according to and governed by the laws of
the State of New Hampshire.
4. Escrow of Software Source Code. In furtherance of this Agreement
------------------------------
and the rights granted by Borrower to Bank hereunder, the Borrower shall deliver
to the Bank within sixty (60) days of the date hereof and thereafter on each
anniversary of the date hereof, the following with respect to the Software: all
source code on computer magnetic media and all necessary and available
information, proprietary information, and documentation which is required or
appropriate for the proper operation of the Software. The Borrower further
agrees that upon Bank's reasonably request from time to time the Borrower shall
deliver to Bank all updates of the Software (including the source code therefor)
and such other information and documents relating to the Software as the Bank
deems reasonably necessary to effect the purposes of this Agreement. The Bank
shall be entitled to hold all of the foregoing and, upon Borrower's default
under any of the Secured Obligations and Instruments, to exercise all rights of
ownership with respect thereto as is provided under this Agreement with respect
to the Collateral. From time to time hereafter, upon reasonable prior notice
and during normal business hours, the Bank shall have the right to verify that
the materials deposited with it pursuant hereto are accurate, complete and
sufficient. Borrower shall permit the Bank and/or its representatives to use
the facilities of Borrower free of charge, including its computer systems, and
will make available technical and support personnel necessary for the Bank
and/or its representatives to perform such verification. Upon the termination
of this Agreement pursuant to Section 3.i. hereof, the Bank shall return to
Borrower all materials deposited with the Bank by Borrower hereunder. Until an
event of default has arisen under the Secured Obligations and Instruments, Bank
shall not be entitled to use the materials deposited by Borrower with the Bank
hereunder for the Bank's own benefit or the benefit of any third party.
Additionally, until an event of default has arisen under the Secured Obligations
and Instruments, the Bank shall retain the material deposited by Borrower with
Bank hereunder in confidence and shall not disclose the same to any third party.
Executed under seal and delivered in Nashua, New Hampshire as of the date
first above written.
<PAGE>
FLEET BANK - NH
/s/ Robert Putman By: /s/ Kenneth R. Sheldon
- ----------------------------------- -----------------------------------
Witness Kenneth R. Sheldon,
Vice President
BORROWER:
WHITE PINE SOFTWARE, INC.
/s/ Robert Putman By: /s/ Howard Berke
- ----------------------------------- -----------------------------------
Witness Howard Berke, President
STATE OF NEW HAMPSHIRE
COUNTY OF HILLSBOROUGH
On this the 30th day of December, 1994, before me, the undersigned notary or
justice, personally appeared Howard Berke, who acknowledged himself to be the
President of White Pine Software, Inc., a corporation and that he, as such
authorized officer, being authorized so to do, executed the foregoing instrument
for the purposes therein contained, by signing the name of the corporation by
himself as such authorized officer.
[ILLEGIBLE SIGNATURE]
-----------------------------------
Justice of the Peace/Notary Public
STATE OF NEW HAMPSHIRE
COUNTY OF HILLSBOROUGH
On this the 30th day of December, 1994, before me, the undersigned notary or
justice, personally appeared Kenneth R. Sheldon, who acknowledged himself to be
a Vice President of Fleet Bank - NH, and that he, as such authorized
officer, being authorized so to do, executed the foregoing instrument for the
purposes therein contained, by signing the name of the bank by himself as such
authorized officer.
[ILLEGIBLE SIGNATURE]
-----------------------------------
Justice of the Peace/Notary Public
<PAGE>
COLLATERAL ASSIGNMENT OF COPYRIGHTS,
LICENSES, TRADENAMES AND TRADEMARKS
AND SECURITY AGREEMENT
SCHEDULE A
Description of Software
-----------------------
<PAGE>
COLLATERAL ASSIGNMENT OF COPYRIGHTS,
LICENSES, TRADENAMES AND TRADEMARKS
AND SECURITY AGREEMENT
SCHEDULE B
U.S. Copyright Office
---------------------
Software Product Registration Number
---------------- -------------------
<PAGE>
COLLATERAL ASSIGNMENT OF COPYRIGHTS,
LICENSES, TRADENAMES AND TRADEMARKS
AND SECURITY AGREEMENT
SCHEDULE C
Software Product Registered Trademark
---------------- --------------------
<PAGE>
EXHIBIT 10.17
COMMERCIAL PROMISSORY NOTE
$53,000.00 Nashua , New Hampshire
- --------------- ------------
August 29, , 1995
--------------- --
FOR VALUE RECEIVED, the undersigned, jointly and severally if more than one
("Maker"), hereby unconditionally promises to pay to the order of FLEET BANK-NH,
a bank incorporated under the laws of the State of New Hampshire with a place of
business at One Indian Head Plaza, Nashua, New Hampshire (the "Bank"), or to any
holder, at the Bank's principal location or at such other place as the Bank or
any subsequent holder hereof may in writing designate, in installments as
hereafter provided, the principal sum of
Fifty three thousand and 00/100***********************DOLLARS ($53,000.00) in
lawful currency of the United States of America, with annual interest thereon
from the date hereof on the amount of principal from time to time outstanding on
the basis of a 360-day year at the Rate of Interest stated below. This
obligation is subject to a minimum interest charge of One Hundred Dollars
($100.00).
A RATE based on the Base Rate of the Bank will change each time and as of the
date that the Base Rate of the Bank changes.
The Base Rate of the Bank means the fluctuating Base Rate of interest
established by the Bank from time to time whether or not such rate shall be
otherwise published, and it is not necessarily the lowest rate charged by the
Bank to its commercial customers.
I. INTEREST RATE (check one)
[ ] The RATE shall be the Base Rate of the Bank plus _____________________
(_______________%) percent per annum.
[X] The RATE shall be fixed at nine and 54/100ths (9.54 % percent
----------------------------------
per annum.
---------
[ ] The RATE shall be_____________________________________________________
II. INTEREST PAYMENTS: Interest, at the Rate set forth above, shall be paid as
follows: (Check one)
[ ] Interest included in the Blended Installment provision set forth
below.
[X] Monthly, in arrears, calculated daily upon the outstanding principal
balance, with the first such payment due on September 29 , 1995, and
--------------- --
each subsequent payment due on the like day of each Calendar Month
thereafter.
[ ] Quarterly, in arrears, calculated daily upon the outstanding principal
balance, with the first such payment due on ________, 19__, and each
subsequent payment due on the like day of each Calendar Quarter
thereafter.
[ ] Other:________________________________________________________________
______________________________________________________________________
III. PRINCIPAL PAYMENTS: In addition to any interest payments to be made as
indicated above, Maker shall repay the principal balance as follows:
(Check one)
[ ] Blended Installments. Principal and interest shall be paid in ________
equal monthly installments of $_________ each, commencing on
___________, 19__, and continuing on the same day of each successive
month thereafter with a final payment of all unpaid principal and
interest due on ____________, 19__.
[ ] Blended installments. Principal and interest shall be paid in
___________ equal quarterly installments of $__________ each,
commencing on __________, 19__, and continuing on the same day of each
successive quarter thereafter with a final payment of all unpaid
principal and interest due on _____________, 19__.
[X] Principal to be paid in 59 equal monthly installments of $883.33
-------- ------
each, commencing on September 29, 1995, and continuing on the same
------------- --
day of each successive month thereafter with the final payment of all
unpaid principal due on August 29 , 2000.
------------- ----
[ ] Principal to be paid in __________ equal quarterly installments of
$___________, each, commencing on ____________, 19__, and continuing
on the same day of each successive quarter thereafter with the final
payment of all unpaid principal due on ____________, 19__.
[ ] Principal and any accrued but unpaid interest to be paid at maturity
on ________________________________, 19__.
[ ] Principal and any accrued but unpaid interest to be paid ON DEMAND;
the Maker specifically acknowledges that this Note shall be due and
payable upon written demand by the holder. All payments by Maker
hereunder shall expressly acknowledge the continuing existence of this
Demand Note. Each payment by Maker hereunder shall be deemed to be a
specific and new promise by Maker to pay the unpaid balance or
principal and interest to the holder as evidenced by this Demand Note.
Other:________________________________________________________________
______________________________________________________________________
IV. PREPAYMENT PROVISION (Check one)
[ ] The Borrower shall have the right to prepay this note, in whole or in
part, at any time, without a prepayment charge.
[X] The Borrower shall pay a prepayment charge of 2.0 % of the unpaid
-------
balance if prepayment occurs during the first year, 2.0 % of the
-----
unpaid balance if prepayment occurs during the second year,
1.0 % of the unpaid balance if prepayment occurs during the third
--------
year.
V. REAL ESTATE: This Note is secured by a mortgage on real estate located at
_________________________________ County of__________________, and State
of ___________________
All payments by Maker hereunder shall be applied first to accrued interest,
then to principal currently due in accordance with the terms hereof, then to
charges and/or fees (if any), with the balance (if any) to prepayment of
principal. No prepayment of less than the full unpaid balance of principal and
interest shall relieve Maker of his obligation to pay the next installment of
principal or interest hereunder.
THE UNDERSIGNED EXPRESSLY ACKNOWLEDGE that he/she/they have read (and
understood) the terms, conditions, and covenants appearing on the reverse side
of this instrument prior to its execution and agree that said terms, conditions,
and covenants are incorporated hereby by reference with the same force and
effect as if they fully appeared immediately above.
IN WITNESS WHEREOF, the Maker has caused this Note to be duly executed as of
the date first above written.
IN THE PRESENCE OF: White Pine Software, Inc. MAKER
----------------------------------
/s/ Kenneth Sheldon /s/ Howard Berke
________________________ By_____________________________________
Witness Duly Authorized
_______________________________________
Address
__________________________________CO-MAKER
________________________ By_____________________________________
Witness
_______________________________________
Address
<PAGE>
_____________________________________CO-MAKER
________________________ By___________________________________________
Witness
_____________________________________________
Address
_____________________________________CO-MAKER
State of New Hampshire
County of
On this the __________ day of ________________________________, 19__, before, me
________________________________________________________________________________
the undersigned notary or justice, personally appeared
________________________________________________________________________________
(person or persons acknowledging instrument), known to me or satisfactorily
proven to be the person or persons whose name is or names are subscribed to the
within instrument and acknowledged that he/she/they executed the same for the
purposes therein contained.
_____________________________
Notary Public/Justice of the Peace
My commission expires on
_______________________, 19__
<PAGE>
Upon the occurrence of any of the following Events of Default, all sums payable
under this Note shall, at the option of the Bank, become immediately due and
payable without further notice or demand:
1. Failure to make a payment of principal or interest on this Note or any other
sum payable hereunder, within ten (10) days of when due or on any other
obligation of Maker to the Bank, now existing or subsequently created, whether
by direct loan, guarantee or otherwise; or acceleration with respect thereto;
2. Any breach, default or failure of warranty or representation caused by Maker
in connection with this Note, with any other document now or subsequently
evidencing indebtedness of Maker to Bank, or of any mortgage, guarantee or
security documents delivered in connection herewith or therewith;
3. Dissolution or liquidation of Maker or any guarantor (if a corporation or
partnership); insolvency of Maker or any guarantor, or the appointment of a
receiver, trustee or custodian, of any of his property; failure of Maker or any
guarantor to pay his other obligations, as and when due; attachment of or
execution or the filing of a lien against any property of Maker or any
guarantor;
4. If Maker or any guarantor makes an assignment for the benefit of creditors,
files a petition in bankruptcy, is subject to the entry of an order for relief
against it, petitions or applies to any tribunal for a receiver or any trustee
of any substantial part of its property; or Maker or any guarantor commences any
proceeding related to it under any reorganization, arrangement, readjustment of
debt, dissolution or liquidation law or statute of any jurisdiction, whether now
or hereafter in effect, or if there is commenced against Maker or any guarantor
any such proceeding and it fails to file a proper answer thereto pursuant to
Section 303(d) of the Bankruptcy Code (11 USC Section 303(d)) within ten (10)
days of receipt of notice of said proceeding, which answer shall include a
request that petitioning creditors post adequate bond under Section 303(e) (11
USC Section 303(e)) or Maker or any guarantor by any act indicates its consent
to, approval of, or acquiescence to any such proceeding or to the appointment of
any receiver of, or trustee for Maker or any guarantor or any substantial part
of its property, or Maker or any guarantor suffers any such receivership or
trusteeship to continue undischarged for a period of thirty (30) days, or upon
the issuance of any attachment or execution against Maker or any guarantor, or
any governmental agency or instrumentality shall seize, appropriate, condemn,
occupy or interfere in any manner with any of Maker's operation of, all or any
substantial portion of its property, or any security for this Note or any right
to Maker therein shall be subject to judicial process or condemnation or
forfeiture proceedings, which is not dismissed within thirty (30) days, or Maker
or any guarantor undertake an assignment for the benefit of its creditors,
enters into a composition or engages or is engaged in any other action for the
relief of debtors;
5. Sale, transfer or conveyance of any collateral encumbered or pledged to
secure this Note or to secure any guarantee thereof, or of any interest in such
collateral, however occurring, without prior written consent of the Bank, or
termination or suspension of any guarantee of this Note, or of any subordination
of debt hereto;
6. If Maker is a corporation or a partnership, the merger or consolidation of
Maker, or transfer of any substantial equity interest therein, or change in
primary business activity, without the Bank's prior written consent;
7. If the Bank shall deem itself insecure under New Hampshire RSA 382-A; 1-208,
or shall deem the financial condition of Maker unsatisfactory or to be
materially impaired and shall give Maker written or oral notice thereof;
8. If a court or agency having jurisdiction makes a determination adverse to
Bank of the invalidity or unenforceability (in whole or in material part) of any
security document delivered in connection herewith; or
9. Death of any Maker or any guarantor, if an individual.
The Maker hereof and all endorsers and guarantors of this Note waive
presentment, protest and demand, notice of protest, demand and dishonor and
nonpayment of this Note, and agree to pay all costs of collection and
endorsement when incurred, including attorney's fees.
In the event of a default, upon demand, or upon notice of issue of any legal
process by which process any of Maker's assets in the possession of Bank may be
trusteed, attached or levied upon, and in addition to the other rights contained
herein, the Bank shall have the immediate and unconditional right of setoff
against all accounts, demand deposits, certificates, securities, choses in
action and all other rights or property of Maker or any guarantor reflecting an
obligation of the Bank to Maker or to any guarantor, which are then maintained
with (or in existence as against) the Bank ("Cash Collateral"). Maker and all
guarantors hereby expressly grant to Bank a security interest in the said Cash
Collateral pursuant to RSA 382-A; 9-101 et seq.
In the event of late payment hereunder, Maker shall, in addition to all
other amounts then due, pay a late charge (as liquidated damages) equal to five
percent (5%) of the overdue payment(s) of principal and/or interest. Acceptance
by the Bank of the late charge shall not be deemed a waiver of any default.
Whenever there is a default under this Note or non-payment upon demand or at
maturity, the RATE, as set forth above, on the unpaid principal and interest
shall, at the option of the Bank, be increased by five (5) percentage points,
and said RATE shall continue after demand or the commencement of legal
proceedings brought by Bank for the purpose of collecting any amounts owed to it
hereunder as permitted by RSA 336:1, and Maker shall, in addition to all other
amounts then due, pay a late charge (as liquidated damages) equal to five
percent (5%) of the total amount owed upon demand or maturity, not to exceed
$5,000.00, it being expressly acknowledged by Maker that the liquidated damages
provided for herein are reasonable and based upon costs and expenses capable of
calculation as of the date hereof.
No delay or omission on the part of the Bank in exercising any right
hereunder shall operate as a waiver of such right, or of any other right of the
Bank, nor shall any delay, omission or waiver on any one occasion be deemed a
bar to or waiver of the same or any other right on any future occasion. No
single or partial exercise of a power hereunder shall preclude other exercises
thereof, or the exercise of any other power hereunder.
Any reference herein to a party in any gender shall be construed in the
masculine, feminine or neuter gender, as the context may require. This Note is
fully negotiable, and upon negotiation may be enforced by the holder in
accordance with its terms. This Note shall be governed exclusively by the laws
of the State of New Hampshire. Maker and all guarantors hereby agree that any
action hereon or relating hereto may be maintained in a Court of competent
jurisdiction located in that state, and consent to the jurisdiction of any such
Court for all purposes connected herewith. Maker acknowledges and represents to
Bank that the funds advanced to it hereunder shall be used exclusively for
business or commercial purposes.
<PAGE>
EXHIBIT 10.18
LOAN CONTRACT
ADVANCED SOFTWARE CONCEPTS INC. [S.A.R.L.]
FINANCIAL CHARACTERISTICS OF LOAN, Number 0395495 01
039108601
[handwritten] Q 1.1 [handwritten] 1/10
[handwritten] Loan #3: 800,000 French francs
[handwritten] 8/95 D.
601/1
LOAN TYPE: MEDIUM-TERM NON-AUGMENTED LOAN -
Regular (invariant) payments - Interest payable on payment due-dates -
Proportional interest rate
AMOUNT OF LOAN: 800,000.- F. TOTAL DURATION OF LOAN: 7 years
FREQUENCY OF REPAYMENTS: Monthly PAYMENT DUE-DATES: 28th of each month
- - BORROWING AMORTIZATION / DEPRECIATION CONDITIONS:
------------------------------------------------
{INTEREST RATE: -- %
DEFERMENT PERIOD: {NUMBER OF PAYMENT-DATES: --
{AMOUNT DUE PER PAYMENT-DATE: -- F.
{INTEREST RATE: 11.55 %
1st AMORTIZATION / DEPRECIATION PERIOD:{NUMBER OF PAYMENT-DATES: 84
{AMOUNT DUE PER PAYMENT-DATE: 13,930.89 F.
{INTEREST RATE: -- %
2nd AMORTIZATION / DEPRECIATION PERIOD:{NUMBER OF PAYMENT-DATES: --
{AMOUNT DUE PER PAYMENT-DATE: -- F.
- - OTHER SPECIFICATIONS:
- Effective interest-rate - aggregate: 11.654 %
- Regional Loan-Guarantee Fund intervention: -- %
- General Loan-Guarantee Fund intervention: --
- Total amount of filing/processing costs & fees: 2,846.40 F.
- Number and date of DDE-DDA decision: --
- Death and disability insurance (main) rate: -- %
- Death and disability insurance (optional) rate: -- %
(In cases of aggravated medical risk, the insurance rate hereby specified will
be increased by a supplement of -- F. -- % per year.)
The rates and payment due-dates specified herein are the rates currently
prevailing on the day the loan was requested. The contractually definitive rates
and payment due-dates will be those currently prevailing on the day the loan
amount is credited to the borrower and made available to him/her, and from then
on said rates and payment due-dates will be considered to have been accepted by
the borrower.
<PAGE>
[stamp:] Advanced Software Concepts
"Espace La Gaude", 9551 Route de St. Laurent du Var, [handwritten] 800,000 FF
F-06610 LA GAUDE Tel. (33) 9324-7600 eight hundred thousand
French francs
S.A.R.L. [incorporated company with limited liability],
total capital: [two signatures]
800,000 F [illegible]
RCS Grasse 88 B 364 [illegible]
SIRET Number 348-998-964-00012 APE 7703
<PAGE>
[handwritten] 2/10
[handwritten] 601/2
[company logo: CA]
CREDIT AGRICOLE, ALPES-MARITIMES REGIONAL DIVISION:
LOAN TERMS
111 avenue Emile Deschame, 06708 SAINT-LAURENT-DU-VAR Cedex
_______________________
A - APPLICATION: C - SPECIFIC LOAN TERMS
PRELIMINARY REMARKS I - Terms applicable to residence loan
offers made under the guidelines
of law
79-596 dated July 13, 1979
B - GENERAL LOAN TERMS
1. Summary of the stipulations in
article 7 of said law
1. Credit Agricole account 2. Terms affecting the loan-contract's
-holding members/associates, completion
Credit Agricole users 3. Loan transfer
2. Loan-transaction methods 4. Covenant-based residential loan
3. Conditional terms,
reconsideration terms 5. Residential savings loan
4. Proof 6. Loan to an agent or employee of
Credit Agricole
5. Equal effects of debtor-
liability, and loan-credit
indivisibility II -Terms applicable to professional
/ business loan offers
6. Authorizing account-debits
and compensation
7. Index-linking the loan's
annual interest rate to
ceiling-rates 1. Opening current-account credit
8. Loan duration 2. Opening aggregate mortgage-based
credit
9. Loan amortization / 3. Loan guaranteed by Regional
depreciation Loan-Guarantee Fund
10. Anticipatory repayment 4. Loan guaranteed by General Loan-
Guarantee Fund
11. Loan recovery 5. Recalling the loan
12. Punitive clauses 6. Loan to a morally reliable
representative
13. Death and disability 7. Augmented loans
insurance
14. Insurance on mortgaged goods
and real estate
15. Ban on mortgaging and promise
of mortgage-derived payment
16. Aggregate effective interest-
rate
17. Court jurisdiction, in case
of lawsuit
18. Contract-related costs and
fees
19. Agreements of indefinite
duration
- --------------------------------------------------------------------------------
<PAGE>
A - APPLICATION: PRELIMINARY REMARKS
The terms and conditions herein apply to loan transactions executed in favor of
beneficiaries who are physical, morally responsible private persons under the
law.
Said terms do not apply to loan transactions which assist the promotion of
property holdings and real estate.
Credit Agricole Mutuel, Alpes-Maritimes Regional Division, is known hereinafter
as "the lender".
The debtor or debtors is/are known hereafter as "the borrower", whether one or
more physical, morally responsible persons are parties to the loan as borrowers.
If more than one loan is involved, the total amount loaned will be designated by
the abbreviation "the loan".
B - GENERAL LOAN TERMS
1 - CREDIT AGRICOLE ACCOUNT-HOLDING MEMBERS/ASSOCIATES, CREDIT AGRICOLE USERS
The stipulations named hereinafter are applicable if the borrower is an account-
holding member/associate or a user of Credit Agricole:-
(a) If a Credit Agricole account-holding member/associate: The borrower must
invest in the corporate capital of the Local Branch of Credit Agricole with
which it is associated by subscribing to a fixed number of its corporate shares,
said number to be determined by said branch's Executive Board, payment for which
is to be made by withdrawal against the borrower's account starting from the
date the loan takes effect.
Said corporate shares are interest-bearing; the interest will be available
starting from the January 1st following the date of said subscription. The
interest accruing is calculated each
<PAGE>
calendar year and paid on payment due-dates annually, after interest rates have
been fixed by the Local Branch concerned. The corporate shares are refundable
once the borrower has been discharged of all its obligations towards the lender,
with the provision however that said Local Branch may defer this refund for up
to five years maximum.
(b) If a Credit Agricole account-holding member/associate and user: The borrower
must cover filing/processing costs and fees, the total amount whereof is to be
determined by the lender on the basis of the loan transaction that is being
considered. Payment for said costs and fees is to be made by withdrawal against
the borrower's account, starting from the date the loan takes effect.
2 - LOAN-TRANSACTION METHODS
After personal asset-contributions have been paid as demanded by the lender, the
loan is generally transacted as follows:-
- - by means of a check or girocheck addressed to the borrower's Notary-Public
(for purchases of fixed property and real estate, purchases of commercial or
manufacturing/industrial assets, and for bridging relay-credits).
- - by payment to the borrower's account, or else credited to all delegated
parties as designated by the borrower and agreed to by the lender (for financing
operating materials, equipment and apparatus, vehicles, goods, plant
installations, management operations, or repair of property and real estate),
and in stage-by-stage phases, as a project progresses towards completion or as
invoices are presented for payment (for work on construction projects or on
enlarging property and real estate holdings, and for purchases of fixed property
and real estate to be completed at a future date).
By express agreement, if the loan is transacted as payment to the borrower's
current account, said manner of transaction will entail no alteration in the sum
credited by the lender, and will in no way affect the sureties accorded to the
lender by way of security-guarantees for the loan's repayment.
3 - CONDITIONAL SUSPENSION TERMS, RECONSIDERATION/CANCELLATION TERMS
Whenever loan-guarantees are demanded by the lender, granting of the loan is
invariably conditional on said loan-guarantees being effectively supplied by the
borrower (if this condition is not met, the loan may be suspended). Granting of
the loan is likewise conditional on no fact or piece of information becoming
known to the lender, after the lender's decision to award the loan, of a kind
that - if the lender had known it at the time - would have led the lender to
refuse the loan (if this condition is not met, the loan may be reconsidered or
canceled).
<PAGE>
4 - PROOF
The lender's written documentation will constitute proof of good faith in
transacting the loan and in making payments relating to the loan, unless proof
to the contrary is presented by the borrower.
5 - EQUAL EFFECTS OF DEBTOR-LIABILITY, AND LOAN-CREDIT INDIVISIBILITY
All debtor-liability obligations arising from the loan-contract, particularly
the obligation to repay said loan, will affect equally all persons and parties
designated as "the borrower".
Since the sum loan-credited by the lender is indivisible, as contractually
stipulated, it will be deemed legally recoverable from each and every heir of
every debtor, as laid down by article 1221 of the Civil Code, paragraph 5.
6 - AUTHORIZING ACCOUNT-DEBITS AND COMPENSATION
All payments will be made at the lender's business headquarters, through the
intermediary of one of its branch offices.
The borrower authorizes the lender to debit its account permanently in the
amount of the loan-payment sums demanded.
The borrower likewise authorizes the lender - fully within the lender's rights,
and without the borrower's intervention - to make compensation for all sums that
may be owing and payable on the loan, whether principal or interest, as well as
for all indemnities, by means of such sums as the borrower might potentially owe
the lender under any legal entitlement whatsoever.
7 - INDEX-LINKING THE LOAN'S ANNUAL INTEREST RATE TO CEILING-RATE
Once the loan takes effect, on a loan that is to last two years or less it will
be possible for the annual interest rate to fluctuate, based on limit-ceilings
fixed either by the National Headquarters of Credit Agricole or else by the
lender's Executive Board.
Said rate-fluctuation will likewise be possible for any loan that is to last
more than two years or indefinitely, if this fluctuation is provided for in the
particular terms of the loan.
The new rate will be effective starting from the date fixed either by the
National Headquarters of Credit Agricole or else by the lender's Executive
Board.
8 - LOAN DURATION
The loan's duration is specified in the particular terms of the loan. Said
duration takes effect starting from the first payment due-date, less one
payment-period (either one, three, six or twelve months, depending on whether
the payment frequency agreed upon is monthly, three-monthly, six-monthly or
yearly).
The duration of loans granted for construction projects may be increased in
certain cases by an anticipatory period, covering the project-work period and
reaching term at the completion of said projects. The duration of said
anticipatory period may however not exceed two years (or four years in certain
cases).
<PAGE>
When the loan granted is a bridging relay-credit, the duration of the latter is
two years maximum, during which time the borrower is obliged to sell the real-
estate property designated in the loan application. If it takes less than two
years for said sale to be effected, the loan's duration is thus obligatorily re-
assessed to end at the date of the sale.
The duration of credit-lines opened in current accounts is specified in the
relevant paragraph [C II.1, below] relating to said matters.
9 - LOAN AMORTIZATION / DEPRECIATION
The stipulations relating to the loan's amortization or depreciation are
specified in the particular terms of the loan. It should be noted that the
amount of the first due payment specified in said particular loan-terms may be
decreased or increased, depending on the date that the loan-credits are made
available.
Depending on the payment frequency agreed upon, this first payment due-date will
be designated as either one, three, six or twelve months after the loan takes
effect, whether fully or partially. However, if the loan is on a monthly
payment-frequency basis, the first payment due-date will be designated as the
month following that in which the loan takes effect.
Whenever the loan is granted on the basis of progressive payments due, the total
payments due in any one year, and each year, will progress during the whole
amortization period according to a percentage determined in the particular terms
of the loan (and proportionately to the previous year's total payments due). In
addition, if the amortization period is fifteen years or more, the loan entails
successive interest-rates, and the interest-rate specified in said particular
loan-terms will then represent the average interest-rate. Said stipulations
affect covenant-based residential loans and State-assisted loans intended to
permit access to ownership of family residences.
By express agreement, if the loan is amortized against the borrower's current
account, said amortization will entail no alteration in the sum credited by the
lender, and will in no way affect the sureties accorded to the lender by way of
security-guarantees for the loan's repayment.
10 - ADVANCE REPAYMENT
The borrower has the option, if it so wishes, to repay the loan in advance,
provided that it gives the lender at least one month's advance notice to this
effect. If partial advance repayment is made, the amount repaid must total at
least 10 % of the capital principal originally borrowed.
Any advance repayment will entail payment of an indemnity equal to two months'
interest, calculated based on the loan's average interest-rate on the capital
principal repaid in advance.
Furthermore, if at the time of the advance repayment the interest-rate for a
loan in the same category is lower than the interest-rate for the loan on which
the repayment is being made, payment of a financial indemnity will likewise be
demanded. Said indemnity will be calculated based on multiplying the advance-
repaid capital principal by the difference between the two interest-rates
(expressed on the basis of the same payment frequency as for the payment due-
dates), and by the number of payment due-dates outstanding. In no case will it
be permissible for said indemnity to exceed 10 % of the capital principal repaid
in advance.
Finally, if the loan is on the basis of progressive payments due, and successive
interest-rates, the advance repayment will entail the borrower's paying
compensatory interest, calculated in the same way as the interest-rate applied
to loan-repayment over the loan-
<PAGE>
period already elapsed, said interest-rate being equal to the average interest-
rate specified in the particular loan-terms.
. For a loan affected by Law number 79-596, dated July 13, 1979:
The total cumulative amount of indemnities will not be permitted to exceed the
value of a six-month period of interest payments, calculated based on the
advance-repaid capital principal at the loan's average interest-rate, with the
proviso that said amount will not be permitted to exceed 3 % of the capital
principal still owing before the repayment.
The compensatory interest amounts payable, calculated separately, are not
affected by this maximum limit.
. For a State-assisted loan intended to permit access to ownership of
family residences: An indemnity will simply be appropriated in an amount equal
to 1 % of the capital principal repaid in advance.
All taxes and transaction-total duties applicable to said indemnities, and
levied according to the fiscal rate-schedule currently prevailing at the time of
the advance repayment, will be paid by the borrower.
11 - LOAN RECOVERY
Repayment of the loan may be demanded immediately and in full if any one of the
following events takes place:
- - in case of non-payment of amounts demanded;
- - if the borrower ceases to satisfy the terms that allowed it to obtain the
loan, or the terms arising from the loan-contract or from the written
documents that the loan-contract mentions;
- - if the loan-credits paid out by the lender have been used for purposes other
than those on the basis of which the loan was requested;
- - in case of refusal to make available to the lender such accounting
documentation or interim financial statements as may be demanded by the
lender;
- - if the property offered as loan-guaranteeing security-collateral has been
wholly or partially sold or conveyanced to a third party, if it has undergone
a significant depreciation through the borrower's action or fault, however
slight, or if it has been the object of a distraint, seizure, or lease, that
violates the terms under which the loan has been granted;
- - in case of cancellation or annulment of their security-collateral agreement by
one or more of the parties standing surety;
- - in case of the death of one of the persons designated as "the borrower",
unless said person's spouse or direct heirs or one or more of these parties
does not agree - with the lender's assent - to continue the loan under the
same terms as those agreed to by the loan-terms' deceased original author,
barring any potential effects of death insurance;
- - if the borrower is insolvent or ceases payments, particularly if said
financial condition comes to light as a result of unpaid sums, creditor
complaints, and any and all forms of attempts to recover payment;
<PAGE>
- - in all cases where supporting documentation, information and declarations
supplied by the borrower are revealed to be inaccurate, as likewise in any
case where the borrower has been guilty of any fraudulent activity with
respect to the lender;
- - finally, if any one of the obligations arising from the loan-contract has not
been fulfilled by the borrower.
If any one of the above-mentioned causes for premature termination occurs, the
lender will give notice of its intention to avail itself of its right to demand
repayment of its loan-credit immediately and in full, by registered letter
addressed to the borrower with signed acknowledgment of receipt.
The premature termination of a loan also entails the subsequent premature
termination concomitantly of all agreements granted to the borrower by the
lender.
12 - PUNITIVE CLAUSES
- - Default by the borrower without the loan's having been prematurely terminated.
If payments are late, the lender may choose not to demand immediate repayment of
the capital principal still owing. Any unpaid amount will then rightfully
generate an increased interest-rate due, equal to the loan's annual interest-
rate raised by three percentage points, starting from the first date payment is
late, and continuing until the date payment is effectively made.
- - Each time the loan-payment due is not paid on the proper due-date, the lender
will bill the client for the amount specified in the general banking loan-terms
under the heading "Late loan-payment due".
- - Default by the borrower following the loan's premature termination. If the
loan can be demanded back, the lender may choose to demand immediate repayment
of the capital principal still owing as of the date designated for the last due
payment.
Starting from the first date payment is late, and continuing until the date
payment is definitively made, all designated due payments left unpaid before -
or, where applicable, after - the loan's premature termination will then
rightfully generate an increased interest-rate due, equal to the loan's annual
interest-rate raised by three percentage points; and the capital principal still
owing as of the date designated for the last due payment will likewise
rightfully generate an interest-rate equal to the loan's interest-rate, starting
from this latter date.
Furthermore, the lender will be entitled to recover from the borrower an
indemnity equal to seven percent of the capital principal still owing.
No sum other than those explicitly mentioned in the two paragraphs above may be
recovered from the borrower by the lender, with the exception, however, of
taxable costs and fees resulting from the borrower's defaulting on payments.
The punitive clauses applicable to credit-lines opened in current accounts are
specified in the relevant paragraph [C II.1, below] relating to said matters.
13 - DEATH AND DISABILITY INSURANCE (physical persons)
Since this insurance covers risk to an individual, each borrower will be obliged
to take out death-and-disability insurance personally, after filling out an
individual policy-application form.
<PAGE>
Since the lender has maintained a group insurance policy for one year
(renewable) intended to cover its borrowers on a short-, medium- and long-term
basis against death and disability risks, the borrower will be obliged to do as
follows, once it has accepted the loan-offer or else once the loan-contract has
been signed:-
- - give its consent to said insurance, insofar as it meets the insurer's terms of
admission and conditional on the insurer's assent;
- - pay in advance, and including interest, the insurance premiums that the lender
will claim from it at the rate currently prevailing each year.
Said insurance will be purchased by the borrower starting from the date the loan
takes effect, on the terms specified in the individual insurance-application
form. However, whenever a health questionnaire is required by the insurer,
insurance coverage is only granted on the basis of suspension terms, conditional
on favorable results from the medical check-up. The borrower will be notified
of said results by way of the returned individual insurance-application form,
which will specify the insuree's first name and last name, along with the risks
against which the insuree is covered. An announcement specifying the details
and forms of said insurance is attached either to the loan-offer or to the loan-
contract.
14 - INSURANCE ON MORTGAGED GOODS AND REAL ESTATE
The buildings and movable property offered as loan-guaranteeing security-
collateral will have to be insured against the risk of fire, for a capital
amount deemed adequate by the lender, until the loan has been repaid in full.
The borrower will be obliged to show supporting documentary evidence of said
insurance and of payment of insurance premiums, upon request. If this
obligation is not met, the lender may take it upon itself to pay any insurance
premiums and take out any insurance policies, then demand immediate
reimbursement for the amounts it has advanced therewith for said purposes.
In case of misadventure, the indemnities owed by the insurer will be paid by the
insurer directly to the lender, up to an amount equaling the lender's total
loan-credit.
The borrower will have the option to re-fit and rebuild the property offered as
loan-guaranteeing collateral in its former condition, within a one-year period
from the date of said misadventure. The indemnity will in this case be made
available to the borrower - with whatever amount is payable duly deducted - in
the form of account credits, which will be paid to the borrower gradually as the
rebuilding work progresses, with said progress documented if necessary by a
representative of the lender.
If by the end of this one-year period the borrower has not begun work on the
rebuilding project, or has notified the lender that it intends not to rebuild,
the indemnity will be definitively acquired by the lender, as the appropriate
amount, and deducted as advance payment against the lender's total loan-credit.
15 - BAN ON MORTGAGING AND PROMISE OF MORTGAGE-DERIVED PAYMENT
The lender may demand from the borrower a promise not to mortgage the property
that constitutes the central purpose of the loan, and to agree - upon request,
and to the lender's sole benefit and advantage - to a top-ranking mortgage
without any other competitor-mortgages, or else to a mortgage whose ranking is
immediately below another signed security-agreement already in favor of the
lender also, so as to guarantee payment of all
<PAGE>
loan-related amounts owed to the lender by rightful entitlement, whether in the
form of capital principal or subsidiary sums.
If such a promise is requested by the lender, said promise will take effect
solely as a result of the signature on the loan-contract (or else with the
acceptance of the real-estate loan offer), and will therefore not require a
separate document to be drawn up specifically for this purpose.
16 - AGGREGATE EFFECTIVE INTEREST-RATE
Pursuant to Law number 66-1010, dated December 28, 1966, and its concomitant
written attachments and successors, the loan's aggregate effective interest-rate
- - allowing for (1) the interest-rate agreed upon, on the one hand, and allowing
if necessary for (2) the death-and-disability insurance premium, costs and fees
resulting from filing/processing, stamps, and record-keeping, management costs,
premiums and assessments relating to the General Loan-Guarantee Fund or to the
Regional Loan-Guarantee Fund, and all other outlays and expenses that might be
chargeable to the borrower, on the other hand, - is specified in the particular
terms of the loan.
17 - LEGAL JURISDICTION, IN CASE OF LAWSUIT
Except for cases where article 44 of the new Civil Procedure Code applies, in
case of lawsuit the lender may exercise the option to require the legal
jurisdiction of the place where the contract is to be put into effect (the place
where contractual loan-payments must be made), rejecting the legal jurisdiction
of the defendant's place of residence.
18 - CONTRACT-RELATED COSTS AND FEES
All costs, fees and commissions arising from the loan-contract will be paid by
the borrower.
19 - AGREEMENTS OF INDEFINITE DURATION
The lender reserves the right to modify the loan-terms herein; it bears
responsibility for notifying the borrower of any such modification.
The loan-terms so modified will not take effect until a period of two months has
elapsed following the date said notification is transmitted.
In case of disagreement, and within this same two-month period, the borrower may
cancel the contract, repaying the amounts owed, without liability and with no
possibility of recovery of any indemnity resulting from said action.
Agreements of indefinite duration will allow the lender the right to collect an
annual contractual-undertaking commission-fee, the total amount whereof is
specified in the general banking loan-terms.
- ------
<PAGE>
C - SPECIFIC LOAN TERMS
I - TERMS APPLICABLE TO RESIDENCE LOAN OFFERS MADE UNDER THE GUIDELINES OF LAW
79-596, dated July 13, 1979
1 - SUMMARY OF THE STIPULATIONS IN ARTICLE 7 OF SAID LAW
Making the offer available obliges the lender to maintain the terms specified in
the offer for a period of at least thirty days, starting from the date the offer
is received by the borrower.
The offer is submitted to the borrower and to the designated parties standing
surety, the latter being physical persons, for acceptance.
The borrower and the parties standing surety may only accept the loan-offer ten
days after they have received it.
Acceptance of the offer must be provided in writing, with signed counter-
acknowledgment of said written acceptance's receipt.
2 - TERMS AFFECTING THE LOAN-CONTRACT'S EXECUTION
. CONDITIONAL SUSPENSION TERMS
- - Concomitant granting of all loans concurrently assisting the financing of the
main operation.
If the borrower has more than one loan at its disposal to assist the real-estate
property project that it intends to complete, the loan is awarded conditional on
each of said other loans being granted also (if this condition is not met, the
loan may be suspended). However, this stipulation only applies to loans larger
than 10 % of the grand total credit-amount.
- - The borrower's qualifying for acceptance as an insuree for group death-and-
disability insurance.
The lender reserves the option not to follow through on its loan-offer if the
borrower fails to qualify for acceptance by the insurer, as an insuree, on the
group-insurance contract covering risks of death, permanent and absolute
disability, and/or temporary incapacity.
. RECONSIDERATION/CANCELLATION TERMS
- - Failure to execute the main contract.
Granting of the loan is invariably conditional on failure to execute the
contract for which the loan was requested, within a period of four months from
the date of the loan's acceptance (if said contract is not executed, the loan
may be reconsidered or canceled).
The borrower will be obliged to show supporting documentary evidence of said
contract's execution within this time-period.
If the loan is canceled, the lender will be entitled to recovery of costs from
the borrower, covering examination of materials and documents, and already
contractually fixed at 0.75 % of the total loan-amount, but with a maximum limit
of one thousand francs.
- - The borrower's failure to qualify for acceptance as an insuree for group
death-and-disability insurance.
<PAGE>
If, following an unfavorable medical check-up, the borrower fails to qualify for
acceptance by the insurer as an insuree on the group death-and-disability
insurance contract, the loan-contract herein may rightfully be canceled without
any costs or penalty, simply at the borrower's request. Said request must be
presented within a period of one month from the date the borrower is notified of
the insurer's rejection of his/her application.
- - Consequence of conditional suspension terms and reconsideration/cancellation
terms.
The loan-offer, even once it has been accepted, will not be definitively binding
on the parties until after the conditional suspension terms have been declared
satisfied, and until after the reconsideration/cancellation terms have been
declared not satisfied.
3 - LOAN TRANSFER
If the real-estate property constituting the central purpose of the loan offer
were to be surrendered or transferred to a third party, this loan herein could
be transferred to said party [transferee], regulations permitting, after
examination of the files and acceptance of said transfer by the lender, based on
the cost-schedules specified in the general banking loan-terms, provided the
transferor supported said cost-schedules.
4 - COVENANT-BASED RESIDENTIAL LOAN
If the loan is a covenant-based residential loan, and is therefore subject to
the stipulations of Law number 77-1, dated January 3, 1977, and of legislative
decree number 77-1287, dated November 22, 1977, relating to covenant-based
residential loans, along with the stipulations of said decrees' written
attachments and successors, the following regulations are in force.
- - Obligations resulting from a covenant-based residential loan.
The borrower states that it has been made aware of the stipulations of
legislative decree number 77-1287, relating to the terms under which covenant-
based residential loans are awarded and maintained, and hereby undertakes to
respect said stipulations.
It undertakes to perform work on residence-improvement projects, if these even
partially constitute the purpose of the loan, within a maximum time-period of
two years starting from the date the loan-credit funds are made available.
- - Summary of the stipulations in articles 4 and 8 of the legislative decree
dated November 22, 1977.
Pursuant to article 11 of the Public Notice dated May 5, 1978, issued by the
Credit Foncier de France [Investment Bank of France] relating to covenant-based
residential loans, articles 4 and 8 of the legislative decree dated November 22,
1977, are here reproduced below:-
"Article 4 - Parties who may be beneficiaries of these loans:-
1) Physical persons who are building or purchasing new residences as
their family homes, and those who are purchasing existing residences with a view
to improving them.
Those who are engaged in purchasing real-estate property, or subscribing to or
purchasing corporate shares or stocks in Companies regulated by titles II and
III of Law number 71-579, dated July 16, 1971.
2) Physical persons who own a residence, and who are carrying out
improvement projects on said residence.
<PAGE>
Said loan-beneficiaries must intend said residence to be their main domicile,
defined as personal occupancy of said residence for at least eight months per
year, whether by themselves, by their spouse, by their forebears or descendants,
or by their spouse's. Said occupancy must take effect within a period of no
longer than one year, starting either from when the work-projects are declared
complete, or else from date of purchase, if the latter postdates said
declaration. Said time-period may be extended to five years whenever the
residence is intended for occupancy by the loan-beneficiary following the
latter's retirement, or return from another district of France or an overseas
territory, or from abroad."
However, whenever loan-beneficiaries of covenant-based residential loans are no
longer able to designate said residence as their future main domicile, whether
for professional or family reasons, they may be permitted to rent it. Said
leasing must respect the terms and conditions defined by Law number 82-528,
dated June 22, 1982, and must be the subject of a statement to the lender to
this effect, as well as a statement to the National Commissioner in cases where
they are beneficiaries of personalized residential assistance (in this latter
instance, payment of said assistance is then terminated).
"Article 8 - In order to qualify as a beneficiary of a covenant-based
residential loan, the applicant must agree to ensure that during the whole loan-
amortization period, the residence financed by means of this loan will be:
(a) neither remodeled as commercial or professional premises;
(b) nor turned over to seasonal leasing, nor leased out as a furnished residence
for more than four months per year;
(c) nor used as a secondary vacation-residence;
(d) nor subject to occupancy as part of a work-contract arrangement.
An attached assessment, authored by the Ministers of Housing, Agriculture, and
Economy and Finance, specifies exceptions to regulations (b) and (d) in rural
areas.
Any violation of this agreement necessitates repayment of the loan."
5 - RESIDENTIAL SAVINGS LOAN
If the loan is a residential savings loan, and is therefore subject to the
stipulations of Law number 65-554, dated July 10, 1965, establishing a
residential savings assessment-schedule, and of legislative decree number 65-
1044, dated December 2, 1965, along with the stipulations of said decrees'
written attachments and successors, the following regulations are in force:
- - Obligations resulting from a residential savings loan.
The borrower is required to use the funds constituting the purpose of the loan
to purchase or build - as appropriate - a residence exclusively intended as the
main home either for him/her or for a family member (for a spouse, or for a
forebear or descendant of the borrower or of his/her spouse), or else - as
appropriate - exclusively intended as the main home for a leasing tenant,
according to the terms of a written lease duly agreed upon, for a period of
three years maximum, said tenant alone retaining an option to cancel the lease
with three months' notice, and with no subletting permitted under the terms of
the lease.
<PAGE>
If the loan is a residential savings loan subject to the stipulations of Law
number 85-536, dated May 21, 1985, and of legislative decrees numbers 85-638 and
85-647, both dated June 28, 1985, along with the stipulations of said decrees'
written attachments and successors, the following regulations are in force:-
- - Financing access to ownership of a residence that is not intended as the main
home is limited exclusively to individual structures, defined as new residences
that have never been either adapted or subject to occupancy on any entitlement
basis whatsoever.
- - Concurrent financing of a home and (separately) of a residence intended for a
different type of use, by the same loan-beneficiary, by means of residential
savings loans, is not permitted.
Premature recovery of the loan.
If any one of the operational regulations established under the Residential
Savings-Loan assessment-schedule is not observed, and particularly if payment of
the Savings premium is rejected by the Credit Foncier [Investment Bank], or has
to be presented more than once, the loan will become immediately subject to
demand for repayment in full, as per the terms specified above in the paragraph
"Loan recovery" [B 11].
6 - LOAN TO AN AGENT OR EMPLOYEE OF CREDIT AGRICOLE
The terms of this loan-agreement, particularly the interest-rate, are accorded
to the borrower as a salaried agent or employee of Credit Agricole Mutuel,
Alpes-Maritimes Region.
If the borrower were to lose said employee status, this loan herein could be
maintained based on the regular terms for this category of loans, and in
particular based on the interest-rate currently prevailing for other borrowers
on the date the loan was granted.
II - TERMS APPLICABLE TO PROFESSIONAL / BUSINESS LOANS
1 - OPENING CURRENT-ACCOUNT CREDIT
- - Duration of an opened credit-line.
Loans transacted in the form of a credit-line opened in a current account are in
principle granted for an indefinite period.
They may be canceled at any time by the lender, conditional on two months'
advance notice to the borrower by registered letter with signed acknowledgment
of receipt; the advance-notice period starts at midnight (00:00) on the day
following receipt of said letter, date of receipt-acknowledgment constituting
documentary proof.
The lender is not constrained to respect any advance-notice period if the
borrower displays gravely reprehensible behavior, or if the borrower's financial
circumstances are manifestly compromised beyond repair.
- - Operating terms.
During the entire period of the opened credit-line, the borrower is entitled to
use up unprotected credit however it sees fit.
It is therefore entitled, after using all or part of the credit-line, to repay
the lender all or part of the amounts it has used, so as to use the credit-line
once again later on and generate new repayments, thereby enabling the advances
to be paid back by the payments the borrower makes, up till the day the credit-
line expires.
<PAGE>
- - Interest, exceeding authorized credit-limit, commissions.
The borrower is obliged to pay the lender interest on the total credit-amount
the borrower effectively uses, at the interest-rate specified in the particular
terms of the loan. Interest is calculated at three-monthly intervals, and a
statement of account sent to the borrower notifies it of the amount payable. If
the amount of interest causes the account to be overdrawn in excess of the
authorized credit-limit, and in general each time the account indicates a
negative (debit) total in excess of the agreed limit-ceiling, the borrower will
be obliged to make an immediate payment at least large enough to equal the
overdraft as documented.
Overdrafts in excess of the authorized limit-ceiling, if they occur, may not in
any way constitute a right or a privilege available to the borrower for use.
They will by rightful entitlement entail interest payments at the interest-rate
customarily imposed by the lender on any unprotected account-credits that it
grants to its clients, in accordance with current norms of banking practice.
Said interest payments will be deducted from the borrower's account at the same
time as the interest payments specified in the previous paragraph.
The borrower is likewise obliged to pay the lender commissions as specified in
both the particular terms of the loan and the general banking loan-terms.
The borrower will likewise settle payment of the annual contractual-undertaking
commission-fee to the lender, the assessment-rate and terms of application
whereof are specified in the general banking loan-terms.
- - Regulating the loan, punitive clauses.
As soon as the credit-line comes to an end, for whatever reason, a definitive
count is made of the total amounts still owing to the lender, in capital
principal and supplementary payments [interest, fees etc.]. The remainder-total
supplied thereby must be paid to the lender within eight days.
If said eight-day period elapses without full payment being made, the current
account's negative (debit) total will then rightfully generate interest payable
every three months at an increased rate, equal to the loan's annual interest-
rate raised by three percentage points, until the date of full and final
settlement of the amount owed. Furthermore, the lender will be entitled to
demand from the borrower an indemnity equal to seven percent of the total
amounts still owing, not counting payment of taxable costs and fees the lender
incurs while recovering its loan-credit.
2 - OPENING AGGREGATE MORTGAGE-BASED CREDIT
- - How the opening of a credit-line is effected.
The opening of a credit-line is effected by means of short-, medium- and long-
term money loans, unprotected account-credits, discounts, secured sums, or other
grantable instruments within the legislative and regulatory framework as it
applies to Credit Agricole, under the terms and with the purposes specified by
said framework, and always conditional on such legal or regulatory stipulations
as may limit, modify or suppress the distribution of credit. Any financial
advance will be repayable to the extent of the total amount of the opened
credit-line, and new advances may also be granted - these latter advances will
then be protected - to the same total credit-line extent, by means of mortgage-
based payment resulting from said opened credit-line.
The granting of new credit-advances, and likewise (where applicable) the
lender's acceptance of movable property as loan-guaranteeing collateral, or of
supplementary personal security-guarantees, never entail any alteration in the
opened credit-line; and the mortgage-based payment that guarantees the opened
credit-line therefore remains the
<PAGE>
lender's loan-security, until complete repayment of all amounts that the
borrower may owe the lender, and until the threat of lender's distraint is
removed for said amounts.
- - Option to cancel.
The opening of the credit-line may be canceled at any moment:
- - either by the borrower, provided it repays the amounts it owes the lender in
their entirety;
- - or by the lender, as per the stipulations specified above in the paragraph
"Loan recovery" [B 11], if the borrower fails to uphold any one of the
conditions that are cause for the loan's premature termination.
- - Interest-rate.
The interest-rate, which fluctuates according to the type and category of the
credit-advances transacted within the framework of opening a credit-line, is
tailored specifically to each of said credit-advances via specifications in the
contract, or appropriate equivalent document, which it is the lender's
responsibility to draw up and the borrower's responsibility to modify before
funds are made available.
In the contract for opening a credit-line, the designated maximum interest-rate
corresponds to Credit Agricole's maximum interest-rate for credit-advances,
which depends on the economic-financial regulations currently prevailing at the
time the contract is signed. This interest-rate's designation is particularly
tailored to demands for mortgage-based payments.
If in the future said regulations were to be modified, especially in the
direction of a renewed rise in said maximum interest-rate, a fluctuating
difference of this nature would have an immediate effect on the credit-advances
which are adjustable to allow for said difference. Consequently, as stipulated
in the final subsection of new article 57 of the legislative decree dated
October 14, 1965, the clause intended as a formal record of the opened credit-
line, for purposes of taking out loan-guarantees, must indicate the maximum
interest-rate and give notice that "rate-fluctuation is contractually specified
and predicted".
<PAGE>
3 - LOAN GUARANTEED BY GENERAL LOAN-GUARANTEE FUND
The borrower who is the beneficiary of a loan that is likely to receive the
General Loan-Guarantee Fund's loan-guarantee (securing against individual
residual losses, once all options and recourses against the borrower have been
exhausted) is obliged to do the following:
- - pay in advance all premiums and assessments intended for said fund, with the
lender authorized to debit the borrower's account in the amount of all sums
subject to repayment-demand;
- - make available all mortgage-based or other loan-guarantees that may be
demanded.
4 - LOAN SUBJECT TO REGIONAL LOAN-GUARANTEE FUND
The borrower who is the beneficiary of a loan that is likely to be subject to
the Regional Loan-Guarantee Fund's loan-guarantee (restoring individual residual
losses, once all options and recourses against the borrower have been exhausted)
is obliged to pay in advance all premiums, assessments and commissions, with the
lender authorized to debit the borrower's account in the amount of all sums
subject to repayment-demand.
5 - RECOVERING THE LOAN
So as to allow the lender to proceed with recovering its loan-credit via re-
discount, the lender will be entitled to request from the borrower at any moment
that it prepare debtor-notes representing the value of the lender's loan-credit.
6 - LOAN TO A MORALLY RESPONSIBLE REPRESENTATIVE
The borrower is constrained to notify the lender of the following, within
fifteen days of the event:-
- - any legally significant modification in the formal structure of the company;
- - the loss of half or more of its total corporate capital;
- - any corporate merger, split, takeover or break-up;
- - the appointment of a new corporate representative;
- - any event likely to increase significantly the volume of its obligations, or
likely to harm or prejudice the lender's rights and loan-guarantees.
If the borrower fails to comply with this obligation, the lender will be
entitled to demand repayment of the loan immediately and in full, as per the
terms specified above in the paragraph "Loan recovery" [B 11].
7 - AUGMENTED LOANS
<PAGE>
Augmented loans are granted by the lender within the framework of specific
regulations assessed by public authorities (loans to support farming,
manufacturing and industry, etc.).
Any failure to comply with particular obligations that the borrower is required
by said regulations to satisfy may entail loss of all benefits from the loan,
and cause the loan to become immediately subject to repayment-demand.
The borrower acknowledges herewith that it has been made fully aware of its
particular obligations and of their attendant sanctions.
<PAGE>
Exhibit 10.19
CREDIT AGRICOLE [company logo: CA]
[handwritten] 1/5
[handwritten] Loan #2: 1,800,000 French francs
[handwritten] 8/95 D.
[handwritten] 701/1
LOAN CONTRACT [handwritten] 062 332 701
MPP/CPO/FU
655699015
- -------------------------------------------------------------------------------
The loan contract herein is drawn up under the following particular terms, and
under the general and (where applicable) specific terms attached herewith,
titled "Credit Agricole Mutuel, Alpes-Maritimes Regional Division: Loan terms";
the borrower states that he/she has been made aware of said terms; and the
borrower has been provided with a copy of said terms.
- -------------------------------------------------------------------------------
- - NAME OF BORROWER: Advanced Software Concepts Inc. [S.A.]
Head Office: Espace La Gaude, 9551 Rte.
de St. Laurent du Var,
06610 LA GAUDE; SIREN Number: 348-998-964;
total capital: 3,288,000.00 F;
Company Representative: Mr. Killko CABALLERO,
born 9.3.59, in Istanbul (Turkey), P.D.G.
- - TOTAL OPERATING AMOUNT: 2,595,000.00 F.
- - TOTAL AMOUNT LOANED BY CREDIT AGRICOLE: 1,800,000.00 F.
- - OTHER LOANS DECLARED BY THE BORROWER: -- F.
-- F.
- - AMOUNT OF PERSONAL ASSET-CONTRIBUTION: 795,000.00 F.
- - PURPOSE OF LOAN'S FINANCING: Acquisition of computer equipment, materials,
and software, and financing of exhibition and publicity costs for developing the
borrowers' business operations in the EU and the USA
- - LOAN-GUARANTEE: [circled (handwritten)] Security in the form of computer
equipment and materials, jointly in co-operation with SOFARIS and the REGIONAL
COUNCIL, and the security-collateral of SOFARIS
<PAGE>
and the REGIONAL COUNCIL [section highlighted and queried (handwritten)]
- - NOTARY-PUBLIC DRAWING UP THE BORROWING TRANSACTION: -- [queried
(handwritten)]
- - MAXIMUM AMOUNT OF THE COMPANY'S SHARE OF THE LOAN (in francs), that may be
directly appropriated and withdrawn against your savings account starting from
the day this loan-transaction takes effect, and that is available for use at the
LOCAL BRANCH OF CREDIT AGRICOLE MUTUEL: --
[company letterhead]
CREDIT AGRICOLE - ALPES-MARITIMES REGIONAL DIVISION
Corporate headquarters: 111 avenue E. Dechame, 06708 St. Laurent du Var, Cedex.
Tel. 9314-8500+; P.O. Box 250; Telex: 450903 Creagri. X C.C.F. Marseilles
289.11 R.
<PAGE>
LOAN CONTRACT
ADVANCED SOFTWARE CONCEPTS INC. [S.A.]
FINANCIAL CHARACTERISTICS OF LOAN, Number 0618587 01
------------------------------------------
[handwritten] 2/5
[handwritten] 701/2
LOAN TYPE: PBE, STANDARD LOAN-REPAYMENT SCHEDULE; REGULAR (INVARIANT) PAYMENTS,
INTEREST PAYABLE ON PAYMENT DUE-DATES, PROPORTIONAL INTEREST RATE
AMOUNT OF LOAN: 1,800,000.00 F. TOTAL DURATION OF LOAN: 5 years
FREQUENCY OF REPAYMENTS: MONTHLY PAYMENT DUE-DATES: 28th of each month
- - BORROWING AMORTIZATION / DEPRECIATION TERMS (see Note 1 below):
-------------------------------------------
{INTEREST RATE: 8.750 %,variable rate
DEFERMENT PERIOD: {NUMBER OF PAYMENT-DATES: 12
{AMOUNT DUE PER PAYMENT-DATE: 13,125.00 F.
{INTEREST RATE: 8.750 %, variable rate
1st AMORTIZATION/DEPRECIATION PERIOD: {NUMBER OF PAYMENT-DATES: 48
{AMOUNT DUE PER PAYMENT-DATE: 44,579.70 F.
{INTEREST RATE: -- %
2nd AMORTIZATION/DEPRECIATION PERIOD: {NUMBER OF PAYMENT-DATES: --
{AMOUNT DUE PER PAYMENT-DATE: -- F.
- - OTHER SPECIFICATIONS (see Note 1 below):
- Effective interest-rate - aggregate: 9.398 %
- Regional Loan-Guarantee Fund intervention: -- %
- General Loan-Guarantee Fund intervention: --
- Total amount of filing/processing costs & fees: -- F.
- Number and date of DDE-DDA decision: --
- Death and disability insurance (main) rate: 0.648 %
- Death and disability insurance (optional) rate: -- %
(In cases of aggravated medical risk, the insurance rate hereby specified
will be increased by a supplement of [-- F.] 0.648 % per year.)
(Note 1) The rates and payment due-dates specified herein are the rates
currently prevailing on the day the loan was requested.The contractually
definitive rates and payment due-dates will be those currently prevailing on
the day the loan amount is credited to the borrower and made available to
him/her, and from then on said rates and payment due-dates will be considered to
have been accepted by the borrower.
<PAGE>
A - APPLICATION: PRELIMINARY REMARKS
The terms and conditions herein apply to loan transactions executed in favor of
beneficiaries who are physical, morally responsible private persons under the
law.
Said terms do not apply to loan transactions which assist the promotion of
property holdings and real estate.
Credit Agricole Mutuel, Alpes-Maritimes Regional Division, is known hereinafter
as "the lender".
The debtor or debtors is/are known hereafter as "the borrower", whether one or
more physical, morally responsible persons are parties to the loan as borrowers.
If more than one loan is involved, the total amount loaned will be designated by
the abbreviation "the loan".
B - GENERAL LOAN TERMS
1 - CREDIT AGRICOLE ACCOUNT-HOLDING MEMBERS/ASSOCIATES, CREDIT AGRICOLE USERS
The stipulations named hereinafter are applicable if the borrower is an account-
holding member/associate or a user of Credit Agricole:-
(a) If a Credit Agricole account-holding member/associate: The borrower must
invest in the corporate capital of the Local Branch of Credit Agricole with
which it is associated by subscribing to a fixed number of its corporate shares,
said number to be determined by said branch's Executive Board, payment for which
is to be made by withdrawal against the borrower's account starting from the
date the loan takes effect.
Said corporate shares are interest-bearing; the interest will be available
starting from the January 1st following the date of said subscription. The
interest accruing is calculated each
<PAGE>
calendar year and paid on payment due-dates annually, after interest rates have
been fixed by the Local Branch concerned. The corporate shares are refundable
once the borrower has been discharged of all its obligations towards the lender,
with the provision however that said Local Branch may defer this refund for up
to five years maximum.
(b) If a Credit Agricole account-holding member/associate and user: The borrower
must cover filing/processing costs and fees, the total amount whereof is to be
determined by the lender on the basis of the loan transaction that is being
considered. Payment for said costs and fees is to be made by withdrawal against
the borrower's account, starting from the date the loan takes effect.
2 - LOAN-TRANSACTION METHODS
After personal asset-contributions have been paid as demanded by the lender, the
loan is generally transacted as follows:-
- - by means of a check or girocheck addressed to the borrower's Notary-Public
(for purchases of fixed property and real estate, purchases of commercial or
manufacturing/industrial assets, and for bridging relay-credits).
- - by payment to the borrower's account, or else credited to all delegated
parties as designated by the borrower and agreed to by the lender (for financing
operating materials, equipment and apparatus, vehicles, goods, plant
installations, management operations, or repair of property and real estate),
and in stage-by-stage phases, as a project progresses towards completion or as
invoices are presented for payment (for work on construction projects or on
enlarging property and real estate holdings, and for purchases of fixed property
and real estate to be completed at a future date).
By express agreement, if the loan is transacted as payment to the borrower's
current account, said manner of transaction will entail no alteration in the sum
credited by the lender, and will in no way affect the sureties accorded to the
lender by way of security-guarantees for the loan's repayment.
3 - CONDITIONAL SUSPENSION TERMS, RECONSIDERATION/CANCELLATION TERMS
Whenever loan-guarantees are demanded by the lender, granting of the loan is
invariably conditional on said loan-guarantees being effectively supplied by the
borrower (if this condition is not met, the loan may be suspended). Granting of
the loan is likewise conditional on no fact or piece of information becoming
known to the lender, after the lender's decision to award the loan, of a kind
that - if the lender had known it at the time - would have led the lender to
refuse the loan (if this condition is not met, the loan may be reconsidered or
canceled).
<PAGE>
4 - PROOF
The lender's written documentation will constitute proof of good faith in
transacting the loan and in making payments relating to the loan, unless proof
to the contrary is presented by the borrower.
5 - EQUAL EFFECTS OF DEBTOR-LIABILITY, AND LOAN-CREDIT INDIVISIBILITY
All debtor-liability obligations arising from the loan-contract, particularly
the obligation to repay said loan, will affect equally all persons and parties
designated as "the borrower".
Since the sum loan-credited by the lender is indivisible, as contractually
stipulated, it will be deemed legally recoverable from each and every heir of
every debtor, as laid down by article 1221 of the Civil Code, paragraph 5.
6 - AUTHORIZING ACCOUNT-DEBITS AND COMPENSATION
All payments will be made at the lender's business headquarters, through the
intermediary of one of its branch offices.
The borrower authorizes the lender to debit its account permanently in the
amount of the loan-payment sums demanded.
The borrower likewise authorizes the lender - fully within the lender's rights,
and without the borrower's intervention - to make compensation for all sums that
may be owing and payable on the loan, whether principal or interest, as well as
for all indemnities, by means of such sums as the borrower might potentially owe
the lender under any legal entitlement whatsoever.
7 - INDEX-LINKING THE LOAN'S ANNUAL INTEREST RATE TO CEILING-RATE
Once the loan takes effect, on a loan that is to last two years or less it will
be possible for the annual interest rate to fluctuate, based on limit-ceilings
fixed either by the National Headquarters of Credit Agricole or else by the
lender's Executive Board.
Said rate-fluctuation will likewise be possible for any loan that is to last
more than two years or indefinitely, if this fluctuation is provided for in the
particular terms of the loan.
The new rate will be effective starting from the date fixed either by the
National Headquarters of Credit Agricole or else by the lender's Executive
Board.
8 - LOAN DURATION
The loan's duration is specified in the particular terms of the loan. Said
duration takes effect starting from the first payment due-date, less one
payment-period (either one, three, six or twelve months, depending on whether
the payment frequency agreed upon is monthly, three-monthly, six-monthly or
yearly).
The duration of loans granted for construction projects may be increased in
certain cases by an anticipatory period, covering the project-work period and
reaching term at the completion of said projects. The duration of said
anticipatory period may however not exceed two years (or four years in certain
cases).
<PAGE>
When the loan granted is a bridging relay-credit, the duration of the latter is
two years maximum, during which time the borrower is obliged to sell the real-
estate property designated in the loan application. If it takes less than two
years for said sale to be effected, the loan's duration is thus obligatorily re-
assessed to end at the date of the sale.
The duration of credit-lines opened in current accounts is specified in the
relevant paragraph [C II.1, below] relating to said matters.
9 - LOAN AMORTIZATION / DEPRECIATION
The stipulations relating to the loan's amortization or depreciation are
specified in the particular terms of the loan. It should be noted that the
amount of the first due payment specified in said particular loan-terms may be
decreased or increased, depending on the date that the loan-credits are made
available.
Depending on the payment frequency agreed upon, this first payment due-date will
be designated as either one, three, six or twelve months after the loan takes
effect, whether fully or partially. However, if the loan is on a monthly
payment-frequency basis, the first payment due-date will be designated as the
month following that in which the loan takes effect.
Whenever the loan is granted on the basis of progressive payments due, the total
payments due in any one year, and each year, will progress during the whole
amortization period according to a percentage determined in the particular terms
of the loan (and proportionately to the previous year's total payments due). In
addition, if the amortization period is fifteen years or more, the loan entails
successive interest-rates, and the interest-rate specified in said particular
loan-terms will then represent the average interest-rate. Said stipulations
affect covenant-based residential loans and State-assisted loans intended to
permit access to ownership of family residences.
By express agreement, if the loan is amortized against the borrower's current
account, said amortization will entail no alteration in the sum credited by the
lender, and will in no way affect the sureties accorded to the lender by way of
security-guarantees for the loan's repayment.
10 - ADVANCE REPAYMENT
The borrower has the option, if it so wishes, to repay the loan in advance,
provided that it gives the lender at least one month's advance notice to this
effect. If partial advance repayment is made, the amount repaid must total at
least 10 % of the capital principal originally borrowed.
Any advance repayment will entail payment of an indemnity equal to two months'
interest, calculated based on the loan's average interest-rate on the capital
principal repaid in advance.
Furthermore, if at the time of the advance repayment the interest-rate for a
loan in the same category is lower than the interest-rate for the loan on which
the repayment is being made, payment of a financial indemnity will likewise be
demanded. Said indemnity will be calculated based on multiplying the advance-
repaid capital principal by the difference between the two interest-rates
(expressed on the basis of the same payment frequency as for the payment due-
dates), and by the number of payment due-dates outstanding. In no case will it
be permissible for said indemnity to exceed 10 % of the capital principal repaid
in advance.
Finally, if the loan is on the basis of progressive payments due, and successive
interest-rates, the advance repayment will entail the borrower's paying
compensatory interest, calculated in the same way as the interest-rate applied
to loan-repayment over the loan-
<PAGE>
period already elapsed, said interest-rate being equal to the average interest-
rate specified in the particular loan-terms.
. For a loan affected by Law number 79-596, dated July 13, 1979:
The total cumulative amount of indemnities will not be permitted to exceed the
value of a six-month period of interest payments, calculated based on the
advance-repaid capital principal at the loan's average interest-rate, with the
proviso that said amount will not be permitted to exceed 3 % of the capital
principal still owing before the repayment.
The compensatory interest amounts payable, calculated separately, are not
affected by this maximum limit.
. For a State-assisted loan intended to permit access to ownership of
family residences: An indemnity will simply be appropriated in an amount equal
to 1 % of the capital principal repaid in advance.
All taxes and transaction-total duties applicable to said indemnities, and
levied according to the fiscal rate-schedule currently prevailing at the time of
the advance repayment, will be paid by the borrower.
11 - LOAN RECOVERY
Repayment of the loan may be demanded immediately and in full if any one of the
following events takes place:
- - in case of non-payment of amounts demanded;
- - if the borrower ceases to satisfy the terms that allowed it to obtain the
loan, or the terms arising from the loan-contract or from the written
documents that the loan-contract mentions;
- - if the loan-credits paid out by the lender have been used for purposes other
than those on the basis of which the loan was requested;
- - in case of refusal to make available to the lender such accounting
documentation or interim financial statements as may be demanded by the
lender;
- - if the property offered as loan-guaranteeing security-collateral has been
wholly or partially sold or conveyanced to a third party, if it has undergone
a significant depreciation through the borrower's action or fault, however
slight, or if it has been the object of a distraint, seizure, or lease, that
violates the terms under which the loan has been granted;
- - in case of cancellation or annulment of their security-collateral agreement by
one or more of the parties standing surety;
- - in case of the death of one of the persons designated as "the borrower",
unless said person's spouse or direct heirs or one or more of these parties
does not agree - with the lender's assent - to continue the loan under the
same terms as those agreed to by the loan-terms' deceased original author,
barring any potential effects of death insurance;
- - if the borrower is insolvent or ceases payments, particularly if said
financial condition comes to light as a result of unpaid sums, creditor
complaints, and any and all forms of attempts to recover payment;
<PAGE>
- - in all cases where supporting documentation, information and declarations
supplied by the borrower are revealed to be inaccurate, as likewise in any
case where the borrower has been guilty of any fraudulent activity with
respect to the lender;
- - finally, if any one of the obligations arising from the loan-contract has not
been fulfilled by the borrower.
If any one of the above-mentioned causes for premature termination occurs, the
lender will give notice of its intention to avail itself of its right to demand
repayment of its loan-credit immediately and in full, by registered letter
addressed to the borrower with signed acknowledgment of receipt.
The premature termination of a loan also entails the subsequent premature
termination concomitantly of all agreements granted to the borrower by the
lender.
12 - PUNITIVE CLAUSES
- - Default by the borrower without the loan's having been prematurely terminated.
If payments are late, the lender may choose not to demand immediate repayment of
the capital principal still owing. Any unpaid amount will then rightfully
generate an increased interest-rate due, equal to the loan's annual interest-
rate raised by three percentage points, starting from the first date payment is
late, and continuing until the date payment is effectively made.
- - Each time the loan-payment due is not paid on the proper due-date, the lender
will bill the client for the amount specified in the general banking loan-terms
under the heading "Late loan-payment due".
- - Default by the borrower following the loan's premature termination. If the
loan can be demanded back, the lender may choose to demand immediate repayment
of the capital principal still owing as of the date designated for the last due
payment.
Starting from the first date payment is late, and continuing until the date
payment is definitively made, all designated due payments left unpaid before -
or, where applicable, after - the loan's premature termination will then
rightfully generate an increased interest-rate due, equal to the loan's annual
interest-rate raised by three percentage points; and the capital principal still
owing as of the date designated for the last due payment will likewise
rightfully generate an interest-rate equal to the loan's interest-rate, starting
from this latter date.
Furthermore, the lender will be entitled to recover from the borrower an
indemnity equal to seven percent of the capital principal still owing.
No sum other than those explicitly mentioned in the two paragraphs above may be
recovered from the borrower by the lender, with the exception, however, of
taxable costs and fees resulting from the borrower's defaulting on payments.
The punitive clauses applicable to credit-lines opened in current accounts are
specified in the relevant paragraph [C II.1, below] relating to said matters.
13 - DEATH AND DISABILITY INSURANCE (physical persons)
Since this insurance covers risk to an individual, each borrower will be obliged
to take out death-and-disability insurance personally, after filling out an
individual policy-application form.
<PAGE>
Since the lender has maintained a group insurance policy for one year
(renewable) intended to cover its borrowers on a short-, medium- and long-term
basis against death and disability risks, the borrower will be obliged to do as
follows, once it has accepted the loan-offer or else once the loan-contract has
been signed:-
- - give its consent to said insurance, insofar as it meets the insurer's terms of
admission and conditional on the insurer's assent;
- - pay in advance, and including interest, the insurance premiums that the lender
will claim from it at the rate currently prevailing each year.
Said insurance will be purchased by the borrower starting from the date the loan
takes effect, on the terms specified in the individual insurance-application
form. However, whenever a health questionnaire is required by the insurer,
insurance coverage is only granted on the basis of suspension terms, conditional
on favorable results from the medical check-up. The borrower will be notified
of said results by way of the returned individual insurance-application form,
which will specify the insuree's first name and last name, along with the risks
against which the insuree is covered. An announcement specifying the details
and forms of said insurance is attached either to the loan-offer or to the loan-
contract.
14 - INSURANCE ON MORTGAGED GOODS AND REAL ESTATE
The buildings and movable property offered as loan-guaranteeing security-
collateral will have to be insured against the risk of fire, for a capital
amount deemed adequate by the lender, until the loan has been repaid in full.
The borrower will be obliged to show supporting documentary evidence of said
insurance and of payment of insurance premiums, upon request. If this
obligation is not met, the lender may take it upon itself to pay any insurance
premiums and take out any insurance policies, then demand immediate
reimbursement for the amounts it has advanced therewith for said purposes.
In case of misadventure, the indemnities owed by the insurer will be paid by the
insurer directly to the lender, up to an amount equaling the lender's total
loan-credit.
The borrower will have the option to re-fit and rebuild the property offered as
loan-guaranteeing collateral in its former condition, within a one-year period
from the date of said misadventure. The indemnity will in this case be made
available to the borrower - with whatever amount is payable duly deducted - in
the form of account credits, which will be paid to the borrower gradually as the
rebuilding work progresses, with said progress documented if necessary by a
representative of the lender.
If by the end of this one-year period the borrower has not begun work on the
rebuilding project, or has notified the lender that it intends not to rebuild,
the indemnity will be definitively acquired by the lender, as the appropriate
amount, and deducted as advance payment against the lender's total loan-credit.
15 - BAN ON MORTGAGING AND PROMISE OF MORTGAGE-DERIVED PAYMENT
The lender may demand from the borrower a promise not to mortgage the property
that constitutes the central purpose of the loan, and to agree - upon request,
and to the lender's sole benefit and advantage - to a top-ranking mortgage
without any other competitor-mortgages, or else to a mortgage whose ranking is
immediately below another signed security-agreement already in favor of the
lender also, so as to guarantee payment of all
<PAGE>
loan-related amounts owed to the lender by rightful entitlement, whether in the
form of capital principal or subsidiary sums.
If such a promise is requested by the lender, said promise will take effect
solely as a result of the signature on the loan-contract (or else with the
acceptance of the real-estate loan offer), and will therefore not require a
separate document to be drawn up specifically for this purpose.
16 - AGGREGATE EFFECTIVE INTEREST-RATE
Pursuant to Law number 66-1010, dated December 28, 1966, and its concomitant
written attachments and successors, the loan's aggregate effective interest-rate
- - allowing for (1) the interest-rate agreed upon, on the one hand, and allowing
if necessary for (2) the death-and-disability insurance premium, costs and fees
resulting from filing/processing, stamps, and record-keeping, management costs,
premiums and assessments relating to the General Loan-Guarantee Fund or to the
Regional Loan-Guarantee Fund, and all other outlays and expenses that might be
chargeable to the borrower, on the other hand, - is specified in the particular
terms of the loan.
17 - LEGAL JURISDICTION, IN CASE OF LAWSUIT
Except for cases where article 44 of the new Civil Procedure Code applies, in
case of lawsuit the lender may exercise the option to require the legal
jurisdiction of the place where the contract is to be put into effect (the place
where contractual loan-payments must be made), rejecting the legal jurisdiction
of the defendant's place of residence.
18 - CONTRACT-RELATED COSTS AND FEES
All costs, fees and commissions arising from the loan-contract will be paid by
the borrower.
19 - AGREEMENTS OF INDEFINITE DURATION
The lender reserves the right to modify the loan-terms herein; it bears
responsibility for notifying the borrower of any such modification.
The loan-terms so modified will not take effect until a period of two months has
elapsed following the date said notification is transmitted.
In case of disagreement, and within this same two-month period, the borrower may
cancel the contract, repaying the amounts owed, without liability and with no
possibility of recovery of any indemnity resulting from said action.
Agreements of indefinite duration will allow the lender the right to collect an
annual contractual-undertaking commission-fee, the total amount whereof is
specified in the general banking loan-terms.
- ------
<PAGE>
C - SPECIFIC LOAN TERMS
I - TERMS APPLICABLE TO RESIDENCE LOAN OFFERS MADE UNDER THE GUIDELINES OF LAW
79-596, dated July 13, 1979
1 - SUMMARY OF THE STIPULATIONS IN ARTICLE 7 OF SAID LAW
Making the offer available obliges the lender to maintain the terms specified in
the offer for a period of at least thirty days, starting from the date the offer
is received by the borrower.
The offer is submitted to the borrower and to the designated parties standing
surety, the latter being physical persons, for acceptance.
The borrower and the parties standing surety may only accept the loan-offer ten
days after they have received it.
Acceptance of the offer must be provided in writing, with signed counter-
acknowledgment of said written acceptance's receipt.
2 - TERMS AFFECTING THE LOAN-CONTRACT'S EXECUTION
. CONDITIONAL SUSPENSION TERMS
- - Concomitant granting of all loans concurrently assisting the financing of the
main operation.
If the borrower has more than one loan at its disposal to assist the real-estate
property project that it intends to complete, the loan is awarded conditional on
each of said other loans being granted also (if this condition is not met, the
loan may be suspended). However, this stipulation only applies to loans larger
than 10 % of the grand total credit-amount.
- - The borrower's qualifying for acceptance as an insuree for group death-and-
disability insurance.
The lender reserves the option not to follow through on its loan-offer if the
borrower fails to qualify for acceptance by the insurer, as an insuree, on the
group-insurance contract covering risks of death, permanent and absolute
disability, and/or temporary incapacity.
. RECONSIDERATION/CANCELLATION TERMS
- - Failure to execute the main contract.
Granting of the loan is invariably conditional on failure to execute the
contract for which the loan was requested, within a period of four months from
the date of the loan's acceptance (if said contract is not executed, the loan
may be reconsidered or canceled).
The borrower will be obliged to show supporting documentary evidence of said
contract's execution within this time-period.
If the loan is canceled, the lender will be entitled to recovery of costs from
the borrower, covering examination of materials and documents, and already
contractually fixed at 0.75 % of the total loan-amount, but with a maximum limit
of one thousand francs.
- - The borrower's failure to qualify for acceptance as an insuree for group
death-and-disability insurance.
<PAGE>
If, following an unfavorable medical check-up, the borrower fails to qualify for
acceptance by the insurer as an insuree on the group death-and-disability
insurance contract, the loan-contract herein may rightfully be canceled without
any costs or penalty, simply at the borrower's request. Said request must be
presented within a period of one month from the date the borrower is notified of
the insurer's rejection of his/her application.
- - Consequence of conditional suspension terms and reconsideration/cancellation
terms.
The loan-offer, even once it has been accepted, will not be definitively binding
on the parties until after the conditional suspension terms have been declared
satisfied, and until after the reconsideration/cancellation terms have been
declared not satisfied.
3 - LOAN TRANSFER
If the real-estate property constituting the central purpose of the loan offer
were to be surrendered or transferred to a third party, this loan herein could
be transferred to said party [transferee], regulations permitting, after
examination of the files and acceptance of said transfer by the lender, based on
the cost-schedules specified in the general banking loan-terms, provided the
transferor supported said cost-schedules.
4 - COVENANT-BASED RESIDENTIAL LOAN
If the loan is a covenant-based residential loan, and is therefore subject to
the stipulations of Law number 77-1, dated January 3, 1977, and of legislative
decree number 77-1287, dated November 22, 1977, relating to covenant-based
residential loans, along with the stipulations of said decrees' written
attachments and successors, the following regulations are in force.
- - Obligations resulting from a covenant-based residential loan.
The borrower states that it has been made aware of the stipulations of
legislative decree number 77-1287, relating to the terms under which covenant-
based residential loans are awarded and maintained, and hereby undertakes to
respect said stipulations.
It undertakes to perform work on residence-improvement projects, if these even
partially constitute the purpose of the loan, within a maximum time-period of
two years starting from the date the loan-credit funds are made available.
- - Summary of the stipulations in articles 4 and 8 of the legislative decree
dated November 22, 1977.
Pursuant to article 11 of the Public Notice dated May 5, 1978, issued by the
Credit Foncier de France [Investment Bank of France] relating to covenant-based
residential loans, articles 4 and 8 of the legislative decree dated November 22,
1977, are here reproduced below:-
"Article 4 - Parties who may be beneficiaries of these loans:-
1) Physical persons who are building or purchasing new residences as
their family homes, and those who are purchasing existing residences with a view
to improving them.
Those who are engaged in purchasing real-estate property, or subscribing to or
purchasing corporate shares or stocks in Companies regulated by titles II and
III of Law number 71-579, dated July 16, 1971.
2) Physical persons who own a residence, and who are carrying out
improvement projects on said residence.
<PAGE>
Said loan-beneficiaries must intend said residence to be their main domicile,
defined as personal occupancy of said residence for at least eight months per
year, whether by themselves, by their spouse, by their forebears or descendants,
or by their spouse's. Said occupancy must take effect within a period of no
longer than one year, starting either from when the work-projects are declared
complete, or else from date of purchase, if the latter postdates said
declaration. Said time-period may be extended to five years whenever the
residence is intended for occupancy by the loan-beneficiary following the
latter's retirement, or return from another district of France or an overseas
territory, or from abroad."
However, whenever loan-beneficiaries of covenant-based residential loans are no
longer able to designate said residence as their future main domicile, whether
for professional or family reasons, they may be permitted to rent it. Said
leasing must respect the terms and conditions defined by Law number 82-528,
dated June 22, 1982, and must be the subject of a statement to the lender to
this effect, as well as a statement to the National Commissioner in cases where
they are beneficiaries of personalized residential assistance (in this latter
instance, payment of said assistance is then terminated).
"Article 8 - In order to qualify as a beneficiary of a covenant-based
residential loan, the applicant must agree to ensure that during the whole loan-
amortization period, the residence financed by means of this loan will be:
(a) neither remodeled as commercial or professional premises;
(b) nor turned over to seasonal leasing, nor leased out as a furnished residence
for more than four months per year;
(c) nor used as a secondary vacation-residence;
(d) nor subject to occupancy as part of a work-contract arrangement.
An attached assessment, authored by the Ministers of Housing, Agriculture, and
Economy and Finance, specifies exceptions to regulations (b) and (d) in rural
areas.
Any violation of this agreement necessitates repayment of the loan."
5 - RESIDENTIAL SAVINGS LOAN
If the loan is a residential savings loan, and is therefore subject to the
stipulations of Law number 65-554, dated July 10, 1965, establishing a
residential savings assessment-schedule, and of legislative decree number 65-
1044, dated December 2, 1965, along with the stipulations of said decrees'
written attachments and successors, the following regulations are in force:
- - Obligations resulting from a residential savings loan.
The borrower is required to use the funds constituting the purpose of the loan
to purchase or build - as appropriate - a residence exclusively intended as the
main home either for him/her or for a family member (for a spouse, or for a
forebear or descendant of the borrower or of his/her spouse), or else - as
appropriate - exclusively intended as the main home for a leasing tenant,
according to the terms of a written lease duly agreed upon, for a period of
three years maximum, said tenant alone retaining an option to cancel the lease
with three months' notice, and with no subletting permitted under the terms of
the lease.
<PAGE>
If the loan is a residential savings loan subject to the stipulations of Law
number 85-536, dated May 21, 1985, and of legislative decrees numbers 85-638 and
85-647, both dated June 28, 1985, along with the stipulations of said decrees'
written attachments and successors, the following regulations are in force:-
- - Financing access to ownership of a residence that is not intended as the main
home is limited exclusively to individual structures, defined as new residences
that have never been either adapted or subject to occupancy on any entitlement
basis whatsoever.
- - Concurrent financing of a home and (separately) of a residence intended for a
different type of use, by the same loan-beneficiary, by means of residential
savings loans, is not permitted.
Premature recovery of the loan.
If any one of the operational regulations established under the Residential
Savings-Loan assessment-schedule is not observed, and particularly if payment of
the Savings premium is rejected by the Credit Foncier [Investment Bank], or has
to be presented more than once, the loan will become immediately subject to
demand for repayment in full, as per the terms specified above in the paragraph
"Loan recovery" [B 11].
6 - LOAN TO AN AGENT OR EMPLOYEE OF CREDIT AGRICOLE
The terms of this loan-agreement, particularly the interest-rate, are accorded
to the borrower as a salaried agent or employee of Credit Agricole Mutuel,
Alpes-Maritimes Region.
If the borrower were to lose said employee status, this loan herein could be
maintained based on the regular terms for this category of loans, and in
particular based on the interest-rate currently prevailing for other borrowers
on the date the loan was granted.
II - TERMS APPLICABLE TO PROFESSIONAL / BUSINESS LOANS
1 - OPENING CURRENT-ACCOUNT CREDIT
- - Duration of an opened credit-line.
Loans transacted in the form of a credit-line opened in a current account are in
principle granted for an indefinite period.
They may be canceled at any time by the lender, conditional on two months'
advance notice to the borrower by registered letter with signed acknowledgment
of receipt; the advance-notice period starts at midnight (00:00) on the day
following receipt of said letter, date of receipt-acknowledgment constituting
documentary proof.
The lender is not constrained to respect any advance-notice period if the
borrower displays gravely reprehensible behavior, or if the borrower's financial
circumstances are manifestly compromised beyond repair.
- - Operating terms.
During the entire period of the opened credit-line, the borrower is entitled to
use up unprotected credit however it sees fit.
It is therefore entitled, after using all or part of the credit-line, to repay
the lender all or part of the amounts it has used, so as to use the credit-line
once again later on and generate new repayments, thereby enabling the advances
to be paid back by the payments the borrower makes, up till the day the credit-
line expires.
<PAGE>
- - Interest, exceeding authorized credit-limit, commissions.
The borrower is obliged to pay the lender interest on the total credit-amount
the borrower effectively uses, at the interest-rate specified in the particular
terms of the loan. Interest is calculated at three-monthly intervals, and a
statement of account sent to the borrower notifies it of the amount payable. If
the amount of interest causes the account to be overdrawn in excess of the
authorized credit-limit, and in general each time the account indicates a
negative (debit) total in excess of the agreed limit-ceiling, the borrower will
be obliged to make an immediate payment at least large enough to equal the
overdraft as documented.
Overdrafts in excess of the authorized limit-ceiling, if they occur, may not in
any way constitute a right or a privilege available to the borrower for use.
They will by rightful entitlement entail interest payments at the interest-rate
customarily imposed by the lender on any unprotected account-credits that it
grants to its clients, in accordance with current norms of banking practice.
Said interest payments will be deducted from the borrower's account at the same
time as the interest payments specified in the previous paragraph.
The borrower is likewise obliged to pay the lender commissions as specified in
both the particular terms of the loan and the general banking loan-terms.
The borrower will likewise settle payment of the annual contractual-undertaking
commission-fee to the lender, the assessment-rate and terms of application
whereof are specified in the general banking loan-terms.
- - Regulating the loan, punitive clauses.
As soon as the credit-line comes to an end, for whatever reason, a definitive
count is made of the total amounts still owing to the lender, in capital
principal and supplementary payments [interest, fees etc.]. The remainder-total
supplied thereby must be paid to the lender within eight days.
If said eight-day period elapses without full payment being made, the current
account's negative (debit) total will then rightfully generate interest payable
every three months at an increased rate, equal to the loan's annual interest-
rate raised by three percentage points, until the date of full and final
settlement of the amount owed. Furthermore, the lender will be entitled to
demand from the borrower an indemnity equal to seven percent of the total
amounts still owing, not counting payment of taxable costs and fees the lender
incurs while recovering its loan-credit.
2 - OPENING AGGREGATE MORTGAGE-BASED CREDIT
- - How the opening of a credit-line is effected.
The opening of a credit-line is effected by means of short-, medium- and long-
term money loans, unprotected account-credits, discounts, secured sums, or other
grantable instruments within the legislative and regulatory framework as it
applies to Credit Agricole, under the terms and with the purposes specified by
said framework, and always conditional on such legal or regulatory stipulations
as may limit, modify or suppress the distribution of credit. Any financial
advance will be repayable to the extent of the total amount of the opened
credit-line, and new advances may also be granted - these latter advances will
then be protected - to the same total credit-line extent, by means of mortgage-
based payment resulting from said opened credit-line.
The granting of new credit-advances, and likewise (where applicable) the
lender's acceptance of movable property as loan-guaranteeing collateral, or of
supplementary personal security-guarantees, never entail any alteration in the
opened credit-line; and the mortgage-based payment that guarantees the opened
credit-line therefore remains the
<PAGE>
lender's loan-security, until complete repayment of all amounts that the
borrower may owe the lender, and until the threat of lender's distraint is
removed for said amounts.
- - Option to cancel.
The opening of the credit-line may be canceled at any moment:
- - either by the borrower, provided it repays the amounts it owes the lender in
their entirety;
- - or by the lender, as per the stipulations specified above in the paragraph
"Loan recovery" [B 11], if the borrower fails to uphold any one of the
conditions that are cause for the loan's premature termination.
- - Interest-rate.
The interest-rate, which fluctuates according to the type and category of the
credit-advances transacted within the framework of opening a credit-line, is
tailored specifically to each of said credit-advances via specifications in the
contract, or appropriate equivalent document, which it is the lender's
responsibility to draw up and the borrower's responsibility to modify before
funds are made available.
In the contract for opening a credit-line, the designated maximum interest-rate
corresponds to Credit Agricole's maximum interest-rate for credit-advances,
which depends on the economic-financial regulations currently prevailing at the
time the contract is signed. This interest-rate's designation is particularly
tailored to demands for mortgage-based payments.
If in the future said regulations were to be modified, especially in the
direction of a renewed rise in said maximum interest-rate, a fluctuating
difference of this nature would have an immediate effect on the credit-advances
which are adjustable to allow for said difference. Consequently, as stipulated
in the final subsection of new article 57 of the legislative decree dated
October 14, 1965, the clause intended as a formal record of the opened credit-
line, for purposes of taking out loan-guarantees, must indicate the maximum
interest-rate and give notice that "rate-fluctuation is contractually specified
and predicted".
<PAGE>
3 - LOAN GUARANTEED BY GENERAL LOAN-GUARANTEE FUND
The borrower who is the beneficiary of a loan that is likely to receive the
General Loan-Guarantee Fund's loan-guarantee (securing against individual
residual losses, once all options and recourses against the borrower have been
exhausted) is obliged to do the following:
- - pay in advance all premiums and assessments intended for said fund, with the
lender authorized to debit the borrower's account in the amount of all sums
subject to repayment-demand;
- - make available all mortgage-based or other loan-guarantees that may be
demanded.
4 - LOAN SUBJECT TO REGIONAL LOAN-GUARANTEE FUND
The borrower who is the beneficiary of a loan that is likely to be subject to
the Regional Loan-Guarantee Fund's loan-guarantee (restoring individual residual
losses, once all options and recourses against the borrower have been exhausted)
is obliged to pay in advance all premiums, assessments and commissions, with the
lender authorized to debit the borrower's account in the amount of all sums
subject to repayment-demand.
5 - RECOVERING THE LOAN
So as to allow the lender to proceed with recovering its loan-credit via re-
discount, the lender will be entitled to request from the borrower at any moment
that it prepare debtor-notes representing the value of the lender's loan-credit.
6 - LOAN TO A MORALLY RESPONSIBLE REPRESENTATIVE
The borrower is constrained to notify the lender of the following, within
fifteen days of the event:-
- - any legally significant modification in the formal structure of the company;
- - the loss of half or more of its total corporate capital;
- - any corporate merger, split, takeover or break-up;
- - the appointment of a new corporate representative;
- - any event likely to increase significantly the volume of its obligations, or
likely to harm or prejudice the lender's rights and loan-guarantees.
If the borrower fails to comply with this obligation, the lender will be
entitled to demand repayment of the loan immediately and in full, as per the
terms specified above in the paragraph "Loan recovery" [B 11].
7 - AUGMENTED LOANS
<PAGE>
Augmented loans are granted by the lender within the framework of specific
regulations assessed by public authorities (loans to support farming,
manufacturing and industry, etc.).
Any failure to comply with particular obligations that the borrower is required
by said regulations to satisfy may entail loss of all benefits from the loan,
and cause the loan to become immediately subject to repayment-demand.
The borrower acknowledges herewith that it has been made fully aware of its
particular obligations and of their attendant sanctions.
<PAGE>
EXHIBIT 10.20
CREDIT AGRICOLE [company logo: CA]
[handwritten] 1/5
[handwritten] Loan #1: 180,000 French francs
[handwritten] 8/95 D.
[handwritten] 801/1
LOAN CONTRACT [handwritten] 061 743 801
MPP/CPO/FU
655699015
____________________________________________________________________________
The loan contract herein is drawn up under the following particular terms, and
under the general and (where applicable) specific terms attached herewith,
titled "Credit Agricole Mutuel, Alpes-Maritimes Regional Division: Loan terms";
the borrower states that he/she has been made aware of said terms; and the
borrower has been provided with a copy of said terms.
____________________________________________________________________________
- - NAME OF BORROWER: Advanced Software Concepts Inc. [S.A.]
Head Office: 9551 Rte. de St. Laurent du Var,
06610 LA GAUDE; SIREN Number: 348-998-964;
total capital: 3,288,000 F;
Company Representative: Mr. Killko CABALLERO,
born 9.3.59, in Istanbul (Turkey), P.D.G.
- - TOTAL OPERATING AMOUNT: 215,346.00 F.
- - TOTAL AMOUNT LOANED BY CREDIT AGRICOLE: 180,000.00 F.
- - OTHER LOANS DECLARED BY THE BORROWER: -- F.
- - AMOUNT OF PERSONAL ASSET-CONTRIBUTION: 35,346.00 F.
- - PURPOSE OF LOAN'S FINANCING: Management operations and equipment-
- - LOAN-GUARANTEE: [circled (handwritten)] Security in the form of
<PAGE>
commercial funds and business-assets for purposes of creating software and
distributing computer products, said business based at Espace La Gaude,
9551 Route de St. Laurent du Var, 06610 LA GAUDE
[section highlighted and queried (handwritten)]
- - NOTARY-PUBLIC DRAWING UP THE BORROWING TRANSACTION: -- [queried
(handwritten)]
- - MAXIMUM AMOUNT OF THE COMPANY'S SHARE OF THE LOAN (in francs), that may
be directly appropriated and withdrawn against your savings account
starting from the day this loan-transaction takes effect, and that is
available for use at the LOCAL BRANCH OF CREDIT AGRICOLE MUTUEL: --
[company letterhead]
CREDIT AGRICOLE - ALPES-MARITIMES REGIONAL DIVISION
Corporate headquarters: 111 avenue E. Dechame, 06708 St. Laurent du Var, Cedex.
Tel. 9314-8500+; P.O. Box 250;
Telex: 450903 Creagri. X C.C.F. Marseilles 289.11 R.
<PAGE>
LOAN CONTRACT
ADVANCED SOFTWARE CONCEPTS INC. [S.A.]
FINANCIAL CHARACTERISTICS OF LOAN, Number 0617438 01
-----------------------------------------
[handwritten] 801/2
LOAN TYPE: PBE, STANDARD LOAN-REPAYMENT SCHEDULE; REGULAR (INVARIANT) PAYMENTS.
INTEREST PAYABLE ON PAYMENT DUE-DATES, PROPORTIONAL INTEREST RATE
AMOUNT OF LOAN: 180,000.00 F. TOTAL DURATION OF LOAN: 5 years
FREQUENCY OF REPAYMENTS: MONTHLY PAYMENT DUE-DATES: 28th of each month
- - BORROWING AMORTIZATION / DEPRECIATION CONDITIONS (see Note 1 below):
------------------------------------------------
{INTEREST RATE: -- %
DEFERMENT PERIOD: {NUMBER OF PAYMENT-DATES: --
{AMOUNT DUE PER PAYMENT-DATE: -- F.
{INTEREST RATE: 8.750 %, variable rate
1st AMORTIZATION / DEPRECIATION PERIOD: {NUMBER OF PAYMENT-DATES: 60
{AMOUNT DUE PER PAYMENT-DATE:
3,714.70 F.
{INTEREST RATE: -- %
2nd AMORTIZATION / DEPRECIATION PERIOD: {NUMBER OF PAYMENT-DATES: --
{AMOUNT DUE PER PAYMENT-DATE: -- F.
- - OTHER SPECIFICATIONS (see Note 1 below):
---------------------
- Effective interest-rate - aggregate: 8.750 %
- Regional Loan-Guarantee Fund intervention: -- %[space circled
(handwritten)]
- General Loan-Guarantee Fund intervention: --
- Total amount of filing/processing costs & fees: -- F.[space
circled (handwritten)]
- Number and date of DDE-DDA decision: --
- Death and disability insurance (main) rate: -- %[space circled
(handwritten)]
- Death and disability insurance (optional) rate: -- %[space circled
(handwritten)]
(In cases of aggravated medical risk, the insurance rate hereby specified will
be increased by a supplement of -- F. --% per year.)
(Note 1) The rates and payment due-dates specified herein are the rates
currently prevailing on the day the loan was requested. The contractually
definitive rates and payment due-dates will be those currently prevailing on the
day the loan amount is credited to the borrower and made available to him/her,
and from then on said rates and payment due-dates will be considered to have
been accepted by the borrower.
<PAGE>
A - APPLICATION: PRELIMINARY REMARKS
The terms and conditions herein apply to loan transactions executed in favor of
beneficiaries who are physical, morally responsible private persons under the
law.
Said terms do not apply to loan transactions which assist the promotion of
property holdings and real estate.
Credit Agricole Mutuel, Alpes-Maritimes Regional Division, is known hereinafter
as "the lender".
The debtor or debtors is/are known hereafter as "the borrower", whether one or
more physical, morally responsible persons are parties to the loan as borrowers.
If more than one loan is involved, the total amount loaned will be designated by
the abbreviation "the loan".
B - GENERAL LOAN TERMS
1 - CREDIT AGRICOLE ACCOUNT-HOLDING MEMBERS/ASSOCIATES, CREDIT AGRICOLE USERS
The stipulations named hereinafter are applicable if the borrower is an account-
holding member/associate or a user of Credit Agricole:-
(a) If a Credit Agricole account-holding member/associate: The borrower must
invest in the corporate capital of the Local Branch of Credit Agricole with
which it is associated by subscribing to a fixed number of its corporate shares,
said number to be determined by said branch's Executive Board, payment for which
is to be made by withdrawal against the borrower's account starting from the
date the loan takes effect.
Said corporate shares are interest-bearing; the interest will be available
starting from the January 1st following the date of said subscription. The
interest accruing is calculated each
<PAGE>
calendar year and paid on payment due-dates annually, after interest rates have
been fixed by the Local Branch concerned. The corporate shares are refundable
once the borrower has been discharged of all its obligations towards the lender,
with the provision however that said Local Branch may defer this refund for up
to five years maximum.
(b) If a Credit Agricole account-holding member/associate and user: The borrower
must cover filing/processing costs and fees, the total amount whereof is to be
determined by the lender on the basis of the loan transaction that is being
considered. Payment for said costs and fees is to be made by withdrawal against
the borrower's account, starting from the date the loan takes effect.
2 - LOAN-TRANSACTION METHODS
After personal asset-contributions have been paid as demanded by the lender, the
loan is generally transacted as follows:-
- - by means of a check or girocheck addressed to the borrower's Notary-Public
(for purchases of fixed property and real estate, purchases of commercial or
manufacturing/industrial assets, and for bridging relay-credits).
- - by payment to the borrower's account, or else credited to all delegated
parties as designated by the borrower and agreed to by the lender (for financing
operating materials, equipment and apparatus, vehicles, goods, plant
installations, management operations, or repair of property and real estate),
and in stage-by-stage phases, as a project progresses towards completion or as
invoices are presented for payment (for work on construction projects or on
enlarging property and real estate holdings, and for purchases of fixed property
and real estate to be completed at a future date).
By express agreement, if the loan is transacted as payment to the borrower's
current account, said manner of transaction will entail no alteration in the sum
credited by the lender, and will in no way affect the sureties accorded to the
lender by way of security-guarantees for the loan's repayment.
3 - CONDITIONAL SUSPENSION TERMS, RECONSIDERATION/CANCELLATION TERMS
Whenever loan-guarantees are demanded by the lender, granting of the loan is
invariably conditional on said loan-guarantees being effectively supplied by the
borrower (if this condition is not met, the loan may be suspended). Granting of
the loan is likewise conditional on no fact or piece of information becoming
known to the lender, after the lender's decision to award the loan, of a kind
that - if the lender had known it at the time - would have led the lender to
refuse the loan (if this condition is not met, the loan may be reconsidered or
canceled).
<PAGE>
4 - PROOF
The lender's written documentation will constitute proof of good faith in
transacting the loan and in making payments relating to the loan, unless proof
to the contrary is presented by the borrower.
5 - EQUAL EFFECTS OF DEBTOR-LIABILITY, AND LOAN-CREDIT INDIVISIBILITY
All debtor-liability obligations arising from the loan-contract, particularly
the obligation to repay said loan, will affect equally all persons and parties
designated as "the borrower".
Since the sum loan-credited by the lender is indivisible, as contractually
stipulated, it will be deemed legally recoverable from each and every heir of
every debtor, as laid down by article 1221 of the Civil Code, paragraph 5.
6 - AUTHORIZING ACCOUNT-DEBITS AND COMPENSATION
All payments will be made at the lender's business headquarters, through the
intermediary of one of its branch offices.
The borrower authorizes the lender to debit its account permanently in the
amount of the loan-payment sums demanded.
The borrower likewise authorizes the lender - fully within the lender's rights,
and without the borrower's intervention - to make compensation for all sums that
may be owing and payable on the loan, whether principal or interest, as well as
for all indemnities, by means of such sums as the borrower might potentially owe
the lender under any legal entitlement whatsoever.
7 - INDEX-LINKING THE LOAN'S ANNUAL INTEREST RATE TO CEILING-RATE
Once the loan takes effect, on a loan that is to last two years or less it will
be possible for the annual interest rate to fluctuate, based on limit-ceilings
fixed either by the National Headquarters of Credit Agricole or else by the
lender's Executive Board.
Said rate-fluctuation will likewise be possible for any loan that is to last
more than two years or indefinitely, if this fluctuation is provided for in the
particular terms of the loan.
The new rate will be effective starting from the date fixed either by the
National Headquarters of Credit Agricole or else by the lender's Executive
Board.
8 - LOAN DURATION
The loan's duration is specified in the particular terms of the loan. Said
duration takes effect starting from the first payment due-date, less one
payment-period (either one, three, six or twelve months, depending on whether
the payment frequency agreed upon is monthly, three-monthly, six-monthly or
yearly).
The duration of loans granted for construction projects may be increased in
certain cases by an anticipatory period, covering the project-work period and
reaching term at the completion of said projects. The duration of said
anticipatory period may however not exceed two years (or four years in certain
cases).
<PAGE>
When the loan granted is a bridging relay-credit, the duration of the latter is
two years maximum, during which time the borrower is obliged to sell the real-
estate property designated in the loan application. If it takes less than two
years for said sale to be effected, the loan's duration is thus obligatorily re-
assessed to end at the date of the sale.
The duration of credit-lines opened in current accounts is specified in the
relevant paragraph [C II.1, below] relating to said matters.
9 - LOAN AMORTIZATION / DEPRECIATION
The stipulations relating to the loan's amortization or depreciation are
specified in the particular terms of the loan. It should be noted that the
amount of the first due payment specified in said particular loan-terms may be
decreased or increased, depending on the date that the loan-credits are made
available.
Depending on the payment frequency agreed upon, this first payment due-date will
be designated as either one, three, six or twelve months after the loan takes
effect, whether fully or partially. However, if the loan is on a monthly
payment-frequency basis, the first payment due-date will be designated as the
month following that in which the loan takes effect.
Whenever the loan is granted on the basis of progressive payments due, the total
payments due in any one year, and each year, will progress during the whole
amortization period according to a percentage determined in the particular terms
of the loan (and proportionately to the previous year's total payments due). In
addition, if the amortization period is fifteen years or more, the loan entails
successive interest-rates, and the interest-rate specified in said particular
loan-terms will then represent the average interest-rate. Said stipulations
affect covenant-based residential loans and State-assisted loans intended to
permit access to ownership of family residences.
By express agreement, if the loan is amortized against the borrower's current
account, said amortization will entail no alteration in the sum credited by the
lender, and will in no way affect the sureties accorded to the lender by way of
security-guarantees for the loan's repayment.
10 - ADVANCE REPAYMENT
The borrower has the option, if it so wishes, to repay the loan in advance,
provided that it gives the lender at least one month's advance notice to this
effect. If partial advance repayment is made, the amount repaid must total at
least 10 % of the capital principal originally borrowed.
Any advance repayment will entail payment of an indemnity equal to two months'
interest, calculated based on the loan's average interest-rate on the capital
principal repaid in advance.
Furthermore, if at the time of the advance repayment the interest-rate for a
loan in the same category is lower than the interest-rate for the loan on which
the repayment is being made, payment of a financial indemnity will likewise be
demanded. Said indemnity will be calculated based on multiplying the advance-
repaid capital principal by the difference between the two interest-rates
(expressed on the basis of the same payment frequency as for the payment due-
dates), and by the number of payment due-dates outstanding. In no case will it
be permissible for said indemnity to exceed 10 % of the capital principal repaid
in advance.
Finally, if the loan is on the basis of progressive payments due, and successive
interest-rates, the advance repayment will entail the borrower's paying
compensatory interest, calculated in the same way as the interest-rate applied
to loan-repayment over the loan-
<PAGE>
period already elapsed, said interest-rate being equal to the average interest-
rate specified in the particular loan-terms.
. For a loan affected by Law number 79-596, dated July 13, 1979:
The total cumulative amount of indemnities will not be permitted to exceed the
value of a six-month period of interest payments, calculated based on the
advance-repaid capital principal at the loan's average interest-rate, with the
proviso that said amount will not be permitted to exceed 3 % of the capital
principal still owing before the repayment.
The compensatory interest amounts payable, calculated separately, are not
affected by this maximum limit.
. For a State-assisted loan intended to permit access to ownership of
family residences: An indemnity will simply be appropriated in an amount equal
to 1 % of the capital principal repaid in advance.
All taxes and transaction-total duties applicable to said indemnities, and
levied according to the fiscal rate-schedule currently prevailing at the time of
the advance repayment, will be paid by the borrower.
11 - LOAN RECOVERY
Repayment of the loan may be demanded immediately and in full if any one of the
following events takes place:
- - in case of non-payment of amounts demanded;
- - if the borrower ceases to satisfy the terms that allowed it to obtain the
loan, or the terms arising from the loan-contract or from the written
documents that the loan-contract mentions;
- - if the loan-credits paid out by the lender have been used for purposes other
than those on the basis of which the loan was requested;
- - in case of refusal to make available to the lender such accounting
documentation or interim financial statements as may be demanded by the
lender;
- - if the property offered as loan-guaranteeing security-collateral has been
wholly or partially sold or conveyanced to a third party, if it has undergone
a significant depreciation through the borrower's action or fault, however
slight, or if it has been the object of a distraint, seizure, or lease, that
violates the terms under which the loan has been granted;
- - in case of cancellation or annulment of their security-collateral agreement by
one or more of the parties standing surety;
- - in case of the death of one of the persons designated as "the borrower",
unless said person's spouse or direct heirs or one or more of these parties
does not agree - with the lender's assent - to continue the loan under the
same terms as those agreed to by the loan-terms' deceased original author,
barring any potential effects of death insurance;
- - if the borrower is insolvent or ceases payments, particularly if said
financial condition comes to light as a result of unpaid sums, creditor
complaints, and any and all forms of attempts to recover payment;
<PAGE>
- - in all cases where supporting documentation, information and declarations
supplied by the borrower are revealed to be inaccurate, as likewise in any
case where the borrower has been guilty of any fraudulent activity with
respect to the lender;
- - finally, if any one of the obligations arising from the loan-contract has not
been fulfilled by the borrower.
If any one of the above-mentioned causes for premature termination occurs, the
lender will give notice of its intention to avail itself of its right to demand
repayment of its loan-credit immediately and in full, by registered letter
addressed to the borrower with signed acknowledgment of receipt.
The premature termination of a loan also entails the subsequent premature
termination concomitantly of all agreements granted to the borrower by the
lender.
12 - PUNITIVE CLAUSES
- - Default by the borrower without the loan's having been prematurely terminated.
If payments are late, the lender may choose not to demand immediate repayment of
the capital principal still owing. Any unpaid amount will then rightfully
generate an increased interest-rate due, equal to the loan's annual interest-
rate raised by three percentage points, starting from the first date payment is
late, and continuing until the date payment is effectively made.
- - Each time the loan-payment due is not paid on the proper due-date, the lender
will bill the client for the amount specified in the general banking loan-terms
under the heading "Late loan-payment due".
- - Default by the borrower following the loan's premature termination. If the
loan can be demanded back, the lender may choose to demand immediate repayment
of the capital principal still owing as of the date designated for the last due
payment.
Starting from the first date payment is late, and continuing until the date
payment is definitively made, all designated due payments left unpaid before -
or, where applicable, after - the loan's premature termination will then
rightfully generate an increased interest-rate due, equal to the loan's annual
interest-rate raised by three percentage points; and the capital principal still
owing as of the date designated for the last due payment will likewise
rightfully generate an interest-rate equal to the loan's interest-rate, starting
from this latter date.
Furthermore, the lender will be entitled to recover from the borrower an
indemnity equal to seven percent of the capital principal still owing.
No sum other than those explicitly mentioned in the two paragraphs above may be
recovered from the borrower by the lender, with the exception, however, of
taxable costs and fees resulting from the borrower's defaulting on payments.
The punitive clauses applicable to credit-lines opened in current accounts are
specified in the relevant paragraph [C II.1, below] relating to said matters.
13 - DEATH AND DISABILITY INSURANCE (physical persons)
Since this insurance covers risk to an individual, each borrower will be obliged
to take out death-and-disability insurance personally, after filling out an
individual policy-application form.
<PAGE>
Since the lender has maintained a group insurance policy for one year
(renewable) intended to cover its borrowers on a short-, medium- and long-term
basis against death and disability risks, the borrower will be obliged to do as
follows, once it has accepted the loan-offer or else once the loan-contract has
been signed:-
- - give its consent to said insurance, insofar as it meets the insurer's terms of
admission and conditional on the insurer's assent;
- - pay in advance, and including interest, the insurance premiums that the lender
will claim from it at the rate currently prevailing each year.
Said insurance will be purchased by the borrower starting from the date the loan
takes effect, on the terms specified in the individual insurance-application
form. However, whenever a health questionnaire is required by the insurer,
insurance coverage is only granted on the basis of suspension terms, conditional
on favorable results from the medical check-up. The borrower will be notified
of said results by way of the returned individual insurance-application form,
which will specify the insuree's first name and last name, along with the risks
against which the insuree is covered. An announcement specifying the details
and forms of said insurance is attached either to the loan-offer or to the loan-
contract.
14 - INSURANCE ON MORTGAGED GOODS AND REAL ESTATE
The buildings and movable property offered as loan-guaranteeing security-
collateral will have to be insured against the risk of fire, for a capital
amount deemed adequate by the lender, until the loan has been repaid in full.
The borrower will be obliged to show supporting documentary evidence of said
insurance and of payment of insurance premiums, upon request. If this
obligation is not met, the lender may take it upon itself to pay any insurance
premiums and take out any insurance policies, then demand immediate
reimbursement for the amounts it has advanced therewith for said purposes.
In case of misadventure, the indemnities owed by the insurer will be paid by the
insurer directly to the lender, up to an amount equaling the lender's total
loan-credit.
The borrower will have the option to re-fit and rebuild the property offered as
loan-guaranteeing collateral in its former condition, within a one-year period
from the date of said misadventure. The indemnity will in this case be made
available to the borrower - with whatever amount is payable duly deducted - in
the form of account credits, which will be paid to the borrower gradually as the
rebuilding work progresses, with said progress documented if necessary by a
representative of the lender.
If by the end of this one-year period the borrower has not begun work on the
rebuilding project, or has notified the lender that it intends not to rebuild,
the indemnity will be definitively acquired by the lender, as the appropriate
amount, and deducted as advance payment against the lender's total loan-credit.
15 - BAN ON MORTGAGING AND PROMISE OF MORTGAGE-DERIVED PAYMENT
The lender may demand from the borrower a promise not to mortgage the property
that constitutes the central purpose of the loan, and to agree - upon request,
and to the lender's sole benefit and advantage - to a top-ranking mortgage
without any other competitor-mortgages, or else to a mortgage whose ranking is
immediately below another signed security-agreement already in favor of the
lender also, so as to guarantee payment of all
<PAGE>
loan-related amounts owed to the lender by rightful entitlement, whether in the
form of capital principal or subsidiary sums.
If such a promise is requested by the lender, said promise will take effect
solely as a result of the signature on the loan-contract (or else with the
acceptance of the real-estate loan offer), and will therefore not require a
separate document to be drawn up specifically for this purpose.
16 - AGGREGATE EFFECTIVE INTEREST-RATE
Pursuant to Law number 66-1010, dated December 28, 1966, and its concomitant
written attachments and successors, the loan's aggregate effective interest-rate
- - allowing for (1) the interest-rate agreed upon, on the one hand, and allowing
if necessary for (2) the death-and-disability insurance premium, costs and fees
resulting from filing/processing, stamps, and record-keeping, management costs,
premiums and assessments relating to the General Loan-Guarantee Fund or to the
Regional Loan-Guarantee Fund, and all other outlays and expenses that might be
chargeable to the borrower, on the other hand, - is specified in the particular
terms of the loan.
17 - LEGAL JURISDICTION, IN CASE OF LAWSUIT
Except for cases where article 44 of the new Civil Procedure Code applies, in
case of lawsuit the lender may exercise the option to require the legal
jurisdiction of the place where the contract is to be put into effect (the place
where contractual loan-payments must be made), rejecting the legal jurisdiction
of the defendant's place of residence.
18 - CONTRACT-RELATED COSTS AND FEES
All costs, fees and commissions arising from the loan-contract will be paid by
the borrower.
19 - AGREEMENTS OF INDEFINITE DURATION
The lender reserves the right to modify the loan-terms herein; it bears
responsibility for notifying the borrower of any such modification.
The loan-terms so modified will not take effect until a period of two months has
elapsed following the date said notification is transmitted.
In case of disagreement, and within this same two-month period, the borrower may
cancel the contract, repaying the amounts owed, without liability and with no
possibility of recovery of any indemnity resulting from said action.
Agreements of indefinite duration will allow the lender the right to collect an
annual contractual-undertaking commission-fee, the total amount whereof is
specified in the general banking loan-terms.
- ------
<PAGE>
C - SPECIFIC LOAN TERMS
I - TERMS APPLICABLE TO RESIDENCE LOAN OFFERS MADE UNDER THE GUIDELINES OF LAW
79-596, dated July 13, 1979
1 - SUMMARY OF THE STIPULATIONS IN ARTICLE 7 OF SAID LAW
Making the offer available obliges the lender to maintain the terms specified in
the offer for a period of at least thirty days, starting from the date the offer
is received by the borrower.
The offer is submitted to the borrower and to the designated parties standing
surety, the latter being physical persons, for acceptance.
The borrower and the parties standing surety may only accept the loan-offer ten
days after they have received it.
Acceptance of the offer must be provided in writing, with signed counter-
acknowledgment of said written acceptance's receipt.
2 - TERMS AFFECTING THE LOAN-CONTRACT'S EXECUTION
. CONDITIONAL SUSPENSION TERMS
- - Concomitant granting of all loans concurrently assisting the financing of the
main operation.
If the borrower has more than one loan at its disposal to assist the real-estate
property project that it intends to complete, the loan is awarded conditional on
each of said other loans being granted also (if this condition is not met, the
loan may be suspended). However, this stipulation only applies to loans larger
than 10 % of the grand total credit-amount.
- - The borrower's qualifying for acceptance as an insuree for group death-and-
disability insurance.
The lender reserves the option not to follow through on its loan-offer if the
borrower fails to qualify for acceptance by the insurer, as an insuree, on the
group-insurance contract covering risks of death, permanent and absolute
disability, and/or temporary incapacity.
. RECONSIDERATION/CANCELLATION TERMS
- - Failure to execute the main contract.
Granting of the loan is invariably conditional on failure to execute the
contract for which the loan was requested, within a period of four months from
the date of the loan's acceptance (if said contract is not executed, the loan
may be reconsidered or canceled).
The borrower will be obliged to show supporting documentary evidence of said
contract's execution within this time-period.
If the loan is canceled, the lender will be entitled to recovery of costs from
the borrower, covering examination of materials and documents, and already
contractually fixed at 0.75 % of the total loan-amount, but with a maximum limit
of one thousand francs.
- - The borrower's failure to qualify for acceptance as an insuree for group
death-and-disability insurance.
<PAGE>
If, following an unfavorable medical check-up, the borrower fails to qualify for
acceptance by the insurer as an insuree on the group death-and-disability
insurance contract, the loan-contract herein may rightfully be canceled without
any costs or penalty, simply at the borrower's request. Said request must be
presented within a period of one month from the date the borrower is notified of
the insurer's rejection of his/her application.
- - Consequence of conditional suspension terms and reconsideration/cancellation
terms.
The loan-offer, even once it has been accepted, will not be definitively binding
on the parties until after the conditional suspension terms have been declared
satisfied, and until after the reconsideration/cancellation terms have been
declared not satisfied.
3 - LOAN TRANSFER
If the real-estate property constituting the central purpose of the loan offer
were to be surrendered or transferred to a third party, this loan herein could
be transferred to said party [transferee], regulations permitting, after
examination of the files and acceptance of said transfer by the lender, based on
the cost-schedules specified in the general banking loan-terms, provided the
transferor supported said cost-schedules.
4 - COVENANT-BASED RESIDENTIAL LOAN
If the loan is a covenant-based residential loan, and is therefore subject to
the stipulations of Law number 77-1, dated January 3, 1977, and of legislative
decree number 77-1287, dated November 22, 1977, relating to covenant-based
residential loans, along with the stipulations of said decrees' written
attachments and successors, the following regulations are in force.
- - Obligations resulting from a covenant-based residential loan.
The borrower states that it has been made aware of the stipulations of
legislative decree number 77-1287, relating to the terms under which covenant-
based residential loans are awarded and maintained, and hereby undertakes to
respect said stipulations.
It undertakes to perform work on residence-improvement projects, if these even
partially constitute the purpose of the loan, within a maximum time-period of
two years starting from the date the loan-credit funds are made available.
- - Summary of the stipulations in articles 4 and 8 of the legislative decree
dated November 22, 1977.
Pursuant to article 11 of the Public Notice dated May 5, 1978, issued by the
Credit Foncier de France [Investment Bank of France] relating to covenant-based
residential loans, articles 4 and 8 of the legislative decree dated November 22,
1977, are here reproduced below:-
"Article 4 - Parties who may be beneficiaries of these loans:-
1) Physical persons who are building or purchasing new residences as
their family homes, and those who are purchasing existing residences with a view
to improving them.
Those who are engaged in purchasing real-estate property, or subscribing to or
purchasing corporate shares or stocks in Companies regulated by titles II and
III of Law number 71-579, dated July 16, 1971.
2) Physical persons who own a residence, and who are carrying out
improvement projects on said residence.
<PAGE>
Said loan-beneficiaries must intend said residence to be their main domicile,
defined as personal occupancy of said residence for at least eight months per
year, whether by themselves, by their spouse, by their forebears or descendants,
or by their spouse's. Said occupancy must take effect within a period of no
longer than one year, starting either from when the work-projects are declared
complete, or else from date of purchase, if the latter postdates said
declaration. Said time-period may be extended to five years whenever the
residence is intended for occupancy by the loan-beneficiary following the
latter's retirement, or return from another district of France or an overseas
territory, or from abroad."
However, whenever loan-beneficiaries of covenant-based residential loans are no
longer able to designate said residence as their future main domicile, whether
for professional or family reasons, they may be permitted to rent it. Said
leasing must respect the terms and conditions defined by Law number 82-528,
dated June 22, 1982, and must be the subject of a statement to the lender to
this effect, as well as a statement to the National Commissioner in cases where
they are beneficiaries of personalized residential assistance (in this latter
instance, payment of said assistance is then terminated).
"Article 8 - In order to qualify as a beneficiary of a covenant-based
residential loan, the applicant must agree to ensure that during the whole loan-
amortization period, the residence financed by means of this loan will be:
(a) neither remodeled as commercial or professional premises;
(b) nor turned over to seasonal leasing, nor leased out as a furnished residence
for more than four months per year;
(c) nor used as a secondary vacation-residence;
(d) nor subject to occupancy as part of a work-contract arrangement.
An attached assessment, authored by the Ministers of Housing, Agriculture, and
Economy and Finance, specifies exceptions to regulations (b) and (d) in rural
areas.
Any violation of this agreement necessitates repayment of the loan."
5 - RESIDENTIAL SAVINGS LOAN
If the loan is a residential savings loan, and is therefore subject to the
stipulations of Law number 65-554, dated July 10, 1965, establishing a
residential savings assessment-schedule, and of legislative decree number 65-
1044, dated December 2, 1965, along with the stipulations of said decrees'
written attachments and successors, the following regulations are in force:
- - Obligations resulting from a residential savings loan.
The borrower is required to use the funds constituting the purpose of the loan
to purchase or build - as appropriate - a residence exclusively intended as the
main home either for him/her or for a family member (for a spouse, or for a
forebear or descendant of the borrower or of his/her spouse), or else - as
appropriate - exclusively intended as the main home for a leasing tenant,
according to the terms of a written lease duly agreed upon, for a period of
three years maximum, said tenant alone retaining an option to cancel the lease
with three months' notice, and with no subletting permitted under the terms of
the lease.
<PAGE>
If the loan is a residential savings loan subject to the stipulations of Law
number 85-536, dated May 21, 1985, and of legislative decrees numbers 85-638 and
85-647, both dated June 28, 1985, along with the stipulations of said decrees'
written attachments and successors, the following regulations are in force:-
- - Financing access to ownership of a residence that is not intended as the main
home is limited exclusively to individual structures, defined as new residences
that have never been either adapted or subject to occupancy on any entitlement
basis whatsoever.
- - Concurrent financing of a home and (separately) of a residence intended for a
different type of use, by the same loan-beneficiary, by means of residential
savings loans, is not permitted.
Premature recovery of the loan.
If any one of the operational regulations established under the Residential
Savings-Loan assessment-schedule is not observed, and particularly if payment of
the Savings premium is rejected by the Credit Foncier [Investment Bank], or has
to be presented more than once, the loan will become immediately subject to
demand for repayment in full, as per the terms specified above in the paragraph
"Loan recovery" [B 11].
6 - LOAN TO AN AGENT OR EMPLOYEE OF CREDIT AGRICOLE
The terms of this loan-agreement, particularly the interest-rate, are accorded
to the borrower as a salaried agent or employee of Credit Agricole Mutuel,
Alpes-Maritimes Region.
If the borrower were to lose said employee status, this loan herein could be
maintained based on the regular terms for this category of loans, and in
particular based on the interest-rate currently prevailing for other borrowers
on the date the loan was granted.
II - TERMS APPLICABLE TO PROFESSIONAL / BUSINESS LOANS
1 - OPENING CURRENT-ACCOUNT CREDIT
- - Duration of an opened credit-line.
Loans transacted in the form of a credit-line opened in a current account are in
principle granted for an indefinite period.
They may be canceled at any time by the lender, conditional on two months'
advance notice to the borrower by registered letter with signed acknowledgment
of receipt; the advance-notice period starts at midnight (00:00) on the day
following receipt of said letter, date of receipt-acknowledgment constituting
documentary proof.
The lender is not constrained to respect any advance-notice period if the
borrower displays gravely reprehensible behavior, or if the borrower's financial
circumstances are manifestly compromised beyond repair.
- - Operating terms.
During the entire period of the opened credit-line, the borrower is entitled to
use up unprotected credit however it sees fit.
It is therefore entitled, after using all or part of the credit-line, to repay
the lender all or part of the amounts it has used, so as to use the credit-line
once again later on and generate new repayments, thereby enabling the advances
to be paid back by the payments the borrower makes, up till the day the credit-
line expires.
<PAGE>
- - Interest, exceeding authorized credit-limit, commissions.
The borrower is obliged to pay the lender interest on the total credit-amount
the borrower effectively uses, at the interest-rate specified in the particular
terms of the loan. Interest is calculated at three-monthly intervals, and a
statement of account sent to the borrower notifies it of the amount payable. If
the amount of interest causes the account to be overdrawn in excess of the
authorized credit-limit, and in general each time the account indicates a
negative (debit) total in excess of the agreed limit-ceiling, the borrower will
be obliged to make an immediate payment at least large enough to equal the
overdraft as documented.
Overdrafts in excess of the authorized limit-ceiling, if they occur, may not in
any way constitute a right or a privilege available to the borrower for use.
They will by rightful entitlement entail interest payments at the interest-rate
customarily imposed by the lender on any unprotected account-credits that it
grants to its clients, in accordance with current norms of banking practice.
Said interest payments will be deducted from the borrower's account at the same
time as the interest payments specified in the previous paragraph.
The borrower is likewise obliged to pay the lender commissions as specified in
both the particular terms of the loan and the general banking loan-terms.
The borrower will likewise settle payment of the annual contractual-undertaking
commission-fee to the lender, the assessment-rate and terms of application
whereof are specified in the general banking loan-terms.
- - Regulating the loan, punitive clauses.
As soon as the credit-line comes to an end, for whatever reason, a definitive
count is made of the total amounts still owing to the lender, in capital
principal and supplementary payments [interest, fees etc.]. The remainder-total
supplied thereby must be paid to the lender within eight days.
If said eight-day period elapses without full payment being made, the current
account's negative (debit) total will then rightfully generate interest payable
every three months at an increased rate, equal to the loan's annual interest-
rate raised by three percentage points, until the date of full and final
settlement of the amount owed. Furthermore, the lender will be entitled to
demand from the borrower an indemnity equal to seven percent of the total
amounts still owing, not counting payment of taxable costs and fees the lender
incurs while recovering its loan-credit.
2 - OPENING AGGREGATE MORTGAGE-BASED CREDIT
- - How the opening of a credit-line is effected.
The opening of a credit-line is effected by means of short-, medium- and long-
term money loans, unprotected account-credits, discounts, secured sums, or other
grantable instruments within the legislative and regulatory framework as it
applies to Credit Agricole, under the terms and with the purposes specified by
said framework, and always conditional on such legal or regulatory stipulations
as may limit, modify or suppress the distribution of credit. Any financial
advance will be repayable to the extent of the total amount of the opened
credit-line, and new advances may also be granted - these latter advances will
then be protected - to the same total credit-line extent, by means of mortgage-
based payment resulting from said opened credit-line.
The granting of new credit-advances, and likewise (where applicable) the
lender's acceptance of movable property as loan-guaranteeing collateral, or of
supplementary personal security-guarantees, never entail any alteration in the
opened credit-line; and the mortgage-based payment that guarantees the opened
credit-line therefore remains the
<PAGE>
lender's loan-security, until complete repayment of all amounts that the
borrower may owe the lender, and until the threat of lender's distraint is
removed for said amounts.
- - Option to cancel.
The opening of the credit-line may be canceled at any moment:
- - either by the borrower, provided it repays the amounts it owes the lender in
their entirety;
- - or by the lender, as per the stipulations specified above in the paragraph
"Loan recovery" [B 11], if the borrower fails to uphold any one of the
conditions that are cause for the loan's premature termination.
- - Interest-rate.
The interest-rate, which fluctuates according to the type and category of the
credit-advances transacted within the framework of opening a credit-line, is
tailored specifically to each of said credit-advances via specifications in the
contract, or appropriate equivalent document, which it is the lender's
responsibility to draw up and the borrower's responsibility to modify before
funds are made available.
In the contract for opening a credit-line, the designated maximum interest-rate
corresponds to Credit Agricole's maximum interest-rate for credit-advances,
which depends on the economic-financial regulations currently prevailing at the
time the contract is signed. This interest-rate's designation is particularly
tailored to demands for mortgage-based payments.
If in the future said regulations were to be modified, especially in the
direction of a renewed rise in said maximum interest-rate, a fluctuating
difference of this nature would have an immediate effect on the credit-advances
which are adjustable to allow for said difference. Consequently, as stipulated
in the final subsection of new article 57 of the legislative decree dated
October 14, 1965, the clause intended as a formal record of the opened credit-
line, for purposes of taking out loan-guarantees, must indicate the maximum
interest-rate and give notice that "rate-fluctuation is contractually specified
and predicted".
<PAGE>
3 - LOAN GUARANTEED BY GENERAL LOAN-GUARANTEE FUND
The borrower who is the beneficiary of a loan that is likely to receive the
General Loan-Guarantee Fund's loan-guarantee (securing against individual
residual losses, once all options and recourses against the borrower have been
exhausted) is obliged to do the following:
- - pay in advance all premiums and assessments intended for said fund, with the
lender authorized to debit the borrower's account in the amount of all sums
subject to repayment-demand;
- - make available all mortgage-based or other loan-guarantees that may be
demanded.
4 - LOAN SUBJECT TO REGIONAL LOAN-GUARANTEE FUND
The borrower who is the beneficiary of a loan that is likely to be subject to
the Regional Loan-Guarantee Fund's loan-guarantee (restoring individual residual
losses, once all options and recourses against the borrower have been exhausted)
is obliged to pay in advance all premiums, assessments and commissions, with the
lender authorized to debit the borrower's account in the amount of all sums
subject to repayment-demand.
5 - RECOVERING THE LOAN
So as to allow the lender to proceed with recovering its loan-credit via re-
discount, the lender will be entitled to request from the borrower at any moment
that it prepare debtor-notes representing the value of the lender's loan-credit.
6 - LOAN TO A MORALLY RESPONSIBLE REPRESENTATIVE
The borrower is constrained to notify the lender of the following, within
fifteen days of the event:-
- - any legally significant modification in the formal structure of the company;
- - the loss of half or more of its total corporate capital;
- - any corporate merger, split, takeover or break-up;
- - the appointment of a new corporate representative;
- - any event likely to increase significantly the volume of its obligations, or
likely to harm or prejudice the lender's rights and loan-guarantees.
If the borrower fails to comply with this obligation, the lender will be
entitled to demand repayment of the loan immediately and in full, as per the
terms specified above in the paragraph "Loan recovery" [B 11].
7 - AUGMENTED LOANS
<PAGE>
Augmented loans are granted by the lender within the framework of specific
regulations assessed by public authorities (loans to support farming,
manufacturing and industry, etc.).
Any failure to comply with particular obligations that the borrower is required
by said regulations to satisfy may entail loss of all benefits from the loan,
and cause the loan to become immediately subject to repayment-demand.
The borrower acknowledges herewith that it has been made fully aware of its
particular obligations and of their attendant sanctions.
<PAGE>
Exhibit 10.22
WHITE PINE SOFTWARE, INC.
STOCK PURCHASE AGREEMENT
Dated as of April 17, 1996
<PAGE>
WHITE PINE SOFTWARE, INC.
STOCK PURCHASE AGREEMENT
Dated as of April 17, 1996
INDEX
-----
ARTICLE I
PURCHASE AND SALE OF SHARES
---------------------------
<TABLE>
<S> <C> <C>
1.1 Purchase and Sale of Shares....................................... 1
1.2 Closings.......................................................... 1
1.3 Use of Proceeds................................................... 1
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
2.1 Organization and Corporate Power.................................. 2
2.2 Authorization..................................................... 2
2.3 Government Approvals.............................................. 2
2.4 Authorized and Outstanding Stock.................................. 3
2.5 Subsidiaries...................................................... 3
2.6 Financial Information............................................. 3
2.7 Events Subsequent to the Date of the Financial Statements......... 4
2.8 Litigation........................................................ 5
2.9 Compliance with Laws and Other Instruments........................ 5
2.10 Taxes............................................................. 5
2.11 Real.............................................................. 6
2.12 Personal Property................................................. 6
2.13 Patents, Trademarks, etc.......................................... 6
2.14 Agreements of Directors, Officers and Employees................... 7
2.15 Governmental and Industrial Approvals............................. 7
2.16 Federal Reserve Regulations....................................... 8
2.17 Contracts and Commitments......................................... 8
2.18 Securities Act.................................................... 8
2.19 Registration Rights............................................... 8
2.20 Insurance Coverage................................................ 8
2.21 Employee Matters.................................................. 8
2.22 No Brokers or Finders............................................. 9
2.23 Transactions with Affiliates...................................... 9
2.24 Assumptions, Guarantees, etc. of Indebtedness of Other Persons.... 9
2.25 Restrictions on Subsidiaries...................................... 9
2.26 Disclosures....................................................... 9
</TABLE>
<PAGE>
ARTICLE III
AFFIRMATIVE COVENANTS OF THE COMPANY
------------------------------------
<TABLE>
<S> <C> <C>
3.1 Accounts and Reports.............................................. 10
3.2 Payment of Taxes.................................................. 11
3.3 Maintenance of Key Man Insurance.................................. 11
3.4 Compliance with Laws, etc......................................... 12
3.5 Inspection........................................................ 12
3.6 Corporate Existence; Ownership of Subsidiaries.................... 12
3.7 Compliance with ERISA............................................. 13
3.8 Board Approval.................................................... 13
3.9 Financings........................................................ 13
3.10 Meetings of the Board of Directors................................ 13
3.11 Rule 144A Information............................................. 13
3.12 Regular Course of Business........................................ 13
ARTICLE IV
NEGATIVE COVENANTS OF THE COMPANY
---------------------------------
4.1 Distributions................................... ................. 14
4.2 Dealings with Affiliates.......................................... 14
4.3 Limitation on Restrictions on Subsidiary
Dividends and Other Distributions................................ 15
4.4 No Conflicting Agreements......................................... 15
4.5 Compensation; Consulting and Other Agreements..................... 15
4.6 Limitations on Indebtedness....................................... 15
ARTICLE V
INVESTMENT REPRESENTATIONS
--------------------------
5.1 Representations and Warranties.................................... 15
5.2 Permitted Sales; Legends.......................................... 16
ARTICLE VI
CONDITIONS OF PURCHASERS' OBLIGATION
------------------------------------
6.1 Effect of Conditions.............................................. 17
6.2 Representations and Warranties.................................... 17
6.3 Performance....................................................... 17
6.4 No Material Adverse Change........................................ 17
6.6 Consents and Waivers.............................................. 18
</TABLE>
-ii-
<PAGE>
ARTICLE VII
CONDITIONS OF THE COMPANY'S OBLIGATION
--------------------------------------
<TABLE>
<S> <C> <C>
7.1 Effect of Conditions.............................................. 18
7.2 Shareholder Approval.............................................. 18
ARTICLE VIII
CERTAIN DEFINITIONS
-------------------
ARTICLE IX
TERMINATION
-----------
9.1 Termination by Mutual Written Consent.............................. 19
9.2 Termination for Breach............................................. 19
9.3 Termination for Delay.............................................. 19
9.4 Rights After Termination........................................... 20
ARTICLE X
MISCELLANEOUS
-------------
10.1 Survival of Representations....................................... 20
10.2 Parties in Interest............................................... 20
10.3 Shares Owned by Affiliates........................................ 20
10.4 Amendments and Waivers............................................ 20
10.5 Notices........................................................... 21
10.6 Expenses.......................................................... 21
10.7 Counterparts...................................................... 21
10.8 Effect of Headings................................................ 21
10.9 Adjustments....................................................... 21
10.10 Governing Law..................................................... 21
</TABLE>
-iii-
<PAGE>
April 17, 1996
To: The Person Listed on
Schedule 1.1 attached hereto
------------
Re: $5.83 par value Common Stock
----------------------------
Dear Sir:
White Pine Software, Inc., a Delaware corporation (the "Company"), hereby
agrees with you as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
---------------------------
1.1 Purchase and Sale. (a) Subject to the terms and conditions herein
-----------------
set forth, at the Closing (as defined below) the Company shall issue and sell to
the person listed on Schedule 1.1 hereto (the "Purchaser"), and the Purchaser
shall purchase from the Company, the number of shares of the Company's $5.83 par
value Common Stock (the "$5.83 par Common Stock"), set forth opposite the name
of such Purchaser on Schedule 1.1, for the aggregate purchase price set forth
opposite the name of such Purchaser on such Schedule.
(b) The $5.83 par Common Stock shall have the rights, terms and
privileges set forth on Exhibit A attached hereto. The shares of $5.83 par
---------
Common Stock purchased pursuant to this Section 1.1 are referred to herein as
the "Purchased Shares".
1.2 Closings.Subject to the satisfaction or waiver of the conditions
--------
set forth in Articles VI and VII hereof, the closing (the "Closing") of the sale
and purchase of the Purchased Shares specified in Section 1.1 above shall take
place at the offices of Devine, Millimet & Branch, Professional Association, 111
Amherst Street, Manchester, New Hampshire, at 10:00 A.M., on April 18, 1996, or
such other date, time and place as shall be mutually agreed upon by the Company
and the Purchaser (the "Closing Date"). At the Closing, the Company will deliver
the Purchased Shares being acquired by the Purchaser in the form of a
certificate issued in such Purchaser's name, upon receipt by the Company of
payment of the full purchase price therefor by or on behalf of each Purchaser to
the Company by check or by wire transfer of immediately available funds.
1.3 Use of Proceeds. As an integral part of the purpose and structure
---------------
of the financing contemplated herein, the Company shall use the proceeds
received upon the sale of the Purchased Shares at the Closing (and the proceeds
received upon the sale of the Subsequently Purchased Shares at the Subsequent
Closing, if any) to (i) fund general working
<PAGE>
capital, (ii) pay all fees, costs and expenses incurred by the Company in
connection with the transactions contemplated by this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
---------------------------------
THE COMPANY
-----------
In order to induce the Purchaser to purchase the Purchased Shares, the
Company makes the following representations and warranties which shall be true,
correct and complete in all respects on the date hereof and shall be true,
correct and complete in all material respects as of the Closing, and disclosure
on a schedule attached hereto shall be deemed disclosure for all purposes
hereunder:
2.1 Organization and Corporate Power. The Company and each of its
--------------------------------
Subsidiaries (as defined in Article VIII hereof) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own its properties and to carry on its business as presently
conducted. The Company and each of its Subsidiaries is duly licensed or
qualified to do business as a foreign corporation in each jurisdiction wherein
the character of its property, or the nature of the activities presently
conducted by it, makes such qualification necessary.
2.2 Authorization. The Company has all necessary corporate power and
-------------
has taken all necessary corporate action required for the due authorization,
execution, delivery and performance by the Company of this Agreement, the
Amended and Restated Shareholders' Agreement dated as of March 19, 1996 (the
"Shareholders' Agreement") and the Amended and Restated Registration Rights
Agreement dated as of March 19, 1996, and any other agreements or instruments
executed by the Company in connection herewith or therewith (collectively, the
"Related Agreements"), and the consummation of the transactions contemplated
herein or therein, and for the due authorization, issuance and delivery of the
Purchased Shares. The issuance of the Purchased Shares does not require any
further corporate action and is not and will not be subject to any preemptive
right, right of first refusal or the like. This Agreement, the Related
Agreements and the other agreements and instruments executed by the Company in
connection herewith or therewith will each be a valid and binding obligation of
the Company enforceable in accordance with its terms.
2.3 Government Approvals. No consent, approval, license or
--------------------
authorization of, or designation, declaration or filing with, any court or
governmental authority is or will be required on the part of the Company in
connection with the execution, delivery and performance by the Company of this
Agreement, any of the Related Agreements and any other agreements or instruments
executed by the Company in connection herewith or therewith, or in connection
with the issuance of the Purchased Shares, except for (i) those which have
already been made or granted, (ii) the filing of registration statements with
the
-2-
<PAGE>
Securities and Exchange Commission (the "Commission") in connection with the
terms of the Registration Rights Agreement and (iii) any applicable state
securities commissions.
2.4 Authorized and Outstanding Stock. Before giving effect to the
--------------------------------
transactions to be effected at Closing, the authorized capital stock of the
Company will consist of: (A) 7,500,000 shares of Common Stock, $.01 par value
per share (the "$.01 par value Common Stock"; together with the $5.83 par Common
Stock, sometimes referred to as the "Common Stock"), of which 5,588,262.3 shares
are validly issued and outstanding (or are held by the Company pending issuance
pursuant to the terms of that certain Acquisition Agreement dated as of October
10, 1995 by and among the Company and the other parties thereto) and held of
record and owned beneficially as set forth in Schedule 2.4 attached hereto; and
------------
(B) 500,000 shares of $5.83 par Common Stock of which 343,053 shares are validly
issued and outstanding. Immediately prior to the Closing, (i) options to
purchase 871,798.8 shares of $.01 par value Common Stock will be granted and
outstanding and held as set forth on Schedule 2.4, and (ii) 970,000 shares of
------------
$.01 par value Common Stock will be reserved for issuance under the Company's
stock option plans described on Schedule 2.4. There are no treasury shares held
------------
by the Company. All issued and outstanding shares of capital stock are, and
when issued in accordance with the terms hereof, all Purchased Shares will be,
duly and validly authorized, validly issued and fully paid and non-assessable
and, except as set forth on Schedule 2.4, free from any restrictions on
------------
transfer, except for restrictions imposed by federal or state securities or
"blue-sky" laws and except for those imposed pursuant to this Agreement or any
Related Agreement. Except as set forth on Schedule 2.4, there are no
------------
outstanding warrants, options, commitments, preemptive rights, rights to acquire
or purchase, conversion rights or demands of any character relating to the
capital stock or other securities of the Company. All issued and outstanding
shares of capital stock of the Company were issued (i) in transactions complying
with or exempt from the registration provisions of the Act, and (ii) in
compliance with or in transactions exempt from the registration provisions of
applicable state securities or "blue-sky" laws.
2.5 Subsidiaries. Except as set forth in Schedule 2.5, the Company
------------ ------------
has no Subsidiaries nor any investment or other interest in, or any outstanding
loan or advance to or from, any Person (as defined in Article VII), including,
without limitation, any officer, director or shareholder. Except as set forth on
Schedule 2.5, the Company owns of record and beneficially, free and clear of all
- ------------
liens, charges, restrictions, claims and encumbrances of any nature, all of the
issued and outstanding capital stock of each of its Subsidiaries.
2.6 Financial Information. The Company has made available to the
---------------------
Purchaser (i) the financial statements of the Company for each of the fiscal
years ended December 31, 1993, and December 31, 1994, audited by Ernst & Young,
L.L.P., the Company's certified public accountants (collectively, the "Financial
Statements"), and (ii) the unaudited balance sheet of the Company at September
30, 1995, and the related statements of earnings for the nine-months then ended
(the "Unaudited Financial Statements"). The Financial Statements and the
Unaudited Financial Statements are complete and correct in all material
respects, are in accordance with the books and records of the Company and
present fairly in accordance
-3-
<PAGE>
with United States generally accepted accounting principles applied on a basis
consistent with prior periods the financial condition and results of operations
of the Company and its Subsidiaries organized in the United States as of the
dates and for the periods shown and in accordance with French generally accepted
accounting principles, consistently applied, for Subsidiaries organized under
the laws of the Republic of France. The Unaudited Financial Statements shall
not contain footnotes and are subject to normal year-end adjustments, which
adjustments are neither individually nor in the aggregate material. Neither the
Company nor any Subsidiary has any liability, contingent or otherwise, which is
not adequately reflected in or reserved against in the Financial Statements or
the Unaudited Financial Statements (subject to normal year-end adjustments) that
could materially and adversely affect the financial condition of the Company or
such Subsidiary. Since the date of the Unaudited Financial Statements, (i)
there has been no change in the business, assets, liabilities, condition
(financial or otherwise) or operations of the Company and its Subsidiaries
except for changes in the ordinary course of business which, in the aggregate,
have not been materially adverse, and (ii) none of the business, prospects,
condition (financial or otherwise), operations, property or affairs of the
Company and its Subsidiaries has been materially adversely affected by any
occurrence or development, in the aggregate, whether or not insured against.
2.7 Events Subsequent to the Date of the Financial Statements.
---------------------------------------------------------
Except as set forth on Schedule 2.7 and except as relates to the Company's sale
------------
of 343,053 shares of $5.83 par Common Stock to affiliates of Advent
International Corporation as of March 19, 1996, since September 30, 1995,
neither the Company nor any Subsidiary has (i) issued any stock, bond or other
corporate security, (ii) borrowed any amount or incurred or become subject to
any liability (absolute, accrued or contingent), except liabilities under
contracts entered into in the ordinary course of business, (iii) discharged or
satisfied any lien or encumbrance or incurred or paid any obligation or
liability (absolute, accrued or contingent) other than current liabilities shown
on the Unaudited Financial Statements and current liabilities incurred since
September 30, 1995, in the ordinary course of business, (iv) declared or made
any payment or distribution to stockholders or purchased or redeemed any shares
of its capital stock or other securities, (v) mortgaged, pledged or subjected to
lien any of its assets, tangible or intangible, other than liens of current real
property taxes not yet due and payable, (vi) sold, assigned or transferred any
of its tangible assets except in the ordinary course of business, or canceled
any debt or claim, except in the ordinary course of business, (vii) sold,
assigned, transferred or granted any license with respect to any patent,
trademark, trade name, service mark, copyright, trade secret or other intangible
asset, except pursuant to license or other agreements entered into in the
ordinary course of business, (viii) suffered any loss of property or waived any
right of substantial value whether or not in the ordinary course of business,
(ix) made any change in officer compensation, (x) made any material change in
the manner of business or operations of the Company or any Subsidiary, (xi)
entered into any transaction except in the ordinary course of business or as
otherwise contemplated hereby or (xii) entered into any commitment (contingent
or otherwise) to do any of the foregoing.
-4-
<PAGE>
2.8 Litigation. Except as otherwise set forth on Schedule 2.8, there
---------- ------------
is no litigation or governmental proceeding or investigation pending or, to the
knowledge of the Company, threatened, against the Company or any Subsidiary or
affecting any of the Company's or such Subsidiary's properties or assets, or
against any officer, key employee or shareholder of the Company or any
Subsidiary in his capacity as such, nor, to the knowledge of the Company, has
there occurred any event or does there exist any condition on the basis of which
any litigation, proceeding or investigation might properly be instituted with
any substantial chance of recovery where such recovery would likely have a
material adverse effect on the Company and its Subsidiaries, taken as a whole.
Neither the Company nor any Subsidiary, nor any officer, key employee or
shareholder of the Company or any Subsidiary in his capacity as such is, to the
knowledge of the Company, in default with respect to any order, writ,
injunction, decree, ruling or decision of any court, commission, board or other
government agency which may materially and adversely affect the business or
assets of the Company and its Subsidiaries, taken as a whole.
2.9 Compliance with Laws and Other Instruments. The Company and its
------------------------------------------
Subsidiaries are in compliance with all of the provisions of this Agreement and
of its charter and by-laws, and in all material respects with the provisions of
each mortgage, indenture, lease, license, other agreement or instrument,
judgment, decree, judicial order, statute, and regulation by which any of them
is bound or to which any of them or any of their respective properties are
subject. Neither the execution, delivery or performance of this Agreement and
the Related Agreements, nor the offer, issuance, sale or delivery of the
Purchased Shares with or without the giving of notice or passage of time, or
both, will violate, or result in any breach of, or constitute a default under,
or result in the imposition of any encumbrance upon any asset of the Company or
any Subsidiary pursuant to any provision of the Company's or such Subsidiary's
charter or by-laws, or any statute, rule or regulation, contract, lease,
judgment, decree or other document or instrument by which the Company or any
Subsidiary is bound or to which the Company or any Subsidiary or any of their
respective properties are subject, or, to the knowledge of the Company, will
cause the Company or any Subsidiary to lose the benefit of any right or
privilege it presently enjoys or cause any Person who is expected to normally do
business with the Company or any Subsidiary to discontinue to do so on the same
basis.
2.10 Taxes. The Company and each of its Subsidiaries has filed all
-----
tax returns (including statements of estimated taxes owed) required to be filed
within the applicable periods for such filings and has paid all taxes required
to be paid, and has established adequate reserves (net of estimated tax payments
already made) for the payment of all taxes payable in respect to the period
subsequent to the last periods covered by such returns. Except as set forth on
schedule 2.10, no deficiencies for any tax are currently assessed against the
- -------------
Company or any Subsidiary, and no tax returns of the Company or any Subsidiary
have been audited during the last three (3) years, and, to the knowledge of the
Company, there is no such audit pending or contemplated. There is no tax lien,
whether imposed by any federal, state or local taxing authority, outstanding
against the assets, properties or business of the Company. For the purposes of
this Agreement, the term "tax"
-5-
<PAGE>
shall include all federal, state and local taxes, including income, franchise,
property, sales, withholding, payroll and employment taxes.
2.11 Real Property.
-------------
(a) Schedule 2.11 sets forth the addresses and uses of all real
-------------
property that the Company or any Subsidiary owns, leases or subleases, and any
lien or encumbrance on any such owned real property or the Company's or
Subsidiary's leasehold interest therein, specifying in the case of each such
lease or sublease, the name of the lessor or sublessor, as the case may be, the
lease term and the financial obligations of the lessee thereunder.
(b) Except as set forth on Schedule 2.11, the Company or its
-------------
Subsidiary, as the case may be, has good and marketable title to, and owns free
and clear of all liens and encumbrances, all property listed as owned by the
Company or any Subsidiary on Schedule 2.11, and to the knowledge of the Company,
-------------
there is no material violation of any law, regulation or ordinance (including
without limitation laws, regulations or ordinances relating to zoning,
environmental, city planning or similar matters) relating to any real property
owned, leased or subleased by the Company or any Subsidiary.
(c) There are no defaults by the Company or any Subsidiary or,
to the knowledge of the Company, by any other party thereto, which might curtail
in any material respect the present use of the Company's and such Subsidiary's
property listed on Schedule 2.11. The performance by the Company of this
-------------
Agreement and the Related Agreements will not result in the termination of, or
in any increase of any amounts payable under, any lease listed on Schedule 2.11.
-------------
2.12 Personal Property. Except as set forth on Schedule 2.12 and
----------------- -------------
except for property sold or otherwise disposed of in the ordinary course of
business since September 30, 1995, the Company and its Subsidiaries own free and
clear of any liens or encumbrances, all of the personal property reflected as
owned by the Company and its Subsidiaries in the balance sheet contained in the
Unaudited Financial Statements, and all other material items of personal
property acquired by the Company and its Subsidiaries through the date hereof.
To the knowledge of the Company, all material items of such personal property
used in the operation of the business of the Company are in good operating
condition, normal wear and tear excepted.
2.13 Patents, Trademarks, etc. Set forth on Schedule 2.13 is a list
------------------------ -------------
of all material patents, patent rights, patent applications, trademarks,
trademark applications, service marks, service mark applications trade names and
registered copyrights, and all applications for such that are in the process of
being prepared, owned by or registered in the name of the Company or any
Subsidiary, or of which the Company or any Subsidiary is a licensor or licensee
or in which the Company or any Subsidiary has any right, and in each case a
brief description of the nature of such right. The Company and its Subsidiaries
own or possess adequate licenses or other rights to use all patents, patent
applications, trademarks, trademark
-6-
<PAGE>
applications, service marks, service mark applications, trade names, copyrights,
manufacturing processes, formulae, trade secrets and know how (collectively,
"Intellectual Property") necessary or desirable to the conduct of their business
as conducted and as proposed to be conducted, and no claim is pending or, to the
knowledge of the Company, threatened to the effect that the operations of the
Company infringe upon or conflict with the asserted rights of any other person
under any Intellectual Property, and there is no known basis for any such claim
(whether or not pending or threatened). No claim is pending or, to the
knowledge of the Company, threatened to the effect that any such Intellectual
Property owned or licensed by the Company, or which the Company or any
Subsidiary otherwise has the right to use, is invalid or unenforceable by the
Company or such Subsidiary, and there is no known basis for any such claim
(whether, or not pending or threatened). To the knowledge of the Company, all
technical information developed by and belonging to the Company and its
Subsidiaries which has not been patented or copywritten has been kept
confidential. Except in the ordinary course of business, neither the Company
nor any Subsidiary has granted or assigned to any other person or entity any
right to manufacture, have manufactured, assemble or sell the products or
proposed products or to provide the services or proposed services of the Company
or such Subsidiary. No current or former stockholder, employee, officer or
director of the Company or any of its Subsidiaries has (directly or indirectly)
any right, title or interest in any of the rights described on Schedule 2.13
-------------
other than such right which such Person may enjoy as a stockholder of the
Company.
2.14 Agreements of Directors, Officers and Employees. To the knowledge
-----------------------------------------------
of the Company, no director, officer or employee of or consultant to the Company
or any Subsidiary is in violation of any terms of any employment contract,
non-competition agreement, non-disclosure agreement, patent disclosure or
assignment agreement or other contract or agreement containing restrictive
covenants relating to the right of any such director, officer, employee or
consultant to be employed or engaged by the Company or such Subsidiary because
of the nature of the business conducted or proposed to be conducted by the
Company or such Subsidiary, or relating to the use of trade secrets or
proprietary information of others. Schedule 2.14 hereto sets forth the name and
-------------
address of each person currently serving as a director of the Company, and each
person listed on Schedule 2.14 was duly elected and is presently serving as a
-------------
director. Set forth on Schedule 2.14 is a list of all employees of the Company
-------------
who have (i) executed a non-disclosure agreement with the Company and (ii)
executed a non-competition agreement with the Company.
2.15 Governmental and Industrial Approvals. The Company and each of
-------------------------------------
its Subsidiaries has all the material permits, licenses, orders, franchises and
other rights and privileges of all federal, state, local or foreign governmental
or regulatory bodies necessary for the Company and such Subsidiaries to conduct
their respective businesses as presently conducted. All such permits, licenses,
orders, franchises and other rights and privileges are in full force and effect
and, to the knowledge of the Company, no suspension or cancellation of any of
them is threatened, and none of such permits, licenses, orders, franchises or
other rights and privileges will be affected by the consummation of the
transactions contemplated in this Agreement and the Related Agreements.
-7-
<PAGE>
2.16 Federal Reserve Regulations. Neither the Company nor any of its
---------------------------
Subsidiaries has engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation G of the
Board of Governors of the Federal Reserve System), and no part of the proceeds
of the sale of the Purchased Shares will be used to purchase or carry any margin
security or to extend credit to others for the purpose of purchasing or carrying
any margin security or in any other manner which would involve a violation of
any of the regulations of the Board of Governors of the Federal Reserve System.
2.17 Contracts and Commitments. Except as set forth on Schedule 2.17
------------------------- -------------
attached hereto, neither the Company nor any Subsidiary has any contract,
obligation or commitment which is material or which involves a potential
material commitment or any stock redemption or stock purchase agreement,
financing agreement, license or lease. For purposes of this Section 2.17, a
contract, obligation or commitment shall be deemed material if it requires
future expenditures by the Company or any Subsidiary in excess of $50,000 or
might result in payments to the Company or any Subsidiary in excess of $50,000.
2.18 Securities Act. The Company has complied and will comply with
--------------
all applicable federal or state securities laws in connection with the issuance
and sale of the Purchased Shares. Neither the Company nor, to the Company's
knowledge, anyone acting on its behalf has offered any of the Purchased Shares,
or similar securities, or solicited any offers to purchase any of such
securities, so as to bring the issuance and sale of the Purchased Shares under
the registration provisions of the Act.
2.19 Registration Rights. The Company has not granted any rights
-------------------
relating to registration of its capital stock under the Act or state securities
laws other than those contained in this Agreement and the Related Agreements and
those described in Schedule 2.19 hereto.
-------------
2.20 Insurance Coverage. Schedule 2.20 hereto contains an accurate
------------------ -------------
summary of the insurance policies currently maintained by the Company and its
Subsidiaries. Except as described on Schedule 2.20, there are currently no
-------------
claims pending against the Company or any Subsidiary under any insurance
policies currently in effect and covering the property, business or employees of
the Company and its Subsidiaries, and all premiums due and payable with respect
to the policies maintained by the Company and its Subsidiaries have been paid to
date.
2.21 Employee Matters. Except as set forth on Schedule 2.21, neither
---------------- -------------
the Company nor any Subsidiary has in effect any employment agreements,
consulting agreements, deferred compensation, pension or retirement agreements
or arrangements, bonus, incentive or profit-sharing plans or arrangements, or
labor or collective bargaining agreements, written or oral. The Company has no
knowledge that any of the officers or other key employees of the Company or any
Subsidiary presently intends to terminate his employment. The Company and its
Subsidiaries are in compliance in all material respects
-8-
<PAGE>
with all applicable laws and regulations relating to labor, employment, fair
employment practices, terms and conditions of employment, and wages and hours.
The Company and each Subsidiary is in material compliance with the terms of all
plans, programs and agreements listed on Schedule 2.21, and each such plan,
-------------
program or agreement is in compliance in all material respects with all of the
requirements and provisions of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"). No such plan or program has engaged in any
"prohibited transaction" as defined in Section 4975 of the Internal Revenue Code
of 1986, as amended (the "Code"), or has incurred any "accumulated funding
deficiency" as defined in Section 302 of ERISA, nor has any reportable event as
defined in Section 4043(b) of ERISA occurred with respect to any such plan or
program. With respect to each plan listed on Schedule 2.21, all required
-------------
filings, including all filings required to be made with the United States
Department of Labor and Internal Revenue Service, have been timely filed.
2.22 No Brokers or Finders. No person has or will have, as a result
---------------------
of the transactions contemplated by this Agreement, any right, interest or claim
against or upon the Company or any of its Subsidiaries for any commission, fee
or other compensation as a finder or broker because of any act or omission by
the Company or any of its Subsidiaries.
2.23 Transactions with Affiliates. Except as set forth on
----------------------------
Schedule 2.23, there are no loans, leases or other continuing transactions
- -------------
between the Company or any Subsidiary on the one hand, and any officer or
director of the Company or any Subsidiary or any person owning five percent (5%)
or more of the Common Stock of the Company or any respective family member or
affiliate of such officer, director or shareholder on the other hand.
2.24 Assumptions, Guarantees, etc. of Indebtedness of Other Persons.
--------------------------------------------------------------
Except as set forth on Schedule 2.24, neither the Company nor any Subsidiary has
-------------
assumed, guaranteed, endorsed or otherwise become directly or contingently
liable on or for any indebtedness of any other Person, except guarantees by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business.
2.25 Restrictions on Subsidiaries. Except as set forth on
----------------------------
Schedule 2.25, there are no restrictions on the Company or any of its
- -------------
Subsidiaries which prohibit or otherwise restrict the transfer of cash or other
assets between the Company and any of its Subsidiaries or between any
Subsidiaries of the Company.
2.26 Disclosures. Neither this Agreement, any Schedule or Exhibit to
-----------
this Agreement, the Related Agreements, the Financial Statements, the Unaudited
Financial Statements, nor any other agreement, document or written statement
made by the Company and furnished by the Company to the Purchaser or the
Purchaser's special counsel in connection with the transactions contemplated
hereby, contains any untrue statement of material fact or omits to state any
material fact necessary to make the statements contained herein or therein not
misleading. There is no fact known to the Company that has not been
-9-
<PAGE>
disclosed herein or in any other agreement, document or written statement
furnished by the Company or any of its Subsidiaries to the Purchaser or its
special counsel in connection with the transactions contemplated hereby which
materially adversely affects or could materially and adversely affect the
business, properties, assets or financial condition of the Company or any of its
Subsidiaries.
ARTICLE III
AFFIRMATIVE COVENANTS OF THE COMPANY
------------------------------------
Without limiting any other covenants and provisions hereof, the Company
covenants and agrees that it will observe the following covenants on and after
the date hereof and until the consummation of the first Qualified Public
Offering (as defined in Article VIII):
3.1 Accounts and Reports. The Company will, and will cause each of
--------------------
its Subsidiaries to, maintain a standard system of accounts in accordance with
generally accepted accounting principles consistently applied (as required by
such entities' country of organization) and the Company will, and will cause
each of its Subsidiaries to, keep full and complete financial records. The
Company will furnish to each Purchaser the information set forth in this Section
3.1.
(a) Within one hundred twenty (120) days after the end of each
fiscal year, a copy of the consolidated and consolidating balance sheet of the
Company and its Subsidiaries as of the end of such year, together with
consolidated and consolidating statements of income, shareholders' equity and
cash flow of the Company and its Subsidiaries for such year, setting forth in
each case in comparative form the corresponding figures for the preceding fiscal
year, all in reasonable detail and duly certified by an independent public
accountant of national recognition selected by the Board of Directors of the
Company.
(b) Within thirty (30) days after the end of each calendar
month, a preliminary balance sheet of the Company and its Subsidiaries as of the
end of such month and preliminary statements of income for such month and for
the period commencing at the end of the previous fiscal year and ending with the
end of such month, setting forth in each case in comparative form (i) the
corresponding figures for the corresponding period of the preceding fiscal year
and (ii) the corresponding figures for the corresponding period set forth in the
Business Plan (as defined in Section 3.8), all in reasonable detail (except for
the Company's Subsidiary organized under the laws of the Republic of France,
which shall deliver such material within forty-five (45) days after the end of
each calendar month).
(c) At the time of delivery of each quarterly and annual
statement, a certificate, executed by either the president or chief financial
officer of the Company stating that such officer has caused this Agreement to be
reviewed and has no knowledge of any
-10-
<PAGE>
default by the Company or any Subsidiary in the performance or observance of any
of the provisions of this Agreement or, if such officer has such knowledge,
specifying such default.
(d) Within forty-five (45) days after the commencement of each
fiscal year, a copy of the Business Plan for the next fiscal year required under
Section 3.8, in form consistent with good business practice.
(e) Promptly upon receipt thereof and review by the Company's
Board of Directors, any written report, so called "management letter", and any
other communication submitted to the Company or any Subsidiary by its
independent public accountants relating to the business, prospects or financial
condition of the Company and its Subsidiaries;
(f) Promptly after the commencement thereof, notice of (i) all
actions, suits and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting the Company (or any Subsidiary) which, if successful, could have a
material adverse effect on the Company and its Subsidiaries, taken as a whole;
and (ii) all material defaults by the Company or any Subsidiary (whether or not
declared) under any agreement for money borrowed (unless waived or cured within
applicable grace periods);
(g) Promptly upon sending, making available, or filing the same,
all reports and financial statements which the Company (or any Subsidiary) shall
send or make available generally to the shareholders of the Company as such or
to the Commission; and
(h) Such other information with regard to the business,
properties or the condition or operations, financial or otherwise, of the
Company or its Subsidiaries as the Purchaser may from time to time reasonably
request.
3.2 Payment of Taxes. The Company will pay and discharge (and cause
----------------
any Subsidiary to pay and discharge) all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or profits, or upon any
properties belonging to it, prior to the date on which penalties attach thereto,
and all lawful claims which, if unpaid, might become a lien or charge upon any
properties of the Company (or any Subsidiary), provided that neither the Company
nor any Subsidiary shall be required to pay any such tax, assessment, charge,
levy or claim which is being contested in good faith and by proper proceedings
if the Company or such Subsidiary shall have set aside on its books adequate
reserves with respect thereto.
3.3 Maintenance of Key Man Insurance. The Company will, at its
--------------------------------
expense, use its best efforts to obtain within sixty (60) days of the date
hereof and thereafter maintain a life insurance policy with a responsible and
reputable insurance company payable to the Company on the life of Howard R.
Berke in the face amount of $1,000,000. The Company will maintain such policy
and will not cause or permit any assignment of the proceeds of such policy and
will not borrow against such policy. The Company will add one designee of
-11-
<PAGE>
the Purchaser as a notice party to such policy, and will request that the issuer
of such policy provide such designee with ten (10) days' notice before such
policy is terminated (for failure to pay premium or otherwise) or assigned, or
before any change is made in the designation of the beneficiary thereof.
3.4 Compliance with Laws, etc. The Company will comply (and cause
-------------------------
each of its Subsidiaries to comply) with all applicable laws, rules, regulations
and orders of any governmental authority, the noncompliance with which could
materially adversely affect the business or condition, financial or otherwise,
of the Company and its Subsidiaries, taken as a whole.
3.5 Inspection. At any reasonable time during normal business hours
----------
and from time to time, but not more frequently than once per calendar quarter
for the Purchaser and permitted transferees of the Purchaser as a group, upon
five (5) days written notice, the Company (and each of its Subsidiaries) will
permit any one or more of the Purchaser, or any permitted transferee of the
Purchaser who owns, of record or beneficially, or has the right to acquire, at
least twenty five percent (25%) of the then outstanding $5.83 par Common Stock,
or any of the duly authorized agents or representatives of the foregoing
Persons, to examine and make copies of and extracts from the records and books
of account of and visit the properties of the Company (and any of its
Subsidiaries) and to discuss the Company's affairs, finances and accounts with
any of its officers or directors; provided that any Person or Persons exercising
rights under this Section 3.5 shall (i) use all reasonable efforts to ensure
that any such examination or visit results in a minimum of disruption to the
operations of the Company and (ii) prior to the Company disclosing or providing
access to information with respect to the Company, shall agree in writing to
keep all proprietary information of the Company disclosed to him in the course
of such inspection confidential in a manner consistent with prudent business
practices and treatment of such Person's or Persons' own confidential
information and not use such proprietary information for any purpose. The rights
granted under this Section 3.5 shall be in addition to any rights which any
Purchaser may have under applicable law in its capacity as a shareholder of the
Company.
3.6 Corporate Existence; Ownership of Subsidiaries. The Company will
----------------------------------------------
and will cause its Subsidiaries to, at all times preserve and keep in full force
and effect their corporate existence, and rights and franchises material to the
business of the Company and its Subsidiaries, taken as a whole, and will
qualify, and will cause each of its Subsidiaries to qualify, to do business as a
foreign corporation in any jurisdiction where the failure to do so would have a
material adverse effect on the business, condition (financial or other), assets,
properties or operations of the Company and its Subsidiaries, taken as a whole;
provided, however, that the Company may merge or liquidate one or more of its
Subsidiaries into the Company or into another Subsidiary. The Company or a
Subsidiary shall at all times own of record and beneficially, free and clear of
all liens, charges, restrictions, claims and encumbrances of any nature, all of
the issued and outstanding capital stock of each of its Subsidiaries, except for
six (6) shares of stock of About Software Corporation, S.A., a French
corporation, (which shares represent ___% of such corporation's outstanding
stock)
-12-
<PAGE>
which are or will be owned by six directors, officers or employees of the
Company, pursuant to the requirements of French law.
3.7 Compliance with ERISA. The Company will comply, (and cause each
---------------------
of its Subsidiaries to comply) in all material respects with all minimum funding
requirements applicable to any pension or other employee benefit plans which are
subject to ERISA or to the Code, and comply in all other material respects with
the provisions of ERISA and the Code, and the rules and regulations thereunder,
which are applicable to any such plan. Neither the Company nor any of its
Subsidiaries will permit any event or condition to exist which could permit any
such plan to be terminated under circumstances which cause the lien provided for
in Section 3068 of ERISA to attach to the assets of the Company or any of its
Subsidiaries.
3.8 Board Approval. Within thirty (30) days after the commencement
--------------
of each fiscal year, the Company will prepare and submit to its Board of
Directors for its approval prior to such year end an operating plan and budget,
cash flow projections and profit and loss projections, all itemized in
reasonable detail for the immediately following year (collectively referred to
herein as the "Business Plan").
3.9 Financings. The Company will promptly provide to the Board of
----------
Directors the details and terms of, and any brochures or investment memoranda
prepared by the Company related to, any possible financing of any nature for the
Company (or any of its Subsidiaries), whether initiated by the Company or any
other Person.
3.10 Meetings of the Board of Directors. The Directors shall schedule
----------------------------------
regular meetings not less frequently than once every fiscal quarter.
3.11 Rule 144A Information. The Company shall, upon the written
---------------------
request of any Purchaser, provide to such Purchaser and to any prospective
institutional transferee of the Purchased Shares designated by such Purchaser,
such financial and other information as is available to the Company or can be
reasonably obtained by the Company without material expense and as such
Purchaser may reasonably determine is required to permit such transfer to comply
with the requirements of Rule 144A promulgated under the Act (as defined in
Article VIII hereof).
3.12 Regular Course of Business. The Company agrees that on and after
--------------------------
the date hereof and prior to the Closing that it will carry on its business
diligently and in the ordinary course and substantially in the same manner as
heretofore carried on and will use its best efforts to preserve its present
business organization intact, keep available the services of its present
officers, agents and employees and preserve its present relationships with
suppliers, customers and other persons having business dealings with it.
-13-
<PAGE>
ARTICLE IV
NEGATIVE COVENANTS OF THE COMPANY
---------------------------------
Without limiting any other covenants and provisions hereof, the Company
covenants and agrees that it will comply (and will cause each Subsidiary to
comply) with each of the provisions of this Article IV on and after the date
hereof and until (i) the consummation of the first Qualified Public Offering or
(ii) the Purchaser holds less than 50% of the Purchased Shares originally
acquired by them, unless the failure to comply with any such covenant is waived
by a majority in interest of the holders of the $5.83 par Common Stock in
accordance with Section 10.4 hereof; provided, however, that the provisions of
-------- -------
Section 4.1 shall continue in force only so long as there are Purchased Shares
outstanding which are held by the Purchaser.
4.1 Distributions. Except for redemptions of stock which do not
-------------
exceed $100,000 per transaction or aggregate in excess of $250,000 in any twelve
month period, the Company will not declare or pay any dividends, purchase,
redeem, retire, or otherwise acquire for value any of its capital stock (or
rights, options or warrants to purchase such shares) now or hereafter
outstanding, return any capital to its shareholders as such, or make any
distribution of assets to its shareholders as such, or permit any Subsidiary to
do any of the foregoing, except that the Subsidiaries may declare and make
payment of cash and stock dividends, return capital and make distributions of
assets to the Company and except that nothing herein contained shall prevent the
Company from:
(i) effecting a stock split or declaring or paying any dividend
consisting of shares of any class of capital stock to the holders of shares
of such class of capital stock; or
(ii) complying with any specific provision of the terms of the
$5.83 par Common Stock as contained in Exhibit A attached hereto relating
---------
to the payment of dividends, liquidation preferences or redemption payments
on or with respect to the $5.83 par Common Stock or redemption of the $5.83
par Common Stock.
4.2 Dealings with Affiliates. Except for transactions made on an
------------------------
arms-length basis, or through the Company's normal and customary dealings, the
Company will not enter into any transaction including, without limitation, any
loans or extensions of credit or royalty agreements with any officer or director
of the Company or any Subsidiary or holder of any class of capital stock of the
Company, or any member of their respective immediate families or any corporation
or other entity directly or indirectly controlled by one or more of such
officers, directors or shareholders or members of their immediate families,
except for (i) advances in reasonable amounts made to employees of the Company
or any Subsidiary for valid business purposes, provided that such advances are
repaid to the Company within 90 days, and (ii) advances made to employees of the
Company, upon approval of the Board of Directors, related to such employees'
exercise of stock options.
-14-
<PAGE>
4.3 Limitation on Restrictions on Subsidiary Dividends and Other
------------------------------------------------------------
Distributions.
- -------------
The Company shall not permit any of its Subsidiaries, directly or indirectly, to
create or suffer to exist or become effective any encumbrances or restrictions
on the ability of any of its Subsidiaries to (i) pay dividends or make any other
distributions on its capital stock or any other interest or participation in its
profit owned by any of the Company or any of its Subsidiaries, or pay any
indebtedness owed by any of the Subsidiaries, (ii) make loans or advances to the
Company, or (iii) transfer any of its properties or assets to the Company.
4.4 No Conflicting Agreements. The Company agrees that neither it
-------------------------
nor any Subsidiary will, without the consent of a majority in interest of the
Purchaser, enter into or amend any agreement, contract, commitment or
understanding which would restrict or prohibit the exercise by the Purchaser of
any of its rights under this Agreement.
4.5 Compensation; Consulting and Other Agreements. The Company shall
---------------------------------------------
not pay to its management or consultants compensation in excess of that
compensation customarily paid to management and consultants in companies of
similar size, of similar maturity, and in similar business, all as determined by
the Compensation Committee of the Board of Directors established pursuant to the
Shareholders' Agreement.
4.6 Limitations on Indebtedness. Without the consent of the Board of
---------------------------
Directors, the Company will not create, incur, assume or permit to exist any
debt for borrowed money in excess of $2,500,000, except (i) all deferred taxes,
and (ii) all unfunded pension fund and other employee benefit plan obligations
and liabilities but only to the extent they are permitted to remain unfunded
under applicable law.
ARTICLE V
INVESTMENT REPRESENTATIONS
--------------------------
5.1 Representations and Warranties. The Purchaser hereby represents
------------------------------
and warrants to the Company, understanding and agreeing that the Company is
entering into this Agreement in part in reliance on such representations and
warranties, as follows:
(a) Assuming due execution and delivery by the Company of the
Agreement and the Related Agreements, this Agreement and the Related Agreements
to which such Purchaser is a party constitute legal, valid and binding
obligations of such Purchaser, enforceable against such Purchaser in accordance
with their respective terms;
(b) Such Purchaser has been advised and understands that the
Purchased Shares have not been registered under the Act, on the grounds that no
distribution or public offering of the Purchased Shares is to be effected, and
that in this connection, the Company is relying in part on the representations
of such Purchaser set forth in this Article V;
-15-
<PAGE>
(c) Such Purchaser has been further advised and understands that
no public market now exists for any of the securities issued by the Company and
that a public market may never exist for the Purchased Shares;
(d) Such Purchaser is purchasing the Purchased Shares for
investment purposes, for its own account and not with a view to, or for sale in
connection with, any distribution thereof in violation of Federal or state
securities laws and that such Purchaser has no present intention of selling,
granting any participations in, or otherwise distributing the same;
(e) By reason of its business or financial experience, such
Purchaser has the capacity to protect its own interest and evaluate the merits
of the investment in the Purchased Shares in connection with the transactions
contemplated hereunder;
(f) Such Purchaser is aware of, and has had the opportunity to
ask questions of and receive answers about the Company's business affairs,
financial condition and prospects and has acquired sufficient information about
the Company to reach an informed and knowledgeable decision to acquire the
Purchased Shares, and believes that it has received all of the information it
considers necessary or appropriate for deciding whether to purchase the
Purchased Shares; provided, however, that nothing in this Section 5.1 shall be
deemed to vitiate or limit the representations, warranties and covenants of the
Company contained in this Agreement;
(g) No person has or will have, as a result of the transaction
contemplated by this Agreement, any right, interest or claim against or upon the
Company or any of its Subsidiaries for any commission, fee or other compensation
as a finder or broker because of any act or omission by such Purchaser; and
(h) Such Purchaser is an "accredited investor" as such term is
defined in Rule 501(a) of Regulation D of the Act.
5.2 Permitted Sales; Legends. Notwithstanding the foregoing
------------------------
representations, the Company agrees that it will permit (i) a distribution of
Purchased Shares by a partnership to one or more of its partners or investors,
where no consideration is exchanged therefor by such partners, or to a retired
or withdrawn partner who retires or withdraws after the date hereof in full or
partial distribution of his interest in such partnership, or to the estate of
any such partner or the transfer by gift, will or intestate succession of any
partner to his spouse or to the siblings, lineal descendants or ancestors of
such partner or his spouse, or to a trust created for the benefit of one or more
of the foregoing, if the transferee agrees in writing to be subject to the terms
hereof to the same extent as if it were an original Purchaser hereunder and (ii)
a sale or other transfer of any of the Purchased Shares upon obtaining assurance
satisfactory to the Company that such transaction is exempt from the
registration requirements of, or is covered by an effective registration
statement under, the Act and applicable state securities or "blue-sky" laws,
including, without limitation, receipt of an
-16-
<PAGE>
unqualified opinion to such effect of counsel reasonably satisfactory to the
Company. The certificates representing the Purchased Shares shall bear a legend
evidencing such restriction on transfer substantially in the following form:
"The shares represented by this certificate have been
acquired for investment and have not been registered
under the Securities Act of 1933 (the "Act") or the
securities laws of any state. The shares may not be
transferred by sale, assignment, pledge or otherwise
unless (i) a registration statement for the shares
under the Act is in effect or (ii) the corporation has
received an opinion of counsel, which opinion is
reasonably satisfactory to the corporation, to the
effect that such registration is not required under the
Act."
ARTICLE VI
CONDITIONS OF PURCHASER'S OBLIGATION
------------------------------------
6.1 Effect of Conditions. The obligation of the Purchaser to
--------------------
purchase and pay for the Purchased Shares at the Closing and the Subsequent
Closing, if any, shall be subject at their election to the satisfaction of each
of the conditions stated in the following Sections of this Article.
6.2 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in this Agreement shall be true and correct
on the date of the Closing with the same effect as though made on and as of that
date, and the Purchaser shall have received a certificate dated as of such
Closing and signed on behalf of the Company to that effect.
6.3 Performance. The Company shall have performed and complied with
-----------
all of the agreements, covenants and conditions contained in this Agreement
required to be performed or complied with by it at or prior to the Closing, and
the Purchaser shall have received a certificate dated as of such Closing and
signed on behalf of the Company to that effect.
6.4 No Material Adverse Change. The business, properties, assets or
--------------------------
condition (financial or otherwise) of the Company and its Subsidiaries shall not
have been materially adversely affected since the date of this Agreement,
whether by fire, casualty, act of God or otherwise, and there shall have been no
other changes in the business, properties, assets, condition (financial or
otherwise), management or prospects of the Company or any of its Subsidiaries
that would have a material adverse effect on their respective businesses or
assets.
-17-
<PAGE>
6.5 Consents and Waivers. The Company shall have obtained all
--------------------
consents or waivers necessary to execute this Agreement and the other agreements
and documents contemplated herein, to issue the Purchased Shares, and to carry
out the transactions contemplated hereby and thereby. All corporate and other
action and governmental filings necessary to effectuate the terms of this
Agreement, the Purchased Shares, and other agreements and instruments executed
and delivered by the Company in connection herewith shall have been made or
taken.
ARTICLE VII
CONDITIONS OF THE COMPANY'S OBLIGATION
--------------------------------------
7.1 Effect of Conditions. The Company's obligation to sell the
--------------------
Purchased Shares shall be subject at their election to the satisfaction of each
of the conditions stated in the following Sections of this Article.
7.2 Shareholder Approval. Holders of at least 50% of the shares of
--------------------
$.01 par Common Stock shall have consented to the transactions contemplated
hereby.
ARTICLE VIII
CERTAIN DEFINITIONS
-------------------
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Act" means the Securities Act of 1933, as amended.
"Agreement" means this Stock Purchase Agreement as from time to time
amended and in effect between the parties.
"Closing" shall have the meaning set forth in Section 1.2(a).
"Commission" shall have the meaning set forth in Section 2.3.
"Common Stock" will include (a) the Company's Common Stock as authorized on
the date of this Agreement, (b) any other capital stock of any class or classes
of the Company authorized on or after the date hereof, the holders of which
shall have the right, without limitation as to amount, either to all or to a
share of the balance of current dividends and liquidating dividends after the
payment of dividends and distributions on any shares entitled to preference, and
(c) any other securities of the Company into which or for which any of the
securities described in (a) or (b) may be converted or exchanged pursuant to a
plan of recapitalization, reorganization, merger, sale of assets or otherwise.
-18-
<PAGE>
"Company" means and shall include White Pine Software, Inc., a Delaware
corporation, and its successors and assigns.
"Person" means an individual, corporation, partnership, limited liability
company, joint venture, trust or unincorporated organization or a government or
agency or political subdivision thereof.
"Purchased Shares" shall have the meaning set forth in Section 1.1(c).
"Purchaser" shall have the meaning set forth in Section 1.1(a).
"Qualified Public Offering" means the closing of an underwritten public
offering by the Company pursuant to a registration statement filed and declared
effective under the Act covering the offer and sale of Common Stock for the
account of the Company in which the aggregate net proceeds to the Company equal
at least $15,000,000 and in which the price per share of Common Stock equals or
exceeds $10.00.
"Related Agreements" shall have the meaning set forth in Section 2.2.
"Subsidiary" or "Subsidiaries" means any corporation, association or other
business entity of which the Company and/or any of its other Subsidiaries (as
herein defined) directly or indirectly owns at the time more than fifty percent
(50%) of the outstanding voting shares of every class of such corporation or
trust other than directors' qualifying shares.
ARTICLE IX
TERMINATION
-----------
9.1 Termination by Mutual Written Consent. This Agreement may be
-------------------------------------
terminated, and the transactions contemplated hereby abandoned, at any time
prior to the Closing by the written agreement of the Company and the Purchaser.
9.2 Termination for Breach. This Agreement may be terminated and the
----------------------
transactions contemplated hereby may be abandoned at any time before the Closing
(or any date to which such Closing may have been extended by the written
agreement of the parties obligated to perform on such Closing) by any party
obligated to perform on such Closing if the conditions for its benefit set forth
in Article VI or VII, as the case may be, have not been satisfied on or prior to
such Closing and if the conditions for the benefit of the other parties have
been satisfied or waived, and if such performing party shall have given written
notice of termination to the non-performing party.
9.3 Termination for Delay. Unless earlier terminated in accordance
---------------------
with Section 9.1 or 9.2, this Agreement may be terminated and the transactions
contemplated hereby may
-19-
<PAGE>
be abandoned by the Company or the Purchaser if the Closing does not occur by
April 18, 1996, provided, however, that the right to terminate this Agreement
-------- -------
under this Section 9.3 shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or resulted
in, the failure of the Closing to occur on or before such date.
9.4 Rights After Termination. Upon termination of this Agreement
------------------------
under this Article IX, the parties shall be released from all obligations
arising hereunder.
ARTICLE X
MISCELLANEOUS
-------------
10.1 Survival of Representations. The representations, warranties,
---------------------------
covenants and agreements made herein or in any certificates or documents
executed in connection herewith shall survive the execution and delivery hereof
and the closing of the transaction contemplated hereby.
10.2 Parties in Interest. Except as otherwise set forth herein, all
-------------------
covenants, agreements, representations, warranties and undertakings contained in
this Agreement shall be binding on and shall inure to the benefit of the
respective successors and assigns of the parties hereto (including permitted
transferees of any of the Purchased Shares). Except as may be required to be
disclosed by order of a court or otherwise required by law, the parties agree to
maintain in confidence the terms of the purchase of the Purchased Shares
hereunder, except that the Purchaser may disclose such terms to its investors in
the ordinary course and except that the Company may disclose such terms to its
shareholders, accountants, bankers and advisors in the ordinary course.
10.3 Shares Owned by Affiliates. For the purposes of applying all
--------------------------
provisions of this Agreement which condition the receipt of information or
access to information or exercise of any rights upon ownership of a specified
number or percentage of shares, the shares owned of record by any affiliate of
the Purchaser shall be deemed to be owned by such Purchaser. For the purpose of
this Agreement, the term "affiliate" shall mean any Person controlling,
controlled by or under common control with, the Purchaser and any shareholder of
the Purchaser.
10.4 Amendments and Waivers. Amendments or additions to this
----------------------
Agreement may be made and compliance with any term, covenant, agreement,
condition or provision set forth herein may be omitted or waived (either
generally or in a particular instance and either retroactively or prospectively)
upon the written consent of the Company and the holders of a majority of the
Purchased Shares. Prompt notice of any such amendment or waiver shall be given
to any Person who did not consent thereto. This Agreement (including the
Schedules and Exhibits annexed hereto, which are an integral part of this
Agreement) constitutes the full and complete agreement of the parties with
respect to the subject matter hereof.
-20-
<PAGE>
10.5 Notices. All notices, requests, consents, reports and demands
-------
shall be in writing and shall be hand delivered, sent by facsimile or other
electronic medium, or mailed, postage prepaid, to the Company or to the
Purchaser at the address set forth below or to such other address as may be
furnished in writing to the other parties hereto:
The Company: White Pine Software, Inc.
40 Simon Street
Nashua, NH 03060
Attention: Howard R. Berke, President
with copy to: Devine, Millimet & Branch, Professional Association
111 Amherst Street
Manchester, NH 03101
Attention: Steven Cohen, Esq.
The Purchaser: The address set forth opposite the Purchaser's name on
Schedule 1.1 attached hereto.
- ------------
with copy to: _________________________
_________________________
_________________________
_________________________
10.6 Expenses. Each party hereto will pay its own expenses in
--------
connection with the transactions contemplated hereby.
10.7 Counterparts. This Agreement and any exhibit hereto may be
------------
executed in multiple counterparts, each of which shall constitute an original
but all of which shall constitute but one and the same instrument. One or more
counterparts of this Agreement or any exhibit hereto may be delivered via
telecopier, with the intention that they shall have the same effect as an
original counterpart hereof.
10.8 Effect of Headings. The article and section headings herein are
------------------
for convenience only and shall not affect the construction or interpretation
hereof.
10.9 Adjustments. All provisions of this Agreement shall be
-----------
automatically adjusted to reflect any stock dividend, stock split or other such
form of recapitalization.
10.10 Governing Law. This Agreement shall be deemed a contract made
-------------
under the laws of the State of New Hampshire and together with the rights and
obligations of the parties hereunder, shall be construed under and governed by
the laws of such state.
* * * * * * *
-21-
<PAGE>
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to
the Company, whereupon, this letter shall become a binding agreement among us.
Very truly yours,
THE COMPANY:
WHITE PINE SOFTWARE, INC.
By: /s/ Howard R. Berke
------------------------------
Name: Howard R. Berke
Title: President
PURCHASER:
J.F. SHEA CO., INC.
By: /s/ Edmund H. Shea
------------------------------
Edmund H. Shea its duly
--------------------
authorized Vice President
-------------------
-22-
<PAGE>
Schedule 1.1(a)
---------------
Purchaser Purchased Shares Consideration
- --------- ---------------- -------------
J.F. Shea Co., Inc. 51,458 $300,000.14
655 Brea Canyon Road
Walnut, CA 91789
Attn: Edmund Shea
-23-
<PAGE>
FIRST AMENDMENT
TO
STOCK PURCHASE AGREEMENT
This First Amendment dated as of July 26, 1996 (this "Amendment") amends
the Stock Purchase Agreement dated as of April 17, 1996 (the "Agreement") by and
between White Pine Software, Inc., a Delaware corporation (the "Company"), and
J.F. Shea Co., Inc. (the "Purchaser").
WHEREAS, the Purchaser wishes to facilitate the proposed initial public
offering of the Company;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Amendment and other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
The definition of "Qualified Public Offering" contained in Article VIII of
the Agreement is hereby deleted and replaced in its entirety with the following
paragraph:
"`Qualified Public Offering' means the closing of an underwritten
public offering by the Company pursuant to a registration statement filed
and declared effective under the Securities Act of 1933 covering the offer
and sale of Common Stock for the account of the Company in which the
aggregate net proceeds to the Company equal at least $12,000,000 and in
which the price per share of Common Stock equals or exceeds $6.00."
IN WITNESS WHEREOF, this Amendment has been duly executed by the parties
hereto as of the date first written above.
WHITE PINE SOFTWARE, INC.
By: /s/ Howard R. Berke
-------------------------------
President
J.F. SHEA CO., INC.
By: /s/ James G. Shontere
-------------------------------
James G. Shontere
Secretary
<PAGE>
EXHIBIT 10.24
ACQUISITION AGREEMENT
---------------------
THIS ACQUISITION AGREEMENT (the "Agreement") is made as of the 10th day of
October, 1995, between and among WHITE PINE SOFTWARE, INC., a Delaware
corporation (hereinafter referred to as "White Pine"), KILLKO CABALLERO,
REGINALD BURSENS and SOFINNOVA S.A., a French corporation, SOFINNOVA CAPITAL
FCPR, a French limited partnership and CV SOFINNOVA VENTURES PARTNERS III, a
Dutch limited partnership (Sofinnova S.A., Sofinnova Capital FCPR and CV
Sofinnova Ventures Partners III are hereinafter collectively referred to as
"Sofinnova") (Killko Caballero, Reginald Bursens and Sofinnova are hereinafter
collectively referred to as the "Significant Shareholders") and MICHIEL FAST,
JEAN-FRANCOIS DUCARROZ, MALLKU CABALLERO, PASCAL CRAUSAZ and PIERRE SASLAWSKY
(the Significant Shareholders and Fast, Ducarroz, Mallku Caballero, Crausaz and
Saslawsky are hereinafter sometimes referred to individually as a "Shareholder"
or collectively as the "Shareholders").
RECITALS
--------
WHEREAS, the Shareholders own one hundred percent (100%) of the issued and
outstanding shares of the capital stock of About Software Corporation S.A.,
formerly known as Advanced Software Concepts, a French corporation (hereinafter
referred to as "ASC", and together with About Software Corporation, a California
corporation and wholly owned subsidiary of ASC (the "Subsidiary"), the "ASC
Group"); and
WHEREAS, the Shareholders desire to sell and exchange all of their shares
of stock in ASC for shares of stock in White Pine; and
WHEREAS, White Pine is willing to issue shares of its stock to the
Shareholders in exchange for their shares of stock in ASC; and
WHEREAS, the Shareholders and White Pine have agreed to conduct such an
exchange on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the covenants and promises herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto represent,
covenant and agree as follows:
<PAGE>
ARTICLE I
EXCHANGE OF STOCK
1.01 Exchange of Stock.
-----------------
a. Ownership of ASC Stock. The Shareholders represent and acknowledge
----------------------
that they collectively own one hundred percent (100%) of the issued and
outstanding shares of capital stock of ASC, consisting of thirty-nine thousand,
seventeen (39,017) shares, with a value of FF100 per share (hereinafter
collectively referred to as the "ASC Stock"). The ASC Stock is owned by the
Shareholders in the amounts set forth on Schedule 1.01a attached hereto and
--------------
herein incorporated by reference.
b. Exchange of Shares. Subject to the terms and conditions of this
------------------
Agreement, the Shareholders agree to transfer, convey and deliver to White Pine
at the Closing (as hereinafter defined) all of their ASC Stock. In exchange for
the ASC Stock, White Pine agrees to issue to the Shareholders, post Closing,
nineteen million, nine hundred and nine thousand, five hundred and sixty-four
(19,909,564) shares of common stock of White Pine (the "WPS Stock"). The
parties agree that the aggregate number of shares of WPS Stock shall be
allocated among the Shareholders as set forth on Schedule 1.01a attached hereto.
--------------
c. Escrow and Distribution of WPS Stock. Ten percent (10%) of the
------------------------------------
aggregate number of shares of WPS Stock plus the number of shares of common
stock of White Pine set aside for options for ASC key employees pursuant to
Section 1.01d hereof shall be escrowed at the Closing in accordance with Section
1.01A hereof (the "Escrowed Stock"). The number of shares of WPS Stock less the
number of shares of Escrowed Stock shall be distributed to the Shareholders at
the Closing (the "Distributable Stock"). The number of shares of the
Distributable Stock to be distributed at the Closing to each Shareholder
respectively is set forth on Schedule 1.01a attached hereto.
--------------
d. Options for Key Employees of ASC. Options for the purchase of one
--------------------------------
million, forty-five thousand, four hundred and seventy-eight (1,045,478) shares
of common stock of White Pine shall be granted to the key employees of ASC in
the amounts set forth opposite to each such key employee's name on Schedule
--------
1.01d attached hereto and herein incorporated by reference (the "Options"). The
- -----
Options shall be granted to such key employees on terms and conditions similar
to the terms and conditions upon which options for the purchase of shares of
common stock of White Pine are made to the key employees of White Pine from time
to time.
2
<PAGE>
1.01A Escrowed Stock. Pursuant to Section 1.01c hereof, two million,
--------------
ninety thousand, five hundred and four (2,090,504) shares of the WPS Stock shall
be held in escrow (the "Escrowed Stock"). The purpose of such escrow shall be
to provide a source of remedy in the event that a party hereto is entitled to be
indemnified in accordance with Article IX hereof. The terms and conditions
pursuant to which the Escrowed Stock shall be held, adjusted and released are as
follows:
a. Escrow Agent. The treasurer of White Pine shall act as escrow agent
------------
for the Escrowed Stock (the "Escrow Agent"). White Pine shall deliver to the
Escrow Agent a copy of this Agreement at the Closing, representing the
Shareholders' right to receive the Escrowed Stock, as adjusted herein. White
Pine shall not be obligated to issue any Escrowed Stock or certificates
representing such stock until the termination of the "Escrow Period" (as
hereinafter defined) and the resolution of all issues related to the Escrowed
Stock and adjustments to the Escrowed Stock.
b. Escrow Period. The "Escrow Period" shall mean the period of time that
-------------
the Escrowed Stock is held in escrow hereunder. The Escrow Period shall
commence on the Closing Date and shall continue for a period of one (1) year
thereafter or until all issues related to the Escrowed Stock and all adjustments
to the Escrowed Stock have been resolved.
c. Adjustments. The number of shares of Escrowed Stock which shall be
-----------
distributed to the Shareholders, if any, (the "Distributable Escrowed Stock")
shall be the number of shares of Escrowed Stock increased or decreased, as the
case may be, by the number of shares of White Pine common stock necessary to
accomplish the indemnities provided by Article IX hereof including, but not
limited to, the failure or inaccuracy of the Shareholders' representations and
warranties regarding the amount of cash owned and held by ASC Group as of the
Closing Date, the amount of third-party debt owed by ASC Group as of the Closing
Date and the amount of professional and other fees incurred by ASC Group and
related to this acquisition. For purposes of adjusting the number of shares of
Escrowed Stock as required herein, adjustments shall be made at a rate of three
thousand one hundred and thirty-nine (3,139) shares of White Pine common stock
for each One Thousand Dollars ($1,000 U.S.) of adjustment required herein.
Adjustments shall be pro rated at such rate for lesser adjustment amounts. No
adjustment shall be made until the aggregate of all adjustments exceeds Ten
Thousand Dollars ($10,000). When applicable, such adjustments shall be based
upon the "Closing Balance Sheet" (as hereinafter defined).
3
<PAGE>
d. Closing Balance Sheet. The "Closing Balance Sheet" shall be the
---------------------
consolidated balance sheet of ASC Group which accurately reveals the financial
condition of ASC Group as of September 30, 1995. The Closing Balance Sheet
shall be prepared in accordance with French generally accepted accounting
principles, consistently applied, for ASC and in accordance with United States
generally accepted accounting principles, consistently applied for the
Subsidiary (hereinafter referred to as "GAAP"). Such generally accepted
accounting principles shall be applied consistently to the Closing Balance Sheet
with those used in the review of the ASC Group's June 30, 1995 financial
statements by Ernst & Young. The Closing Balance Sheet shall reflect the
adjustments recommended by Ernst & Young as a result of its review of the ASC
Group's June 30, 1995 financial statements. Notwithstanding the foregoing,
White Pine shall be entitled to escrow adjustments based on a breach of
representations and warranties hereunder, including, without limitation,
adjustments for undisclosed or under reported liabilities.
e. Preliminary Closing Balance Sheet. As soon as practicable, but in any
---------------------------------
event within thirty (30) days following the Closing Date (as hereinafter
defined), the Significant Shareholders shall ensure that ASC has prepared and
delivered to White Pine a preliminary consolidated closing balance sheet of ASC
Group (hereinafter referred to as the "Preliminary Closing Balance Sheet").
White Pine shall have fifteen (15) days following receipt of the Preliminary
Closing Balance Sheet to review it for compliance with this Agreement. Within
such 15-day period, White Pine shall deliver to the Shareholders a written
statement accepting or objecting to the Preliminary Closing Balance Sheet. In
the event that White Pine does so object, such written statement shall include a
detailed itemization of White Pine's objections and its reasons therefor. If no
such written statement of objection is delivered by White Pine to the
Shareholders within such 15-day period, then White Pine shall be deemed to have
accepted the Preliminary Closing Balance Sheet as submitted by the Significant
Shareholders.
In the event that White Pine shall have accepted or shall be deemed to have
accepted the Preliminary Closing Balance Sheet as prepared and delivered by the
Significant Shareholders, the Preliminary Closing Balance Sheet shall constitute
the Closing Balance Sheet.
f. Resolution of Objections to the Preliminary Closing Balance Sheet. In
-----------------------------------------------------------------
the event that White Pine shall object to the Preliminary Closing Balance Sheet,
the Significant Shareholders and White Pine shall promptly meet in a good-faith
attempt to resolve such objection. In the event that such objection cannot be
resolved between the Shareholders and White Pine within
4
<PAGE>
twenty-one (21) days after a written statement of objection has been delivered,
the Shareholders and White Pine shall submit the dispute to White Pine's
independent accounting firm (the "Arbiter") to arbitrate the disagreement. The
Shareholders and White Pine agree that any arbitration shall be conducted in
Manchester, New Hampshire in accordance with Section 10.11 hereof. Promptly,
but not later than thirty (30) days after acceptance of its appointment as
Arbiter, the Arbiter shall determine (based solely on presentations of the
Significant Shareholders and White Pine, or their respective representatives, to
the Arbiter and not by independent review) only those issues in dispute and
shall render a written report as to the dispute and the resulting adjustment to
the Percentage. In resolving any disputed item, the Arbiter may not assign a
value to any item greater than the greatest value for such item claimed by
either party.
The Preliminary Closing Balance Sheet, as adjusted in accordance with the
agreement between the parties or by determination of the Arbiter, shall
constitute the Closing Balance Sheet for purposes of this Agreement.
g. Costs of Resolution. The fees, costs and expenses of the Arbiter, if
-------------------
any, shall be paid one-half (1/2) by the Shareholders and one-half (1/2) by
White Pine. Each of the Shareholders and White Pine shall pay the costs and
expenses of his, her or its attorneys, advisors and accountants.
h. Issuance of Distributable Escrowed Stock. The Distributable Escrowed
----------------------------------------
Stock shall be issued by White Pine to the Shareholders within twenty (20) days
after the close of the Escrow Period.
1.02 Loans. Subject to the terms and conditions of this Agreement, White
-----
Pine hereby agrees to loan to each of Michiel Fast, Reginald Bursens, Jean-
Francois Ducarroz and Mallku Caballero (hereinafter sometimes referred to as the
"Borrowers") an amount of money to pay tax liabilities incurred as a result of
the exchange of ASC Stock for WPS Stock described in Section 1.01 hereof. The
amount of each of these loans is limited to the amount of taxes incurred as a
result of the exchange, but in no event shall any such loan exceed Twenty
Thousand Dollars ($20,000) in U.S. currency. The loans shall be evidenced in
the form of the non-recourse promissory note attached hereto as Exhibit 1.02(a),
---------------
which such non-recourse promissory notes shall be executed by each of the
Borrowers.
Interest on the outstanding principal shall be charged at a rate equal to
six and one-half percent (6.5%) or, if greater, the monthly mid-term applicable
federal rate in effect as of the
5
<PAGE>
Closing Date, as determined by the most recently published Revenue Ruling by the
Internal Revenue Service, as defined in Section 1274(d)(1)(C)(ii) of the
Internal Revenue Code of 1986, as amended. This interest rate shall be in
effect for the duration of the loan.
The outstanding principal and accrued interest of these loans shall be due
in full upon the earliest of the following events: (i) the sale of a majority of
the shares of issued and outstanding stock of White Pine by the shareholders of
White Pine provided that the Borrowers have the opportunity to participate in
such sale; or (ii) the sale of a majority of the assets of White Pine provided
that the proceeds of such sale are distributed pro rata among the then White
Pine shareholders; or (iii) an initial public offering of the shares of stock of
White Pine provided and to the extent that the Borrowers have the opportunity to
participate in such offering; or (iv) that date which is five (5) years from the
date of execution of this Agreement; or (v) the sale or other disposition by a
Borrower of his White Pine shares of stock. Each Borrower shall secure his or
her loan with all of the shares of the WPS Stock to be received by him or her
under Section 1.01 hereof by pledging his or her stock with an agreement in the
form of the Stock Pledge Agreement attached hereto as Exhibit 1.02(b). White
---------------
Pine agrees to release a portion of each Borrower's pledged WPS Stock to such
Borrower, to the extent necessary, in the event that such Borrower elects to
sell such portion of his WPS Stock to Sofinnova or such other person or entity
in order to obtain funds with which to pay his tax liability incurred as a
result of the transactions described herein.
1.03 The Closing. Subject to the terms and conditions of this Agreement,
-----------
the closing of the transactions contemplated herein (hereinafter referred to as
the "Closing") shall take place as soon as practicable after the completion of
due diligence, but in no event later than September 30, 1995 (the date on which
the Closing is held is herein referred to as the "Closing Date"), it being
understood that time is of the essence. The Closing shall occur as a
contemporaneous signing by the parties hereto of duplicate originals of the
documents required for the transactions contemplated herein, with the signature
pages being transmitted via facsimile machine to the other parties hereto, with
signed originals to follow, shipped via Federal Express on the Closing Date.
6
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ALL SHAREHOLDERS
For the purposes of this Agreement, any reference to the "best of such
Shareholder's knowledge" shall mean the best of such individual Shareholder's
knowledge only after (i) due inquiry of the current officers and employees of
ASC; and (ii) based upon matters which have otherwise come to such Shareholder's
attention in his or her capacity as a Shareholder of ASC, but does not imply
that such Shareholder has made any actual investigation regarding such matters
except as set forth above. Subject to the foregoing, each Shareholder
represents and warrants to White Pine as follows:
2.01 Authority. Such Shareholder has the full authority to enter into
---------
this Agreement and to carry out the transactions contemplated herein. This
Agreement constitutes a valid and binding obligation of such Shareholder,
enforceable in accordance with its terms.
2.02 Consents and Approvals. No permit, consent, license, approval or
----------------------
authorization of, or declaration, exemption from or filing or registration with,
any court or governmental or regulatory authority, domestic or foreign, is
required in connection with the execution and delivery of this Agreement by such
Shareholder or the consummation by him or her of the transactions contemplated
herein, except for the consent and written approval of the French Ministry of
Economy and Finances, to be obtained by counsel for the Shareholders as a
condition of closing.
2.03 No Broker or Finder. Such Shareholder has not retained any finder or
-------------------
broker or agent for whose fees or expenses or commissions White Pine, ASC or the
other Shareholders would be responsible in connection with this Agreement or the
transactions contemplated herein.
2.04 Accuracy of Representations and Warranties. To the best of such
------------------------------------------
Shareholder's knowledge, the information concerning ASC set forth in this
Agreement and the Exhibits and Schedules hereto do not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated herein or therein or necessary to make the statements contained herein or
therein not false or misleading. To the best of such Shareholder's knowledge,
copies of all written documents, instruments and agreements, evidencing items
listed on any Exhibit or Schedule hereto which have been or which will be
delivered to White Pine or its advisors are or will be true, complete and
correct, in all material respects, including all amendments thereto and
modifications thereof.
7
<PAGE>
2.05 Securities Laws. Such Shareholder acknowledges that his or her
---------------
representations and warranties contained in Sections 2.05 through 2.09 hereof
are being relied upon by White Pine as a basis for the exemption of the transfer
of the WPS Stock from the registration requirements of the Securities Act of
1933, as amended (hereinafter referred to as the "Securities Act"), and any
applicable state securities laws.
2.06 Nonregistration. Such Shareholder understands that (i) the WPS Stock
---------------
has not been registered under the Securities Act or any state securities laws by
reason of their issuance in a transaction exempt from the registration
requirements of the Securities Act and applicable state securities laws, (ii)
the WPS Stock must be held indefinitely unless a subsequent disposition thereof
is registered under the Securities Act and applicable state securities laws or
is exempt from such registration, (iii) the WPS Stock will bear a legend to such
effect and (iv) White Pine will make a notation on its transfer books to such
effect. Each Shareholder is aware that the provisions of Rule 144, which
permits limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, is not now, and may not become, available
for resale of the WPS Stock.
2.07 Investment Purposes. Such Shareholder is acquiring WPS Stock for his
-------------------
or her individual account and is doing so with the intent of holding the WPS
Stock for investment and without the intent of participating directly or
indirectly in a distribution thereof.
2.08 Informed Judgment. Such Shareholder has had the opportunity to
-----------------
discuss the transactions contemplated herein with his or her attorneys,
accountants, investment and financial advisors, if any. Such Shareholder has
been furnished or provided access to such additional information as the
Shareholder or his or her advisors, if any, have requested. Such Shareholder
has had the opportunity to discuss White Pine's business, management and
financial affairs, and all documents affecting White Pine generally, with White
Pine's management.
2.09 Investment Risk. Such Shareholder is familiar with the business of
---------------
White Pine and realizes that the WPS Stock is a speculative investment involving
a high degree of risk for which there is no assurance of any return. Such
Shareholder has knowledge and experience in financial and business affairs,
including investing in companies similar to White Pine and is capable of
determining the information necessary to make an informed investment decision,
of requesting such information from White Pine, and of utilizing the information
that they have received from White Pine to evaluate the merits and risks of
investment in the WPS Stock. Such Shareholder is able to bear
8
<PAGE>
the economic risk of his or her investment in the WPS Stock, and understands he
or she must do so for an indefinite period of time.
2.10 Escrow Adjustment Amounts. The Closing Balance Sheet shall include
-------------------------
the following amounts:
<TABLE>
<S> <C> <C>
a. Cash - At least $ 147,000
b. Third Party Debt - Not more than $(542,268)
(see Schedule 3.07)
c. Accrued Fees and
Professional Expenses - Not more than $ (95,000)
---------
Net Amount $(490,268)
---------
</TABLE>
This representation and warranty shall be based upon the net aggregate
amount of the above items. The amount of accrued fees and professional expenses
shall include, but not be limited to, fees related to the services of Von Gehr
International, Fenwick & West, Attorney Francois Monod, Lussan Brouillard and
Sokolow, Dunaud, Mercadier & Carreras.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SIGNIFICANT SHAREHOLDERS
Given the Significant Shareholders' special position and knowledge with
respect to ASC's operations, in addition to the representations and warranties
contained in Article II hereof, the Significant Shareholders represent and
warrant to White Pine, except as set forth in ASC's Disclosure Schedule attached
hereto and herein incorporated by reference, as follows:
3.01 Organization and Qualification of ASC. ASC is duly organized,
-------------------------------------
validly existing and in good standing under the laws of the country of France
and the State of California, as applicable, and has the full corporate power and
authority to carry on its business as such business is now being conducted, and
to own or lease its properties and assets. ASC is duly licensed or qualified to
do business as a foreign corporation and is in good standing in all of the
jurisdictions in which the failure to be so licensed or qualified would have a
material adverse effect on the business, properties or condition of ASC.
3.02 Capitalization and Ownership of ASC. The authorized and issued
-----------------------------------
capital stock of ASC consists of thirty-nine thousand, seventeen (39,017) shares
of common stock, with a value of FF100 per share, of which all of the shares are
owned directly by the Shareholders. The authorized and issued capital stock of
the Subsidiary consists of one hundred thousand (100,000) shares of
9
<PAGE>
common stock, par value of $1.00 per share, of which all of the shares are owned
directly by ASC. The ASC Stock is (or at Closing, will be) owned beneficially
and of record by the Shareholders, has been duly authorized and validly issued
and is fully paid and non-assessable with no personal liability attaching to the
ownership thereof, free of preemptive or similar rights and is owned free and
clear of all mortgages, pledges, liens, claims and encumbrances. At the
Closing, White Pine will receive good and valid title to the ASC Stock, free and
clear of all mortgages, pledges, liens, claims and encumbrances. There are no
outstanding:
a. securities convertible into or exchangeable for capital stock of ASC;
or
b. options, warrants, calls of, or other rights to purchase or subscribe
to, capital stock of ASC or securities convertible or exchangeable for capital
stock of ASC; or
c. written contracts, commitments, agreements, understandings or
arrangements of any kind relating to the issuance of any capital stock of ASC or
any such convertible or exchangeable securities or any such options, warrants,
calls or rights.
3.03 Subsidiaries. Schedule 3.03, attached hereto and herein incorporated
------------ -------------
by reference, contains a list of any and all subsidiaries, partnerships, joint
ventures and other entities in which ASC has, directly or indirectly, any legal
or beneficial interest (hereinafter referred to individually as a "Subsidiary"
and collectively as the "Subsidiaries") and indicates for each such Subsidiary:
(i) the percentage and type of equity securities of or other interest in the
Subsidiary owned or controlled by ASC, (ii) the identity of any other beneficial
or record owner of any such Subsidiary and the percentage and type of such
ownership, (iii) the jurisdiction of incorporation or organization and (iv) each
jurisdiction in which it is qualified or licensed to conduct its business. ASC
is the direct owner, beneficially and of record, of all such equity securities
or other interests listed as being owned by it, free and clear of all liens,
pledges, charge, claims and encumbrances of any nature whatsoever. All the
outstanding shares of stock of each such Subsidiary have been duly authorized
and validly issued and are fully paid and non-assessable.
There are not any options, warrants, calls, rights, commitments, preemptive
rights or agreements of any character to which any such Subsidiary is a party or
by which any such Subsidiary is bound obligating it to issue, deliver or sell,
or cause to be issued, delivered or sold, contingently or otherwise, additional
equity or other ownership interests of such Subsidiary or any securities or
obligations convertible into or exchangeable
10
<PAGE>
for such interests, or to grant, extend or enter into any such option, warrant,
call, right, commitment, preemptive right or agreement.
Each Subsidiary that is a corporation is duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation and has
all requisite corporate power and authority to own, lease and operate its
properties and to conduct its business as it is now being conducted. Each
Subsidiary that is not a corporation is duly organized under the laws of the
jurisdiction of its organization and has all requisite power and authority to
own, lease and operate its properties and to conduct its business as it is now
being conducted. A true and correct copy of the certificate of incorporation
(or the analogous document) and By-Laws of each corporate Subsidiary and of the
organizational and governing instruments of each other Subsidiary as in effect
is attached to Schedule 3.03. Each of the Subsidiaries is duly qualified or
-------------
licensed to conduct its business and is in good standing in each jurisdiction
where the character of its business or the nature of its properties makes such
qualification or licensing necessary and the failure to have so qualified or
been licensed would have a material adverse effect on the business of ASC or
such Subsidiary.
3.04 No Violation. The execution and delivery of this Agreement, the
------------
consummation of the transactions contemplated herein and the compliance by the
Shareholders and ASC with all of the provisions hereof will not:
a. violate, or conflict with, or result in a breach of any provision of,
or constitute a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result
in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of ASC under any of the terms,
conditions or provisions of (i) its Certificate of Incorporation,
charter, organizational documents or By-Laws, or (ii) any note, bond,
indenture, mortgage or deed of trust relating to borrowed money, or
(iii) any license, lease, agreement or other instrument or obligation
to which it is a party or by which it or any of its properties or
assets may be bound or affected, except for such violations,
conflicts, breaches or defaults as (A) do not and will not affect the
validity or enforceability of this Agreement, or (B) do not and will
not have, in the aggregate, any material adverse effect on the
business, properties or condition of ASC.
11
<PAGE>
b. violate any (i) order, writ, injunction, decree, statute, or (ii) rule
or regulation applicable to ASC, or any of its properties or assets,
except for such violations of rules and regulations as (A) do not and
will not affect the validity or enforceability of this Agreement, or
(B) do not and will not have, in the aggregate, any material adverse
effect on the business, properties or condition of ASC.
3.05 Compliance with Law. ASC is in compliance with all applicable laws,
-------------------
rules, regulations, orders ordinances, judgments and decrees of all national,
federal, state, local, foreign or other Governmental authorities in both the
countries of the United States and France, including, but not limited to, the
Federal Occupational Safety and Health Act, the National Labor Relations Act,
the Civil Rights Act, and all applicable laws, rules and regulations relating to
the safe conduct of business, employment discrimination, antitrust, consumer
protection, environmental protection, currency exchange, securities and trading
with the enemy matters.
3.06 Financial Statements. Annexed hereto as Schedule 3.06 are true and
-------------------- -------------
accurate copies of:
a. all management prepared financial statements of ASC and the Subsidiary
for the fiscal year ended December 31, 1994 including the balance
sheet, statement of income and retained earnings, statement of changes
in financial position for such year and the notes thereto, (the
"Annual Financial Statements");
b. the unaudited financial statements of ASC and the Subsidiary as of
August 31, 1995 including the balance sheet and statement of income
(the "Interim Financial Statements").
The Annual Financial Statements and the Interim Financial Statements are
hereinafter collectively referred to as the "Financial Statements."
The Annual Financial Statements accurately represent the financial
position, assets and liabilities, results of operations and changes in financial
position of ASC as of the respective dates and, for the respective periods
indicated, reflect all necessary accruals required by GAAP and have been
prepared in accordance with GAAP consistently applied. The Interim Financial
Statements are in accordance with the books and records of ASC and although the
Interim Financial Statements are not audited and do not contain the footnotes
which would be required in audited financial statements, they accurately
represent the financial position, assets and liabilities of ASC and the results
of its operations, and changes in financial position for the respective
12
<PAGE>
periods indicated and reflect all necessary accruals, all in conformity with
GAAP applied on a consistent basis. The Interim Financial Statements contain
all adjustments (consisting of only normal recurring accruals) required to be
made by GAAP and such adjustments required to be made pursuant to the Ernst &
Young due diligence report, subject to normal year end adjustments.
3.07 Absence of Undisclosed Liabilities. All debt owed to third parties
----------------------------------
is accurately described in Schedule 3.07, attached hereto and herein
-------------
incorporated by reference, such description to include the name and address of
each creditor or lender, the amount of outstanding principal and accrued, but
unpaid, interest as of the Closing Date, the method of repayment of principal,
the rate of interest, the method of payment of interest, the date the debt was
incurred, when such debt is due, what collateral secures such debt or whether
the debt is unsecured and any other pertinent aspects of the debt. The
Significant Shareholders represent and warrant that, without exception, all the
debt owed to third parties is assumable by White Pine without triggering any
default, acceleration or any other material change in the debt arrangement
resulting from the transactions described in this Agreement.
3.08 Tax Matters. ASC has filed all domestic and foreign tax returns and
-----------
statements in the United States and France (including appropriate schedules and
attachments thereto and elections therein), including, but not limited to,
income, profit, franchise, capital stock, sales, use, admissions, occupation,
property and excise returns and license or other fees required to be filed by it
and has paid or provided for all taxes, fees, interest or penalties (i) shown on
or which are due and payable pursuant to such returns, and (ii) which have
become due pursuant to any assessment, deficiency notice or similar notice
received by ASC, and (iii) which otherwise have become due, whether or not shown
on any such return; other than, in each case, those which are disclosed in
Schedule 3.08, attached hereto and herein incorporated by reference, which are
- -------------
presently payable without interest or penalty or which are being contested in
good faith. Except as set forth in Schedule 3.08, ASC has not waived or agreed
-------------
to the extension of any applicable statute of limitations relating to the
assessment of any national, federal, state, local or foreign taxes. No issue
has been raised in any prior or pending review or audit of ASC with respect to
its national, federal, state, local or foreign tax returns which reasonably may
be expected to have an adverse effect on future periods. Except as set forth in
Schedule 3.08, the tax returns or fee statements of or relating to ASC are not
- -------------
currently in the process of being examined by any taxing authority, and within
the past five (5) years no taxing authority has examined any tax return
applicable to ASC or provided ASC with any notice of any questions relating to,
or claims asserted for, taxes against ASC. The Significant Shareholders have no
knowledge of any tax
13
<PAGE>
deficiency which has been asserted against ASC or its properties or assets. No
properties of ASC which serve as the basis for the imposition of a tax or fee
have been appraised, examined or reassessed by any governmental or taxing
authority since the filing of the last return or statement relating to or the
payment of such tax or fee.
3.09 Properties Encumbrances. Other than personal property or assets
-----------------------
belonging to employees of ASC or which are leased by ASC, ASC has good and valid
title to all of the personal properties and assets located on the real property
listed on Schedule 3.09, attached hereto and herein incorporated by reference,
-------------
together with the motor vehicles listed on Schedule 3.09, including, without
-------------
limitation, all of the properties and assets reflected in the balance sheet
contained in the Annual Financial Statements, except for sales of inventory in
the ordinary course of business and consistent with past practices.
All of the personal properties and assets owned by ASC as well as the real
property listed on Schedule 3.09 are free and clear of all title defects or
-------------
objections, mortgages, pledges, liens, claims, charges, security interests,
conditional sales agreements, easements (other than utility easements) and other
encumbrances of any nature whatsoever except as set forth on Schedule 3.09.
-------------
To the best of the Significant Shareholders' knowledge, no structure or
improvement on the real property owned or leased by ASC violates any applicable
zoning, building regulations or ordinances or national, federal, state or
municipal law.
To the best of the Significant Shareholders' knowledge, there are no
notices of any eminent domain, compulsory acquisition or similar proceedings or
of violations of law, or ordinances, orders or requirements noted in or issued
by any governmental authority having jurisdiction, against or affecting such
owned or leased real property.
3.10 Absence of Certain Changes or Events. Since June 30, 1995, ASC has
------------------------------------
conducted its business only in the ordinary course, and without limiting the
generality of the foregoing, there has not been any:
a. loss, damage, destruction or other casualty to any of its properties;
b. material adverse change in the business, properties or condition of
ASC;
14
<PAGE>
c. commitment or agreement to merge or consolidate with, purchase
substantially all of the assets of, or otherwise acquire any firm,
association, corporation or other business organization or division
thereof;
d. incurrence of any debt for borrowed money (whether secured or
unsecured) other than in the ordinary course of its business, that is
not disclosed on Schedule 3.07;
-------------
e. sale, assignment or transfer of any tangible property or assets of ASC
other than in the ordinary course of business;
f. purchase, sale, assignment or transfer of any intangible property or
assets of ASC including, without limitation, any software copyrights,
licenses or sublicenses except in the ordinary course of business;
g. capital expenditures, in the aggregate, in excess of $50,000;
h. increase in the compensation payable or to become payable by ASC to
any officers or key managerial employees other than pursuant to any
existing bonus or similar compensation arrangement listed on Schedule
--------
3.15 hereof; or
----
i. payment to Shareholders of any distributions or dividends of property
other than cash, or changes in accounting principles or procedures.
3.11 Contracts and Commitments. Except as set forth in Schedule 3.11,
------------------------- -------------
attached hereto and herein incorporated by reference:
a. ASC does not have any agreements, contracts, leases, commitments,
arrangements or restrictions, written or oral, which are material to
its business, operations or prospects;
b. ASC does not have any outstanding contracts with officers, key
employees, agents, distributors, dealers or brokers;
c. ASC does not have any collective bargaining agreements or union
contracts or like agreements;
d. ASC is not in default, nor, to the best of the Significant
Shareholders' knowledge, is there any basis for any valid claim of
default, under (i) any material contract, lease, commitment or
instrument made or
15
<PAGE>
obligation owed, (ii) any judgment, order, injunction, or decree of
any court, national or federal governmental authority, department,
commission, board, agency or other instrumentality, or (iii) any order
or decree of any state or local governmental authority, department,
commission, board, agency or other instrumentality and, to the best of
the Significant Shareholders' knowledge, no condition or event has
occurred which (whether with or without notice, lapse of time, or
both, or the happening or occurrence of any other event) would
constitute a default by ASC and the Significant Shareholders do not
know of any condition or state of facts which, in their reasonable
judgment, is likely to cause or create a default or defaults by ASC
under any such contract, lease, commitment, instrument or obligation,
judgment, order, injunction or decree;
e. ASC is not restricted from carrying on business anywhere in the world;
f. ASC has no other debt obligations for borrowed money other than those
disclosed on Schedule 3.07; and
-------------
g. Each of the contracts, lease and agreements to which ASC is a party
and which are material to the business, operations or prospects of ASC
are valid, binding and enforceable in accordance with their terms.
3.12 Litigation. There are no claims, actions, suits, investigations or
----------
proceedings of any nature pending against ASC or against any officer or director
of ASC in his or her capacity as such. To the best of the Significant
Shareholders' knowledge, there are no such threatened claims, actions, suits,
investigations or proceedings of any nature with respect to which the
Significant Shareholders or ASC has received written notice or which are
reasonably likely to result in any liability of ASC. There are no claims,
actions, suits, investigations or proceedings of any nature, pending or, to the
best of the Significant Shareholders' knowledge, threatened, which question the
validity of this Agreement or any actions taken or to be taken in connection
with the consummation of the transactions contemplated herein.
3.13 Trademarks, Trade Names and Other Intellectual Property. Schedule
------------------------------------------------------- --------
3.13, attached hereto and herein incorporated by reference, contains an accurate
- ----
and complete list and brief description of all material trademarks (either
registered or common law), trade names, service marks, patents and copyrights
(and all applications and licenses therefor and agreements with respect thereto)
owned by ASC or in which it has any interest and, except as described in
Schedule 3.13:
- -------------
16
<PAGE>
a. no claims are pending or, to the best of the Significant Shareholders'
knowledge, threatened, by any person and there are no disputes with
respect to the use of the trade names, servicemarks, patents or
copyrights by ASC;
b. to the best of the Significant Shareholders' knowledge, the use of
such material trademarks, servicemarks, patents, trade names and
copyrights does not infringe on the rights of any person; and
c. Except for ASC licenses to end use customers in its ordinary course of
business, ASC has not granted to any party any interest in or to the
registrations or applications listed on Schedule 3.13 or the material
-------------
trademarks, copyrights, trade names, servicemarks or patents covered
thereby and such marks, rights and patents are free and clear of any
lien or similar encumbrance.
All certificates, affidavits and other documents necessary to keep the
registrations with respect to the material trademarks, trade names,
servicemarks, patents or copyrights set forth on Schedule 3.13 are in full force
-------------
and effect have been filed and no default exists which impairs the validity or
effectiveness of such registrations.
3.14 Employee Benefits Plans. Schedule 3.14, attached hereto and herein
----------------------- -------------
incorporated by reference, discloses any group life, health and all other
employee benefits and arrangements, including any "employee welfare benefit
plan" or "employee pension benefit plan," as such terms are defined in Section 3
of the Employment Retirement Income Security Act of 1974, as amended ("ERISA"),
that are maintained by ASC. All such plans comply in all material respects with
ERISA (including the regulations and published interpretations thereunder); no
reportable event within the meaning of Title IV of ERISA has occurred and is
continuing with respect to any such plan and no prohibited transaction within
the meaning of Title I of ERISA has occurred with respect to any such plan. ASC
Group has not at any time maintained or contributed to any "Multi-Employer Plan"
as such term is defined in Section 3(37) of ERISA.
3.15 Personnel and Certain Authorized Persons. Schedule 3.15, attached
---------------------------------------- -------------
hereto and herein incorporated by reference, contains a true and complete list
of the names, current salaries and fringe benefits of all of the officers and
employees of ASC.
3.16 Insurance. Schedule 3.16, attached hereto and herein incorporated by
--------- -------------
reference, contains an accurate and complete list of all insurance policies and
bonds currently in force with respect to the officers and directors, and the
properties, assets
17
<PAGE>
and business of ASC. Said insurance policies and bonds are current. All
premiums which have become due with respect thereto covering all periods up to
the Closing have been paid or will be paid when due. The Significant
Shareholders believe that ASC has adequate insurance with respect to the
properties and assets of ASC against risks of a character usually insured
against by corporations engaged in the same or similar business as ASC, and
against loss or damage of the kinds customarily insured against by such
corporations.
3.17 Employment Agreements. Except as set forth on Schedule 3.17 attached
--------------------- -------------
hereto and herein incorporated by reference, ASC does not have any employment
agreements or contracts with any of its officers or employees.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF WHITE PINE
White Pine represents and warrants to the Shareholders, as follows:
4.01 Organization and Qualification. White Pine is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the full corporate power and authority to carry on its
business as such business is now being conducted, and to own or lease its
properties and assets. White Pine is duly licensed or qualified to do business
as a foreign corporation and is in good standing in all of the jurisdictions in
which the failure to be so licensed or qualified would have a material adverse
effect on the business, properties or condition of White Pine.
4.02 Authority. White Pine has the full corporate power and authority to
---------
enter into this Agreement and to carry out the transactions contemplated herein.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated herein have been duly and validly authorized by all
requisite corporate action on the part of White Pine. This Agreement
constitutes a valid and binding obligation of White Pine, enforceable in
accordance with its terms.
4.03 No Violation. Neither the execution and delivery of this Agreement
------------
nor the consummation of the transactions contemplated hereby will violate, or
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both would
constitute a default) under or result in the termination or accelerate the
performance required by:
a. White Pine's Certificate of Incorporation or By-Laws;
18
<PAGE>
b. any note, bond, indenture, mortgage, deed of trust, license, lease,
agreement or other instrument or obligation to which White Pine is a party or by
which it or any of its properties or assets may be bound or affected; or
c. violate any order, writ, injunction, decree, statute, rule or
regulation applicable to White Pine or any of its properties or
assets, except for such violations, conflicts, breaches or defaults as
do not and will not affect the validity or enforceability of this
Agreement.
4.04 Consents and Approvals. No permit, consent, approval or
----------------------
authorization of, or declaration, filing or registration with any governmental
or regulatory authority is required in connection with the execution and
delivery by White Pine of this Agreement and the consummation of the
transactions contemplated hereby.
4.05 Litigation. Except as set forth on Schedule 4.05 attached hereto and
---------- -------------
herein incorporated by reference, there are no claims, actions, suits,
investigations or proceedings pending or, to the best of White Pine's knowledge,
threatened, against White Pine which are reasonably likely to result in
liability of White Pine or which question the validity of this Agreement or any
action taken or to be taken in connection with the consummation of the
transactions contemplated hereby.
4.06 No Broker or Finder. White Pine has not dealt with or retained any
-------------------
finder or broker or agent for whose fees or expenses or commissions the
Shareholders or ASC would be responsible in connection with this Agreement or
the transactions contemplated hereby.
4.07 Accuracy of Representations and Warranties. To the best of White
------------------------------------------
Pine's knowledge, the information concerning White Pine set forth in this
Agreement and the Exhibits and Schedules hereto do not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated herein or therein or necessary to make the statements contained herein or
therein not false or misleading. Copies of all written documents, instruments
and agreements, evidencing items listed on any Exhibit or Schedule hereto which
have been or which will be delivered to ASC or its advisors are or will be true,
complete and correct, in all material respects, including all amendments thereto
and modifications thereof.
4.08 Capitalization and Ownership of White Pine. The authorized and
------------------------------------------
issued capital stock of White Pine consists of thirty-five million, nine hundred
seventy-two thousand, three hundred forty-four (35,972,344) shares of common
stock, par value
19
<PAGE>
$.001 per share. All of the outstanding shares of White Pine stock have been
duly authorized and validly issued and are fully paid and non-assessable.
Except as set forth on Schedule 4.08 attached hereto and herein incorporated by
-------------
reference, there are no outstanding:
a. securities convertible into or exchangeable for capital stock of White
Pine; or
b. options, warrants, calls of, or other rights to purchase or subscribe
to, capital stock of White Pine or securities convertible or exchangeable for
capital stock of White Pine; or
c. written contracts, commitments, agreements, understandings or
arrangements of any kind relating to the issuance of any capital stock of White
Pine or any such convertible or exchangeable securities or any such options,
warrants, calls or rights.
4.09 Subsidiaries. White Pine has no subsidiaries, partnerships, joint
------------
ventures or other entities in which it owns, directly or indirectly, any legal
or beneficial controlling interest.
4.10 Compliance with Law. White Pine is in compliance with all applicable
-------------------
laws, rules, regulations, orders, ordinances, judgments and decrees of all
federal, state and local governmental authorities in the country of the United
States including, but not limited to, the Federal Occupational Safety and Health
Act, the National Labor Relations Act, the Civil Rights Act, and all applicable
laws, rules and regulations relating to the safe conduct of business, employment
discrimination, antitrust, consumer protection, environmental protection,
currency exchange, securities and trading with the enemy matters.
4.11 Financial Statements. Annexed hereto as Schedule 4.11, and herein
-------------------- -------------
incorporated by reference, are true and accurate copies of:
a. all financial statements of White Pine for the fiscal year ended
December 31, 1994 including the balance sheet, statement of income and
retained earnings, statement of changes in financial position for such
year and the notes thereto, accompanied by the reports of the
independent certified public accountants who prepared such statements
(the "White Pine Audited Financial Statements");
20
<PAGE>
b. the unaudited financial statements of White Pine as of August 31, 1995
including the balance sheet and statement of income (the "White Pine
Interim Financial Statements").
The White Pine Audited Financial Statements and the White Pine Interim Financial
Statements are hereinafter collectively referred to as the "White Pine Financial
Statements."
The White Pine Audited Financial Statements accurately represent the
financial position, assets and liabilities, results of operations and changes in
financial position of White Pine as of the respective dates and, for the
respective periods indicated, reflect all necessary accruals required by GAAP
and have been prepared in accordance with GAAP consistently applied. The White
Pine Interim Financial Statements are in accordance with the books and records
of White Pine and although the White Pine Interim Financial Statements are not
audited and do not contain the footnotes which would be required in audited
financial statements, they accurately represent the financial position, assets
and liabilities of White Pine and the results of its operations, and changes in
financial position for the respective periods indicated and reflect all
necessary accruals, all in conformity with GAAP applied on a consistent basis.
The White Pine Interim Financial Statements contain all adjustments (consisting
of only normal recurring accruals) required to be made by GAAP, subject to
normal year end adjustments.
4.12 Absence of Undisclosed Liabilities. Except as disclosed in the White
----------------------------------
Pine Financial Statements, all debt owed to third parties is accurately
described in Schedule 4.12, attached hereto and herein incorporated by
-------------
reference, such description to include the name and address of each creditor or
lender, the amount of outstanding principal and accrued, but unpaid, interest as
of the Closing Date, the method of repayment of principal, the rate of interest,
the method of payment of interest, the date the debt was incurred, when such
debt is due, what collateral secures such debt or whether the debt is unsecured
and any other pertinent aspects of the debt.
4.13 Tax Matters. White Pine has filed all tax returns and statements in
-----------
the United States (including appropriate schedules and attachments thereto and
elections therein), including, but not limited to, income, profit, franchise,
capital stock, sales, use, admissions, occupation, property and excise returns
and license or other fees required to be filed by it and has paid or provided
for all taxes, fees, interest or penalties (i) shown on or which are due and
payable pursuant to such returns, and (ii) which have become due pursuant to any
assessment, deficiency notice or similar notice received by White Pine, and
(iii) which otherwise have become due, whether or not shown on any such return;
other than, in each case, those which are disclosed in
21
<PAGE>
Schedule 4.13, attached hereto and herein incorporated by reference, which are
- -------------
presently payable without interest or penalty or which are being contested in
good faith. Except as set forth in Schedule 4.13, White Pine has not waived or
-------------
agreed to the extension of any applicable statute of limitations relating to the
assessment of any federal, state or local taxes. No issue has been raised in
any prior or pending review or audit of White Pine with respect to its federal,
state or local tax returns which reasonably may be expected to have an adverse
effect on future periods. Except as set forth in Schedule 4.13, the tax returns
-------------
or fee statements of or relating to White Pine are not currently in the process
of being examined by any taxing authority, and within the past five (5) years no
taxing authority has examined any tax return applicable to White Pine or
provided White Pine with any notice of any questions relating to, or claims
asserted for, taxes against White Pine. White Pine has no knowledge of any tax
deficiency which has been asserted against White Pine or its properties or
assets. No properties of White Pine which serve as the basis for the imposition
of a tax or fee have been appraised, examined or reassessed by any governmental
or taxing authority since the filing of the last return or statement relating to
or the payment of such tax or fee.
4.14 Properties Encumbrances. White Pine owns no real estate or motor
-----------------------
vehicles. Schedule 4.14, attached hereto and herein incorporated by reference,
-------------
is a complete list of all real estate leased by White Pine. Other than personal
property or assets belonging to employees of White Pine or which are leased by
White Pine, White Pine has good and valid title to all of the personal
properties and assets located on the leased real property listed on Schedule
--------
4.14 including, without limitation, all of the properties and assets reflected
- ----
in the balance sheet contained in the White Pine Audited Financial Statements,
except for sales of inventory in the ordinary course of business and consistent
with past practices.
All of the personal properties and assets owned by White Pine are free and
clear of all title defects or objections, mortgages, pledges, liens, claims,
charges, security interests, conditional sales agreements, easements (other than
utility easements) and other encumbrances of any nature whatsoever except as set
forth on Schedule 4.14.
-------------
To the best of White Pine's knowledge, no structure or improvement on the
real property leased by White Pine violates any applicable zoning, building
regulations or ordinances or national, federal, state or municipal law.
To the best of White Pine's knowledge, there are no notices of any eminent
domain, compulsory acquisition or similar proceedings or of violations of law,
or ordinances, orders or requirements noted in or issued by any governmental
authority
22
<PAGE>
having jurisdiction, against or affecting such owned or leased real property.
4.15 Absence of Certain Changes or Events. Except as set forth on
------------------------------------
Schedule 4.15 attached hereto and herein incorporated by reference, since June
- -------------
30, 1995, White Pine has conducted its business only in the ordinary course, and
without limiting the generality of the foregoing, there has not been any:
a. loss, damage, destruction or other casualty to any of its properties;
b. material adverse change in the business, properties or condition of
White Pine;
c. commitment or agreement to merge or consolidate with, purchase
substantially all of the assets of, or otherwise acquire any firm,
association, corporation or other business organization or division
thereof;
d. incurrence of any debt for borrowed money (whether secured or
unsecured) other than in the ordinary course of its business, that is
not disclosed on Schedule 4.12 or the White Pine Financial Statements;
-------------
e. sale, assignment or transfer of any tangible property or assets of
White Pine other than in the ordinary course of business;
f. purchase, sale, assignment or transfer of any intangible property or
assets of White Pine including, without limitation, any software
copyrights, licenses or sublicenses except in the ordinary course of
business;
g. capital expenditures, in the aggregate, in excess of $100,000;
h. increase in the compensation payable or to become payable by White
Pine to any officers or key managerial employees other than pursuant
to any existing bonus or similar compensation arrangement; or
i. payment to shareholders of any distributions or dividends of property
other than cash, or changes in accounting principles or procedures.
23
<PAGE>
4.16 Contracts and Commitments. Except as set forth in Schedule 4.16,
------------------------- -------------
attached hereto and herein incorporated by reference:
a. White Pine does not have any agreements, contracts, leases,
commitments, arrangements or restrictions, written or oral, which are
material to its business, operations or prospects;
b. White Pine does not have any outstanding contracts with officers, key
employees, agents, distributors, dealers or brokers;
c. White Pine does not have any collective bargaining agreements or union
contracts or like agreements;
d. White Pine is not in default, nor, to the best of its knowledge, is
there any basis for any valid claim of default, under (i) any material
contract, lease, commitment or instrument made or obligation owed,
(ii) any judgment, order, injunction, or decree of any court,
governmental authority, department, commission, board, agency or other
instrumentality, or (iii) any order or decree of any state or local
governmental authority, department, commission, board, agency or other
instrumentality and, to the best of its knowledge, no condition or
event has occurred which (whether with or without notice, lapse of
time, or both, or the happening or occurrence of any other event)
would constitute a default by White Pine and White Pine does not know
of any condition or state of facts which, in its reasonable judgment,
is likely to cause or create a default or defaults by White Pine under
any such contract, lease, commitment, instrument or obligation,
judgment, order, injunction or decree;
e. White Pine is not restricted from carrying on business anywhere in the
world;
f. White Pine has no other debt obligations for borrowed money other than
those disclosed on Schedule 4.12 or the White Pine Financial
-------------
Statements; and
g. Each of the contracts, lease and agreements to which White Pine is a
party and which are material to the business, operations or prospects
of White Pine are valid, binding and enforceable in accordance with
their terms.
24
<PAGE>
4.17 Trademarks, Trade Names and Other Intellectual Property. Schedule
------------------------------------------------------- --------
4.17, attached hereto and herein incorporated by reference, contains an accurate
- ----
and complete list and brief description of all material trademarks (either
registered or common law), trade names, service marks, patents and copyrights
(and all applications and licenses therefor and agreements with respect thereto)
owned by White Pine or in which it has any interest and, except as described in
Schedule 4.17:
- -------------
a. no claims are pending or, to the best of White Pine's knowledge,
threatened, by any person and there are no disputes with respect to
the use of the trade names, servicemarks, patents or copyrights by
White Pine;
b. to the best of White Pine's knowledge, the use of such material
trademarks, servicemarks, patents, trade names and copyrights does not
infringe on the rights of any person; and
c. Except for White Pine licenses granted in its ordinary course of
business or as set forth on Schedule 4.16, White Pine has not granted
-------------
to any party any interest in or to the registrations or applications
listed on Schedule 4.17 or the material trademarks, copyrights, trade
-------------
names, servicemarks or patents covered thereby and such marks, rights
and patents are free and clear of any lien or similar encumbrance.
All certificates, affidavits and other documents necessary to keep the
registrations with respect to the material trademarks, trade names,
servicemarks, patents or copyrights set forth on Schedule 4.17 are in full force
-------------
and effect have been filed and no default exists which impairs the validity or
effectiveness of such registrations.
4.18 Employee Benefits Plans. Schedule 4.18, attached hereto and herein
----------------------- -------------
incorporated by reference, discloses any group life, health and all other
employee benefits and arrangements, including any "employee welfare benefit
plan" or "employee pension benefit plan," as such terms are defined in Section 3
of the Employment Retirement Income Security Act of 1974, as amended ("ERISA"),
that are maintained by White Pine. All such plans comply in all material
respects with ERISA (including the regulations and published interpretations
thereunder); no reportable event within the meaning of Title IV of ERISA has
occurred and is continuing with respect to any such plan and no prohibited
transaction within the meaning of Title I of ERISA has occurred with respect to
any such plan. White Pine has not at any time maintained or contributed to any
"Multi-Employer Plan" as such term is defined in Section 3(37) of ERISA.
25
<PAGE>
ARTICLE V
COVENANTS OF THE SIGNIFICANT SHAREHOLDERS
5.01 Conduct of Business until Closing Date. Except as permitted or
--------------------------------------
required hereby or as White Pine may otherwise consent to in writing, between
the date hereof and the Closing Date, each Significant Shareholder shall use
diligent efforts to cause ASC and the Subsidiary, to the extent that he or it is
able, to:
a. operate its business only in the usual, regular and ordinary manner as
conducted by ASC and the Subsidiary prior to the date hereof and, to
the extent consistent with the operation of the business, use its best
efforts to:
(i) preserve the present business organization intact; and
(ii) preserve the present business relationships with customers,
suppliers and others having business dealings with ASC or the
Subsidiary;
b. maintain the books, records and accounts which relate to ASC and the
Subsidiary business in the usual, regular and ordinary manner on a
basis consistent with prior periods.
c. neither:
(i) sell, lease or otherwise convey any asset or group of assets for
consideration (which the Significant Shareholders in good faith
believe represents fair market value) in excess of $20,000 in the
aggregate (except for transfers of inventory in the ordinary
course of business);
(ii) change the character of its business in any material respect;
(iii)assume or incur any obligation for borrowed money;
(iv) except for liens or encumbrances incurred in the ordinary course
of business which are unrelated to borrowed money, subject any of
its assets to any lien or encumbrance;
(v) purchase any asset or group of assets for a purchase price in
excess of $20,000; nor
(vi) enter into any agreement, commitment or understanding to do or
with respect to any of the foregoing.
26
<PAGE>
d. give White Pine prompt written notice of any change in the business,
properties or condition of ASC and the Subsidiary of the type that
would be required to be disclosed to ASC or the Subsidiary's auditors.
5.02 Approvals and Consents. Each Significant Shareholder shall use his
----------------------
or its diligent efforts to obtain in writing as promptly as possible all
approvals and consents including, but not limited to, (i) the release of any
rights of refusal required to be obtained by each Shareholder in order to
complete the transactions contemplated herein; and (ii) the termination of any
stock option plans and shareholder agreements related to ASC, the Subsidiary and
each of their respective shareholders, officers, directors and employees.
5.03 Conduct. Prior to the Closing Date, except as permitted or required
-------
hereby or as White Pine may otherwise consent to in writing, the Significant
Shareholders shall not, and shall use diligent efforts to cause each member of
ASC Group not to, enter into any transactions, take any action or permit any
event within such Shareholder's control to occur which would result in any of
the representations and warranties of the Shareholders or of the Significant
Shareholders contained in this Agreement not being true and correct in any
material respect on the Closing Date.
5.04 Further Assurances. From and after the Closing Date each Significant
------------------
Shareholder shall, at the request of White Pine, execute and deliver to White
Pine, without further consideration, all such further assignments, endorsements,
instruments of conveyance and answer, and other documents as White Pine may
reasonably request in order to consummate the transactions contemplated by this
Agreement.
5.05 Non-Disclosure. From and after the date of this Agreement, except as
--------------
may be required by law, each Significant Shareholder shall refrain from
disclosing to any third party any presently existing confidential or proprietary
information about the business or operations of White Pine and its Subsidiaries.
ARTICLE VI
COVENANTS OF WHITE PINE
6.01 Conduct. Prior to the Closing Date, except as permitted or required
-------
hereby or as the Shareholders may otherwise consent to in writing, White Pine
shall not enter into any transactions, take any action or permit any event to
occur which would result in any of its representations and warranties contained
in this Agreement not being true and correct in any material respect on the
Closing Date.
27
<PAGE>
ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF WHITE PINE
The obligations of White Pine to be performed on or prior to the
Closing Date pursuant to this Agreement are subject to the satisfaction at or
prior to the Closing of each of the following conditions, any of which may be
waived in writing by White Pine at its option:
7.01 Accuracy of Representations and Warranties. The representations
------------------------------------------
and warranties of the Shareholders and the Significant Shareholders contained
herein shall be true in all material respects on and as of the Closing Date with
the same force and effect as though made on and as of the Closing Date (a
representation that a state of facts exists "on or as of the date hereof" shall
then be a representation that such state of facts exists on or as of the Closing
Date, and a representation that a state of facts has or has not changed between
a date prior to "the date hereof" and "the date hereof" shall then be a
representation that such state of facts has or has not changed between such
prior date and the Closing Date), except as affected by the transactions
contemplated herein. Each Shareholder understands and agrees that,
notwithstanding the foregoing, nothing contained in this Section 7.01 shall be
construed as a waiver by White Pine of its right to pursue damages or as a
diminution of any of White Pine's rights to damages from the Shareholders for
the breach of any representation or warranty contained in this Agreement;
provided, however, that such rights to damages shall be limited to adjustment of
the amount of Escrowed Stock to be received by each Shareholder.
7.02 Performance of Agreement. Each Shareholder shall have performed
------------------------
and complied with, in all material respects, and shall have used diligent
efforts to have caused ASC and the Subsidiary to perform and comply with, in all
material respects, all covenants, obligations and agreements to be performed or
complied with by him, her or it on or before the Closing Date pursuant to this
Agreement.
7.03 Significant Shareholders' Certificate. White Pine shall have
-------------------------------------
received a certificate from the Significant Shareholders, dated as of the
Closing Date, in form as attached hereto as Exhibit 7.03, certifying as to the
------------
fulfillment of the matters specified in Sections 7.01 and 7.02.
7.04 Good Standing Certificates. White Pine shall have received
--------------------------
certificates issued by appropriate governmental authorities evidencing, as of a
recent date, the good standing and tax status of ASC in those jurisdictions in
which it has entities incorporated and in those jurisdictions in which the
entities are qualified to do business.
28
<PAGE>
7.05 Certified Charter Documents. White Pine shall have received a
---------------------------
copy of all Certificates of Incorporation or other applicable charter
instruments and all amendments thereto of ASC certified by the appropriate
governmental authorities.
7.06 Certified By-Laws. White Pine shall have received copies of all
-----------------
the By-Laws of ASC as amended through the Closing Date, certified by the
Secretaries of such corporations.
7.07 Opinion of Counsel to ASC and the Subsidiary. White Pine shall
--------------------------------------------
have received an opinion of the counsel to ASC and the Subsidiary dated as of
the Closing Date and in form and substance as attached hereto as Exhibit 7.07,
------------
satisfactory to White Pine and its counsel with respect to the matters set forth
in the following Sections of this Agreement: 2.01, 2.02, 3.01, 3.02, 3.03, 3.04
(provided that said opinion with respect to subsections (a)(ii) and (iii) shall
be to the best of said counsel's knowledge), 3.05 (provided that said opinion
shall be to the best of said counsel's knowledge and to the extent said opinion
with respect to Section 3.05 relates to laws, rules, regulations and ordinances,
it may be limited to laws, rules, regulations and ordinances of the French
government and the U.S. federal government and the State of California), 3.11
(only with respect to subparagraph (d)(i), (ii) and (iii) thereof and only to
the best of said counsel's knowledge), and 3.12 (provided that such opinion need
only be to the best of said counsel's knowledge). For purposes of this Section
7.07, the phrase "to the best of said counsel's knowledge" shall have the same
meaning accorded to the phrase "to the best of such Shareholder's knowledge"
contained in the first paragraph of Article II of this Agreement.
7.08 No Casualty. ASC's and the Subsidiary's business shall not have
-----------
been adversely affected in any material way by or have sustained any material
loss, whether or not insured, as a result of any fire, flood, accident,
explosion, strike, labor disturbances, riot, act of God or the public enemy or
other calamity or casualty, provided, however, that White Pine, in its sole
--------
discretion may waive this condition precedent.
7.09 Expiration of Waiting Periods. All notifications concerning
-----------------------------
rights of first refusal shall have been made and the waiting periods thereunder
shall have expired or been waived.
7.10 Matters Satisfactory to White Pine's Counsel. All actions,
--------------------------------------------
proceedings, opinions and ancillary documents required or incidental to the
consummation of the transactions contemplated by this Agreement, and all legal
matters related thereto, shall be reasonably satisfactory to counsel for White
Pine.
29
<PAGE>
7.11 Stockholders Voting Agreement. Each Shareholder shall execute a
-----------------------------
Stockholders Voting Agreement in the form of Exhibit 7.11, attached hereto.
------------
This Stockholders Voting Agreement shall terminate upon the tenth (10th)
anniversary of its signing or if at any time the Shareholders own less than
twenty percent (20%) of the issued and outstanding stock of White Pine.
7.12 General Release. Each Shareholder and Alistair Woodman shall
---------------
execute a General Release in the form of Exhibit 7.12, attached hereto. This
------------
release shall be in favor of ASC, and shall release it from all claims against
it that the Shareholder may have.
7.13 Investment Letter. Each Shareholder shall execute an Investment
-----------------
Letter in the form of Exhibit 7.13, attached hereto.
------------
7.14 Bring Down Certificate. Each Shareholder shall execute a Bring
----------------------
Down Certificate in the form of Exhibit 7.14, attached hereto. This Certificate
------------
shall ensure that the condition of ASC as of the execution of this Agreement
shall be the condition of ASC as of the Closing Date.
7.15 All ASC Stock to be Purchased. Each Shareholder shall deliver
-----------------------------
to White Pine stock certificates representing all of the ASC Stock owned by such
Shareholder, duly endorsed and otherwise in proper form for transfer.
7.16 Registration Rights Agreement. Each Shareholder shall execute a
-----------------------------
Registration Rights Agreement in the form of Exhibit 7.16, attached hereto.
------------
7.17 Approval of French Ministry of Economy and Finances. Counsel
---------------------------------------------------
for the Shareholders shall have obtained the consent and written approval of the
French Ministry of Economy and Finances concerning the transactions contemplated
herein, and delivered such consent and written approval to White Pine.
7.18 Promissory Notes and Stock Pledge Agreements. Each Borrower
--------------------------------------------
shall execute a promissory note in the form of Exhibit 1.02(a), attached hereto
---------------
and a Stock Pledge Agreement in the form of Exhibit 1.02(b), attached hereto.
---------------
7.19 Approval of White Pine Shareholders. White Pine shall have
-----------------------------------
obtained the consent and approval of its shareholders to consummate the
transactions contemplated herein and to increase the number of shares of its
authorized capital stock.
30
<PAGE>
ARTICLE VIII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SHAREHOLDERS
The obligations of the Shareholders to be performed on or prior to the
Closing Date pursuant to this Agreement are subject to the satisfaction at or
prior to the Closing of each of the following conditions, any of which may be
waived by a majority vote of the Shareholders:
8.01 Accuracy of Representations and Warranties. The representations
------------------------------------------
and warranties of White Pine contained herein shall be true in all material
respects on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date (a representation that a state of facts
exists "on or as of the date hereof" shall then be a representation that such a
state of facts exists on or as of the Closing Date, and a representation that a
state of facts has or has not changed between a date prior to "the date hereof"
and "the date hereof" shall then be a representation that such state of facts
has or has not changed between such prior date and the Closing Date), except as
affected by the transactions contemplated herein. White Pine understands and
agrees that, notwithstanding the foregoing, nothing contained in this Section
8.01 shall be construed as a waiver by the Shareholders of their right to pursue
damages or as a diminution of any of the Shareholders' rights to damages from
White Pine for the breach of any representation or warranty contained in this
Agreement; provided, however, that such rights to damages shall be limited to
adjustment of the amount of Escrowed Stock to be received by each Shareholder.
The amount of Escrowed Stock shall in no case exceed the maximum amount of
Escrowed Stock as provided in Section 1.01b hereof.
8.02 Performance of Agreements. White Pine shall have performed and
-------------------------
complied, in all material respects, with all covenants, obligations and
agreements to be performed or complied with by it on or before the Closing Date
pursuant to this Agreement.
8.03 Officer's Certificate. The Shareholders shall have received a
---------------------
certificate of an executive officer of White Pine dated as of the Closing Date,
certifying as to the fulfillment of the matters specified in Sections 8.01 and
8.02.
8.04 Secretary's Certificate. The Shareholders shall have received a
-----------------------
certificate, dated the Closing Date, of the secretary or an assistant secretary
of White Pine setting forth and certifying to the accuracy and completeness of
White Pine's Certificate of Incorporation, Bylaws and the resolutions adopted by
the Board of Directors of White Pine authorizing this Agreement and the
transactions contemplated herein.
31
<PAGE>
8.05 Good Standing Certificates. The Shareholders shall have
--------------------------
received certificates issued by appropriate governmental authorities evidencing,
as of a recent date, the good standing and tax status of White Pine in Delaware
(White Pine's jurisdiction of incorporation).
8.06 Loans from White Pine. The Borrowers shall have received from
---------------------
White Pine a commitment to make certain loans consistent with Section 1.02,
hereof.
8.07 Opinion of Counsel to White Pine. The Shareholders shall have
--------------------------------
received an opinion of the counsel to White Pine dated as of the Closing Date
and in form and substances as attached hereto as Exhibit 8.07, satisfactory to
------------
the Shareholders and their counsel with respect to the matters set forth in the
following Sections of this Agreement; 4.01, 4.02, 4.03 (provided that said
opinion with respect to subsection (b) shall be to the best of said counsel's
knowledge), 4.04 and 4.05 (provided that such opinion need only be to the best
of said counsel's knowledge), 4.08, 4.09. For purposes of this Section 8.07,
the phrase "to the best of said counsel's knowledge" shall have the same meaning
accorded to the phrase "to the best of such Shareholder's knowledge" contained
in the first paragraph of Article II of this Agreement.
8.08 Stockholders Voting Agreement. White Pine shall execute a
-----------------------------
Stockholders Voting Agreement in the form of Exhibit 7.11, attached hereto.
------------
8.09 Registration Rights Agreement. White Pine shall execute a
-----------------------------
Registration Rights Agreement in the form of Exhibit 7.16, attached hereto.
------------
ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES: INDEMNIFICATION
9.01 Survival of Representations. All representations and warranties
---------------------------
contained in this Agreement shall survive the Closing.
9.02 Indemnification by the Shareholders. Subject to the limitations
-----------------------------------
hereinafter set forth, the Shareholders shall severally indemnify, defend and
hold harmless White Pine and any parent, subsidiary or affiliate thereof and all
directors, officers, shareholders, employees and representatives of each of the
foregoing, for one (1) year after the Closing Date from and against all
liabilities, losses, claims, costs or damages whatsoever (including expenses and
reasonable fees of legal counsel), arising out of or from or based upon:
32
<PAGE>
a. the inaccuracy of any representation or warranty contained herein made
by the Shareholders; or
b. the non-performance by the Shareholders of any covenant, agreement or
obligation to be performed by the Shareholders hereunder; or
c. any liability of ASC for taxes, other than liabilities for deferred
taxes shown on the audited closing Balance Sheet, for any period
through and including the Closing Date, including interest and
penalties thereon.
The amount of the indemnification by the Shareholders shall be limited to
ten percent (10%) of the value of the WPS Stock at the Closing Date, and each
Shareholder shall only be liable for ten percent (10%) of the value of the
shares of the WPS Stock that such Shareholder actually received. Subject to
such limitation, the amount owed for indemnification shall only be satisfied by
transferring to White Pine such number of Shares of WPS Stock as are worth the
amount owed, using the stock value as of the Closing Date.
9.03 Indemnification by White Pine. Subject to the limitations
-----------------------------
hereinafter set forth, White Pine shall indemnify, defend and hold harmless the
Shareholders, their heirs, successors and assigns for one (1) year after the
Closing Date from and against all liabilities, losses, claims, costs or damages
whatsoever (including expenses and reasonable fees of legal counsel) arising out
of or from or based upon:
a. the inaccuracy of any representation or warranty contained herein made
by White Pine; or
b. the non-performance by White Pine of any covenant, agreement or
obligation to be performed by White Pine hereunder.
The indemnification of any Shareholder by White Pine shall be limited to
receiving from White Pine additional Shares of common stock, such
indemnification to be a number of shares the value of which shall not exceed ten
percent (10%) of the value of the WPS Stock that such Stockholder received
pursuant to this Agreement using the stock value as of the Closing Date.
9.04 Transfer of Stock.
-----------------
a. After a claim has been approved or deemed approved by the
Shareholders, by majority vote, pursuant to Section 9.05(b) and
subject to the right of the Shareholders, by majority vote, to assume
the control of the contest and defense of such claim pursuant to
Section 9.05(c), the Shareholders agree to reimburse White Pine within
thirty (30) days after receipt of written request therefor for any
payment made by White Pine or any loss, damage, cost or expense
suffered by White Pine at any time after the date hereof in respect of
any matter to which the indemnity referred to in Section 9.02 relates.
This reimbursement shall be limited to a
33
<PAGE>
maximum amount equal to ten percent (10%) of the value of the WPS
Stock received by the Shareholders pursuant to this Agreement, and the
liability of each Shareholder shall be limited to ten percent (10%) of
the value of the WPS Stock received by such Shareholder. The
valuation of the WPS Stock for the purpose of this indemnification
limit shall be ten percent (10%) of the value of the WPS Stock as of
the Closing Date. The reimbursement shall only be paid by the return
and cancellation of the appropriate number of shares of the WPS Stock,
the value of such shares to equal the amount of the claim but in no
event to exceed the maximum indemnification amount hereinbefore
discussed.
b. After a claim has been approved or deemed approved by White Pine
pursuant to Section 9.05(b) and subject to the right of White Pine to
assume control of the contest and defense of such claim pursuant to
Section 9.05(c), White Pine agrees to reimburse the Shareholder(s)
within thirty (30) days after receipt of written request therefor for
any payment made by the Shareholders or any loss, damage, cost or
expense suffered by the Shareholder(s) at any time after the date
hereof in respect of any matter to which the indemnity referred to in
Section 9.03 relates. The reimbursement shall be limited to a maximum
amount which is equal to ten percent (10%) of the value of the WPS
Stock received by the Shareholder seeking indemnification. The
valuation of the WPS Stock for the purpose of this indemnification
limit shall be the value as of the Closing Date. The reimbursement
shall only be made by issuing additional shares of White Pine stock to
the Shareholder seeking indemnification, the value of such shares to
equal to the amount of the claim but in no event to exceed the maximum
indemnification amount hereinbefore discussed.
9.05 Conditions of Indemnification.
-----------------------------
a. Whenever any claim is made by any person with respect to any matter to
which the indemnification provisions contained in this Article IX
relate, the indemnified party (the "Indemnitee") shall notify the
indemnifying party (the "Indemnitor") in writing within twenty (20)
days after the Indemnitee has received written notice of the facts
constituting the basis for such claim (the "Notice of Claim"). The
Notice of Claim shall specify all facts known to the Indemnitee giving
rise to such indemnification claim and the amount or an estimate of
the amount of the liability arising therefrom. If the Indemnitor does
not give written notice of approval or disapproval within ten (10)
days after receipt of the first Notice of Claim, then the Indemnitee
shall send a second Notice of Claim. The Notice of Claim shall be
given in accordance with Section 10.02 hereof.
34
<PAGE>
b. Each claim will deemed approved by the Indemnitor, unless the
Indemnitor gives the Indemnitee written notice of disapproval within
thirty (30) days of receipt of such second Notice of Claim. The
parties shall undertake, in good faith, to resolve any dispute with
respect to any such claim which is so disapproved; if the parties are
unable to agree on such resolution within thirty (30) days after the
Indemnitee receives notice of disapproval from the Indemnitor, then
the respective rights of the parties shall be determined by
arbitration in accordance with Section 10.11 hereof.
c. If the facts giving rise to such indemnification shall involve any
actual, threatened or possible claim or demand by any person against
the Indemnitee, then the Indemnitor shall be entitled to contest or
defend such claim at its expense and through counsel of its own
choosing if it gives written notice of its intention to assume the
contest and defense of such claim to the Indemnitee within thirty (30)
days after receipt of the Notice of Claim. If the Indemnitor shall
exercise such option, then it shall have control over such contest and
defense and over the payment, settlement or compromise of such claim,
and the Indemnitee agrees to cooperate fully with the Indemnitor and
its attorneys with respect to such contest and defense. If the
Indemnitor shall not exercise such option, then the Indemnitee may,
but shall not be obligated to, assume the contest and defense of such
claim. Any payment or settlement resulting from such contest,
together with the total expenses thereof, including but not limited to
reasonable attorneys' fees, shall be binding upon the Indemnitor and
Indemnitee, subject to the limits set forth in Section 9.04.
d. The indemnification provided for by this Article IX shall constitute
the exclusive remedy of any party hereto with respect to (i) the
matters for which such indemnification is provided and (ii) any other
matters arising out of, relating to or connected with this Agreement
or the transactions contemplated hereby, and whether any claims or
causes of action asserted with respect to any such matters are brought
in contract, tort or any other legal theory whatsoever.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.01 Further Assurances. White Pine and each of the Shareholders agree,
------------------
from time to time, at the reasonable request of the other, to deliver to the
other such further instruments or to take such other actions as the other may
reasonably require to effect the purposes and intent of this Agreement.
10.02 Notices. All notices or other communications hereunder shall be in
-------
writing and shall be deemed given if
35
<PAGE>
delivered personally or by prepaid registered or certified first class mail,
return receipt requested, and addressed as follows (it being understood that
such notice shall not be effective against any party unless sent to both
addresses for such party):
a. If intended for White Pine, as follows:
Attention: President
White Pine Software, Inc.
40 Simon Street, Suite 201
Nashua, New Hampshire 03060-3043
and to:
Steven Cohen, Esquire
Devine, Millimet & Branch
P. O. Box 719
111 Amherst Street
Manchester, New Hampshire 03105-0719
b. If intended for the Shareholders, then to the Shareholders at the
addresses provided heretofore to White Pine;
or to such other address as shall be furnished in writing by either party to the
other in accordance with this Section 11.02, and any such notice or
communication shall be deemed to have been given if delivered, as of the date
actually delivered, or if mailed, when mailed.
10.03 Successors and Assigns. This Agreement shall be binding upon and
----------------------
shall inure to the benefit of the parties hereto and their respective heirs,
executors, legal representatives, successors and assigns. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any party hereto without the prior written consent of the other
parties.
10.04 Expenses. Each party hereto agrees to pay its own fees, costs and
--------
expenses associated with this Agreement and the transaction contemplated herein.
No party shall be liable for any fees, cost and expenses incurred by another
party hereto. Except as otherwise provided herein, all costs and expenses
incurred in connection with this Agreement or any of the transactions
contemplated herein (including, but not limited to, accounting, consulting and
attorneys' fees and expenses) shall be paid by the party incurring such expense.
10.05 Complete Agreement. This Agreement, including the Exhibits and
------------------
Schedules attached hereto, contains the entire agreement and understanding of
the parties with respect to its subject matter. This Agreement supersedes all
prior agreements and understandings between the parties, both written and oral,
with respect to such subject matter including, but not limited to, a certain
letter of intent dated April 1, 1995 executed by Howard Berke on behalf of White
Pine and Killko Caballero on behalf of ASC and an undated Term Sheet executed by
Howard Berke on behalf of White Pine, Killko Caballero on behalf of ASC,
36
<PAGE>
Olivier Protard on behalf of Sofinnova and Arthur Bruno on behalf of Hambrecht &
Quist, as amended by an Extension of Term Sheet Provisions dated August 1, 1995
executed by Howard Berke on behalf of White Pine and Killko Caballero on behalf
of ASC.
10.06 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original instrument.
10.07 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the internal laws of the State of New Hampshire, as applied to
contracts executed in and performed wholly within the State of New Hampshire.
10.08 Headings. The Article and Section headings contained in this
--------
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
10.09 Amendment. This Agreement may be amended, modified or supplemented
---------
by the parties hereto only by written instrument of subsequent date signed by
each of the parties hereto.
10.10 Severability. In the event that any covenant, condition, term or
------------
restriction contained in this Agreement shall be held to be invalid, illegal or
unenforceable in any respect, in whole or in part, the validity of the remaining
covenants, conditions, terms and provisions contained in this Agreement, and the
validity of the remaining part of any term or provision held to be partially
invalid, illegal or unenforceable shall in no way be affected, prejudiced or
disturbed thereby.
10.11 Arbitration. White Pine and the Shareholders agree that any dispute
-----------
or controversy arising out of or in connection with this Agreement or any
alleged breach hereof shall be settled by arbitration in Manchester, New
Hampshire pursuant to the rules of the American Arbitration Association. If the
disputing parties cannot agree upon a single arbitrator to determine the matter,
then one arbitrator shall be chosen by White Pine and one arbitrator shall be
collectively selected by majority vote of the Shareholders (or, if a party fails
to make a choice, then by the American Arbitration Association on behalf of such
party) and the two (2) arbitrators so chosen will select a third. The decision
of the single arbitrator selected by the parties, or, if three (3) arbitrators
are selected, the decision of any two (2) of them, will be final and binding
upon the parties and the judgment of a court of competent jurisdiction may be
entered thereon. Fees of the arbitrators and costs of arbitration shall be
borne by the parties in such manner as shall be determined by the arbitrator or
arbitrators.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Acquisition Agreement as of the date hereinbefore first written.
WHITE PINE SOFTWARE, INC.
("White Pine")
37
<PAGE>
/s/ Kathleen Standish By: /s/ Howard R. Berke
- ------------------------- --------------------------------
Witness Howard R. Berke, its duly
Authorized President
[ILLEGIBLE SIGNATURE] /s/ Killko Caballero
- ------------------------- -----------------------------------
Witness Killko Caballero (a "Significant
Shareholder" and a "Shareholder")
[ILLEGIBLE SIGNATURE] /s/ Reginald Bursens
- ------------------------- -----------------------------------
Witness Reginald Bursens (a "Significant
Shareholder" and a "Shareholder")
38
<PAGE>
SOFINNOVA S.A.
("Sofinnova", a "Significant
Shareholder" and a "Shareholder")
[ILLEGIBLE SIGNATURE] By: /s/ Olivier Protard
- ------------------------- --------------------------------
Witness Duly Authorized
SOFINNOVA CAPITAL FCPR
("Sofinnova", a "Significant
Shareholder" and a "Shareholder")
[ILLEGIBLE SIGNATURE] By: /s/ Olivier Protard
- ------------------------- --------------------------------
Witness Duly Authorized
CV SOFINNOVA VENTURES PARTNERS III
("Sofinnova", a "Significant
Shareholder" and a "Shareholder")
[ILLEGIBLE SIGNATURE] By: /s/ Olivier Protard
- ------------------------- --------------------------------
Witness Duly Authorized
[ILLEGIBLE SIGNATURE] /s/ Michiel Fast
- ------------------------- -----------------------------------
Witness Michiel Fast
(a "Shareholder")
[ILLEGIBLE SIGNATURE] /s/ Jean-Francois Ducarroz
- ------------------------- -----------------------------------
Witness Jean-Francois Ducarroz
(a "Shareholder")
[ILLEGIBLE SIGNATURE] /s/ Mallku Caballero
- ------------------------- -----------------------------------
Witness Mallku Caballero
(a "Shareholder")
[ILLEGIBLE SIGNATURE] /s/ Pascal Crausaz
- ------------------------- -----------------------------------
Witness Pascal Crausaz
(a "Shareholder")
[ILLEGIBLE SIGNATURE] /s/ Pierre Saslawsky
- ------------------------- -----------------------------------
Witness Pierre Saslawsky
(a "Shareholder")
39
<PAGE>
EXHIBIT 10.25
LEASE
THIS INDENTURE OF LEASE dated as of the 15th day of May 1996, by and
between 1987 NASH-TAMPOSI LIMITED PARTNERSHIP, FIVE N ASSOCIATES of 40 Temple
Street, Nashua, New Hampshire, and BALLINGER PROPERTIES, L.L.C. of 20 Trafalgar
Square, Nashua, New Hampshire (hereinafter called "Lessor") and WHITE PINE
SOFTWARE, a Delaware corporation having an office and place of business at 542
Amherst Street, Nashua, NH 03063, (hereinafter called "Lessee").
WITNESSETH that, in consideration of the mutual covenants and agreements
herein contained, the Lessor has demised and leased, and by these presents does
demise and lease, to the Lessee, for the rental, for the term and upon the other
conditions hereinafter set forth, that parcel of land, together with the
buildings and improvements thereon, situated in Nashua, Hillsborough County, and
State of New Hampshire on the west side of Amherst Street route 101-A and being
bounded and described as follows:
BEGINNING at the northwest corner of the within conveyed premises at a
stone bound, said bound being S 39 degrees 15' 15" W 402.19 feet from the west
line of Amherst Street Route 101-A and N 49 degrees 39' 45" W 234.78 feet from
the north line of Capitol Street; thence running N 39 degrees 15' 15" E a
distance of 402.19 feet to a stone bound in the west line of Amherst Street 101-
A; thence S 49 degrees 55' 19" E by the west line of Amherst Street a distance
of 163.28 feet to a N.H.H. Bound; thence S 10 degrees 06' 59" E a distance of
94.18 feet to a point in the north line of Capitol Street; thence S 39 degrees
15' 15" W by the north line of Capitol Street a distance of 342.79 feet to a
stone bound; thence N 49 degrees 39' 45" W a distance of 234.78 feet to the
bound of beginning.
SUBJECT to rights of access, air, view and light over, from or to Amherst
Street, Route 101-A, with the exception of one point of access fifty (50) feet
in width, and the right to extend and maintain slopes and embankments, in
relation to the widening of said Amherst Street, as conveyed to The State of New
Hampshire by deed of Bessie Porter, dated July 22, 1976 and recorded at Book
2473, Page 500. Reference is further made to the Petition and Commissioners'
Return of Highway Layout, Nashua U-101-1(10)-P-1330-B, 1977, recorded at Book
2561, Page 149, and to Plan #9867, Sheet 3 of 8.
SUBJECT to covenant to maintain drainage swale as recited in easement from
Samuel A. Tamposi et al to Shamrock Construction, dated April 20, 1982 recorded
at Book 2915, Page 56.
SUBJECT to telephone and power line easement from Shamrock Construction to
New England Telephone and Telegraph Company and Public Service Company of New
Hampshire, dated September 3, 1982 and recorded at Book 2948, Page 230.
TOGETHER with all the rights and easements thereunder belonging and
appertaining.
TO HAVE AND TO HOLD the premises hereby leased as above described
(hereinafter called the "Leased Premises") to the Lessee, its successors and
assigns, to and for the purpose for its and their proper use and benefit.
<PAGE>
SECTION 1 - TERM. The Term of this Lease shall be a period of five (5)
--------- ----
years, beginning on August 1, 1996, and ending on July 31, 2001.
SECTION 2 - RENT. (a) The Lessee shall pay to the Lessor as base rent
--------- ----
beginning August 15, 1996 the sum of Eighty Two Thousand Nine Hundred Dollars
($82,900.00), with August rent being prorated so remaining rents will be due on
the first of each month, payable in equal monthly installments of Six Thousand
Nine Hundred Eight Dollars and Thirty-Three Cents ($6,908.33) until January 31,
1997 then beginning February 1, 1997 equal monthly installments of Nine Thousand
Seventy-Five Dollars ($9,075.00) until July 31, 1997. Then beginning August 1,
1997 the Lessee shall pay to the Lessor as base rent the sum of one Hundred
Twenty Two Thousand Five Hundred Twelve Dollars and Fifty Cents ($122,512.50)
per year payable in equal monthly installments of Ten Thousand Two Hundred Nine
Dollars and Thirty-Eight Cents ($10,209.38), until June 30, 1998. Then
beginning August 1, 1998 the Lessee shall pay to the Lessor as base rent the sum
of One Hundred Thirty Six Thousand one Hundred Twenty-Five Dollars ($136,125.00)
per year payable in equal monthly installments of Eleven Thousand Three Hundred
Forty-Three Dollars and Seventy-Five Cents ($11,343.75) until June 30, 1999.
Then beginning August 1, 1999 the Lessee shall pay to the Lessor as base rent
the sum of One Hundred Forty Nine Thousand Seven Hundred Thirty-Seven Dollars
and Fifty Cents ($149,737.50) per year payable in equal monthly installments of
Twelve Thousand Four Hundred Seventy-Eight Dollars and Thirteen Cents
($12,478.13) until June 30, 2000. Then beginning August 1, 2000 the Lessee
shall pay to the Lessor as base rent the sum of One Hundred Sixty Three Thousand
Three Hundred Fifty Dollars ($163,350.00) per year payable in equal monthly
installments of Thirteen Thousand Six Hundred Twelve Dollars and Fifty Cents
($13,612.50) until June 30, 2001. Each monthly installment shall be due and
payable on the first day of each month.
SECTION 3 - QUIET ENJOYMENT. The Lessor shall put the Lessee in possession
--------- ---------------
of the Leased Premises at the beginning of the term hereof, and the Lessee, upon
paying the rent and observing the other covenants and conditions herein upon to
be observed, shall peaceably and quietly hold and enjoy the Leased Premises.
SECTION 4 - REPAIRS BY LESSOR. The Lessor's responsibility for maintenance
--------- -----------------
or repair of the Leased Premises is limited to repair or replacement
necessitated by defective design or construction of the building. The Lessee
represents that it has examined the Leased Premises and found them to be in
satisfactory condition and the Lessee accordingly accepts the Leased Premises in
"as is, unless resulting from design and construction" condition, except for
the Work Letter attached as Exhibit A.
SECTION 5 - REPAIRS BY LESSEE. (a) The Lessee shall, at its cost and
--------- -----------------
expense, maintain the Leased Premises and all mechanical and non-mechanical
installations therein and the exterior (including the roof) of that portion
which houses the Leased Premises of the building of which the Leased Premises
are a part, in good condition and repair, and at the expiration of this Lease or
earlier termination hereof for any cause herein provided for shall deliver up
the Leased Premises to the Lessor in the same condition and state of repair as
at the beginning of the term hereof, reasonable wear and tear, taking by eminent
domain and damage insurable under the standard New Hampshire fire insurance
policy with extended coverage excepted.
(b) The Lessee shall make normal repairs to and perform normal maintenance
to the Leased Premises as needed, including, without limitation, the replacement
of broken glass, interior repainting, the repair of floors, the keeping of
windows and doors water tight and the maintenance in good operating condition of
all plumbing, electrical, heating, sprinkling and other utility systems, it
-2-
<PAGE>
being understood that the Lessee may make any further repairs and replacements
which the Lessee may desire although neither party shall be under obligation to
do so.
(c) The Lessee shall keep in good repair and free from obstructions or
encumbrances all surfaced roadways, walks, loading, unloading and parking areas
which are part of or which serve the Leased Premises; shall keep clear of dirt,
snow and ice all such roadways, walks and areas; shall remove snow and ice from
roof of the building on the Leased Premises when necessary; and shall keep the
exterior of the Leased Premises clean and neat, including cutting and proper
care of lawns and shrubbery.
(d) The Lessee shall at its expense make any alterations or changes in the
Leased Premises which may be necessary, which are caused by Lessee's type of
occupancy, to meet the regulations and standards promulgated and established
under the occupational Safety and Health Act of 1970.
(e) During the term of this lease, the Lessee shall be responsible for any
repairs or alterations to the leased premises deemed necessary by local, state
or federal officials, in order to meet compliance with any changes made, after
the commencement date of this lease, to any existing local, state or federal
regulations, as well as any new local, state or federal regulations made during
the term of this lease. Lessor shall be responsible for complying with any
required repairs or alterations to the Leased Premises with respect to any
changes to such regulations made prior to the commencement date of this Lease.
(f) During the term of this lease, in the event of a claim brought under
the Americans with Disabilities Act, Lessee shall be responsible for ensuring
satisfaction therewith, which are caused by Lessee's type of occupancy.
In the event Lessee shall fail to perform its obligations hereunder (a
through f above) after ten (10) days written notice by Lessor, or in the event
of an emergency after an attempt by Lessor to give telephone notice to Lessee,
the Lessor may, at its option, perform the same and charge the Lessee the
reasonable expense of said obligation.
SECTION 6 - IMPROVEMENTS BY LESSEE. The Lessee may make such alterations,
--------- ----------------------
additions or improvements to the Leased Premises as it shall deem necessary or
desirable, provided (a) that no such alteration, addition or improvement shall
be made which would affect or change the structural character of the Leased
Premises without first obtaining the written consent and approval of the Lessor
before any work thereon shall be commenced and (b) the Lessee shall not, in any
event, commit, suffer or permit waste upon the Leased Premises. Lessee shall be
responsible for obtaining all necessary local, state and federal government
permits as may be necessary.
SECTION 7 - REMOVAL OF IMPROVEMENTS. At the expiration of this Lease, or at
--------- -----------------------
its earlier termination for any cause herein provided for, the Lessee may, and
provided the Lessor shall so direct in writing not less than thirty (30) days
prior to such termination or ten (10) days following such earlier termination,
the Lessee shall remove any alterations, additions and improvements to the
Leased Premises made by it during the term hereof, and shall restore the Leased
Premises to their condition as at the beginning of the term hereof, reasonable
wear and tear, taking by eminent domain and damage insurable under the standard
New Hampshire fire insurance policy with extended coverage excepted. If the
Lessee shall not exercise its option of removal, and if the Lessor shall not
give such written direction to the Lessee, all such alterations, additions and
improvements shall
-3-
<PAGE>
become and remain the property of the Lessor. If the Lessee shall fail to
remove the alterations, additions and improvements, which are required hereunder
to be removed, then the reasonable cost of removal of such alterations,
additions and improvements, if necessary, shall be the responsibility and
obligation of the Lessee.
SECTION 8 - MACHINERY AND EQUIPMENT - TRADE FIXTURES. The Lessee agrees
--------- ----------------------------------------
that all machinery and equipment, and appurtenances thereto, installed in the
Leased Premises by it or by any employee, agent or subcontractor of the Lessee,
or by any subtenant of the Lessee, which cannot be removed from the Leased
Premises shall be and become part of the realty and shall be and become the
property of the Lessor and shall not be removed from the Leased Premises without
the written consent of the Lessor. The Lessor agrees that (a) all machinery and
equipment, and appurtenances thereto, installed in the Leased Premises by the
Lessee, or by any employee, agent or subcontractor of the Lessee, or by any
subtenant of the Lessee, which may be removed from the Leased Premises without
permanent and substantial damage to the Leased Premises and (b) all furniture,
furnishings and movable trade fixtures installed in the Leased Premises shall be
deemed to remain personal property and that all such machinery, equipment,
appurtenances, furniture, furnishings and movable trade fixtures of the Lessee
or of any employee, agent or subcontractor or subtenant of the Lessee, may be
removed prior to the expiration of this Lease or its earlier termination for any
cause herein provided for; but the Lessee shall repair any damage occasioned BY
such removal and shall restore the facilities on the Leased Premises to their
condition as at the beginning of the term hereof, reasonable wear and tear,
taking by eminent domain, and damage insurable under the standard New Hampshire
fire insurance policy with extended coverage excepted. Any such property which
may be removed pursuant to the preceding sentence and which is not so removed
prior to the expiration or earlier termination of this Lease may be removed from
the Leased Premises by the Lessor and stored for the account of the Lessee; and
if the Lessee shall fail to reclaim such property within sixty (60) days
following such expiration or earlier termination of this Lease such property
shall be deemed to have been abandoned by the Lessee, and may be appropriated,
sold, destroyed or otherwise disposed of by the Lessor without notice to the
Lessee and without obligation to account therefor. The Lessee shall pay to the
Lessor a reasonable cost incurred by the Lessor in removing, storing, selling,
destroying or otherwise disposing of any such property.
SECTION 9 - UTILITIES. The Lessee shall provide and shall pay when due all
--------- ---------
charges for water, gas, electricity, sewerage, heat, power and any other
services supplied to it at the Leased Premises.
SECTION 10 - USE OF PREMISES. (a) In its use of the Leased Premises, the
---------- ---------------
Lessee shall comply with all statutes, ordinances and regulations applicable to
the use thereof, including, without limiting the generality of the foregoing,
the Zoning Ordinances of the City of Nashua, New Hampshire, the Resource
Conservation and Recovery Act of 1976, and the Hazardous Waste Management
Program of the State of New Hampshire (R.S.A. 147:48 et seq).
(b) The Lessee shall not injure or deface the Leased Premises nor occupy
or use, or permit or suffer the Leased Premises or any part thereof to be
occupied or used, for any unlawful or illegal business, use or purpose, nor for
any business, use or purpose which is disreputable or extra-hazardous, nor in
such manner as to constitute a nuisance of any kind nor for any purpose nor in
any manner which would increase the premiums for fire insurance with extended
coverage for the Leased Premises. The Lessee shall, immediately upon discovery
of any such unlawful, illegal, disreputable or extra-hazardous use, take all
necessary steps, legal and equitable, to compel the discontinuance of such use
and to oust and remove any sublessee, occupants or other persons guilty of such
unlawful, illegal, disreputable or extra-hazardous use.
-4-
<PAGE>
(c) The Lessee shall procure any licenses or permits required by any use
of the Leased Premises by the Lessee.
(d) The Lessee shall indemnify and save the Lessor harmless from and
against any and all claims, demands, liabilities, costs and expenses, including
reasonable counsel fees, asserted by third parties and arising out of or by
reason of any breach or violation by the Lessee of the provisions of this
Section.
SECTION 11 - ASSIGNMENT - SUBLEASE. The Lessee shall not, without the
---------- ---------------------
prior written consent of the Lessor, assign this Lease or sublease the Leased
Premises, in whole or in part. Such consent shall not be unreasonably withheld
or delayed, provided Lessor shall be convinced that subtenant or assignee shall
have financial capacity to pay the rent hereunder. Notwithstanding any such
sublet or assignments, the obligations of Lessee hereunder shall not be released
by assignment or sublease and Lessee shall assign such assignment or sublease as
additional security for the performance of this lease.
Notwithstanding anything provided herein, in the event of subtenancy or
assignment, Lessee shall provide Lessor with the correct and updated name and
mailing address of every assignee or subtenant and the requirements if any of
all Notice to Lessee in this lease shall be sufficiently satisfied if forwarded
in writing to the subtenant or assignee and Lessee at the address given. In the
event of Lessee's default hereunder, should subtenant or assignee, at its
option, cure such defect or default, the Lessee shall not be relieved of future
obligations hereunder.
SECTION 12 - TAXES AND ASSESSMENTS. (a) The Lessee shall pay and
---------- ---------------------
discharge all real estate taxes, betterment charges and levies, and charges and
governmental impositions, duties and discharges of like kind and nature, which
or may during the term of this Lease be charged, laid, levied or imposed upon or
become a lien or liens upon the Leased Premises or any part thereof, or upon any
buildings or appurtenances thereof, or any part thereof, or which may become due
and payable with respect thereto, and any and all taxes charged, laid or levied
in addition to the foregoing under or by virtue of any present or future laws,
rules, requirements, orders, directions, ordinances or regulations of the United
States of America, or of the state, county or city government, or of any other
municipal government or lawful authority whatsoever. The Lessee shall also be
responsible for the payment of any assessments for improvements; provided,
--------
however, that if any such assessment shall be payable in installments, the
- -------
Lessee shall not be required to pay any installment becoming due subsequent to
the termination of this Lease; and provided, further, that if any such assess-
-------- -------
ment shall be payable in a lump sum, the Lessee may submit to arbitration in
accordance with Section 24 hereof the question of the proportion of the
assessment which the Lessee should equitably be required to pay in the light of
the nature of the improvement, the remaining term of this Lease and the
existence of the option to renew set forth in Section 25 hereof. Unless required
by a mortgagee to make payments into an escrow account for taxes, the Lessee
shall, if so requested by the Lessor, pay the Lessor with each installment of
rent an amount equal to one twelfth of the real estate taxes for the current
year, if the amount thereof is known, or of such taxes for the prior year, if
the amount thereof for current year is not known. Such amounts shall be held in
escrow by the Lessor and utilized in partial or complete discharge of the
Lessee's obligations to pay such taxes on or before the date upon which interest
upon such taxes would otherwise start to accrue. If payments into an escrow
account for taxes shall not be required by a mortgagee or by the Lessor, (1) the
Lessee shall make the required payments directly to the appropriate taxing or
other governmental authorities, and (2) the Lessor shall forward all tax bills,
statements and charges to the Lessee in time sufficient to enable the Lessee to
pay the same without incurring interest or penalties and in time so that the
Lessee may contest the same if it so desires. The Lessee shall also punctually
pay and discharge all taxes which
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<PAGE>
shall or may during the term of this Lease be charged, laid, levied or imposed
upon or become a lien upon the stock in trade or other personal property of the
Lessee attached to or used in connection with the Lessee's business conducted on
the premises. Nothing herein contained shall require the Lessee to pay the
Lessor's income or business profits taxes or any taxes on the rents reserved to
the Lessor hereunder or franchise taxes or estate taxes or transfer taxes.
Property taxes for the tax year in which the term hereof commences and for the
tax year in which the term hereof terminates shall be apportioned between the
Lessor and the Lessee in accordance with the number of months or major fraction
thereof during which each party shall be in possession of the Leased Premises
during such tax years.
(b) The Lessee shall have the right to contest or review (in the name of
the Lessee, or of the Lessor, or both, as the Lessee shall elect) by appropriate
proceedings (which if instituted shall be conducted promptly at the Lessee's own
expense free of all expense to the Lessor) any tax, charge or other governmental
imposition aforementioned upon condition that before instituting any such
proceeding the Lessee shall pay (under protest) such tax, charge or other
governmental imposition aforementioned, or furnish to the Lessor a surety
company performance bond in a company acceptable to the Lessor or other security
satisfactory to the Lessor sufficient to cover the amount of the contested item
or items with interest for the period which such proceedings may reasonably be
expected to take and costs securing the payment of such contested item or items
and all interest and costs in connection therewith when finally determined.
Notwithstanding the furnishing of any such bond or security, the Lessee shall
pay all such items before the date when the Leased Premises or any part thereof
would under applicable law be forfeited. The Lessor shall timely file the
annual inventory required by Chapter 74:7 of the Revised Statutes Annotated of
New Hampshire the filing of which, by virtue of Chapter 76:16 of such revised
Statutes Annotated, is a condition precedent to tax abatement.
(c) The Lessor, at its option may, but shall not be obligated to, contest
or review by any appropriate proceedings, and at the Lessor's expense, any tax,
charge or other governmental imposition aforementioned which shall not be
contested or reviewed as aforesaid by the Lessee, and unless the Lessee shall
promptly join with the Lessor in such contest or review, the Lessor shall be
entitled to receive and retain any refund payable by the taxing authorities with
respect thereto.
SECTION 13 - MECHANIC'S LIEN. In the event of the filing in Hillsborough
---------- ---------------
County Registry of Deeds of any notice of a builder's, supplier's or mechanic's
lien on the Leased Premises arising out of any work performed by or on behalf of
the Lessee, the Lessee shall either cause such lien to be discharged or released
or shall initiate legal proceedings to test the validity of the lien claimed;
and if the Lessee shall initiate legal proceedings to test the validity of the
lien, the Lessee shall cause such lien to be discharged or released by the
posting of bond or otherwise and shall completely indemnify the Lessor against
any such claim or lien and all costs of such proceedings wherein the validity of
such lien is contested by the Lessee.
SECTION 14 - EMINENT DOMAIN. In the event that the Leased Premises shall
---------- --------------
be lawfully condemned or taken by any public authority either in their entirety
or in such proportion that they are no longer suitable for the intended use by
the Lessee, this Lease shall automatically terminate without further act of
either party hereto on the date when possession of the Leased Premises shall be
taken by such public authority, and each party hereto shall be relieved of any
further obligation to the other except that the Lessee shall be liable for and
shall promptly pay to the Lessor any rent then in arrears or the Lessor shall
promptly rebate to the Lessee a pro rata portion of any rent paid in advance.
In the event the proportion of the Leased Premises so condemned or taken is such
that they are still
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<PAGE>
suitable for the intended use by the Lessee, this Lease shall continue in effect
in accordance with its terms and a portion of the rent shall abate equal to the
proportion of the rental value of the Leased Premises so condemned or taken. In
either of the above events, the award for the property so condemned or taken
shall be apportioned between the Lessor and the Lessee so that the Lessor shall
receive the then value of his reversionary interest in the Leased Premises plus
the then value of the future rents due under the terms of this Lease if such
taking had not occurred, and the Lessee shall receive the then value of its
leasehold interest including the then value of any mechanical installations,
equipment and appurtenances, if any, constructed or installed by the Lessee
after the beginning of the term hereof.
SECTION 15 - LIABILITY. The Lessor shall not be liable to the Lessee for
---------- ---------
any injury or harm to any person occurring on or about the Leased Premises or
for injury or damage to the Leased Premises or to any property of the Lessee or
to any property of any third person, firm, association or corporation on or
about the Leased Premises except such as may be caused by the willful negligent
act of the Lessor, his servants or agents, and the Lessee shall indemnify and
save the Lessor harmless from and against any and all liability and damages and
from and against any and all suits, claims and demands of any kind or nature, by
and on behalf of any person, firm, association or corporation, arising out of or
based upon any incident, occurrence, injury or damage which shall or may happen
on or about the Leased Premises and from and against any matter or thing growing
out of the condition, maintenance, repair, alteration, use, occupation of the
Leased Premises or the installation of any property therein or the removal of
any property therefrom except such as may be caused by the willful negligent act
of the Lessor, his servants or agents.
SECTION 16 - LIABILITY INSURANCE. The Lessee shall throughout the term
---------- -------------------
hereof procure and carry at its expense comprehensive liability insurance on the
Leased Premises with an insurance company authorized to do business in New
Hampshire and acceptable to the Lessor. Such insurance shall be carried in the
name of and for the benefit of the Lessee and the Lessor, shall be written on an
"occurrence" basis; and shall provide coverage of at least $2,000,000 in case of
death of or injury to one person; $3,000,000 in case of death of or injury to
more than one person in the same occurrence; and at least $100,000 in case of
loss, destruction or damage to property. A single limit policy or policies in
the total amount of $3,000,000 shall be deemed compliance with the preceding
sentence. The Lessee shall comply with requirements of the Boilers Unfired
Pressured Vessels Law (RSA 157-a), if applicable, and in such event the policies
referred to above shall contain an endorsement providing pressure vessels
insurance coverage and naming the Lessor as additional insured. The Lessee
shall furnish to the Lessor a certificate of such insurance which shall provide
that the insurance indicated therein shall not be cancelled without at least ten
(10) days written notice to the Lessor. At the date of each adjustment to the
base rent as provided for in Section 26 hereof, Lessee agrees to increase the
insurance coverages provided for herein, if requested to do so by the Lessor, to
an amount mutually agreeable to Lessor and Lessee which is then adequate to
protect against increases in insurance awards whether caused by inflation or
otherwise. Should the parties be unable to agree on an amount, the matter shall
be the subject of arbitration in accordance with Section 24 hereof.
SECTION 17 - ALL RISK INSURANCE. (a) The Lessor shall procure and
---------- ------------------
continue in force during the term hereof such amounts as in its judgment are
adequate of All Risk Replacement Cost Insurance with Agreed Amount Endorsement
(the latter to be adjusted annually) upon the facilities constructed, erected or
installed on the Leased Premises at the beginning of the term hereof. The
Lessee shall pay to the Lessor upon presentation of invoice therefor and as
additional rent during the term hereof, an amount equal to the premiums for such
All Risk Replacement Cost Insurance. During the term hereof the Lessee shall
procure and continue in force All Risk Replacement Cost Insurance with
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<PAGE>
Agreed Amount Endorsement (the latter to be adjusted annually) upon facilities,
machinery, equipment and appurtenances constructed, erected or installed on or
in the Leased Premises by the Lessee and which have or may become the property
of the Lessor pursuant to Sections 7 and 8 hereof. The policies evidencing such
insurance shall provide that loss, if any, payable thereunder shall be payable
to the Lessor and/or the Lessee and/or any mortgagee of the Leased Premises as
their respective interests may appear, and all such policies together with
evidence of payment of the premiums thereon shall be delivered to the Lessor
and/or any such mortgagee. All such policies shall be taken in such responsible
companies authorized to do business in New Hampshire as the Lessor shall approve
and shall be in form satisfactory to the Lessor. Upon receipt of a copy of
notice of cancellation of any insurance which is the responsibility of the
Lessee hereunder, the Lessor may pay the premiums necessary to reinstate the
same. The amount so paid shall constitute additional rent payable by the Lessee
at the next rental payment date. The payment of premiums by the Lessor shall
not be deemed a waiver or release by the Lessor of default by the Lessee in
failing to pay the same or of any action the Lessor may take hereunder as a
result of such default. The Lessee shall not violate, nor permit any person,
firm, association or corporation to violate any of the terms, conditions and
provisions of such policies. In the event of loss the Lessor shall promptly
initiate action to effect a settlement with the insurer, the Lessee shall
cooperate with the Lessor and any mortgagee in connection with the processing
and collection of claims and shall execute and deliver to the Lessor such proofs
of loss, releases and other instruments as may be necessary to settle any such
claims and obtain the proceeds thereof, and in the event the Lessee shall fail
or neglect so to cooperate or to execute and deliver any such instrument, the
Lessor may as the agent or attorney in fact of the Lessee, execute and deliver
any such instrument, and the Lessee hereby nominates and appoints the Lessor the
proper and legal attorney in fact of the Lessee for such purposes, hereby
ratifying all that the Lessor may lawfully do as such attorney in fact.
(b) If and to the extent permitted without prejudice to any rights of the
Lessor under applicable insurance policies, the Lessee shall be held free and
harmless from liability for loss or damage to the Leased Premises by fire, the
extended coverage perils, sprinkler leakage, vandalism and malicious mischief if
and to the extent actually insured against, whether or not such loss or damage
be the result of the negligence of the Lessee, its employees or agents. This
subsection does not impose any added obligation or expense upon the Lessor nor
require that it carry insurance of any kind and is to be construed only as a
limitation upon the rights of the insurance carriers to subrogation.
(c) If and to the extent permitted without prejudice to any rights of the
Lessee under the applicable insurance policies, the Lessor shall be held free
and harmless from liability for loss or damage to personal property of the
Lessee in the Leased Premises, by fire, the extended coverage perils, water
leakage, sewer problems, sprinkler leakage, vandalism and malicious mischief if
and to the extent actually insured against, whether or not such loss or damage
be the result of the negligence of the Lessor, its employees or agents. This
subsection does not impose any added obligation or expense upon the Lessee nor
require that it carry any insurance of any kind and is to be construed only as a
limitation upon the rights of the insurance carriers to subrogation.
SECTION 18 - DESTRUCTION OF PREMISES. In the event that the Leased
---------- -----------------------
Premises shall be totally destroyed by fire or other casualty insured against,
or shall be so damaged that repairs and restoration cannot be accomplished both
(a) within a period of one hundred twenty (120) days, and (b) more than ninety
(90) days prior to the expiration of the term hereof, including any renewal term
for which the option therefor shall have been exercised, or (c) without cost to
Lessor in excess of the insurance proceeds available, if any, this Lease shall
automatically terminate without further act of either party
-8-
<PAGE>
hereto, and each party shall be relieved of any further obligations to the other
except that the Lessee shall be liable for and shall promptly pay the Lessor any
rent then in arrears or the Lessor shall promptly rebate to the Lessee a pro
rata portion of any rent paid in advance. In the event the Leased Premises
shall be so damaged that repairs and restoration can be accomplished both (a)
within a period of one hundred twenty (120) days, and (b) more than ninety (90)
days prior to the expiration of the term hereof, including the renewal term if
the option therefor shall have been exercised, this Lease shall continue in
effect in accordance with its terms; the Lessor shall accomplish such repairs
and restoration as promptly as practicable (utilizing therefor the proceeds of
the insurance applicable thereto without any apportionment therefore for damages
to the leasehold interest created by this Indenture); and until such repairs
and restoration have been accomplished, a portion of the rent shall abate equal
to the proportion of the Leased Premises rendered unusable by the damage. In no
event shall the obligation of the Lessor to repair and restore exceed in amount
the sum of the insurance proceeds paid to Lessor and/or released to Lessor by
any mortgagee with which settlement was made, and the Lessee agrees to execute
and deliver to the Lessor all instruments and documents necessary to evidence
the fact that the right to such insurance proceeds is vested in the Lessor. The
Lessor shall notify the Lessee within thirty (30) days following the date of any
such damage or destruction whether or not repairs and restoration can be
accomplished both (a) within a period of one hundred twenty (120) days and (b)
more than ninety (90) days prior to the expiration of the term hereof, including
any renewal term for which the option therefor shall have been exercised.
SECTION 19 - REPOSSESSION BY LESSOR. At the expiration of this Lease or
---------- ----------------------
upon an earlier termination of this Lease for any cause herein provided for, the
Lessee shall peaceably and quietly quit the Leased Premises and deliver up
possession of same to the Lessor, together with all alterations, additions,
improvements, mechanical installation, equipment and appurtenances thereto not
removed from the Leased Premises pursuant to Sections 7 and 8 hereof. The
Lessee covenants and agrees that at the time of delivery of possession to the
Lessor at the expiration of this Lease, any and all alterations, additions,
improvements, mechanical installations, equipment and appurtenances constructed
or installed on or in the Leased Premises at its expense after the beginning of
the term hereof and which have become the property of the Lessor pursuant to
Sections 7 and 8 hereof shall be free and clear of any mortgage, lien, pledge or
other encumbrances or charges.
SECTION 20 - SUBORDINATION. The Lessee agrees that this Lease and all
---------- -------------
rights of the Lessee hereunder are and shall be subject and subordinate to the
lien of (a) any mortgage or deed of trust constituting a first lien on the
Leased Premises, or any part thereof, at the date hereof, and (b) the lien of
any mortgage or deed of trust hereafter executed to provide permanent financing
or refinancing of the building of which the Leased Premises are a part, and (c)
any renewal, modification, consolidation or extension of any mortgage or deed of
trust referred to in clause (a) or clause (b). The Lessee shall, upon demand at
any time or times, execute, acknowledge and deliver to the Lessor without any
expense to the Lessor, any and all instruments that may be necessary or proper
to subordinate this Lease and all rights of the Lessee hereunder to the lien of
any mortgage, deed of trust or other instrument referred to in clause (b) or
clause (c) of the preceding sentence; provided, however, that such subordination
--------
of this Lease may at the option of the Lessee be conditioned upon the mortgagee
or trustee executing an agreement (i) that so long as the Lessee is not in
default under the terms of this Indenture, the mortgagee or trustee, or any
person succeeding to the rights of the mortgagee or trustee, or any purchaser at
a foreclosure sale under said mortgage or deed of trust, shall not disturb the
peaceful possession of the Lessee hereunder, and (ii) that the proceeds of
insurance policies held by it will be applied to the cost and restoration in
those instances in which the Lessor is obligated to repair and restore pursuant
to the provisions hereof.
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<PAGE>
SECTION 21 - DEFAULT. In the event (i) any installment of rent shall not
---------- -------
be paid within ten (10) days after the Lessor shall have notified the Lessee in
writing that the same is due and payable; or (ii) the Lessee defaults in the
performance or observation of any covenant or condition in this Indenture and
such default remains unremedied for thirty (30) days after written notice
thereof has been given to the Lessee by the Lessor or (iii) the holder of a
security interest in all or substantially all of the personal property utilized
by the Lessee in, or generated by the operations of the Lessee in, the Leased
Premises forecloses the same; or (iv) the Lessee makes an assignment for the
benefit of creditors, files a voluntary petition in bankruptcy, is adjudicated
insolvent or bankrupt, petitions or applies to any tribunal for any receiver or
any trustee of or for the Lessee or any substantial part of its property,
commences any proceeding relating to the Lessee or any substantial part of its
property under any reorganization, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, whether now or
hereafter in effect, or there is commenced against the Lessee any such
proceedings which remains undismissed for a period of sixty (60) days, or any
order approving the petition in any such proceeding is entered, or the Lessee by
any act indicates its consent to, or acquiescence in, any such proceeding or the
appointment of any receiver or trustee for the Lessee or any substantial part of
its property, or suffers any such receivership or trusteeship to continue
undischarged for a period of sixty (60) days, then, in any such events, the
Lessor may immediately or at any time thereafter and without demand notice enter
upon the Leased Premises or any part thereof in the name of the whole and
repossess the same as of the Lessor's former estate and expel the Lessee and
those claiming through or under the Lessee and remove their effects forcibly if
necessary, without being deemed guilty of any manner of trespass and without
prejudice to any remedies which might otherwise be used for arrears of rent or
preceding breach of covenant, and upon such entry this Lease shall terminate;
and the Lessee covenants that, in case of such termination or in case of
termination under the provisions of statute by reason of the default of the
Lessee, the Lessee shall remain and continue liable to the Lessor in an amount
equal to the total rent reserved for the balance of the term plus all additional
rent reserved for the balance of the term hereof less the net amounts (after
deducting the expenses of repair, renovation or demolition) which the Lessor
realizes, or with due diligence should have realized, from the reletting of the
Leased Premises. As used in this Section, the term "additional rent" means the
value of all considerations other than rent agreed to be paid or performed by
the Lessee hereunder, including, without limiting the generality of the
foregoing, taxes, assessments and insurance premiums. The Lessor shall have the
right from time to time to relet the Leased Premises upon such terms as he may
deem fit, and if a sufficient sum shall not be thus realized to yield the net
rent required under this Lease, the Lessee agrees to satisfy and pay all
deficiencies as they may become due during each month of the remaining term of
this Lease, or the Lessor may require the Lessee to pay to him as damages such
lump sum as will suffice to make the Lessor whole for the balance of the then
term of this Lease. Nothing herein contained shall be deemed to require the
Lessor to await the date whereon this Lease, or the term hereof, would have
expired had there been no default by the Lessee, or no such termination or
cancellation. The Lessee expressly waives service of any notice of intention to
reenter and waives any and all right to recover or regain possession of the
Leased Premises, or to reinstate or redeem this Lease as may be permitted or
provided for by or under any statute or law now or hereafter in force and
effect. The rights and remedies given to the Lessor in this Lease are distinct,
separate and cumulative remedies, and no one of them, whether or not exercised
by the Lessor, shall be deemed to be in exclusion of any of the others herein or
by law or equity provided. Nothing contained in this Section shall limit or
prejudice the right of the Lessor to prove and obtain, in proceedings involving
the bankruptcy or insolvency of, or a composition with creditors by, the Lessee
the maximum allowed by any statute or rule of law at the time in effect.
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<PAGE>
SECTION 22 - ACCESS TO PREMISES. The Lessor or his representatives shall
---------- ------------------
have free access to the Leased Premises at reasonable intervals during normal
business hours for the purpose of inspection, or for the purpose of showing the
premises to prospective purchasers or tenants, or for the purpose of making
repairs, which the Lessee is obligated to make hereunder but has failed or
refused to make. The preceding sentence does not impose upon the Lessor any
obligation to make repairs. During the six (6) months next preceding the
expiration of this Lease, the Lessor may keep affixed to any suitable part of
the outside of the building of which the Leased Premises are a part a notice
that the Leased Premises are for sale or rent.
SECTION 23 - HOLDING OVER. In the event the Lessee shall hold over after
---------- ------------
the expiration of the term hereof, such holding over shall not extend the term
of this Lease but shall create a month-to-month tenancy upon all the terms and
conditions of this Indenture.
SECTION 24 - ARBITRATION. (a) In the event of any dispute to the meaning
---------- -----------
or interpretation of any provision of this Lease, either party may, upon ten
(10) days' written notice to the other party, require that the dispute be
determined by arbitration under the rules, then obtaining, of the Commercial
Panel of the American Arbitration Association.
(b) A decision of an arbitrator made in accordance with the provisions of
this Section shall be final and binding upon both parties hereto and enforceable
in a court of law.
SECTION 25 - OPTION TO RENEW. Provided it be not at the time in default in
---------- ---------------
payment of the rent or in the performance of any of its other obligations
hereunder, the Lessee, upon not less than six (6) months' written notice to the
Lessor, may renew this Lease for three (3) additional terms of two (2) years
each. Such renewal terms shall be upon all of the terms and conditions of this
Lease except the rent shall be as provided in Section 26 hereof and except that
there shall be no further option of renewal upon expiration of the renewal
terms.
SECTION 26 - BASE RENT FOR RENEWAL TERM. (a) If any option to renew shall
---------- --------------------------
be exercised, the base monthly rent during the renewal term shall be an amount
determined by multiplying the base monthly rent of Thirteen Thousand Six Hundred
Twelve Dollars and Fifty Cents ($13,612.50) by a fraction the numerator of which
shall be the Price Index for the last complete month prior to the expiration of
the original or expiring renewal term hereof, and the denominator of which shall
be the Price Index for the month prior to the month in which the original term
hereof began; provided, however, that if such fraction is one or less, the base
-------- -------
monthly rent shall remain at Thirteen Thousand Six Hundred Twelve Dollars and
Fifty Cents ($13,612.50).
(b) As used in this Section the term "Price Index" means (i) the
"Consumers' Price Index - For all urban consumers, U.S. City Average, All Items,
(1982-84 = 100)" (referred to as CPI-U) published by the Bureau of Labor
Statistics of the United states Department of Labor, or (ii) if the publication
of such Consumers' Price Index shall be discontinued, the comparable index most
clearly reflecting diminution of the real value of the base rent herein provided
for.
In the event of a change in the base for the Consumers' Price Index, the
numerator and denominator of the fraction referred to above shall be
appropriately adjusted to reflect continued use of the 1982-84 base in the case
of the Consumers' Price Index or in the case of such comparable index, the
continued use of the base period in effect at the time of its adoption for use
hereunder. At the request of either party hereto, the other from time to time
shall execute an appropriate instrument
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<PAGE>
supplemental to this Indenture evidencing the then current monthly rent payable
by the Lessee hereunder.
SECTION 27 - HAZARDOUS SUBSTANCES. Lessee shall not generate, store,
---------- --------------------
dispose of or otherwise handle any hazardous substance or waste or toxic waste
on the premises in any fashion contrary to any federal, state or local statutes,
laws, ordinances, rules and regulations, as the same may be described by
federal, state or local laws. Lessee shall indemnify and save the Lessor
harmless from and against any and all claims, demands, liabilities, costs and
expenses including reasonable counsel fees, asserted by any third parties and
arising out of or by reason of use by Lessee of the premises for or in
conjunction with the disposal of hazardous or toxic waste. To the best of
Lessor's knowledge there is no hazardous waste on the property.
SECTION 28 - NOTICES. Any written notice, request or demand required or
---------- -------
permitted by this Indenture shall, until either party shall notify the other in
writing of a different address, be properly given if sent by certified or
registered first class mail, postage prepaid, and addressed as follows:
If to the Lessor: 1987 Nash-Tamposi L.P.
Five N Associates
Ballinger Properties L.L.C.
40 Temple Street
Nashua, NH 03060
If to the Lessee: White Pine Software
542 Amherst Street
Nashua, NH 03063
SECTION 29 - SUCCESSION. This Indenture shall be binding upon and inure to
---------- ----------
the benefit of the heirs, executors, administrators, successors and assigns of
the parties hereto.
SECTION 30 - WAIVER. Any consent, express or implied by the Lessor to any
---------- ------
breach by the Lessee of any covenant or condition of this Lease shall not
constitute a waiver by the Lessor of any prior or succeeding breach by the
Lessee of the same or any other covenant or condition of this Lease. Acceptance
by the Lessor of rent or other payment with knowledge of a breach of or default
under any term hereof by the Lessee shall not constitute a waiver by the Lessor
of such breach or default.
SECTION 31 - GOVERNING LAW. This Indenture shall be construed and
---------- -------------
interpreted in accordance with the laws of the State of New Hampshire and
questions or disputes concerning interpretation shall be determined in the court
of appropriate jurisdiction.
SECTION 32 - FORCE MAJEURE. Except as expressly provided herein, there
---------- -------------
shall be no abatement, diminution or reduction of the rent or other charges
payable by the Lessee hereunder based upon, or claimed as a result of, any act
of God, act of the public enemy, governmental action, or other casualty, cause
or happening beyond the control of the parties hereto.
SECTION 33 - BROKERAGE. Each of the parties represents and warrants that
---------- ---------
there are no claims for brokerage commissions or finder's fees with respect to
this Lease or the negotiation hereof except as set forth in this Section. The
parties further agree to indemnify the other against, hold harmless from, all
liabilities arising from any such claim (including without limitation, the cost
of counsel fees
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<PAGE>
in connection therewith) except; the broker for this Lease is Tamposi-Nash Real
-----------------
Estate Group, whose fee will be paid by Lessor.
- ------------
SECTION 34 - COUNTERPARTS. This Indenture may be executed in two (2) or
---------- ------------
more counterparts, each of which shall be deemed to be an original, and all
collectively but one and the same instrument.
SECTION 35 - ADDITIONAL PARKING. The Lessor will use it's best efforts to
---------- ------------------
allow for some additional parking at rear of 522 Amherst Street.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
executed and delivered as of the day and year first above written.
1987 NASH-TAMPOSI LIMITED PARTNERSHIP
/s/ Q. Peter Nash
----------------------------------------
Five N Associates, General Partner by
Q. Peter Nash, Managing General Partner
of Five N Associate
/s/ Samuel A. Tamposi, Jr.
---------------------------------------
Ballinger Properties L.L.C., General
Partner by Samuel A. Tamposi, Jr. as
Manager of Ballinger Properties L.L.C.
FIVE N ASSOCIATES
By: /s/ Q. Peter Nash
------------------------------------
Q. Peter Nash, Managing General
Partner
BALLINGER PROPERTIES L.L.C.
By: /s/ Samuel A. Tamposi, Jr.
-------------------------------------
Samuel A. Tamposi, Jr., as Manager
WHITE PINE SOFTWARE
By: /s/ Howard R. Berke
-------------------------------------
-13-
<PAGE>
EXHIBIT A
WORK LETTER
1. Repair all damaged walls and paint all interior walls
2. Replace all damaged ceiling tiles, matching to best of our ability to
existing tiles
3. All building systems (HVAC, plumbing, lighting and electric) in good
operating condition
4. Floor Coverings (see Exhibit B)
1. Manufacturing/Assembly, Electric Room, Toilet Rooms and Kitchen - NONE
2. R&D Lab, Cafeteria and Hall between - Vinyl tile
3. Balance of building carpet
5. Remove previous tenant's cooling and compressor piping
6. Bathrooms: remove existing wallpaper and re-paper. Fix broken cabinets and
clean.
7. One time spring landscaping of building's grounds
8. Construct 7 - 8 X 10 offices and divide one office and add door as per
Exhibit B colored in Red
9. One year Warranty on all parts and labor of the mechanical systems (HVAC,
plumbing, electrical and roof membrane)
-14-
<PAGE>
EXHIBIT 11.1
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
SCHEDULE OF NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED THREE MONTHS THREE MONTHS
DECEMBER 31, DECEMBER 31, ENDED MARCH ENDED MARCH
1994 1995 31, 1995 31, 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Weighted average shares
outstanding............... 3,585,578 3,592,009 3,585,947 5,589,764
Net dilutive effect of
stock options-based on the
treasury stock method
using the assumed initial
public offering price of
$9.00 per share........... 640,322 659,051
Effect of common and common
equivalent shares issued
by the Company during the
twelve month period
immediately preceding the
Company's registration for
initial public offering on
August 2, 1996, as if they
were outstanding for all
periods presented prior to
the registration for
initial public offering,
using the treasury stock
method, as described
above..................... 1,858,875 1,858,875 1,858,875 310,354
---------- ----------- ---------- ----------
Total shares............... 6,084,775 5,450,884 6,103,873 5,900,118
---------- ----------- ---------- ----------
Net income (loss).......... $ 393,695 $(3,525,985) $ 37,997 $ (962,004)
========== =========== ========== ==========
Net income (loss) per
common and common
equivalent share.......... $ .06 $ (.65) $ .01 $ (.16)
========== =========== ========== ==========
</TABLE>
<PAGE>
EXHIBIT 21.1
WHITE PINE SOFTWARE, INC.
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
NAME OF CORPORATION JURISDICTION OF INCORPORATION
------------------- -----------------------------
<S> <C>
About Software Corporation S.A. France
About Software Corporation California
(subsidiary of About Software Corpora-
tion S.A.)
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated June 28, 1996 (except Note 3, as to which the date
is July 31, 1996) in the Registration Statement of Form SB-2 and related
Prospectus of White Pine Software, Inc. for the registration of 3,000,000
shares of its common stock.
Ernst & Young LLP
Manchester, New Hampshire July 31, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated July 26, 1996, with respect to the consolidated
financial statements of About Software Corporation S.A. and Subsidiary
included in the Registration Statement on Form SB-2 and related Prospectus of
White Pine Software, Inc. for the registration of 3,000,000 shares of its
common stock.
Ernst & Young Audit
/s/ Jacques Fournier
Jacques Fournier
Nice, France
July 31, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C> <C>
<PERIOD-TYPE> 9-MOS 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1995 DEC-31-1996
<PERIOD-START> APR-01-1994 JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1994 DEC-31-1995 MAR-31-1996
<CASH> 0 1,773,855 2,832,507
<SECURITIES> 0 0 0
<RECEIVABLES> 0 1,554,977 1,897,702
<ALLOWANCES> 0 116,449 127,875
<INVENTORY> 0 178,546 186,178
<CURRENT-ASSETS> 0 3,559,746 5,191,384
<PP&E> 0 2,262,100 2,401,945
<DEPRECIATION> 0 1,648,839 1,740,177
<TOTAL-ASSETS> 0 6,437,408 7,987,341
<CURRENT-LIABILITIES> 0 2,777,956 3,322,930
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 0 55,898 2,055,898
<OTHER-SE> 0 0 0
<TOTAL-LIABILITY-AND-EQUITY> 0 6,437,408 7,987,341
<SALES> 0 0 0
<TOTAL-REVENUES> 4,964,762 7,183,745 2,086,290
<CGS> 0 0 0
<TOTAL-COSTS> 654,996 1,247,094 373,407
<OTHER-EXPENSES> 4,043,665 9,582,955 2,670,096
<LOSS-PROVISION> 31,006 9,984 5,100
<INTEREST-EXPENSE> 0 7,000 9,107
<INCOME-PRETAX> 411,695 (3,495,961) (936,800)
<INCOME-TAX> 18,000 30,024 25,204
<INCOME-CONTINUING> 0 0 0
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 393,695 (3,525,985) (962,004)
<EPS-PRIMARY> .06 (.65) (.16)
<EPS-DILUTED> .06 (.65) (.16)
</TABLE>
