<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 6, 1996
REGISTRATION NO. 333-9525
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
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)
542 AMHERST STREET
NASHUA, NEW HAMPSHIRE 03063
(603) 886-9050
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES AND PRINCIPAL
PLACE OF BUSINESS)
----------------
HOWARD R. BERKE
WHITE PINE SOFTWARE, INC.
542 AMHERST STREET
NASHUA, NEW HAMPSHIRE 03063
(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, MEAGHER & FLOM
ONE POST OFFICE SQUARE ONE BEACON STREET
BOSTON, MASSACHUSETTS 02109 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]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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 September 6, 1996
3,000,000 SHARES
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 and 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, industry analysts have estimated that shipments of desktop
videoconferencing systems will grow from approximately 100,000 units in 1995 to
an estimated 20 million units in 2000.
In June 1995, the Company secured from Cornell Research Foundation, Inc. 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 and the White
Pine Reflector may be downloaded for evaluation, without any purchase
obligation, from the Company's World Wide Web ("Web") site. Enhanced CU-SeeMe
has been downloaded for evaluation approximately 450,000 times since March
1996, and the White Pine Reflector has been downloaded for evaluation more than
60,000 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 principal distributors
include, among others, Ingram Micro, Inc. and Tech Data Corporation in the
United States, Macnica, Inc. and dit Co., Ltd. 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 September 3, 1996, (i) 1,004,085 shares of Common Stock
issuable upon the exercise of options at a weighted average exercise price
of $1.78 per share, (ii) 474,250 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 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
registered trademark of 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
six months ended June 30, 1995 and (iii) the Company (which includes the
consolidated operations of WPS and ASC) for the six months ended June 30, 1996.
The table also presents summary balance sheet data for the Company as of June
30, 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 SIX MONTHS SIX MONTHS
ENDED ENDED ENDED
DEC. 31, 1995 JUNE 30, 1995 JUNE 30, 1996
------------- ------------- -------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue....................... $ 9,227 $3,425 $ 4,860
Income (loss) from operations....... (1,396) 166 (1,855)
Net income (loss)................... (1,171) 226 (1,888)
Net income (loss) per common and
common equivalent share............ $ .04 $ (.32)
Weighted average number of common
and common equivalent shares
outstanding........................ 6,118 5,901
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
---------------------
ACTUAL AS ADJUSTED(1)
------ --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $2,031 $25,983
Working capital........................................... 1,125 25,205
Total assets.............................................. 7,010 30,962
Long-term debt, less current portion...................... 312 171
Total stockholders' equity................................ 3,168 27,388
</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 $1,855,000 in the six months ended June 30, 1996.
At June 30, 1996, the Company had an accumulated deficit of approximately
$11,863,000. In the fiscal year ended December 31, 1995 and the six months
ended June 30, 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.
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.
The loss of, or a significant curtailment of purchases by, Ingram Micro, Inc.,
including a loss or curtailment due to factors outside of the Company's
control, could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--Customers" and
Note 1 of Notes to the Company's Consolidated Financial Statements.
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
6
<PAGE>
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.
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
7
<PAGE>
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 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. 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
8
<PAGE>
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 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 Brian
L. Lichorowic, its Vice President of Marketing, who joined the Company in
August 1996; 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. 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 relocated its
corporate headquarters to larger facilities in Nashua, New Hampshire in late
August 1996 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 also recently
moved 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."
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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 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
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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 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. As of the date of this
Prospectus, the Company has not paid the minimum amount payable with respect
to sublicensing royalties for the period from June 1, 1995 through November
30, 1996. 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
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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 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 six months ended June 30, 1996, respectively. The increased level of
international revenue in the six months ended June 30, 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.
RISK OF PRODUCT 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.
The Company is a defendant in 13 lawsuits pending in New York federal and
state courts in which the plaintiffs claim to suffer from carpal tunnel
syndrome, or "repetitive stress injuries," as a result of having used computer
keyboards that are alleged to have been defectively designed by a predecessor
of the Company. None of these suits has reached trial and additional
information detrimental to the Company could be developed in the course of
discovery. Although the Company has established a reserve for these suits that
the Company believes is adequate, there can be no assurance that the Company's
liabilities under these suits will not substantially exceed that reserve. See
"Business--Legal Proceedings."
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
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("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 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 and chill the development of Internet content, thereby decreasing
the demand for the Company's Internet videoconferencing products or otherwise
having 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
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(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. 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. The
Company's existing bank line of credit will expire on January 1, 1997. 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 September 3, 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, 5,946,321 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, 40,824 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 3,543,100 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 September 3, 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 $274,000 of indebtedness and to use the
remaining approximately $23,886,000 of such proceeds (assuming an initial
public offering price of $9.00 per share) 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 $6.81 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 the Company's other legacy connectivity 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 542 Amherst Street, Nashua, New Hampshire
03063, 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 June 30, 1996, FF340,486,
FF71,974 and FF972,309 (approximately $67,423, $14,252 and $192,536, based
upon foreign currency exchange rates as of August 28, 1996) were outstanding
under loans bearing interest at different variable rates (11.55%, 8.75% and
7.25%, respectively, at August 28, 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 June
30, 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 outstanding shares of $5.83 Stock, 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>
JUNE 30, 1996
---------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt, less current portion..................... $ 312 $ 171
-------- --------
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 5,591,810 shares issued and
outstanding, actual; 30,000,000 shares authorized and
9,006,321 shares issued and outstanding, as
adjusted(1)........................................... 56 90
Common stock (redeemable), $5.83 par value; 500,000
shares authorized and 394,511 shares issued and
outstanding, actual; no shares authorized, issued or
outstanding, as adjusted.............................. 2,300 --
Additional paid-in capital............................. 12,577 39,063
Accumulated deficit.................................... (11,863) (11,863)
Currency translation adjustments....................... 98 98
-------- --------
Total stockholders' equity........................... 3,168 27,388
-------- --------
Total capitalization............................... $ 3,480 $ 27,559
======== ========
</TABLE>
- --------
(1) Excludes, as of June 30, 1996, 949,884 shares of Common Stock issuable
upon the exercise of options at a weighted average exercise price of
$1.36. Between June 30, 1996 and September 3, 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 75,750 shares of Common
Stock, (v) issued 21,549 shares of Common Stock upon the exercise of
options and (vi) 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 June 30, 1996 was
$1,772,868, or $.30 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 outstanding shares
of $5.83 Stock 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 June 30, 1996 would have been $28,722,868 or $3.19 per share. This
represents an immediate increase in pro forma net tangible book value of $2.89
per share to existing stockholders and an immediate dilution of $6.81 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 June 30, 1996... $ .30
Increase per share attributable to new investors............... 2.89
-----
Pro forma net tangible book value per share after offering....... 3.19
------
Pro forma net tangible book value dilution per share to new
investors....................................................... $ 6.81
======
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1996,
the number of shares of Common Stock purchased from the Company (after giving
effect to the conversion of the outstanding shares of $5.83 Stock 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....... 6,006,321 66.7% $14,992,589 33.3% $ 2.50
New investors............... 3,000,000 33.3 30,000,000 66.7 $10.00
--------- ----- ----------- -----
Total..................... 9,006,321 100.0% $44,992,589 100.0%
========= ===== =========== =====
</TABLE>
The foregoing table assumes no exercise of options outstanding after June
30, 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 six months ended June
30, 1995 and 1996, and as of June 30, 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 six months ended June 30, 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 SIX MONTHS SIX 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) JUNE 30, 1995 JUNE 30, 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 $2,914 $ 4,304
Services and
other.......... 600 1,166 511 556
------ ------- ------ -------
Total revenue... 4,965 7,184 $1,331 $2,043 $ 9,227 3,425 4,860
Cost of revenue.. 655 1,247 150 226 1,473 415 921
------ ------- ------ ------ ------- ------ -------
Gross profit..... 4,310 5,937 1,181 1,817 7,754 3,010 3,939
------ ------- ------ ------ ------- ------ -------
Operating
expenses:
Sales and
marketing...... 1,637 2,517 592 688 3,204 1,173 2,810
Research and
development.... 1,301 1,866 684 780 2,726 920 1,701
General and
administrative
............... 1,106 2,000 552 1,020 3,220 751 1,283
------ ------- ------ ------ ------- ------ -------
Total operating
expenses....... 4,044 6,383 1,828 2,488 9,150 2,844 5,794
------ ------- ------ ------ ------- ------ -------
Income (loss)
from
operations...... 266 (446) (647) (671) (1,396) 166 (1,855)
------ ------- ------ ------ ------- ------ -------
Other income
(expense):
Write-off of
purchased
research
and development
costs.......... -- (3,200) -- -- -- -- --
Interest
income......... 66 82 (49) (52) 30 45 43
Other, net...... 80 68 71 157 225 27 (20)
------ ------- ------ ------ ------- ------ -------
146 (3,050) 22 105 255 72 23
------ ------- ------ ------ ------- ------ -------
Income (loss)
before provision
for income
taxes........... 412 (3,496) (625) (566) (1,141) 238 (1,832)
Provision for
income taxes.... 18 30 -- -- 30 12 56
------ ------- ------ ------ ------- ------ -------
Net income
(loss).......... $ 394 $(3,526) $ (625) $ (566) $(1,171) $ 226 $ 1,888
====== ======= ====== ====== ======= ====== =======
Net income (loss)
per common and
common
equivalent
share........... $ .06 $ (.65) $ .04 $ (.32)
====== ======= ====== =======
Weighted average
number of common
and common
equivalent
shares
outstanding..... 6,085 5,451 6,118 5,901
====== ======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
COMPANY
---------------------------
DEC. 31, 1995 JUNE 30, 1996
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................... $1,774 $2,031
Working capital..................................... 782 1,125
Total assets........................................ 6,437 7,010
Long-term debt, less current portion................ 385 312
Total stockholders' equity(4)....................... 2,780 3,168
</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 effective 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 income 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 SIX MONTHS
(NINE MONTHS) FISCAL YEAR ENDED JUNE 30,
ENDED ENDED -----------------
DEC. 31, 1994 DEC. 31, 1995 1995 1996
------------- ------------- ------- -------
<S> <C> <C> <C> <C>
Revenue:
Software license fees........ 87.9 % 83.8 % 85.1 % 88.6 %
Services and other........... 12.1 16.2 14.9 11.4
----- ----- ------- -------
Total revenue............... 100.0 100.0 100.0 100.0
Cost of revenue............... 13.2 17.4 12.1 19.0
----- ----- ------- -------
Gross profit.................. 86.8 82.6 87.9 81.0
----- ----- ------- -------
Operating expenses:
Sales and marketing.......... 32.9 35.0 34.2 57.8
Research and development..... 26.2 26.0 26.9 35.0
General and administrative... 22.3 27.8 21.9 26.4
----- ----- ------- -------
Total operating expenses.... 81.4 88.8 83.0 119.2
----- ----- ------- -------
Income (loss) from
operations................... 5.4 (6.2) 4.9 (38.2)
Write-off of purchased
research and development
costs........................ -- (44.5) -- --
Interest income and other,
net.......................... 2.9 2.0 2.1 0.5
Provision for income taxes.... (0.4) (0.4) (0.4) 1.1
----- ----- ------- -------
Net income (loss)............. 7.9 % (49.1)% 6.6 % (38.8)%
===== ===== ======= =======
</TABLE>
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 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 six months ended June 30, 1995 and
1996 are not necessarily meaningful.
Revenue
Total revenue increased by 42% to $4,860,000 in the six months ended June
30, 1996 from $3,425,000 in the six months ended June 30, 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 18% of total
revenue for the six months ended June 30, 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, product localization for international markets,
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 19% for the six months ended
June 30, 1996 as compared
24
<PAGE>
to 12% for the six months ended June 30, 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 140% to
$2,810,000 in the six months ended June 30, 1996 from $1,173,000 in the six
months ended June 30, 1995, and increased as a percentage of total revenue to
58% from 34%. The increase related to (i) the additional sales force employed
as part of the acquisition of ASC, effective as of November 1, 1995, (ii) the
strengthening of the Company's sales and marketing organization through the
hiring of additional personnel in channel development, marketing,
communication, technical support and sales and (iii) the launch of Enhanced
CU-SeeMe, which included increased advertising, trade show participation and
other marketing-related programs. The Company intends to continue to increase
sales and marketing efforts in connection with the first year of its marketing
and sales of Enhanced CU-SeeMe and to hire sales and marketing personnel, but
at a slower rate of increase than during the six months ended June 30, 1996.
Research and Development
Research and development expense consists primarily of costs of personnel
and equipment. Research and development expense increased by 85% to $1,701,000
in the six months ended June 30, 1996 from $920,000 in the six months ended
June 30, 1995. Research and development expense represented 35% and 27% of
total revenue for the six months ended June 30, 1996 and 1995, respectively.
The increase was principally attributable to the employment of additional
engineers as a result of the acquisition of ASC and 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 71% to $1,283,000 in the six months ended
June 30, 1996 from $751,000 in the six months ended June 30, 1995 and
increased as a percentage of total revenue to 26% 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, as the
contract for services expired pursuant to its terms.
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 six months ended June 30, 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 $1,577,000 in the
six months ended June 30, 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 $2,300,000 from a private placement of equity securities in
the six months ended June 30, 1996.
Capital expenditures totalled $303,000, $330,000 and $185,000 for the six
months ended June 30, 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 January 1, 1997, and the Company and the Bank have
entered into negotiations for a successor credit line to be effective after
January 1, 1997 at a higher principal amount than the existing line. 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 June 30, 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 September 30, 1996. At December 31, 1995 and June 30,
1996, no borrowings were outstanding under the revolving line of credit and
$49,467 and $44,167 were outstanding under the term loan, respectively.
At June 30, 1996, the Company had cash and cash equivalents of $2,031,000
and working capital of $1,125,000. 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.
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<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 $109 million in
1995 to $216 million in 1998.
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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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 20 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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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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. 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.
[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 videoconfrencing among users with different
connection speeds without having to use the lowest common bandwidth.
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[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.
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<PAGE>
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,
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. Based on an industry analyst's report, 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)
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<PAGE>
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 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.
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 $1,701,000 in the fiscal years ended December 31, 1994 and 1995
and the six months ended June 30, 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
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<PAGE>
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 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, without any purchase obligation, from the Company's
Web site approximately 450,000 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 60,000 times. There can be no assurance
that downloads for evaluation will lead to sales of the Company's
videoconferencing products.
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, the Little League
50th Anniversary World Series and the 1996 Republican National Convention, 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 18% and 30% of total
revenue in the six months ended June 30, 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
END USERS AND 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 Southwestern Bell Macnica, Inc.
Corp.
Merrill Lynch Technology Tech Data Corporation
Telecom
Finance U.S. Department of Utopia Inc.
Defense
National University of Utah VideoLabs, Inc.
Aeronautics and
Space Winnov Inc.
Administration
- ---------------------------------------------------------------------------------------------
Amgen Inc. J.P. Morgan & Co. Attachmate Corp.
Apple Computer, Incorporated CompuServe Incorporated
Inc.
AT&T Corp. Kredietbank N.V. Digital Equipment Corporation
Corning Motorola, Inc. Diversified Computer Systems,
Incorporated Inc.
The Dow Chemical SNCF E92 Plus Ltd.
LEGACY CONNECTIVITY Company TRW Inc. EA Systems Inc.
E.I. DuPont Universite de Ingram Micro, Inc.
Lausanne
de Nemours & U.S. West Inc. Insignia Solutions Inc.
Company
Deere & Company Merisel Inc.
TCI
</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
42
<PAGE>
Internet and chill the development of Internet content, thereby decreasing the
demand for the Company's Internet videoconferencing products or otherwise
having 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. As of the date of this
Prospectus, the Company has not paid the minimum amount payable with respect
to sublicensing royalties for the period from June 1, 1995 through November
30, 1996. There can be no assurance that the Company will meet its royalty
obligations for the current license period or any subsequent license year.
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
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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 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, effective August 1, 1996, for
facilities in Nashua, New Hampshire with approximately 27,000 square feet of
office space. The Company also leases office space in San Jose, California and
LaGaude, France. The Company believes that its facilities are 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
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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
September 3, 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..... 37 Senior Vice President of Research and Development,
Chief Technology Officer and Director
David O. Bundy.......... 38 Vice President of Engineering
Jack A. Dutzy........... 52 Vice President of Sales, Americas
Carl A. Koppel.......... 46 Vice President of Sales, International
Brian L. Lichorowic..... 35 Vice President of Marketing
Arthur H. Bruno(1)(2)... 62 Director
Jonathan G. Morgan(1)... 42 Director
Pierre-Gabriel 54 Director
Vallee(2)..............
</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.
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.
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-- 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.
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<PAGE>
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.
BRIAN L. LICHOROWIC joined the Company in August 1996 as Vice President of
Marketing. From January 1996 to August 1996, Mr. Lichorowic served as
Executive Director Strategic Alliance for CyberCash Inc., a company
specializing in secure Internet transactions. Mr. Lichorowic was a co-founder
of InterCon Systems Corporation, a wholly owned subsidiary of PSINet Inc. that
specializes in software and Internet services, and served as its Vice
President of Marketing from January 1991 to December 1995. Mr. Lichorowic
received a B.A. in Business Administration from Boston University and an
M.B.A. from Lynn University.
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 subsequently
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
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<PAGE>
Directors may not grant options to purchase more than 200,000 shares of Common
Stock under the 1996 Option Plan. As of September 3, 1996, options to purchase
an aggregate of 1,004,085 shares of Common Stock having a weighted average
exercise price of $1.78 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.
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<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,
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<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.
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<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 at a purchase price of $5.83 per share 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 920,330 15.3% 10.2%
Investment(5)..................
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 Group(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 3,126,938 49.2% 33.4%
officers as a group (10
persons)(13)...................
</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, 542 Amherst Street, Nashua, New
Hampshire 03063.
(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 and the Consortium de Realisation
(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) Includes 42,349 shares 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 shares held by venture capital funds managed by Advent
International Corporation, as follows: 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 Partnership, 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 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 September 3, 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 September 3, 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 1,004,085
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 September 3,
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
September 3, 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 September 3,
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, 5,946,321 shares are subject to the lock-up
agreements described below. Of the Restricted Shares not subject to such lock-
up agreements, 40,824 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 3,543,100 Restricted Shares will be eligible
for sale in the public market pursuant to Rule 144. The remaining 2,443,529
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 90,279) 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 September 3, 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
660,431 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 September 3, 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 June 30, 1996...... F-15
Unaudited Condensed Consolidated Statements of Operations for the six
months ended June 30, 1995 and 1996.................................... F-16
Unaudited Condensed Consolidated Statements of Cash Flows for the six
months ended June 30, 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 income 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>
JUNE 30, 1996
-------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................... $ 2,031,321
Accounts receivable, less allowance of $242,233................. 1,636,076
Inventories..................................................... 142,743
Prepaid expenses................................................ 468,975
Other current assets............................................ 10,204
------------
Total current assets........................................... 4,289,319
Property and equipment:
Computer equipment.............................................. 1,692,728
Furniture and fixtures.......................................... 398,587
Software........................................................ 351,871
Equipment....................................................... 108,287
Leasehold improvements.......................................... 26,297
------------
2,577,770
Accumulated depreciation and amortization....................... (1,861,796)
------------
715,974
Other assets:
Third-party licenses, less accumulated amortization of
$496,498....................................................... 585,975
Goodwill, less accumulated amortization of $159,005............. 1,033,513
Other assets.................................................... 385,292
------------
2,004,780
------------
Total assets..................................................... $ 7,010,073
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................ $ 544,063
Accrued expenses and other accrued liabilities.................. 1,531,270
Deferred revenue................................................ 898,634
Current portion of long-term debt............................... 190,219
------------
Total current liabilities...................................... 3,164,186
Long-term debt, less current portion............................. 311,642
Long-term portion of accrued third-party licenses................ 366,358
Stockholders' equity:
Common stock, $.01 par value:
Authorized shares--7,500,000
Issued and outstanding shares--5,591,810....................... 55,918
Common stock, $5.83 par value:
Authorized shares--500,000
Issued and outstanding shares--394,511......................... 2,300,000
Additional paid-in capital...................................... 12,576,671
Accumulated deficit............................................. (11,863,066)
Currency translation adjustments................................ 98,364
------------
Total stockholders' equity..................................... 3,167,887
------------
Total liabilities and stockholders' equity....................... $ 7,010,073
============
</TABLE>
See accompanying notes.
F-15
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
1995 1996
---------- -----------
<S> <C> <C>
Revenue:
Software license fees................................ $2,914,361 $ 4,304,595
Services and other................................... 510,810 555,607
---------- -----------
Total revenue....................................... 3,425,171 4,860,202
Cost of revenue....................................... 414,524 920,838
---------- -----------
Gross profit.......................................... 3,010,647 3,939,364
Operating expenses:
Sales and marketing.................................. 1,173,257 2,810,316
Research and development............................. 920,299 1,700,844
General and administrative........................... 750,755 1,283,428
---------- -----------
Total operating expenses............................ 2,844,311 5,794,588
---------- -----------
Loss from operations.................................. 166,336 (1,855,224)
Other income (expense):
Interest income...................................... 44,539 43,269
Other, net........................................... 27,515 (20,546)
---------- -----------
72,054 22,723
---------- -----------
Income (loss) before provision for income taxes....... 238,390 (1,832,501)
Provision for income taxes............................ 12,351 55,665
---------- -----------
Net income (loss)..................................... $ 226,039 $(1,888,166)
========== ===========
Net income (loss) per common and common equivalent
share................................................ $ .04 $ (.32)
========== ===========
Weighted average number of common and common
equivalent shares outstanding........................ 6,118,327 5,901,050
========== ===========
</TABLE>
See accompanying notes.
F-16
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
1995 1996
---------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss).................................... $ 226,039 $(1,888,166)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization...................... 98,043 576,519
Changes in operating assets and liabilities:
Accounts receivable............................... (164,546) (243,139)
Inventories....................................... (32,183) 36,207
Prepaid expenses.................................. (6,817) (291,187)
Other assets...................................... -- (87,625)
Accounts payable.................................. (82,960) 70,550
Accrued expenses and other accrued liabilities.... (140,971) (207,992)
Deferred revenue.................................. 30,545 458,132
---------- -----------
Net cash provided by (used in) operating activi-
ties........................................... 93,070 (1,576,701)
INVESTING ACTIVITIES
Purchase of property and equipment, net.............. (328,016) (303,494)
Purchase of third-party licenses, net................ -- (29,961)
Other................................................ -- --
---------- -----------
Net cash used in investing activities........... (328,016) (333,455)
FINANCING ACTIVITIES
Proceeds from long-term debt......................... -- 22,722
Principal payments on long-term debt................. -- (95,973)
Proceeds from sale of common stock, net.............. 692 2,239,261
---------- -----------
Net cash provided by financing activities....... 692 2,166,010
Currency translation effect on cash and
cash/equivalents.................................... -- 1,612
---------- -----------
Net increase (decrease) in cash and cash equiva-
lents............................................... (234,254) 257,466
Cash and cash equivalents at beginning of period..... 1,871,032 1,773,855
---------- -----------
Cash and cash equivalents at end of period........... $1,636,778 $ 2,031,321
========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest............................... 1,451 $ 19,222
========== ===========
Cash paid for taxes.................................. $ 22,662 $ 34,912
========== ===========
</TABLE>
See accompanying notes.
F-17
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 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 June 30, 1995 and 1996 and for the six-month
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
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....................................... 275,000
Blue sky fees and expenses (including related legal fees).......... 20,000
Legal fees and expenses............................................ 350,000
Printing and engraving expenses.................................... 100,000
Transfer agent fees................................................ 5,000
Miscellaneous...................................................... 19,083
--------
Total.......................................................... $950,000
========
</TABLE>
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
5 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 10 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 as filed on August 2, 1996)
27.1 Financial Data Schedules for fiscal year ended December 31, 1995
and six months ended June 30, 1996
</TABLE>
- --------
+ Previously filed under application for confidential treatment.
* Previously filed.
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 AMENDMENT
NO. 1 TO REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
IN THE CITY OF NASHUA, NEW HAMPSHIRE ON SEPTEMBER 6, 1996.
White Pine Software, Inc.
/s/ Richard M. Darer
By: _________________________________
RICHARD M. DARER
CHIEF FINANCIAL OFFICER AND VICE
PRESIDENT OF ADMINISTRATION
IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
AMENDMENT NO. 1 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED ON SEPTEMBER 6, 1996.
SIGNATURE TITLE
President, Chief Executive Officer and
* Director (Principal Executive
- ------------------------------------- Officer)
HOWARD R. BERKE
/s/ Richard M. Darer Chief Financial Officer and Vice
- ------------------------------------- President of Administration
RICHARD M. DARER (Principal Financial and Accounting
Officer)
Director
*
- -------------------------------------
KILLKO A. CABALLERO
Director
*
- -------------------------------------
ARTHUR H. BRUNO
Director
*
- -------------------------------------
JONATHAN G. MORGAN
Director
*
- -------------------------------------
PIERRE-GABRIEL VALLEE
*By:
/s/ Richard M. Darer
_____________________________
RICHARD M. DARER
ATTORNEY-IN-FACT
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 the
Registration Statement
as filed on August 2, 1996)
27.1 Financial Data Schedules for fiscal year ended December 31,
1995 and six months ended June 30, 1996
</TABLE>
- --------
+ Previously filed under application for confidential treatment.
* Previously filed.
<PAGE>
DRAFT
3,000,000 Shares
White Pine Software, Inc.
Common Stock
UNDERWRITING AGREEMENT
----------------------
[ ], 1996
COWEN & COMPANY
OPPENHEIMER & CO., INC.
VOLPE, WELTY & COMPANY
As Representatives of the several Underwriters
c/o Cowen & Company
Financial Square
New York, New York 10005
Dear Sirs:
1. Introductory. White Pine Software, Inc., a Delaware corporation
------------
(the "Company"), proposes to sell, pursuant to the terms of this Agreement, to
the several underwriters named in Schedule A hereto (the "Underwriters" or,
each, an "Underwriter"), an aggregate of 3,000,000 shares of Common Stock, $.01
par value (the "Common Stock") of the Company. The aggregate of 3,000,000
shares so proposed to be sold is hereinafter referred to as the "Firm Stock."
The Company also proposes to sell to the Underwriters, upon the terms and
conditions set forth in Section 3 hereof, up to an additional 450,000 shares of
Common Stock (the "Optional Stock"). The Firm Stock and the Optional Stock are
hereinafter collectively referred to as the "Stock." The respective amounts of
the Firm Stock and the Optional Stock to be so purchased by the several
Underwriters are set forth opposite their names in Schedule A hereto. Cowen &
Company ("Cowen"), Oppenheimer & Co., Inc. ("Oppenheimer") and Volpe, Welty &
Company ("Volpe") are acting as representatives of the several Underwriters and,
in such capacity, are hereinafter referred to as the "Representatives."
2. Representations and Warranties of the Company. The Company
---------------------------------------------
represents and warrants to, and agrees with, the several Underwriters as
follows:
(a) A registration statement on Form SB-2 (File No. 333-9525) in
the form in which it became or becomes effective, and also in such form
as it may be when any post-effective amendment thereto shall become effec-
tive with respect to the Stock, including any pre-effective prospectuses
included as part of the registration statement as originally filed or as
part of any amendment or supplement thereto, or filed
<PAGE>
pursuant to Rule 424 under the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder, copies of which have heretofore been delivered to you, has been
carefully prepared by the Company in conformity with the requirements of
the Securities Act and has been filed with the Commission under the
Securities Act; one or more amendments to such registration statement,
including in each case an amended pre-effective prospectus, copies of which
amendments have heretofore been delivered to you, also have been so
prepared and filed. The term "Registration Statement," as used in this
Agreement, means the registration statement referenced in the first
sentence of this Section 2(a), subject to the following two sentences if it
is contemplated, at the time this Agreement is executed, that a post-
effective amendment to the registration statement will be filed and must be
declared effective before the offering of the Stock may commence, the term
"Registration Statement" as used in this Agreement means the registration
statement as amended by said post-effective amendment. The term
"Registration Statement," as used in this Agreement, shall also include any
registration statement relating to the Stock that is filed and declared
effective pursuant to Rule 462(b) under the Securities Act. The term
"Prospectus," as used in this Agreement, means the prospectus in the form
included in the Registration Statement subject to the following two
sentences. If the prospectus included in the Registration Statement omits
information in reliance on Rule 430A under the Securities Act and such
information is included in a prospectus filed with the Commission pursuant
to Rule 424(b) under the Securities Act, the term "Prospectus," as used in
this Agreement, means the prospectus in the form included in the
Registration Statement as supplemented by the addition of the Rule 430A
information and other information contained in the prospectus filed with
the Commission pursuant to Rule 424(b). If prospectuses that meet the
requirements of Section 10(a) of the Securities Act are delivered pursuant
to Rule 434 under the Securities Act, then (i) the term "Prospectus" as
used in this Agreement means the "prospectus subject to completion" (as
such term is defined in Rule 434(g) under the Securities Act) as
supplemented by (a) the addition of Rule 430A information or other
information contained in the form of prospectus delivered pursuant to Rule
434(b)(2) under the Securities Act or (b) the information contained in the
term sheets described in Rule 434(b)(3) under the Securities Act, and (ii)
the date of such prospectuses shall be deemed to be the date of the term
sheets. The term "Pre-effective Prospectus" as used in this Agreement
means the prospectus subject to completion in the form included in the
registration statement referenced in the first sentence of this Section
2(a) at the time of the initial filing thereof and as such prospectus shall
have been amended from time to time prior to the date of the Prospectus.
(b) The Commission has not issued or threatened to issue any order
preventing or suspending the use of any Pre-effective Prospectus, and, at
its date of issue, each Pre-effective Prospectus conformed in all material
respects with the requirements of the Securities Act and did not include
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary
2
<PAGE>
to make the statements therein, in light of the circumstances under which
they were made, not misleading; and, when the Registration Statement became
or becomes effective and at all times subsequent thereto up to and
including the Closing Dates (as hereinafter defined), the Registration
Statement and the Prospectus and any amendments or supplements thereto
contained and will contain all material statements and information required
to be included therein by the Securities Act and conformed and will conform
in all material respects to the requirements of the Securities Act and
neither the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, included or will include any untrue statement of a
material fact or omitted or will omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading; provided,
---------
however, that the foregoing representations, warranties and agreements
-------
shall not apply to information contained in or omitted from any Pre-
effective Prospectus or the Registration Statement or the Prospectus or any
such amendment or supplement thereto in reliance upon, and in conformity
with, written information furnished to the Company by or on behalf of any
Underwriter, directly or through you, specifically for use in the
preparation thereof. There is no franchise, lease, contract, agreement or
document required to be described in the Registration Statement or
Prospectus or to be filed as an exhibit to the Registration Statement which
is not described therein or filed as required, and all descriptions of any
such franchises, leases, contracts, agreements or documents contained in
the Registration Statement are accurate and complete descriptions of such
documents in all material respects.
(c) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, except as set forth or
contemplated in the Prospectus (including without limitation with respect
to the stock plans, warrant, and conversion of $5.83 Stock (as hereinafter
defined)), neither the Company nor its subsidiaries has incurred any
liabilities or obligations, direct or contingent, or entered into any
transactions not in the ordinary course of business, and there has not been
any material adverse change in the condition (financial or other),
properties, business, management, prospects, net worth or results of
operations of the Company and its subsidiaries considered as a whole, or
any change in the capital stock, short-term or long-term debt of the
Company and its subsidiaries considered as a whole.
(d) The financial statements, together with the related notes and
schedules, set forth in the Prospectus and elsewhere in the Registration
Statement fairly present, on the basis stated in the Registration
Statement, the financial position and the results of operations and changes
in financial position of the Company and its subsidiaries at the respective
dates and for the respective periods therein specified. Such statements
and related notes and schedules have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis.
The selected financial and statistical data set forth in the Prospectus
under the caption "Selected Financial
3
<PAGE>
Data" fairly present, on the basis stated in the Registration Statement,
the information set forth therein.
(e) Ernst & Young, LLP, who have expressed their opinion on the
audited financial statements and related schedules included in the
Registration Statement and the Prospectus, are independent public
accountants as required by the Securities Act and the Rules and
Regulations.
(f) The Company and each of its subsidiaries has been duly organized
and is validly existing and in good standing as corporations under the laws
of their respective jurisdictions of organization, with power and authority
(corporate and other) to own or lease their businesses as described in the
Prospectus; the Company and each of its subsidiaries is in possession of
and operating in compliance with all franchises, grants, authorizations,
licenses, permits, easements, consents, certificates and orders required
for the conduct of their respective businesses, all of which are valid and
in full force and effect; and the Company and each of its subsidiaries is
duly qualified to do business and in good standing as foreign corporations
in all other jurisdictions where the failure to so qualify would have a
material adverse effect on the Company. The Company and each of its
subsidiaries has all requisite power and authority, and all necessary
consents, approvals, authorizations, orders, registrations, qualifications,
licenses and permits of and from all public regulatory or governmental
agencies and bodies to own, lease and operate their respective properties
and conduct their respective businesses as now being conducted and as
described in the Registration Statement and the Prospectus, and no such
consent, approval, authorization, order, registration, qualification,
license or permit contains a materially burdensome restriction not
adequately disclosed in the Registration Statement and the Prospectus.
The Company owns or controls, directly or indirectly, only the following
corporations: About Software Corporation S.A. and About Software
Corporation.
(g) The Company's authorized and outstanding capital stock is on the
date hereof, and will be on the Closing Dates (as hereinafter defined), as
set forth under the caption "Description of Capital Stock" in the
Prospectus; the outstanding shares of capital stock of the Company conform
to the description thereof in the Prospectus, have been duly authorized and
validly issued and are fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws and were not issued
in violation of, and on the Closing Date will not be subject to, any
preemptive rights or similar rights to subscribe for or purchase
securities. The 394,511 shares of Common Stock to be issued upon the
conversion of all outstanding shares of common stock, par value $5.83 per
share (the "$5.83 Stock"), of the Company, to be effected immediately prior
to the First Closing (as hereinafter defined), have been duly and validly
authorized and, when issued, will be duly and validly issued, fully paid
and nonassessable and free of any preemptive or similar rights. Except as
disclosed in and or contemplated by the Prospectus (including without
limitation with respect to stock purchase and stock option plans) and the
financial statements of the Company
4
<PAGE>
and related notes thereto included in the Prospectus, the Company does not
have outstanding any options or warrants to purchase, or any preemptive
rights or other rights to subscribe for or to purchase any securities or
obligations convertible into, or any contracts or commitments to issue or
sell, shares of its capital stock or any such options, rights, convertible
securities or obligations. The description of the Company's stock option
and other stock plans or arrangements, and the options or other rights
granted or exercised thereunder, as set forth in the Prospectus, accurately
and fairly presents the information required to be shown with respect to
such plans, arrangements, options and rights. All outstanding shares of
capital stock of the Company's subsidiaries have been duly authorized and
validly issued, and are fully paid and nonassessable and are owned directly
by the Company free and clear of any liens, encumbrances, equities or
claims.
(h) The Stock to be issued and sold by the Company to the
Underwriters hereunder has been duly and validly authorized and, when
issued and delivered against payment therefor as provided herein, will be
duly and validly issued, fully paid and nonassessable and free of any
preemptive or similar rights and will conform to the description thereof in
the Prospectus.
(i) Except as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its
subsidiaries or any affiliates is a party or of which any property of the
Company or any of its subsidiaries or any affiliate is subject, which, if
determined adversely to the Company or any of its subsidiaries or any such
affiliate, might individually or in the aggregate (i) prevent or adversely
affect the transactions contemplated by this Agreement, (ii) suspend the
effectiveness of the Registration Statement, (iii) prevent or suspend the
use of the Pre-effective Prospectus in any jurisdiction or (iv) result in a
material adverse change in the condition (financial or other), properties,
business, management, prospects, net worth or results of operations of the
Company and its subsidiaries considered as a whole, and there is no valid
basis for any such legal or governmental proceeding; and to the best of the
Company's knowledge, no such proceedings are threatened or contemplated
against the Company or any of its subsidiaries or any affiliate by
governmental authorities or others. The Company is neither a party nor
subject to the provisions of any material injunction, judgment, decree or
order of any court, regulatory body or other governmental agency or body.
The description of the Company's litigation under the caption "Legal
Proceedings" in the Prospectus is true and correct and complies with the
Rules and Regulations.
(j) The execution, delivery and performance of this Agreement and
the consummation of the transactions herein contemplated (i) will not
result in any violation of the provisions of the Amended and Restated
Certificate of Incorporation, and Amended and Restated By-Laws or other
organizational documents of the Company or any of its subsidiaries or any
law, order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any of its
5
<PAGE>
subsidiaries or any of their properties or assets, (ii) will not conflict
with or result in a breach or violation of any of the terms or provisions
of, or constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other material agreement or instrument to which the
Company or any of its subsidiaries is a party or to which the Company, any
of its subsidiaries or any of the property or assets of the Company or any
of its subsidiaries is subject and (iii) will not result in the creation or
imposition of a lien upon any property or assets of the Company or any of
its subsidiaries.
(k) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance of this Agreement by the Company and the consummation of the
transactions contemplated by this Agreement, except such consents,
approvals, or authorizations which have been obtained, such as may be
required by the National Association of Securities Dealers, Inc. (the
"NASD") or under the Securities Act or the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), or securities or "Blue Sky" laws of any
jurisdiction in connection with the purchase and distribution of the Stock
by the Underwriters.
(l) The Company has the full corporate power and authority to enter
into this Agreement and to perform its obligations hereunder (including to
issue, sell and deliver the Stock), and this Agreement has been duly and
validly authorized, executed and delivered by the Company and is a valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except to the extent that rights to indemnity
and contribution hereunder may be limited by federal or state securities
laws or the public policy underlying such laws.
(m) The Company and its subsidiaries are in all material respects in
compliance with, and conduct their businesses in conformity with, all
applicable federal, state, local and foreign laws, rules and regulations
(including but not limited to the Foreign Corrupt Practices Act) and all
applicable judgments, decrees or orders of any court or governmental agency
or body; to the best of the Company's knowledge, otherwise than as set
forth in the Registration Statement and the Prospectus, no prospective
change in any of such laws, rules or regulations has been adopted which,
when made effective, would have a material adverse effect on the operations
of the Company and its subsidiaries.
(n) The Company and its subsidiaries have filed all necessary
federal, state, local and foreign income, payroll, franchise and other tax
returns and have paid all taxes shown as due thereon or with respect to any
of their properties, and there is no tax deficiency that has been, or to
the best of the Company's knowledge is likely to be, asserted against the
Company or any of its subsidiaries or any of their respective properties or
assets that would adversely affect the financial position, business or
operations of the Company and its subsidiaries.
6
<PAGE>
(o) No person or entity has the right to require registration of
shares of Common Stock or other securities of the Company because of the
filing or effectiveness of the Registration Statement or otherwise, except
for persons and entities who have expressly waived such right or who have
been given proper notice and have failed to exercise such right within the
time or times required under the terms and conditions of such right.
(p) Neither the Company nor any of its officers, directors or
affiliates has taken or will take, directly or indirectly, any action
designed or intended to stabilize or manipulate the price of any security
of the Company, or which caused or resulted in, or which might in the
future reasonably be expected to cause or result in, stabilization or
manipulation of the price of any security of the Company.
(q) The Company has provided you with all financial statements since
inception to the date hereof that are available to the officers of the
Company, including financial statements for the six months ended June 30,
1996.
(r) The Company and its subsidiaries own or possess the right to use
all patents, trademarks, trademark registrations, service marks, service
mark registrations, trade names, copyrights, licenses, inventions, trade
secrets and rights described in the Prospectus as being owned by them or
any of them or necessary for the conduct of their respective businesses,
and the Company is not aware of any claim to the contrary or any challenge
by any other person to the rights of the Company and its subsidiaries with
respect to the foregoing. The Company's business as now conducted and as
proposed to be conducted does not and will not infringe or conflict with in
any material respect patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses or other intellectual property or
franchise right of any other person. Except as described in the
Prospectus, no claim has been made against the Company alleging the
infringement by the Company of any patent, trademark, service mark, trade
name, copyright, trade secret, license in or other intellectual property
right or franchise right of any person.
(s) The Company and its subsidiaries have performed all material
obligations required to be performed by them under all contracts required
to be filed as exhibits to the Registration Statement by Item 601(b)(10) of
Regulation S-B under the Securities Act, and neither the Company nor its
subsidiaries nor any other party to such contract is in default under or in
breach of any such obligations. Neither the Company nor its subsidiaries
has received any notice of such default or breach.
(t) The Company is not involved in any labor dispute nor is any such
dispute threatened. The Company is not aware that (i) any executive, key
employee or significant group of employees of the Company or any of its
subsidiaries plans to terminate employment with the Company or any of its
subsidiaries or (ii) any such executive or key employee is subject to any
noncompete, nondisclosure, confidentiali-
7
<PAGE>
ty, employment, consulting or similar agreement that would be violated by
the present or proposed business activities of the Company and its
subsidiaries. Neither the Company nor any of its subsidiaries has or
expects to have any liability for any prohibited transaction or funding
deficiency or any complete or partial withdrawal liability with respect to
any pension, profit sharing or other plan which is subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), to which the
Company or any of its subsidiaries makes or ever has made a contribution
and in which any employee of the Company or any of its subsidiaries is or
has ever been a participant. With respect to such plans, the Company and
its subsidiaries are in compliance in all material respects with all
applicable provisions of ERISA.
(u) The Company has obtained the written agreement described in
Section 8(j) of this Agreement from each of its officers, directors and
holders of Common Stock and or options exercisable for shares of Common
Stock listed on Schedule B hereto.
(v) The Company and its subsidiaries have, and the Company and its
subsidiaries as of the Closing Dates (as hereinafter defined) will have,
good and marketable title in fee simple to all real property and good and
marketable title to all personal property owned or proposed to be owned by
them which is material to the business of the Company or of its
subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in the Prospectus or such as would not
have a material adverse effect on the Company and its subsidiaries
considered as a whole; and any real property and buildings held under lease
by the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as would not have a
material adverse effect on the Company and its subsidiaries considered as a
whole, in each case except as described in or contemplated by the
Prospectus.
(w) The Company and its subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in
such amounts as are customary in the businesses in which they are engaged
or propose to engage after giving effect to the transactions described in
the Prospectus; and neither the Company nor any of its subsidiaries has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage
from similar insurers as may be necessary to continue their respective
businesses at a cost that would not materially and adversely affect the
condition (financial or other), or the earnings, business or operations of
the Company and its subsidiaries considered as a whole, except as described
in or contemplated by the Prospectus.
(x) Other than as contemplated by this Agreement, there is no
broker, finder or other party that is entitled to receive from the Company
any brokerage or
8
<PAGE>
finder's fee or other fee or commission as a result of any of the
transactions contemplated by this Agreement.
(y) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurances
that (i) transactions are executed in accordance with management's general
or specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(z) To the best of the Company's knowledge, neither the Company nor
any of its subsidiaries nor any employee or agent of the Company or any of
its subsidiaries has made any payment of funds of the Company or any of its
subsidiaries or received or retained any payment in violation of any law,
rule or regulation, which payment, receipt or retention of funds is of a
character required to be disclosed in the Prospectus.
(aa) Neither the Company nor any of its subsidiaries is or, after
application of the net proceeds of this offering as described under the
caption "Use of Proceeds" in the Prospectus, will become an "investment
company" or an entity "controlled" by an "investment company" as such terms
are defined in the Investment Company Act of 1940, as amended.
(bb) Each certificate signed by an officer of the Company and
delivered to the Underwriters or counsel for the Underwriters shall be
deemed to be a representation and warranty by the Company as to the matters
covered thereby.
(cc) The stock records provided to the Representatives and their
counsel are correct in all material respects.
3. Purchase by, and Sale and Delivery to, Underwriters -- Closing
--------------------------------------------------------------
Dates. The Company agrees to sell to the Underwriters the Firm Stock; and on
- -----
the basis of the representations, warranties, covenants and agreements herein
contained, but subject to the terms and conditions herein set forth, the
Underwriters agree, severally and not jointly, to purchase the Firm Stock from
the Company, the number of shares of Firm Stock to be purchased by each
Underwriter being set opposite its name in Schedule A, subject to adjustment in
accordance with Section 12 hereof.
The purchase price per share to be paid by the Underwriters to the
Company will be $[ ] per share (the "Purchase Price").
9
<PAGE>
The Company will deliver the Firm Stock to the Representatives for the
respective accounts of the several Underwriters in the form of definitive
certificates, issued in such names and in such denominations as the Represen-
tatives may direct by notice in writing to the Company given at or prior to
12:00 Noon, New York Time, on the second full business day preceding the First
Closing Date (as defined below) or, if no such direction is received, in the
names of the respective Underwriters or in such other names as Cowen may
designate (solely for the purpose of administrative convenience) and in such
denominations as Cowen may determine, against payment of the aggregate Purchase
Price therefor by certified or official bank check or checks in Clearing House
funds (next day funds), payable to the order of the Company, all at the offices
of Foley, Hoag & Eliot LLP, One Post Office Square, Boston, Massachusetts 02109.
The time and date of the delivery and closing shall be at 10:00 A.M., New York
Time, on [ ], 1996, in accordance with Rule 15c6-1 of the Exchange Act. The time
and date of such payment and delivery are herein referred to as the "First
Closing Date". The First Closing Date and the location of, delivery of, and the
form of payment for, the Firm Stock may be varied by agreement between the
Company and Cowen. The First Closing Date may be postponed pursuant to the
provisions of Section 12.
The Company shall make the certificates for the Stock available to the
Representatives for examination on behalf of the Underwriters not later than
10:00 A.M., New York Time, on the business day preceding the First Closing Date
at the offices of Cowen & Company, Financial Square, New York, New York 10005.
It is understood that Cowen or Oppenheimer or Volpe, individually and
not as Representatives of the several Underwriters, may (but shall not be
obligated to) make payment to the Company on behalf of any Underwriter or
Underwriters, for the Stock to be purchased by such Underwriter or Underwriters.
Any such payment by Cowen, Oppenheimer or Volpe, shall not relieve such
Underwriter or Underwriters from any of its or their other obligations
hereunder.
The several Underwriters agree to make an initial public offering of
the Firm Stock at the initial public offering price as soon after the
effectiveness of the Registration Statement as in their judgment is advisable.
The Representatives shall promptly advise the Company of the making of the
initial public offering.
For the purpose of covering any over-allotments in connection with the
distribution and sale of the Firm Stock as contemplated by the Prospectus, the
Company hereby grants to the Underwriters an option to purchase, severally and
not jointly, some or all of the shares of Optional Stock. The price per share
to be paid for the Optional Stock shall be the Purchase Price. The option
granted hereby may be exercised as to all or any part of the Optional Stock at
any time, and from time to time, not more than thirty (30) days subsequent to
the effective date of this Agreement. No Optional Stock shall be sold and
delivered unless the Firm Stock previously has been, or simultaneously is, sold
and delivered. The right to purchase the Optional Stock or any portion thereof
may be surrendered and terminated at any time upon notice by the Underwriters to
the Company.
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The option granted hereby may be exercised by the Underwriters by
giving written notice from Cowen to the Company setting forth the number of
shares of the Optional Stock to be purchased by them and the date and time for
delivery of and payment for the Optional Stock. Each date and time for delivery
of and payment for the Optional Stock (which may be the First Closing Date, but
not earlier) is herein called the "Option Closing Date" and shall in no event be
earlier than two (2) business days nor later than ten (10) business days after
written notice is given. (The Option Closing Date and the First Closing Date are
herein called the "Closing Dates.") All purchases of Optional Stock from the
Company shall be made on a pro rata basis. Optional Stock shall be purchased
for the account of each Underwriter in the same proportion as the number of
shares of Firm Stock set forth opposite such Underwriter's name in Schedule A
hereto bears to the total number of shares of Firm Stock (subject to adjustment
by the Underwriters to eliminate odd lots). Upon exercise of the option by the
Underwriters, the Company agrees to sell to the Underwriters the number of
shares of Optional Stock set forth in the written notice of exercise and the
Underwriters agree, severally and not jointly and subject to the terms and
conditions herein set forth, to purchase the number of such shares determined as
aforesaid.
The Company will deliver the Optional Stock to the Underwriters (in
the form of definitive certificates) issued in such names and in such
denominations as the Representatives may direct by notice in writing to the
Company given at or prior to 12:00 Noon, New York Time, on the second full
business day preceding the Option Closing Date or, if no such direction is
received, in the names of the respective Underwriters or in such other names as
Cowen may designate (solely for the purpose of administrative convenience) and
in such denominations as Cowen may determine, against payment of the aggregate
Purchase Price therefor by certified or official bank check or checks in
Clearing House funds (next day funds), payable to the order of the Company, all
at the offices of Foley, Hoag & Eliot LLP, One Post Office Square, Boston,
Massachusetts 02109. The Option Closing Date and the location of delivery of,
and the form of payment for, the Option Stock may be varied by agreement between
the Company and Cowen. The Option Closing Date may be postponed pursuant to the
provisions of Section 12.
4. Covenants and Agreements of the Company. The Company covenants
---------------------------------------
and agrees with the several Underwriters that:
(a) The Company will (i) use its best efforts to comply with the
provisions of and make all requisite filings with the Commission pursuant
to Rule 424 of the Rules and Regulations, (ii) if the Company and the
Representatives have determined not to proceed pursuant to Rule 430A of the
Rules and Regulations, use its best efforts to cause the Registration
Statement to become effective, (iii) if the Company and the Representatives
have determined to proceed pursuant to Rule 430A, use its best efforts to
comply with the provisions of and make all requisite filings with the
Commission pursuant to Rule 430A of the Rules and Regulations and (iv) if
the Company and the Representatives have determined to deliver Prospectuses
pursuant to Rule 434 of the Rules and Regulations, to use its best efforts
to comply with all the
11
<PAGE>
applicable provisions thereof. The Company will advise the Representatives
promptly as to the time at which the Registration Statement becomes
effective, will advise the Representatives promptly of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or of the institution of any proceedings for that
purpose, and will use its best efforts to prevent the issuance of any such
stop order and to obtain as soon as possible the lifting thereof, if
issued. The Company will advise the Representatives promptly of the
receipt of any comments of the Commission or any request by the Commission
for any amendment of or supplement to the Registration Statement or the
Prospectus or for additional information and will not at any time file any
amendment to the Registration Statement or supplement to the Prospectus
which shall not previously have been submitted to the Representatives a
reasonable time prior to the proposed filing thereof or to which the
Representatives shall reasonably object in writing or which is not in
compliance with the Securities Act and the Rules and Regulations.
(b) The Company will prepare and file with the Commission, promptly
upon the request of the Representatives, any amendments or supplements to
the Registration Statement or the Prospectus which in the opinion of the
Representatives may be necessary to enable the several Underwriters to
continue the distribution of the Stock and will use its best efforts to
cause the same to become effective as promptly as possible.
(c) If at any time after the effective date of the Registration
Statement when a prospectus relating to the Stock is required to be
delivered under the Securities Act any event relating to or affecting the
Company or any of its subsidiaries occurs as a result of which the
Prospectus or any other prospectus as then in effect would include an
untrue statement of a material fact, or omit to state any material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or if it is necessary at any
time to amend the Prospectus to comply with the Securities Act, the Company
will promptly notify the Representatives thereof and will prepare an
amended or supplemented prospectus which will correct such statement or
omission; and in case any Underwriter is required to deliver a prospectus
relating to the Stock nine (9) months or more after the effective date of
the Registration Statement, the Company upon the request of the
Representatives and at the expense of such Underwriter, will prepare
promptly such prospectus or prospectuses as may be necessary to permit
compliance with the requirements of Section 10(a)(3) of the Securities Act.
(d) The Company will deliver to the Representatives, at or before
the First Closing, signed copies of the Registration Statement, as
originally filed with the Commission, and all amendments thereto including
all financial statements and exhibits thereto, and will deliver to the
Representatives such number of copies of the Registration Statement,
including such financial statements, but without exhibits, and all
amendments thereto, as the Representatives may reasonably request. The
Compa-
12
<PAGE>
ny will deliver or mail to or upon the order of the Representatives, from
time to time until the effective date of the Registration Statement, as
many copies of the Pre-effective Prospectus as the Representatives may
reasonably request. The Company will deliver or mail to or upon the order
of the Representatives on the date of the initial public offering, and
thereafter from time to time during the period when delivery of a
prospectus relating to the Stock is required under the Securities Act, as
many copies of the Prospectus, in final form or as thereafter amended or
supplemented, as the Representatives may reasonably request; provided,
--------
however, that the expense of the preparation and delivery of any prospectus
-------
required for use nine (9) months or more after the effective date of the
Registration Statement shall be borne by the Underwriters required to
deliver such prospectus.
(e) The Company will make generally available to its stockholders as
soon as practicable, but not later than fifteen (15) months after the
effective date of the Registration Statement, an earnings statement which
will be in reasonable detail (but which need not be audited) and which will
comply with Section 11(a) of the Securities Act, covering a period of at
least twelve (12) months beginning after the "effective date" (as defined
in Rule 158 under the Securities Act) of the Registration Statement.
(f) The Company will cooperate with the Representatives to enable
the Stock to be registered or qualified for offering and sale by the
Underwriters and by dealers under the securities laws of such jurisdictions
as the Representatives may designate and, at the request of the
Representatives, will make such applications and furnish such consents to
service of process or other documents as may be required of it as the
issuer of the Stock for that purpose; provided, however, that the Company
-------- -------
shall not be required to qualify to do business or to file a general
consent (other than that arising out of the offering or sale of the Stock)
to service of process in any such jurisdiction where it is not now so
subject. The Company will, from time to time, prepare and file such
statements and reports as are or may be required of it as the issuer of the
Stock to continue such qualifications in effect for so long a period as the
Representatives may reasonably request for the distribution of the Stock.
The Company will advise the Representatives promptly after the Company
becomes aware of the suspension of the qualifications or registration of
(or any such exception relating to) the Common Stock of the Company for
offering, sale or trading in any jurisdiction or of any initiation or
threat of any proceeding for any such purpose, and in the event of the
issuance of any orders suspending such qualifications, registration or
exception, the Company will, with the cooperation of the Representatives,
use its best efforts to obtain the withdrawal thereof.
(g) The Company will furnish to its stockholders annual reports
containing financial statements certified by independent public accountants
and with quarterly summary financial information in reasonable detail which
may be unaudited. During the period of five (5) years from the date
hereof, the Company will deliver to the Representatives and, upon request,
to each of the other Underwriters, as soon as they
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<PAGE>
are available, copies of each annual report of the Company and each other
report furnished by the Company to its stockholders and will deliver to the
Representatives, (i) as soon as they are available, copies of any other
reports (financial or other) which the Company shall publish or otherwise
make available to any of its stockholders as such, (ii) as soon as they are
available, copies of any reports and financial statements furnished to or
filed with the Commission or any national securities exchange and (iii)
from time to time such other information concerning the Company as you may
request. So long as the Company's subsidiaries are active, such financial
statements will be on a consolidated basis to the extent the accounts of
the Company and its subsidiaries are consolidated in reports furnished to
its stockholders generally.
(h) The Company will use its best efforts to cause the Stock to be
accepted for quotation on the Nasdaq National Market concurrently with the
effectiveness of the Registration Statement.
(i) The Company will maintain a transfer agent and registrar for its
Common Stock.
(j) Prior to filing its quarterly statements on Form 10-Q, the
Company will have its independent auditors perform a limited quarterly
review of its quarterly results.
(k) The Company will not offer, sell, assign, transfer, encumber,
contract to sell, grant an option, right or warrant to purchase or
otherwise dispose (or announce any offer, assignment, sale, transfer,
encumbrance, contract to sell, grant of an option, right or warrant to
purchase or other disposition) of any shares of, Common Stock or securities
convertible into or exercisable or exchangeable for Common Stock
(including, without limitation, Common Stock of the Company which may be
deemed to be beneficially owned by the undersigned in accordance with the
Rules and Regulations) during the 180 days following the date of the final
prospectus, other than the Company's sale of Common Stock hereunder and the
Company's issuance of Common Stock upon the exercise of warrants and stock
options which are presently outstanding and described in the Prospectus.
(l) Prior to filing with the Commission any reports on Form SR
pursuant to Rule 463 of the Rules and Regulations, the Company will furnish
a copy thereof to the counsel for the Underwriters and receive and consider
its comments thereon, and will deliver promptly to the Representatives a
signed copy of each report on Form SR filed by it with the Commission.
(m) The Company will apply the net proceeds from the sale of the
Stock as set forth in the description under "Use of Proceeds" in the
Prospectus, which description complies in all respects with the
requirements of Item 504 of Regulation S-B.
14
<PAGE>
(n) The Company will supply you with copies of all correspondence to
and from, and all documents issued to and by, the Commission in connection
with the registration of the Stock under the Securities Act.
(o) Prior to the Closing Dates, the Company will furnish to you, as
soon as they have been prepared, copies of any unaudited interim
consolidated financial statements of the Company and any of its
subsidiaries for any periods subsequent to the periods covered by the
financial statements appearing in the Registration Statement and the
Prospectus.
(p) Prior to the Closing Dates, the Company will issue no press
release or other communications directly or indirectly and hold no press
conference with respect to the Company or any of its subsidiaries, the
financial condition, results of operations, business, prospects, assets or
liabilities of any of them, or the offering of the Stock, without your
prior written consent. For a period of twelve (12) months following the
Closing Date, the Company will use its best efforts to provide to you
copies of each press release or other public communication with respect to
the financial condition, results of operations, business, prospects, assets
or liabilities of the Company at least twenty-four (24) hours prior to the
public issuance thereof or during such longer advance period as may
reasonably be practicable.
(q) During the period of five (5) years hereafter, the Company will
furnish to the Representatives, and upon request of the Representatives, to
each of the Underwriters: (i) as soon as practicable after the end of each
fiscal year, copies of the Annual Report of the Company containing the
balance sheet of the Company as of the close of such fiscal year and
statements of income, stockholders' equity and cash flows for the year then
ended and the opinion thereon of the Company's independent public
accountants; (ii) as soon as practicable after the filing thereof, copies
of each proxy statement, Annual Report on Form 10-K, Quarterly Report on
Form 10-Q, Current Report on Form 8-K or other report filed by the Company
with the Commission, or the NASD or The Nasdaq Stock Market, Inc. or any
securities exchange; and (iii) as soon as available, copies of any report
or communication of the Company mailed generally to holders of the Common
Stock.
5. Payment of Expenses. (a) The Company will pay (directly or by
-------------------
reimbursement) all costs, fees and expenses incurred in connection with or
incident to the performance of its obligations under this Agreement and in
connection with the transactions contemplated hereby, including but not limited
to (i) all expenses and taxes incident to the issuance and delivery of the Stock
to the Representatives; (ii) all expenses incident to the registration of the
Stock under the Securities Act; (iii) the costs of preparing stock certificates
(including printing and engraving costs); (iv) all fees and expenses of the
registrar of and transfer agent for the Stock; (v) all necessary issue, transfer
and other stamp taxes in connection with the issuance and sale of the Stock to
the Underwriters; (vi) fees and expenses of the Company's counsel and the
Company's independent accountants; (vii) all costs and expenses
15
<PAGE>
incurred in connection with the preparation, printing, filing, shipping and
distribution of the Registration Statement, each Pre-effective Prospectus and
the Prospectus (including all exhibits and financial statements) and all
amendments and supplements provided for herein, the "Agreement Among
Underwriters" between the Representatives and the Underwriters, the Master
Selected Dealers' Agreement, the Underwriters' Questionnaire and the Blue Sky
memoranda (including related fees and expenses of counsel to the Underwriters)
and this Agreement; (viii) all filing fees, attorneys' fees and expenses
incurred by the Company or the Underwriters in connection with exemptions from
the qualifying or registering (or obtaining qualification or registration of)
all or any part of the Stock for offer and sale and determination of its
eligibility for investment under the Blue Sky or other securities laws of such
jurisdictions as the Representatives may designate; (ix) all fees and expenses
paid or incurred in connection with filings made with the NASD and The Nasdaq
Stock Market, Inc.; and (x) all other reasonable costs and expenses incident to
the performance of its obligations hereunder which are not otherwise
specifically provided for in this Section.
(b) In addition to their other obligations under Section 6(a)
hereof, the Company agrees that, as an interim measure during the pendency of
any claim, action, investigation, inquiry or other proceeding arising out of or
based upon (i) any statement or omission or any alleged statement or omission
described in Section 6(a), (ii) any act or failure to act or any alleged act or
failure to act or (iii) any breach or inaccuracy in its representations and
warranties, it will reimburse each Underwriter on a quarterly basis for all
reasonable legal or other expenses incurred in connection with investigating or
defending any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Company's obligation to reimburse each Underwriter for
such expenses and the possibility that such payments might later be held to have
been improper by a court of competent jurisdiction. To the extent that any such
interim reimbursement payment is so held to have been improper, each Underwriter
shall promptly return it to the Company together with interest, compounded
daily, determined on the basis of the prime rate (or other commercial lending
rate for borrowers of the highest credit standing) announced from time to time
by [ ], New York, New York (the "Prime Rate"). Any such interim reimbursement
payments which are not made to an Underwriter in a timely manner as provided
below shall bear interest at the Prime Rate from the due date for such
reimbursement. This expense reimbursement agreement will be in addition to any
other liability which the Company may otherwise have. The request for
reimbursement will be sent to the Company.
(c) In addition to its other obligations under Section 6(b) hereof,
each Underwriter severally agrees that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other proceeding
arising out of or based upon any statement or omission, or any alleged statement
or omission, described in Section 6(b) hereof which relates to information
furnished by the Underwriters to the Company, it will reimburse the Company
(and, to the extent applicable, each officer, director, or controlling person)
on a quarterly basis for all reasonable legal or other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding,
16
<PAGE>
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Underwriters' obligation to reimburse the Company (and, to
the extent applicable, each officer, director, or controlling person) for such
expenses and the possibility that such payments might later be held to have been
improper by a court of competent jurisdiction. To the extent that any such
interim reimbursement payment is so held to have been improper, the Company
(and, to the extent applicable, each officer, director, or controlling person)
shall promptly return it to the Underwriters together with interest, compounded
daily, determined on the basis of the Prime Rate. Any such interim
reimbursement payments which are not made to the Company within thirty (30) days
of a request for reimbursement shall bear interest at the Prime Rate from the
date of such request. This indemnity agreement will be in addition to any
liability which such Underwriter may otherwise have.
(d) It is agreed that any controversy arising out of the operation
of the interim reimbursement arrangements set forth in paragraph (b) or (c) of
this Section 5, including the amounts of any requested reimbursement payments
and the method of determining such amounts, shall be settled by arbitration
conducted under the provisions of and pursuant to the provisions of the
Constitution and Rules of the Board of Governors of the New York Stock Exchange,
Inc. or pursuant to the Code of Arbitration Procedure of the NASD. Any such
arbitration must be commenced by service of a written demand for arbitration or
written notice of intention to arbitrate, therein electing the arbitration
tribunal. In the event the party demanding arbitration does not make such
designation of an arbitration tribunal in such demand or notice, then the party
responding to said demand or notice is authorized to do so. Such an arbitration
would be limited to the operation of the interim reimbursement provisions
contained in paragraph (b) or (c) of this Section 5, as applicable, and would
not resolve the ultimate propriety or enforceability of the obligation to
reimburse expenses which is created by the provisions of Section 6.
6. Indemnification and Contribution. (a) The Company agrees to
--------------------------------
indemnify and hold harmless each Underwriter and each person, if any, who
controls such Underwriter within the meaning of the Securities Act and the
respective officers, directors, partners, employees, representatives and agents
of each of such Underwriter (collectively, the "Underwriter Indemnified Parties"
and, each, an "Underwriter Indemnified Party"), against any losses, claims,
damages, liabilities or expenses (including, unless the Company elects to assume
the defense as described in this Section 6(a), the reasonable cost of
investigating and defending against any claims therefor and counsel fees
incurred in connection therewith), joint or several, which may be based upon the
Securities Act, or any other statute or at common law, (i) on the ground or
alleged ground that any Pre-effective Prospectus, the Registration Statement or
the Prospectus (or any Pre-effective Prospectus, the Registration Statement or
the Prospectus as from time to time amended or supplemented) includes or
allegedly includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, unless such statement or omission was made in reliance upon, and
in conformity with, written information furnished to the Company by any
Underwriter, directly or through the Representatives, specifically for
17
<PAGE>
use in the preparation thereof (ii) for any act or failure to act or any
alleged act or failure to act by any Underwriter in connection with, or relating
in any manner to, the Stock or the offering contemplated hereby, and which is
included as part of or referred to in any loss, claim, damage, liability or
expense arising out of or based upon matters covered by clause (i) above
(provided that the Company shall not be liable under this clause (ii) to the
extent that it is determined in a final judgment by a court of competent
jurisdiction that such loss, claim, damage, liability or expense resulted
directly from any such acts or failures to act undertaken or omitted to be taken
by such Underwriter through its gross negligence or willful misconduct)
provided, that with respect to any untrue statement or omission or alleged
untrue statement or omission made in any Pre-effective Prospectus, the indemnity
agreement contained in this subsection (a) shall not inure to the benefit of any
Underwriter Indemnified Party from whom the person asserting any such losses,
claims, damages or liabilities purchased the shares of Stock concerned to the
extent that any such loss, claim, damage or liability of such Underwriter
Indemnified Party results from the fact that a copy of the Prospectus was not
sent or given to such person at or prior to the written confirmation of the sale
of such shares of Stock to such person as required by the Securities Act and if
the untrue statement or omission concerned has been corrected in the Prospectus.
An Underwriter Indemnified Party shall give prompt written notice to the Company
in writing within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been served
upon the Underwriter Indemnified Party; provided that the failure of any
Underwriter Indemnified Party to give notice shall not relieve the Company of
its obligations under this Section 6 (a), except to the extent that such failure
has materially and adversely affected the rights of the Company. The Company
will be entitled to participate at its own expense in the defense or, if it so
elects, to assume the defense, of any suit brought to enforce any such
liability, but if the Company elects to assume the defense, such defense shall
be conducted by counsel chosen by it and reasonably acceptable to the
Underwriters. In the event the Company elects to assume the defense of any such
suit and retain such counsel, any Underwriter Indemnified Parties, defendant or
defendants in the suit, may retain additional counsel but shall bear the fees
and expenses of such counsel unless (i) the Company shall have specifically
authorized the retaining of such counsel or (ii) the parties to such suit
include any such Underwriter Indemnified Parties and the Company, and such
Underwriter Indemnified Parties at law or in equity have been advised by counsel
to the Underwriters that one or more legal defenses may be available to it or
them which may not be available to the Company, in which case the Company shall
not be entitled to assume the defense of such suit notwithstanding its
obligation to bear the fees and expenses of such counsel. The Company shall not
be liable to indemnify any person for any settlement of any such claim effected
without the Company's consent. This indemnity agreement is not exclusive and
will be in addition to any liability which the Company might otherwise have and
shall not limit any rights or remedies which may otherwise be available at law
or in equity to each Underwriter Indemnified Party.
(b) Each Underwriter severally and not jointly agrees to indemnify
and hold harmless the Company, each of its directors, each of its officers who
have signed the Registration Statement and each person, if any, who controls the
Company within the
18
<PAGE>
meaning of the Securities Act (collectively, the "Company Indemnified Parties"),
against any losses, claims, damages, liabilities or expenses (including, unless
the Underwriter elects to assume the defense as described in this Section 6(b))
the reasonable cost of investigating and defending against any claims therefor
and counsel fees incurred in connection therewith), joint or several, which
arise out of or are based in whole or in part upon the Securities Act, the
Exchange Act or any other federal, state, local or foreign statute or
regulation, or at common law, on the ground or alleged ground that any Pre-
effective Prospectus, the Registration Statement or the Prospectus (or any Pre-
effective Prospectus, the Registration Statement or the Prospectus, as from time
to time amended and supplemented) includes an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
in which they were made, not misleading, but only insofar as any such statement
or omission was made in reliance upon, and in conformity with, written
information furnished to the Company by such Underwriter, directly or through
the Representatives, specifically for use in the preparation thereof. A
Company Indemnified Party shall give prompt written notice to the Underwriter
in writing within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been served
upon the Company Indemnified Party; provided that the failure of any Company
Indemnified Party to give notice shall not relieve the Underwriter of its
obligations under this Section 6 (a), except to the extent that such failure has
materially and adversely affected the rights of the Underwriter. Such
Underwriter shall be entitled to participate at its own expense in the defense,
or, if it so elects, to assume the defense of any suit brought to enforce any
such liability, but, if such Underwriter elects to assume the defense, such
defense shall be conducted by counsel chosen by it [and approved by the
Company]. In the event that any Underwriter elects to assume the defense of any
such suit and retain such counsel, the Company Indemnified Parties and any other
Underwriter or Underwriters or controlling person or persons, defendant or
defendants in the suit, shall bear the fees and expenses of any additional
counsel retained by them, respectively. The Underwriter against whom indemnity
may be sought shall not be liable to indemnify any person for any settlement of
any such claim effected without such Underwriter's consent. This indemnity
agreement is not exclusive and will be in addition to any liability which such
Underwriter might otherwise have and shall not limit any rights or remedies
which may otherwise be available at law or in equity to any Company Indemnified
Party.
(c) If the indemnification provided for in this Section 6 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages,
liabilities or expenses (or actions in respect thereof) referred to herein, then
each indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and the
Underwriters on the other from the offering of the Stock. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is
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appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or the Underwriters and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and equitable
if contribution were determined by pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
referred to above shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
defending, settling or compromising any such claim. Notwithstanding the
provisions of this subsection (c), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the shares of the Stock underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. The Underwriters' obligations to
contribute are several in proportion to their respective underwriting
obligations and not joint. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
7. Survival of Indemnities, Representations, Warranties, etc. The
---------------------------------------------------------
respective indemnities, covenants, agreements, representations, warranties and
other statements of the Company and the several Underwriters, as set forth in
this Agreement or made by them respectively, pursuant to this Agreement, shall
remain in full force and effect, regardless of any investigation made by or on
behalf of any Underwriter, the Company or any of its officers or directors or
any controlling person, and shall survive delivery of and payment for the Stock.
8. Conditions of Underwriters' Obligations. The respective
---------------------------------------
obligations of the several Underwriters hereunder shall be subject to the
accuracy, at and (except as otherwise stated herein) as of the date hereof and
at and as of the Closing Dates, of the representations and warranties made
herein by the Company, to compliance at and as of the Closing Dates by the
Company with its covenants and agreements herein contained and other
20
<PAGE>
provisions hereof to be satisfied at or prior to the Closing Dates, and to the
following additional conditions:
(a) The Registration Statement shall have become effective and no
stop order suspending the effectiveness thereof shall have been issued and
no proceedings for that purpose shall have been initiated or, to the
knowledge of the Company or the Representatives, shall be threatened by the
Commission, and any request for additional information on the part of the
Commission (to be included in the Registration Statement or the Prospectus
or otherwise) shall have been complied with to the reasonable satisfaction
of the Representatives. Any filings of the Prospectus, or any supplement
thereto, required pursuant to Rule 424(b) or Rule 434 of the Rules and
Regulations, shall have been made in the manner and within the time period
required by Rule 424(b) and Rule 434 of the Rules and Regulations, as the
case may be.
(b) The Representatives shall have been satisfied that there shall
not have occurred any change, on a consolidated basis, prior to the
respective Closing Dates in the condition (financial or other), properties,
business, management, prospects, net worth or results of operations of the
Company and its subsidiaries considered as a whole, or any change in the
capital stock, short-term debt or long-term debt of the Company and any of
its subsidiaries considered as a whole, such that (i) the Registration
Statement or the Prospectus, or any amendment or supplement thereto,
contains an untrue statement of fact which, in the opinion of the
Representatives, is material, or omits to state a fact which, in the
opinion of the Representatives, is required to be stated therein or is
necessary to make the statements therein not misleading or (ii) it is
impracticable in the reasonable judgment of the Representatives to proceed
with the public offering or purchase the Stock as contemplated hereby.
(c) The Representatives shall be satisfied that no legal or
governmental action, suit or proceeding affecting the Company which is
material and adverse to the Company or which affects or may affect the
Company's ability to perform its obligations under this Agreement shall
have been instituted or threatened, and there shall have occurred no
material adverse development in any existing such action, suit or
proceeding.
(d) At the time of execution of this Agreement, the Representatives
shall have received from Ernst & Young LLP, independent certified public
accountants, a letter, dated the date hereof, in form and substance
satisfactory to the Underwriters.
(e) The Representatives shall have received from Ernst & Young LLP,
independent certified public accountants, letters, dated the Closing Dates,
to the effect that such accountants reaffirm, as of the Closing Dates, and
as though made on the Closing Dates, the statements made in the letter
furnished by such accountants pursuant to subsection (d) of this Section 8.
21
<PAGE>
(f) The Representatives shall have received from Foley, Hoag & Eliot
LLP, counsel for the Company, their opinions, dated the Closing Dates, to
the effect set forth in Exhibit I hereto.
(g) The Representatives shall have received from Skadden, Arps,
Slate, Meagher & Flom, counsel for the Underwriters, their opinions, dated
the Closing Dates, with respect to the incorporation of the Company, the
validity of the Stock, the Registration Statement and the Prospectus and
such other related matters as it may reasonably request, and the Company
shall have furnished to such counsel such documents as they may request for
the purpose of enabling them to pass upon such matters.
(h) The Representatives shall have received a certificate, dated the
Closing Dates, of the Chief Executive Officer and the chief financial or
accounting officer of the Company to the effect that:
(i) No stop order suspending the effectiveness of the
Registration Statement has been issued, and to the best of the
knowledge of the signers, no proceedings for that purpose have been
instituted or are pending or contemplated under the Securities Act;
(ii) Neither any Pre-effective Prospectus, as of its date, nor
the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, as of the time when the Registration Statement
became effective and at all times subsequent thereto up to the
delivery of such certificate, included any untrue statement of a
material fact or omitted to state any material fact required to be
stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading;
(iii) Subsequent to the respective dates as of which informa-
tion is given in the Registration Statement and the Prospectus, and
except as set forth or contemplated in the Prospectus (including
without limitation with respect to stock plans, the warrant and the
conversion of the $5.83 stock), neither the Company nor any of its
subsidiaries have incurred any material liabilities or obligations,
direct or contingent; nor entered into any material transactions, not
in the ordinary course of business and there has not been any material
adverse change in the condition (financial or otherwise), properties,
business, prospects, net worth or results of operations of the Company
and its subsidiaries considered as a whole, or any change in the
capital stock, short-term or long-term debt of the Company and its
subsidiaries considered as a whole.
22
<PAGE>
(iv) The representations and warranties of the Company in this
Agreement are true and correct at and as of the Closing Dates, and the
Company has complied with all the agreements and performed or
satisfied all the conditions on its part to be performed or satisfied
at or prior to the Closing Dates; and
(v) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, and except as
disclosed in or contemplated by the Prospectus (including, without
limitation with respect to the stock plans, the warrant and the
conversion of the $5.83 Stock), (A) there has not been any material
adverse change or a development involving a material adverse change in
the condition (financial or other), properties, business, management,
prospects, net worth or results of operations of the Company and its
subsidiaries considered as a whole; (B) the business and operations
conducted by the Company and its subsidiaries have not sustained a
loss by strike, fire, flood, accident or other calamity (whether or
not insured) of such a character as to interfere materially with the
conduct of the business and operations of the Company and its
subsidiaries considered as a whole; (C) no legal or governmental
action, suit or proceeding is pending or threatened against the
Company which is material to the Company, whether or not arising from
transactions in the ordinary course of business, or which may
materially and adversely affect the transactions contemplated by this
Agreement; (D) since such dates and except as so disclosed, the
Company has not incurred any material liability or obligation, direct,
contingent or indirect, made any change in its capital stock (except
pursuant to its stock plans), made any material change in its short-
term or funded debt or repurchased or otherwise acquired any of the
Company's capital stock; and (E) the Company has not declared or paid
any dividend, or made any other distribution, upon its outstanding
capital stock payable to stockholders of record on a date prior to the
Closing Date.
(i) The Company shall have furnished to the Representatives such
additional certificates as the Representatives may have reasonably
requested as to the accuracy, at and as of the Closing Dates, of the
representations and warranties made herein by it and as to compliance at
and as of the Closing Dates by it with its covenants and agreements herein
contained and other provisions hereof to be satisfied at or prior to the
Closing Dates, and as to satisfaction of the other conditions to the
obligations of the Underwriters hereunder.
(j) Cowen shall have received the written agreements of the
officers, directors and holders of Common Stock listed in Schedule B that
each will not, without the prior written consent of Cowen, on behalf of the
Representatives, offer,
23
<PAGE>
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 security convertible into or exchangeable or exercisable for shares
of Common Stock (including, without limitation, Common Stock of the Company
which may be deemed to be beneficially owned by the undersigned in
accordance with the Rules and Regulations) during the 180 days following
the date of the final Prospectus.
(k) The Nasdaq National Market shall have approved the stock for
listing, subject only to official notice of issuance.
All opinions, certificates, letters and other documents will be in
compliance with the provisions hereunder only if they are satisfactory in form
and substance to the Representatives. The Company will furnish to the
Representatives conformed copies of such opinions, certificates, letters and
other documents as the Representatives shall reasonably request. If any of the
conditions hereinabove provided for in this Section shall not have been
satisfied when and as required by this Agreement, this Agreement may be
terminated by the Representatives by notifying the Company of such termination
in writing or by telegram at or prior to the Closing Dates, but Cowen, on behalf
of the Representatives, shall be entitled to waive any of such conditions.
9. Effective Date. This Agreement shall become effective
--------------
immediately as to Sections 5, 6, 7, 9, 10, 11, 13, 14, 15, 16 and 17 and, as to
all other provisions, at [ ] a.m. New York City time on the first full
business day following the effectiveness of the Registration Statement or at
such earlier time after the Registration Statement becomes effective as the
Representatives may determine on and by notice to the Company or by release of
any of the Stock for sale to the public. For the purposes of this Section 9,
the Stock shall be deemed to have been so released upon the release for
publication of any newspaper advertisement relating to the Stock or upon the
release by you of telegrams (a) advising Underwriters that the shares of Stock
are released for public offering or (b) offering the Stock for sale to
securities dealers, whichever may occur first.
10. Termination. This Agreement (except for the provisions of
-----------
Section 5) may be terminated by the Company at any time, prior to the time that
this Agreement shall become effective as to all of its provisions, by notice to
the Representatives, and may be terminated by the Representatives at any time,
prior to the time that this Agreement shall become effective as to all of its
provisions, by notice to the Company. In the event of any termination of this
Agreement under this or any other provision of this Agreement, there shall be no
liability of any party to this Agreement to any other party, other than as
provided in Sections 5, 6 and 11 and other than as provided in Section 12 as to
the liability of defaulting Underwriters.
This Agreement may be terminated after it becomes effective by the
Representatives by notice to the Company (a) if at or prior to the First Closing
Date or the Option Closing Date trading in securities on any of the New York
Stock Exchange, American Stock
24
<PAGE>
Exchange or the Nasdaq National Market shall have been suspended or minimum or
maximum prices shall have been established on any such exchange or market, or a
banking moratorium shall have been declared by New York or United States
authorities; (b) trading of any securities of the Company shall have been
suspended on any exchange or in any over-the-counter market; (c) if at or prior
to the First Closing Date or the Option Closing Date there shall have been (i)
an outbreak or escalation of hostilities between the United States and any
foreign power or of any other insurrection or armed conflict involving the
United States or (ii) any change in financial markets or any calamity or crisis
which, in the judgment of the Representatives, makes it impractical or
inadvisable to offer or sell the Firm Stock or Optional Stock, as applicable, on
the terms contemplated by the Prospectus; (d) if there shall have been any
development or prospective development involving particularly the business or
properties or securities of the Company or its subsidiaries or the transactions
contemplated by this Agreement, which, in the judgment of the Representatives,
makes it impracticable or inadvisable to offer or deliver the Firm Stock or the
Optional Stock, as applicable, on the terms contemplated by the Prospectus; (e)
if there shall be any litigation or proceeding, pending or threatened, which, in
the judgment of the Representatives, makes it impracticable or inadvisable to
offer or deliver the Firm Stock or Optional Stock, as applicable, on the terms
contemplated by the Prospectus; or (f) if there shall have occurred any of the
events specified in the immediately preceding clauses (a) - (e) together with
any other such event that makes it, in the judgment of the Representatives,
impractical or inadvisable to offer or deliver the Firm Stock or Optional Stock,
as applicable, on the terms contemplated by the Prospectus.
11. Reimbursement of Underwriters. Notwithstanding any other
-----------------------------
provisions hereof, if this Agreement shall not become effective by reason of any
election of the Company pursuant to the first paragraph of Section 10 or shall
be terminated by the Representatives under Section 8 or Section 10, the Company
will bear and pay the expenses specified in Section 5 hereof and, in addition to
its obligations pursuant to Section 6 hereof, the Company will reimburse the
reasonable out-of-pocket expenses of the several Underwriters (including
reasonable fees and disbursements of counsel for the Underwriters) incurred in
connection with this Agreement and the proposed purchase of the Stock, and
promptly upon demand the Company will pay such amounts to you as
Representatives.
12. Substitution of Underwriters. If any Underwriter or Under-
----------------------------
writers shall default in its or their obligations to purchase shares of Stock
hereunder and the aggregate number of shares which such defaulting Underwriter
or Underwriters agreed but failed to purchase does not exceed ten percent (10%)
of the total number of shares underwritten, the other Underwriters shall be
obligated severally, in proportion to their respective commitments hereunder, to
purchase the shares which such defaulting Underwriter or Underwriters agreed but
failed to purchase. If any Underwriter or Underwriters shall so default and the
aggregate number of shares with respect to which such default or defaults occur
is more than ten percent (10%) of the total number of shares underwritten and
arrangements satisfactory to the Representatives and the Company for the
purchase of such shares by other persons are not made within forty-eight (48)
hours after such default, this Agreement shall terminate.
25
<PAGE>
If the remaining Underwriters or substituted Underwriters are required
hereby or agree to take up all or part of the shares of Stock of a defaulting
Underwriter or Underwriters as provided in this Section 12, (a) the Company
shall have the right to postpone the Closing Dates for a period of not more than
five (5) full business days in order that the Company may effect whatever
changes may thereby be made necessary in the Registration Statement or the
Prospectus, or in any other documents or arrangements, and the Company agrees
promptly to file any amendments to the Registration Statement or supplements to
the Prospectus which may thereby be made necessary, and (b) the respective
numbers of shares to be purchased by the remaining Underwriters or substituted
Underwriters shall be taken as the basis of their underwriting obligation for
all purposes of this Agreement. Nothing herein contained shall relieve any
defaulting Underwriter of its liability to the Company or the other Underwriters
for damages occasioned by its default hereunder. Any termination of this
Agreement pursuant to this Section 12 shall be without liability on the part of
any non-defaulting Underwriter or the Company, except for expenses to be paid or
reimbursed pursuant to Section 5 and except for the provisions of Section 6.
13. Notices. All communications hereunder shall be in writing and,
-------
if sent to the Underwriters shall be mailed, delivered or telegraphed and
confirmed to you, as their Representatives, c/o Cowen & Company at Financial
Square, New York, New York 10005, except that notices given to an Underwriter
pursuant to Section 6 hereof shall be sent to such Underwriter at the address
furnished by the Representatives or, if sent to the Company, shall be mailed,
delivered or telegraphed and confirmed to Chief Financial Officer at 542 Amherst
Street, Nashua, New Hampshire 03060 with a copy to Mark L. Johnson at Foley,
Hoag & Eliot LLP at One Post Office Square, Boston, Massachusetts 02109-2170.
14. Successors. This Agreement shall inure to the benefit of and be
----------
binding upon the several Underwriters, the Company and their respective
successors and legal representatives. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person other than the
persons mentioned in the preceding sentence any legal or equitable right, remedy
or claim under or in respect of this Agreement, or any provisions herein
contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person; except that the representations, warranties,
covenants, agreements and indemnities of the Company contained in this Agreement
shall also be for the benefit of the person or persons, if any, who control any
Underwriter or Underwriters within the meaning of Section 15 of the Securities
Act or Section 20 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the indemnities of the several Underwriters shall also be
for the benefit of each director of the Company, each of its officers who has
signed the Registration Statement and the person or persons, if any, who control
the Company within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act.
15. Applicable Law. This Agreement shall be governed by and
--------------
construed in accordance with the laws of the State of New York.
26
<PAGE>
16. Authority of the Representatives. In connection with this
--------------------------------
Agreement, you will act for and on behalf of the several Underwriters, and any
action taken under this Agreement by Cowen, as Representative, will be binding
on all the Underwriters.
17. Partial Unenforceability. The invalidity or unenforceability of
------------------------
any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision hereof.
If any Section paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid
and enforceable.
18. General. This Agreement constitutes the entire agreement of the
-------
parties to this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof. In this Agreement, the masculine, feminine and
neuter genders and the single and plural include one another. The section
headings in this Agreement are for the convenience of the parties only and will
not affect the construction or interpretation of this Agreement. This Agreement
may be amended or modified, and the observance of any term of this Agreement may
be waived, only by a writing signed by the Company and the Representatives.
19. Counterparts. This Agreement may be signed in two (2) or more
------------
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter and your acceptance shall constitute a binding agreement
between us.
27
<PAGE>
Very truly yours,
WHITE PINE SOFTWARE, INC.
By:
------------------------------------
Name:
Title:
Accepted and delivered in
New York, New York as of
the date first above written.
COWEN & COMPANY
OPPENHEIMER & CO., INC.
VOLPE, WELTY & COMPANY
Acting on their own behalf and as
Representatives of several Underwriters
referred to in the foregoing Agreement.
By: Cowen & Company
By: Cowen Incorporated,
its general partner
By:
-------------------------------
Name:
Title:
28
<PAGE>
SCHEDULE A
Number Number of
of Firm Optional
Shares Shares
to be to be
Name Purchased Purchased
- ---- --------- ---------
Cowen & Company....................
Oppenheimer & Co., Inc.............
Volpe, Welty & Company.............
Total.............................. --------- ---------
========= =========
<PAGE>
SCHEDULE B
Adwest L.P.
Advent Partners L.P.
Advent International Investors II L.P.
ADVENTACT L.P.
Adtel L.P.
Jean Francois Abramatic
Michael Braca
Arthur Bruno
David Bundy
Howard R. Berke
Jerome Burke
Reginald Bursens
C.A.T. (Attn: Denis Champenois)
CV Sofinnova Ventures Partners II
Killko Caballero
Mallku Caballero
Pascal Crausaz
Richard M. Darer
Jean-Francois Ducarroz
Jack A. Dutzy
Michiel Fast
Golden Gate Development and Investment L.P.
H&Q London Ventures
H&Q Venture Partners
H&Q Ventures IV
H&Q Ventures International C.V.
William Hambrecht
Hambrecht & Quist
Hambrecht & Quist Group
The Hambrecht 1980 Revocable Trust
Hamquist
Innolion
Carl A. Koppel
Land Free Investment
Brian L. Lichorowic
Charles Lingel
Forrest Milkowski
Jonathan G. Morgan
Phoenix Venture (BVI) Ltd.
Michael O. Preletz
Robert Putnam
Stephen Roche
J.F. Shea & Co., Inc.
Sofinnova Capital FCPR
Sofinnova S.A.
Pierre-Gabriel Vallee
<PAGE>
EXHIBIT I
---------
FORM OF OPINION TO BE DELIVERED BY COUNSEL TO COMPANY
-----------------------------------------------------
1. The Company and each subsidiary has been duly incorporated and is
validly existing and in good standing as a corporation under the laws of its
jurisdiction of organization, with the corporate power and authority necessary
to own and lease its properties and conduct its business as described in the
Registration Statement and the Prospectus; and the Company and each subsidiary
is duly registered and qualified to conduct business and is in good standing in
each jurisdiction where the conduct of its business requires such registration
or qualification (other than those jurisdictions in which the failure to so
register or qualify would not have a material adverse effect on the Company and
its subsidiaries, considered as a whole).
2. The Company has an authorized capitalization as set forth under the
caption "Capitalization" in the Prospectus, and the authorized capital stock of
the Company conforms to the descriptions thereof contained in the Prospectus
under the caption "Description of Capital Stock"; all of the issued and
outstanding shares of capital stock of the Company have been duly and validly
authorized and issued and are fully paid and nonassessable. Except as set forth
in the Prospectus, there are no preemptive or other rights to subscribe for or
to purchase, nor any restriction upon the voting or transfer of, the Common
Stock pursuant to the Company's Amended and Restated Certificate of
Incorporation or Amended and Restated By-Laws or any agreement or other
instrument. The 394,511 shares of common stock to be issued upon the conversion
of all outstanding shares of common stock, par value $5.83 per share of the
Company, to be effected upon the consummation of the offering, have been duly
and validly authorized and when issued, will be duly and validly issued, fully
paid and nonassessable.
3. There are neither outstanding options, warrants or other rights
calling for the issuance of, nor any commitment, plan or arrangement to issue,
any shares of capital stock of the Company or any security convertible into or
exchangeable or exercisable for capital stock of the Company, except as
described in the Prospectus.
4. The Stock has been duly and validly authorized and, upon issuance,
delivery and payment therefor as described in the Underwriting Agreement, (a)
will be duly and validly issued, fully paid and nonassessable, (b) will be free
of any preemptive or similar rights that entitle or will entitle any person to
acquire any Stock upon the issuance thereof by the Company and (c) will conform
to the description thereof contained in the Prospectus.
5. The certificates representing the Stock are in proper form under the
Delaware General Corporation Law.
6. The Registration Statement and all post-effective amendments, if any,
have become effective under the Securities Act and the Prospectus has been filed
with the Commission in the manner and time period required pursuant to Rule
424(b) of the Rules and Regulations, no stop order suspending the effectiveness
of the Registration Statement or suspending or preventing the use of the
Prospectus is in effect and, to such counsel's
<PAGE>
knowledge, no proceedings for that purpose have been instituted by or are
pending before or contemplated by the Commission.
7. The Registration Statement and the Prospectus and any supplements or
amendments thereto as of their respective dates, appeared on their respective
faces to be appropriately responsive in all material respects with the
requirements of the Securities Act and with the Rules and Regulations, except as
to the financial statements, the notes thereto and the related schedules and
other financial and statistical data contained therein, as to which such counsel
need express no opinion.
8. The Company has the corporate power and authority to enter into the
Underwriting Agreement and to perform its obligations thereunder (including to
issue, sell and deliver the Stock to the Underwriters as provided therein), and
the Underwriting Agreement has been duly and validly authorized, executed and
delivered by the Company and is a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
9. The execution, delivery and performance of the Underwriting Agreement,
the consummation of the transactions contemplated thereby and the issuance, sale
and delivery of the Stock (a) will not result in any violation of the provisions
of the Certificate of Incorporation, as amended, or By-Laws or other
organizational documents of the Company or its subsidiaries, or any law of the
United States or the Delaware General Corporation Law or any law, order, rule or
regulation of any court or governmental agency or body having jurisdiction over
the Company or its subsidiaries or any of their properties or assets, or (b)
will not conflict with or result in a breach or violation of, constitute a
default under, or result in the creation or imposition of any lien pursuant to
the provisions of, any material contract, indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which the Company or its
subsidiaries is a party or by which the Company or its subsidiaries or any of
their respective properties or assets are bound.
10. No consent, approval, authorization or order of, and no notice to or
filing or registration with, any court or governmental agency or body is
required to be obtained or made by the Company for the valid execution, delivery
and performance of the Underwriting Agreement, the consummation of the
transactions contemplated thereby, and the issuance, sale and delivery of the
Stock pursuant to the Underwriting Agreement, except such consents approvals,
authorizations or registrations which have been obtained, and except such as may
be required by the Nasdaq Stock Market, Inc., or under the Securities Act or the
Exchange Act, or securities or "Blue Sky" laws of any jurisdiction in connection
with the purchase and distribution of the Stock.
11. Except as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its subsidiaries
or affiliates is a party or to which any property of the Company or any of its
subsidiaries or affiliates is subject, which, if determined adversely to the
Company or such subsidiary or affiliate, might individually or in the aggregate
(i) prevent or adversely affect consummation of the transactions contemplated by
the Underwriting Agreement, (ii) suspend the effectiveness of the Registration
Statement, (iii) prevent or suspend the use of the Pre-effective Prospectus in
any jurisdiction or (iv) result in a material adverse change in the condition
(financial or otherwise), properties, business, management, prospects, net worth
or results of operations of the
2
<PAGE>
Company and its subsidiaries considered as a whole; and to the best of such
counsel's knowledge, no such proceedings are threatened or contemplated against
the Company or any of its subsidiaries or affiliates by governmental authorities
or others. To the best of such counsel's knowledge, the Company is not a party
nor subject to the provisions of any material injunction, judgment, decree or
order of any court, regulatory body or other governmental agency or body.
12. To the best of such counsel's knowledge, there are no franchises,
leases, contracts, agreements or other documents that are required to be
described in the Registration Statement or Prospectus (or any amendment or
supplement thereto) or to be filed as exhibits to the Registration Statement
which have not been described or filed as required.
13. The statements in the Registration Statement and Prospectus under the
captions "Business - Government Regulation," "Business - Proprietary Rights,"
"Management -Benefit Plans," "Certain Transactions," "Description of Capital
Stock," and "Shares Eligible for Future Sale," to the extent that such
statements constitute a summary of documents referred to therein or matters of
law, or constitute legal conclusions, are accurate summaries in all material
respects and fairly present the information called for by the Securities Act and
the Rules and Regulations with respect to such documents and matters. Such
counsel does not know of any laws, rules or regulations or legal or governmental
proceedings applicable to the business of the Company or its subsidiaries
required to be described in the Registration Statement or the Prospectus that
are not described as required.
14. To the best of such counsel's knowledge, there are no contracts,
agreements or understandings between the Company and any person granting such
person the right to require the Company to file a registration statement under
the Securities Act with respect to any securities of the Company owned or to be
owned by such person or to require the Company to include such securities in the
securities registered pursuant to the Registration Statement or in any
securities being registered pursuant to any other registration statement filed
by the Company under the Securities Act, except as set forth in the Prospectus
and, except for persons who have expressly waived such right, who have been
given proper notice and have failed to exercise such right within the time or
times required under the terms and conditions of such right or who have given
notice of their intent to exercise such right and have been informed that the
Underwriters would not permit the inclusion of shares offered by selling
stockholders in the offering.
15. The Company is not now and upon the sale of the Stock to be issued and
sold in accordance with the Underwriting Agreement and the application of the
net proceeds from such sale as described in the Prospectus under the caption
"Use of Proceeds," will not be an "investment company" within the meaning of
such term under the United States Investment Company Act of 1940, as amended,
and the rules and regulations of the Commission thereunder.
16. The Company is the record owner of the trademarks and servicemark
registrations and applications for the marks "EXODUS," "REFLECTOR," "WHITE
PINE," 5PM OFFICE," "5PM PRO," "5PM TERM" free and clear of any liens, security
interests, assignments, and encumbrances recorded in the United States Patent
and Trademark Office or in the United States Copyright Offices; the
registrations are subsisting and in good standing and, as of the date hereof,
all filings that are required to be made in order to avoid
3
<PAGE>
cancellation, expiration, or abandonment of the registrations and applications
have been timely made; to such counsel's knowledge, there are no pending
proceedings before any trademark or copyright registry to cancel any of the
registrations.
17. The agreements, pursuant to which the Company has obtained any rights
to use or incorporate the intellectual property owned by (or formerly owned by)
a third party into any product of the Company described in the Prospectus give
the Company valid, binding and enforceable rights with respect to the subject
matter thereof in accordance with their respective terms, except to the extent
that such enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or similar laws of general
application relating to or affecting the rights and remedies of creditors and by
the application of general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
18. There are no legal or governmental proceedings pending or, to the best
of such counsel's knowledge threatened (i) against the Company or its
subsidiaries that involves a claim that the Company's name or it products or
services infringe or misappropriate any intellectual property rights of any
third party or (ii) by the Company or its subsidiaries that involves a claim
that a third party's name or its products or services infringe or misappropriate
the Company's intellectual property rights, which, in either case, if determined
adversely to the Company or its subsidiaries would result in a material adverse
change in the condition (financial or otherwise), properties, business,
prospects, net worth or results of operations of the Company and its
subsidiaries considered as a whole.
In addition, such Counsel shall state that nothing has come to such
counsel's attention during the preparation of the Registration Statement that
has led such counsel to believe that the Registration Statement, as of the date
it was declared effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or that the Prospectus, as of its
date and the date of the opinion, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (provided that such
counsel need express no view with respect to the financial statements, the notes
thereto and the related schedules and other financial or statistical data
included in the Registration Statement or the Prospectus).
4
<PAGE>
EXHIBIT 4.1
Engraved specimen stock certificate bearing the following text:
[Obverse of Certificate]
[Graphic: White Pine Software, Inc. pine tree logo]
WHITE PINE SOFTWARE, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
NUMBER CUSIP 964347 10 8
SEE REVERSE FOR CERTAIN DEFINITIONS
This Certifies that
is the owner of
fully paid and non-assessable shares of the COMMON STOCK, $.01 par value, of
White Pine Software, Inc.
(the "Corporation") transferable on the books of the Corporation in person or by
duly authorized attorney upon surrender of this Certificate properly endorsed.
This Certificate and the shares represented hereby are issued and held
subject to the laws of The State of Delaware, the Certificate of Incorporation
of the Corporation and the By-Laws of the Corporation, each as now in effect or
hereafter amended.
This Certificate is not valid unless countersigned and registered by
the Transfer Agent and Registrar.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
executed by the facsimile signatures of its duly authorized officers and sealed
with the facsimile seal of the Corporation.
Dated:
[Corporate seal bearing text:] WHITE PINE SOFTWARE, INC. - 1992 - Delaware - *
/s/ Howard R. Berke /s/ Robert M. Putman
President Treasurer and Assistant Secretary
COUNTERSIGNED AND REGISTERED:
BOSTON EQUISERVE L.P.
TRANSFER AGENT AND REGISTRAR
By
Authorized signature
<PAGE>
[Reverse of Certificate]
WHITE PINE SOFTWARE, INC.
THE CORPORATION IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS AND SERIES OF STOCK.
THE CORPORATION WILL FURNISH TO THE HOLDER UPON WRITTEN REQUEST WITHOUT CHARGE A
STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND
THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR
RIGHTS.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in
common
COM PROP - as community property
UNIF GIFT MIN ACT - _____________ Custodian ________________
(Cust) (Minor)
under Uniform Gifts to Minors
Act _____________
(State)
Additional abbreviations may also be used though not in the above list.
For value received, __________ hereby sell, assign, and transfer unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE [Box]
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
______________ shares of the common stock represented by the within Certificate,
and do hereby irrevocably constitute and appoint _________________ Attorney to
transfer the said stock on the books of the within named Corporation with full
power of substitution in the premises.
Dated, ______ ________________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER.
Signature(s) Guaranteed:
_________________________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
<PAGE>
EXHIBIT 5.1
FOLEY, HOAG & ELIOT LLP
One Post Office Square
Boston, Massachusetts 02109-2170
Telephone: (617) 832-1000
Facsimile: (617) 832-7000
Telex 940693
http://www.fhe.com
September 6, 1996
White Pine Software, Inc.
542 Amherst Street
Nashua, New Hampshire 03063
Ladies and Gentlemen:
This opinion is furnished to you in connection with Amendment No. 1 to
Registration Statement on Form SB-2 (Registration No. 333-9525) (the
"Registration Statement") being filed on the date hereof by White Pine Software,
Inc., a Delaware corporation (the "Company"), with the Securities and Exchange
Commission under the Securities Act of 1933, as amended. The Registration
Statement relates to the proposed public offering by the Company of 3,450,000
shares (the "Shares") of its Common Stock, $.01 par value per share. The
foregoing assumes the exercise in full of the over-allotment option described in
the Registration Statement. The Shares are to be sold pursuant to an
underwriting agreement (the "Underwriting Agreement") to be entered into between
the Company and Cowen & Company, Oppenheimer & Co., Inc. and Volpe, Welty &
Company, as representatives of the several underwriters.
We are familiar with the Company's Certificate of Incorporation and all
amendments thereto, its By-Laws and all amendments thereto, the records of
meetings and consents of its Board of Directors and stockholders, and its stock
records. We have examined such other records and documents as we deemed
necessary or appropriate for purposes of rendering this opinion.
Based upon the foregoing, we are of the opinion that the Shares have been
duly authorized and, when certificates for the Shares have been duly executed
and countersigned and delivered in accordance with the Underwriting Agreement,
the Shares will be validly issued, fully paid and non-assessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to us under the heading "Legal Matters" in the
prospectus forming a part of the Registration Statement.
Very truly yours,
Foley, Hoag & Eliot LLP
By /s/ Mark L. Johnson
------------------------------
A Partner
<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
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<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
-3-
<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
-6-
<PAGE>
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.
-7-
<PAGE>
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
-8-
<PAGE>
STOCK OPTION PLAN
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
This Plan takes effect immediately 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.
-9-
<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>
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. Guarantors(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 County 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, NH & Plainville, MA .
----------------------------------
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 considerations, 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 Note dated December 30 , 1994, is hereby extended to January 1,
-------------- -- --------
1997.
--
[ ] 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 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
the 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 herby 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 items set forth herein shall
govern.
Executed the 4th day of September , 1996.
--------- ----------------- --
WITNESS: BORROWER: White Pine Software, Inc.
/s/ Robert Putman By:/s/ Howard R. Berke
- ------------------------------ --------------------------------------
By: Duly Authorized
BORROWER
<PAGE>
EXHIBIT 10.21
WHITE PINE SOFTWARE, INC.
STOCK PURCHASE AGREEMENT
Dated as of March 19, 1996
<PAGE>
Table of Contents
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I PURCHASE AND SALE OF SHARES................................. 1
---------------------------
1.1 Purchase and Sale................................................ 1
1.2 Closings......................................................... 1
1.3 Use of Proceeds.................................................. 2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF........................... 2
---------------------------------
2.1 Organization and Corporate Power................................. 2
2.2 Authorization.................................................... 3
2.3 Government Approvals............................................. 3
2.4 Authorized and Outstanding Stock................................. 3
2.5 Subsidiaries..................................................... 4
2.6 Financial Information............................................ 4
2.7 Events Subsequent to the Date of the Financial
Statements....................................................... 5
2.8 Litigation....................................................... 5
2.9 Compliance with Laws and Other Instruments....................... 6
2.10 Taxes............................................................ 6
2.11 Real Property.................................................... 7
2.12 Personal Property................................................ 7
2.13 Patents, Trademarks, etc......................................... 7
2.14 Agreements of Directors, Officers and Employees.................. 8
2.15 Governmental and Industrial Approvals............................ 9
2.16 Federal Reserve Regulations...................................... 9
2.17 Contracts and Commitments........................................ 9
2.18 Securities Act................................................... 9
2.19 Registration Rights.............................................. 9
2.20 Insurance Coverage............................................... 9
2.21 Employee Matters................................................. 10
2.22 No Brokers or Finders............................................ 10
2.23 Transactions with Affiliates..................................... 10
2.24 Assumptions, Guarantees, etc. of Indebtedness of
Other Persons.................................................... 11
2.25 Restrictions on Subsidiaries..................................... 11
2.26 Disclosures...................................................... 11
ARTICLE III AFFIRMATIVE COVENANTS OF THE COMPANY........................ 11
------------------------------------
3.1 Accounts and Reports............................................. 11
3.2 Payment of Taxes................................................. 13
3.3 Maintenance of Key Man Insurance................................. 13
3.4 Compliance with Laws, etc........................................ 13
3.5 Inspection....................................................... 13
3.6 Corporate Existence; Ownership of Subsidiaries................... 14
3.7 Compliance with ERISA............................................ 14
3.8 Board Approval................................................... 15
3.9 Financings....................................................... 15
3.10 Meetings of the Board of Directors............................... 15
3.11 Rule 144A Information............................................ 15
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
3.12 Regular Course of Business....................................... 15
ARTICLE IV NEGATIVE COVENANTS OF THE COMPANY........................... 15
---------------------------------
4.1 Distributions.................................................... 16
4.2 Dealings With Affiliates......................................... 16
4.3 Limitation on Restrictions on Subsidiary Dividends
and Other Distributions.......................................... 17
4.4 No Conflicting Agreements........................................ 17
4.5 Compensation: Consulting and Other Agreements.................... 17
4.6 Limitations on Indebtedness...................................... 17
ARTICLE V INVESTMENT REPRESENTATIONS.................................. 17
--------------------------
5.1 Representations and Warranties................................... 17
5.2 Permitted Sales; Legends......................................... 18
ARTICLE VI CONDITIONS OF PURCHASERS' OBLIGATION........................ 19
------------------------------------
6.1 Effect of Conditions............................................. 19
6.2 Representations and Warranties................................... 19
6.3 Performance...................................................... 19
6.4 Opinion of Counsel............................................... 20
6.5 Certified Documents, etc......................................... 20
6.6 No Material Adverse Change....................................... 20
6.7 Amended and Restated Shareholders' Agreement..................... 20
6.8 Amended and Restated Registration Rights Agreement............... 20
6.9 Amendment to Certificate of Incorporation........................ 20
6.10 Reverse Stock Split.............................................. 21
6.11 Consents and Waivers............................................. 21
ARTICLE VII CONDITIONS OF THE COMPANY'S OBLIGATION...................... 21
--------------------------------------
7.1 Effect of Conditions............................................. 21
7.2 Shareholder Approval............................................. 21
7.3 Amended and Restated Shareholders' Agreement..................... 21
7.4 Amended and Restated Registration Rights Agreement............... 21
ARTICLE VIII CERTAIN DEFINITIONS........................................ 22
-------------------
ARTICLE IX TERMINATION................................................ 23
-----------
9.1 Termination by Mutual Written Consent............................ 23
9.2 Termination for Breach........................................... 23
9.3 Termination for Delay............................................ 23
9.4 Rights After Termination......................................... 23
ARTICLE X MISCELLANEOUS............................................... 23
-------------
10.1 Survival of Representations...................................... 23
10.2 Parties in Interest.............................................. 24
10.3 Shares Owned by Affiliates....................................... 24
10.4 Amendments and Waivers........................................... 24
10.5 Notices.......................................................... 24
10.6 Expenses......................................................... 25
10.7 Counterparts..................................................... 25
10.8 Effect of Headings............................................... 25
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C> <C>
10.9 Adjustments...................................................... 25
10.10 Governing Law................................................... 25
</TABLE>
-iii-
<PAGE>
March 19,1996
To: The Persons Listed on
Schedule 1.1 attached hereto
------------
Re: $5.83 par value Common Stock
----------------------------
Gentlemen:
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
each of the persons listed on Schedule 1.1 hereto (collectively, the
"Purchasers" and individually, a Purchaser"), and each 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.
--------
(a) Initial Closing. Subject to the satisfaction or waiver of the
---------------
conditions set forth in Articles VI and VII hereof, an initial 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 Hutchins, Wheeler & Dittmar, A
Professional Corporation, 101 Federal Street, Boston, Massachusetts, at 10:00
A.M., on March 19, 1996, or such other date, time and place as shall be mutually
agreed upon by the Company and the Purchasers (the "Closing Date"). At the
Closing, the Company will deliver the Purchased Shares being acquired by each
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
<PAGE>
the Company by check or by wire transfer of immediately available funds.
(b) Subsequent Closing,. Within 30 days of the Closing, the Company
-------------------
may hold a subsequent closing (a "Subsequent Closing") at which it may sell to a
subsequent purchaser up to 85,763 shares of $5.83 par Common Stock pursuant to
the terms hereof. Any such subsequent purchaser shall, as a condition to its
purchase of shares of stock, sign a counterpart signature page to this Agreement
and the Related Agreements, agreeing to be bound by each of such agreements as
if an original signatory thereto. At the Subsequent Closing, the Company will
deliver the shares of $5.83 par Common Stock purchased by such subsequent
purchaser in the form of a certificate issued in such subsequent purchaser's
name, upon receipt by the Company of payment of the full purchase price therefor
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 capital, (ii) pay all fees, costs and expenses
incurred by the Company in connection with the transactions contemplated by this
Agreement, including, without limitation, the costs and expenses of the
Purchasers which the Company is obligated to pay pursuant to Section 10.6
hereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
In order to induce the Purchasers 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-
<PAGE>
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 referred to in Section 6.7 (the
"Shareholders' Agreement") and the Amended and Restated Registration Rights
Agreement referred to in Section 6.8, 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 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 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.
------------
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
-3-
<PAGE>
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 previously delivered to the
---------------------
Purchasers (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 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 o;
reserved against in the Financial Statements or the Unaudited Financial
Statements (subject to nominal year-end adjustments) that could materially and
adversely affect the financial condition of the Company or
-4-
<PAGE>
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, 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.
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,
-5-
<PAGE>
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 bylaws, 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" shall include all federal,
-6-
<PAGE>
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 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
-7-
<PAGE>
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 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.
-8-
<PAGE>
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.
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
-9-
<PAGE>
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 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 fending deficiency" as defined in
Section 302 of ERISA, nor has any reportable event as defined in Section 403(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.
-10-
<PAGE>
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 Purchasers or the
Purchasers' 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 disclosed
herein or in any other agreement, document or written statement furnished by the
Company or any of its Subsidiaries to the Purchasers or their 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
-11-
<PAGE>
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 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
-12-
<PAGE>
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 Purchasers 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 the Purchasers
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
all Purchasers and permitted transferees of Purchasers as a group. upon five (5)
days written
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<PAGE>
notice, the Company (and each of its Subsidiaries) will permit any one or more
of the Purchasers, or any permitted transferee of a 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 (1) 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 no more than 5% of such corporation's
outstanding stock) 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.
-14-
<PAGE>
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.
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
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<PAGE>
consummation of the first Qualified Public Offering or (ii) the Purchasers hold
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
hereto; 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
a 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.
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<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
Purchasers, enter into or amend any agreement, contract. commitment or
understanding which would restrict or prohibit the exercise by the Purchasers of
any of their 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. Each 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,
-17-
<PAGE>
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 Purchasers set forth in this Article V;
(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; and
(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.
(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
-18-
<PAGE>
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 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 PURCHASERS' OBLIGATION
------------------------------------
6.1 Effect of Conditions. The obligation of the Purchasers 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
Purchasers 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
Purchasers shall have received a certificate dated as of such Closing and signed
on behalf of the Company to that effect.
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<PAGE>
6.4 Opinion of Counsel. The Purchasers shall have received an opinion,
------------------
dated the date of the Closing, from Devine, Millimet & Branch, Professional
Association, counsel to the Company, in the form attached as Exhibit B.
---------
6.5 Certified Documents, etc. Counsel for the Purchasers shall have
------------------------
received a copy of the Company's Certificate of Incorporation, as amended,
certified by the Secretary of State of the State of Delaware and copies of the
Company's By-Laws certified by its Secretary, as well as any and all other
documents, including certificates as to votes adopted and incumbency of officers
and certificates from appropriate authorities as to the legal existence and good
standing of the Company and its Subsidiaries, which the Purchasers or their
counsel may reasonably request.
6.6 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.
6.7 Amended and Restated Shareholders' Agreement. The Company and certain
--------------------------------------------
of its shareholders shall have amended (i) the First Amendment to and
Restatement of Right of First Refusal and Co-Sale Agreement, dated as of March
8, 1994 and (ii) the Stockholder Voting Agreement, dated as of October 10, 1995,
and the Company, each Purchaser and certain shareholders of the Company shall
have executed an Amended and Restated Shareholders' Agreement in the form of
Exhibit C attached hereto.
- ---------
6.8 Amended and Restated Registration Rights Agreement. The Company and
--------------------------------------------------
certain of its shareholders shall have amended (i) the Registration Rights
Agreement dated as of October 10, 1995 by and among the Company and certain of
its shareholders, (ii) the Registration Rights Agreement dated as of March 8,
1994 by and among the Company and certain of its shareholders, and (iii) the
Registration Rights Agreement dated as of August 31, 1993 by and among, the
Company and certain of its shareholders, and the Company, each Purchaser and
certain shareholders of the Company shall have executed an Amended and Restated
Registration Rights Agreement in the form of Exhibit D attached hereto.
------- -
6.9 Amendment to Certificate of Incorporation. The Certificate of
-----------------------------------------
Incorporation of the Company shall have been amended to provide for the
authorization of the Purchased Stock with the terms set forth in Exhibit A
---------
hereto.
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<PAGE>
6.10 Reverse Stock Split. The Company shall have effected a 10 for 1
-------------------
reverse stock split.
6.11 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 Related Agreements, 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.
7.3 Amended and Restated Shareholders' Agreement. The Company and certain
--------------------------------------------
of its shareholders shall have amended (i) the First Amendment to and
Restatement of Right of First Refusal and Co-Sale Agreement, dated as of March
8, 1994 and (ii) the Stockholder Voting Agreement, dated as of October 10, 1995,
and the Company, each Purchaser and certain shareholders of the Company shall
have executed an Amended and Restated Shareholders' Agreement in the form of
Exhibit C attached hereto.
- ---------
7.4 Amended and Restated Registration Rights Agreement. The Company and
--------------------------------------------------
certain of its shareholders shall have amended (i) the Registration Rights
Agreement dated as of October 10, 1995 by and among the Company and certain of
its shareholders, (ii) the Registration Rights Agreement dated as of March 8,
1994 by and among the Company and certain of its shareholders, and (iii) the
Registration Rights Agreement dated as of August 31, 1993 by and among the
Company and certain of its shareholders, and the Company, each Purchaser and
certain shareholders of the Company shall have executed an Amended and Restated
Registration Rights Agreement in the form of Exhibit D attached hereto.
---------
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<PAGE>
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.
"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.
-22-
<PAGE>
"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 Purchasers.
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 be abandoned by the Company or the Purchasers if the
Closing does not occur by March 31, 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
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<PAGE>
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 Purchasers may disclose such terms to their 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 a
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, a Purchaser and any general or limited partner of
a Purchaser. Without limiting the foregoing, each Purchaser shall be considered
an affiliate of each other 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 prior
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.
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 Purchasers 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
-24-
<PAGE>
with copy to: Devine, Millimet & Branch, Professional Association
111 Amherst Street
Manchester, NH 03101
Attention: Steven Cohen, Esq.
The Purchasers: The address set forth opposite the Purchaser's name on
Schedule 1.1 attached hereto.
------------
with copy to: Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, MA 02110
Attention: Anthony J. Medaglia, Jr., Esquire
10.6 Expenses. Each party hereto will pay its own expenses in connection
--------
with the transactions contemplated hereby; provided, however, that the Company
-------- -------
shall pay the Purchasers' reasonable costs and expenses, not to exceed $25,000
in the aggregate, for legal counsel and accounting review (not including audit
procedures performed by such accountants), in connection with the investigation,
preparation, execution and delivery of this Agreement (and due diligence related
thereto) and the other instruments and documents to be delivered hereunder and
the transactions contemplated hereby and thereby, including without limitation,
the reasonable fees and disbursements of Price Waterhouse, accountants for the
Purchasers and the reasonable fees and disbursements of Hutchins, Wheeler &,
Dittmar, special counsel to the Purchasers.
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.
*******
-25-
<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
PURCHASERS:
ADWEST LIMITED PARTNERSHIP
By: Advent International Limited
Partnership, its general partner
By: * *
--------------------------------------
ADTEL LIMITEDPARTNERSHIP
By: Advent International Limited
Partnership, its general partner
By: * *
--------------------------------------
ADVENTACT LIMITED PARTNERSHIP
By: Advent International Limited
Partnership, its general partner
By: * *
--------------------------------------
GOLDEN GATE DEVELOPMENT INVESTMENT FUND
By: Advent International Limited
Partnership, its general partner
By: * *
--------------------------------------
ADVENT INTERNATIONAL INVESTORS II
LIMITED PARTNERSHIP
By: Advent International Limited
Partnership, its general partner
By: * *
--------------------------------------
ADVENT PARTNERS LIMITED PARTNERSHIP
By: Advent International Limited
Partnership, its general partner
By: * *
--------------------------------------
-26-
<PAGE>
**By: Advent International Corporation,
its general partner
By: /s/ P.J. Sansonetti
--------------------------------------
Patrick J. Sansonetti
Senior Vice President, General Partner
-27-
<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 March 19, 1996 (the "Agreement") by and
among White Pine Software, Inc., a Delaware corporation (the "Company"), and the
persons listed on Schedule 1.1 thereto (the "Purchasers").
------------
Whereas, the Shareholders wish 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.
COMPANY: PURCHASERS:
WHITE PINE SOFTWARE, INC. ADWEST LIMITED PARTNERSHIP
ADVENTACT LIMITED PARTNERSHIP
/s/ Howard R. Berke ADTEL LIMITED PARTNERSHIP
By: ____________________________ GOLDEN GATE DEVELOPMENT AND
President INVESTMENT FUND
By: Advent International Limited
Partnership, General Partner
By: Advent International Corporation,
General Partner
By: Janet L. Hennessy, Vice President
ADVENT INTERNATIONAL INVESTORS
LIMITED PARTNERSHIP II
ADVENT PARTNERS LIMITED PARTNERSHIP
By: Advent International Corporation,
General Partner
By: Janet L. Hennessy, Vice President
/s/ Janet L. Hennesy
________________________________________
Janet L. Hennessy*
Vice President, Controller
*For all of the above
<PAGE>
Exhibit 10.23
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
This Agreement dated as of March 19, 1996 is entered into by and among
White Pine Software, Inc., a Delaware corporation (the "Company"), those persons
listed on Schedule 1 hereto (the "Investors"), and those persons listed on
----------
Schedule 2 hereto (the "Current Stockholders;" together with the Investors, the
- ----------
"Stockholders").
WHEREAS, the Investors are acquiring an aggregate of 343,053 shares of
common stock, $5.83 par value per share (the "$5.83 par Common Stock"), of the
Company pursuant to the terms of a Stock Purchase Agreement dated as of the date
hereof between the Company and the Investors (the "Purchase Agreement");
WHEREAS, the shares of the Company's common stock , $.01 par value per
share (the "$.01 par Common Stock"), now owned by the Current Stockholders are
subject to that certain Registration Rights Agreement dated as of October 10,
1995 by and among the Company and certain Current Stockholders, that certain
Registration Rights Agreement dated as of March 8, 1994 by and among the Company
and certain Current Stockholders, and that certain Registration Rights Agreement
dated as of August 31, 1993 by and among the Company and certain Current
Stockholders (collectively, the "Prior Registration Rights Agreements");
WHEREAS, each of the Prior Registration Rights Agreements may be amended by
the written consent of the parties thereto, and the requisite percentage of the
Stockholders who are parties to each of the Prior Registration Rights Agreements
have executed and delivered this Agreement;
WHEREAS, the Investors have required, as a condition to the consummation of
the transactions contemplated by the Purchase Agreement, that the Company
provide for certain arrangements with respect to the registration of the shares
of $5.83 par Common Stock under the Securities Act of 1933, as amended, and the
Investors and the Current Stockholders wish to coordinate such arrangements with
the arrangements previously granted under the Prior Registration Rights
Agreements; and
WHEREAS, the Investors have required as a condition under the Purchase
Agreement that this Agreement be executed by the parties hereto, and the parties
are willing to execute this Agreement and to be bound by the provisions hereof.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, and other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree that the
Prior Registration Rights Agreements are hereby amended and restated in their
entirety as follows:
<PAGE>
1. Certain Definitions. As used in this Agreement, the following terms
-------------------
shall have the following respective meanings:
"$.01 par Common Stock" means the common stock, $.01 par value per share,
---------------------
of the Company.
"$5.83 par Common Stock" means the common stock, $5.83 par value per share,
----------------------
of the Company.
"Common Stock" means the $.01 par Common Stock and the $5.83 par Common
------------
Stock, collectively.
"Commission" means the Securities and Exchange Commission, or any other
----------
Federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
------------
any similar Federal statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be in effect.
"Registration Statement" means a registration statement filed by the
----------------------
Company with the Commission for a public offering and sale of Common Stock
(other than a registration statement on Form S-8 or Form S-4, or their
successors, or any other form for a similar limited purpose, or any registration
statement covering only securities proposed to be issued in exchange for
securities or assets of another corporation).
"Registration Expenses" means the expenses described in Section 5.
---------------------
"Registrable Shares" means (i) any shares of $5.83 par Common Stock and
------------------
$.01 par Common Stock, and any shares of Common Stock issued or issuable upon
the conversion or exercise of any other securities, now owned or hereafter
acquired by the Stockholders and (ii) any shares of Common Stock issued in
respect of such shares (because of stock splits, stock dividends,
reclassification, recapitalizations, or similar events); provided, however, that
shares of Common Stock which are Registrable Shares shall cease to be
Registrable Shares (i) upon any sale pursuant to a Registration Statement or
Rule 144 under the Securities Act or (ii) upon any sale in any manner to a
person or entity which, by virtue of Section 12 of this Agreement, is not
entitled to the rights provided by this Agreement. Wherever reference is made in
this Agreement to a request or consent of holders of a certain percentage of
Registrable Shares, the determination of such percentage shall include shares of
Common Stock issuable upon conversion of such shares even if such conversion has
not yet been effected.
"Securities Act" means the Securities Act of 1933, as amended, or any
--------------
similar Federal statute, and the rules and regulations of the Commission issued
under such Act, as they each may, from time to time, be in effect.
- 2 -
<PAGE>
2. Demand Registrations.
--------------------
(a) If, after six (6) months following an initial public offering of
equity securities of the Company, the Company shall receive a written request
(specifying that it is being made pursuant to this Section 2) from (i)
Stockholders owning in excess of 50% of the then outstanding shares of $5.83 par
Common Stock or (ii) Stockholders owning in excess of 50% of the then
outstanding $.01 par Common Stock requesting that the Company file a
registration statement under the Securities Act, or a similar document pursuant
to any other statute then in effect corresponding to the Securities Act,
covering the registration of Registrable Shares then owned by such Stockholder,
then the Company shall not later than seventy-five (75) days after receipt by
the Company of such a written request, file a registration statement with the
Commission relating to such Registrable Shares as to which such request for a
demand registration relates and the Company shall use its best efforts to cause
the offering of such Registrable Shares to be registered under the Securities
Act. No registration initiated hereunder shall count as a registration under
this Section 2 unless and until it shall have been declared effective by the
Commission.
(b) If the total amount of Registrable Shares that all Stockholders
request to be included in an offering made pursuant to this Section 2 exceeds
the amount of securities that the underwriters reasonably believe compatible
with the success of the offering, then the Company will include in such
registration only the number of securities which, in the good faith opinion of
such underwriters, can be sold, selected from the Registrable Shares requested
to be included by the Stockholders who requested the registration pursuant to
this Section 2 pro rata based on the number of Registrable Shares each of them
--- ----
owns.
(c) The underwriter of any underwriting requested under this Section
2 shall be selected by a majority in interest of the Stockholders requesting
such registration and the Company.
3. Registration on Form S-3. The Company shall use its best efforts to
------------------------
qualify for registration on Form S-3 or any comparable or successor form; and to
that end the Company shall register (whether or not required by law to do so)
the Common Stock under the Exchange Act in accordance with the provisions of the
Exchange Act following the effective date of the first registration of any
securities of the Company on Form S-1 or any comparable or successor form.
After the Company has qualified for the use of Form S-3, in addition to the
rights contained in Section 2 hereof, the Investors shall have the right to
request an unlimited number of registrations on Form S-3 (such requests shall be
in writing and shall state the number of shares of Registrable Shares to be
disposed of and the intended methods of disposition of such shares by such
Stockholder or Stockholders), provided that in no event shall the Company be
required to register shares with an aggregate market value of less than
$1,000,000.
- 3 -
<PAGE>
4. Registration Procedures. If and whenever the Company is required by
-----------------------
the provisions of this Agreement to effect the registration of any of the
Registrable Shares under the Securities Act, the Company shall:
(a) file with the Commission a Registration Statement with respect to
such Registrable Shares and use its best efforts to cause that Registration
Statement to become and remain effective;
(b) as expeditiously as possible prepare and file with the Commission
any amendments and supplements to the Registration Statement and the prospectus
included in the Registration Statement as may be necessary to keep the
Registration Statement effective, in the case of a firm commitment underwritten
public offering, until each underwriter has completed the distribution of all
securities purchased by it and, in the case of any other offering, until the
earlier of the sale of all Registrable Shares covered thereby or 120 days after
the effective date thereof;
(c) enter into any underwriting agreement with a first-tier
underwriter reasonably necessary to effect the offer and sale of Common Stock,
provided such underwriting agreement contains customary underwriting provisions
and is entered into by the Stockholder or Stockholders selling Common Stock
pursuant to such Registration Statement and provided further that, if the
underwriter so requests, the underwriting agreement will contain customary
contribution provisions on the part of the Company;
(d) To the extent then permitted under applicable professional
guidelines and standards, obtain a comfort letter from the Company's independent
public accountants in customary form and covering such matters of the type
customarily covered by comfort letters and an opinion from the Company's counsel
in customary form and covering such matters of the type customarily covered in a
public issuance of securities, in each case addressed to the Stockholder, and
provide copies thereof to the Stockholders;
(e) as expeditiously as possible furnish to each selling Stockholder
such reasonable numbers of copies of the prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as the selling Stockholder may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Shares owned
by the selling Stockholder; and
(f) as expeditiously as possible use its best efforts to register or
qualify the Registrable Shares covered by the Registration Statement under the
securities or Blue Sky laws of such states as the selling Stockholders shall
reasonably request, and do any and all other acts and things that may be
necessary or desirable to enable the selling Stockholders to consummate the
public sale or other disposition in such states of the Registrable Shares owned
by the selling Stockholder; provided, however, that the Company shall not be
required in connection with this paragraph (f) to qualify as a foreign
corporation or execute a general consent to service of process in any
jurisdiction;
- 4 -
<PAGE>
If the Company has delivered preliminary or final prospectuses to the
selling Stockholders and after having done so the prospectus is amended to
comply with the requirements of the Securities Act, the Company shall promptly
notify the selling Stockholders and, if requested, the selling Stockholders
shall immediately cease making offers of Registrable Shares and return all
prospectuses to the Company. The Company shall promptly provide the selling
Stockholders with revised prospectuses and, following receipt of the revised
prospectuses, the selling Stockholders shall be free to resume malting offers of
the Registrable Shares.
5. Expenses. The Company will pay all reasonable, customary and
--------
necessary Registration Expenses of all registrations under this Agreement. For
purposes of this Section 5, the term "Registration Expenses" shall mean all
expenses incurred by the Company in complying with this Agreement, including,
without limitation, all reasonable, customary and necessary registration and
filing fees, exchange listing fees, printing expenses, fees and expenses of
counsel for the Company and the fees and expenses of one counsel jointly
selected by the Stockholders requesting registration to represent the selling
Stockholders, state Blue Sky fees and expenses, and the expense of any special
audits incident to or required by any such registration, but excluding
underwriting discounts, selling commissions and the fees and expenses of the
selling Stockholders' own counsel (other than the counsel selected to represent
all selling Stockholders).
6. Indemnification.
---------------
(a) In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, the Company will indemnify
and hold harmless the seller of such Registrable Shares, and each other person,
if any, who controls such seller within the meaning of the Securities Act or the
Exchange Act against any losses, claims, damages or liabilities, joint or
several, to which such seller or controlling person may become subject under the
Securities Act, the Exchange Act, state securities or Blue Sky laws or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement
under which such Registrable Shares were registered under the Securities Act,
any preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to such Registration Statement, or
arise out of or are based upon the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and the Company will reimburse such seller, and each
such controlling person for any legal or any other expenses reasonably incurred
by such seller or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
-------- -------
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any untrue
statement or omission made in such Registration Statement, preliminary
prospectus or final prospectus, or any such amendment or supplement, in reliance
upon and in conformity with
- 5 -
<PAGE>
information furnished to the Company, in writing, by or on behalf of such
seller, underwriter or controlling person specifically for use in the
preparation thereof.
(b) In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, each seller of Registrable
Shares, severally and not jointly, will indemnify and hold harmless the Company,
each of its directors and officers and each person, if any, who controls the
Company within the meaning of the Securities Act or the Exchange Act, against
any losses, claims, damages or liabilities, joint or several, to which the
Company, such directors and officers or controlling person may become subject
under the Securities Act, Exchange Act, state securities or Blue Sky laws or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement
under which such Registrable Shares were registered under the Securities Act,
any preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to the Registration Statement, or
arise out of or are based upon any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, if the statement or omission was made in reliance upon
and in conformity with information relating to such seller furnished in writing
to the Company by or on behalf of such seller specifically for use in connection
with the preparation of such Registration Statement, prospectus, amendment or
supplement; provided, however, that the obligations of such Stockholder
-------- -------
hereunder shall be limited to an amount equal to the proceeds to each
Stockholder of Registrable Shares sold in connection with such registration.
(c) Each party entitled to indemnification under this Section 6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided, that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld); and, provided, further, that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 6. The Indemnified Party may participate in such
defense at such party's expense; provided, however, that the Indemnifying Party
shall pay such expense if representation of such Indemnified Party by the
counsel retained by the Indemnifying Party would be inappropriate due to actual
or potential differing interests between the Indemnified Party and any other
party represented by such counsel in such proceeding. No Indemnifying Party, in
the defense of any such claim or litigation shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect of such claim or litigation, and no Indemnified Party shall
consent to entry of any judgment or settle such claim or litigation without the
prior written consent of the Indemnifying Party.
- 6 -
<PAGE>
(d) No Stockholder shall be required to participate in a registration
pursuant to which it would be required to execute an underwriting agreement in
connection with a registration effected under this Agreement which imposes
indemnification or contribution obligations on such Stockholder more onerous
than those imposed hereunder; provided, however, that the Company shall not be
deemed to breach the provisions of this Agreement if a Stockholder is not
permitted to participate in a registration on account of his refusal to execute
an underwriting agreement on the basis of this subsection (d).
7. Exception to Registration. The Company shall not be required to
-------------------------
effect a registration under this Agreement if (i) in the written opinion of
counsel for the Company such Stockholders may sell without registration under
the Securities Act all Registrable Shares for which they requested registration
under the provisions of the Securities Act and in the manner and in the quantity
in which the Registrable Shares were proposed to be sold, or (ii) the Company
shall have obtained from the Commission a "no-action" letter to that effect;
provided that this Section 7 shall not apply to sales made under Rule 144(k) or
any successor rule promulgated by the Commission until after the effective date
of the Company's initial registration of shares under the Securities Act.
8. Information by Holder. Each Stockholder including Registrable Shares
---------------------
in any registration shall furnish to the Company such information regarding such
Stockholder and the distribution proposed by such Stockholder as the Company may
reasonably request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Agreement.
9. "Stand-Off" Agreement. Each Stockholder, if requested by 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, shall
agree not to sell publicly or otherwise transfer or dispose of any Registrable
Shares or other securities of the Company held by such Stockholder for a
specified period of time (not to exceed 180 days) following the effective date
of such Registration Statement; provided, that all Stockholders holding not less
than the number of shares of Common Stock held by the Stockholder (including
shares of Common Stock issuable upon the conversion of Registrable Shares, or
other convertible securities, or upon the exercise of options, warrants or
rights) and all officers and directors of the Company enter into similar
agreements.
10. Rule 144 Requirements. After the earlier of (i) the closing of the
---------------------
sale of securities of the Company pursuant to a Registration Statement, or (ii)
the registration by the Company of a class of securities under Section 12 of the
Exchange Act, the Company agrees:
(a) to comply with the requirements of Rule 144(c) under the
Securities Act with respect to current public information about the Company;
- 7 -
<PAGE>
(b) to use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements); and
(c) to furnish to any holder of Registrable Shares upon request (i) a
written statement by the Company as to its compliance with the requirements of
said Rule 144(c), and the reporting requirements of the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements), (ii) a copy of the most recent annual or quarterly report of the
Company, and (iii) such other reports and documents of the Company as such
holder may reasonably request to avail itself of any similar rule or regulation
of the Commission allowing it to sell any such securities without registration.
11. Mergers, Etc. The Company shall not, directly or indirectly, enter
-------------
into any merger, consolidation or reorganization in which the Company shall not
be the surviving corporation unless the proposed surviving corporation shall,
prior to such merger, consolidation or reorganization, agree in writing to
assume the obligations of the Company under this Agreement, and for that purpose
references hereunder to "Registrable Shares" shall be deemed to be references to
the securities which the Stockholders would be entitled to receive in exchange
for Registrable Shares under any such merger, consolidation or reorganization;
provided, however, that the provisions of this Section 11 shall not apply in the
event of any merger, consolidation or reorganization in which the Company is not
the surviving corporation if the Stockholders are entitled to receive in
exchange for their Registrable Shares consideration consisting solely of (i)
cash, (ii) securities of the acquiring corporation which may be immediately sold
to the public without registration under the Securities Act, or (iii) securities
of the acquiring corporation which the acquiring corporation has agreed to
register within 180 days of completion of the transaction for resale to the
public pursuant to the Securities Act.
12. Listing Application. If shares of any class of stock of the Company
-------------------
shall be listed on a national securities exchange, the Company shall, at its
expense, include in its listing application all of the shares of the listed
class then eligible for listing owned by any Stockholder.
13. Damages. The Company recognizes and agrees that the holder of
-------
Registrable Shares shall not have an adequate remedy if the Company fails to
comply with the provisions of this Agreement, and that damages will not be
readily ascertainable, and the Company expressly agrees that in the event of
such failure any Stockholder shall be entitled to seek specific performance of
the Company's obligations hereunder.
14. Termination. All of the Company's obligations to register Registrable
-----------
Shares under this Agreement shall terminate on the tenth anniversary of this
Agreement.
15. Transfers of Rights. This Agreement, and the rights and obligations
-------------------
of each Stockholder hereunder, may be assigned by such Stockholder to any person
or entity
- 8 -
<PAGE>
acquiring at least 25% of the Registrable Shares owned by such Stockholder
(subject to adjustment for stock splits, stock dividends, recapitalizations or
similar events), and such transferee shall be deemed a "Stockholder" for
purposes of this Agreement; provided that the transferee provides written notice
of such assignment to the Company.
16. General.
-------
(a) Notices. All notices, requests, consents, and other
-------
communications under this Agreement shall be in writing and shall be delivered
by hand or mailed by first class certified or registered mail, return receipt
requested, postage prepaid:
If to the Company, at 40 Simon Street, Suite 201, Nashua, NH 03060-3043,
Attention: President, or at such other address or addresses as may have been
furnished in writing by the Company to the Stockholders; or
If to a Stockholder, at such address or addresses as may have been
furnished to the Company in writing by such Stockholder.
Notices provided in accordance with this Section 16(a) shall be deemed
delivered upon personal delivery or two (2) business days after deposit in the
mail.
(b) Entire Agreement. This Agreement embodies the entire agreement
----------------
and understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter, including without limitation the rights and obligations of the
Current Stockholders under the Prior Registration Rights Agreements and each
Current Stockholder hereby waives all of its rights under the Prior Registration
Rights Agreements and hereby cancels the Prior Registration Rights Agreements.
(c) Amendments and Waivers. Neither this Agreement nor any provision
----------------------
hereof may be waived, modified, amended or terminated except by a written
agreement signed by the parties hereto; provided, however, that Stockholders
-------- -------
owning at least 66 2/3% of the Registrable Shares owned by all Stockholders may
effect any such waiver, modification, amendment or termination on behalf of all
of the Stockholders; provided, further, that, without the consent of all parties
-------- -------
to this Agreement who own Registrable Shares, no amendment or addition to this
Agreement may be made which (i) modifies this Section 16(c) or (ii) would affect
the holders of Registrable Shares in a disproportionate manner; and provided,
further, that no amendment or addition to this Agreement which affects any
Stockholder's rights under Section 2 or 3 hereof may be made without the consent
of such Stockholder. For purposes hereof, the term "disproportionate manner"
shall refer to any event which would impair the rights of one Stockholder while
not impairing similar rights held by another Stockholder. No waiver of any
breach or default hereunder shall be considered valid unless in writing, and no
such waiver shall be deemed a waiver of any subsequent breach or default of the
same or similar nature.
- 9 -
<PAGE>
(d) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
shall be one and the same document.
(e) Severability. The invalidity or unenforceability of any
------------
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
(f) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of New Hampshire.
[Remainder of Page Intentionally Left Blank]
- 10 -
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the date first written above.
COMPANY:
WITNESS WHITE PINE SOFTWARE, INC.
/s/ Robert Putnam /s/ Howard R. Berke
___________________________ --------------------------------------------
Howard R. Berke, President
INVESTORS:
ADWEST LIMITED PARTNERSHIP
By: Advent International Limited Partnership,
its general partner
By: **
------------------------------------------
ADTEL LIMITED PARTNERSHIP
By: Advent International Limited Partnership,
its general partner
By: **
------------------------------------------
ADVENTACT LIMITED PARTNERSHIP
By: Advent International Limited Partnership,
its general partner
By: **
------------------------------------------
GOLDEN GATE DEVELOPMENT AND LIMITED
PARTNERSHIP
By: Advent International Limited Partnership,
its general partner
By: **
------------------------------------------
- 11 -
<PAGE>
ADVENT INTERNATIONAL INVESTORS LIMITED
PARTNERSHIP
By: Advent International Limited Partnership,
its general partner
By: **
------------------------------------------
ADVENT PARTNERS LIMITED PARTNERSHIP
By: Advent International Limited Partnership,
its general partner
By: **
------------------------------------------
** By: Advent International
Corporation, its general partner
By:/s/ Patrick J. Sansonetti
______________________________________
Patrick J. Sansonetti
Senior Vice President, General Partner
- 12 -
<PAGE>
CURRENT STOCKHOLDERS:
/s/ Charles Lingel
- ------------------------ -------------------------------------
Witness Charles Lingel
/s/ Howard R. Berke
- ------------------------ -------------------------------------
Witness Howard R. Berke
/s/ Forrest Milkowski
- ------------------------ -------------------------------------
Witness Forrest Milkowski
/s/ Stephen Roche
- ------------------------ -------------------------------------
Witness Stephen Roche
/s/ Arthur Bruno
- ------------------------ -------------------------------------
Witness Arthur Bruno
J.F. Shea & Co., Inc.
By: /s/ illegible
- ------------------------ ---------------------------------
Witness
Innolion
By: /s/ P.G. Vallee
- ------------------------ ---------------------------------
Witness
Land Free Investment
By: /s/ illegible
- ------------------------ ---------------------------------
Witness
Signature Page Amended and Restated
Registration Rights Agreement
<PAGE>
H & Q London Ventures
By:/s/ William Hambrecht
- ----------------------------- -------------------------------------
Witness
H & Q Tiawan Ventures, C.V.
By:/s/ William Hambrecht
- ----------------------------- --------------------------------------
Witness
H & Q Ventures International C.V.
By:/s/ William Hambrecht
- ----------------------------- -------------------------------------
Witness
H & Q Ventures IV
By:/s/ William Hambrecht
- ----------------------------- -------------------------------------
Witness
Hambrecht & Quist
By:/s/ William Hambrecht
- ----------------------------- -------------------------------------
Witness
The Hambrecht 1980 Revocable Trust
By:/s/ William Hambrecht
- ----------------------------- -------------------------------------
Witness
Hamco Capital Corporation
By:/s/ William Hambrecht
- ----------------------------- -------------------------------------
Witness
Hamquist
By:/s/ William Hambrecht
- ----------------------------- -------------------------------------
Witness
/s/ William Hambrecht
- ----------------------------- ----------------------------------------
Witness William Hambrecht
Phoenix Venture (BVI) Ltd.
By:/s/ William Hambrecht
- ----------------------------- -------------------------------------
Witness
/s/ Michael Preletz
- ----------------------------- -----------------------------------------
Witness Michael Preletz
<PAGE>
SOFINNOVA S.A.
By: /s/ illegible
- ------------------------ ---------------------------------
Witness ________________________ its duly
authorized _______________________
SOFINNOVA CAPITAL FCPR
By: /s/ illegible
- ------------------------ ---------------------------------
Witness ________________________ its duly
authorized _______________________
CV SOFINNOVA VENTURES PARTNERS II
By: /s/ illegible
- ------------------------ ---------------------------------
Witness ________________________ its duly
authorized _______________________
/s/ Killko Caballero
- ------------------------ -------------------------------------
Witness Killko Caballero
/s/ Reginald Bursens
- ------------------------ -------------------------------------
Witness Reginald Bursens
/s/ Michiel Fast
- ------------------------ -------------------------------------
Witness Michiel Fast
/s/ Jean-Francois Ducarroz
- ------------------------ -------------------------------------
Witness Jean-Francois Ducarroz
/s/ Mallku Caballero
- ------------------------ -------------------------------------
Witness Mallku Caballero
/s/ Pascal Crausaz
- ------------------------ -------------------------------------
Witness Pascal Crausaz
/s/ Pierre Saslawsky
- ------------------------ -------------------------------------
Witness Pierre Saslawsky
Signature Page Amended and Restated
Registration Rights Agreement
<PAGE>
SCHEDULE 1
INVESTORS
---------
Adwest Limited Partnership
Adtel Limited Partnership
ADVENTACT Limited Partnership
Golden Gate Development Investment Fund
Advent International Investors II Limited Partnership
Advent Partners Limited Partnership
c/o Advent International Corporation
101 Federal Street
Boston, MA 02110
Attention: Patrick J. Sansonetti
- 16 -
<PAGE>
SCHEDULE 2
CURRENT STOCKHOLDERS
--------------------
Charles Lingel
Howard R. Berke
Forrest Milkowski
Stephen Roche
Arthur Bruno
J.F. Shea & Co., Inc.
Innolion
Land Free Investment
Sofinnova S.A.
Sofinnova Capital FCPR
CV Sofinnova Ventures Partners III
Killko Caballero
Reginald Bursens
Michiel Fast
Jean-Francois Ducarroz
Mallku Caballero
Pascal Crausaz
Pierre Saslawsky
H & Q London Ventures
H & Q Taiwan Ventures, C.V.
H & Q Ventures International C.V.
H & Q Ventures IV
Hambrecht & Quist
The Hambrecht 1980 Revocable Trust
Hamco Capital Corporation
Hamquist
William Hambrecht
Phoenix Venture (BVI) Ltd.
Michael Preletz
- 17 -
<PAGE>
FIRST AMENDMENT
TO
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
This First Amendment dated as of July 22, 1996 (this "Amendment") amends the
Amended and Restated Registration Rights Agreement dated as of March 19, 1996
(the "Agreement") by and among White Pine Software, Inc., a Delaware corporation
(the "Company"), the persons listed on Schedule 1 thereto (the "Investors"), and
----------
the persons listed on Schedule 2 thereto (the "Current Stockholders" and,
----------
together with the Investors, the "Stockholders").
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 that the Agreement is hereby amended
as follows:
1. The following paragraph is inserted in Section 1 after the definition of
"Common Stock":
"`Converted Common Stock' means (i) the shares of $.01 par Common Stock
----------------------
issued or issuable upon conversion of shares of $5.83 par Common Stock and
(ii) any additional shares of $.01 par Common Stock issued in respect of such
shares (because of stock splits, stock dividends, reclassification,
recapitalizations, or similar events)."
2. The following paragraph is inserted in Section 1 after the definition of
"Registration Expenses":
"`Registrable Converted Shares' means Registrable Shares consisting of
----------------------------
shares of Converted Common Stock."
3. The definition of "Registrable Shares" in Section 1 is hereby deleted and
replaced with the following:
"`Registrable Shares' means (i) any shares of $.01 par Common Stock
------------------
(including shares of Converted Common Stock), and any additional shares of
$.01 par Common Stock issuable upon the conversion or exercise of any other
securities, owned by the Stockholders as of the date of the final prospectus
for the initial public offering of equity securities of the Company and (ii)
any shares of $.01 par Common Stock issued in respect of such shares or
additional shares (because of stock splits, stock dividends,
reclassification, recapitalizations, or similar events); provided, however,
-------- -------
that shares of $.01 par Common Stock that are Registrable Shares shall cease
to be Registrable Shares (a) upon any sale pursuant to any registration
statement filed by the Company with the Commission or pursuant to Rule 144 or
Rule 701 under the Securities Act or (b) upon any sale in any manner to a
person or entity which, by virtue of Section 15 of this Agreement, is not
entitled to the rights provided by this Agreement. Wherever reference is
made in this Agreement to a request or consent of holders of a certain
percentage of Registrable Shares, the determination of such percentage shall
include Registrable Shares consisting of shares of $.01 par Common Stock
issuable upon conversion or exercise of securities, even if such conversion
or exercise has not yet been effected."
<PAGE>
4. Section 2 is hereby deleted and replaced with the following:
"2. Demand Registrations.
--------------------
"(a) If, after 120 days following the date of the final prospectus
for an initial public offering of equity securities of the Company, the
Company shall receive a written request (specifying that it is being made
pursuant to this Section 2(a)) from Stockholders owning in excess of 50% of
the then-outstanding Registrable Converted Shares requesting that the Company
file a registration statement under the Securities Act, or a similar document
pursuant to any other statute then in effect corresponding to the Securities
Act, covering the registration of Registrable Converted Shares then owned by
such Stockholders, then the Company shall, not later than 75 days after
receipt by the Company of such a written request, file a registration
statement with the Commission for the Registrable Converted Shares as to
which such request relates and the Company shall use its best efforts to
cause the offering of such Registrable Converted Shares to be registered
under the Securities Act; provided, however, that (i) the effective date of
such Registration Statement shall not occur prior to the one hundred eighty-
first day after the date of the final prospectus for the initial public
offering of equity securities of the Company, (ii) the aggregate market value
of the Registrable Converted Shares registered pursuant to this Section 2(a)
shall not exceed $2,300,000 and (iii) the Company shall not be required to
effect more than one demand registration pursuant to this Section 2(a). For
purposes of this Agreement, the `market value' of a Registrable Converted
Share as of a specified date shall be the average of the closing prices per
share of $.01 par Common Stock on the Nasdaq National Market or any national
securities exchange during the ten trading days preceding such date. If the
market value of Registrable Converted Shares that Stockholders request to be
included in an offering made pursuant to this Section 2(a) exceeds
$2,300,000, then the Company will include in such registration only
Registrable Converted Shares the market value of which shall not exceed
$2,300,000, selected from the Registrable Converted Shares requested to be
included in such registration pro rata based on the number of Registrable
--- ----
Converted Shares each of them then owns. No registration initiated hereunder
shall count as a registration under this Section 2(a) unless and until it
shall have been declared effective by the Commission.
"(b) If, after 180 days following the date of the final prospectus
for an initial public offering of equity securities of the Company, the
Company shall receive a written request (specifying that it is being made
pursuant to this Section 2(b)) from Stockholders owning in excess of 50% of
the then-outstanding Registrable Shares held by the Stockholders requesting
that the Company file a registration statement under the Securities Act, or a
similar document pursuant to any other statute then in effect corresponding
to the Securities Act, covering the registration of Registrable Shares then
owned by such Stockholders, then the Company shall, not later than 75 days
after receipt by the Company of such written request, file a registration
statement with the Commission for the Registrable Shares as to which such
request relates and the Company shall use its best efforts to cause the
offering of such Registrable Shares to be registered under the Securities
Act; provided, however, that the Company shall not be required to effect
-------- -------
more than one registration pursuant to this Section 2(b). No registration
initiated hereunder shall count as a registration under this Section 2(b)
unless and until it shall have been declared effective by the Commission.
"(c) If the total amount of Registrable Shares that all Stockholders
request to be included in an offering made pursuant to this Section 2 exceeds
the amount of securities that the underwriters reasonably believe compatible
with the success of such offering, then the
<PAGE>
Company will include in such registration only the number of Registrable
Shares which, in the good faith opinion of such underwriters, can be sold,
selected from the Registrable Shares requested to be included in such
registration as follows:
"(i) in the case of a registration initiated pursuant to a written
request under Section 2(a), (A) all of the Registrable Converted Shares
that have been requested to be included in such registration by the
Stockholders at whose request the registration is made, provided that if
--------
such Registrable Converted Shares exceed the limitation described in
Section 2(a)(ii), then, in order to comply with such limitation, the
number of such Registrable Converted Shares to be registered shall be
decreased pro rata based on the number of Registrable Converted Shares
--- ----
each of the Stockholders then owns and (B) to the extent the Registrable
Converted Shares that have been requested to be included in such
registration by the Stockholders at whose request the registration is made
are less than such limitation, then (and only then) Registrable Shares of
other Stockholders shall be included, pro rata based on the number of
--- ----
Registrable Shares each of them then owns; and
"(ii) in the case of a registration initiated pursuant to a written
request under Section 2(b), (A) the Registrable Shares requested to be
included by the Stockholders at whose request the registration is made,
pro rata based on the number of Registrable Shares each of them owns and
--- ----
(B) then (and only then) the remaining Registrable Shares, pro rata based
--- ----
on the number of Registrable Shares each of the Stockholders then owns.
"(d) The underwriter of any underwriting requested under Section
2(a) or Section 2(b), as the case may be, shall be selected by a majority in
interest of the Stockholders requesting such registration and the Company."
5. The reference to "Common Stock" in Section 3 is deleted and replaced with
"$.01 par Common Stock" and the following phrase is inserted before the period
at the end of Section 3:
", determined in accordance with the definition of `market value' in Section
2(a)".
6. Schedule 1 is hereby amended to include "J.F. Shea Co., Inc."
7. Except as amended by this Amendment, the Agreement shall remain in effect
in accordance with its terms.
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed by the parties
hereto as of the date first written above.
COMPANY:
WHITE PINE SOFTWARE, INC.
By: /s/ Howard R. Berke
________________________________
President
INVESTORS:
ADWEST LIMITED PARTNERSHIP
ADVENTACT LIMITED PARTNERSHIP
ADTEL LIMITED PARTNERSHIP
GOLDEN GATE DEVELOPMENT AND
INVESTMENT FUND
By: Advent International Limited
Partnership, General Partner
By: Advent International Corporation,
General Partner
By: Janet L. Hennessy, Vice President
ADVENT INTERNATIONAL INVESTORS
LIMITED PARTNERSHIP II
ADVENT PARTNERS LIMITED PARTNERSHIP
By: Advent International Corporation,
General Partner
By: Janet L. Hennessy, Vice President
/s/ Janet L. Hennessy
____________________________________
Janet L. Hennessy*
Vice President, Controller
*For all of the above
J.F. SHEA CO., INC.
By:/s/ James H. Shorten
________________________________
<PAGE>
CURRENT STOCKHOLDERS:
/s/ Charles Lingel
____________________________________
Charles Lingel
/s/ Howard R. Berke
____________________________________
Howard R. Berke
/s/ Forrest Milkowski
____________________________________
Forrest Milkowski
/s/ Stephen Roche
____________________________________
Stephen Roche
/s/ Arthur Bruno
____________________________________
Arthur Bruno
J.F. SHEA CO., INC.
By: /s/ James H. Shorten
________________________________
INNOLION
By: /s/ P.G. Vallee
________________________________
LAND FREE INVESTMENT
By: /s/ illegible
________________________________
/s/ Michael Preletz, Trustee
____________________________________
Michael Preletz
SOFINNOVA S.A.
By:/s/ Olivier Protard
_______________________, its duly
authorized Officer
________________________
<PAGE>
SOFINNOVA CAPITAL FCPR
By:/s/ Olivier Protard
_______________________________, its duly
authorized Officer
______________________________
CV SOFINNOVA VENTURES PARTNERS II
By:/s/ Olivier Protard
___________________________, its duly
authorized Attorney
_____________________________
/s/ Killko Caballero
_________________________________________
Killko Caballero
/s/ Reginald Bursens
_________________________________________
Reginald Bursens
/s/ Michiel Fast
_________________________________________
Michiel Fast
/s/ Jean-Francois Ducarroz
_________________________________________
Jean-Francois Ducarroz
/s/ Mallko Caballero
_________________________________________
Mallku Caballero
/s/ Pascal Crausaz
_________________________________________
Pascal Crausaz
/s/ Pierre Saslawsky
_________________________________________
Pierre Saslawsky
<PAGE>
H & Q LONDON VENTURES
By: /s/ Jackie Berterretche
_____________________________________
H & Q TV MANAGEMENT N.V.
By: /s/ illegible
_____________________________________
H & Q VENTURES INTERNATIONAL C.V.
By: /s/ Jackie Berterretche
_____________________________________
H & Q VENTURES IV
By: /s/ Jackie Berterretche
_____________________________________
HAMBRECHT & QUIST
By: /s/ Jackie Berterretche
_____________________________________
THE HAMBRECHT 1980 REVOCABLE TRUST
By: /s/ Jackie Berterretche
_____________________________________
H & Q VENTURE PARTNERS
By: /s/ Jackie Berterretche
_____________________________________
HAMQUIST
By: /s/ Jackie Berterretche
_____________________________________
/s/ William Hambrecht
_________________________________________
William Hambrecht
<PAGE>
PHOENIX VENTURE (BVI) LTD.
By:/s/ Jackie Berterretche
_____________________________________
HAMBRECHT & QUIST GROUP
By:/s/ Jackie Berterretche
_____________________________________
<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 SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30,
1994 1995 1995 1996
------------ ------------ ---------- -----------
<S> <C> <C> <C> <C>
Weighted average shares
outstanding............... 3,585,578 3,592,009 3,586,062 5,590,696
Net dilutive effect of
stock options-based on the
treasury stock method
using the assumed initial
public offering price of
$9.00 per share........... 640,322 673,390
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 6,118,327 5,901,050
---------- ----------- ---------- -----------
Net income (loss).......... $ 393,695 $(3,525,985) $ 226,039 $(1,888,166)
========== =========== ========== ===========
Net income (loss) per
common and common
equivalent share.......... $ .06 $ (.65) $ .04 $ (.32)
========== =========== ========== ===========
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Financial Data" and "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 Amendment No. 1 to
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
August 30, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Financial Data" and "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 Amendment No. 1 to 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
August 30, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C> <C>
<PERIOD-TYPE> 9-MOS 12-MOS 6-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 JUN-30-1996
<CASH> 0 1,773,855 2,031,321
<SECURITIES> 0 0 0
<RECEIVABLES> 0 1,554,977 1,878,309
<ALLOWANCES> 0 116,449 242,233
<INVENTORY> 0 178,546 142,743
<CURRENT-ASSETS> 0 3,559,746 4,289,319
<PP&E> 0 2,262,100 2,577,770
<DEPRECIATION> 0 1,648,839 1,861,796
<TOTAL-ASSETS> 0 6,437,408 7,010,073
<CURRENT-LIABILITIES> 0 2,777,956 3,164,186
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 0 55,898 2,355,918
<OTHER-SE> 0 0 0
<TOTAL-LIABILITY-AND-EQUITY> 0 6,437,408 7,010,073
<SALES> 0 0 0
<TOTAL-REVENUES> 4,964,762 7,183,745 4,860,202
<CGS> 0 0 0
<TOTAL-COSTS> 654,996 1,247,094 920,838
<OTHER-EXPENSES> 4,043,665 9,582,955 5,815,134
<LOSS-PROVISION> 31,006 9,984 10,824
<INTEREST-EXPENSE> 0 7,000 19,570
<INCOME-PRETAX> 411,695 (3,495,961) (1,532,501)
<INCOME-TAX> 18,000 30,024 55,665
<INCOME-CONTINUING> 0 0 0
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 393,695 (3,525,985) (1,888,166)
<EPS-PRIMARY> .06 (.65) (.32)
<EPS-DILUTED> .06 (.65) (.32)
</TABLE>
