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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 28, 2000
REGISTRATION NO. 333-95541
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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WHITE PINE SOFTWARE, INC.
(Name of small business issuer in its charter)
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<S> <C> <C>
DELAWARE 7372 04-3151064
(State or other jurisdiction (Primary Standard Industrial (I.R.S. employer
of incorporation or organization) Classification Code Number) identification number)
</TABLE>
542 AMHERST STREET
NASHUA, NEW HAMPSHIRE 03063
(603) 886-9050
(Address and telephone number of principal executive offices and principal place
of business)
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KILLKO A. CABALLERO
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:
MARK L. JOHNSON, ESQ.
RICHARD G. COSTELLO, ESQ.
EMILY F. HAYES, ESQ.
HALE AND DORR LLP
60 STATE STREET
BOSTON, MASSACHUSETTS 02109
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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, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / ____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ____________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / / ____________
------------------------
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>
PROSPECTUS (SUBJECT TO COMPLETION)
DATED MARCH 28, 2000
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL SECURITIES, AND THE SELLING STOCKHOLDERS ARE
NOT SOLICITING OFFERS TO BUY THESE SECURITIES, IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
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<C> <C> <S>
1,302,084 SHARES
[LOGO] WHITE PINE SOFTWARE, INC.
COMMON STOCK
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The selling stockholders named on page 42 are offering 1,302,084 shares of
common stock. We will not receive any of the proceeds from sales of shares by
the selling stockholders.
Our common stock trades on the Nasdaq National Market under the symbol "WPNE."
On March 24, 2000, the last reported sale price of our common stock on the
Nasdaq National Market was $38.625 per share.
The selling stockholders may sell the shares from time to time on the Nasdaq
National Market or otherwise. They may sell the shares at prevailing market
prices or at prices negotiated with buyers. The selling stockholders will be
responsible for any commissions or discounts due to brokers or dealers. The
amount of those commissions or discounts will be negotiated before the sales. We
will pay all of the other offering expenses, which we estimate will total
$100,000.
------------------------
INVESTING IN THESE SHARES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE
5.
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THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT
APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
March , 2000
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS.
NEITHER WE NOR THE SELLING STOCKHOLDERS HAVE AUTHORIZED ANYONE TO PROVIDE YOU
WITH INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS. THE SELLING
STOCKHOLDERS ARE OFFERING TO SELL, AND SEEKING OFFERS TO BUY, SHARES OF COMMON
STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. IN THIS
PROSPECTUS, REFERENCES TO "WE," "US" AND "OUR" REFER TO WHITE PINE
SOFTWARE, INC. AND ITS SUBSIDIARY.
------------------------
TABLE OF CONTENTS
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PAGE
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Prospectus Summary.......................................... 3
Risk Factors................................................ 5
Use of Proceeds............................................. 12
Dividend Policy............................................. 12
Price Range of Our Common Stock............................. 12
Capitalization.............................................. 13
Selected Consolidated Financial Data........................ 14
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 15
Business.................................................... 20
Management.................................................. 35
Related Party Transactions.................................. 41
Principal and Selling Stockholders.......................... 42
Description of Capital Stock................................ 44
Plan of Distribution........................................ 46
Legal Matters............................................... 47
Experts..................................................... 47
Where You Can Find More Information......................... 47
Index to Consolidated Financial Statements.................. F-1
</TABLE>
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We own or have rights to trademarks or trade names that we use in
conjunction with the sale of our products and services. Our trademarks include
ClassPoint, CU-SeeMe, CU-SeeMe Web, MeetingPoint and White Pine.
2
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PROSPECTUS SUMMARY
BECAUSE THIS IS ONLY A SUMMARY, IT DOES NOT CONTAIN ALL OF THE INFORMATION
THAT MAY BE IMPORTANT TO YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS, INCLUDING
"RISK FACTORS," BEFORE DECIDING TO INVEST IN SHARES OFFERED BY THIS PROSPECTUS.
OUR COMPANY
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OUR BUSINESS.............................. We develop software solutions that facilitate worldwide
video and audio communication across the Internet,
intranets, extranets and other networks using the
Internet protocol.
OUR PRODUCTS.............................. Our group conferencing software products, CU-SeeMe and
MeetingPoint, create a client-server solution that
allows users to participate in real-time, multipoint,
multimedia conferences from the users' desktop
computers, using existing Internet, intranet and
extranet connections. Our CU-SeeMe Web software provides
multipoint video instant messaging over the Internet. By
developing multimedia conferencing products that require
no proprietary hardware, we are able to offer multimedia
conferencing at a substantially lower price than vendors
of traditional hardware-based systems and thereby to
encourage businesses and others to adopt multimedia
conferencing as a mass communication medium.
OUR MARKET................................ Our customers include Internet service providers, Web
portal sites, businesses, educational institutions,
government organizations and individual consumers. We
market and sell our products in the United States,
Europe and the Pacific Rim through distributors,
resellers, strategic partners, original equipment
manufacturers and our direct sales organization, as well
as directly over the Internet.
OUR ADDRESS............................... Our principal executive offices are located at 542
Amherst Street, Nashua, New Hampshire 03063. Our
telephone number is (603) 886-9050. Our web site is
located at WWW.WPINE.COM or WWW.CUSEEME.COM; information
contained in our web site is not a part of this
prospectus.
ADDITIONAL CONSIDERATIONS................. Since inception, we have incurred substantial losses,
resulting in an accumulated deficit of $33.7 million at
December 31, 1999. We expect to incur additional
substantial losses for the foreseeable future. Market
acceptance of our application hosting services, which we
expect to introduce in the second fiscal quarter of
2000, is critical to our future success. For a
discussion of these and other risks relating to an
investment in our common stock, see "Risk Factors"
below.
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3
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THE OFFERING
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Common Stock Offered: All of the 1,302,084 shares offered by this prospectus
are being sold by the selling stockholders. The selling
stockholders acquired the shares from us in private
placements completed in December 1999.
Use of Proceeds: We will not receive any of the proceeds from sales of
shares by the selling stockholders.
Nasdaq National Market Symbol: WPNE
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SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following tables summarize the financial data of our business.
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YEAR ENDED DECEMBER 31,
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1996 1997 1998 1999
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STATEMENT OF OPERATIONS DATA:
Revenue:
Software license fees................................. $10,500 $ 9,797 $ 6,948 $ 10,715
Services and other.................................... 1,166 1,255 845 1,287
Total revenue....................................... 11,666 11,052 7,793 12,002
Gross profit............................................ 9,454 9,162 6,148 9,454
Loss from operations.................................... (3,790) (7,746) (8,911) (4,931)
Net loss................................................ (3,637) (6,826) (8,424) (4,849)
Basic and diluted net loss per share.................... $ (0.55) $ (0.75) $ (0.86) $ (0.46)
======= ======= ======= ========
Basic and diluted weighted average shares outstanding... 6,618 9,148 9,798 10,620
======= ======= ======= ========
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DECEMBER 31, 1999
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BALANCE SHEET DATA:
Cash and cash equivalents................................... $22,088
Working capital............................................. 22,943
Total assets................................................ 32,046
Long-term debt, net of current portion...................... --
Total stockholders' equity.................................. 27,772
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RISK FACTORS
AN INVESTMENT IN SHARES OF OUR COMMON STOCK IS RISKY. YOU SHOULD CONSIDER
CAREFULLY THE FOLLOWING RISK FACTORS IN ADDITION TO THE REMAINDER OF THIS
PROSPECTUS BEFORE PURCHASING SHARES OFFERED BY THIS PROSPECTUS.
SOME OF THE INFORMATION IN THIS PROSPECTUS CONTAINS FORWARD-LOOKING
STATEMENTS THAT INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES. YOU CAN IDENTIFY
THESE STATEMENTS BY FORWARD-LOOKING WORDS SUCH AS "MAY," "WILL," "EXPECT,"
"ANTICIPATE," "BELIEVE," "ESTIMATE," "CONTINUE" AND SIMILAR WORDS. YOU SHOULD
READ STATEMENTS THAT CONTAIN THESE WORDS CAREFULLY BECAUSE THEY (1) DISCUSS OUR
FUTURE EXPECTATIONS, (2) CONTAIN PROJECTIONS OF OUR FUTURE OPERATING RESULTS OR
FINANCIAL CONDITION OR (3) STATE OTHER "FORWARD-LOOKING" INFORMATION. WE BELIEVE
IT IS IMPORTANT TO COMMUNICATE CERTAIN OF OUR EXPECTATIONS TO OUR INVESTORS.
THERE MAY BE EVENTS IN THE FUTURE, HOWEVER, THAT WE ARE NOT ACCURATELY ABLE TO
PREDICT OR OVER WHICH WE HAVE NO CONTROL. THE RISK FACTORS LISTED IN THIS
SECTION, AS WELL AS ANY OTHER CAUTIONARY LANGUAGE IN THIS PROSPECTUS, PROVIDE
EXAMPLES OF RISKS, UNCERTAINTIES AND EVENTS THAT MAY CAUSE OUR ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THE EXPECTATIONS WE DESCRIBE IN OUR FORWARD-LOOKING
STATEMENTS. BEFORE YOU INVEST IN OUR COMMON STOCK, YOU SHOULD BE AWARE THAT THE
OCCURRENCE OF ANY OF THE EVENTS DESCRIBED IN THESE RISK FACTORS AND ELSEWHERE IN
THIS PROSPECTUS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. IN SUCH CASE, THE TRADING PRICE OF OUR
COMMON STOCK COULD DECLINE AND YOU COULD LOSE ALL OR PART OF YOUR INVESTMENT.
WE HAVE INCURRED SUBSTANTIAL LOSSES IN THE PAST AND MAY NOT BE PROFITABLE IN THE
FUTURE.
We may never generate significant revenue or be profitable. Since we began
operations, we have incurred substantial losses. We incurred net losses of
$8.4 million in 1998 and $4.8 million in 1999. We had an accumulated deficit of
$33.7 million at December 31, 1999.
We expect to incur substantial losses for the foreseeable future, because we
intend to continue investing heavily in the development and marketing of
MeetingPoint and our application hosting services. In February 2000, we
completed the sale of our legacy connectivity products business. In addition, we
expect that revenue from CU-SeeMe will not increase substantially, and may
decrease, during the foreseeable future. We cannot be certain that sales of
MeetingPoint and application hosting services and other new products and
services will offset lost revenue from the sale of our legacy connectivity
products business and declines in revenue from CU-SeeMe in 2000 or in later
years.
OUR QUARTERLY RESULTS MAY FLUCTUATE AND CAUSE THE PRICE OF OUR COMMON STOCK TO
FALL.
Our quarterly revenue and operating results are difficult to predict and may
fluctuate significantly from quarter to quarter. If our quarterly revenue or
operating results fall below the expectations of investors or public market
analysts, the price of our common stock could fall substantially. Our quarterly
operating results may vary significantly depending on a number of factors, some
of which are outside of our control. These factors include:
- the timing of the introduction or acceptance of new products offered by us
or our competitors;
- changes in demand for Internet services;
- changes in the mix of products sold by us;
- announcements of new products, services or technologies by us or our
competitors that cause customers to defer or cancel purchases of our
products;
- changes in pricing strategies by us or competitors;
- changes in regulations affecting the multimedia conferencing industry; and
- changes in currency exchange rates.
5
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As a result of these factors, we may not be able to predict our operating
results accurately. In addition, MeetingPoint continues to undergo long
evaluation and sale cycles by potential users. The lengths of these cycles make
it particularly difficult for us to predict the amount and timing of revenue
from this product.
We base our expense levels on our product development plans and our
estimates of future revenue. To a large extent, our expenses are fixed. We may
be unable to adjust our spending in time to compensate for any unexpected
revenue shortfall, thus magnifying the adverse effect of any revenue shortfall.
OUR APPLICATION HOSTING SERVICES HAVE NOT YET BEEN INTRODUCED AND MAY NOT
ACHIEVE SIGNIFICANT MARKET ACCEPTANCE.
We expect to introduce our application hosting services in the second fiscal
quarter of 2000. Broad acceptance of our application hosting services is
critical to our future success and is subject to a number of significant risks,
many of which are outside of our control. These risks include:
- the ability of our system infrastructure to support large numbers of
concurrent users is unproven;
- corporate users may not be willing to outsource control and management of
their multimedia conferencing to a third party due to possible security,
reliability or other concerns;
- the introduction of competing products and technologies; and
- our dependence on third-party hardware and network providers.
WE FACE INTENSE COMPETITION FROM OTHER INDUSTRY PARTICIPANTS AND MAY NOT BE ABLE
TO COMPETE EFFECTIVELY.
The market for Internet communications products and services is extremely
competitive. Because the barriers to entry in the market are relatively low and
the potential market is large, we expect continued growth in the industry and
the entrance of new competitors in the future. Many of our current and potential
competitors, particularly Intel, Microsoft, PictureTel and Ezenia!, have
significantly longer operating histories and significantly greater managerial,
financial, marketing, technical and other competitive resources, as well as
greater name recognition, than we do. As a result, these companies 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 conferencing products and services. In addition, to the extent
that competitors choose to bundle competing multimedia conferencing applications
with other products, the demand for our products and services might be
substantially reduced.
As a result, we cannot assure you that we will be able to compete
successfully with existing or new competitors in the multimedia conferencing
market. We believe that our ability to compete successfully in this market will
depend on a number of factors both within and outside our control, including:
- the adoption and evolution of industry standards;
- the pricing policies of our competitors and suppliers;
- the timing of the introduction of new software products and services by us
and our competitors; and
- our ability to hire and retain highly qualified employees.
To remain competitive in the multimedia conferencing market, we must
continue to invest heavily in research and development and in sales and
marketing. We may not have sufficient resources to make
6
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those investments, or we may not be able to make the technological advances
necessary to continue to be competitive. In addition, current and potential
competitors have established or may establish collaborative relationships among
themselves and with third parties 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 share, which could
have a material adverse effect on our business.
WE MUST HIRE AND RETAIN SKILLED PERSONNEL IN A COMPETITIVE LABOR MARKET.
Qualified personnel are in great demand throughout the software and Internet
industries. Our success depends in large part upon our ability to attract,
train, motivate and retain highly skilled employees, particularly sales and
marketing personnel, professional services personnel and software engineers. If
we fail to attract and retain the highly trained technical personnel that are
integral to our sales, professional services and product development teams, the
rate at which we can generate sales and develop new products or services may be
limited. This could have a material adverse effect on our business, operating
results and financial condition.
IF WE LOSE THE SERVICES OF OUR CHIEF EXECUTIVE OFFICER OR ANY OTHER KEY MEMBER
OF OUR MANAGEMENT TEAM, OUR BUSINESS COULD SUFFER.
Our future success depends to a significant degree on the skill, experience
and efforts of Killko Caballero, our chief executive officer, and other key
members of our management team. The loss of any key member of our management
team could have a material adverse effect on our business.
WE RELY ON ONE DISTRIBUTOR FOR A SIGNIFICANT PORTION OF OUR TOTAL REVENUE.
Sales to Ingram Micro represented 8% of our total revenue in 1999 and 26% of
our total revenue in 1998. The loss of, or a significant curtailment of
purchases by, Ingram Micro, including a loss or curtailment due to factors
outside of our control, could have a material adverse effect on our business.
WE MAY BE UNABLE TO PROTECT OUR PROPRIETARY TECHNOLOGY.
Our business could be seriously harmed if we are unable to protect
adequately our proprietary software and our other proprietary intellectual
property rights. We may be unable to deter misappropriation of our proprietary
technology, detect unauthorized use and take appropriate steps to enforce our
intellectual property rights. Our competitors could, without violating our
proprietary rights, develop technologies that are as good or better than our
technology.
Some of our multimedia conferencing products are licensed to customers under
"shrink wrap" licenses included as part of the product packaging. In most cases
our shrink wrap licenses are not negotiated with or signed by individual
licensees. Some of the provisions of our shrink wrap licenses, including
provisions limiting our liability and protecting us against unauthorized use,
copying, transfer and disclosure of the licensed program, may be unenforceable
under the laws of certain jurisdictions. Also, we have delivered technical data
and information relating to CU-SeeMe and MeetingPoint to the United States
government, and as a result, the United States government may have unlimited
rights to use the technical data and information or to authorize others to use
the technical data and information. We can not assure you that the United States
government will not authorize others to use our technical data and information
for purposes competitive with our products. In addition, the laws of some
foreign countries do not protect our proprietary rights to the same extent as do
laws in the United States.
7
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CLAIMS BY OTHER COMPANIES THAT WE INFRINGE THEIR PROPRIETARY TECHNOLOGY COULD
PREVENT US FROM OFFERING OUR PRODUCTS OR OTHERWISE HURT OUR BUSINESS AND OUR
FINANCIAL CONDITION.
Because the protection of intellectual property rights is often critically
important to the success of companies in the multimedia conferencing industry,
our competitors or others could assert claims that our technologies infringe
their proprietary rights. From time to time, we have 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. For
example, a third party has objected to our use of the name "MeetingPoint." We
may not have the financial resources necessary to pursue any resulting
litigation to a final judgment, and we may not prevail in any litigation. In
defending against such litigation, we could incur significant legal and other
expenses and our management could be distracted from our principal business
operations. If any party making a claim against us were to prevail in litigation
against us, we may have to pay substantial damages. The court could also grant
injunctive or other equitable relief that could prevent us from offering our
products and services without a license or other permission from others, which
may not be available on commercially available terms or at all. Any of these
outcomes could seriously harm our business and our financial condition.
WE FACE ADDITIONAL RISKS FROM OUR INTERNATIONAL OPERATIONS.
Our international business involves a number of risks that could hurt our
operating results or contribute to fluctuations in those results. Our revenue
from international sales represented 24% of our total revenue in 1999 and 26% of
our total revenue in 1998. We intend to seek opportunities to expand our product
and service offerings into additional international markets, although we cannot
be certain that we will succeed in developing localized versions of our products
for new international markets or in marketing or distributing products and
services in those markets.
The majority of our international 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 our
sales are denominated in currencies other than U.S. dollars, fluctuations in
exchange rates may render our products less competitive relative to local
product offerings or result in foreign exchange losses. We have no experience in
implementing hedging techniques that might minimize our risks from exchange rate
fluctuations.
Our international business also involves a number of other difficulties and
risks, including risks associated with:
- changing economic conditions in foreign countries;
- export restrictions and 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 and 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.
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OUR SOFTWARE PRODUCTS MAY CONTAIN UNDETECTED DEFECTS.
Software developed by us or developed by others and incorporated by us into
our products may contain significant undetected errors when first released or as
new versions are released. Although we test our software products before
commercial release, we cannot be certain that errors in the products will not be
found after customers begin to use the software. Any defects in CU-SeeMe or
MeetingPoint, or any future products, may result in significant decreases in
revenue or increases in 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 defects.
OUR SUCCESS DEPENDS ON THE PERFORMANCE OF PARTICIPANTS IN OUR DISTRIBUTION
CHANNELS.
We market our group conferencing products by forming channel relationships
in key markets with major distributors. We also license our group conferencing
products to original equipment manufacturers, value-added resellers and
additional distributors for bundling with their products and services. We expect
that our future success will depend in large part upon these original equipment
manufacturers, value-added resellers and distributors. The performance of these
original equipment manufacturers, value-added resellers and distributors is
outside our control, and we are unable to predict the extent to which these
organizations will be successful in marketing and selling our group conferencing
products or products incorporating our group conferencing products. We cannot
assure you that we will be successful in establishing relationships with
original equipment manufacturers, value-added resellers and distributors, and if
we fail, our business could be seriously harmed.
Our distributors typically carry the products of some of our competitors.
The distributors have limited capital to invest in inventory, and their
decisions to purchase our 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 our competitors, which we cannot predict or control.
We distribute certain of our products directly over the Internet. By
distributing our products over the Internet, we may increase the likelihood of
unauthorized copying and use of our software.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES MAY ADVERSELY AFFECT OUR BUSINESS.
The application of existing laws to the Internet is uncertain and may take
years to resolve, particularly with respect to property ownership, user privacy,
freedom of expression, pricing, characteristics and quality of products and
services, taxation, advertising, intellectual property rights, information
security and the convergence of traditional telecommunications services with
Internet communications. Because the Internet is becoming increasingly popular,
various foreign or domestic governmental bodies may seek to adopt laws and
control use of the Internet. We cannot predict the nature of any such laws.
Legislation could subject us or our customers to potential liability or could
decrease the growth of the Internet, either of which could have an adverse
effect on our business.
In March 1996, ACTA, a group of telecommunications common carriers, filed
the ACTA Petition with the FCC, arguing that providers of computer software
products that enable voice transmission over the Internet ("Internet telephone"
services), such as us, 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"
services software to immediately cease the sale of such software pending such
rulemaking. Certain parties have filed comments with the FCC regarding the ACTA
Petition. We are unable to predict the outcome of this proceeding. In December
1996, the
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FCC stated that it intended to address the legal questions raised by the ACTA
Petition in a future proceeding but has not yet done so. ACTA has submitted
petitions, similar to its FCC filing, to certain state regulators, including
public service commissions. Any action by the FCC or state regulators 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 our business.
WE MAY REQUIRE ADDITIONAL CAPITAL.
We may need to raise additional capital in order to fund the development and
marketing of our products and services. Although we expect our cash and cash
equivalents to provide us with sufficient working capital for the remainder of
2000, our current plans and projections may prove to be inaccurate or our
expected cash flow may prove to be insufficient to fund our operations because
of product delays, unanticipated expenses or other unforeseen difficulties. Our
ability to obtain additional financing will depend on a number of factors,
including market conditions, our operating performance and investor interest.
These factors may make the timing, amount, terms and conditions of any financing
unattractive. They may also result in our incurring additional indebtedness or
accepting stockholder dilution. If adequate funds are not available or are not
available on acceptable terms, we may have to forego strategic acquisitions or
investments, defer our development activities, or delay our introduction of new
products and services. Any of these actions may seriously harm our business and
operating results.
THE MARKET PRICE OF OUR COMMON STOCK HAS BEEN EXTREMELY VOLATILE.
The market price of our common stock has been extremely volatile in the
past, and may be expected to be volatile in the future for many reasons,
including:
- actual or anticipated variations in our revenue and operating results;
- announcements of the development of improved technology;
- changes in estimates of our financial performance, or the absence of
coverage, by securities analysts;
- conditions and trends in the Internet and multimedia conferencing
industries;
- adoption of new accounting standards; and
- general market conditions.
Recently the stock markets have experienced extreme price and volume
fluctuations that have dramatically affected the market prices of the stocks of
many technology companies, particularly companies associated with the Internet.
These fluctuations often have been unrelated or disproportionate to the
operating performance of those companies. These factors may adversely affect the
market price of our common stock.
VOLATILITY IN OUR STOCK PRICE MAY LEAD TO LITIGATION AGAINST US.
Stockholders frequently commence securities class action litigation against
a company after a significant decrease in the company's stock price. If our
stock price drops and our stockholders commence litigation against us, we could
incur significant legal and other expenses defending the litigation and our
management could be distracted from our principal business operations. Either of
these outcomes could seriously harm our business.
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DELAWARE LAW AND OUR CHARTER DOCUMENTS CONTAIN ANTI-TAKEOVER AND INDEMNIFICATION
PROVISIONS THAT MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR STOCK.
Section 203 of the Delaware General Corporation Laws and our charter and
by-laws contain provisions that might enable our management to resist a takeover
of our company. These provisions might discourage, delay or prevent a change in
the control of our company or a change in our management. These provisions could
also discourage proxy contests and make it more difficult for you and other
stockholders to elect directors and take other corporate actions. The existence
of these provisions could limit the price that investors might be willing to pay
in the future for shares of our common stock.
11
<PAGE>
USE OF PROCEEDS
All of the shares of common stock offered by this prospectus are being
offered by the selling stockholders. For information about the selling
stockholders, see "Principal and Selling Stockholders." We will not receive any
proceeds from sales of these shares. We received approximately $20 million from
the sale of those shares to the selling stockholders in private placements
completed in December 1999.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
currently anticipate that we will retain future earnings, if any, to fund the
development and growth of our business, and therefore we do not expect to pay
any cash dividends in the foreseeable future. Payment of future dividends, if
any, will be at the discretion of our board of directors after taking into
account various factors, including our financial condition, results of
operations, current and anticipated cash needs, and plans for expansion.
PRICE RANGE OF OUR COMMON STOCK
Our common stock commenced trading on the Nasdaq National Market on
October 11, 1996 under the symbol "WPNE." The following table sets forth the
high and low closing sales price for the common stock for each quarter during
the past two years and the first quarter of 2000 to date, as reported by the
Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
1998:
First Quarter......................................... $3.125 $2.000
Second Quarter........................................ 3.28125 1.500
Third Quarter......................................... 2.15625 .84375
Fourth Quarter........................................ 2.375 .75
1999:
First Quarter......................................... 4.00 1.875
Second Quarter........................................ 8.75 3.5625
Third Quarter......................................... 7.625 4.00
Fourth Quarter........................................ 28.5625 6.875
2000:
First Quarter (through March 24, 2000)................ 45.375 19.875
</TABLE>
As of March 1, 2000, there were 171 holders of record of common stock who
held an aggregate of 12,073,662 shares of common stock as nominees for an
undisclosed number of beneficial holders.
12
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999.
The following table should be read in conjunction with our consolidated
financial statements and related notes appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
------------------
(IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C>
Stockholders' equity:
Preferred stock, $0.01 par value; 5,000,000 shares
authorized; no shares issued or outstanding............. --
Common stock, $0.01 par value; 30,000,000 shares
authorized; 12,049,476 shares issued and outstanding.... $ 120
Additional paid-in capital................................ 61,270
Accumulated deficit....................................... (33,711)
Accumulated other comprehensive income.................... 93
--------
Total stockholders' equity............................ $ 27,772
========
</TABLE>
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<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following financial data for the years ended December 31, 1998 and 1999,
and as of December 31, 1999, are derived from our consolidated financial
statements audited by Ernst & Young LLP and appearing elsewhere in this
prospectus. Financial data for the years ended December 31, 1995, 1996 and 1997
are derived from our audited consolidated financial statements not included in
this prospectus. The financial data should be read in conjunction with our
consolidated financial statements and related notes and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" appearing
elsewhere in this prospectus. Historical results are not necessarily indicative
of operating results to be expected in the future.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Software license fees..................................... $ 6,018 $10,500 $ 9,797 $ 6,948 $10,715
Services and other........................................ 1,166 1,166 1,255 845 1,287
------- ------- ------- ------- -------
Total revenue........................................... 7,184 11,666 11,052 7,793 12,002
Cost of revenue............................................. 1,247 2,212 1,890 1,645 2,548
------- ------- ------- ------- -------
Gross profit................................................ 5,937 9,454 9,162 6,148 9,454
------- ------- ------- ------- -------
Operating expenses:
Sales and marketing....................................... 2,517 6,632 7,939 7,739 7,266
Research and development.................................. 1,866 3,819 5,722 5,042 4,760
General and administrative................................ 2,000 2,793 2,586 2,278 2,359
Write-off of purchased research and development costs..... 3,200 -- -- -- --
Restructuring............................................. -- -- 661 -- --
------- ------- ------- ------- -------
Total operating expenses................................ 9,583 13,244 16,908 15,059 14,385
------- ------- ------- ------- -------
Income (loss) from operations............................... (3,646) (3,790) (7,746) (8,911) (4,931)
------- ------- ------- ------- -------
Other income (expense):
Interest income........................................... 82 251 1,037 577 178
Other, net................................................ 68 (20) (110) (85) (96)
------- ------- ------- ------- -------
Other income, net....................................... 150 231 927 492 82
------- ------- ------- ------- -------
Income (loss) before provision for income taxes............. (3,496) (3,559) (6,819) (8,419) (4,849)
Provision for income taxes.................................. 30 78 7 5 --
------- ------- ------- ------- -------
Net loss.................................................... $(3,526) $(3,637) $(6,826) $(8,424) $(4,849)
======= ======= ======= ======= =======
Basic and diluted net loss per share........................ $ (0.65) $ (0.55) $ (0.75) $ (0.86) $ (0.46)
======= ======= ======= ======= =======
Basic and diluted weighted average shares outstanding....... 5,451 6,618 9,148 9,798 10,620
======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $22,088
Working capital............................................. 22,943
Total assets................................................ 32,046
Long-term debt, net current portion......................... --
Total stockholders' equity.................................. 27,772
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
We develop software solutions that facilitate worldwide video and audio
communication and data collaboration across the Internet, intranets, extranets
and other networks using the Internet protocol. Our CU-SeeMe Web provides the
industry's first multipoint video instant messaging over the Internet. Our
CU-SeeMe Pro and MeetingPoint create a client-server solution that allows
multiple users to participate simultaneously in conferences over the Internet.
ClassPoint is a MeetingPoint add-on that provides a complete solution for
corporate training and distance learning. We support multiple platforms,
including Windows 95, 98 and NT, Sun Solaris, and Red Hat Linux. In
February 2000, we sold the assets of our legacy connectivity business to
Powerlan USA, a wholly owned subsidiary of Powerlan Limited, an Australian
company. We can be found on the World Wide Web at WWW.WPINE.COM. CU-SeeMe Web
can be experienced at WWW.CUSEEMEWORLD.COM.
RESULTS OF OPERATIONS
The following table sets forth operating data expressed as percentages of
total revenue for each period indicated.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue:
Software license fees..................................... 88.6% 89.2% 89.3%
Services and other........................................ 11.4 10.8 10.7%
------ ------ ------
Total revenue........................................... 100.0 100.0 100.0
Cost of revenue............................................. 17.1 21.1 21.2
------ ------ ------
Gross profit................................................ 82.9 78.9 78.8
------ ------ ------
Operating expenses:
Sales and marketing....................................... 71.8 99.3 60.5
Research and development.................................. 51.8 64.7 39.7
General and administrative................................ 23.4 29.2 19.7
Restructuring............................................. 6.0 -- --
------ ------ ------
Total operating expenses................................ 153.0 193.2 119.9
------ ------ ------
Loss from operations........................................ (70.1) (114.3) (41.1)
Other income (expense)...................................... 8.4 6.3 0.7
Provision for income taxes.................................. (0.1) (0.1) --
------ ------ ------
Net loss.................................................... (61.8)% (108.1)% (40.4)%
====== ====== ======
</TABLE>
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
REVENUE
Total revenue increased by 54% to $12,002,000 in 1999 from $7,793,000 in
1998.
Revenue from conferencing software increased by 69% to $9,783,000 in 1999
from $5,781,000 in 1998. This increase resulted largely from a 93% increase in
MeetingPoint sales from $2,947,000 in 1998 to $5,684,000 in 1999. The increase
in MeetingPoint sales is attributable primarily to a higher average selling
price, resulting from a higher ratio of direct sales versus distributor sales,
increased sales of add-
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<PAGE>
on functionality such as Continuous Presence, and increased sales of higher
port-count servers. In addition, CUSeeMe client sales of $4,099,000 in 1999
represented a 45% increase over the previous year. The CU-SeeMe revenue increase
is due in part to significantly higher sales of the CU-SeeMe camera bundle
during the December holiday season.
Our legacy connectivity product sales continued to decline as we focused
fewer resources on these older product lines. Legacy connectivity revenue
declined by 17% to $1,844,000 in 1999 from $2,226,000 in 1998. The percentage of
total revenue represented by revenue from legacy connectivity products decreased
to 15% in 1999 from 29% in 1998. On February 29, 2000, we sold the assets of the
legacy connectivity business to Powerlan USA, a wholly owned subsidiary of
Powerlan Limited, an Australian company. We received $1,000,000 in cash and
467,730 ordinary shares of Powerlan Limited as consideration for the sale.
Maintenance revenue increased 86% to $1,275,000 in 1999 from $686,000 in
1998 in conjunction with the growth in server conferencing revenue.
Revenue from sales outside the United States comprised 24% of total revenue
in 1999 and 26% of total revenue in 1998. See "Risk Factors--We face additional
risks from our international operations."
Sales to Ingram Micro represented 8% of total revenue in 1999 and 26% of
total revenue in 1998. See "Risk Factors--We rely on one distributor for a
significant portion of our total revenue."
COST OF REVENUE
Cost of revenue consists principally of royalties and associated
amortization of paid license fees relating to third-party software included in
our products, as well as costs of product media, manuals, packaging materials,
cameras, duplication and shipping. Cost of revenue as a percentage of total
revenue was 21% for both 1999 and 1998.
In May 1997, we renegotiated the terms of the license agreement to provide
for a $1,000,000 prepayment of royalties in exchange for a decrease in the level
of revenue-based royalties payable to the Cornell Research Foundation. The
renegotiated terms were retroactive to January 1, 1997, and we remained subject
to minimum royalty payments. In the fourth fiscal quarter of 1998, we acquired
the Cornell Research Foundation's trademark and other intellectual property
rights in CU-SeeMe, upon which our current versions of CU-SeeMe are based, and
the related server technology, which underlies MeetingPoint. The purchase price
for these rights consisted of (1) a note in the principal amount of $900,000, of
which $300,000 is due on each of June 30, 2000, June 30, 2001 and June 30, 2002,
and (2) warrants to purchase 150,000 shares of our common stock at a price of
$1.00 per share. The warrants were issued in exchange for outstanding warrants
issued previously to the Cornell Research Foundation; these prior warrants had
an exchange price of $6.00 per share but otherwise had terms substantially
identical to those of the new warrants. As a result of this acquisition, we are
no longer required to pay any royalties to the Cornell Research Foundation. See
"Business--Proprietary Rights."
We intend to continue our strategy of improving the features and
functionality of our products, particularly MeetingPoint and future products
incorporating MeetingPoint technology, through the incorporation of third-party
software. As a result, the cost of revenue as a percentage of total revenue may
fluctuate in the future.
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 decreased by 6% to $7,265,000
in 1999 from $7,739,000 in 1998, and decreased as a percentage of total revenue
to 61% in 1999 from 99% in 1998. The decrease in sales and marketing expense in
1999 was primarily attributable to decreased marketing programs.
16
<PAGE>
RESEARCH AND DEVELOPMENT
Research and development expense consists primarily of costs of personnel
and noncapitalized equipment. Research and development expense decreased by 6%
to $4,761,000 in 1999 from $5,042,000 in 1998. Research and development expense
decreased as a percentage of total revenue to 40% in 1999 from 65% in 1998. The
decrease in research and development expense was attributable primarily to lower
headcount and consulting support.
GENERAL AND ADMINISTRATIVE
General and administrative expense consists of costs of administrative,
financial and general management activities, including legal, accounting and
other professional fees. General and administrative expense increased by 4% to
$2,359,000 in 1999 from $2,278,000 in 1998. It represented 20% of total revenue
in 1999 and 29% of total revenue in 1998. The dollar increase in general and
administrative expense was due primarily to a one-time $240,000 reversal of a
portion of a legal reserve in 1998.
PROVISION FOR INCOME TAXES
Provision for income taxes consists of federal alternative minimum taxes and
state and foreign income taxes. We recorded no tax provision in 1999 and $5,000
in 1998. At December 31, 1999, we had cumulative federal net operating loss
carryforwards of $26,848,000.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
REVENUE
Total revenue decreased by 30% to $7,793,000 in 1998 from $11,052,000 in
1997.
Revenue from conferencing software decreased by 9% to $5,781,000 in 1998
from $6,369,000 in 1997. This decrease resulted from a 41% decline in revenue
from client conferencing software, which decreased to $2,833,000 in 1998 from
$4,777,000 in 1997. The decline in client conferencing revenue was offset in
part by an 85% increase in revenue from server conferencing software, which grew
to $2,948,000 in 1998 from $1,592,000 in 1997. The growth in server conferencing
revenue principally resulted from the release of MeetingPoint in November 1997
and ClassPoint in April 1998. The growth rate of server conferencing revenue has
been determined in part by product performance and customer acceptance and
adoption.
Our legacy connectivity product sales continued to decline as we focused
fewer resources on these older product lines. Legacy connectivity revenue
declined by 43% to $2,226,000 in 1998 from $3,880,000 in 1997. The percentage of
total revenue represented by revenue from legacy connectivity products decreased
to 29% in 1998 from 35% in 1997. Maintenance and other revenue decreased in
conjunction with the decline in legacy connectivity revenue, as the majority of
maintenance agreements historically related to legacy connectivity products.
Revenue from sales outside the United States comprised 26% of total revenue
in 1998 and 27% of total revenue in 1997.
Sales to Ingram Micro represented 26% and 14% of our total revenue in each
of 1998 and 1997. In addition, sales to Tech Data represented 14% of our total
revenue in 1997.
COST OF REVENUE
Cost of revenue as a percentage of total revenue increased to 21% in 1998 as
compared to 17% in 1997. The percentage increase resulted primarily from the
increased sales volume of lower-margin
17
<PAGE>
servers as compared with higher-margin legacy connectivity products and, to a
lesser extent, increased sales of lower-margin camera bundles in the fourth
fiscal quarter of 1998.
SALES AND MARKETING
Sales and marketing expense decreased by 3% to $7,739,000 in 1998 from
$7,939,000 in 1997, and increased as a percentage of total revenue to 99% in
1998 from 72% in 1997. The dollar decrease in sales and marketing expense in
1998 was primarily attributable to decreased advertising, offset in part by
increases in sales headcount and travel expense.
RESEARCH AND DEVELOPMENT
Research and development expense decreased by 12% to $5,042,000 in 1998 from
$5,722,000 in 1997. Research and development expense represented 65% of total
revenue for 1998 and 52% of total revenue for 1997. The dollar decrease in
research and development expense was attributable primarily to reduced headcount
and consulting support, as well as limited software supply spending. A
company-wide restructuring in June 1997 reduced the number of research and
development personnel, cost benefits of which were fully realized in 1998.
GENERAL AND ADMINISTRATIVE
General and administrative expense decreased by 12% to $2,278,000 in 1998
from $2,586,000 in 1997. It represented 29% of total revenue in 1998 and 23% of
total revenue in 1997. The dollar decrease in general and administrative expense
was due primarily to reduced headcount, consolidation of operations conducted at
our office in La Gaude, France, decreased legal fees, and a one-time $240,000
reversal of a portion of a legal reserve.
RESTRUCTURING CHARGE
In the second fiscal quarter of 1997, we reorganized our operations and
recorded a restructuring charge in the amount of $661,000 as a result of a
change in senior management and a reduction in our workforce. This amount
consisted primarily of severance payments, outplacement expense, and related
fees for 26 employees who were laid off at the quarter end. The reorganization
reflected our decision to focus our resources on our Web-based conferencing and
connectivity products, and to terminate support, development and sales of
certain older product lines.
In the third fiscal quarter of 1998, we reduced our total headcount by ten
persons, of whom seven were engaged in research and development, one in general
and administration activities, and two in marketing. There was no restructuring
charge recorded as a result of this transaction, and severance payments were
charged to their respective operating expense line items. Severance payments
outstanding at December 31, 1998 were immaterial.
PROVISION FOR INCOME TAXES
We recorded a tax provision of $5,000 for 1998 and $7,000 for 1997.
LIQUIDITY AND CAPITAL RESOURCES
We generated $15,667,000 of cash in 1999, as compared with using $8,283,000
of cash in 1998. Cash generated in 1999 was comprised largely of $20,000,000 in
gross proceeds from our private placement of common stock in December 1999,
partially offset by our net loss of $4,850,000 and the net increase in accounts
receivable of $2,033,000.
In late December, we secured $20,000,000 in a private placement of shares of
our common stock to GE Capital, Private Equity Holding (Cayman) Ltd., Altamira
Management Ltd., and Special Situations Funds. In four private placements of
$5,000,000 each, the named investors each secured
18
<PAGE>
325,521 shares at a price of $15.36 per share. The price was based on a 30-day
weighted average at the time the terms were negotiated.
At December 31, 1999, we had cash and cash equivalents of $22,088,000 and
working capital of $22,943,000. We believe that our current cash and cash
equivalents will be sufficient to fund our operations and capital expenditures
through 2000. Thereafter, our liquidity will be materially dependent on our
internally generated funds and our ability to obtain funds from additional
equity or debt financings from external sources. We continue to experience a
negative cash flow from operations in each fiscal quarter. Our capital
requirements may vary materially from those we now anticipate, depending on a
number of factors including:
- the level of our research and development activities;
- the expansion of our facility and Service Operations Center and related
staffing;
- the rate of market acceptance of our software offerings; and
- the success of our sales, marketing and distribution strategy.
If we do not meet our goals with respect to revenue or if our costs are
higher than anticipated, substantial additional funds may be required.
INFLATION
Although certain of our expenses increase with general inflation in the
economy, inflation has not had a material impact on our financial condition or
results of operations to date.
RECENT ACCOUNTING PRONOUNCEMENTS
We adopted Statement of Financial Accounting Standards No. 131, Disclosures
about Segments of an Enterprise and Related Information ("SFAS 131"), in fiscal
1998. SFAS 131 establishes standards for reporting information regarding
operating segments in annual financial statements and requires selected
information for those segments to be presented in interim financial reports
issued to stockholders. SFAS 131 also establishes standards for related
disclosures about products and services and geographic areas. Operating segments
are identified as components of an enterprise about which separate discrete
financial information is available for evaluation by the chief operating
decision maker, or decision making group, in making decisions how to allocate
resources and assess performance. Our chief decision maker, as defined under
SFAS 131, is Killko Caballero, our Chief Executive Officer and President. To
date, we have viewed our operations as principally one segment, software sales
and associated services. As a result, the financial information disclosed in our
consolidated financial statements materially represents all of the financial
information related to our principal operating segment.
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities ("SFAS 133"), requires companies
to record derivatives on the balance sheet as assets or liabilities, measured at
fair value. Gains or losses resulting from changes in the values of those
derivatives would be accounted for depending on the use of the derivative and
whether it qualifies for hedge accounting. SFAS 133 is effective for our fiscal
year ending December 31, 2001. The adoption of SFAS 133 is not expected to have
a material impact on our financial position or results of operations.
Statement of Position 98-9, Modification of Statement of Position 97-2,
Software Revenue Recognition, with Respect to Certain Transactions, modifies
certain provisions of Statement of Position 97-2. Our accounting policy on
software revenue recognition currently is in compliance with Statement of
Position 97-2, as amended by Statement of Position 98-9, and adoption of this
Statement of Position, as currently issued, has not had a material impact on our
financial position or results of operations.
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<PAGE>
BUSINESS
OVERVIEW
We develop software solutions that facilitate worldwide video and audio
communication and data collaboration across the Internet, intranets, extranets
and other networks using the Internet protocol. Our CU-SeeMe Web product
provides the industry's first multipoint video instant messaging over the
Internet. Our CU-SeeMe Pro and MeetingPoint create a client-server solution that
allows multiple users to participate simultaneously in conferences over the
Internet. ClassPoint is a MeetingPoint add-on that provides a complete solution
for corporate training and distance learning. We support multiple platforms,
including Windows 95, 98 and NT, Sun Solaris, and Red Hat Linux. Our web site is
located at WWW.WPINE.COM. CU-SeeMe Web can be experienced at
WWW.CUSEEMEWORLD.COM. Information contained in our web site is not a part of
this prospectus.
We have established White Pine as a leader in visual communications
technology. We offer technologies such as streaming media integration and a
Web-based client that we believe are not offered by any other provider today.
Our CU-SeeMe client is widely distributed, and we believe that there is strong
brand equity in the CU-SeeMe name.
We intend to capitalize on these attributes by targeting increased
distribution of our client software, which will ultimately create additional
demand for MeetingPoint servers. Targeting Internet service providers, portal
sites, and enterprises, we will either sell a complete end-to-end solution for
visual communications or sell visual communications services whereby the
customer pays a recurring fee to video/audio-enable and maintain their web site.
As the Internet continues to evolve from an information exchange to an
integrated communications medium, we believe our technology can help facilitate
this transition by providing visual communications on demand that are simple
enough for the average Internet user to engage, and powerful enough to provide
robust functionality for web-based businesses.
OUR CU-SEEME WEB/MEETINGPOINT SOLUTION
Our CU-SeeMe Web technology, introduced in October 1999, enables live audio,
video and text chat to be embedded in a standard web browser. CU-SeeMe Web
facilitates on-demand Visual Instant Messaging, web-based videochat, live
interactive web events, and face-to-face, on-line call centers for e-commerce
and support services.
With CU-SeeMe Web, we believe that Internet portals and web sites can
customize their web pages with new interactive features that will attract more
visitors to their sites and keep them there for longer periods of time. Internet
service providers, or ISPs, and applications service providers, or ASPs, can
offer a broad range of value-added services to their enterprise and consumer
customers. E-commerce sites can offer live, personalized assistance to buyers
while they are in the process of shopping online. CU-SeeMe Web gives Internet
web sites a new set of tools to grow membership, create online communications,
increase revenue streams, and offer services that have not previously been
available. As portal sites deploy CU-SeeMe Web to enhance the communications
capabilities of their sites, we believe that consumers will adopt visual
communications on the Internet as an accepted medium. This will accelerate all
forms of visual communications as mainstream Internet applications.
Portals and businesses with a strong Internet presence are constantly
engaged in activities to bring consumers to their sites and keep them there
longer. CU-SeeMe Web allows these sites to create interactive communities for
sharing information about their products and services through live videochat
experiences. CU-SeeMe Web allows Internet businesses to provide community-based
videochat inside a browser window of their design.
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<PAGE>
Instant Messaging and e-mail have become powerful services provided by
Internet portals to add value to their sites and keep consumers coming back.
Video Instant Messaging provides a new enhancement to this accepted Internet
activity by adding audio and video to the Instant Message experience. The
product provides innovative web developers with the flexibility of choice as
Instant Messaging becomes embedded into new Internet applications. CU-SeeMe Web
allows Internet call centers to be developed that enable interactive two-way
communications over the Internet, including two-way visual communications.
Product demonstrations, personalized customer service, interactive press and
analyst briefings, and employment interviews are a few of the many applications
for CU-SeeMe Web. The consumer is automatically connected, visually, audibly,
and with text-based chat simply by clicking on a browser button. For sites that
host text-based chat rooms today, CU-SeeMe Web offers the possibility to enhance
the user experience and add a new dimension of communication with video and
audio. CU-SeeMe Web provides significant differentiation from other companies
that offer only text chat or text and audio interaction over the Internet.
Visitors can access a page that is CU-SeeMe Web-enabled using either Netscape
Navigator or Microsoft Internet Explorer. Users can access live video and audio
without having any related software previously installed on their machines.
Should the end user decide to upgrade from CU-SeeMe Web into a more
feature-rich client software, we provide CU-SeeMe Pro for sale over our web site
and in retail stores. CU-SeeMe Pro offers the user the additional features of
H.323 standards compliance, integrated desktop application sharing, a flexible
user interface, a Conference Companion that simplifies storing and retrieving
contact information, and additional audio and visual enhancements.
CU-SeeMe Web integrates with our MeetingPoint conference server, which
provides many of the back-end functions needed for applications like videochat,
collaboration, IP call centers, Internet event management, and other multipoint
applications. MeetingPoint also enables back-end services like call transfer,
queuing, and agent log-in and management. MeetingPoint allows for additional
innovation on the site - for example, a small group of people could participate
interactively with CU-SeeMe Web in a live event, while the entire event could be
streamed out to a large number of viewers using MeetingPoint's Streaming Media
integration technology.
MeetingPoint, the software-only server component of our multimedia
conferencing solution, allows users of CU-SeeMe to participate in multipoint,
multimedia conferences with a nearly unlimited number of users. Administrators
create and host conferences using MeetingPoint. End users then connect to the
conference, using either CU-SeeMe or any other third-party H.323 compliant
multimedia conferencing client product. MeetingPoint's core "multimedia router"
technology enables the group interaction to take place by "routing" it to the
other conference participants. MeetingPoint 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.
MeetingPoint, introduced in November 1997, was the industry's first H.323
compliant multimedia conferencing server. MeetingPoint's software-only
architecture makes it scalable and deployable over a variety of hardware
platforms and operating systems, including Windows NT, Solaris and RedHat Linux.
MeetingPoint is the only software-only conferencing server currently available
on a UNIX platform.
MeetingPoint is able to manage the amount of network resources that are
consumed as it hosts a group conference. We believe that the use of Internet
protocol-based networks for real-time communication is beginning a phase of
significant growth, with thousands of new users every day and creative new
applications being discovered weekly. However, multimedia requires significant
bandwidth. While emerging technologies like Fast Ethernet, ADSL and high-speed
cable modems promise expanded bandwidth in the near future, today most users
face network constraints. Home users, for example, are often limited to 28.8
Kbps modem connections. Business, governmental and educational enterprises may
have 10 Mbps modem local area networks, but these are used for a variety of
21
<PAGE>
traditional, mission-critical applications such as file sharing, e-mail and
printing. Even network service providers are challenged to stretch their network
resources to cover rapidly growing customer traffic. In those rare instances
where bandwidth is plentiful, it typically comes at a relatively high cost,
especially for wide area network links. Because of these network constraints,
MeetingPoint's bandwidth management capability allows users to make the most of
the new collaboration, entertainment and learning possibilities that
network-based multimedia communications create, without having to make expensive
upgrades to their existing network infrastructure.
OUR APPLICATION SERVICE PROVIDER SOLUTION
We believe that certain ISPs, portal sites, and enterprises would like to
offer visual communications services, but are unwilling to take on the added
burden of infrastructure costs, technology training, and resource allocation
necessary to deploy these services well. Part of our strategy is to accelerate
broadscale deployment and facilitate site adoption of our technology by
providing customers with the services necessary to get them up and running, and
keep them running reliably and smoothly.
We plan to assist our customers with our technology deployments,
MeetingPoint-specific systems integration services, network design, and
MeetingPoint server installation and configuration. Hosting of conferencing
services will be provided on shared or dedicated MeetingPoint servers, providing
greater scalability and flexibility than the customer could provide on its own.
Our ASP will provide a full suite of Internet communications services, enabling
our customers to provide community managment, directory services, point-to-point
calls, broadcast and server-based conferencing. These services are ideally
suited for enterprise customers; however, ISPs and portal sites interested in
hosting their own sites can also benefit from our deployment assistance.
Our ASP business can be divided into two discrete offerings: Hosting
Services and Professional Services.
HOSTING SERVICES
When introduced in the fiscal second quarter of 2000, our hosting services
will enable the customer to offer video/audio-enhanced applications leveraging
our back-end infrastructure and service operations center, or SOC. The customer
can realize greater economies of scale by utilizing our shared server hosting
model and forgoing the actual purchase of MeetingPoint conferencing servers and
necessary supporting infrastructure. The SOC will serve as our interface with
the network operation functions provided by our outsourced network partner, as
well as provide the customer with monitoring and analytical functions as
follows:
- application and performance monitoring, configuration and support;
- primary interface to the customer site via a secure browser;
- trouble ticket and ticket status reporting, application configuration,
application monitoring, and electronic help;
- traditional dial-in support, staffed 24 hours every day; and
- real-time monitoring of customer's web site in an effort to prevent and
curtail inappropriate behavior and maintain secure, G-rated sites for a
customer's subscribers.
Hosting services will be offered for both White Pine technologies and other
supported technologies. Our ASP will provide communications services from PC to
PC and from PC to telephone, on both a one-to-one and a group basis.
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PROFESSIONAL SERVICES
Our Professional Services unit will offer the customer an integrated service
plan, regardless of the customer's intention to self-host or outsource hosting.
Professional Services will provide ongoing or periodic support for the
following:
- hardware deployment;
- software deployment, including engineering support to optimize the
customer's network to render it audio- and video-enabled;
- network management of customer-hosted services through the SOC (regardless
of whose network the operations are deployed on);
- ongoing status monitoring (hardware failure, software usage, saturation
forecasting, ongoing maintenance and support, and extranet interface
reporting); and
- capacity management.
We have secured our first network operations center, or NOC, from where the
majority of these services will be deployed, and begun the buildout necessary to
render the facility operational by the second fiscal quarter of 2000. We are in
the process of securing partnerships with a major network provider as well as a
major hardware provider in order to provide an optimal and complete service
offering. Services offered through the ASP business will be compensated through
hourly fees or contractual agreements.
OUR PORTAL SITE SOLUTION
In an effort to expose the Internet community to the positive and highly
adaptable concept of Internet communications, we have launched our own
communications portal site, CUSeeMe World. The site enables anyone with Internet
access the opportunity to "click to videochat" by downloading a thin CU-SeeMe
Web client and initiating video and audio communication immediately, either in a
preconfigured topic-specific chat room or a customized chat room created by the
user. The site is designed to not only expose the average user to video
communications, but to present ISPs and portal sites with proof of concept for
their own anticipated communications deployments. An important aspect of the
site is its ability to draw users into the online communication experience,
without the prerequisites of purchasing software or hardware. The user needs no
special software or hardware to participate; users without cameras can readily
text- and audio-chat with, as well as see, users with cameras. We believe that
many users choose to purchase a camera after experiencing the CUSeeMe World
site. The site offers free membership to users, and is sponsored by a number of
topic-specific web sites.
STRATEGY
Our objective is to be the leading supplier of software solutions that
facilitate worldwide video and audio communication and data collaboration across
the Internet. To achieve this objective, we are implementing the following
strategies:
MAINTAIN TECHNOLOGICAL LEADERSHIP. Since 1996, we have developed and
introduced leading-edge visual communications technology for the Internet.
Products such as CU-SeeMe and MeetingPoint have won numerous industry awards for
their market-leading technology. We intend to extend our leadership position by
continuing to invest in research and development and to build upon our existing
technology.
DRIVE MARKET ACCEPTANCE OF OUR APPLICATION SERVICE PROVIDER
CAPABILITIES. We believe that a number of potential users of Internet-based
visual communications services are hesitant to make the significant
infrastructure and training investment viewed as necessary to deploy and support
these services. We
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believe that our introduction of hosting services and related professional
services will ease the implementation of Internet-based visual communications
services for customers such as ISPs, portal sites and enterprises. We intend to
increase market awareness and acceptance of our software products, such as
CU-SeeMe and MeetingPoint, through the introduction of our hosting services and
professional services in the second fiscal quarter of 2000.
EXPAND MARKET PENETRATION OF MEETINGPOINT. We believe our future success
will depend significantly on our ability to market MeetingPoint. We believe that
opportunities exist to market MeetingPoint to Internet service providers,
corporations and other entities seeking to enable and promote multimedia group
conferencing. We believe that our leadership position in this market space has
positioned us to achieve revenue growth as the H.323 market matures and expands.
CONTINUE TO DEVELOP PORTFOLIO OF PROPRIETARY TECHNOLOGY. Our success
depends heavily upon our proprietary technology. Through several transactions,
such as our purchase of T.120 whiteboard and data collaboration technology from
Labtam Communications and our acquisition of trademark, source code and other
intellectual property rights related to the CU-SeeMe and MeetingPoint
technologies from Cornell Research Foundation, we have significantly
strengthened our proprietary technology. We intent to continue to develop
proprietary technology internally through our research and development efforts,
as well as to continue to seek selected opportunities to acquire intellectual
property rights from third parties.
PRODUCTS
INTERNET COMMUNICATIONS
Our multimedia conferencing products, CU-SeeMe and MeetingPoint, provide a
real-time, multipoint video and audio communication and data solution over the
Internet, intranets, extranets and other networks using the Internet protocol.
By developing multimedia conferencing products that require no proprietary
hardware, we are able to offer multimedia conferencing at a substantially lower
price than vendors of traditional hardware-based systems, thereby encouraging
businesses and others to adopt it as a mass communication medium. Our CU-SeeMe
product has afforded our company brand name recognition, an installed base and a
time-to-market advantage over other vendors seeking to develop software
multimedia conferencing solutions.
CU-SeeMe Web, our latest offering to improve Internet communications,
enables live audio, video and text chat to be embedded in a standard web
browser. CU-SeeMe Web opens up a new world of applications for the Internet,
enabling on-demand Visual Instant Messaging, web-based videochat, live
interactive web events, and face-to-face, on-line call centers for ecommerce and
support services. CU-SeeMe Web is a software application that allows web page
developers to embed audio, video, text chat and conference control features into
a web page. The design of the web page can be completely customized by the
developer, as can the destination of the CU-SeeMe Web connection. CU-SeeMe Web
integrates with our MeetingPoint conference server, which provides many of the
back-end functions needed for applications like videochat, collaboration, IP
call centers, Internet event management, and other multipoint applications.
MeetingPoint also allows for additional innovation on the site--for example, a
small group of people could participate interactively with CU-SeeMe Web in a
live event, while the entire event could be streamed out to a large group of
viewers using MeetingPoint's Streaming Media integration technology.
Awards won by CU-SeeMe Web in 1999 included:
- October 1999
White Pine's CU-SeeMe Web Technology Named BEST OF SHOW at Fall Internet
World
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- November 1999
White Pine's CU-SeeMe Web Technology Named 1999 PRODUCT OF THE YEAR by
INTERNET TELEPHONY Magazine
- December 1999
White Pine's CU-SeeMe Web Technology Named 1999 PRODUCT OF THE YEAR by CALL
CENTER SOLUTIONS Magazine
VIDEOCHAT YOUR SITE
In March 2000, we introduced the commercial package of our CU-SeeMe Web
technology. The package, called Videochat Your Site, enables Internet websites
to embed live, interactive audio, video, and text chat into their site.
Videochat Your Site gives portals and affiliate sites a way to grow their user
communities and increase the amount of time that people spend on their sites. It
gives site users the value of participating in live visual communications, all
with the ease of a standard web browser.
Videochat Your Site includes a software developers kit for CU-SeeMe Web
which enables a web developer to integrate the live audio, video and text
components into a site-branded page. It also includes a number of templates to
get websites up and running with the technology quickly and the MeetingPoint
server, which manages all of the backend aspects of group chatting and
conferencing. Pricing begins at $23,990 for the CU-SeeMe Web SDK and the
MeetingPoint license. A distribution license for the CU-SeeMe Web plug-in is
based on a revenue sharing model between our company and the customer.
CU-SEEME
CU-SeeMe is our desktop multimedia conferencing software for real time
person-to-person or group conferencing. CU-SeeMe works in conjunction with our
MeetingPoint conference server to provide a complete software-based, multipoint
conferencing solution.
CU-SeeMe can be used over the Internet or any Internet protocol-based
network, providing the user with the power to communicate globally without
expensive hardware. By operating over the Internet, CU-SeeMe substantially
broadens the base of businesses, organizations and individuals able to engage in
multimedia conferencing. This software-only solution runs on both Windows and
Macintosh platforms and offers full-color video, audio, chat window and
whiteboard communications. The user can participate in "Live over the Internet"
conferences, broadcasts or chats. CU-SeeMe can be launched directly from web
pages with the user's favorite web browser, using 28.8 Kbps modem, ISDN link or
faster connections. For audio-only telephony use, CU-SeeMe works effectively
over a 14.4 Kbps modem. CU-SeeMe is the only desktop conferencing client capable
of displaying up to twelve simultaneous video windows, allowing the user to see
everyone in a small-group conference without video switching. CU-SeeMe also is
the only cross-platform product capable of H.323 interoperability on Windows 95,
98 and NT, and MacOS.
The initial version of CU-SeeMe, introduced in March 1996, was the first
commercially available Internet-based multimedia conferencing product. CU-SeeMe
has been featured in a number of on-line and industry publications and has won a
substantial number of awards in its three years of commercial availability,
including:
- January 1998
PC COMPUTING names CU-SeeMe V3.0 BEST WEB COMMUNICATIONS PRODUCT OF THE
YEAR 1997
- January 1998
Internet World names CU-SeeMe BEST OF THE NET 1997
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- January 1998
CU-SeeMe receives CTI Magazine's 1997 EDITORS' CHOICE AWARD
- January 1998
CU-SeeMe receives 5 STAR SHAREWARE AWARD
- July 1998
CU-SeeMe receives PC COMPUTING's A-LIST AWARD
In addition, CU-SeeMe was recognized by PC Data, a leading marketing
intelligence firm, as the Top-Selling Retail Multimedia Conferencing Title for
the First Half of 1998.
We currently offer two versions of CU-SeeMe:
- CU-SEEME 3.1.2 began shipping in November 1998 and includes Contact List
feature. CU-SeeMe 3.1.2 is available on Windows 95, 98 and NT, and MacOS
platforms. However, with the introduction of CU-SeeMe Pro, we expect
future sales of CU-SeeMe 3.1.2 to be made principally to Macintosh users
and original equipment manufacturers. CU-SeeMe has a suggested retail
price of $99.
- CU-SEEME PRO began shipping in March 1999 and represents our
next-generation client offering. CU-SeeMe Pro is available on Windows 95,
98 and NT platforms, has a suggested retail price of $99 and includes the
following features:
- full H.323 support, enabling direct interoperability with other H.323
clients such as Microsoft NetMeeting, Intel ProShare and PictureTel
LiveLAN;
- integrated desktop application sharing, whiteboard and data
collaboration via Microsoft NetMeeting;
- a set-up wizard that automatically defines the optimal settings based
on the user's network connection and capture device; and
- a "Conference Companion," which simplifies the way users make
connections, keep a contact list and access directory services. This
new feature replaces the address list found in prior versions and
enables a user to make a connection using only an e-mail address as
opposed to an Internet protocol address. It includes a Web-based home
page that can be customized for internal use by businesses.
We ship CU-SeeMe as packaged software and also make CU-SeeMe available for
downloading over the Internet. We also offer CU-SeeMe as a bundled package with
MeetingPoint and with third-party cameras. In December 1998, we began shipping
CU-SeeMe bundled with our private label camera, the CU-SeeMe Cam, a parallel
port, 256 color desktop camera. The CU-SeeMe Cam bundled package has a suggested
list price of $99.
CU-SEEME WORLD
In March 1999, we introduced our portal Web site, www.cuseemeworld.com. We
believe CU-SeeMe World will help us promote CU-SeeMe, MeetingPoint, and
professional services sales by:
- providing a showcase for our visual communications and related "tools";
- building a centralized community of group conferencing users;
- facilitating user interaction through the utilization of member directors,
Web-based Internet Locator Service for locating users online, "safe" email
interchanges in which email addresses are masked and users exchange email
via user names, and threaded discussion groups;
- generating strategic alliances through sponsorships and partnering
opportunities; and
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- encouraging content providers to offer structured conferencing and
programming.
We believe that successful management of the site will not only serve to
promote our ASP service offerings, but will generate advertising revenue and
strategic alliances through sponsorships and partnering opportunities.
MEETINGPOINT
MeetingPoint, the software-only server component of our multimedia
conferencing solution, allows users of CU-SeeMe to participate in multipoint,
multimedia conferences with a nearly unlimited number of users. Administrators
create and host conferences using MeetingPoint. End users then connect to the
conference, using either CU-SeeMe or any other third-party H.323 compliant
multimedia conferencing client product. MeetingPoint's core "multimedia router"
technology enables the group interaction to take place by "routing" it to the
other conference participants. MeetingPoint 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.
MeetingPoint, introduced in November 1997, was the industry's first H.323
compliant multimedia conferencing server. MeetingPoint's software-only
architecture makes it scalable and deployable over a variety of hardware
platforms and operating systems, including Windows NT and Solaris, a UNIX-based
user environment developed by Sun Microsystems. MeetingPoint for Solaris is the
only software-only conferencing server available on a UNIX platform.
MeetingPoint received two leading industry awards within the first few months of
its release: "1997 Product of the Year" by CTI MAGAZINE in the "Video
Conferencing" category and the "1997 Editors' Choice Award" from INTERNET
TELEPHONY magazine. In 1999, MeetingPoint received the following awards:
- January 1999
MeetingPoint named 1998 PRODUCT OF THE YEAR by INTERNET TELEPHONY Magazine.
- February 1999
MeetingPoint named 1998 PRODUCT OF THE YEAR by CTI Magazine.
- December 1999
MeetingPoint named 1999 PRODUCT OF THE YEAR by COMMUNICATIONS SOLUTIONS
Magazine (formerly CTI Magazine).
MeetingPoint is able to manage the amount of network resources that are
consumed as it hosts a group conference. We believe that the use of Internet
protocol-based networks for real-time communication is beginning a phase of
significant growth, with thousands of new users every day and creative new
applications being discovered weekly. However, multimedia requires significant
bandwidth. While emerging technologies like Fast Ethernet, ADSL and high-speed
cable modems promise expanded bandwidth in the near future, today most users
face network constraints. Home users, for example, are usually limited to 28.8
Kbps modem connections. Business, governmental and educational enterprises may
have 10 Mbps modem local area networks, but these are used for a variety of
traditional, mission-critical applications such as file sharing, e-mail and
printing. Even network service providers are challenged to stretch their network
resources to cover rapidly growing customer traffic. In those rare instances
where bandwidth is plentiful, it typically comes at a relatively high cost,
especially for wide area network links. Because of these network constraints,
MeetingPoint's bandwidth management capability allows users to make the most of
the new collaboration, entertainment and learning possibilities that
network-based multimedia communications create, without having to make expensive
upgrades to their existing network infrastructure.
MeetingPoint's ability to manage the use of network resources while hosting
group conferencing arises from its core multimedia router technology. This
technology is focused on a single, very specific
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task: routing real-time multimedia information among clients participating in
group communications. MeetingPoint manages and limits bandwidth use by using
built-in intelligence regarding the specific nature of multimedia data and
real-time group communications. Increased economies are achieved when wide-area
communications are routed through servers spread out across an organization's
network, either to network service provider "points of presence" or to remote
offices on an intranet.
In October 1998, we became the first company to demonstrate continuous
presence for H.323 conferencing, as an add-on to MeetingPoint. Continuous
presence enhances the conferencing experience by enabling the conference
participants to see up to four video windows at one time. Prior to the
continuous presence capability, H.323 client users could only see the
participant that was talking, and not any of the other participants. We made it
possible, for the first time, for many popular H.323 clients in a multipoint
group conferencing environment to utilize continuous presence, including users
of Microsoft NetMeeting, Intel ProShare and PictureTel LiveLAN. Continuous
Presence is delivered to these desktop H.323 clients through a software add-on
option to MeetingPoint and represents a feature add previously only available
through H.320 conferencing. Continuous presence was made generally available to
the public in the second fiscal quarter of 1999.
Additionally, we offer a Streaming Media Integration add-on to MeetingPoint.
With the option for integration of streaming media, MeetingPoint is able to
broadcast a live interactive conference to hundreds or even thousands of people
using a streaming media server and player such as the Microsoft NetShow Server
and a Windows Media Player. Conferences can be broadcast live, or recorded and
replayed on demand. Because the Windows Media Player is widely available as a
free applet, it extends the possibilities for conferencing with and
communicating to a much wider audience. This combination of technologies, with
both an interactive group of participants and a viewing group of participants,
lends itself to a number of corporate and Internet scenarios.
MeetingPoint pricing begins as a suggested retail price of $8,995 for ten
user connections. We also license CU-SeeMe and MeetingPoint as a bundled package
and offer site licenses and volume discounts for larger purchases.
RESEARCH AND DEVELOPMENT
Our research and development activities historically were separated between
legacy connectivity products and group conferencing products. We believe our
future success depends on our group conferencing solutions, and, in conjunction
with our sale of the assets of the legacy connectivity business in February
2000, we have focused all of our research and development resources on group
conferencing technology.
Our research and development expenditures totaled $4.8 million in 1999 and
$5.0 million in 1998. We intend to increase levels of resources devoted to
research and development in 2000, although the actual amount of research and
development expenses will depend on a number of factors, including the level of
market acceptance of our current products, our ability to fill headcount
requisitions on a timely basis, and the rate of technological change in the
group conferencing industry.
MARKETING AND DISTRIBUTION
We market and sell our products through a combination of distributors,
original equipment manufacturers and strategic partners, our Certified Alliance
Partners program for resellers, our direct sales organization, and directly over
the Internet. Our sales force is located in Nashua, New Hampshire, San Jose,
California, and La Gaude, France. We maintain web sites where prospective
customers can obtain information about our products and services and download
our multimedia conferencing products. We conduct marketing programs, including
direct mail, advertising, public relations and product literature, to support
each of our sale channels and to position and promote our
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products and services. Marketing personnel provide price lists and product
descriptions and assist the direct sales force through lead generation and sales
training.
Our primary strategy for marketing and distributing our group conferencing
products is to establish new strategic and original equipment manufacturer
relationships and extend existing relationships with multinational firms that
provide particular marketing or distribution opportunities or technological
capabilities for our group conferencing products. We have already established
distribution relationships in Australia, Austria, Belgium, Egypt, Finland,
France, Germany, Greece, Hong Kong, Hungary, Israel, Italy, Japan, Korea,
Netherlands, Norway, Slovania, South Africa, Spain, Sweden, Switzerland and the
United Kingdom. We have also formed original equipment manufacturer or bundling
relationships in order to provide customers with turnkey solutions and to
facilitate product sales through distribution channels. In 1996, we began to
employ Tech Data and Ingram Micro as distributors to deliver CU-SeeMe to
consumers through retail channels including store chains and superstores.
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CUSTOMERS
Our customers include ISPs, portal sites, businesses, educational
institutions, government organizations and individual consumers. We sell our
software to end users and to original equipment manufacturers that bundle our
software with other products. We intend to sell our Internet communications
services to ISPs, portal sites and businesses.
CUSTOMER SERVICE AND SUPPORT
We are committed to maintaining customer satisfaction and loyalty. We employ
technical customer representatives located in Nashua, New Hampshire to support
and service our customer base. Certain of our distributors and original
equipment manufacturer customers maintain separate customer support
organizations for their own customers. We provide second-tier support to those
organizations.
We provide customer support via telephone, fax and e-mail during normal
business hours for our warranty product customers. We also offer a variety of
fee-based maintenance and support options, including a 24x7 option, and
automatic shipments of all enhancements and upgrades for licensed products. To
augment our optional support services, we provide online frequently asked
questions and an auto-response knowledge base for e-mail inquiries. We monitor a
number of third-party mail lists and related web sites in order to ensure
technical accuracy for our products. Customer support specialists diagnose and
solve technical problems related not only to our products but also to other
hardware and software with which our products may interact. We track all support
requests, including current status reports and historical customer interaction
logs, using a series of customer databases. We use customer feedback as a source
of ideas for product improvements and enhancements.
In February 1999, we began charging CU-SeeMe customers for technical support
on a per-incident basis if they are not covered by a maintenance contract.
PROPRIETARY RIGHTS
Our success is heavily dependent upon our proprietary technology. We
currently have no patents and rely primarily on copyright, trademark and trade
secrets law, as well as employee and third-party non-disclosure agreements, to
protect our intellectual property. We have applied for a patent on a portion of
the technology underlying the continuous presence feature of MeetingPoint. There
can be no assurance that the steps taken by us to protect our proprietary rights
will be adequate to prevent misappropriation of our technology or independent
development by others of similar technology. Litigation may be necessary to
enforce our intellectual property rights or to protect our trade secrets. Any
such litigation could result in substantial costs and diversion of resources and
could have a material adverse effect on our business, financial condition and
results of operations. Moreover, while we believe that our 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 us or that such claims will not be successful. See "Risk Factors--We may
be unable to protect our proprietary technology."
As described below, in 1998, we took several steps to acquire ownership of
technology embedded in our software offerings.
ACQUISITION OF TECHNOLOGY FROM CORNELL RESEARCH FOUNDATION
Our multimedia conferencing products, CU-SeeMe and MeetingPoint, are
commercial, enhanced versions of Freeware CU-SeeMe and its related server.
Freeware CU-SeeMe and its related server were developed by a research institute
at Cornell University and were freely available on the Web. In June 1995, we
entered into an software license agreement with the Cornell Research Foundation
that granted us the exclusive worldwide right to develop, modify, market,
distribute and sublicense
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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."
We commenced shipments of the initial commercial versions of CU-SeeMe and
the White Pine Reflector (the predecessor of MeetingPoint) in March 1996 and May
1996, respectively. In May 1997, we renegotiated the terms of the license
agreement to provide for a $1,000,000 prepayment of royalties in exchange for a
decrease in the level of revenue-based royalties payable to the Cornell Research
Foundation. The renegotiated terms were retroactive to January 1, 1997, and we
remained subject to minimum royalty payments.
In November 1998, we acquired the Cornell Research Foundation's trademark
and other intellectual property rights in Freeware CU-SeeMe, upon which our
current versions of CU-SeeMe are based, and the related server technology, which
underlies MeetingPoint. The purchase price for these rights consisted of (1) a
note in the principal amount of $900,000, of which $300,000 is due on each of
June 30, 2000, June 30, 2001 and June 30, 2002, and (2) warrants to purchase
150,000 shares of our common stock at a price of $1.00 per share. The warrants
were issued in exchange for outstanding warrants issued previously to the
Cornell Research Foundation; these prior warrants had an exercise price of $6.00
per share but otherwise had terms substantially identical to those of the new
warrants.
ACQUISITION OF TECHNOLOGY FROM LABTAM COMMUNICATIONS
In July 1998, we purchased certain assets, including intellectual property,
comprising certain T.120 whiteboard and data collaboration technology from
Labtam Communications, an Australian corporation. The purchase price for these
assets consisted of 900,000 shares of our common stock and cash payments of
U.S.$628,000 in July 1998 and A$201,606 (or U.S.$133,000) in January 1999. The
terms of, and consideration paid in, this transaction were the result of arm's
length negotiations between Labtam Communications and us, which had no
relationship prior to the transaction. We used cash and cash equivalents to pay
the cash portion of the purchase price. An aggregate of 450,000 shares was
deposited in escrow as security for potential claims by us against Labtam
Communications for breaches of certain representations, warranties, covenants
and agreements contained in the purchase agreement relating to the Labtam
assets. A total of 225,000 of the escrowed shares were released to Labtam
Communications in January 1999 and the remaining 225,000 escrowed shares were
released in July 1999.
We have incorporated the purchased T.120 technology into our MeetingPoint
and ClassPoint conferencing solutions. T.120 is the protocol that defines
whiteboard, application sharing and data collaboration for multipoint
conferencing applications.
TECHNOLOGY ACQUISITION FROM RADVISION
In December 1998, we acquired from RADVision a one-time source code snapshot
of a H.323 protocol stack. This acquisition has allowed us to modify and enhance
certain source code embedded in our products.
COMPETITION
The market for multimedia conferencing products and services is extremely
competitive, and we expect that competition will intensify in the future. We
believe that the principal competitive factors in the multimedia group
conferencing industry are price, video and audio quality, interoperability,
functionality, reliability, service and support, hardware platforms supported,
and vendor and product reputation. We believe that our ability to compete
successfully will depend on a number of factors both within and outside our
control, including the adoption and evolution of industry standards, the pricing
policies of our competitors and suppliers, the timing of the introduction of new
software products and services by us and others, our ability to hire and retain
quality employees, and industry and general
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economic trends. In addition, because the barriers to entry in the software
market are relatively low and the potential market is large, we anticipate
continued growth in the industry and the entrance of new competitors in the
future.
In offering Internet communications products and services, we currently
compete, or expect to compete, directly or indirectly with the following
categories of companies:
- H.323 MCU providers, such as PictureTel, Ezenia!, RADVision and Accord;
- videoconferencing client providers, including MicroSoft NetMeeting,
Polycom, PictureTel, VTEL, Intel and VCON;
- nonvideoconferencing collaborative product providers, such as Centra,
Placeware, Astound and WebEx; and
- application service providers PictureTel, FVC, HearMe.com and Lipstream.
The H.323 MCU market encompasses two types of MCUs: a software-only server
and a hardware server. There is a substantial price variance between software
and hardware servers, which tends to dictate the suitability of one or the other
in specific situations. From a price and scaleability standpoint, the software
server lends itself well to large, distributed and expandable deployments,
whereas the hardware server is often best suited to finite centralized
deployments. White Pine and PictureTel market the only software-only MCUs;
Ezenia!, RADVision and Accord market hardware MCUs. Most of these companies work
with third-party endpoints. White Pine and PictureTel are the only vendors
offering a complete end-to-end (client/server) solution.
As with MCUs, client vendors can be split into software or hardware
categories. In the software client category, our CU-SeeMe competes with
MicroSoft's NetMeeting. Polycom, PictureTel, Vtel, Intel and VCON all provide
hardware clients. The hardware assist typically allowed the hardware clients to
demonstrate performance superior to software-only clients, justifying the $1,000
to $12,000 price point. Intel ProShare and TeamStation are both hardware-based
endpoints, and utilize technology which Intel has licensed to PictureTel. Sales
of these products are targeted to the high-end videoconferencing enterprise
market. Integrators and value-added resellers wrap solutions around ProShare and
TeamSolution endpoints, using their API, along with MeetingPoint's API, to
provide full solutions to enterprise and high-end NSPs. This includes distance
learning and videoconferencing service offerings.
The disparate nonvideoconferencing category encompasses semi-interactive
presentation software solutions. Semi-interactive presentation software
solutions is a broad term utilized here to represent products integrating
streaming with some form of limited interactive technology. These companies
offer products that combine streaming media, shared text, and separate telephony
integration in one solution. Centra, Placeware, Astound and WebEx all provide
business collaboration products. NetPodium and LearnLinc provide educational
solutions.
In the emerging ASP market, there are a number of companies that provide IP
communications services. PictureTel and FVC offer conferencing services to their
business-to-business customers. WebEx primarily concentrates its services in the
data collaboration arena, and EVC offers educational content conferencing
services to its customers. HearMe.com and Lipstream leverage their nonstandard
Voice over IP (VOIP) technology into Internet community development, Internet
media products, and portals with communication services.
H.323 is being rapidly adopted by the industry as the global standard for
group conferencing products. A number of companies have announced
standards-based server products that compete directly with MeetingPoint,
including PictureTel, Ezenia! and RADVision. It is likely that other companies
will also enter this market in the near future.
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<PAGE>
Many of our current and potential competitors, including Intel, Microsoft,
PictureTel and Ezenia!, have significantly longer operating histories and
significantly greater managerial, financial, marketing, technical and other
competitive resources, as well as greater name recognition, than we do. As a
result, our 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. We
cannot assure you that we 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 us and could have a material adverse effect on our business,
financial condition and results of operations.
To remain competitive, we will need to continue to invest in research and
development and sales and marketing. We cannot assure you that we will have
sufficient resources to make such investments or that we 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 which we have 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 our business,
financial condition and results of operations.
EMPLOYEES
At March 1, 2000, we had 126 full-time employees, including 55 in research
and development, 36 in sales and marketing, 14 in technical support, and 21 in
general and administrative and software manufacturing. Sixteen of these
employees were located in France and, in accordance with applicable French law,
were represented by a labor union. Our other employees were located in the
United States and were not represented by any labor organization. We have
experienced no work stoppages and believe that our relations with our employees
are good.
FACILITIES
We conduct our operations from our headquarters in Nashua, New Hampshire and
our facilities in La Gaude, France.
The facility in New Hampshire contains approximately 27,000 square feet,
including 23,500 square feet for engineering and office space, 2,500 square feet
for production space and 1,000 square feet for storage. We lease our office in
New Hampshire from an unaffiliated party under the terms of a five-year lease
ending July 1, 2001 under which we are responsible for maintenance, repairs,
taxes, insurance and utilities. Base rent is $143,000 for 2000 and $82,000 for
the first half of 2001. Renewal options for three two-year terms are available
to us.
The facility in San Jose contains approximately 370 square feet of office
space. We rent our office in San Jose from an unaffiliated party under the terms
of a renewable six-month rental agreement expiring April 15, 2000. Base rent for
this office space for 2000 is $19,000.
We previously occupied 5,000 square feet of engineering and office space at
a different site in San Jose. This space has been subleased to an unaffiliated
party under the terms of a five-year lease ending December 31, 2001. Base rent
for this space is $84,000 for 2000 and $89,000 for 2001. Our base income under
the sublease exceeds our base rent under the primary lease.
The facility in La Gaude contains approximately 8,000 square feet of
engineering and office space. We lease our office in France from several
unaffiliated parties under a series of similar leases, ending
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<PAGE>
on December 31, 2001, under which we are responsible for maintenance, repairs,
taxes, insurance and utilities. Base rent for this space is $7,400 for 2000 and
2001.
We expect to move our headquarters to a larger facility before the end of
2000. We also expect to extend or review the leases for our San Jose and La
Gaude facilities and to continue to occupy those facilities for the foreseeable
future. If we are unable to extend or renew those leases on acceptable terms we
believe that alternative space would be available at acceptable rates.
LEGAL PROCEEDINGS
From time to time, we have received and may receive in the future notice of
claims of infringement of other parties' proprietary rights. Although we believe
that our 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 us or that any infringement claims will
not be successful. See "Risk Factors--We may be unable to protect our
proprietary technology."
34
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors and their ages as of March 1, 2000 are
as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- ------------------------------------------------------------
<S> <C> <C>
Killko A. Caballero..... 40 Chief Executive Officer, President and Chairman
Christine J. Cox........ 41 Chief Financial Officer and Vice President of Finance
David O. Bundy.......... 41 Chief Technology Officer
John E. Kelly........... 46 Vice President of Worldwide Sales and Marketing
Joseph J. Esposito(1)... 48 Director
Jonathan G. 46 Director
Morgan(1)(2)............
Adam Stettner(2)........ 36 Director
</TABLE>
- ------------------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
KILLKO A. CABALLERO was appointed Chairman of the Board on January 18, 2000.
He has been our Chief Executive Officer since December 1998 and our President
since August 1997. He has served as a director since November 1995 and as our
Chairman since January 2000. He served as our interim President during June and
July 1997 and as our Senior Vice President of Research and Development and Chief
Technology Officer from November 1995 until June 1997. Mr. Caballero was a
co-founder of White Pine Software, Europe and served as President, Chief
Executive Officer and Chairman of the Board of White Pine Software, Europe from
July 1991 until November 1995.
CHRISTINE J. COX has been our Chief Financial Officer since December 1998
and our Vice President of Finance since August 1997. She was our Corporate
Controller from October 1996 to August 1997. Ms. Cox served as Division
Controller and Treasurer of Sequoia Systems, Inc., a fault-tolerant and
business-critical microcomputer company, from May 1996 to October 1996,
Operations Controller of Sequoia from June 1995 to May 1996, and held other
financial management positions at Sequoia from August 1993 to June 1995.
DAVID O. BUNDY has been our Chief Technology Officer since July 1998 and as
our Vice President of Engineering from January 1994 to July 1998. Mr. Bundy was
the Vice President and Principal Engineer of our predecessor company from
September 1991 to December 1993.
JOHN E. KELLY has been our Vice President of Worldwide Sales and Marketing
since March 1999. He founded Aura Networks, a developer of datacentric digital
loop carrier products, in May 1997 and was President of Aura from May 1997 until
November 1998. From 1993 to April 1997, Mr. Kelly was Vice President of
Marketing at Intraplex, Incorporated, a developer of digital network products
for broadcast and wireless communications, which was acquired by Harris
Corporation in November 1998.
JOSEPH J. ESPOSITO has served as one of our directors since January 2000. He
was the President and CEO of Tribal Voice, a provider of instant messaging,
interactive communications and online community solutions, until it was sold to
CMGI late in 1999. Currently he works as a consultant, focusing on strategy for
the communications and information industries. Prior to joining Tribal Voice,
Mr. Esposito worked in the publishing industry, with tenures at Simon & Schuster
and Random House. Mr. Esposito also served as CEO of Encyclopaedia Britannica.
JONATHAN G. MORGAN has served as one of our directors 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.
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<PAGE>
ADAM STETTNER has served as one of our directors since March 1999. He has
been Managing Director of the Special Situations Technology Fund, an investment
fund, since April 1997. He has also served as the President of Stettner
Consultants, Inc., a computer consulting company, since 1989.
Executive officers are appointed by and serve at the discretion of the
board. Directors 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.
BOARD COMMITTEES
Our board of directors has appointed an Audit Committee and a Compensation
Committee. Our board has not appointed a standing Nominating Committee.
The Audit Committee reviews the results and scope of the annual audit of our
financial statements conducted by our independent auditors and our policies and
procedures with respect to our internal accounting and financial controls. The
Audit Committee also makes recommendations to our board on the engagement of our
independent auditors, as well as other matters referred by our board. The Audit
Committee currently consists of Jonathan Morgan and Adam Stettner.
The Compensation Committee provides recommendations concerning salaries,
incentives and other compensation for our directors, officers, employees and
consultants. The Compensation Committee also administers our stock option plans
and our employee stock purchase plan. The Compensation Committee currently
consists of Joseph Esposito and Jonathan Morgan.
DIRECTOR COMPENSATION
We do not pay fees to our directors, and we presently have no plans to pay
directors' fees. We grant stock options to our non-employee directors pursuant
to our director stock option plan. The purpose of the director stock option plan
is to encourage ownership of common stock by our non-employee directors in order
to help us attract and retain directors of exceptional competence and to furnish
an added incentive for non-employee directors to increase their efforts on our
behalf. Joseph Esposito, Jonathan Morgan and Adam Stettner are non-employee
directors for purposes of the director stock option plan.
Under the terms of the director stock option plan, we grant automatic
formula stock options to non-employee directors as follows:
- upon a non-employee director's initial election, he or she is entitled to
receive a stock option to purchase 15,000 shares of common stock; and
- upon a non-employee director's re-election, he or she is entitled to
receive a stock option to purchase 10,000 shares of common stock, as long
as he or she has served as a non-employee director for at least the three
months immediately preceding the meeting at which he or she is re-elected.
The exercise price of the options granted under the director stock option
plan must equal the fair market value of our common stock on the grant date.
Each option granted under the director stock option plan is subject to vesting
under the terms of such plan and expires upon the earlier of (a) the tenth
anniversary of the grant date and (b) the first anniversary of the date on which
the option holder ceased serving as a non-employee director.
Pursuant to the director stock option plan, Mr. Morgan received an option to
purchase 15,000 shares of common stock in September 1997 upon the adoption of
the director stock option plan by our stockholders. Mr. Stettner received an
option to purchase 15,000 shares of common stock in March 1999 upon his election
to the board. In addition, each of Messrs. Morgan and Stettner received an
option to purchase 10,000 shares of common stock in July 1999 upon their
re-election to the board
36
<PAGE>
of directors. Mr. Esposito received an option to purchase 15,000 shares of
common stock in January 2000 upon his election to the board.
In addition, on December 16, 1998, our board voted to grant to Mr. Morgan
options to purchase 35,000 shares of common stock at an exercise price of $1.875
per share, which represented the closing price of common stock on the grant
date. These options were issued under our 1996 stock option plan. They vest over
a two-year period.
EXECUTIVE OFFICER COMPENSATION
SUMMARY COMPENSATION TABLE FOR 1997, 1998 AND 1999
The following table summarizes certain information with respect to the
annual and long-term compensation that we paid for the past three fiscal years
to the following persons (the "Named Officers"):
- Killko Caballero, our only chief executive officer in 1999; and
- David Bundy, Christine Cox and John Kelly, our other three executive
officers whose compensation for services rendered in all capacities to us
exceeded $100,000 during 1999.
All of the options described in the following table have a maximum term of
seven to ten years, subject to earlier termination in the event of the
optionee's cessation of service with us. The options are exercisable during the
optionee's lifetime only by the optionee. They are exercisable by the optionee
only while the optionee is one of our employees or advisors and for certain
limited periods of time after termination of employment.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
ANNUAL ------------
COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
- --------------------------- -------- --------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Killko A. Caballero..................... 1999 $155,140 $45,000 115,000 --
Chief Executive Officer and President 1998 150,445 -- 35,000 --
1997 124,347 20,000 50,000 --
David O. Bundy.......................... 1999 128,546 25,000 30,000 --
Chief Technology Officer 1998 132,405 -- 20,000 $20,000(1)
1997 119,909 15,000 60,000 --
Christine J. Cox........................ 1999 112,470 20,000 66,000 --
Chief Financial Officer and 1998 105,467 -- 20,000 --
Vice President of Finance 1997 83,384 15,000 37,000 --
John F. Kelly(2)........................ 1999 140,905(3) -- 75,000 --
Vice President of Worldwide
Sales and Marketing
</TABLE>
- ------------------------
(1) The other compensation paid to Mr. Bundy in 1998 consisted of amounts
paid in connection with Mr. Bundy's relocation, at our request, to New
Hampshire.
(2) Mr. Kelly joined White Pine in March 1999.
(3) Includes commissions paid to Mr. Kelly in 1999.
37
<PAGE>
OPTION GRANTS IN 1999
The following table summarizes (a) option grants to the Named Officers
during 1999 and (b) the value of options held by the Named Officers at
December 31, 1999. The amounts shown in the last two columns represent
hypothetical gains that could be achieved for the respective options if
exercised at the end of their option terms. These gains are based on assumed
rates of stock appreciation of five percent and ten percent, compounded annually
from the date the respective options were granted to the date of their
expiration. The gains shown are net of the option price, but do not include
deductions for taxes or other expenses that may be associated with the exercise.
Actual gains, if any, on stock option exercises will depend on the future
performance of our common stock, the option holders' continued employment
through the option term, and the date on which the options are exercised.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------- VALUE AT ASSUMED
PERCENT OF ANNUAL RATES
NUMBER OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE PER EXPIRATION -----------------------
NAME GRANTED(#) FISCAL YEAR SHARE($/SH) DATE 5%($) 10%($)
- ---- ---------- ------------ -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Killko A. Caballero............ 115,000 13% $25.375 12/17/09 $1,835,193 $4,650,740
David O. Bundy................. 30,000 3 25.375 12/17/09 478,746 1,213,236
Christine J. Cox............... 50,000 6 25.375 12/17/09 797,910 2,022,061
16,000 2 6.625 7/23/09 66,663 168,937
John E. Kelly.................. 75,000 8 2.8125 3/15/09 132,657 336,180
</TABLE>
AGGREGATED OPTION EXERCISES IN 1999 AND OPTION VALUES AT DECEMBER 31, 1999
The following table summarizes information about options exercised during
1999, and the value of unexercised options held at the end of 1999, by the Named
Officers. The closing sale price for our common stock as reported on the Nasdaq
National Market on December 31, 1999 was $24.50. For purposes of the last column
in the table, value is calculated on the basis of the difference between the
option exercise price and $24.50, multiplied by the number of shares of common
stock underlying the options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
ACQUIRED AT FISCAL YEAR-END(#) FISCAL YEAR-END($)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Killko A. Caballero...... -- -- 33,750 166,250 $ 747,969 $1,143,906
David O. Bundy........... 35,000 $405,000 45,625 69,375 1,006,875 875,625
Christine J. Cox......... -- -- 23,875 96,125 528,375 958,125
John E. Kelly............ -- -- 9,375 65,625 203,320 1,423,242
</TABLE>
BENEFIT PLANS
In each of 1992, 1993, 1994, 1995 and 1996, our board adopted a stock option
plan, each of which was approved by our stockholders in the year of adoption.
Options may no longer be granted under these plans. In addition, in July 1996
our board adopted, and our stockholders approved, our 1996
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<PAGE>
stock option plan, under which a total of 1,600,000 shares of common stock have
been reserved for issuance. As of December 31, 1999, options to purchase an
aggregate of 1,656,204 shares of common stock having a weighted average exercise
price of $9.6334 per share were outstanding under our 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, as defined in Section 422
of the Internal Revenue Code, and the grant of options that do not so qualify,
or nonqualified options. Under the 1996 option plan, incentive stock options may
be granted only to our officers and other employees, including members of our
board who are also our employees. Nonqualified Options may be granted to
officers or other employees of our company or any subsidiary, to members of our
board or the board of directors of a subsidiary, whether or not employees of our
company or a subsidiary, and to consultants and other individuals providing
services to us or a subsidiary.
The 1996 option plan provides that, upon a reorganization, merger,
consolidation, liquidation or sale of substantially all of our assets, 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
specified transaction. Alternatively, the Compensation Committee may cancel any
outstanding options as of the effective date of the specified 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 specified 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.
STOCK PURCHASE PLAN
In July 1996, our board adopted, and our stockholders approved, our 1996
stock purchase plan, under which up to 100,000 shares of common stock could be
purchased by our employees. In July 1999, our stockholders approved an amendment
of the purchase plan to increase the total number of shares available for
issuance from 100,000 to 200,000.
During each six-month offering period under the 1996 purchase plan,
participating employees are entitled to purchase shares through payroll
deductions. The maximum number of shares that may be purchased is 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 is able to purchase shares of common stock is equal
to 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 us are eligible to participate in the Stock Purchase Plan.
No employee may be granted an option under the Stock Purchase Plan (a) if the
option would permit the employee's rights to purchase stock under the Stock
Purchase Plan to exceed $25,000 of the fair market value of the stock for each
calendar year in which such option is outstanding or (b) if, immediately after
the grant, the employee would own stock
39
<PAGE>
possessing three percent or more of the total combined voting power or value of
all classes of stock of our company or any subsidiary.
EMPLOYMENT AGREEMENTS
We 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 us and for a period of 19 months following the termination of
his employment with us for any reason, he will not, directly or indirectly,
compete with us or solicit any of our employees, contractors, 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 thirty 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 our company, we will pay
the difference for the balance of this six-month period.
We entered into a letter agreement dated August 5, 1997 with Christine J.
Cox with respect to her employment as our Vice President of Finance. The letter
agreement establishes a base salary of $100,000 per year and provides for a
maximum annual incentive bonus of $15,000, based upon achievement of specific
milestones to be established by us. If Ms. Cox's employment is terminated
without cause during the term of the agreement, she will be entitled to her base
salary for six months. The letter agreement does not provide for any minimum
period of employment, and therefore Ms. Cox continues to be an at-will employee.
40
<PAGE>
RELATED PARTY TRANSACTIONS
In December 1999, we sold 78,125 shares of common stock to Special
Situations Private Equity Fund, L.P., 65,104 shares of common stock to Special
Situations Cayman Fund, L.P., and 182,292 shares of common stock to Special
Situations Fund III, L.P., at a price of $15.36 per share. These 325,521 shares
are included in the shares being offered by this prospectus. Under SEC
regulations, these funds may be deemed to be affiliated with Austin W. Marxe and
David Greenhouse, who beneficially owned 9.2% of our common stock as of
March 1, 2000, and Adam Stettner, one of our directors. The shares sold to these
funds were sold on terms identical to the terms under which we sold an
additional 976,563 shares of common stock to third parties in December 1999.
We have entered into employment agreements with two executive officers. See
"Management--Employment Agreements."
41
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of our common stock as of March 1, 2000, by (a) each of our directors,
(b) each of the Named Officers, (c) all of our directors and executive officers
as a group, (d) each of the persons (or groups of affiliated persons) known by
us to own beneficially more than five percent of the outstanding shares of
common stock and (e) each of the Selling Stockholders. Unless otherwise noted:
- The address of our directors and executive officers is in care of White
Pine Software, Inc., 542 Amherst Street, Nashua, New Hampshire 03063,
except as noted below.
- Each person or group identified in the table 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 sixty days of March 1, 2000 are treated as outstanding only
for purposes of determining the amount and percentages beneficially owned
by that person or group.
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES
NUMBER OF SHARES BENEFICIALLY
BENEFICIALLY OWNED OWNED
--------------------------------------------------- -------------------
OUTSTANDING RIGHT TO TOTAL SHARES BEFORE AFTER
SHARES ACQUIRE NUMBER OFFERED OFFERING OFFERING
----------- ------------------------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Austin W. Marxe and David Greenhouse....... 1,108,421 -- 1,108,421 325,521 9.2% 6.5%
153 East 53 Street, 51st Floor
New York, New York 10022
Adam Stettner.............................. 1,108,421 15,000 1,123,421 325,521 9.3 6.6
153 East 53 Street, 51st Floor
New York, New York 10022
Consortium de Realisation.................. 820,330 -- 820,330 -- 6.8 6.8
27-29 rue Le Peletier
75009 Paris, France
Killko A. Caballero........................ 403,324 33,750 437,074 -- 3.6 3.6
David O. Bundy............................. 16,705 52,500 69,205 -- * *
Joseph J. Esposito......................... -- -- -- -- -- --
Jonathan G. Morgan......................... -- 43,333 43,333 -- * *
Christine J. Cox........................... 2,547 29,375 31,922 -- * *
John E. Kelly.............................. -- 18,750 18,750 -- * *
All directors and executive officers as a 1,530,997 192,708 1,723,705 325,521 14.1 11.4
group (seven persons)....................
Other selling stockholders:
CFE, Inc. ................................. 325,521 -- 325,521 325,521 2.7 --
Private Equity Holding (Cayman) Ltd. ...... 325,521 -- 325,521 325,521 2.7 --
Altamira Management Ltd.................... 325,521 -- 325,521 325,521 2.7 --
</TABLE>
- --------------------------
* Represents less than 1% of the outstanding shares of common stock.
The information reported regarding Messrs. Marxe and Greenhouse is based on
Amendment No. 2 to Schedule 13G filed with the Securities and Exchange
Commission on March 2, 2000 by Special Situations Fund III, L.P., MGP Advisers
Limited Partnership, Special Situations Technology Fund, L.P., SST Advisers,
L.L.C., Special Situations Cayman Fund, L.P., AWM Investment Company, Inc.,
Special Situations Private Equity Fund, L.P., MG Advisors L.L.C., Austin W.
Marxe and David Greenhouse. Of the 1,108,421 shares, (a) 665,192 shares are
beneficially owned by Special Situations Fund III, L.P. and MGP Advisers Limited
Partnership (the general partner of and investment advisor to Special Situations
42
<PAGE>
Fund III, L.P.), (b) 143,600 shares are beneficially owned by Special Situations
Technology Fund, L.P. and SST Advisers, L.L.C. (the general partner of and
investment advisor to Special Situations Technology Fund, L.P.), (c) 221,504
shares are beneficially owned by Special Situations Cayman Fund, L.P. and AWM
Investment Company, Inc. (the general partner of and investment advisor to
Special Situations Cayman Fund, L.P.) and (d) 78,125 shares are beneficially
owned by Special Situations Private Equity Fund, L.P. and MG Advisors L.L.C.
Messrs. Marxe and Greenhouse, who serve as officers, directors and members or
principal shareholders of the three investment advisors, claim sole voting and
dispositive powers for all of the 1,108,421 shares. Of the shares offered,
78,125 are offered by Special Situations Private Equity Fund, L.P., 65,104 are
offered by Special Situations Cayman Fund, L.P., and 182,292 are offered by
Special Situations Fund III, L.P.
The 1,108,421 outstanding shares deemed to be beneficially owned by
Mr. Stettner consist solely of the shares described in the preceding paragraph.
Mr. Stettner is an employee of an entity controlled by Messrs. Marxe and
Greenhouse. Mr. Stettner disclaims ownership of all of these shares, other than
143,600 shares owned by Special Situations Technology Fund, L.P., of which he is
the managing director.
The information reported regarding the Consortium de Realisation is based on
a Schedule 13G filed with the Securities and Exchange Commission on October 2,
1997 by Consortium de Realisation, CDR Enterprises and Land Free Investment. All
of the 820,330 shares are directly owned by Land Free Investment, which is a
direct subsidiary of CDR Enterprises and an indirect subsidiary of Consortium de
Realisation. All of the reporting parties claim shared voting and dispositive
powers for all of the 820,330 shares.
CFE, Inc. is a wholly owned subsidiary of General Electric Capital
Corporation.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 30,000,000 shares of common stock
and 5,000,000 shares of preferred stock. As of March 1, 2000, there were
outstanding 12,073,662 shares of common stock and no shares of preferred stock.
COMMON STOCK
Holders of common stock are entitled to one vote 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 our directors standing for election. Subject to preferences that
may be applicable to the holders of any outstanding shares of preferred stock,
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 our company, whether voluntary or
involuntary, and subject to the rights of the holders of any outstanding shares
of preferred stock, the holders of shares of common stock shall be entitled to
receive pro rata all of our remaining assets available for distribution to our
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 our outstanding voting stock.
PREFERRED STOCK
The board of directors is authorized, subject to 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 rights
(and the restrictions of those preferences and rights) 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 we have 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 our outstanding voting
stock.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF OUR CHARTER, OUR BY-LAWS AND DELAWARE LAW
Our charter and by-laws contain provisions that could discourage potential
takeover attempts and make more difficult the acquisition of a substantial block
of the common stock. Our 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 rights (and the restrictions of
those preferences and rights) of the shares of each such series. Our charter
provides that stockholders may act only at meetings of stockholders and not by
written consent in lieu of a stockholders' meeting. Our by-laws 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 us of its intentions a specified number of days in advance of the
meeting and furnishes to us information regarding itself and the intended
nominee. Our by-laws also provide that special meetings of our stockholders may
be called only by the President and must be called by the President or the
Secretary at the written request of a majority of the directors. Our by-laws
also require a stockholder to provide to our Secretary
44
<PAGE>
advance notice of business to be brought by such stockholder before any
stockholder meeting as well as information regarding the stockholder and others
known to support the 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 until the next
stockholders' meeting. These provisions may also discourage another person or
entity from making a tender offer for our common stock, because the person or
entity, even after acquiring a majority of the outstanding stock, could only
take action at a duly called stockholders' meeting and not by written consent.
We are 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;
- 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;
- 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 (a) by persons who are
directors and also officers and (b) 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
- 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 (a) any merger or
consolidation involving the corporation and the interested stockholder; (b) any
sale, transfer, pledge or other disposition of 10% or more of the assets of the
corporation to or with the interested stockholder; (c) 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;
(d) 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 (e) 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,
controlling or controlled by such entity or person.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Our charter provides that no director shall be personally liable to us or to
any stockholder for monetary damages arising out of such director's breach of
fiduciary duty, except to the extent that the elimination or limitation of
liability is not permitted by Delaware law. The Delaware 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 (a) any breach of the director's duty of loyalty
to a corporation or its stockholders, (b) any acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(c) any payment of a dividend or approval of a stock purchase that is illegal
under Section 174 of the Delaware General
45
<PAGE>
Corporation Law or (d) any transaction from which the director derived an
improper personal benefit. A principal effect of this provision of our charter
is to limit or eliminate the potential liability of our directors for monetary
damages arising from any breach of their duty of care, unless the breach
involves one of the four exceptions described in (a) through (d) above.
Our charter and by-laws further provide for the indemnification of our
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 may be permitted to our directors,
officers and controlling persons pursuant to the foregoing provisions, or
otherwise, we have been advised that in the opinion of the SEC that
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is Boston EquiServe
L.P.
PLAN OF DISTRIBUTION
The shares offered by this prospectus may be sold from time to time by the
selling stockholders, who consist of the persons identified as offering shares
under "Principal and Selling Stockholders" above and those persons' pledgees,
donees, transferees or other successors in interest. The selling stockholders
may sell the shares on the Nasdaq National Market or otherwise, at market prices
or at negotiated prices. They may sell shares by one or a combination of the
following:
- a block trade in which a broker or dealer so engaged will attempt to sell
the shares as agent, but may position and resell a portion of the block as
principal to facilitate the transaction;
- purchases by a broker or dealer as principal and resale by the broker or
dealer for its account pursuant to this prospectus; and
- ordinary brokerage transactions and transactions in which a broker
solicits purchasers.
In effecting sales, brokers or dealers engaged by the selling stockholders
may arrange for other brokers or dealers to participate. Brokers or dealers will
receive commissions or discounts from selling stockholders in amounts to be
negotiated prior to the sale. The selling stockholders and any broker-dealers
that participate in the distribution may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act, and any proceeds or
commissions received by them, and any profits on the resale of shares sold by
broker-dealers, may be deemed to be underwriting discounts and commissions.
If any selling stockholder notifies us that a material arrangement has been
entered into with a broker-dealer for the sale of shares through a block trade,
special offering, exchange distribution or secondary distribution or a purchase
by a broker or dealer, we will file, a prospectus supplement, if required
pursuant to the Securities Act, setting forth:
- the name of each of the participating broker-dealers,
- the number of shares involved,
- the price at which the shares were sold,
- the commissions paid or discounts or concessions allowed to the
broker-dealers, where applicable,
- a statement to the effect that the broker-dealers did not conduct any
investigation to verify the information set out or incorporated by
reference in this prospectus, and
- any other facts material to the transaction.
46
<PAGE>
LEGAL MATTERS
Hale and Dorr LLP, Boston, Massachusetts, has advised us with respect to the
validity of the shares of common stock offered by this prospectus. Mark L.
Johnson, a partner at Hale and Dorr LLP, is our Secretary.
EXPERTS
Our consolidated financial statements as of, and for the years ended,
December 31, 1998 and 1999 appearing in this prospectus and the related
registration statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere in this
prospectus and the related registration statement. Those consolidated financial
statements are included in reliance upon such report given upon the authority of
Ernst & Young LLP as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form SB-2 with the SEC for our
common stock offered hereby. This prospectus does not contain all of the
information set forth in the registration statement. You should refer to the
registration statement and its exhibits for additional information. Whenever we
make reference in this prospectus to any of our contracts, agreements or other
documents, the references are not necessarily complete and you should refer to
the exhibits attached to the registration statement or incorporated herein by
reference for the copies of the actual contract, agreement or other document. We
are also required to file annual, quarterly and special reports, proxy
statements and other information with the SEC.
You can read our SEC filings, including the registration statement, over the
Internet at the SEC's Web site at HTTP://WWW.SEC.GOV. You may also read and copy
any document we file with the SEC at its public reference facilities at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; Suite
1400, 500 West Madison Street, Chicago, Illinois 60661 and 7 World Trade Center,
Thirteenth Floor, New York, New York 10048. You may also obtain copies of the
documents at prescribed rates by writing to the Public Reference Section of the
SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the public reference facilities.
47
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Auditors.......................... F-2
Consolidated Balance Sheets as of December 31, 1999 and
1998................................................... F-3
Consolidated Statements of Operations for the years
ended December 31, 1999 and 1998....................... F-4
Consolidated Statements of Stockholders' Equity......... F-5
Consolidated Statements of Cash Flows................... F-6
Notes to Consolidated Financial Statements.............. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
BOARD OF DIRECTORS
WHITE PINE SOFTWARE, INC.
We have audited the accompanying consolidated balance sheets of White Pine
Software, Inc. and subsidiary as of December 31, 1999 and 1998 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of White Pine
Software, Inc. and subsidiary at December 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows for the years
ended December 31, 1999 and 1998, in conformity with accounting principles
generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Manchester, New Hampshire
February 1, 2000, except for
Note 10, as to which the
date is February 29, 2000.
F-2
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 22,087,638 $ 6,420,686
Accounts receivable, less allowance of $176,000 at
December 31, and $146,000 at December 31, 1998.......... 4,158,603 2,122,275
Inventories............................................... 53,769 64,916
Prepaid expenses.......................................... 237,628 328,562
Other current assets...................................... 79,337 108,871
------------ ------------
Total current assets.................................... 26,616,975 9,045,310
Property and equipment:
Computer equipment........................................ 1,278,157 1,227,647
Furniture and fixtures.................................... 240,596 245,823
Software.................................................. 625,699 536,285
Equipment................................................. 87,691 88,733
Leasehold improvements.................................... 202,689 240,552
------------ ------------
2,434,832 2,339,040
Accumulated depreciation and amortization................... (1,274,302) (985,405)
------------ ------------
1,160,530 1,353,635
Other assets:
Third party licenses, less accumulated amortization of
$432,000 at December 31, 1999 and $460,000 at December
31, 1998................................................ 559,844 933,914
Purchased Software, less accumulated amortization of
$608,000 at December 31, 1999 and $0 at December 31,
1998.................................................... 2,533,352 3,141,521
Trademark, less accumulated amortization of $93,000 at
December 31, 1999 and $13,000 at December 31, 1998...... 870,728 951,104
Goodwill, less accumulated amortization of $995,000 at
December 31, 1999 and $756,000 at December 31, 1998..... 198,845 437,463
Other assets.............................................. 105,908 132,823
------------ ------------
4,268,677 5,596,825
------------ ------------
Total assets................................................ 32,046,182 15,995,770
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... 717,932 491,626
Accrued expenses and other accrued liabilities............ 2,253,800 1,555,055
Deferred revenue.......................................... 695,147 345,945
Current portion of long-term debt......................... 7,067 26,521
------------ ------------
Total current liabilities............................... 3,673,946 2,419,147
Long term debt, less current portion........................ - 7,067
Other long term liabilities................................. 600,000 1,154,808
Stockholders' equity:
Preferred stock, $0.01 par value; 5,000,000 shares
authorized; no shares issued or outstanding at December
31, 1999 or December 31, 1998........................... -- --
Common stock, $.01 par value: Authorized
shares--30,000,000 Issued and outstanding
shares--12,049,476 at December 31, 1999 and 10,460,227
at December 31, 1998.................................... 120,495 104,602
Additional paid-in capital................................ 61,269,773 41,137,186
Accumulated deficit....................................... (33,710,591) (28,861,083)
Accumulated other comprehensive income.................... 92,559 34,043
------------ ------------
Total stockholders' equity.............................. 27,772,236 12,414,748
------------ ------------
Total liabilities and stockholders' equity.................. $ 32,046,182 $ 15,995,770
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1999 1998
----------- -----------
<S> <C> <C>
Revenue:
Software license fees..................................... $10,714,541 $ 6,948,222
Services and other........................................ 1,287,077 844,936
----------- -----------
Total revenue............................................. 12,001,618 7,793,158
Cost of revenue............................................. 2,547,509 1,645,249
----------- -----------
Gross profit.............................................. 9,454,109 6,147,909
Operating expenses:
Sales and marketing..................................... 7,265,224 7,739,075
Research and development................................ 4,761,107 5,041,872
General and administrative.............................. 2,359,341 2,277,849
----------- -----------
Total operating expenses................................ 14,385,672 15,058,796
----------- -----------
Loss from operations........................................ (4,931,563) (8,910,887)
Other income (expense):
Interest income......................................... 177,679 577,393
Other, net.............................................. (95,624) (85,089)
----------- -----------
82,055 492,304
----------- -----------
Loss before provision for income taxes...................... (4,849,508) (8,418,583)
Provision for income taxes.................................. -- 5,306
----------- -----------
Net loss.................................................... $(4,849,508) $(8,423,889)
=========== ===========
Net loss per share: basic and diluted....................... $ (0.46) $ (0.86)
=========== ===========
Weighted average number of common and common equivalent
shares outstanding........................................ 10,619,696 9,798,307
=========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-4
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER TOTAL
----------------------- PAID-IN ACCUMULATED COMPREHENSIVE STOCKHOLDERS'
SHARES PAR VALUE CAPITAL DEFICIT INCOME EQUITY
---------- ---------- ---------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 31,
1997........................ 9,305,714 93,057 38,984,024 (20,437,194) 85,973 18,725,860
Net loss...................... (8,423,889) (8,423,889)
Common stock issued upon
exercise of stock options... 198,111 1,981 199,036 -- -- 201,017
Common stock issued under
Employee Stock Purchase
Plan........................ 56,402 564 70,456 -- -- 71,020
Common stock issued upon
purchase of intangible
assets...................... 900,000 9,000 1,819,170 -- -- 1,828,170
Warrants...................... 64,500 64,500
Accumulated Other
Comprehensive Income........ (51,930) (51,930)
---------- ---------- ---------- ----------- ------- ----------
BALANCES AT DECEMBER 31,
1998........................ 10,460,227 104,602 41,137,186 (28,861,083) 34,043 12,414,748
Net loss...................... (4,849,508) (4,849,508)
Common stock issued upon
exercise of stock options... 225,530 2,256 315,556 -- -- 317,812
Common stock issued under
Employee Stock Purchase
Plan........................ 61,635 616 107,641 -- -- 108,257
Common stock issued in private
placement................... 1,302,084 13,021 19,709,390 -- -- 19,722,411
Accumulated Other
Comprehensive Income........ 58,516 58,516
---------- ---------- ---------- ----------- ------- ----------
BALANCES AT DECEMBER 31,
1999........................ 12,049,476 120,495 61,269,773 (33,710,591) 92,559 27,772,236
========== ========== ========== =========== ======= ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-5
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1999 1998
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................... $(4,849,508) $(8,423,889)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................. 454,258 522,766
Amortization of intangible assets......................... 1,301,234 533,043
Loss on disposal of fixed assets.......................... -- 30,000
Changes in operating assets and liabilities:
Accounts receivable..................................... (2,033,030) 283,866
Inventories............................................. 11,735 33,430
Prepaid expenses........................................ 88,485 435,859
Other assets............................................ 49,221 43,821
Accounts payable........................................ 245,177 (180,912)
Accrued expenses and other accrued liabilities.......... 172,819 (616,318)
Deferred revenue........................................ 351,018 96,929
----------- -----------
Net cash used in operating activities....................... (4,208,591) (7,241,405)
INVESTING ACTIVITIES
Purchase of property and equipment, net..................... (276,158) (371,310)
Purchase of third party licenses, net....................... -- (163,846)
Purchase of Purchased Software.............................. -- (685,351)
----------- -----------
Net cash used in investing activities....................... (276,158) (1,220,507)
FINANCING ACTIVITIES
Principal payments on long-term debt and third-party
licenses.................................................. (25,136) (55,830)
Proceeds from common stock issued upon exercise of stock
options................................................... 317,812 201,017
Proceeds from common stock issued under Employee Stock
Purchase Plan............................................. 108,257 71,020
Proceeds from private placements, net....................... 19,722,411 --
----------- -----------
Net cash provided by financing activities................... 20,123,344 216,207
Currency translation effect on cash and cash equivalents.... 28,357 (37,253)
----------- -----------
Net increase (decrease) in cash and cash equivalents........ 15,666,952 (8,282,958)
Cash and cash equivalents at beginning of period............ 6,420,686 14,703,644
----------- -----------
Cash and cash equivalents at end of period.................. $22,087,638 $ 6,420,686
=========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-6
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
White Pine Software, Inc. and its subsidiary ("the Company") operates in one
business segment, which develops, markets and supports multi-platform desktop
multimedia software that facilitates worldwide video and audio communication and
data collaboration across the Internet, intranets and other networks using
Internet protocol.
The Company markets and sells its products in the United States, Canada,
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.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned foreign subsidiary, White Pine Software, Europe. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on hand and investments in high
grade commercial paper having maturities of three months or less when purchased.
These investments have been categorized as held to maturity under the provisions
of Statement of Financial Accounting Standards No. 115, ACCOUNTING FOR CERTAIN
INVESTMENTS IN DEBT AND EQUITY SECURITIES. Accordingly, the balances are stated
at amortized cost, which approximates fair value, because of the short maturity
of these instruments.
INTANGIBLE ASSETS
Intangible assets except trademark are amortized on a straight line basis
over three to five years. Trademark is amortized over twelve years.
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 overnight repurchase agreements. These
cash and cash equivalents are maintained with high credit quality financial
institutions.
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
F-7
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
1. ACCOUNTING POLICIES (CONTINUED)
been material and have been within management's expectations. Two customers
accounted for approximately 38% and 59% of accounts receivable at December 31,
1999 and 1998.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheet for the Company's cash
and cash equivalents and borrowings 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.
Included in the Company's balance sheet at December 31, 1999 and 1998 are
the assets of the Company's foreign subsidiary, White Pine Software, Europe, of
which $186,000 and $254,000 of tangible assets are located in France.
ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED ASSETS
In accordance with Statement of Financial Accounting Standards No. 121,
"ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED ASSETS," the Company will record
impairment losses on long-lived assets used in operations when indicators of
impairment are present. On an on-going basis, management reviews the value and
period of amortization or depreciation of long-lived assets. During this review,
the Company reevaluates the significant assumptions used in determining the
original cost of long-lived assets. Although the assumptions may vary from
transaction to transaction, they generally include revenue growth, operating
results, cash flows, and other indicators of value. Management then determines
whether there has been a permanent impairment of the value of long-lived assets
based upon events or circumstances, which have occurred since acquisition. To
date, there have been no impairment losses recorded.
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, or the expected life of
technology, whichever is less.
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.
F-8
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
1. ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
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 provisions of AICPA
Statement of Position No. 97-2, SOFTWARE REVENUE RECOGNITION, as amended.
Software license revenue is recognized upon receipt of a firm customer order
and shipment of the software, net of allowances for estimated future returns,
provided that no significant obligations remain on the part of the Company and
collection of the related receivable is deemed probable.
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.
CAPITALIZED SOFTWARE
Software development costs meeting recoverability test are capitalized under
Statement of Financial Accounting Standards No. 86, ACCOUNTING FOR THE COSTS OF
COMPUTER SOFTWARE TO BE SOLD, LEASED OR OTHERWISE MARKETED. The cost of software
capitalized is amortized based on its estimated economic life.
EARNINGS PER SHARE
The Company computes earnings per share in accordance with Statement of
Financial Accounting Standards No. 128 "Earnings Per Share" (SFAS 128). SFAS 128
requires calculation and presentation of basic and diluted earnings per share.
Basic earnings per share is calculated based on the weighted average number of
common shares outstanding and excludes any dilutive effects of warrants, stock
options or other type securities. Diluted earnings per share is calculated based
on the weighted average number of common shares outstanding and the dilutive
effect of stock options, warrants and related securities calculated using the
treasury stock method. Dilutive securities are excluded from the diluted
earnings per share calculation if their effect is antidilutive.
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 of White Pine Software, Europe to December
31, 1999, have been reported separately as a component of stockholders' equity.
The aggregate transaction gains and losses are insignificant for all periods
presented.
F-9
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
1. ACCOUNTING POLICIES (CONTINUED)
ADVERTISING COSTS
All costs related to advertising the Company's products are expensed in the
period incurred. Amounts charged to expense were $252,000 and $655,000, during
the years ended December 31, 1999 and 1998, respectively.
RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Position 98-9, MODIFICATION OF SOP 97-2, SOFTWARE REVENUE
RECOGNITION, WITH RESPECT TO CERTAIN TRANSACTIONS, modifies certain provisions
of Statement of Position 97-2. The Company's accounting policy on software
revenue recognition currently is in compliance with Statement 97-2, as amended
by Statement of Position 98-9, and adoption of this Statement of Position has
not had a material impact on the financial position or results of operations of
the Company.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133.
"ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES," which
establishes standards for the recognition, measurement, and reporting of
derivatives and hedging activities and is effective for the Company's year
ending December 31, 2001. The Company anticipates that the adoption of this new
accounting standard will not have a material impact on the Company's
consolidated financial statements.
2. TECHNOLOGY ACQUISITIONS
ACQUISITION FROM LABTAM COMMUNICATIONS PTY. LTD.
On July 8, 1998 the Company purchased certain assets, including intellectual
property, comprising certain T.120 whiteboarding and data collaboration
technology from Labtam Communications Pty. Ltd. The purchase price for these
assets consisted of 900,000 shares of the Company's Common Stock and cash
payments of U.S.$628,000 in July 1998 and A$201,606 (or U.S.$133,000) in January
1999. The Company recorded capitalized software of $2,641,000 in connection with
the acquisition, consisting of (i) $1,828,000 attributable to the Common Stock
issued in the acquisition, based upon the Common Stock's closing price of $2.03
on July 8, 1998, (ii) the two cash payments totaling $761,000 and (iii) $52,000
of accounting, legal and other fees incurred in connection with the acquisition.
ACQUISITION FROM CORNELL RESEARCH FOUNDATION, INC.
During 1998, the Company obtained certain trademark and intellectual
property rights to CU-SeeMe and the underlying MeetingPoint technology from
Cornell Research Foundation, Inc. The purchase price for these rights consisted
of (i) a note in the principal amount of $900,000, of which $300,000 is due on
each of June 30,2000, June 30, 2001 and June 30, 2002, and (ii) warrants to
purchase 150,000 shares of the Company's Common Stock at a price of $1.00 per
share. The Company recorded as trademark a total of $964,500 in connection with
the acquisition, consisting of the $900,000 principal amount of the long-term
note and $64,500 attributable to the warrants, which were valued in accordance
with SFAS 123. The warrants were issued in exchange for outstanding warrants
issued previously to Cornell Research Foundation, Inc.; these prior warrants had
an exchange price of $6.00 per share but otherwise had terms substantially
identical to those of the new warrants.
F-10
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
2. TECHNOLOGY ACQUISITIONS (CONTINUED)
The acquired trademark rights were capitalized and are being amortized over
their estimated economic life of twelve years.
As a result of the acquisition, the Company recorded as capitalized software
a total of $500,000 previously recorded as prepaid royalties.
3. FINANCINGS
In December 1999, the Company received approximately $20 million from four
different investors through the issuance of 1,302,084 shares of its common
stock. The shares were sold at a price of $15.36 per share, which was the 30-day
weighted average closing price of the common stock at the date the terms of the
financings were negotiated.
4. INDEBTEDNESS
LINE OF CREDIT
On March 31, 1999, the Company terminated its commercial loan agreement with
a financial institution, which had provided for a $1,000,000 revolving line of
credit.
LONG TERM DEBT
Debt obligations consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Secured, non-interest bearing, term loan from a foreign
governmental agency, due in annual installments of
$44,408, with the final installment due in September
1999...................................................... $ -- $16,000
Note payable, due in monthly installments of $883 plus
interest at 9.5%, with remaining balances due August
2000...................................................... 7,000 17,000
------ -------
7,000 33,000
Less current portion........................................ 7,000 26,000
------ -------
$ -- $ 7,000
====== =======
</TABLE>
Total interest expense for the years ended December 31, 1999 and 1998, was
approximately $3,000 and $4,000, respectively, and is included in other expense.
F-11
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
5. ACCRUED EXPENSES AND OTHER ACCRUED LIABILITIES
Accrued expenses and other accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
Accrued compensation and related benefits............ $1,001,000 $ 647,000
Pending litigation................................... -- 51,000
Royalties............................................ 106,000 246,000
Other accruals....................................... 1,147,000 611,000
---------- ----------
$2,254,000 $1,555,000
========== ==========
</TABLE>
In prior years, the Company was a co-defendant in various lawsuits that
sought damages for alleged injuries sustained while using products which the
plaintiffs assert were designed and manufactured by a predecessor company. The
Company reduced its reserve for pending lawsuits from $291,000 to $51,000 as of
December 31, 1998, in recognition of the fact that all but two lawsuits had been
resolved. The Company reversed the final $51,000 reserve upon notification that
the two remaining lawsuits had been dismissed during 1999. Subsequent to this
transaction, there are no outstanding lawsuits against the Company.
6. INCOME TAXES
The Company's deferred tax assets and related valuation allowances are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1999 1998
------------ ----------
<S> <C> <C>
Deferred tax assets................................ $ 10,150,000 $8,866,000
Valuation allowance for deferred tax assets........ (10,150,000) (8,866,000)
------------ ----------
Net deferred tax asset............................. $ -- $ --
============ ==========
</TABLE>
Deferred tax assets consist primarily of net operating loss carryforwards
and accrued liabilities.
The Company recorded a valuation allowance of $10,150,000 and $8,866,000 at
December 31, 1999 and 1998, respectively, 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, 1999, the Company had cumulative federal net operating loss
carryforwards of approximately $26,848,000 for income tax purposes. The
availability of the net operating loss carryforwards to offset future taxable
income is subject to significant annual limitations. The loss carryforwards
expire at various dates through 2020.
F-12
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
7. LEASE COMMITMENTS
The Company leases its office facilities under various operating leases
expiring at various times through fiscal 2001. Future minimum annual rental
commitments under the lease agreements for the years ending December 31 are as
follows:
<TABLE>
<S> <C>
2000........................................................ $253,000
2001........................................................ 178,000
--------
$431,000
--------
</TABLE>
Total rent expense for the years ended December 31, 1999 and 1998, was
approximately $229,000 and $253,000, respectively.
8. SIGNIFICANT CUSTOMERS AND GEOGRAPHICAL SALES
During the years ended December 31, 1999 and 1998, two customers accounted
for approximately 13% and 35%, respectively, of the Company's total revenue.
The Company's sales by geographic location are summarized below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1999 1998
----------- ----------
<S> <C> <C>
United States and Canada............................ $ 9,494,000 $5,887,000
Europe.............................................. 1,533,000 1,449,000
Pacific Rim......................................... 975,000 457,000
----------- ----------
$12,002,000 $7,793,000
=========== ==========
</TABLE>
9. EMPLOYEE BENEFITS
401(K) 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.
EMPLOYEE STOCK PURCHASE PLAN
In 1996 the Company adopted the 1996 Employee Stock Purchase Plan (the
"ESPP"). Under the ESPP, an aggregate of 100,000 shares of Common Stock are
reserved for purchase by qualified employees, at 85% of the appropriate market
price. On December 16, 1998, the Board of Directors amended the total shares of
the ESPP plan to 200,000 shares and deleted a provision that had prohibited
certain "highly compensated" officers of the Company from participating in the
ESPP. The ESPP provides that qualified employees may authorize payroll
deductions from 1% to 6% of their base pay to purchase shares at the lower of
the market price in effect on the day the offering starts or the
F-13
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
9. EMPLOYEE BENEFITS (CONTINUED)
day the offering terminates. In 1998, the company issued 56,402 shares. 17,474
shares were issued at $2.23 per share, and 38,928 shares were issued at $0.82
per share. In 1999, the company issued 61,635 shares. 48,500 shares were issued
at $0.82 per share, and 13,135 shares were issued at $5.10 per share.
STOCK OPTION PLANS
The Company has elected to follow Accounting Principals Board Opinion No.
25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES ("APB 25") and related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
statement No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, requires use of
option valuation models that were not developed for use in valuing employee
stock options. No compensation expense is recognized under APB 25, because the
exercise price of the Company's employee stock options equals the market price
of the underlying stock on the date of grant.
1996 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN
In 1996, the Company adopted the 1996 Stock Option Plan (the "1996 Plan").
Under the 1996 Plan, 550,000 shares of Common Stock are available for grant to
employees. On September 30, 1997 the Company amended the 1996 Plan increase the
number of available shares from 550,000 to 1,000,000. Option prices and exercise
periods are determined by the Board of Directors on the date of grant. All
options granted under the Stock Option Plan become exercisable in installments
over a three to four year period commencing from the date of grant and expire
ten years from the date of grant.
1997 DIRECTOR STOCK OPTION PLAN
In 1997, the Company adopted the 1997 Outside Director Stock Option Plan
(the "Director's Plan"). The Company has reserved 150,000 shares of Common Stock
under the Director's Plan. The Director's Plan authorizes a one-time automatic
grant of options to acquire 15,000 shares of Common Stock as an initial award
for being a Director. Each subsequent year, at re-election, directors are
granted an additional 10,000 options. All options granted are exercisable at the
next annual meeting subsequent to being granted. All options expire ten years
from the date of grant and have an exercise price equal to the fair market value
of the Company's Common Stock on the date of grant.
SFAS 123 DISCLOSURES
Pro forma information regarding net loss and loss per common and common
equivalent share is required by Statement 123, which also requires that the
information be determined as if the Company has accounted for its employee stock
options granted subsequent to December 31, 1994 under the fair
F-14
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
9. EMPLOYEE BENEFITS (CONTINUED)
value method of that Statement. The fair value for these options was estimated
at the date of grant using a Black-Scholes option pricing model with the
following weighted-average assumptions:
<TABLE>
<CAPTION>
OPTIONS ESPP
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Expected life (years)....................................... 4.66 4.05 0.50 0.50
Interest rate............................................... 5.75% 5.50% 5.75% 5.5%
Volatility.................................................. 1.23 0.97 1.23 0.97
</TABLE>
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions, including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information is as follows (in thousands except for per share
information):
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Pro forma net loss.......................................... $(5,474) ($8,925)
Pro forma net loss per share:
basic and diluted......................................... $ (0.52) ($ 0.91)
</TABLE>
Option activity under the Company's stock option plans is summarized below:
<TABLE>
<CAPTION>
1999 1998
---------------------------- ----------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
--------- ---------------- --------- ----------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year......... 1,108,644 $1.88 1,408,248 $2.65
Granted.................................. 895,000 17.51 492,650 1.82
Expired or canceled...................... (121,910) 12.05 (594,143) 4.12
Exercised................................ (225,530) 1.41 (198,111) 1.01
--------- ----- --------- -----
Outstanding at end of year............... 1,656,204 9.63 1,108,644 1.88
========= ===== ========= =====
Exercisable at end of year............... 471,190 2.00 462,828 $1.67
</TABLE>
F-15
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
9. EMPLOYEE BENEFITS (CONTINUED)
The following table presents weighted-average price and fair value
information about options granted at fair market value during fiscal years 1999
and 1998:
<TABLE>
<CAPTION>
NUMBER OF
OPTIONS WEIGHTED-AVERAGE WEIGHTED-AVERAGE FAIR
EXERCISE PRICE ON DATE OF GRANT GRANTED EXERCISE PRICE VALUE
- ------------------------------- --------- ---------------- ---------------------
<S> <C> <C> <C>
1999
Equal to fair market value....................... 895,000 $17.51 $14.78
Less than fair market value...................... -- N/A N/A
-------
895,000
=======
1998
Equal to fair market value....................... 492,650 $ 1.82 $ 1.29
Less than fair market value...................... -- N/A N/A
-------
492,650
=======
</TABLE>
The following table presents weighted-average price and life information
about significant option groups outstanding at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
RANGE OF NUMBER REMAINING EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE PRICE EXERCISABLE PRICE
--------------- ----------- ---------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
1999
$0.50 - $1.875 542,107 7.35 years $1.46 228,582 $1.16
2.00 - 2.50 338,872 7.42 years 2.45 187,508 2.45
2.625 - 7.875 249,225 9.05 years 4.35 55,100 3.99
8.75 - 25.50 526,000 9.96 years 25.19 -- --
-------------- --------- -------
1,656,204 471,190
========= =======
1998
$0.50 - $.80 185,392 2.55 years $0.53 185,392 $0.53
0.84 - 1.25 171,454 8.74 years 1.15 37,954 1.00
1.50 - 1.88 254,300 9.69 years 1.85 18,500 1.50
2.00 - 2.63 439,148 8.29 years 2.43 178,445 2.36
3.75 - 7.88 58,300 8.58 years 4.38 42,537 4.39
--------- -------
1,108,644 462,828
========= =======
</TABLE>
10. SUBSEQUENT EVENTS
The Company sold the assets of its legacy connectivity business to an
Australian company on February 29, 2000 for $1,000,000 in cash and 467,730
ordinary shares of the Australian company. These shares were valued at U.S.
$500,000 on February 29, 2000. The gain generated from this sale will be
calculated in the first quarter of 2000.
F-16
<PAGE>
[LOGO]
<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 charter of White Pine
Software, Inc. (the "Company") 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 or she 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 (a) any breach of the
director's duty of loyalty to the corporation or its stockholders, (b) any acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) any payment of a dividend or approval of a stock
purchase that is illegal under Section 174 of the Delaware Corporation Law or
(d) any transaction from which the director derived an improper personal
benefit. Article NINTH of the Company's charter provides that to the maximum
extent permitted by the Delaware General Corporation Law, 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 Company 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
our directors for monetary damages arising from breaches of their duty of care,
unless the breach involves one of the four exceptions described in (a) through
(d) 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
has procured a directors' and officers' liability and company reimbursement
liability insurance policy that (a) insures 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) insures 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 Company's charter or by-laws.
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 sales commissions. All amounts shown are estimates except
for amounts of filing and listing fees.
<TABLE>
<S> <C>
Filing fee of SEC........................................... $ 7,778
Listing fee of Nasdaq Stock Market, Inc..................... 17,500
Accounting fees and expenses................................ 10,000
Blue sky fees and expenses (including related legal fees)... 1,500
Legal fees and expenses..................................... 30,000
Printing and engraving expenses............................. 30,000
Miscellaneous............................................... 3,222
--------
Total..................................................... $100,000
========
</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 that were not registered under the
Securities Act.
- In May 1997, the Company issued to DataBeam Corporation a total of 11,111
shares of common stock. The shares were issued as partial payment for use
of its server program.
- In July 1998, the Company issued to Labtam Communications Pty. Ltd. a
total of 900,000 shares of common stock. The shares were issued as part of
the consideration for intellectual property purchased by the Company from
Labtam Communications Pty. Ltd.
- In November 1998, the Company issued to Cornell Research Foundation, Inc.
a warrant to purchase 150,000 shares of common stock at a price of $1.00
per share. The warrant was issued as part of the consideration for
intellectual property purchased by the Company from Cornell Research
Foundation, Inc. and for the cancelation of a previously outstanding
warrant that had been issued by the Company to Cornell Research
Foundation, Inc.
- In December 1999, the Company sold the following numbers of shares of
common stock to the parties named below. All of the shares were sold at a
price of $15.36 per share.
<TABLE>
<CAPTION>
SHARES
PURCHASER PURCHASED
- --------- ---------
<S> <C>
CFE, Inc.................................................... 325,521
Private Equity Holding (Caymen) Ltd......................... 325,521
Jayvee & Co A/C YARF 1208002
CIBC Mellon Global Securities............................. 162,760
Jayvee & Co A/C YARF 1203002
CIBC Mellon Global Securities............................. 99,886
Royal Trust Corp. of Canada In Trust for Account 27396004... 62,875
Special Situations Private Equity Fund, LP.................. 78,125
Special Situations Cayman Fund, L.P......................... 65,104
Special Situations Fund III, L.P............................ 182,292
---------
Total..................................................... 1,302,084
=========
</TABLE>
The issuances described above were made in reliance upon the exemptions 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.
II-2
<PAGE>
ITEM 27. EXHIBITS
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ------------------------------------------------------------
<C> <S>
3.1(1) Amended and Restated Certificate of Incorporation of the
Company
3.2(1) Amended and Restated By-Laws of the Company
4.1(1) Specimen certificate for common stock of the Company
5.1 Opinion of Hale and Dorr LLP
10.1(1) White Pine Software, Inc. Stock Option Plan (1993), as
amended
10.2(1) White Pine Software, Inc. Stock Option Plan (1994), as
amended
10.3(1) White Pine Software, Inc. Stock Option Plan (1995), as
amended
10.4(1) White Pine Software, Inc. Stock Option Plan (1996), as
amended
10.5(1) White Pine Software, Inc. 1996 Incentive and Nonqualified
Stock Option Plan
10.6(4) White Pine Software, Inc. 1996 Amended and Restated Employee
Stock Purchase Plan
10.7(3) White Pine Software, Inc. 1997 Director Stock Option Plan
10.8(1) Stock Purchase Agreement dated March 19, 1996 among certain
investors and the Company, as amended
10.9(1) Stock Purchase Agreement dated April 17, 1996 between J.F.
Shea, Co., Inc. and the Company, as amended
10.10(1) Amended and Restated Registration Rights Agreement dated
March 19, 1996 among certain stockholders of the Company and
the Company, together with the First Amendment thereto
10.11 Stock purchase agreements dated December 1999 between White
Pine Software, Inc. and the investors identified therein
10.12(6) Sale of Assets Agreement dated as of July 6, 1998 by and
among White Pine Software, Inc., Labtam Communications Pty.
Ltd., Creative Software Technologies Pty. Ltd., Dawson Noy
Johns and Anthony James Oxley
10.13(4) Technology Transfer Agreement dated as of November 11, 1998
between White Pine Software, Inc. and Cornell Research
Foundation, Inc.
10.14(1) Standard Office Lease-Gross (American Industrial Real Estate
Association) dated October 24, 1996 by and between PBP
Limited Partnership, as lessor and White Pine Software,
Inc., as lessee
10.15(1) Nondisclosure and Noncompetition Agreement dated February
15, 1996 with David O. Bundy
10.16(3) Severance Agreement dated March 16, 1998 between White Pine
Software, Inc. and Robert Hadden
10.17(4) Letter agreement dated August 5, 1997 between White Pine
Software, Inc. and Christine J. Cox
10.18(1) Indenture of Lease dated May 15, 1996 by Nash-Tamposi
Limited Partnership, Ballinger Properties L.L.C. and the
Company
10.19 Consulting Agreement dated as of February 17, 2000 between
White Pine Software, Inc. and Arthur H. Bruno
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ------------------------------------------------------------
<C> <S>
23.1 Consent of Ernst & Young LLP
23.2 Consent of Hale and Dorr LLP (included in Exhibit 5.1)
24.1 Power of Attorney (contained on page II-5 of the
registration statement as originally filed)
27.1(5) Financial Data Schedules for year ended December 31, 1999
</TABLE>
- ------------------------
(1) Incorporated by reference to White Pine's Registration Statement on Form
SB-2 (File No. 333-09525) in the form in which it was declared effective by
the Securities and Exchange Commission.
(2) Incorporated by reference to White Pine's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1996.
(3) Incorporated by reference to White Pine's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1997.
(4) Incorporated by reference to White Pine's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1998.
(5) Incorporated by reference to White Pine's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1999.
(6) Incorporated by reference to White Pine's Current Report on Form 8-K filed
on July 23, 1998.
(b) FINANCIAL STATEMENT SCHEDULES
Report of Independent Accountants
All schedules are omitted because they are not applicable or the required
information is shown in the consolidated financial statements or the related
notes.
ITEM 28. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes to :
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to;
(i) Include any prospectus required by Section 10(a)(3) for the
Securities Act of 1933 (the "Securities Act");
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information set forth in the Registration Statement; and
(iii) Include any additional changed material information on the plan
of distribution.
(2) For determining liability under the Securities Act, treat each such
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to be
the initial BONA FIDE offering thereof.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under 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
II-4
<PAGE>
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-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 to
Registration Statement to be signed on its behalf by the undersigned, in the
City of Nashua, New Hampshire on March 27, 2000.
<TABLE>
<S> <C> <C>
WHITE PINE SOFTWARE, INC.
By: /s/ KILLKO A. CABALLERO
-----------------------------------------
Killko A. Caballero
President and Chief Executive Officer
</TABLE>
In accordance with the requirements of the Securities Act of 1933, this
Amendment to Registration Statement has been signed by the following persons in
the capacities indicated on March 27, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ KILLKO A. CABALLERO President, Chief Executive Officer and
------------------------------------------- Chairman (PRINCIPAL EXECUTIVE OFFICER)
Killko A. Caballero
/s/ CHRISTINE J. COX Chief Financial Officer and Vice President of
------------------------------------------- Finance (PRINCIPAL FINANCIAL AND ACCOUNTING
Christine J. Cox OFFICER)
* Director
-------------------------------------------
Joseph J. Esposito
* Director
-------------------------------------------
Jonathan G. Morgan
* Director
-------------------------------------------
Adam Stettner
</TABLE>
<TABLE>
<S> <C>
/s/ KILLKO A. CABALLERO
---------------------------------------
Killko A. Caballero
*By: Attorney-in-fact
</TABLE>
II-6
<PAGE>
March 22, 2000
White Pine Software, Inc.
542 Amherst Street
Nashua, New Hampshire 03063
Re: Registration Statement on Form SB-2
Ladies and Gentlemen:
This opinion is furnished to you in connection with a Registration
Statement on Form SB-2 (File No. 333-95541) (the "Registration Statement") filed
with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"), for the registration
of an aggregate of 1,302,084 shares of Common Stock, $0.01 par value per share
(the "Shares"), of White Pine Software, Inc. a Delaware corporation (the
"Company"), all of which will be sold by certain stockholders of the Company
(the "Selling Stockholders").
We are acting as counsel for the Company in connection with the sale by
the Selling Stockholders of the Shares. We have examined signed copies of the
Registration Statement as filed with the Commission. We have also examined and
relied upon minutes of meetings of the stockholders and the Board of Directors
of the Company as provided to us by the Company, stock record books of the
Company as provided to us by the Company, the Certificate of Incorporation and
By-Laws of the Company, each as restated and/or amended to date, and such other
documents as we have deemed necessary for purposes of rendering the opinions
hereinafter set forth.
In our examination of the foregoing documents, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as copies, the authenticity of the originals of such latter documents and the
legal competence of all signatories to such documents.
Our opinion below, insofar as it relates to the Selling Stockholders'
shares being fully paid, is based solely on a certificate of the Chief Financial
Officer of the Company confirming the Company's receipt of the consideration
called for by the applicable resolutions authorizing the issuance of such
shares.
<PAGE>
White Pine Software, Inc.
March 22, 2000
Page 2
We assume that the appropriate action will be taken, prior to the offer
and sale of the Shares in accordance with the Underwriting Agreement, to
register and qualify the Shares for sale under all applicable state securities
or "blue sky" laws.
We express no opinion herein as to the laws of any state or
jurisdiction other than the state laws of the Commonwealth of Massachusetts, the
General Corporation Law of the State of Delaware and the federal laws of the
United States of America.
Based upon and subject to the foregoing, we are of the opinion that the
Shares to be issued and sold by the Selling Stockholders have been duly
authorized and are validly issued, fully paid and nonassessable.
It is understood that this opinion is to be used only in connection
with the offer and sale of the Shares while the Registration Statement is in
effect.
Please note that we are opining only as to the matters expressly set
forth herein, and no opinion should be inferred as to any other matters. This
opinion is based upon currently existing statutes, rules, regulations and
judicial decisions, and we disclaim any obligation to advise you of any change
in any of these sources of law or subsequent legal or factual developments which
might affect any matters or opinions set forth herein.
We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement in accordance with the requirements of
Regulation S-B under the Securities Act and to the use of our name therein and
in the related Prospectus under the caption "Legal Matters." In giving such
consent, we do not hereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act or the rules and
regulations of the Commission.
Very truly yours,
HALE AND DORR LLP
<PAGE>
Exhibit 10.11(a)
STOCK PURCHASE AGREEMENT
This Agreement dated as of December 31, 1999 is entered into by and among
White Pine Software, Inc., a Delaware corporation (the "Company"), and each
entity which executes a counterpart to this Agreement and is listed on Exhibit A
(each referred to herein as a "Purchaser," and collectively referred to herein
as the "Purchasers").
In consideration of the mutual promises and covenants contained in this
Agreement, the parties hereto agree as follows:
1. PURCHASE AND SALE OF SHARES.
1.1 AUTHORIZATION. The Company has duly authorized the sale and issuance,
pursuant to the terms of this Agreement, of an aggregate of 325,521 shares
(the "Shares") of its common stock, $0.01 par value per share ("Common
Stock").
1.2 PURCHASE AND SALE OF SHARES. Subject to the terms and conditions of
this Agreement, each purchaser agrees to purchase and the Company agrees
to sell, that number of Shares indicated opposite the Purchaser's name on
Exhibit A, at a purchase price equal to $15.36 per share (the "Purchase
Price").
1.3 CLOSING. The Closing of the purchase and sale of the Shares
contemplated by this Agreement (the "Closing") shall take place at the
offices of Foley, Hoag & Eliot LLP, One Post Office Square, Boston,
Massachusetts 02109 at 12 noon EST, on December 31, 1999, or at such other
place and time as mutually agreed by the Company and the Purchasers (the
"Closing Date"). At the Closing, the Company shall deliver to each
Purchaser a certificate for the number of Shares for which that Purchaser
has subscribed against payment of the purchase price therefore. Each
Purchaser shall remit the purchase price for the Shares being purchased at
the Closing by wire transfer of same-day funds to an account designated in
writing by the Company.
1.4 USE OF PROCEEDS. The Company will use the proceeds from the sale of
the Shares for working capital and other general corporate purposes.
<PAGE>
2. CONDITIONS TO CLOSING.
The obligation of the Purchasers to purchase and pay for the Shares shall
be subject to the accuracy of the representations and warranties made by the
Company herein and to the following conditions (any of which may be waived by a
Purchaser, acting individually, in its sole discretion, as to such Purchaser's
own Shares, but not as to the Shares to be purchased by any other Purchaser):
2.1 DELIVERIES BY THE COMPANY. The Company shall deliver to the Purchaser
or its agent:
(a) a certificate, as of recent date, as to the legal existence and
corporate good standing of the Company issued by the Secretary of State of
the State of Delaware;
(b) a copy of the Certificate of Incorporation of the Company, as
amended and in effect as of the Closing Date, certified by the Secretary
of State of the State of Delaware;
(c) a copy of the resolutions of the Board of Directors of the
Company authorizing and approving this Agreement and the issuance of the
Shares hereby, certified by the Secretary of the Company;
(d) a copy of the By-laws of the Company, certified by the Secretary
of the Company as in effect as of the Closing Date;
(e) an opinion of Foley, Hoag & Eliot LLP, counsel to the Company,
in substantially the form attached hereto as Exhibit B; and
(f) an executed lock-up agreement from each officer and director of
the Company in substantially the form attached hereto as Exhibit C.
3. REPRESENTATIONS OF THE COMPANY. Except as set forth in the applicable section
of the Disclosure Schedule attached hereto, the Company hereby represents and
warrants to each Purchaser as follows as of the date hereof and as of Closing.
3.1 ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. The Company is duly qualified or otherwise authorized
to transact business as a foreign corporation and is in good standing in
each jurisdiction in which the failure to so qualify would have a material
adverse effect on the results of operations, business or financial
condition of the Company and its subsidiaries taken as a whole (a
"Material Adverse Effect"). Each of the Company's subsidiaries is a
corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation. Each of the
2
<PAGE>
Company's subsidiaries is duly qualified or otherwise authorized to
transact business as a foreign corporation and is in good standing in each
jurisdiction in which the failure to so qualify would have a Material
Adverse Effect.
3.2 CAPITALIZATION. The Company is authorized to issue (a) 30,000,000
shares of Common Stock, and (b) 5,000,000 shares of Preferred Stock, $0.01
par value per share. As of December 22, 1999, there were issued and
outstanding [10,702,213] shares of Common Stock; no shares of Preferred
Stock had been issued or were outstanding; and options, warrants or rights
to purchase an aggregate of approximately 1,679,016 shares of Common Stock
had been granted by the Company and were outstanding. The Common Stock and
the Preferred Stock of the Company have the voting powers, designations,
preferences, rights and qualifications, and limitations or restrictions
set forth in the Certificate of Incorporation and amendments thereto. All
of the issued and outstanding shares of capital stock of the Company have
been duly authorized and validly issued, are fully paid and nonassessable,
have been issued in compliance with all federal and state securities laws,
were not issued in violation of or subject to any preemptive rights or
other rights to subscribe for or purchase securities, and conform in all
material respects to the description thereof contained in the Company's
Registration Statement on Form 8-A and the Company Reports (as hereinafter
defined). Except as disclosed in the first sentence of this section, 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 shares of
capital stock of any subsidiary and there is no commitment, plan or
arrangement to issue, any securities or obligations convertible into any
shares of capital stock of the Company or its subsidiaries or any such
options, rights convertible securities or obligations. The description of
the Company's capital stock, stock bonus and other stock plans or
arrangements and the options or other rights granted and exercised
thereunder, contained in the Company's Registration Statement on Form 8-A
and the Company Reports accurately and fairly presents the information
required to be shown with respect to such capital stock, plans,
arrangements, options and rights (except for issuances and exercises of
options in the ordinary course of business).
3.3 AUTHORITY FOR AGREEMENT. The execution, delivery and performance of
this Agreement by the Company has been duly authorized by all necessary
corporate action on the part of the Company, and this Agreement has been
duly executed and delivered by the Company, and this Agreement constitutes
the valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium and similar laws affecting the rights and remedies
of creditors generally and to general principles of equity.
3
<PAGE>
3.4 ISSUANCE AND SALE OF SHARES. The issuance and sale of the Shares by
the Company has been duly authorized and the Shares have been duly
reserved for issuance by all necessary corporate action on the part of the
Company, and the Shares, when issued and delivered against payment
therefor, will be validly issued, fully paid and nonassessable. Based in
part on the representations made by or on behalf of each Purchaser in
Section 4 of this Agreement, the offer, issuance and sale of the Shares
pursuant to this Agreement are exempt from registration under the
Securities Act. The issued shares of capital stock of each of the
Company's subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable and are owned by the Company free and clear
of any perfected security interest, or any other security interests,
liens, encumbrances, equities or claims. No preemptive rights or other
rights to subscribe for or purchase exist with respect to the issuance and
sale of the Shares by the Company pursuant to this Agreement. No
stockholder of the Company has any right to request or require the Company
to register the sale of any shares owned by such stockholder under the
Securities Act of 1933, as amended (the "Securities Act"), in the
Registration Statement (as hereinafter defined). No further approval or
authority of the stockholders or the Board of Directors of the Company
will be required for the issuance and sale of the Shares to be sold by the
Company hereunder.
3.5 NO BREACH. The execution, delivery and performance of this Agreement
by the Company will not (a) conflict with or violate any provision of the
Certificate of Incorporation, as amended, or By-laws of the Company, (b)
require on the part of the Company any filing with, or permit,
authorization, consent or approval of, any governmental entity, (c) result
in breach of, constitute a default under, or require any notice, consent
or waiver under, any contract, agreement or other instrument to which the
Company is a party or by which it is bound (other than any consent or
waiver which has already been obtained) or (d) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company,
excluding from subparagraphs (a)-(d) such matters as would not in the
aggregate have a Material Adverse Effect or a material adverse effect upon
the transactions contemplated hereby. No consent, approval, authorization
or other order of any court, regulatory body, administrative agency or
other governmental body is required for the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby, except for compliance with the Blue Sky laws and
federal securities laws applicable to the offering of the Shares.
3.6 SEC REPORTS. The Company has previously furnished to the Purchasers
complete and accurate copies, as amended or supplemented, of its (a)
Annual Report on Form 10-KSB for the fiscal year ended December 31, 1998,
as filed with the SEC, (b) all proxy statements relating to the Company's
meetings of stockholders held or currently scheduled since December 31,
1998 and (c) all other publicly available reports filed by the Company
with the SEC under the
4
<PAGE>
Securities Exchange Act of 1934, as amended (the "Exchange Act"), since
December 31, 1998 and through the date hereof (such reports are
collectively referred to herein as the "Company Reports"). The Company
Reports constitute all of the documents required to be filed by the
Company under Section 13, 14 or 15(d) of the Exchange Act with the SEC
since January 1, 1999. As of their respective dates, the Company Reports
did not, and as of the date hereof do not, contain any untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3.7 FINANCIAL STATEMENTS. The audited financial statements and unaudited
interim financial statements of the Company included in the Company
Reports (a) comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, (b) have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby
(except as may be indicated therein or in the notes thereto), (c) fairly
present the consolidated financial condition, results of operations and
cash flows of the Company as of the respective dates thereof and for the
periods referred to therein and (d) are consistent with the books and
records of the Company.
3.8 OTHER INFORMATION. The Company has provided to and discussed with the
Purchaser such information as the Purchaser has requested regarding the
current operations, financial condition (including the amount of available
cash) and plans of the Company.
3.9 MATERIAL ADVERSE CHANGE. Since December 31, 1998, and except as
disclosed by the Company in the Company Reports or otherwise in writing to
the Purchasers, (i) there has not been any material adverse change in the
operations or financial condition of operations of the Company, except
that the Company continues to incur operating losses, (ii) neither the
Company nor its subsidiaries have incurred any liabilities or obligations,
indirect or contingent, of such a nature that would require inclusion on a
balance sheet under generally accepted accounting principles (nor, to the
Company's knowledge, any other liabilities or obligations) or entered into
any verbal or written agreements or other transactions which are not in
the ordinary course of business or which could reasonably be expected to
result in a Material Adverse Effect; (iii) neither the Company nor its
subsidiaries have sustained any material loss or interference with its
businesses or properties from fire, flood, windstorm, accident or other
calamity not covered by insurance; (iv) neither the Company nor its
subsidiaries have paid or declared any dividends or other distributions
with respect to its capital stock and neither the Company nor its
subsidiaries is in default in the payment of principal or interest on any
outstanding debt obligations; and (v) there has not been any change in the
capital stock of the Company other than the sale of the Shares hereunder
and shares or options issued pursuant to exercise of outstanding
5
<PAGE>
warrants or employee and director stock option plans approved by the
Company's Board of Directors. There is no fact which the Company has not
disclosed to the Purchasers and their counsel in writing and of which the
Company is aware which has, had or is reasonably likely to have a Material
Adverse Effect.
3.10 ACTIONS AND PROCEEDINGS. There are no actions, suits or claims or
legal or arbitral proceedings or governmental inquiries or investigations,
pending, or, to the Company's knowledge, threatened against the Company,
which question the validity of this Agreement or the right of the Company
to enter into it, or which might result in a Material Adverse Effect.
3.11 PROPERTIES. Each of the Company and its subsidiaries has good and
marketable title to all the properties and assets reflected as owned by
them in the consolidated financial statements included in the Company's
Annual Report on Form 10-KS B for the fiscal year ended December 31, 1998,
subject to no lien, mortgage, pledge, charge or encumbrance of any kind
except (i) those, if any, reflected in such consolidated financial
statements, or (ii) those which are not material in amount and do not
materially and adversely affect the use made and intended to be made of
such property by the Company or its subsidiaries. Each of the Company and
its subsidiaries holds its leased properties under valid and binding
leases, with such exceptions as are not materially significant in relation
to the business of the Company and its subsidiaries, taken as a whole.
Each of the Company and its subsidiaries owns or leases all such
properties as are necessary to its operations as now conducted.
3.12 INTELLECTUAL PROPERTY. The Company and its subsidiaries own or have
obtained valid licenses, options or rights to use for the material
inventions, patent applications, patents, trademarks (both registered and
unregistered), tradenames, copyrights and trade secrets necessary for the
conduct of the Company's and its subsidiaries' respective businesses as
currently conducted and as the Company and its subsidiaries contemplate
conducting in all material respects (collectively, the "Intellectual
Property"). Neither the Company nor any of its subsidiaries has received
notice of any third parties who have any ownership rights to any
Intellectual Property that is owned by, or has been licensed to, the
Company or its subsidiaries that would preclude the Company or its
subsidiaries from conducting their respective businesses as currently
conducted and as the Company and its subsidiaries contemplate conducting
in all material respects. To the Company's knowledge, there are currently
no sales of products that would constitute an infringement by third
parties of any material Intellectual Property owned, licensed or optioned
by the Company or its subsidiaries. There is no pending or, to the
Company's knowledge, threatened action, suit, proceeding or claim by
others challenging the rights of the Company or its subsidiaries in or to
any material Intellectual Property owned, licensed or optioned by the
Company or its subsidiaries. There is no pending or, to the Company's
knowledge, threatened action, suit, proceeding or claim by others
challenging the validity or
6
<PAGE>
scope of any material Intellectual Property owned, licensed or optioned by
the Company or its subsidiaries. There is no pending or, to the Company's
knowledge, threatened action, suit, proceeding or claim by others that the
Company or its subsidiaries infringe or otherwise violate any patent,
trademark, copyright, trade secret or other proprietary right of others as
would reasonably be expected to result in a Material Adverse Effect.
3.13 COMPLIANCE. Neither the Company nor any of its subsidiaries has been
advised, and has no reason to believe, that it is not conducting its
business in compliance with all applicable laws, rules and regulations of
the jurisdictions in which it is conducting business, including, without
limitation, all applicable local, state and federal environmental laws and
regulations, except where failure to be so in compliance would not
individually or in the aggregate have a Material Adverse Effect.
3.14 TAXES. Each of the Company and its subsidiaries has filed or obtained
filing extensions with respect to all federal, state, local and foreign
income and franchise tax returns material to the Company and the
subsidiaries, taken as a whole, and has paid or accrued all taxes shown as
due thereon, and neither the Company nor any of its subsidiaries has
knowledge of a tax deficiency which has been asserted or threatened
against it which would reasonably be expected to have a Material Adverse
Effect.
3.15 TRANSFER TAXES. On the Closing Date, all stock transfers or other
taxes (other than income taxes) which are required to be paid in
connection with the sale and transfer of the Shares to be sold to the
Purchasers hereunder will be, or will have been, fully paid or provided
for by the Company and all laws imposing such taxes will be or will have
been fully complied with.
3.16 INSURANCE. Each of the Company and its subsidiaries maintains
insurance of the type and in the amount that the Company reasonably
believes is adequate for its business, including, but not limited to,
insurance covering all real and personal property owned or leased by the
Company or its subsidiaries against risks customarily insured against by
similarly situated companies, all of which insurance is in full force and
effect.
3.17 CONTRIBUTIONS. Neither the Company at any time since its
incorporation nor its subsidiaries at any time since they were acquired or
formed by the Company have, directly or indirectly, (i) made any unlawful
contribution to any candidate for public office, failed to disclose fully
where required by law any contribution in violation of law, or (ii) made
any payment to any federal or state governmental officer or official, or
other person charged with similar public or quasi-public duties, other
than payments required or permitted by the laws of the United States or
any jurisdiction thereof and in each case except for instances that would
not have a Material Adverse Effect.
7
<PAGE>
3.18 YEAR 2000 COMPLIANCE. The Company has reviewed its operations to
evaluate the extent to which the business or operations of the Company and
its subsidiaries will be affected by the Year 2000 Problem (as defined
below). As a result of such review, the Company has no reason to believe,
and does not believe, that the Year 2000 Problem will have a Material
Adverse Effect. The "Year 2000 Problem" as used herein means any
significant risk that the Company's computer hardware or software used in
the receipt, transmission, processing, manipulation, storage, retrieval,
retransmissions or other utilization of data or in the operation of
mechanical or electrical systems of any kind will not, in the case of
dates or time periods occurring after December 31, 1999, function at least
as effectively as in the case of dates or time periods occurring prior to
January 1, 2000.
3.19 INVESTMENT COMPANY. The Company is not an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for an
investment company, within the meaning of the Investment Company Act of
1940, as amended.
3.20 OFFERING MATERIALS. The Company has not distributed and will not
distribute prior to the Closing Date any offering material in connection
with the offering and sale of the Shares other than the Company Reports.
The Company has not nor will it take any action to sell, offer for sale or
solicit offers to buy any securities of the Company which would reasonably
be expected to cause the offer or sale of the Shares, as contemplated by
this Agreement, to be within the provisions of Section 5 of the Securities
Act.
3.21 RELATED PARTY TRANSACTIONS. No transaction has occurred between or
among the Company and its affiliates, officers or directors or any
affiliate or affiliates of any such officer or director that is required
to be described in the Company's Reports and other filings under the
Securities Exchange Act of 1934 (the "Exchange Act") that is not so
described.
3.22 BOOKS AND RECORDS. The books, records and accounts of the Company
accurately and fairly reflect, in reasonable detail, the transactions in,
and dispositions of, the assets of, and the results of operations of, the
Company, all to the extent required by generally accepted accounting
principles. The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles and to maintain asset accountability, (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 the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
8
<PAGE>
4. REPRESENTATIONS OF THE PURCHASERS.
Each Purchaser, severally and not jointly, represents and warrants to the
Company as follows:
4.1 INVESTMENT. Purchaser (a) is acquiring the Shares solely for its own
account for investment purposes and not with a view to, or for sale in
connection with, any distribution thereof, nor with any present intention
of distributing or selling the same other than pursuant to an effective
registration statement under the Securities Act, (b) has no present or
contemplated agreement, undertaking, arrangement, obligation, indebtedness
or commitment providing for the disposition thereof and (c) is fully aware
that in agreeing to sell the Shares and entering into this Agreement, the
Company is relying upon the truth and accuracy of the representations and
warranties contained herein. Each Purchaser has made its own investment
decision without reliance upon any representation, warranty or covenant
from any other Purchaser.
4.2 AUTHORITY FOR AGREEMENT. Purchaser has full power and authority to
execute, deliver and perform its obligations under this Agreement in
accordance with its terms. Purchaser represents that it has not been
organized, reorganized or recapitalized specifically for the purpose of
investing in the Company. This Agreement has been duly executed and
delivered by Purchaser and constitutes a valid and binding obligation of
Purchaser, enforceable against such Purchaser in accordance with its
terms.
4.3 INFORMATION. Purchaser or its attorney-in-fact (a) has reviewed the
representations of the Company contained in this Agreement and the Company
Reports and (b) has had the opportunity to make inquiry concerning the
Company and its business and personnel. The officers of the Company have
made available to each such person any and all written information that it
has requested and have answered to each such person's satisfaction all
inquiries made.
4.4 ACCREDITED INVESTOR. Purchaser is an "Accredited Investor" as that term is
defined in Rule 501 of Regulation D promulgated under the Securities Act.
Purchaser, either alone or with its purchaser representative or
attorney-in-fact, has sufficient knowledge and experience in investing in
companies similar to the Company so as to be able to evaluate the risks
and merits of its investment in the Company and is able financially to
bear the risks thereof, including a complete loss of its entire
investment.
4.5 TRANSFER OF SHARES. Purchaser will not, directly or indirectly, offer,
sell, pledge, transfer or otherwise dispose of (or solicit any offers to
buy, purchase or otherwise acquire or take a pledge of) any of the Shares
except in compliance with the Securities Act, the rules and regulations
promulgated thereunder, and applicable state securities laws.
9
<PAGE>
4.6 PURCHASER REPRESENTATIVES. In the event that any signatory hereto is
signing as attorney-in-fact for one or more advisory client Purchaser(s),
as indicated by checking the box above the signature for the Purchaser at
the end hereof, the undersigned signatory represents and warrants that the
undersigned has been duly appointed as attorney-in-fact of such
Purchaser(s), that the undersigned has sufficient discretionary authority
to enter into this Agreement on behalf of such Purchaser(s), and that each
of the representations and warranties contained in this Section 4 are true
and correct with respect to each of such Purchaser(s). Except as
specifically disclosed in writing prior to the date hereof to the Company,
the Purchaser is not an affiliate of the Company, a broker-dealer or
affiliated with a broker-dealer.
5. COVENANTS. The Company and the Purchasers agree as follows:
5.1 INFORMATION TO BE FURNISHED. The Company shall deliver to the
Purchaser with reasonable promptness, such material notices, information
and data with respect to the Company as the Company files with the SEC and
delivers to all holders of its Common Stock.
5.2 REGISTRATION OF SHARES. The Company will, at its expense, within 20
business days after the Closing Date file with the SEC a registration
statement on Form S-3, or if Form S-3 is unavailable to the Company, on
Form 5-1, to register, under the Securities Act, the resale of the Shares
by the holders thereof (the "Registration Statement"), and will use its
reasonable best efforts to cause such Registration Statement to become
effective as promptly as possible (including by filing when and as
appropriate amendments and supplements thereto and to the related
prospectus, and by making all required "Blue Sky" filings, if any) and to
remain effective continuously until the earlier of (a) two years from the
Closing Date, (b) such time as all of the Shares held by Purchaser may be
sold pursuant to Rule 144 promulgated under the Securities Act on a single
day without regard to volume limitations or (c) such time as all Shares
have been sold. After the Registration Statement is declared effective
under the Securities Act, the Company will furnish holders of Shares (and
to each underwriter, if any, of the Shares) with such number of copies of
the prospectus included in the Registration Statement as the holders may
reasonably request to facilitate the resale of the Shares. Each Purchaser
will cooperate in promptly providing all information or certificates
required from it in order to be included as a selling stockholder on such
Registration Statement. In the event that the Company shall fail to cause
the Registration Statement to be declared effective within 90 days after
the Closing Date, the Company shall pay to each holder of Shares, as
compensation therefor, a cash payment equal to 1% of the product obtained
by multiplying the Purchase Price and the number of Shares held by such
holder. In addition, if the Registration Statement is not declared
effective within 180 days after the Closing Date, the Company shall pay to
each holder of Shares
10
<PAGE>
an additional cash payment equal to 2% of the product obtained by
multiplying the Purchase Price and the number of Shares held by such
holder for each 30 day-period or part thereof that effectiveness of the
Registration Statement is delayed beyond 180 days after the Closing Date.
After the Closing Date, the Company shall not file or maintain any
registration statement with the Securities and Exchange Commission under
the Securities Act prior to the time it files the Registration Statement.
The Company, upon reasonable request of a Purchaser, will meet with such
Purchaser or a representative thereof at the Company's headquarters to
discuss information relevant for disclosure in the Registration Statement
covering the Shares, subject to appropriate confidentiality limitations as
the Company may require.
5.3 PURCHASER SALES PROCEDURES.
(a) Each Purchaser agrees that such Purchaser will not effect any
disposition of the Shares that would constitute a sale within the meaning
of the Securities Act, except as contemplated in the Registration
Statement, and that the Purchaser will promptly notify the Company of any
changes in the information set forth in the Registration Statement
regarding the Purchaser or such Purchaser's plan of distribution set forth
in such Registration Statement.
(b) For so long as the prospectus delivery requirement under the
Securities Act is in effect, the Purchaser shall not make any sale of the
Shares without complying with such requirement.
(c) Notwithstanding the provisions of Section 5.2, each Purchaser
acknowledges that there may occasionally be times when the Company must
suspend the use of the prospectus forming a part of the Registration
Statement if there then exists material, non-public information regarding
the Company, of such a nature that the public disclosure of which would
not, in the reasonable opinion of the Company, be appropriate at that
time; provided, however, that the Company shall not suspend the use of the
prospectus for a period or periods that, in the aggregate, exceed 90 days
in any twelve-month period. The Purchaser hereby covenants that, prior to
selling any Shares pursuant to the Registration Statement, the Purchaser
shall notify the Company in writing of its intent to sell Shares. The
Company shall have the two business days immediately following the date of
delivery of such notice during which to notify the Purchaser of a
suspension of the prospectus forming a part of the Registration Statement.
During this two-day period, the Purchaser will not sell any Shares. If the
Company notifies the Purchaser that use of the prospectus has been
suspended, the Purchaser will not sell any Shares pursuant to said
prospectus until such time that the Company gives the Purchaser notice
(all such notices shall be given by the Company as promptly as practicable
following the suspension notice) that the Purchaser may thereafter effect
sales pursuant to said prospectus, from which time the Purchaser may sell
shares for a period of ten business days without complying
11
<PAGE>
with the pre-sale notification requirements set forth above. The Purchaser
further covenants to promptly notify the Company following the sale of all
of the Purchaser's Shares.
5.4 LISTING OF SHARES. The Company will, within twenty business days after
the Closing Date, file with The Nasdaq Stock Market, Inc. a Notification
of Listing of Additional Shares (together with the required listing fee),
thereby listing the Shares on the NASDAQ National Market.
5.5 MARKET STAND-OFF. If requested by the managing underwriters in an
underwritten offering composed primarily of newly issued shares of Common
Stock, the Purchasers, or any assignees thereof, will not sell any of the
Shares for up to 90 days (as requested by such underwriters) following
such public.
6. INDEMNIFICATION AND CONTRIBUTION.
6.1 INDEMNIFICATION BY THE COMPANY. The Company will indemnify and hold
harmless each Purchaser, and each other person, if any, who controls or is
an affiliate of such Purchaser within the meaning of the Securities Act or
the Exchange Act, against any losses, claims, damages or liabilities,
joint or several, to which such Purchaser, controlling person or affiliate
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 the Registration Statement under which the
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 Purchaser and
each such controlling person and affiliate for any legal or any other
expenses reasonably incurred by such Purchaser, controlling person or
affiliate 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 information furnished to the Company,
in writing, by or on behalf of such Purchaser, controlling person or
affiliate specifically for use in the preparation thereof.
6.2 INDEMNIFICATION BY THE PURCHASERS. Each Purchaser, 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
12
<PAGE>
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 the 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, but only to the extent the statement or omission was made in
reliance upon and in conformity with information relating to such
Purchaser furnished in writing to the Company by or on behalf of such
Purchaser specifically for use in connection with the preparation of such
Registration Statement, prospectus, amendment or supplement; provided,
however, that the obligations of each Purchaser hereunder shall be limited
to an amount equal to the net proceeds to such Purchaser of Shares sold in
connection with such registration.
6.3 INDEMNIFICATION PROCEDURES. 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, unless and except to the extent that the
Indemnifying Party is prejudiced by the failure of the Indemnified Party
to provide timely notice. 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
in the judgment of the Indemnified Party 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
13
<PAGE>
settle such claim or litigation without the prior written consent of the
Indemnifying Party.
6.4 CONTRIBUTION. In order to provide for just and equitable contribution
to joint liability under the Securities Act in any case in which either
(a) any Purchaser, or any controlling person of any such Purchaser, makes
a claim for indemnification pursuant to this Section 6 but it is
judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or
the denial of the last right of appeal) that such indemnification may not
be enforced in such case notwithstanding the fact that this Section 6
provides for indemnification in such case, or (b) contribution under the
Securities Act may be required on the part of any such Purchaser or any
such controlling person in circumstances for which indemnification is
provided under this Section 6; then, in each such case, the Company and
such Purchaser will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others)
in such proportions so that such Purchaser is responsible for the portion
represented by the percentage that the public offering price of its Shares
offered by the Registration Statement bears to the public offering price
of all securities offered by such Registration Statement, and the Company
is responsible for the remaining portion; provided, however, that, in any
such case, (x) no such Purchaser will be required to contribute any amount
in excess of the net proceeds to it of all Shares sold by it pursuant to
such Registration Statement and (y) no person or entity guilty of
fraudulent misrepresentation, within the meaning of Section 11(f) of the
Securities Act, shall be entitled to contribution from any person or
entity who is not guilty of such fraudulent misrepresentation.
7. RIGHT OF FIRST REFUSAL.
7.1 LIMITATION ON FUTURE ISSUANCES. For a period of one year from the date
hereof, the Company shall not issue, sell or exchange, or agree to issue,
sell or exchange (a) any shares of its Common Stock or (b) any option,
warrant or other right that is exercisable for, or convertible into,
shares of its Common Stock (collectively, "Offered Securities"), unless in
each such case the Company shall have first complied with this Section 7.
7.2 PROCEDURE.
(a) The Company shall deliver to each Purchaser a written notice of
any proposed or intended issuance, sale or exchange of Offered Securities
(the "Offer"), which Offer shall (i) identify and describe the Offered
Securities, (ii) describe the price and other terms upon which they are to
be issued, sold or exchanged, and the number or amount of the Offered
Securities to be issued, sold or exchanged and (iii) offer to issue and
sell to or exchange with such Purchaser that number of the Offered
Securities which represents the same percentage of the
14
<PAGE>
total Offered Securities as the number of Shares held by such Purchaser
represents of the total number of shares of Common Stock outstanding (the
"Basic Amount"). Each Purchaser shall have the right, for a period of 10
business days following delivery of the Offer, to accept the Offer in the
manner set forth below. The Offer by its term shall remain open and
irrevocable for such 10-business day period. To accept an Offer, in whole
or in part, a Purchaser must deliver a written notice to the Company prior
to the end of the 10-business day period of the Offer, setting forth the
portion of such Purchaser's Basic Amount that such Purchaser elects to
purchase (the "Notice of Acceptance").
(b) The Company shall have 60 days from the expiration of the
10-business day period set forth above to issue, sell or exchange all or
any part of such Offered Securities as to which a Notice of Acceptance has
not been given by the Investors, but only upon terms and conditions which
are not more favorable, in the aggregate, to the acquiring person or
persons or less favorable to the Company than those set forth in the
Offer.
(c) Any Offered Securities not acquired by the Purchasers or other
persons in accordance with Section 7.2 may not be issued, sold or
exchanged until they are again offered to the Purchasers under the
procedures specified in this Section 7.
7.3 EXCLUDED ISSUANCES. The rights of the Purchasers under this Section 7
shall not apply to:
(a) Common Stock issued as a stock dividend to holders of Common
Stock or upon any subdivision or combination of shares of Common Stock;
(b) the issuance of shares of Common Stock, or options exercisable
therefor, to employees, consultants, directors, equipment lessors or banks
(in commercial bank financing arrangements) or similar institutional
credit financing sources;
(c) securities issued solely in consideration for the acquisition
(whether by merger or otherwise) by the Company or any of its subsidiaries
of stock or assets of any other entity, or in connection with a licensing
or strategic partnering transaction approved by the Board of Directors of
the Company (and the stockholders, if required under applicable law or
regulation); or
(d) shares of Common Stock sold by the Company in an underwritten
public offering pursuant to an effective registration statement under the
Securities Act.
15
<PAGE>
8. MISCELLANEOUS.
8.1 ASSIGNABILITY. This Agreement, and the rights and obligations of the
Purchaser hereunder, may not be assigned in whole or in part by Purchaser
to any person or entity other than to an affiliate of such Purchaser or
its ultimate parent entity.
8.2 CONFIDENTIALITY. Purchaser agrees that it will keep confidential and
will not disclose or divulge any confidential, proprietary or secret
information which Purchaser may obtain from the Company pursuant to this
Agreement, unless such information is known, or until such information
becomes known, to the public; provided, however, that Purchaser may
disclose such information (a) to its attorneys, accountants, consultants
and other professionals to the extent necessary to obtain their services
in connection with its investment in the Company, (b) to any prospective
purchaser of any Shares from a Purchaser as long as such prospective
purchaser agrees in writing to be bound by the provisions of this Section
or (c) to any affiliate of a Purchaser; subject, in each case, to the
agreement of such party to keep such information confidential as set forth
herein.
8.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All agreements,
representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the closing of the
transactions contemplated hereby.
8.4 NOTICES. All notices, requests, consents and other communications
under this Agreement shall be in writing and shall be delivered by hand,
sent via a reputable nationwide overnight courier service, transmitted via
facsimile with hard copy via U.S. mail, or mailed by first class certified
or registered mail, return receipt requested, postage prepaid:
If to the Company, at White Pine Software, Inc., 542 Amherst Street,
Nashua, New Hampshire 03063, Attention: Chief Executive Officer, or
at such other address as may have been furnished in writing by the
Company to the Purchaser, with a copy to: Mark L. Johnson, Esq.,
Foley, Hoag & Eliot LLP, One Post Office Square, Boston,
Massachusetts 02109; or
If to any Purchaser, at its address as indicated on Exhibit A below,
or at such other address or addresses as may have been furnished in
writing by the Purchaser to the Company.
16
<PAGE>
Notices provided in accordance with this Section 8.4 shall be deemed
delivered upon personal delivery, one business day after being sent via a
reputable nationwide overnight courier service for next business day
delivery, or two business days after deposit in the mail and on the next
business day following transmittal via facsimile.
8.5 EXPENSES. The Company and each Purchaser each agree to indemnify and
save the other harmless from and against any and all claims, liabilities
or obligations with respect to brokerage or finders' fees or commissions
in connection with the transactions contemplated by this Agreement
asserted by any person on the basis of any agreement, statement or
representation alleged to have been made by such indemnifying party. The
Company shall pay its own expenses including attorneys' fees.
8.6 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.
8.7 AMENDMENT AND WAIVER. Except as otherwise expressly set forth in this
Agreement, any term of this Agreement may be amended and the observance of
any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), with the
written consent of the Company and of Purchasers holding in the aggregate
not less than two-thirds (67%) of all the Shares then outstanding and held
by the Purchasers. Any amendment or waiver effected in accordance with
this Section 6.7 shall be binding upon each holder of any Shares. No
waivers of or exceptions to any term, condition or provision of this
Agreement, in any one or more instances, shall be deemed to be, or
construed as, a further or continuing waiver of any such term, condition
or provision.
8.8 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.
8.9 SEPARATE AGREEMENT WITH EACH PURCHASER. While this Agreement is being
executed in multiple counterparts with multiple Purchasers, the
transaction with each Purchaser shall be considered a separate transaction
and none of the rights or obligations of any Purchaser shall be the in any
way affected by actions of any other Purchasers except to the extent that
Purchasers are required by the terms hereof to act as a group.
8.10 HEADINGS. The section headings are for the convenience of the parties
and in no way alter, modify, amend, limit or restrict the contractual
obligations of the parties.
17
<PAGE>
8.11 ENFORCEABILITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
8.12 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to
the choice of law provisions thereof.
* * *
18
<PAGE>
Executed as of the date first written above.
WHITE PINE SOFTWARE, INC.
By: /s/ Killko A. Caballero
------------------------------
Killko A. Caballero
Chief Executive Officer
PURCHASER:
Shares Purchased Dollars Invested
- ---------------- ----------------
325,521 $5,000,002.56
/s/ Steve Hawkins
- ---------------------------
(Purchaser's name here)
Altamira Management Ltd. as Agent for the Accounts listed in Exhibit A
Steve Hawkins, Supervisor Compliance
/ / Check this box to the undersigned is acting as attorney-in-fact for certain
advisory client Purchasers with respect to which it has discretionary authority.
By:________________________________
Name:______________________________
Title:_____________________________
Date:______________________________
Address for delivery of shares:
___________________________________
___________________________________
Contact Information
Steve Hawkins
ph (416) 507-7108 fx (416) 507-7111
e-mail: [email protected]
19
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
ALTAMIRA MANAGEMENT LTD. SHARE
- ------------------------ -----
ACCOUNT# QUANTITY NET AMOUNT REGISTRATION INSTRUCTION DELIVERY INSTRUCTIONS
-------- -------- ---------- ------------------------ ---------------------
<S> <C> <C> <C> <C> <C>
31 162,760 $2,499,993.60 JAYVEE & CO A/C YARF 1209002 CIBC MELLON GLOBAL SECURITIES
CIBC MELLON GLOBAL SECURITES COMMERCE COURT WEST,
320 BAY STREET, P0 BOX 1 SECURITIES LEVEL
TORONTO ONT. M5H 4A6 TORONTO, ONT M5G 1A2
ATTN: MICHAEL PAVKOVIC
360 99,886 $1,534,248.96 JAYVEE & CO A/C YARF 1203002 CIBC MELLON GLOBAL SECURITIES
CIBC MELLON GLOBAL SECURITES COMMERCE COURT WEST,
320 BAY STREET, P0 BOX 1 SECURITIES LEVEL
TORONTO ONT. M5H 4A6 TORONTO, ONT M5G 1A2
ATTN: MICHAEL PAVKOVIC
408 62,875 $965,760.00 ROYAL TRUST CORP. OF CANADA IN ROYAL TRUST CORP OF CANADA
TRUST FOR ACCOUNT 27396004 ROYAL BANK PLAZA, 200 BAY ST.
ROYAL BANK PLAZA 200 SOUTH TOWER, SUB LEVEL
BAY STREET TORONTO TORONTO, ONT. M5J 2J5
ONT M5J 2J5 ATTN: NALINI
SAHADEO
TOTALS 325,521 $5,000,002.56
</TABLE>
<PAGE>
Exhibit 10.11(b)
STOCK PURCHASE AGREEMENT
This Agreement dated as of December 31, 1999 is entered into by and among
White Pine Software, Inc., a Delaware corporation (the "Company"), and each
entity which executes a counterpart to this Agreement and is listed on Exhibit A
(each referred to herein as a "Purchaser," and collectively referred to herein
as the "Purchasers").
In consideration of the mutual promises and covenants contained in this
Agreement, the parties hereto agree as follows:
1. PURCHASE AND SALE OF SHARES.
1.1 AUTHORIZATION. The Company has duly authorized the sale and issuance,
pursuant to the terms of this Agreement, of an aggregate of 325,521 shares
(the "Shares") of its common stock, $0.01 par value per share ("Common
Stock").
1.2 PURCHASE AND SALE OF SHARES. Subject to the terms and conditions of
this Agreement, each Purchaser agrees to purchase and the Company agrees
to sell, that number of Shares indicated opposite the Purchaser's name on
Exhibit A, at a purchase price equal to $15.36 per share (the "Purchase
Price").
1.3 CLOSING. The Closing of the purchase and sale of the Shares
contemplated by this Agreement (the "Closing") shall take place at the
offices of Foley, Hoag & Eliot LLP, One Post Office Square, Boston,
Massachusetts 02109 at 12 noon EST, on December 31, 1999, or at such other
place and time as mutually agreed by the Company and the Purchasers (the
"Closing Date"). At the Closing, the Company shall deliver to each
Purchaser a certificate for the number of Shares for which that Purchaser
has subscribed against payment of the purchase price therefore. Each
Purchaser shall remit the purchase price for the Shares being purchased at
the Closing by wire transfer of same-day funds to an account designated in
writing by the Company.
1.4 USE OF PROCEEDS. The Company will use the proceeds from the sale of
the Shares for working capital and other general corporate purposes.
<PAGE>
2. CONDITIONS TO CLOSING.
The obligation of the Purchasers to purchase and pay for the Shares shall
be subject to the accuracy of the representations and warranties made by the
Company herein and to the following conditions (any of which may be waived by a
Purchaser, acting individually, in its sole discretion, as to such Purchaser's
own Shares, but not as to the Shares to be purchased by any other Purchaser):
2.1 DELIVERIES BY THE COMPANY. The Company shall deliver to the Purchaser
or its agent:
(a) a certificate, as of recent date, as to the legal existence and
corporate good standing of the Company issued by the Secretary of State of
the State of Delaware;
(b) a copy of the Certificate of Incorporation of the Company, as
amended and in effect as of the Closing Date, certified by the Secretary
of State of the State of Delaware;
(c) a copy of the resolutions of the Board of Directors of the
Company authorizing and approving this Agreement and the issuance of the
Shares hereby, certified by the Secretary of the Company;
(d) a copy of the By-laws of the Company, certified by the Secretary
of the Company as in effect as of the Closing Date;
(e) an opinion of Foley, Hoag & Eliot LLP, counsel to the Company,
in substantially the form attached hereto as Exhibit B; and
(f) an executed lock-up agreement from each officer and director of
the Company in substantially the form attached hereto as Exhibit C.
3. REPRESENTATIONS OF THE COMPANY. Except as set forth in the applicable section
of the Disclosure Schedule attached hereto, the Company hereby represents and
warrants to each Purchaser as follows as of the date hereof and as of Closing.
3.1 ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. The Company is duly qualified or otherwise authorized
to transact business as a foreign corporation and is in good standing in
each jurisdiction in which the failure to so qualify would have a material
adverse effect on the results of operations, business or financial
condition of the Company and its subsidiaries taken as a whole (a
"Material Adverse Effect"). Each of the Company's subsidiaries is a
corporation duly organized, validly existing an din good standing under
the laws of its jurisdiction of incorporation. Each of the
2
<PAGE>
Company's subsidiaries is duly qualified or otherwise authorized to
transact business as a foreign corporation and is in good standing in each
jurisdiction in which the failure to so qualify would have a Material
Adverse Effect.
3.2 CAPITALIZATION. The Company is authorized to issue (a) 30,000,000
shares of Common Stock, and (b) 5,000,000 shares of Preferred Stock, $0.01
par value per share. As of December 22, 1999, there were issued and
outstanding [10,702,213] shares of Common Stock; no shares of Preferred
Stock had been issued or were outstanding; and options, warrants or rights
to purchase an aggregate of approximately 1,679,016 shares of Common Stock
had been granted by the Company and were outstanding. The Common Stock and
the Preferred Stock of the Company have the voting powers, designations,
preferences, rights and qualifications, and limitations or restrictions
set forth in the Certificate of Incorporation and amendments thereto. All
of the issued and outstanding shares of capital stock of the Company have
been duly authorized and validly issued, are fully paid and nonassessable,
have been issued in compliance with all federal and state securities laws,
were not issued in violation of or subject to any preemptive rights or
other rights to subscribe for or purchase securities, and conform in all
material respects to the description thereof contained in the Company's
Registration Statement on Form 8-A and the Company Reports (as hereinafter
defined). Except as disclosed in the first sentence of this section, 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 shares of
capital stock of any subsidiary and there is no commitment, plan or
arrangement to issue, any securities or obligations convertible into any
shares of capital stock of the Company or its subsidiaries or any such
options, rights convertible securities or obligations. The description of
the Company's capital stock, stock bonus and other stock plans or
arrangements and the options or other rights granted and exercised
thereunder, contained in the Company's Registration Statement on Form 8-A
and the Company Reports accurately and fairly presents the information
required to be shown with respect to such capital stock, plans,
arrangements, options and rights (except for issuances and exercises of
options in the ordinary course of business).
3.3 AUTHORITY FOR AGREEMENT. The execution, delivery and performance of
this Agreement by the Company has been duly authorized by all necessary
corporate action on the part of the Company, and this Agreement has been
duly executed and delivered by the Company, and this Agreement constitutes
the valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium and similar laws affecting the rights and remedies
of creditors generally and to general principles of equity.
3
<PAGE>
3.4 ISSUANCE AND SALE OF SHARES. The issuance and sale of the Shares by
the Company has been duly authorized and the Shares have been duly
reserved for issuance by all necessary corporate action on the part of the
Company, and the Shares, when issued and delivered against payment
therefor, will be validly issued, fully paid and nonassessable. Based in
part on the representations made by or on behalf of each Purchaser in
Section 4 of this Agreement, the offer, issuance and sale of the Shares
pursuant to this Agreement are exempt from registration under the
Securities Act. The issued shares of capital stock of each of the
Company's subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable and are owned by the Company free and clear
of any perfected security interest, or any other security interests,
liens, encumbrances, equities or claims. No preemptive rights or other
rights to subscribe for or purchase exist with respect to the issuance and
sale of the Shares by the Company pursuant to this Agreement. No
stockholder of the Company has any right to request or require the Company
to register the sale of any shares owned by such stockholder under the
Securities Act of 1933, as amended (the "Securities Act"), in the
Registration Statement (as hereinafter defined). No further approval or
authority of the stockholders or the Board of Directors of the Company
will be required for the issuance and sale of the Shares to be sold by the
Company hereunder.
3.5 NO BREACH. The execution, delivery and performance of this Agreement
by the Company will not (a) conflict with or violate any provision of the
Certificate of Incorporation, as amended, or By-laws of the Company, (b)
require on the part of the Company any filing with, or permit,
authorization, consent or approval of, any governmental entity, (c) result
in breach of, constitute a default under, or require any notice, consent
or waiver under, any contract, agreement or other instrument to which the
Company is a party or by which it is bound (other than any consent or
waiver which has already been obtained) or (d) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company,
excluding from subparagraphs (a)-(d) such matters as would not in the
aggregate have a Material Adverse Effect or a material adverse effect upon
the transactions contemplated hereby. No consent, approval, authorization
or other order of any court, regulatory body, administrative agency or
other governmental body is required for the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby, except for compliance with the Blue Sky laws and
federal securities laws applicable to the offering of the Shares.
3.6 SEC REPORTS. The Company has previously furnished to the Purchasers
complete and accurate copies, as amended or supplemented, of its (a)
Annual Report on Form 10-KSB for the fiscal year ended December 31,1998,
as filed with the SEC, (b) all proxy statements relating to the Company's
meetings of stockholders held or currently scheduled since December 31,
1998 and (c) all other publicly available reports filed by the Company
with the SEC under the
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Securities Exchange Act of 1934, as amended (the "Exchange Act"), since
December 31, 1998 and through the date hereof (such reports are
collectively referred to herein as the "Company Reports"). The Company
Reports constitute all of the documents required to be filed by the
Company under Section 13, 14 or 15(d) of the Exchange Act with the SEC
since January 1, 1999. As of their respective dates, the Company Reports
did not, and as of the date hereof do not, contain any untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3.7 FINANCIAL STATEMENTS. The audited financial statements and unaudited
interim financial statements of the Company included in the Company
Reports (a) comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, (b) have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby
(except as may be indicated therein or in the notes thereto), (c) fairly
present the consolidated financial condition, results of operations and
cash flows of the Company as of the respective dates thereof and for the
periods referred to therein and (d) are consistent with the books and
records of the Company.
3.8 OTHER INFORMATION. The Company has provided to and discussed with the
Purchaser such information as the Purchaser has requested regarding the
current operations, financial condition (including the amount of available
cash) and plans of the Company.
3.9 MATERIAL ADVERSE CHANGE. Since December 31, 1998, and except as
disclosed by the Company in the Company Reports or otherwise in writing to
the Purchasers, (i) there has not been any material adverse change in the
operations or financial condition of operations of the Company, except
that the Company continues to incur operating losses, (ii) neither the
Company nor its subsidiaries have incurred any liabilities or obligations,
indirect or contingent, of such a nature that would require inclusion on a
balance sheet under generally accepted accounting principles (nor, to the
Company's knowledge, any other liabilities or obligations) or entered into
any verbal or written agreements or other transactions which are not in
the ordinary course of business or which could reasonably be expected to
result in a Material Adverse Effect; (iii) neither the Company nor its
subsidiaries have sustained any material loss or interference with its
businesses or properties from fire, flood, windstorm, accident or other
calamity not covered by insurance; (iv) neither the Company nor its
subsidiaries have paid or declared any dividends or other distributions
with respect to its capital stock and neither the Company nor its
subsidiaries is in default in the payment of principal or interest on any
outstanding debt obligations; and (v) there has not been any change in the
capital stock of the Company other than the sale of the Shares hereunder
and shares or options issued pursuant to exercise of outstanding
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warrants or employee and director stock option plans approved by the
Company's Board of Directors. There is no fact which the Company has not
disclosed to the Purchasers and their counsel in writing and of which the
Company is aware which has, had or is reasonably likely to have a Material
Adverse Effect.
3.10 ACTIONS AND PROCEEDINGS. There are no actions, suits or claims or
legal or arbitral proceedings or governmental inquiries or investigations,
pending, or, to the Company's knowledge, threatened against the Company,
which question the validity of this Agreement or the right of the Company
to enter into it, or which might result in a Material Adverse Effect.
3.11 PROPERTIES. Each of the Company and its subsidiaries has good and
marketable title to all the properties and assets reflected as owned by
them in the consolidated financial statements included in the Company's
Annual Report on Form 10-KSB for the fiscal year ended December 31, 1998,
subject to no lien, mortgage, pledge, charge or encumbrance of any kind
except (i) those, if any, reflected in such consolidated financial
statements, or (ii) those which are not material in amount and do not
materially and adversely affect the use made and intended to be made of
such property by the Company or its subsidiaries. Each of the Company and
its subsidiaries holds its leased properties under valid and binding
leases, with such exceptions as are not materially significant in relation
to the business of the Company and its subsidiaries, taken as a whole.
Each of the Company and its subsidiaries owns or leases all such
properties as are necessary to its operations as now conducted.
3.12 INTELLECTUAL PROPERTY. The Company and its subsidiaries own or have
obtained valid licenses, options or rights to use for the material
inventions, patent applications, patents, trademarks (both registered and
unregistered), tradenames, copyrights and trade secrets necessary for the
conduct of the Company's and its subsidiaries' respective businesses as
currently conducted and as the Company and its subsidiaries contemplate
conducting in all material respects (collectively, the "Intellectual
Property"). Neither the Company nor any of its subsidiaries has received
notice of any third parties who have any ownership rights to any
Intellectual Property that is owned by, or has been licensed to, the
Company or its subsidiaries that would preclude the Company or its
subsidiaries from conducting their respective businesses as currently
conducted and as the Company and its subsidiaries contemplate conducting
in all material respects. To the Company's knowledge, there are currently
no sales of products that would constitute an infringement by third
parties of any material Intellectual Property owned, licensed or optioned
by the Company or its subsidiaries. There is no pending or, to the
Company's knowledge, threatened action, suit, proceeding or claim by
others challenging the rights of the Company or its subsidiaries in or to
any material Intellectual Property owned, licensed or optioned by the
Company or its subsidiaries. There is no pending or, to the Company's
knowledge, threatened action, suit, proceeding or claim by others
challenging the validity or
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scope of any material Intellectual Property owned, licensed or optioned by
the Company or its subsidiaries. There is no pending or, to the Company's
knowledge, threatened action, suit, proceeding or claim by others that the
Company or its subsidiaries infringe or otherwise violate any patent,
trademark, copyright, trade secret or other proprietary right of others as
would reasonably be expected to result in a Material Adverse Effect.
3.13 COMPLIANCE. Neither the Company nor any of its subsidiaries has been
advised, and has no reason to believe, that it is not conducting its
business in compliance with all applicable laws, rules and regulations of
the jurisdictions in which it is conducting business, including, without
limitation, all applicable local, state and federal environmental laws and
regulations, except where failure to be so in compliance would not
individually or in the aggregate have a Material Adverse Effect.
3.14 TAXES. Each of the Company and its subsidiaries has filed or obtained
filing extensions with respect to all federal, state, local and foreign
income and franchise tax returns material to the Company and the
subsidiaries, taken as a whole, and has paid or accrued all taxes shown as
due thereon, and neither the Company nor any of its subsidiaries has
knowledge of a tax deficiency which has been asserted or threatened
against it which would reasonably be expected to have a Material Adverse
Effect.
3.15 TRANSFER TAXES. On the Closing Date, all stock transfers or other
taxes (other than income taxes) which are required to be paid in
connection with the sale and transfer of the Shares to be sold to the
Purchasers hereunder will be, or will have been, fully paid or provided
for by the Company and all laws imposing such taxes will be or will have
been fully complied with.
3.16 INSURANCE. Each of the Company and its subsidiaries maintains
insurance of the type and in the amount that the Company reasonably
believes is adequate for its business, including, but not limited to,
insurance covering all real and personal property owned or leased by the
Company or its subsidiaries against risks customarily insured against by
similarly situated companies, all of which insurance is in full force and
effect.
3.17 CONTRIBUTIONS. Neither the Company at any time since its
incorporation nor its subsidiaries at any time since they were acquired or
formed by the Company have, directly or indirectly, (i) made any unlawful
contribution to any candidate for public office, failed to disclose fully
where required by law any contribution in violation of law, or (ii) made
any payment to any federal or state governmental officer or official, or
other person charged with similar public or quasi-public duties, other
than payments required or permitted by the laws of the United States or
any jurisdiction thereof and in each case except for instances that would
not have a Material Adverse Effect.
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3.18 YEAR 2000 COMPLIANCE. The Company has reviewed its operations to
evaluate the extent to which the business or operations of the Company and
its subsidiaries will be affected by the Year 2000 Problem (as defined
below). As a result of such review, the Company has no reason to believe,
and does not believe, that the Year 2000 Problem will have a Material
Adverse Effect. The "Year 2000 Problem" as used herein means any
significant risk that the Company's computer hardware or software used in
the receipt, transmission, processing, manipulation, storage, retrieval,
retransmissions or other utilization of data or in the operation of
mechanical or electrical systems of any kind will not, in the case of
dates or time periods occurring after December 31, 1999, function at least
as effectively as in the case of dates or time periods occurring prior to
January 1, 2000.
3.19 INVESTMENT COMPANY. The Company is not an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for an
investment company, within the meaning of the Investment Company Act of
1940, as amended.
3.20 OFFERING MATERIALS. The Company has not distributed and will not
distribute prior to the Closing Date any offering material in connection
with the offering and sale of the Shares other than the Company Reports.
The Company has not nor will it take any action to sell, offer for sale or
solicit offers to buy any securities of the Company which would reasonably
be expected to cause the offer or sale of the Shares, as contemplated by
this Agreement, to be within the provisions of Section 5 of the Securities
Act.
3.21 RELATED PARTY TRANSACTIONS. No transaction has occurred between or
among the Company and its affiliates, officers or directors or any
affiliate or affiliates of any such officer or director that is required
to be described in the Company's Reports and other filings under the
Securities Exchange Act of 1934 (the "Exchange Act") that is not so
described.
3.22 BOOKS AND RECORDS. The books, records and accounts of the Company
accurately and fairly reflect, in reasonable detail, the transactions in,
and dispositions of, the assets of, and the results of operations of, the
Company, all to the extent required by generally accepted accounting
principles. The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles and to maintain asset accountability, (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 the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
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4. REPRESENTATIONS OF THE PURCHASERS.
Each Purchaser, severally and not jointly, represents and warrants to the
Company as follows:
4.1 INVESTMENT. Purchaser (a) is acquiring the Shares solely for its own
account for investment purposes and not with a view to, or for sale in
connection with, any distribution thereof, nor with any present intention
of distributing or selling the same other than pursuant to an effective
registration statement under the Securities Act, (b) has no present or
contemplated agreement, undertaking, arrangement, obligation, indebtedness
or commitment providing for the disposition thereof and (c) is fully aware
that in agreeing to sell the Shares and entering into this Agreement, the
Company is relying upon the truth and accuracy of the representations and
warranties contained herein. Each Purchaser has made its own investment
decision without reliance upon any representation, warranty or covenant
from any other Purchaser.
4.2 AUTHORITY FOR AGREEMENT. Purchaser has full power and authority to
execute, deliver and perform its obligations under this Agreement in
accordance with its terms. Purchaser represents that it has not been
organized, reorganized or recapitalized specifically for the purpose of
investing in the Company. This Agreement has been duly executed and
delivered by Purchaser and constitutes a valid and binding obligation of
Purchaser, enforceable against such Purchaser in accordance with its
terms.
4.3 INFORMATION. Purchaser or its attorney-in-fact (a) has reviewed the
representations of the Company contained in this Agreement and the Company
Reports and (b) has had the opportunity to make inquiry concerning the
Company and its business and personnel. The officers of the Company have
made available to each such person any and all written information that it
has requested and have answered to each such person's satisfaction all
inquiries made.
4.4 ACCREDITED INVESTOR. Purchaser is an "Accredited Investor" as that term is
defined in Rule 501 of Regulation D promulgated under the Securities Act.
Purchaser, either alone or with its purchaser representative or
attorney-in-fact, has sufficient knowledge and experience in investing in
companies similar to the Company so as to be able to evaluate the risks
and merits of its investment in the Company and is able financially to
bear the risks thereof, including a complete loss of its entire
investment.
4.5 TRANSFER OF SHARES. Purchaser will not, directly or indirectly, offer,
sell, pledge, transfer or otherwise dispose of (or solicit any offers to
buy, purchase or otherwise acquire or take a pledge of) any of the Shares
except in compliance with the Securities Act, the rules and regulations
promulgated thereunder, and applicable state securities laws.
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4.6 PURCHASER REPRESENTATIVES. In the event that any signatory hereto is
signing as attorney-in-fact for one or more advisory client Purchaser(s),
as indicated by checking the box above the signature for the Purchaser at
the end hereof, the undersigned signatory represents and warrants that the
undersigned has been duly appointed as attorney-in-fact of such
Purchaser(s), that the undersigned has sufficient discretionary authority
to enter into this Agreement on behalf of such Purchaser(s), and that each
of the representations and warranties contained in this Section 4 are true
and correct with respect to each of such Purchaser(s). Except as
specifically disclosed in writing prior to the date hereof to the Company,
the Purchaser is not an affiliate of the Company, a broker-dealer or
affiliated with a broker-dealer.
5. COVENANTS. The Company and the Purchasers agree as follows:
5.1 INFORMATION TO BE FURNISHED. The Company shall deliver to the
Purchaser with reasonable promptness, such material notices, information
and data with respect to the Company as the Company files with the SEC and
delivers to all holders of its Common Stock.
5.2 REGISTRATION OF SHARES. The Company will, at its expense, within 20
business days after the Closing Date file with the SEC a registration
statement on Form S-3, or if Form S-3 is unavailable to the Company, on
Form S-l, to register, under the Securities Act, the resale of the Shares
by the holders thereof (the "Registration Statement"), and will use its
reasonable best efforts to cause such Registration Statement to become
effective as promptly as possible (including by filing when and as
appropriate amendments and supplements thereto and to the related
prospectus, and by making all required "Blue Sky" filings, if any) and to
remain effective continuously until the earlier of (a) two years from the
Closing Date, (b) such time as all of the Shares held by Purchaser may be
sold pursuant to Rule 144 promulgated under the Securities Act on a single
day without regard to volume limitations or (c) such time as all Shares
have been sold. After the Registration Statement is declared effective
under the Securities Act, the Company will furnish holders of Shares (and
to each underwriter, if any, of the Shares) with such number of copies of
the prospectus included in the Registration Statement as the holders may
reasonably request to facilitate the resale of the Shares. Each Purchaser
will cooperate in promptly providing all information or certificates
required from it in order to be included as a selling stockholder on such
Registration Statement. In the event that the Company shall fail to cause
the Registration Statement to be declared effective within 90 days after
the Closing Date, the Company shall pay to each holder of Shares, as
compensation therefor, a cash payment equal to 1% of the product obtained
by multiplying the Purchase Price and the number of Shares held by such
holder. In addition, if the Registration Statement is not declared
effective within 180 days after the Closing Date, the Company shall pay to
each holder of Shares
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an additional cash payment equal to 2% of the product obtained by
multiplying the Purchase Price and the number of Shares held by such
holder for each 30 day-period or part thereof that effectiveness of the
Registration Statement is delayed beyond 180 days after the Closing Date.
After the Closing Date, the Company shall not file or maintain any
registration statement with the Securities and Exchange Commission under
the Securities Act prior to the time it files the Registration Statement.
The Company, upon reasonable request of a Purchaser, will meet with such
Purchaser or a representative thereof at the Company's headquarters to
discuss information relevant for disclosure in the Registration Statement
covering the Shares, subject to appropriate confidentiality limitations as
the Company may require.
5.3 PURCHASER SALES PROCEDURES.
(a) Each Purchaser agrees that such Purchaser will not effect any
disposition of the Shares that would constitute a sale within the meaning
of the Securities Act, except as contemplated in the Registration
Statement, and that the Purchaser will promptly notify the Company of any
changes in the information set forth in the Registration Statement
regarding the Purchaser or such Purchaser's plan of distribution set forth
in such Registration Statement.
(b) For so long as the prospectus delivery requirement under the
Securities Act is in effect, the Purchaser shall not make any sale of the
Shares without complying with such requirement.
(c) Notwithstanding the provisions of Section 5.2, each Purchaser
acknowledges that there may occasionally be times when the Company must
suspend the use of the prospectus forming a part of the Registration
Statement if there then exists material, non-public information regarding
the Company, of such a nature that the public disclosure of which would
not, in the reasonable opinion of the Company, be appropriate at that
time; provided, however, that the Company shall not suspend the use of the
prospectus for a period or periods that, in the aggregate, exceed 90 days
in any twelve-month period. The Purchaser hereby covenants that, prior to
selling any Shares pursuant to the Registration Statement, the Purchaser
shall notify the Company in writing of its intent to sell Shares. The
Company shall have the two business days immediately following the date of
delivery of such notice during which to notify the Purchaser of a
suspension of the prospectus forming a part of the Registration Statement.
During this two-day period, the Purchaser will not sell any Shares. If the
Company notifies the Purchaser that use of the prospectus has been
suspended, the Purchaser will not sell any Shares pursuant to said
prospectus until such time that the Company gives the Purchaser notice
(all such notices shall be given by the Company as promptly as practicable
following the suspension notice) that the Purchaser may thereafter effect
sales pursuant to said prospectus, from which time the Purchaser may sell
shares for a period often business days without complying
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with the pre-sale notification requirements set forth above. The Purchaser
further covenants to promptly notify the Company following the sale of all
of the Purchaser's Shares.
5.4 LISTING OF SHARES. The Company will, within twenty business days after
the Closing Date, file with The Nasdaq Stock Market, Inc. a Notification
of Listing of Additional Shares (together with the required listing fee),
thereby listing the Shares on the NASDAQ National Market.
5.5 MARKET STAND-OFF. If requested by the managing underwriters in an
underwritten offering composed primarily of newly issued shares of Common
Stock, the Purchasers, or any assignees thereof, will not sell any of the
Shares for up to 90 days (as requested by such underwriters) following
such public.
6. INDEMNIFICATION AND CONTRIBUTION.
6.1 INDEMNIFICATION BY THE COMPANY. The Company will indemnify and hold
harmless each Purchaser, and each other person, if any, who controls or is
an affiliate of such Purchaser within the meaning of the Securities Act or
the Exchange Act, against any losses, claims, damages or liabilities,
joint or several, to which such Purchaser, controlling person or affiliate
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 the Registration Statement under which the
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 Purchaser and
each such controlling person and affiliate for any legal or any other
expenses reasonably incurred by such Purchaser, controlling person or
affiliate 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 information furnished to the Company,
in writing, by or on behalf of such Purchaser, controlling person or
affiliate specifically for use in the preparation thereof.
6.2 INDEMNIFICATION BY THE PURCHASERS. Each Purchaser, 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
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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 the 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, but only to the extent the statement or omission was made in
reliance upon and in conformity with information relating to such
Purchaser furnished in writing to the Company by or on behalf of such
Purchaser specifically for use in connection with the preparation of such
Registration Statement, prospectus, amendment or supplement; provided,
however, that the obligations of each Purchaser hereunder shall be limited
to an amount equal to the net proceeds to such Purchaser of Shares sold in
connection with such registration.
6.3 INDEMNIFICATION PROCEDURES. 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, unless and except to the extent that the
Indemnifying Party is prejudiced by the failure of the Indemnified Party
to provide timely notice. 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
in the judgment of the Indemnified Party 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
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settle such claim or litigation without the prior written consent of the
Indemnifying Party.
6.4 CONTRIBUTION. In order to provide for just and equitable contribution
to joint liability under the Securities Act in any case in which either
(a) any Purchaser, or any controlling person of any such Purchaser, makes
a claim for indemnification pursuant to this Section 6 but it is
judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or
the denial of the last right of appeal) that such indemnification may not
be enforced in such case notwithstanding the fact that this Section 6
provides for indemnification in such case, or (b) contribution under the
Securities Act may be required on the part of any such Purchaser or any
such controlling person in circumstances for which indemnification is
provided under this Section 6; then, in each such case, the Company and
such Purchaser will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others)
in such proportions so that such Purchaser is responsible for the portion
represented by the percentage that the public offering price of its Shares
offered by the Registration Statement bears to the public offering price
of all securities offered by such Registration Statement, and the Company
is responsible for the remaining portion; provided, however, that, in any
such case, (x) no such Purchaser will be required to contribute any amount
in excess of the net proceeds to it of all Shares sold by it pursuant to
such Registration Statement and (y) no person or entity guilty of
fraudulent misrepresentation, within the meaning of Section 11(f) of the
Securities Act, shall be entitled to contribution from any person or
entity who is not guilty of such fraudulent misrepresentation.
7. RIGHT OF FIRST REFUSAL.
7.1 LIMITATION ON FUTURE ISSUANCES. For a period of one year from the date
hereof, the Company shall not issue, sell or exchange, or agree to issue,
sell or exchange (a) any shares of its Common Stock or (b) any option,
warrant or other right that is exercisable for, or convertible into,
shares of its Common Stock (collectively, "Offered Securities"), unless in
each such case the Company shall have first complied with this Section 7.
7.2 PROCEDURE.
(a) The Company shall deliver to each Purchaser a written notice of
any proposed or intended issuance, sale or exchange of Offered Securities
(the "Offer"), which Offer shall (i) identify and describe the Offered
Securities, (ii) describe the price and other terms upon which they are to
be issued, sold or exchanged, and the number or amount of the Offered
Securities to be issued, sold or exchanged and (iii) offer to issue and
sell to or exchange with such Purchaser that number of the Offered
Securities which represents the same percentage of the
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total Offered Securities as the number of Shares held by such Purchaser
represents of the total number of shares of Common Stock outstanding (the
"Basic Amount"). Each Purchaser shall have the right, for a period of 10
business days following delivery of the Offer, to accept the Offer in the
manner set forth below. The Offer by its term shall remain open and
irrevocable for such 10-business day period. To accept an Offer, in whole
or in part, a Purchaser must deliver a written notice to the Company prior
to the end of the 10-business day period of the Offer, setting forth the
portion of such Purchaser's Basic Amount that such Purchaser elects to
purchase (the "Notice of Acceptance").
(b) The Company shall have 60 days from the expiration of the
10-business day period set forth above to issue, sell or exchange all or
any part of such Offered Securities as to which a Notice of Acceptance has
not been given by the Investors, but only upon terms and conditions which
are not more favorable, in the aggregate, to the acquiring person or
persons or less favorable to the Company than those set forth in the
Offer.
(c) Any Offered Securities not acquired by the Purchasers or other
persons in accordance with Section 7.2 may not be issued, sold or
exchanged until they are again offered to the Purchasers under the
procedures specified in this Section 7.
7.3 EXCLUDED ISSUANCES. The rights of the Purchasers under this Section 7
shall not apply to:
(a) Common Stock issued as a stock dividend to holders of Common
Stock or upon any subdivision or combination of shares of Common Stock;
(b) the issuance of shares of Common Stock, or options exercisable
therefor, to employees, consultants, directors, equipment lessors or banks
(in commercial bank financing arrangements) or similar institutional
credit financing sources;
(c) securities issued solely in consideration for the acquisition
(whether by merger or otherwise) by the Company or any of its subsidiaries
of stock or assets of any other entity, or in connection with a licensing
or strategic partnering transaction approved by the Board of Directors of
the Company (and the stockholders, if required under applicable law or
regulation); or
(d) shares of Common Stock sold by the Company in an underwritten
public offering pursuant to an effective registration statement under the
Securities Act.
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8. MISCELLANEOUS.
8.1 ASSIGNABILITY. This Agreement, and the rights and obligations of the
Purchaser hereunder, may not be assigned in whole or in part by Purchaser
to any person or entity other than to an affiliate of such Purchaser or
its ultimate parent entity.
8.2 CONFIDENTIALITY. Purchaser agrees that it will keep confidential and
will not disclose or divulge any confidential, proprietary or secret
information which Purchaser may obtain from the Company pursuant to this
Agreement, unless such information is known, or until such information
becomes known, to the public; provided, however, that Purchaser may
disclose such information (a) to its attorneys, accountants, consultants
and other professionals to the extent necessary to obtain their services
in connection with its investment in the Company, (b) to any prospective
purchaser of any Shares from a Purchaser as long as such prospective
purchaser agrees in writing to be bound by the provisions of this Section
or (c) to any affiliate of a Purchaser; subject, in each case, to the
agreement of such party to keep such information confidential as set forth
herein.
8.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All agreements,
representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the closing of the
transactions contemplated hereby.
8.4 NOTICES. All notices, requests, consents and other communications
under this Agreement shall be in writing and shall be delivered by hand,
sent via a reputable nationwide overnight courier service, transmitted via
facsimile with hard copy via U.S. mail, or mailed by first class certified
or registered mail, return receipt requested, postage prepaid:
If to the Company, at White Pine Software, Inc., 542 Amherst Street,
Nashua, New Hampshire 03063, Attention: Chief Executive Officer, or
at such other address as may have been furnished in writing by the
Company to the Purchaser, with a copy to: Mark L. Johnson, Esq.,
Foley, Hoag & Eliot LLP, One Post Office Square, Boston,
Massachusetts 02109; or
If to any Purchaser, at its address as indicated on Exhibit A below,
or at such other address or addresses as may have been furnished in
writing by the Purchaser to the Company.
16
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Notices provided in accordance with this Section 8.4 shall be deemed
delivered upon personal delivery, one business day after being sent via a
reputable nationwide overnight courier service for next business day
delivery, or two business days after deposit in the mail and on the next
business day following transmittal via facsimile.
8.5 EXPENSES. The Company and each Purchaser each agree to indemnify and
save the other harmless from and against any and all claims, liabilities
or obligations with respect to brokerage or finders' fees or commissions
in connection with the transactions contemplated by this Agreement
asserted by any person on the basis of any agreement, statement or
representation alleged to have been made by such indemnifying party. The
Company shall pay its own expenses including attorneys' fees.
8.6 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.
8.7 AMENDMENT AND WAIVER. Except as otherwise expressly set forth in this
Agreement, any term of this Agreement may be amended and the observance of
any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), with the
written consent of the Company and of Purchasers holding in the aggregate
not less than two-thirds (67%) of all the Shares then outstanding and held
by the Purchasers. Any amendment or waiver effected in accordance with
this Section 6.7 shall be binding upon each holder of any Shares. No
waivers of or exceptions to any term, condition or provision of this
Agreement, in any one or more instances, shall be deemed to be, or
construed as, a further or continuing waiver of any such term, condition
or provision.
8.8 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.
8.9 SEPARATE AGREEMENT WITH EACH PURCHASER. While this Agreement is being
executed in multiple counterparts with multiple Purchasers, the
transaction with each Purchaser shall be considered a separate transaction
and none of the rights or obligations of any Purchaser shall be the in any
way affected by actions of any other Purchasers except to the extent that
Purchasers are required by the terms hereof to act as a group.
8.10 HEADINGS. The section headings are for the convenience of the parties
and in no way alter, modify, amend, limit or restrict the contractual
obligations of the parties.
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8.11 ENFORCEABILITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
8.12 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to
the choice of law provisions thereof.
* * *
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Executed as of the date first written above.
WHITE PINE SOFTWARE, INC.
By: /s/ Killko A. Caballero
------------------------------
Killko A. Caballero
Chief Executive Officer
PURCHASER:
Shares Purchased Dollars Invested
- ---------------- ----------------
325,521 $5,000,003
Private Equity Holding (Cayman) Ltd.
/ / Check this box to indicate that the undersigned is acting as
attorney-in-fact for certain advisory client Purchasers with respect to
which it has discretionary authority.
By: VBTC Management Ltd.
Its: Sole Director
/s/ John Arnold
By: John Arnold
Its: Chairman & Managing Director
Date: December 24, 1999
Address for delivery of shares:
(Please use international courier service)
Private Equity Holding (Cayman) Ltd.
P.O. Box 30846 SMB
Grand Pavilion Commercial Centre
West Bay Road
Grand Cayman. Cayman Islands
British West Indies
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Exhibit A
LIST OF PURCHASERS
Purchaser Dollars
Name and Address Shares Purchased Invested
- ---------------- ---------------- --------
Private Equity Holding (Cayman) Ltd. 325,521 $5,000,003
20
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Executed as of the date first written above.
WHITE PINE SOFTWARE, INC.
By: /s/ Killko A. Caballero
------------------------------
Killko A. Caballero
Chief Executive Officer
PURCHASER:
Shares Purchased Dollars Invested
- ---------------- ----------------
325,521 $5,000,003
Private Equity Holding (Cayman) Ltd.
/ / Check this box to indicate that the undersigned is acting as
attorney-in-fact for certain advisory client Purchasers with respect to
which it has discretionary authority.
By: VBTC Management Ltd.
Its: Sole Director
/s/ John Arnold
By: John Arnold
Its: Chairman & Managing Director
Date: December 24, 1999
Address for delivery of shares:
(Please use international courier service)
Private Equity Holding (Cayman) Ltd.
P.O. Box 30846 SMB
Grand Pavilion Commercial Centre
West Bay Road
Grand Cayman. Cayman Islands
British West Indies
19
<PAGE>
Exhibit 10.11(c)
STOCK PURCHASE AGREEMENT
This Agreement dated as of December 31, 1999 is entered into by and among
White Pine Software, Inc., a Delaware corporation (the "Company"), and each
entity which executes a counterpart to this Agreement and is listed on Exhibit A
(each referred to herein as a "Purchaser," and collectively referred to herein
as the "Purchasers").
In consideration of the mutual promises and covenants contained in this
Agreement, the parties hereto agree as follows:
1. PURCHASE AND SALE OF SHARES.
1.1 AUTHORIZATION. The Company has duly authorized the sale and issuance,
pursuant to the terms of this Agreement, of an aggregate of 325,521 shares
(the "Shares") of its common stock, $0.01 par value per share ("Common
Stock").
1.2 PURCHASE AND SALE OF SHARES. Subject to the terms and conditions of
this Agreement, each Purchaser agrees to purchase and the Company agrees
to sell, that number of Shares indicated opposite the Purchaser's name on
Exhibit A, at a purchase price equal to $15.36 per share (the "Purchase
Price").
1.3 CLOSING. The Closing of the purchase and sale of the Shares
contemplated by this Agreement (the "Closing") shall take place at the
offices of Foley, Hoag & Eliot LLP, One Post Office Square, Boston,
Massachusetts 02109 at 12 noon EST, on December 31, 1999, or at such other
place and time as mutually agreed by the Company and the Purchasers (the
"Closing Date"). At the Closing, the Company shall deliver to each
Purchaser a certificate for the number of Shares for which that Purchaser
has subscribed against payment of the purchase price therefore. Each
Purchaser shall remit the purchase price for the Shares being purchased at
the Closing by wire transfer of same-day funds to an account designated in
writing by the Company.
1.4 USE OF PROCEEDS. The Company will use the proceeds from the sale of
the Shares for working capital and other general corporate purposes.
<PAGE>
2. CONDITIONS TO CLOSING.
The obligation of the Purchasers to purchase and pay for the Shares shall
be subject to the accuracy of the representations and warranties made by the
Company herein and to the following conditions (any of which may be waived by a
Purchaser, acting individually, in its sole discretion, as to such Purchaser's
own Shares, but not as to the Shares to be purchased by any other Purchaser):
2.1 DELIVERIES BY THE COMPANY. The Company shall deliver to the Purchaser
or its agent:
(a) a certificate, as of recent date, as to the legal existence and
corporate good standing of the Company issued by the Secretary of State of
the State of Delaware;
(b) a copy of the Certificate of Incorporation of the Company, as
amended and in effect as of the Closing Date, certified by the Secretary
of State of the State of Delaware;
(c) a copy of the resolutions of the Board of Directors of the
Company authorizing and approving this Agreement and the issuance of the
Shares hereby, certified by the Secretary of the Company;
(d) a copy of the By-laws of the Company, certified by the Secretary
of the Company as in effect as of the Closing Date;
(e) an opinion of Foley, Hoag & Eliot LLP, counsel to the Company,
in substantially the form attached hereto as Exhibit B and
(f) an executed lock-up agreement from each officer and director of
the Company in substantially the form attached hereto as Exhibit C.
3. REPRESENTATIONS OF THE COMPANY. Except as set forth in the applicable section
of the Disclosure Schedule attached hereto, the Company hereby represents and
warrants to each Purchaser as follows as of the date hereof and as of Closing.
3.1 ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. The Company is duly qualified or otherwise authorized
to transact business as a foreign corporation and is in good standing in
each jurisdiction in which the failure to so qualify would have a material
adverse effect on the results of operations, business or financial
condition of the Company and its subsidiaries taken as a whole (a
"Material Adverse Effect"). Each of the Company's subsidiaries is a
corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation. Each of the
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<PAGE>
Company's subsidiaries is duly qualified or otherwise authorized to
transact business as a foreign corporation and is in good standing in each
jurisdiction in which the failure to so qualify would have a Material
Adverse Effect.
3.2 CAPITALIZATION. The Company is authorized to issue (a) 30,000,000
shares of Common Stock, and (b) 5,000,000 shares of Preferred Stock, $0.01
par value per share. As of December 22, 1999, there were issued and
outstanding [10,702,213] shares of Common Stock; no shares of Preferred
Stock had been issued or were outstanding; and options, warrants or rights
to purchase an aggregate of approximately 1,679,016 shares of Common Stock
had been granted by the Company and were outstanding. The Common Stock and
the Preferred Stock of the Company have the voting powers, designations,
preferences, rights and qualifications, and limitations or restrictions
set forth in the Certificate of Incorporation and amendments thereto. All
of the issued and outstanding shares of capital stock of the Company have
been duly authorized and validly issued, are fully paid and nonassessable,
have been issued in compliance with all federal and state securities laws,
were not issued in violation of or subject to any preemptive rights or
other rights to subscribe for or purchase securities, and conform in all
material respects to the description thereof contained in the Company's
Registration Statement on Form 8-A and the Company Reports (as hereinafter
defined). Except as disclosed in the first sentence of this section, 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 shares of
capital stock of any subsidiary and there is no commitment, plan or
arrangement to issue, any securities or obligations convertible into any
shares of capital stock of the Company or its subsidiaries or any such
options, rights convertible securities or obligations. The description of
the Company's capital stock, stock bonus and other stock plans or
arrangements and the options or other rights granted and exercised
thereunder, contained in the Company's Registration Statement on Form 8-A
and the Company Reports accurately and fairly presents the information
required to be shown with respect to such capital stock, plans,
arrangements, options and rights (except for issuances and exercises of
options in the ordinary course of business).
3.3 AUTHORITY FOR AGREEMENT. The execution, delivery and performance of
this Agreement by the Company has been duly authorized by all necessary
corporate action on the part of the Company, and this Agreement has been
duly executed and delivered by the Company, and this Agreement constitutes
the valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium and similar laws affecting the rights and remedies
of creditors generally and to general principles of equity.
3
<PAGE>
3.4 ISSUANCE AND SALE OF SHARES. The issuance and sale of the Shares by
the Company has been duly authorized and the Shares have been duly
reserved for issuance by all necessary corporate action on the part of the
Company, and the Shares, when issued and delivered against payment
therefor, will be validly issued, fully paid and nonassessable. Based in
part on the representations made by or on behalf of each Purchaser in
Section 4 of this Agreement, the offer, issuance and sale of the Shares
pursuant to this Agreement are exempt from registration under the
Securities Act. The issued shares of capital stock of each of the
Company's subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable and are owned by the Company free and clear
of any perfected security interest, or any other security interests,
liens, encumbrances, equities or claims. No preemptive rights or other
rights to subscribe for or purchase exist with respect to the issuance and
sale of the Shares by the Company pursuant to this Agreement. No
stockholder of the Company has any right to request or require the Company
to register the sale of any shares owned by such stockholder under the
Securities Act of 1933, as amended (the "Securities Act"), in the
Registration Statement (as hereinafter defined). No further approval or
authority of the stockholders or the Board of Directors of the Company
will be required for the issuance and sale of the Shares to be sold by the
Company hereunder.
3.5 NO BREACH. The execution, delivery and performance of this Agreement
by the Company will not (a) conflict with or violate any provision of the
Certificate of Incorporation, as amended, or By-laws of the Company, (b)
require on the part of the Company any filing with, or permit,
authorization, consent or approval of, any governmental entity, (c) result
in breach of, constitute a default under, or require any notice, consent
or waiver under, any contract, agreement or other instrument to which the
Company is a party or by which it is bound (other than any consent or
waiver which has already been obtained) or (d) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company,
excluding from subparagraphs (a)-(d) such matters as would not in the
aggregate have a Material Adverse Effect or a material adverse effect upon
the transactions contemplated hereby. No consent, approval, authorization
or other order of any court, regulatory body, administrative agency or
other governmental body is required for the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby, except for compliance with the Blue Sky laws and
federal securities laws applicable to the offering of the Shares.
3.6 SEC REPORTS. The Company has previously furnished to the Purchasers
complete and accurate copies, as amended or supplemented, of its (a)
Annual Report on Form 10-KSB for the fiscal year ended December 31, 1998,
as filed with the SEC, (b) all proxy statements relating to the Company's
meetings of stockholders held or currently scheduled since December 31,
1998 and (c) all other publicly available reports filed by the Company
with the SEC under the
4
<PAGE>
Securities Exchange Act of 1934, as amended (the "Exchange Act"), since
December 31, 1998 and through the date hereof (such reports are
collectively referred to herein as the "Company Reports"). The Company
Reports constitute all of the documents required to be filed by the
Company under Section 13, 14 or 15(d) of the Exchange Act with the SEC
since January 1, 1999. As of their respective dates, the Company Reports
did not, and as of the date hereof do not, contain any untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3.7 FINANCIAL STATEMENTS. The audited financial statements and unaudited
interim financial statements of the Company included in the Company
Reports (a) comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, (b) have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby
(except as may be indicated therein or in the notes thereto), (c) fairly
present the consolidated financial condition, results of operations and
cash flows of the Company as of the respective dates thereof and for the
periods referred to therein and (d) are consistent with the books and
records of the Company.
3.8 OTHER INFORMATION. The Company has provided to and discussed with the
Purchaser such information as the Purchaser has requested regarding the
current operations, financial condition (including the amount of available
cash) and plans of the Company.
3.9 MATERIAL ADVERSE CHANGE. Since December 31, 1998, and except as
disclosed by the Company in the Company Reports or otherwise in writing to
the Purchasers, (i) there has not been any material adverse change in the
operations or financial condition of operations of the Company, except
that the Company continues to incur operating losses, (ii) neither the
Company nor its subsidiaries have incurred any liabilities or obligations,
indirect or contingent, of such a nature that would require inclusion on a
balance sheet under generally accepted accounting principles (nor, to the
Company's knowledge, any other liabilities or obligations) or entered into
any verbal or written agreements or other transactions which are not in
the ordinary course of business or which could reasonably be expected to
result in a Material Adverse Effect; (iii) neither the Company nor its
subsidiaries have sustained any material loss or interference with its
businesses or properties from fire, flood, windstorm, accident or other
calamity not covered by insurance; (iv) neither the Company nor its
subsidiaries have paid or declared any dividends or other distributions
with respect to its capital stock and neither the Company nor its
subsidiaries is in default in the payment of principal or interest on any
outstanding debt obligations; and (v) there has not been any change in the
capital stock of the Company other than the sale of the Shares hereunder
and shares or options issued pursuant to exercise of outstanding
5
<PAGE>
warrants or employee and director stock option plans approved by the
Company's Board of Directors. There is no fact which the Company has not
disclosed to the Purchasers and their counsel in writing and of which the
Company is aware which has, had or is reasonably likely to have a Material
Adverse Effect.
3.10 ACTIONS AND PROCEEDINGS. There are no actions, suits or claims or
legal or arbitral proceedings or governmental inquiries or investigations,
pending, or, to the Company's knowledge, threatened against the Company,
which question the validity of this Agreement or the right of the Company
to enter into it, or which might result in a Material Adverse Effect.
3.11 PROPERTIES. Each of the Company and its subsidiaries has good and
marketable title to all the properties and assets reflected as owned by
them in the consolidated financial statements included in the Company's
Annual Report on Form 10-KSB for the fiscal year ended December 31, 1998,
subject to no lien, mortgage, pledge, charge or encumbrance of any kind
except (i) those, if any, reflected in such consolidated financial
statements, or (ii) those which are not material in amount and do not
materially and adversely affect the use made and intended to be made of
such property by the Company or its subsidiaries. Each of the Company and
its subsidiaries holds its leased properties under valid and binding
leases, with such exceptions as are not materially significant in relation
to the business of the Company and its subsidiaries, taken as a whole.
Each of the Company and its subsidiaries owns or leases all such
properties as are necessary to its operations as now conducted.
3.12 INTELLECTUAL PROPERTY. The Company and its subsidiaries own or have
obtained valid licenses, options or rights to use for the material
inventions, patent applications, patents, trademarks (both registered and
unregistered), tradenames, copyrights and trade secrets necessary for the
conduct of the Company's and its subsidiaries' respective businesses as
currently conducted and as the Company and its subsidiaries contemplate
conducting in all material respects (collectively, the "Intellectual
Property"). Neither the Company nor any of its subsidiaries has received
notice of any third parties who have any ownership rights to any
Intellectual Property that is owned by, or has been licensed to, the
Company or its subsidiaries that would preclude the Company or its
subsidiaries from conducting their respective businesses as currently
conducted and as the Company and its subsidiaries contemplate conducting
in all material respects. To the Company's knowledge, there are currently
no sales of products that would constitute an infringement by third
parties of any material Intellectual Property owned, licensed or optioned
by the Company or its subsidiaries. There is no pending or, to the
Company's knowledge, threatened action, suit, proceeding or claim by
others challenging the rights of the Company or its subsidiaries in or to
any material Intellectual Property owned, licensed or optioned by the
Company or its subsidiaries. There is no pending or, to the Company's
knowledge, threatened action, suit, proceeding or claim by others
challenging the validity or
6
<PAGE>
scope of any material Intellectual Property owned, licensed or optioned by
the Company or its subsidiaries. There is no pending or, to the Company's
knowledge, threatened action, suit, proceeding or claim by others that the
Company or its subsidiaries infringe or otherwise violate any patent,
trademark, copyright, trade secret or other proprietary right of others as
would reasonably be expected to result in a Material Adverse Effect.
3.13 COMPLIANCE. Neither the Company nor any of its subsidiaries has been
advised, and has no reason to believe, that it is not conducting its
business in compliance with all applicable laws, rules and regulations of
the jurisdictions in which it is conducting business, including, without
limitation, all applicable local, state and federal environmental laws and
regulations, except where failure to be so in compliance would not
individually or in the aggregate have a Material Adverse Effect.
3.14 TAXES. Each of the Company and its subsidiaries has filed or obtained
filing extensions with respect to all federal, state, local and foreign
income and franchise tax returns material to the Company and the
subsidiaries, taken as a whole, and has paid or accrued all taxes shown as
due thereon, and neither the Company nor any of its subsidiaries has
knowledge of a tax deficiency which has been asserted or threatened
against it which would reasonably be expected to have a Material Adverse
Effect.
3.15 TRANSFER TAXES. On the Closing Date, all stock transfers or other
taxes (other than income taxes) which are required to be paid in
connection with the sale and transfer of the Shares to be sold to the
Purchasers hereunder will be, or will have been, fully paid or provided
for by the Company and all laws imposing such taxes will be or will have
been fully complied with.
3.16 INSURANCE. Each of the Company and its subsidiaries maintains
insurance of the type and in the amount that the Company reasonably
believes is adequate for its business, including, but not limited to,
insurance covering all real and personal property owned or leased by the
Company or its subsidiaries against risks customarily insured against by
similarly situated companies, all of which insurance is in full force and
effect.
3.17 CONTRIBUTIONS. Neither the Company at any time since its
incorporation nor its subsidiaries at any time since they were acquired or
formed by the Company have, directly or indirectly, (i) made any unlawful
contribution to any candidate for public office, failed to disclose fully
where required by law any contribution in violation of law, or (ii) made
any payment to any federal or state governmental officer or official, or
other person charged with similar public or quasi-public duties, other
than payments required or permitted by the laws of the United States or
any jurisdiction thereof and in each case except for instances that would
not have a Material Adverse Effect.
7
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3.18 YEAR 2000 COMPLIANCE. The Company has reviewed its operations to
evaluate the extent to which the business or operations of the Company and
its subsidiaries will be affected by the Year 2000 Problem (as defined
below). As a result of such review, the Company has no reason to believe,
and does not believe, that the Year 2000 Problem will have a Material
Adverse Effect. The "Year 2000 Problem" as used herein means any
significant risk that the Company's computer hardware or software used in
the receipt, transmission, processing, manipulation, storage, retrieval,
retransmissions or other utilization of data or in the operation of
mechanical or electrical systems of any kind will not, in the case of
dates or time periods occurring after December 31, 1999, function at least
as effectively as in the case of dates or time periods occurring prior to
January 1, 2000.
3.19 INVESTMENT COMPANY. The Company is not an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for an
investment company, within the meaning of the Investment Company Act of
1940, as amended.
3.20 OFFERING MATERIALS. The Company has not distributed and will not
distribute prior to the Closing Date any offering material in connection
with the offering and sale of the Shares other than the Company Reports.
The Company has not nor will it take any action to sell, offer for sale or
solicit offers to buy any securities of the Company which would reasonably
be expected to cause the offer or sale of the Shares, as contemplated by
this Agreement, to be within the provisions of Section 5 of the Securities
Act.
3.21 RELATED PARTY TRANSACTIONS. No transaction has occurred between or
among the Company and its affiliates, officers or directors or any
affiliate or affiliates of any such officer or director that is required
to be described in the Company's Reports and other filings under the
Securities Exchange Act of 1934 (the "Exchange Act") that is not so
described.
3.22 BOOKS AND RECORDS. The books, records and accounts of the Company
accurately and fairly reflect, in reasonable detail, the transactions in,
and dispositions of, the assets of, and the results of operations of, the
Company, all to the extent required by generally accepted accounting
principles. The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles and to maintain asset accountability, (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 the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
8
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4. REPRESENTATIONS OF THE PURCHASERS.
Each Purchaser, severally and not jointly, represents and warrants to the
Company as follows:
4.1 INVESTMENT. Purchaser (a) is acquiring the Shares solely for its own
account for investment purposes and not with a view to, or for sale in
connection with, any distribution thereof, nor with any present intention
of distributing or selling the same other than pursuant to an effective
registration statement under the Securities Act, (b) has no present or
contemplated agreement, undertaking, arrangement, obligation, indebtedness
or commitment providing for the disposition thereof and (c) is fully aware
that in agreeing to sell the Shares and entering into this Agreement, the
Company is relying upon the truth and accuracy of the representations and
warranties contained herein. Each Purchaser has made its own investment
decision without reliance upon any representation, warranty or covenant
from any other Purchaser.
4.2 AUTHORITY FOR AGREEMENT. Purchaser has full power and authority to
execute, deliver and perform its obligations under this Agreement in
accordance with its terms. Purchaser represents that it has not been
organized, reorganized or recapitalized specifically for the purpose of
investing in the Company. This Agreement has been duly executed and
delivered by Purchaser and constitutes a valid and binding obligation of
Purchaser, enforceable against such Purchaser in accordance with its
terms.
4.3 INFORMATION. Purchaser or its attorney-in-fact (a) has reviewed the
representations of the Company contained in this Agreement and the Company
Reports and (b) has had the opportunity to make inquiry concerning the
Company and its business and personnel. The officers of the Company have
made available to each such person any and all written information that it
has requested and have answered to each such person's satisfaction all
inquiries made.
4.4 ACCREDITED INVESTOR. Purchaser is an "Accredited Investor" as that term is
defined in Rule 501 of Regulation D promulgated under the Securities Act.
Purchaser, either alone or with its purchaser representative or
attorney-in-fact, has sufficient knowledge and experience in investing in
companies similar to the Company so as to be able to evaluate the risks
and merits of its investment in the Company and is able financially to
bear the risks thereof, including a complete loss of its entire
investment.
4.5 TRANSFER OF SHARES. Purchaser will not, directly or indirectly, offer,
sell, pledge, transfer or otherwise dispose of (or solicit any offers to
buy, purchase or otherwise acquire or take a pledge of) any of the Shares
except in compliance with the Securities Act, the rules and regulations
promulgated thereunder, and applicable state securities laws.
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4.6 PURCHASER REPRESENTATIVES. In the event that any signatory hereto is
signing as attorney-in-fact for one or more advisory client Purchaser(s),
as indicated by checking the box above the signature for the Purchaser at
the end hereof, the undersigned signatory represents and warrants that the
undersigned has been duly appointed as attorney-in-fact of such
Purchaser(s), that the undersigned has sufficient discretionary authority
to enter into this Agreement on behalf of such Purchaser(s), and that each
of the representations and warranties contained in this Section 4 are true
and correct with respect to each of such Purchaser(s). Except as
specifically disclosed in writing prior to the date hereof to the Company,
the Purchaser is not an affiliate of the Company, a broker-dealer or
affiliated with a broker-dealer.
5. COVENANTS. The Company and the Purchasers agree as follows:
5.1 INFORMATION TO BE FURNISHED. The Company shall deliver to the
Purchaser with reasonable promptness, such material notices, information
and data with respect to the Company as the Company files with the SEC and
delivers to all holders of its Common Stock.
5.2 REGISTRATION OF SHARES. The Company will, at its expense, within 20
business days after the Closing Date file with the SEC a registration
statement on Form S-3, or if Form S-3 is unavailable to the Company, on
Form S-l, to register, under the Securities Act, the resale of the Shares
by the holders thereof (the "Registration Statement"), and will use its
reasonable best efforts to cause such Registration Statement to become
effective as promptly as possible (including by filing when and as
appropriate amendments and supplements thereto and to the related
prospectus, and by making all required "Blue Sky" filings, if any) and to
remain effective continuously until the earlier of (a) two years from the
Closing Date, (b) such time as all of the Shares held by Purchaser may be
sold pursuant to Rule 144 promulgated under the Securities Act on a single
day without regard to volume limitations or (c) such time as all Shares
have been sold. After the Registration Statement is declared effective
under the Securities Act, the Company will furnish holders of Shares (and
to each underwriter, if any, of the Shares) with such number of copies of
the prospectus included in the Registration Statement as the holders may
reasonably request to facilitate the resale of the Shares. Each Purchaser
will cooperate in promptly providing all information or certificates
required from it in order to be included as a selling stockholder on such
Registration Statement. In the event that the Company shall fail to cause
the Registration Statement to be declared effective within 90 days after
the Closing Date, the Company shall pay to each holder of Shares, as
compensation therefor, a cash payment equal to 1% of the product obtained
by multiplying the Purchase Price and the number of Shares held by such
holder. In addition, if the Registration Statement is not declared
effective within 180 days after the Closing Date, the Company shall pay to
each holder of Shares
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an additional cash payment equal to 2% of the product obtained by
multiplying the Purchase Price and the number of Shares held by such
holder for each 30 day-period or part thereof that effectiveness of the
Registration Statement is delayed beyond 180 days after the Closing Date.
After the Closing Date, the Company shall not file or maintain any
registration statement with the Securities and Exchange Commission under
the Securities Act prior to the time it files the Registration Statement.
The Company, upon reasonable request of a Purchaser, will meet with such
Purchaser or a representative thereof at the Company's headquarters to
discuss information relevant for disclosure in the Registration Statement
covering the Shares, subject to appropriate confidentiality limitations as
the Company may require.
5.3 PURCHASER SALES PROCEDURES.
(a) Each Purchaser agrees that such Purchaser will not effect any
disposition of the Shares that would constitute a sale within the meaning
of the Securities Act, except as contemplated in the Registration
Statement, and that the Purchaser will promptly notify the Company of any
changes in the information set forth in the Registration Statement
regarding the Purchaser or such Purchaser's plan of distribution set forth
in such Registration Statement.
(b) For so long as the prospectus delivery requirement under the
Securities Act is in effect, the Purchaser shall not make any sale of the
Shares without complying with such requirement.
(c) Notwithstanding the provisions of Section 5.2, each Purchaser
acknowledges that there may occasionally be times when the Company must
suspend the use of the prospectus forming a part of the Registration
Statement if there then exists material, non-public information regarding
the Company, of such a nature that the public disclosure of which would
not, in the reasonable opinion of the Company, be appropriate at that
time; provided, however, that the Company shall not suspend the use of the
prospectus for a period or periods that, in the aggregate, exceed 90 days
in any twelve-month period. The Purchaser hereby covenants that, prior to
selling any Shares pursuant to the Registration Statement, the Purchaser
shall notify the Company in writing of its intent to sell Shares. The
Company shall have the two business days immediately following the date of
delivery of such notice during which to notify the Purchaser of a
suspension of the prospectus forming a part of the Registration Statement.
During this two-day period, the Purchaser will not sell any Shares. If the
Company notifies the Purchaser that use of the prospectus has been
suspended, the Purchaser will not sell any Shares pursuant to said
prospectus until such time that the Company gives the Purchaser notice
(all such notices shall be given by the Company as promptly as practicable
following the suspension notice) that the Purchaser may thereafter effect
sales pursuant to said prospectus, from which time the Purchaser may sell
shares for a period often business days without complying
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with the pre-sale notification requirements set forth above. The Purchaser
further covenants to promptly notify the Company following the sale of all
of the Purchaser's Shares.
5.4 LISTING OF SHARES. The Company will, within twenty business days after
the Closing Date, file with The Nasdaq Stock Market, Inc. a Notification
of Listing of Additional Shares (together with the required listing fee),
thereby listing the Shares on the NASDAQ National Market.
5.5 MARKET STAND-OFF. If requested by the managing underwriters in an
underwritten offering composed primarily of newly issued shares of Common
Stock, the Purchasers, or any assignees thereof, will not sell any of the
Shares for up to 90 days (as requested by such underwriters) following
such public.
6. INDEMNIFICATION AND CONTRIBUTION.
6.1 INDEMNIFICATION BY THE COMPANY. The Company will indemnify and hold
harmless each Purchaser, and each other person, if any, who controls or is
an affiliate of such Purchaser within the meaning of the Securities Act or
the Exchange Act, against any losses, claims, damages or liabilities,
joint or several, to which such Purchaser, controlling person or affiliate
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 the Registration Statement under which the
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 Purchaser and
each such controlling person and affiliate for any legal or any other
expenses reasonably incurred by such Purchaser, controlling person or
affiliate 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 information furnished to the Company,
in writing, by or on behalf of such Purchaser, controlling person or
affiliate specifically for use in the preparation thereof.
6.2 INDEMNIFICATION BY THE PURCHASERS. Each Purchaser, 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
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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 the 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, but only to the extent the statement or omission was made in
reliance upon and in conformity with information relating to such
Purchaser furnished in writing to the Company by or on behalf of such
Purchaser specifically for use in connection with the preparation of such
Registration Statement, prospectus, amendment or supplement; provided,
however, that the obligations of each Purchaser hereunder shall be limited
to an amount equal to the net proceeds to such Purchaser of Shares sold in
connection with such registration.
6.3 INDEMNIFICATION PROCEDURES. 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, unless and except to the extent that the
Indemnifying Party is prejudiced by the failure of the Indemnified Party
to provide timely notice. 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
in the judgment of the Indemnified Party 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
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settle such claim or litigation without the prior written consent of the
Indemnifying Party.
6.4 CONTRIBUTION. In order to provide for just and equitable contribution
to joint liability under the Securities Act in any case in which either
(a) any Purchaser, or any controlling person of any such Purchaser, makes
a claim for indemnification pursuant to this Section 6 but it is
judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or
the denial of the last right of appeal) that such indemnification may not
be enforced in such case notwithstanding the fact that this Section 6
provides for indemnification in such case, or (b) contribution under the
Securities Act may be required on the part of any such Purchaser or any
such controlling person in circumstances for which indemnification is
provided under this Section 6; then, in each such case, the Company and
such Purchaser will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others)
in such proportions so that such Purchaser is responsible for the portion
represented by the percentage that the public offering price of its Shares
offered by the Registration Statement bears to the public offering price
of all securities offered by such Registration Statement, and the Company
is responsible for the remaining portion; provided, however, that, in any
such case, (x) no such Purchaser will be required to contribute any amount
in excess of the net proceeds to it of all Shares sold by it pursuant to
such Registration Statement and (y) no person or entity guilty of
fraudulent misrepresentation, within the meaning of Section 11(f) of the
Securities Act, shall be entitled to contribution from any person or
entity who is not guilty of such fraudulent misrepresentation.
7. RIGHT OF FIRST REFUSAL.
7.1 LIMITATION ON FUTURE ISSUANCES. For a period of one year from the date
hereof, the Company shall not issue, sell or exchange, or agree to issue,
sell or exchange (a) any shares of its Common Stock or (b) any option,
warrant or other right that is exercisable for, or convertible into,
shares of its Common Stock (collectively, "Offered Securities"), unless in
each such case the Company shall have first complied with this Section 7.
7.2 PROCEDURE.
(a) The Company shall deliver to each Purchaser a written notice of
any proposed or intended issuance, sale or exchange of Offered Securities
(the "Offer"), which Offer shall (i) identify and describe the Offered
Securities, (ii) describe the price and other terms upon which they are to
be issued, sold or exchanged, and the number or amount of the Offered
Securities to be issued, sold or exchanged and (iii) offer to issue and
sell to or exchange with such Purchaser that number of the Offered
Securities which represents the same percentage of the
14
<PAGE>
total Offered Securities as the number of Shares held by such Purchaser
represents of the total number of shares of Common Stock outstanding (the
"Basic Amount"). Each Purchaser shall have the right, for a period of 10
business days following delivery of the Offer, to accept the Offer in the
manner set forth below. The Offer by its term shall remain open and
irrevocable for such 10-business day period. To accept an Offer, in whole
or in part, a Purchaser must deliver a written notice to the Company prior
to the end of the 10-business day period of the Offer, setting forth the
portion of such Purchaser's Basic Amount that such Purchaser elects to
purchase (the "Notice of Acceptance").
(b) The Company shall have 60 days from the expiration of the
10-business day period set forth above to issue, sell or exchange all or
any part of such Offered Securities as to which a Notice of Acceptance has
not been given by the Investors, but only upon terms and conditions which
are not more favorable, in the aggregate, to the acquiring person or
persons or less favorable to the Company than those set forth in the
Offer.
(c) Any Offered Securities not acquired by the Purchasers or other
persons in accordance with Section 7.2 may not be issued, sold or
exchanged until they are again offered to the Purchasers under the
procedures specified in this Section 7.
7.3 EXCLUDED ISSUANCES. The rights of the Purchasers under this Section 7
shall not apply to:
(a) Common Stock issued as a stock dividend to holders of Common
Stock or upon any subdivision or combination of shares of Common Stock;
(b) the issuance of shares of Common Stock, or options exercisable
therefor, to employees, consultants, directors, equipment lessors or banks
(in commercial bank financing arrangements) or similar institutional
credit financing sources;
(c) securities issued solely in consideration for the acquisition
(whether by merger or otherwise) by the Company or any of its subsidiaries
of stock or assets of any other entity, or in connection with a licensing
or strategic partnering transaction approved by the Board of Directors of
the Company (and the stockholders, if required under applicable law or
regulation); or
(d) shares of Common Stock sold by the Company in an underwritten
public offering pursuant to an effective registration statement under the
Securities Act.
15
<PAGE>
8. MISCELLANEOUS.
8.1 ASSIGNABILITY. This Agreement, and the rights and obligations of the
Purchaser hereunder, may not be assigned in whole or in part by Purchaser
to any person or entity other than to an affiliate of such Purchaser or
its ultimate parent entity.
8.2 CONFIDENTIALITY. Purchaser agrees that it will keep confidential and
will not disclose or divulge any confidential, proprietary or secret
information which Purchaser may obtain from the Company pursuant to this
Agreement, unless such information is known, or until such information
becomes known, to the public; provided, however, that Purchaser may
disclose such information (a) to its attorneys, accountants, consultants
and other professionals to the extent necessary to obtain their services
in connection with its investment in the Company, (b) to any prospective
purchaser of any Shares from a Purchaser as long as such prospective
purchaser agrees in writing to be bound by the provisions of this Section
or (c) to any affiliate of a Purchaser; subject, in each case, to the
agreement of such party to keep such information confidential as set forth
herein.
8.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All agreements,
representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the closing of the
transactions contemplated hereby.
8.4 NOTICES. All notices, requests, consents and other communications
under this Agreement shall be in writing and shall be delivered by hand,
sent via a reputable nationwide overnight courier service, transmitted via
facsimile with hard copy via U.S. mail, or mailed by first class certified
or registered mail, return receipt requested, postage prepaid:
If to the Company, at White Pine Software, Inc., 542 Amherst Street,
Nashua, New Hampshire 03063, Attention: Chief Executive Officer, or
at such other address as may have been furnished in writing by the
Company to the Purchaser, with a copy to: Mark L. Johnson, Esq.,
Foley, Hoag & Eliot LLP, One Post Office Square, Boston,
Massachusetts 02109; or
If to any Purchaser, at its address as indicated on Exhibit A below,
or at such other address or addresses as may have been furnished in
writing by the Purchaser to the Company.
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Notices provided in accordance with this Section 8.4 shall be deemed
delivered upon personal delivery, one business day after being sent via a
reputable nationwide overnight courier service for next business day
delivery, or two business days after deposit in the mail and on the next
business day following transmittal via facsimile.
8.5 EXPENSES. The Company and each Purchaser each agree to indemnify and
save the other harmless from and against any and all claims, liabilities
or obligations with respect to brokerage or finders' fees or commissions
in connection with the transactions contemplated by this Agreement
asserted by any person on the basis of any agreement, statement or
representation alleged to have been made by such indemnifying party. The
Company shall pay its own expenses including attorneys' fees.
8.6 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.
8.7 AMENDMENT AND WAIVER. Except as otherwise expressly set forth in this
Agreement, any term of this Agreement may be amended and the observance of
any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), with the
written consent of the Company and of Purchasers holding in the aggregate
not less than two-thirds (67%) of all the Shares then outstanding and held
by the Purchasers. Any amendment or waiver effected in accordance with
this Section 6.7 shall be binding upon each holder of any Shares. No
waivers of or exceptions to any term, condition or provision of this
Agreement, in any one or more instances, shall be deemed to be, or
construed as, a further or continuing waiver of any such term, condition
or provision.
8.8 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.
8.9 SEPARATE AGREEMENT WITH EACH PURCHASER. While this Agreement is being
executed in multiple counterparts with multiple Purchasers, the
transaction with each Purchaser shall be considered a separate transaction
and none of the rights or obligations of any Purchaser shall be the in any
way affected by actions of any other Purchasers except to the extent that
Purchasers are required by the terms hereof to act as a group.
8.10 HEADINGS. The section headings are for the convenience of the parties
and in no way alter, modify, amend, limit or restrict the contractual
obligations of the parties.
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8.11 ENFORCEABILITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
8.12 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to
the choice of law provisions thereof.
* * *
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Executed as of the date first written above.
WHITE PINE SOFTWARE, INC.
By:_____________________________
Killko A. Caballero
Chief Executive Officer
PURCHASER:
Shares Purchased Dollars Invested
- ---------------- ----------------
325,521 $5,000,003
SPECIAL SITUATIONS
PRIVATE EQUITY FUND, L.P.
SPECIAL SITUATIONS
CAYMAN FUND, L.P.
SPECIAL SITUATIONS
FUND III, L.P.
(Purchaser's name here)
/ / Check this box to indicate that the undersigned is acting as
attorney-in-fact for certain advisory client Purchasers with respect to
which it has discretionary authority.
By:_______________________________
Name:_____________________________
Title:____________________________
Date:_____________________________
Address for delivery of shares:
__________________________________
__________________________________
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Exhibit A
LIST OF PURCHASERS
Purchaser Dollars
Name and Address Shares Purchased Invested
- ---------------- ---------------- --------
SPECIAL SITUATIONS
PRIVATE EQUITY FUND, L.P. 78,125 $1,200,000.00
SPECIAL SITUATIONS
CAYMAN FUND, L.P. 65,104 999,997.44
SPECIAL SITUATIONS
FUND III, L.P. 182,292 2,800,005.12
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Executed as of the date first written above.
WHITE PINE SOFTWARE, INC.
By: /s/ Killko A. Caballero
---------------------------------
Killko A. Caballero
Chief Executive Officer
PURCHASER:
Shares Purchased Dollars Invested
- ---------------- ----------------
325,521 $5,000,003
SPECIAL SITUATIONS
PRIVATE EQUITY FUND, L.P.
SPECIAL SITUATIONS
CAYMAN FUND, L.P.
SPECIAL SITUATIONS
FUND III, L.P.
(Purchaser's name here)
/ / Check this box to indicate that the undersigned is acting as
attorney-in-fact for certain advisory client Purchasers with respect to
which it has discretionary authority.
By: /s/ David Greenhouse
-------------------------------
Name: David Greenhouse
----------------------------
Title: MD
---------------------------
Date: 12/31/99
----------------------------
Address for delivery of shares:
----------------------------------
----------------------------------
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Exhibit 10.11(d)
STOCK PURCHASE AGREEMENT
This Agreement dated as of December 29, 1999 is entered into by and among
White Pine Software, Inc., a Delaware corporation (the "Company"), and each
entity which executes a counterpart to this Agreement and is listed on Exhibit A
(each referred to herein as a "Purchaser," and collectively referred to herein
as the "Purchasers").
In consideration of the mutual promises and covenants contained in this
Agreement, the parties hereto agree as follows:
1. PURCHASE AND SALE OF SHARES.
1.1 AUTHORIZATION. The Company has duly authorized the sale and issuance,
pursuant to the terms of this Agreement, of an aggregate of 325,521 shares
(the "Shares") of its common stock, $0.01 par value per share ("Common
Stock").
1.2 PURCHASE AND SALE OF SHARES. Subject to the terms and conditions of
this Agreement, each Purchaser agrees to purchase and the Company agrees
to sell, that number of Shares indicated opposite the Purchaser's name on
Exhibit A, at a purchase price equal to $15.36 per share (the "Purchase
Price").
1.3 CLOSING. The Closing of the purchase and sale of the Shares
contemplated by this Agreement (the "Closing") shall take place at the
offices of Foley, Hoag & Eliot LLP, One Post Office Square, Boston,
Massachusetts 02109 at 12 noon EST, on December 29, 1999, or at such other
place and time as mutually agreed by the Company and the Purchasers (the
"Closing Date"). At the Closing, the Company shall deliver to each
Purchaser a certificate for the number of Shares for which that Purchaser
has subscribed against payment of the purchase price therefore. Each
Purchaser shall remit the purchase price for the Shares being purchased at
the Closing by wire transfer of same-day funds to an account designated in
writing by the Company.
1.4 USE OF PROCEEDS. The Company will use the proceeds from the sale of
the Shares for working capital and other general corporate purposes.
<PAGE>
2. CONDITIONS TO CLOSING.
The obligation of the Purchasers to purchase and pay for the Shares shall
be subject to the accuracy of the representations and warranties made by the
Company herein and to the following conditions (any of which may be waived by a
Purchaser, acting individually, in its sole discretion, as to such Purchaser's
own Shares, but not as to the Shares to be purchased by any other Purchaser):
2.1 DELIVERIES BY THE COMPANY. The Company shall deliver to the Purchaser
or its agent:
(a) a certificate, as of recent date, as to the legal existence and
corporate good standing of the Company issued by the Secretary of State of
the State of Delaware;
(b) a copy of the Certificate of Incorporation of the Company, as
amended and in effect as of the Closing Date, certified by the Secretary
of State of the State of Delaware;
(c) a copy of the resolutions of the Board of Directors of the
Company authorizing and approving this Agreement and the issuance of the
Shares hereby, certified by the Secretary of the Company;
(d) a copy of the By-laws of the Company, certified by the Secretary
of the Company as in effect as of the Closing Date;
(e) an opinion of Foley, Hoag & Eliot LLP, counsel to the Company,
in substantially the form attached hereto as Exhibit B; and
(f) an executed lock-up agreement from each officer and director of
the Company in substantially the form attached hereto as Exhibit C.
3. REPRESENTATIONS OF THE COMPANY. Except as set forth in the applicable section
of the Disclosure Schedule attached hereto, the Company hereby represents and
warrants to each Purchaser as follows as of the date hereof and as of Closing.
3.1 ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. The Company is duly qualified or otherwise authorized
to transact business as a foreign corporation and is in good standing in
each jurisdiction in which the failure to so qualify would have a material
adverse effect on the results of operations, business or financial
condition of the Company and its subsidiaries taken as a whole (a
"Material Adverse Effect"). Each of the Company's subsidiaries is a
corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation. Each of the
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Company's subsidiaries is duly qualified or otherwise authorized to
transact business as a foreign corporation and is in good standing in each
jurisdiction in which the failure to so qualify would have a Material
Adverse Effect.
3.2 CAPITALIZATION. The Company is authorized to issue (a) 30,000,000
shares of Common Stock, and (b) 5,000,000 shares of Preferred Stock, $0.01
par value per share. As of December 28, 1999, there were issued and
outstanding 11,027,734 shares of Common Stock; no shares of Preferred
Stock had been issued or were outstanding; and options, warrants or rights
to purchase an aggregate of approximately 1,679,016 shares of Common Stock
had been granted by the Company and were outstanding. The Common Stock and
the Preferred Stock of the Company have the voting powers, designations,
preferences, rights and qualifications, and limitations or restrictions
set forth in the Certificate of Incorporation and amendments thereto. All
of the issued and outstanding shares of capital stock of the Company have
been duly authorized and validly issued, are fully paid and nonassessable,
have been issued in compliance with all federal and state securities laws,
were not issued in violation of or subject to any preemptive rights or
other rights to subscribe for or purchase securities, and conform in all
material respects to the description thereof contained in the Company's
Registration Statement on Form 8-A and the Company Reports (as hereinafter
defined). Except as disclosed in the first sentence of this section, 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 shares of
capital stock of any subsidiary and there is no commitment, plan or
arrangement to issue, any securities or obligations convertible into any
shares of capital stock of the Company or its subsidiaries or any such
options, rights convertible securities or obligations. The description of
the Company's capital stock, stock bonus and other stock plans or
arrangements and the options or other rights granted and exercised
thereunder, contained in the Company's Registration Statement on Form 8-A
and the Company Reports accurately and fairly presents the information
required to be shown with respect to such capital stock, plans,
arrangements, options and rights (except for issuances and exercises of
options in the ordinary course of business).
3.3 AUTHORITY FOR AGREEMENT. The execution, delivery and performance of
this Agreement by the Company has been duly authorized by all necessary
corporate action on the part of the Company, and this Agreement has been
duly executed and delivered by the Company, and this Agreement constitutes
the valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium and similar laws affecting the rights and remedies
of creditors generally and to general principles of equity.
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3.4 ISSUANCE AND SALE OF SHARES. The issuance and sale of the Shares by
the Company has been duly authorized and the Shares have been duly
reserved for issuance by all necessary corporate action on the part of the
Company, and the Shares, when issued and delivered against payment
therefor, will be validly issued, fully paid and nonassessable. Based in
part on the representations made by or on behalf of each Purchaser in
Section 4 of this Agreement, the offer, issuance and sale of the Shares
pursuant to this Agreement, together with the Private Placement, are
exempt from registration under the Securities Act. The issued shares of
capital stock of each of the Company's subsidiaries have been duly
authorized and validly issued, are fully paid and nonassessable and are
owned by the Company free and clear of any perfected security interest, or
any other security interests, liens, encumbrances, equities or claims. No
preemptive rights or other rights to subscribe for or purchase exist with
respect to the issuance and sale of the Shares by the Company pursuant to
this Agreement. Except for the registration rights granted in connection
with the Private Placement (as defined in Section 3.8), no stockholder of
the Company has any right to request or require the Company to register
the sale of any shares owned by such stockholder under the Securities Act
of 1933, as amended (the "Securities Act"), in the Registration Statement
(as hereinafter defined). No further approval or authority of the
stockholders or the Board of Directors of the Company will be required for
the issuance and sale of the Shares to be sold by the Company hereunder.
3.5 NO BREACH. The execution, delivery and performance of this Agreement
by the Company will not (a) conflict with or violate any provision of the
Certificate of Incorporation, as amended, or By-laws of the Company, (b)
require on the part of the Company any filing with, or permit,
authorization, consent or approval of, any governmental entity, (c) result
in breach of, constitute a default under, or require any notice, consent
or waiver under, any contract, agreement or other instrument to which the
Company is a party or by which it is bound (other than any consent or
waiver which has already been obtained) or (d) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company,
excluding from subparagraphs (a)-(d) such matters as would not in the
aggregate have a Material Adverse Effect or a material adverse effect upon
the transactions contemplated hereby. No consent, approval, authorization
or other order of any court, regulatory body, administrative agency or
other governmental body is required for the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby, except for compliance with the Blue Sky laws and
federal securities laws applicable to the offering of the Shares.
3.6 SEC REPORTS. The Company has previously furnished to the Purchasers
complete and accurate copies, as amended or supplemented, of its (a)
Annual Report on Form 10-KSB for the fiscal year ended December 31, 1998,
as filed with the SEC, (b) all proxy statements relating to the Company's
meetings of
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stockholders held or currently scheduled since December 31, 1998 and (c)
all other publicly available reports filed by the Company with the SEC
under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), since December 31, 1998 and through the date hereof (such reports
are collectively referred to herein as the "Company Reports"). The Company
Reports constitute all of the documents required to be filed by the
Company under Section 13, 14 or 15(d) of the Exchange Act with the SEC
since January 1, 1999. As of their respective dates, the Company Reports
did not, and as of the date hereof do not, contain any untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3.7 FINANCIAL STATEMENTS. The audited financial statements and unaudited
interim financial statements of the Company included in the Company
Reports (a) comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, (b) have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby
(except as may be indicated therein or in the notes thereto), (c) fairly
present the consolidated financial condition, results of operations and
cash flows of the Company as of the respective dates thereof and for the
periods referred to therein and (d) are consistent with the books and
records of the Company.
3.8 OTHER INFORMATION. The Company has provided to and discussed with the
Purchaser such information as the Purchaser has requested regarding the
current operations, financial condition (including the amount of available
cash) and plans of the Company. The Company has provided the Purchaser
with true and correct copies of the transaction documents relating to the
sale of 325,521 shares of Common Stock by the Company in a private
offering on December 24, 1999 (the "Private Placement").
3.9 MATERIAL ADVERSE CHANGE. Since December 31, 1998, and except as
disclosed by the Company in the Company Reports or otherwise in writing to
the Purchasers, (i) there has not been any material adverse change in the
operations or financial condition of operations of the Company, except
that the Company continues to incur operating losses, (ii) neither the
Company nor its subsidiaries have incurred any liabilities or obligations,
indirect or contingent, of such a nature that would require inclusion on a
balance sheet under generally accepted accounting principles (nor, to the
Company's knowledge, any other liabilities or obligations) or entered into
any verbal or written agreements or other transactions which are not in
the ordinary course of business or which could reasonably be expected to
result in a Material Adverse Effect; (iii) neither the Company nor its
subsidiaries have sustained any material loss or interference with its
businesses or properties from fire, flood, windstorm, accident or other
calamity not covered by insurance; (iv) neither the Company nor its
subsidiaries have paid
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or declared any dividends or other distributions with respect to its
capital stock and neither the Company nor its subsidiaries is in default
in the payment of principal or interest on any outstanding debt
obligations; and (v) there has not been any change in the capital stock of
the Company other than the sale of the Shares hereunder, shares or options
issued pursuant to exercise of outstanding warrants or employee and
director stock option plans approved by the Company's Board of Directors
and shares issued in connection with the Private Placement. There is no
fact which the Company has not disclosed to the Purchasers and their
counsel in writing and of which the Company is aware which has, had or is
reasonably likely to have a Material Adverse Effect.
3.10 ACTIONS AND PROCEEDINGS. There are no actions, suits or claims or
legal or arbitral proceedings or governmental inquiries or investigations,
pending, or, to the Company's knowledge, threatened against the Company,
which question the validity of this Agreement or the right of the Company
to enter into it, or which might result in a Material Adverse Effect.
3.11 PROPERTIES. Each of the Company and its subsidiaries has good and
marketable title to all the properties and assets reflected as owned by
them in the consolidated financial statements included in the Company's
Annual Report on Form 10-KSB for the fiscal year ended December 31, 1998,
subject to no lien, mortgage, pledge, charge or encumbrance of any kind
except (i) those, if any, reflected in such consolidated financial
statements, or (ii) those which are not material in amount and do not
materially and adversely affect the use made and intended to be made of
such property by the Company or its subsidiaries. Each of the Company and
its subsidiaries holds its leased properties under valid and binding
leases, with such exceptions as are not materially significant in relation
to the business of the Company and its subsidiaries, taken as a whole.
Each of the Company and its subsidiaries owns or leases all such
properties as are necessary to its operations as now conducted.
3.12 INTELLECTUAL PROPERTY. The Company and its subsidiaries own or have
obtained valid licenses, options or rights to use for the material
inventions, patent applications, patents, trademarks (both registered and
unregistered), tradenames, copyrights and trade secrets necessary for the
conduct of the Company's and its subsidiaries' respective businesses as
currently conducted and as the Company and its subsidiaries contemplate
conducting in all material respects (collectively, the "Intellectual
Property"). Neither the Company nor any of its subsidiaries has received
notice of any third parties who have any ownership rights to any
Intellectual Property that is owned by, or has been licensed to, the
Company or its subsidiaries that would preclude the Company or its
subsidiaries from conducting their respective businesses as currently
conducted and as the Company and its subsidiaries contemplate conducting
in all material respects. To the Company's knowledge, there are currently
no sales of products that would constitute an infringement by third
parties of any material Intellectual
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Property owned, licensed or optioned by the Company or its subsidiaries.
There is no pending or, to the Company's knowledge, threatened action,
suit, proceeding or claim by others challenging the rights of the Company
or its subsidiaries in or to any material Intellectual Property owned,
licensed or optioned by the Company or its subsidiaries. There is no
pending or, to the Company's knowledge, threatened action, suit,
proceeding or claim by others challenging the validity or scope of any
material Intellectual Property owned, licensed or optioned by the Company
or its subsidiaries. There is no pending or, to the Company's knowledge,
threatened action, suit, proceeding or claim by others that the Company or
its subsidiaries infringe or otherwise violate any patent, trademark,
copyright, trade secret or other proprietary right of others as would
reasonably be expected to result in a Material Adverse Effect.
3.13 COMPLIANCE. Neither the Company nor any of its subsidiaries has been
advised, and has no reason to believe, that it is not conducting its
business in compliance with all applicable laws, rules and regulations of
the jurisdictions in which it is conducting business, including, without
limitation, all applicable local, state and federal environmental laws and
regulations, except where failure to be so in compliance would not
individually or in the aggregate have a Material Adverse Effect.
3.14 TAXES. Each of the Company and its subsidiaries has filed or obtained
filing extensions with respect to all federal, state, local and foreign
income and franchise tax returns material to the Company and the
subsidiaries, taken as a whole, and has paid or accrued all taxes shown as
due thereon, and neither the Company nor any of its subsidiaries has
knowledge of a tax deficiency which has been asserted or threatened
against it which would reasonably be expected to have a Material Adverse
Effect.
3.15 TRANSFER TAXES. On the Closing Date, all stock transfers or other
taxes (other than income taxes) which are required to be paid in
connection with the sale and transfer of the Shares to be sold to the
Purchasers hereunder will be, or will have been, fully paid or provided
for by the Company and all laws imposing such taxes will be or will have
been fully complied with.
3.16 INSURANCE. Each of the Company and its subsidiaries maintains
insurance of the type and in the amount that the Company reasonably
believes is adequate for its business, including, but not limited to,
insurance covering all real and personal property owned or leased by the
Company or its subsidiaries against risks customarily insured against by
similarly situated companies, all of which insurance is in full force and
effect.
3.17 CONTRIBUTIONS. Neither the Company at any time since its
incorporation nor its subsidiaries at any time since they were acquired or
formed by the Company have, directly or indirectly, (i) made any unlawful
contribution to
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any candidate for public office, failed to disclose fully where required
by law any contribution in violation of law, or (ii) made any payment to
any federal or state governmental officer or official, or other person
charged with similar public or quasi-public duties, other than payments
required or permitted by the laws of the United States or any jurisdiction
thereof and in each case except for instances that would not have a
Material Adverse Effect.
3.18 YEAR 2000 COMPLIANCE. The Company has reviewed its operations to
evaluate the extent to which the business or operations of the Company and
its subsidiaries will be affected by the Year 2000 Problem (as defined
below). As a result of such review, the Company has no reason to believe,
and does not believe, that the Year 2000 Problem will have a Material
Adverse Effect. The "Year 2000 Problem" as used herein means any
significant risk that the Company's computer hardware or software used in
the receipt, transmission, processing, manipulation, storage, retrieval,
retransmissions or other utilization of data or in the operation of
mechanical or electrical systems of any kind will not, in the case of
dates or time periods occurring after December 31, 1999, function at least
as effectively as in the case of dates or time periods occurring prior to
January 1, 2000.
3.19 INVESTMENT COMPANY. The Company is not an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for an
investment company, within the meaning of the Investment Company Act of
1940, as amended.
3.20 OFFERING MATERIALS. The Company has not distributed and will not
distribute prior to the Closing Date any offering material in connection
with the offering and sale of the Shares other than the Company Reports.
The Company has not nor will it take any action to sell, offer for sale or
solicit offers to buy any securities of the Company which would reasonably
be expected to cause the offer or sale of the Shares, as contemplated by
this Agreement, to be within the provisions of Section 5 of the Securities
Act.
3.21 RELATED PARTY TRANSACTIONS. No transaction has occurred between or
among the Company and its affiliates, officers or directors or any
affiliate or affiliates of any such officer or director that is required
to be described in the Company's Reports and other filings under the
Securities Exchange Act of 1934 (the "Exchange Act") that is not so
described.
3.22 BOOKS AND RECORDS. The books, records and accounts of the Company
accurately and fairly reflect, in reasonable detail, the transactions in,
and dispositions of, the assets of, and the results of operations of, the
Company, all to the extent required by generally accepted accounting
principles. The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as
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necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles and to maintain asset
accountability, (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 the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
4. REPRESENTATIONS OF THE PURCHASERS.
Each Purchaser, severally and not jointly, represents and warrants to the
Company as follows:
4.1 INVESTMENT. Purchaser (a) is acquiring the Shares solely for its own
account for investment purposes and not with a view to, or for sale in
connection with, any distribution thereof, nor with any present intention
of distributing or selling the same other than pursuant to an effective
registration statement under the Securities Act, (b) has no present or
contemplated agreement, undertaking, arrangement, obligation, indebtedness
or commitment providing for the disposition thereof and (c) is fully aware
that in agreeing to sell the Shares and entering into this Agreement, the
Company is relying upon the truth and accuracy of the representations and
warranties contained herein. Each Purchaser has made its own investment
decision without reliance upon any representation, warranty or covenant
from any other Purchaser.
4.2 AUTHORITY FOR AGREEMENT. Purchaser has full power and authority to
execute, deliver and perform its obligations under this Agreement in
accordance with its terms. Purchaser represents that it has not been
organized, reorganized or recapitalized specifically for the purpose of
investing in the Company. This Agreement has been duly executed and
delivered by Purchaser and constitutes a valid and binding obligation of
Purchaser, enforceable against such Purchaser in accordance with its
terms.
4.3 INFORMATION. Purchaser or its attorney-in-fact (a) has reviewed the
representations of the Company contained in this Agreement and the Company
Reports and (b) has had the opportunity to make inquiry concerning the
Company and its business and personnel. The officers of the Company have
made available to each such person any and all written information that it
has requested and have answered to each such person's satisfaction all
inquiries made.
4.4 ACCREDITED INVESTOR. Purchaser is an "Accredited Investor" as that term is
defined in Rule 501 of Regulation D promulgated under the Securities Act.
Purchaser, either alone or with its purchaser representative or
attorney-in-fact, has sufficient knowledge and experience in investing in
companies similar to the Company so as to be able to evaluate the risks
and merits of its investment in the
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Company and is able financially to bear the risks thereof, including a
complete loss of its entire investment.
4.5 TRANSFER OF SHARES. Purchaser will not, directly or indirectly, offer,
sell, pledge, transfer or otherwise dispose of (or solicit any offers to
buy, purchase or otherwise acquire or take a pledge of) any of the Shares
except in compliance with the Securities Act, the rules and regulations
promulgated thereunder, and applicable state securities laws.
4.6 PURCHASER REPRESENTATIVES. In the event that any signatory hereto is
signing as attorney-in-fact for one or more advisory client Purchaser(s),
as indicated by checking the box above the signature for the Purchaser at
the end hereof, the undersigned signatory represents and warrants that the
undersigned has been duly appointed as attorney-in-fact of such
Purchaser(s), that the undersigned has sufficient discretionary authority
to enter into this Agreement on behalf of such Purchaser(s), and that each
of the representations and warranties contained in this Section 4 are true
and correct with respect to each of such Purchaser(s). Except as
specifically disclosed in writing prior to the date hereof to the Company,
the Purchaser is not an affiliate of the Company, a broker-dealer or
affiliated with a broker-dealer.
5. COVENANTS. The Company and the Purchasers agree as follows:
5.1 INFORMATION TO BE FURNISHED. The Company shall deliver to the
Purchaser with reasonable promptness, such material notices, information
and data with respect to the Company as the Company files with the SEC and
delivers to all holders of its Common Stock.
5.2 REGISTRATION OF SHARES. The Company will, at its expense, within 20
business days after the Closing Date file with the SEC a registration
statement on Form S-3, or if Form S-3 is unavailable to the Company, on
Form S-1, to register, under the Securities Act, the resale of the Shares
by the holders thereof (the "Registration Statement"), and will use its
reasonable best efforts to cause such Registration Statement to become
effective as promptly as possible (including by filing when and as
appropriate amendments and supplements thereto and to the related
prospectus, and by making all required "Blue Sky" filings, if any) and to
remain effective continuously until the earlier of (a) two years from the
Closing Date, (b) such time as all of the Shares held by Purchaser may be
sold pursuant to Rule 144 promulgated under the Securities Act on a single
day without regard to volume limitations or (c) such time as all Shares
have been sold. After the Registration Statement is declared effective
under the Securities Act, the Company will furnish holders of Shares (and
to each underwriter, if any, of the Shares) with such number of copies of
the prospectus included in the Registration Statement as the holders may
reasonably request to facilitate the resale of the Shares. Each Purchaser
will cooperate in promptly
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providing all information or certificates required from it in order to be
included as a selling stockholder on such Registration Statement. In the
event that the Company shall fail to cause the Registration Statement to
be declared effective within 90 days after the Closing Date, the Company
shall pay to each holder of Shares, as compensation therefor, a cash
payment equal to 1% of the product obtained by multiplying the Purchase
Price and the number of Shares held by such holder. In addition, if the
Registration Statement is not declared effective within 180 days after the
Closing Date, the Company shall pay to each holder of Shares an additional
cash payment equal to 2% of the product obtained by multiplying the
Purchase Price and the number of Shares held by such holder for each 30
day-period or part thereof that effectiveness of the Registration
Statement is delayed beyond 180 days after the Closing Date. After the
Closing Date, the Company shall not file or maintain any registration
statement with the Securities and Exchange Commission under the Securities
Act prior to the time it files the Registration Statement. The Company,
upon reasonable request of a Purchaser, will meet with such Purchaser or a
representative thereof at the Company's headquarters to discuss
information relevant for disclosure in the Registration Statement covering
the Shares, subject to appropriate confidentiality limitations as the
Company may require.
5.3 PURCHASER SALES PROCEDURES.
(a) Each Purchaser agrees that such Purchaser will not effect any
disposition of the Shares that would constitute a sale within the meaning
of the Securities Act, except as contemplated in the Registration
Statement, and that the Purchaser will promptly notify the Company of any
changes in the information set forth in the Registration Statement
regarding the Purchaser or such Purchaser's plan of distribution set forth
in such Registration Statement.
(b) For so long as the prospectus delivery requirement under the
Securities Act is in effect, the Purchaser shall not make any sale of the
Shares without complying with such requirement.
(c) Notwithstanding the provisions of Section 5.2, each Purchaser
acknowledges that there may occasionally be times when the Company must
suspend the use of the prospectus forming a part of the Registration
Statement if there then exists material, non-public information regarding
the Company, of such a nature that the public disclosure of which would
not, in the reasonable opinion of the Company, be appropriate at that
time; provided, however, that the Company shall not suspend the use of the
prospectus for a period or periods that, in the aggregate, exceed 90 days
in any twelve-month period. The Purchaser hereby covenants that, prior to
selling any Shares pursuant to the Registration Statement, the Purchaser
shall notify the Company in writing of its intent to sell Shares. The
Company shall have the two business days immediately following the date of
delivery of such notice during which to notify the Purchaser of a
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suspension of the prospectus forming a part of the Registration Statement.
During this two-day period, the Purchaser will not sell any Shares. If the
Company notifies the Purchaser that use of the prospectus has been
suspended, the Purchaser will not sell any Shares pursuant to said
prospectus until such time that the Company gives the Purchaser notice
(all such notices shall be given by the Company as promptly as practicable
following the suspension notice) that the Purchaser may thereafter effect
sales pursuant to said prospectus, from which time the Purchaser may sell
shares for a period of ten business days without complying with the
pre-sale notification requirements set forth above. The Purchaser further
covenants to promptly notify the Company following the sale of all of the
Purchaser's Shares.
5.4 LISTING OF SHARES. The Company will, within twenty business days after
the Closing Date, file with The Nasdaq Stock Market, Inc. a Notification
of Listing of Additional Shares (together with the required listing fee),
thereby listing the Shares on the NASDAQ National Market.
5.5 FUTURE SALES BY THE COMPANY. The Company will not, without the prior
written consent of General Electric Capital Corporation or its affiliate,
which consent shall not be unreasonably withheld, for a period from the
date hereof through the date that is 45 days following the initial
effective date of the Registration Statement, offer, sell or contract to
sell Common Stock at a price per share less than $15.36; provided,
however, that such period shall be extended for the number of days, if
any, during such period that the Company has suspended the use of the
prospectus pursuant to Section 5.3(c) herein; and further provided, that
the Company may (a) issue and sell Common Stock pursuant to any director
or employee stock option or purchase plan of the Company and (b) issue
Common Stock in connection with a merger or acquisition transaction or a
licensing or strategic partnering transaction approved by the Board of
Directors of the Company (and the stockholders, if required under
applicable law or regulation).
5.6 MARKET STAND-OFF. If requested by the managing underwriters in an
underwritten offering composed primarily of newly issued shares of Common
Stock, the Purchasers, or any assignees thereof, will not sell any of the
Shares for up to 90 days (as requested by such underwriters) following
such public.
6. INDEMNIFICATION AND CONTRIBUTION.
6.1 INDEMNIFICATION BY THE COMPANY. The Company will indemnify and hold
harmless each Purchaser, and each other person, if any, who controls or is
an affiliate of such Purchaser within the meaning of the Securities Act or
the Exchange Act, against any losses, claims, damages or liabilities,
joint or several, to which such Purchaser, controlling person or affiliate
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
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in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
Registration Statement under which the 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 Purchaser and each such controlling person and
affiliate for any legal or any other expenses reasonably incurred by such
Purchaser, controlling person or affiliate 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
information furnished to the Company, in writing, by or on behalf of such
Purchaser, controlling person or affiliate specifically for use in the
preparation thereof.
6.2 INDEMNIFICATION BY THE PURCHASERS. Each Purchaser, 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 the 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, but only to the extent the statement or omission was made in
reliance upon and in conformity with information relating to such
Purchaser furnished in writing to the Company by or on behalf of such
Purchaser specifically for use in connection with the preparation of such
Registration Statement, prospectus, amendment or supplement; provided,
however, that the obligations of each Purchaser hereunder shall be limited
to an amount equal to the net proceeds to such Purchaser of Shares sold in
connection with such registration.
6.3 INDEMNIFICATION PROCEDURES. 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
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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, unless and except to the extent that the
Indemnifying Party is prejudiced by the failure of the Indemnified Party
to provide timely notice. 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
in the judgment of the Indemnified Party 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.
6.4 CONTRIBUTION. In order to provide for just and equitable contribution
to joint liability under the Securities Act in any case in which either
(a) any Purchaser, or any controlling person of any such Purchaser, makes
a claim for indemnification pursuant to this Section 6 but it is
judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or
the denial of the last right of appeal) that such indemnification may not
be enforced in such case notwithstanding the fact that this Section 6
provides for indemnification in such case, or (b) contribution under the
Securities Act may be required on the part of any such Purchaser or any
such controlling person in circumstances for which indemnification is
provided under this Section 6; then, in each such case, the Company and
such Purchaser will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others)
in such proportions so that such Purchaser is responsible for the portion
represented by the percentage that the public offering price of its Shares
offered by the Registration Statement bears to the public offering price
of all securities offered by such Registration Statement, and the Company
is responsible for the remaining portion; provided, however, that, in any
such case, (x) no such Purchaser will be required to contribute any amount
in excess of the net proceeds to it of all Shares sold by it pursuant to
such Registration Statement and (y) no person or entity guilty of
fraudulent misrepresentation, within the meaning of Section 11(f) of the
Securities Act, shall
14
<PAGE>
be entitled to contribution from any person or entity who is not guilty of
such fraudulent misrepresentation.
7. RIGHT OF FIRST REFUSAL.
7.1 LIMITATION ON FUTURE ISSUANCES. For a period of one year from the date
hereof, the Company shall not issue, sell or exchange, or agree to issue,
sell or exchange (a) any shares of its Common Stock or (b) any option,
warrant or other right that is exercisable for, or convertible into,
shares of its Common Stock (collectively, "Offered Securities"), unless in
each such case the Company shall have first complied with this Section 7.
7.2 PROCEDURE.
(a) The Company shall deliver to each Purchaser a written notice of
any proposed or intended issuance, sale or exchange of Offered Securities
(the "Offer"), which Offer shall (i) identify and describe the Offered
Securities, (ii) describe the price and other terms upon which they are to
be issued, sold or exchanged, and the number or amount of the Offered
Securities to be issued, sold or exchanged and (iii) offer to issue and
sell to or exchange with such Purchaser that number of the Offered
Securities which represents the same percentage of the total Offered
Securities as the number of Shares held by such Purchaser represents of
the total number of shares of Common Stock outstanding (the "Basic
Amount"). Each Purchaser shall have the right, for a period of 10 business
days following delivery of the Offer, to accept the Offer in the manner
set forth below. The Offer by its term shall remain open and irrevocable
for such 10-business day period. To accept an Offer, in whole or in part,
a Purchaser must deliver a written notice to the Company prior to the end
of the 10-business day period of the Offer, setting forth the portion of
such Purchaser's Basic Amount that such Purchaser elects to purchase (the
"Notice of Acceptance").
(b) The Company shall have 60 days from the expiration of the
10-business day period set forth above to issue, sell or exchange all or
any part of such Offered Securities as to which a Notice of Acceptance has
not been given by the Investors, but only upon terms and conditions which
are not more favorable, in the aggregate, to the acquiring person or
persons or less favorable to the Company than those set forth in the
Offer.
(c) Any Offered Securities not acquired by the Purchasers or other
persons in accordance with Section 7.2 may not be issued, sold or
exchanged until they are again offered to the Purchasers under the
procedures specified in this Section 7.
7.3 EXCLUDED ISSUANCES. The rights of the Purchasers under this Section 7
shall not apply to:
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(a) Common Stock issued as a stock dividend to holders of Common
Stock or upon any subdivision or combination of shares of Common Stock;
(b) the issuance of shares of Common Stock, or options exercisable
therefor, to employees, consultants, directors, equipment lessors or banks
(in commercial bank financing arrangements) or similar institutional
credit financing sources;
(c) securities issued solely in consideration for the acquisition
(whether by merger or otherwise) by the Company or any of its subsidiaries
of stock or assets of any other entity, or in connection with a licensing
or strategic partnering transaction approved by the Board of Directors of
the Company (and the stockholders, if required under applicable law or
regulation); or
(d) shares of Common Stock sold by the Company in an underwritten
public offering pursuant to an effective registration statement under the
Securities Act.
8. MISCELLANEOUS.
8.1 ASSIGNABILITY. This Agreement, and the rights and obligations of the
Purchaser hereunder, may not be assigned in whole or in part by Purchaser
to any person or entity other than to an affiliate of such Purchaser or
its ultimate parent entity.
8.2 CONFIDENTIALITY. Purchaser agrees that it will keep confidential and
will not disclose or divulge any confidential, proprietary or secret
information which Purchaser may obtain from the Company pursuant to this
Agreement, unless such information is known, or until such information
becomes known, to the public; provided, however, that Purchaser may
disclose such information (a) to its attorneys, accountants, consultants
and other professionals to the extent necessary to obtain their services
in connection with its investment in the Company, (b) to any prospective
purchaser of any Shares from a Purchaser as long as such prospective
purchaser agrees in writing to be bound by the provisions of this Section
or (c) to any affiliate of a Purchaser; subject, in each case, to the
agreement of such party to keep such information confidential as set forth
herein.
8.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All agreements,
representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the closing of the
transactions contemplated hereby.
8.4 NOTICES. All notices, requests, consents and other communications
under this Agreement shall be in writing and shall be delivered by hand,
sent via a
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reputable nationwide overnight courier service, transmitted via facsimile
with hard copy via U.S. mail, or mailed by first class certified or
registered mail, return receipt requested, postage prepaid:
If to the Company, at White Pine Software, Inc., 542 Amherst Street,
Nashua, New Hampshire 03063, Attention: Chief Executive Officer, or
at such other address as may have been furnished in writing by the
Company to the Purchaser, with a copy to: Mark L. Johnson, Esq.,
Foley, Hoag & Eliot LLP, One Post Office Square, Boston,
Massachusetts 02109; or
If to any Purchaser, at its address as indicated on Exhibit A below,
or at such other address or addresses as may have been furnished in
writing by the Purchaser to the Company.
Notices provided in accordance with this Section 8.4 shall be deemed
delivered upon personal delivery, one business day after being sent via a
reputable nationwide overnight courier service for next business day
delivery, or two business days after deposit in the mail and on the next
business day following transmittal via facsimile.
8.5 EXPENSES. The Company and each Purchaser each agree to indemnify and
save the other harmless from and against any and all claims, liabilities
or obligations with respect to brokerage or finders' fees or commissions
in connection with the transactions contemplated by this Agreement
asserted by any person on the basis of any agreement, statement or
representation alleged to have been made by such indemnifying party. The
Company shall pay its own expenses, including attorneys' fees, and the
reasonable fees and out-of-pocket expenses of one legal counsel for CFE,
Inc.
8.6 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.
8.7 AMENDMENT AND WAIVER. Except as otherwise expressly set forth in this
Agreement, any term of this Agreement may be amended and the observance of
any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), with the
written consent of the Company and of Purchasers holding in the aggregate
not less than two-thirds (67%) of all the Shares then outstanding and held
by the Purchasers. Any amendment or waiver effected in accordance with
this Section 6.7 shall be binding upon each holder of any Shares. No
waivers of or exceptions to any term, condition or provision of this
Agreement, in any one or more instances, shall be deemed to be, or
construed as, a further or continuing waiver of any such term, condition
or provision.
17
<PAGE>
8.8 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.
8.9 SEPARATE AGREEMENT WITH EACH PURCHASER. While this Agreement is being
executed in multiple counterparts with multiple Purchasers, the
transaction with each Purchaser shall be considered a separate transaction
and none of the rights or obligations of any Purchaser shall be the in any
way affected by actions of any other Purchasers except to the extent that
Purchasers are required by the terms hereof to act as a group.
8.10 HEADINGS. The section headings are for the convenience of the parties
and in no way alter, modify, amend, limit or restrict the contractual
obligations of the parties.
8.11 ENFORCEABILITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
8.12 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to
the choice of law provisions thereof.
* * *
18
<PAGE>
Executed as of the date first written above.
WHITE PINE SOFTWARE, INC.
By:______________________________
Killko A. Caballero
Chief Executive Officer
PURCHASER:
Shares Purchased Dollars Invested
- ---------------- ----------------
325,521 $5,000,003
CFE, Inc.
- ---------
(Purchaser's name here)
/ / Check this box to indicate that the undersigned is acting as
attorney-in-fact for certain advisory client Purchasers with respect to
which it has discretionary authority.
By:_______________________________
Name:_____________________________
Title:____________________________
Date:_____________________________
Address for delivery of shares:
__________________________________
__________________________________
19
<PAGE>
Exhibit A
LIST OF PURCHASERS
Purchaser Dollars
Name and Address Shares Purchased Invested
- ---------------- ---------------- --------
CFE, Inc. 325,521 $5,000,003
c/o General Electric Capital Corporation
10 South LaSalle
Suite 2700
Chicago, IL 60603
Attention: White Pine Account Manager
Phone: 312.419.0985
Fax: 312.419.5992
with copies to:
General Electric Capital Corporation
335 Madison Avenue
12th Floor
New York, NY 10017
Attention: Morty White
Phone: 212.370.8058
Fax: 212.309.8783
and
General Electric Capital Corporation
201 High Ridge Road
Stamford, CT 06927
Attention: Corporate Counsel/Commercial Finance
Phone: 203.316.7500
Fax: 203.316.7822
20
<PAGE>
Executed as of the date first written above.
WHITE PINE SOFTWARE, INC.
By:______________________________
Killko A. Caballero
Chief Executive Officer
PURCHASER:
Shares Purchased Dollars Invested
- ---------------- ----------------
325,521 $5,000,003
CFE, Inc.
- ---------
(Purchaser's name here)
/ / Check this box to indicate that the undersigned is acting as
attorney-in-fact for certain advisory client Purchasers with respect to
which it has discretionary authority.
By: /s/ Erin L. Murphy
-------------------------------
Name: ERIN L. MURPHY
-----------------------------
Title: Duly Authorized Signatory
----------------------------
Date: 12/29/99
-----------------------------
Address for delivery of shares:
__________________________________
__________________________________
19
<PAGE>
Executed as of the date first written above.
WHITE PINE SOFTWARE, INC.
By: /s/ Killko A. Caballero
------------------------------
Killko A. Caballero
Chief Executive Officer
PURCHASER:
Shares Purchased Dollars Invested
- ---------------- ----------------
325,521 $5,000,003
CFE, Inc.
- ---------
(Purchaser's name here)
/ / Check this box to indicate that the undersigned is acting as
attorney-in-fact for certain advisory client Purchasers with respect to
which it has discretionary authority.
By:_______________________________
Name:_____________________________
Title:____________________________
Date:_____________________________
Address for delivery of shares:
__________________________________
__________________________________
20
<PAGE>
CONSULTING AGREEMENT
This Consulting Agreement (this "Agreement") is entered into as of February
17, 2000 between White Pine Software, Inc., a Delaware corporation (the
"Company"), and Arthur H. Bruno (the "Consultant").
BACKGROUND
The Consultant previously has served as an officer and director of the
Company for a number of years, and in those capacities has been granted options
to purchase shares of the Company's common stock.
The Consultant possesses an intimate knowledge of the business and affairs
of the Company and its policies, methods, personnel and operations.
The Company and the Consultant have agreed that the Consultant will provide
business consultation services to the Company in exchange for certain
modifications in the terms of options previously granted to the Consultant. The
Company and the Consultant wish to memorialize the terms under which the
consultant will provide services to the Company.
Now, Therefore, the Company and the Consultant hereby agree as follows:
1. TERM OF PERFORMANCE. The Consultant's term of performance under this
Agreement (the "Term") shall commence on February 17, 2000 and shall expire on
December 31, 2000, unless terminated earlier pursuant to Section 5.
2. SCOPE OF WORK. The Consultant shall provide general business
consultation services upon request of the Company from time to time during the
Term. In no event shall the Consultant's services exceed ten hours per week
without his prior consent.
3. PAYMENT. As sole and full consideration for the consulting services to
be provided hereunder, the Company and the Consultant hereby agree that the
terms of the following stock option agreements previously granted to the
Consultant shall be modified as set forth below:
(a) Option number 014, which is fully vested and exercisable to acquire
85,000 shares of the Company's common stock at a price of $0.50 per share,
shall remain exercisable until 15 days after the end of the Term.
(b) Option number 0573, which is partially vested and, when fully
vested, will be exercisable to acquire 35,000 shares of the Company's
common stock at a price of $1.875 per share, (i) shall continue to vest
through the termination of this Agreement, in accordance with the vesting
schedule currently set forth therein, and (ii) shall remain exercisable
until 15 days after the end of the Term.
4. CONFIDENTIALITY. The Consultant acknowledges that in the course of
performing services hereunder he will have access to confidential proprietary
information belonging to the Company and that improper taking, disclosure or use
of such confidential information would cause the Company substantial
<PAGE>
loss, damage and irreparable harm. The Consultant agrees that he shall at all
times hold confidential all trade secrets, proprietary information, inventions
and developments, including customer lists, business plans and all other data or
information, (and any tangible evidence, record or representation thereof),
whether prepared, conceived or developed by an employee or consultant of the
Company (including himself) or received by the Company from an outside source,
that is in the possession of the Company and that is maintained in confidence by
the Company or might permit the Company or its clients or customers to obtain a
competitive advantage over competitors who do not have access to such
information (collectively, referred to herein as the "Confidential
Information"). During the Term, the Consultant shall use and disclose
Confidential Information only to the extent necessary to perform the services to
be provided hereunder and for the sole benefit of the Company, and, in any
event, shall not disclose any Confidential Information to any person or entity
outside the Company except as authorized pursuant to a written confidentiality
agreement supplied by the Company or with the prior written direction or written
permission of a duly authorized officer of the Company. The Consultant shall
not, except for one back-up copy where reasonably necessary to conduct the
business of the Company, copy any Confidential Information. The Consultant shall
not remove any copyright or proprietary notices from any Confidential
Information. After the Term, the Consultant shall not disclose to any person or
entity, or make use of, any Confidential Information without the prior written
permission of a duly authorized officer of the Company. This provision shall not
apply to any Confidential Information that the Company has voluntarily disclosed
to the public or has otherwise legally entered the public domain. The Consultant
understands that the Company has from time to time in its possession information
that is claimed by others to be proprietary and that the Company has agreed to
keep confidential. The Consultant agrees that all such information shall be
Confidential Information for purposes of this Agreement.
5. TERMINATION. The Company or the Consultant may terminate the Term in the
event of the breach by the other party of any term or condition of this
Agreement upon ten days' written notice to the breaching party. Notwithstanding
the foregoing, the Company may terminate the Term, effective immediately upon
providing written notice to the Consultant, if the Consultant breaches or
threatens to breach any provision of Section 4.
6. INDEPENDENT CONTRACTOR. The Consultant is an independent contractor and
assumes full responsibility for the payment of all taxes, including Social
Security, unemployment and withholding taxes, for himself and for all persons
engaged by him in the performance of the services hereunder. The Consultant
shall provide workers' compensation coverage and any insurance or other legally
required benefits for himself and all persons engaged by him in the performance
of the services hereunder. The Consultant shall not be entitled to any benefits,
coverages or privileges, including social security, unemployment, medical or
pension payments, made available to employees of the Company. The Consultant is
not and shall not represent himself as authorized to act on behalf of the
Company, except when specifically authorized to do so by the Company in writing.
7. GENERAL.
(a) AMENDMENT. This Agreement may not be amended, modified or supplemented
by the parties hereto in any manner, except by an instrument in writing signed
on behalf of each of the parties.
(b) NOTICES. Any notice, request, instruction or other document to be given
hereunder by any party to the other shall be in writing and delivered personally
or sent by certified mail, postage prepaid, by facsimile (with receipt
confirmed), or by courier service, as follows:
<PAGE>
To the Company: White Pine Software, Inc.
542 Amherst Street
Nashua, New Hampshire 03063
Facsimile: (603) 883-7920
Attention: President and Chief Executive Officer
WITH A COPY TO:
Foley, Hoag & Eliot LLP
One Post Office Square
Boston, Massachusetts 02109
Facsimile: (617) 832-7000
Attention: Mark L. Johnson
To the Consultant: Arthur H. Bruno
7 Melendy Hollow Drive
Amherst, New Hampshire 03031
or to such other address of a party as may be designated in writing by such
party, by a notice given as aforesaid.
(c) CONSTRUCTION. The headings in this Agreement are included only for
convenience and shall not affect the meaning or interpretation of this
Agreement. The words "herein" and "hereof" and other words of similar import
refer to this Agreement as a whole and not to any particular part of this
Agreement. The word "including" as used herein shall not be construed so as to
exclude any other thing not referred to or described. In computing any period of
time under this Agreement, the day from which the designated period of time
begins to run shall not be included; the last day of the period so computed
shall be included, unless it is not a business day, in which event the period
shall run until the end of the next day which is a business day.
(d) ENTIRE AGREEMENT, ASSIGNABILITY, ETC. This Agreement (i) constitutes
the entire agreement, and supersedes all other prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof, (ii) is not intended to confer upon any person other than
the parties hereto any rights or remedies hereunder, and (iii) shall not be
assignable by operation of law or otherwise. No provisions of this Agreement are
intended, nor shall be interpreted, to provide or create any third party
beneficiary rights or any other rights of any kind in any person other than the
parties to this Agreement.
(e) VALIDITY. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
(f) SURVIVAL. The Consultant's obligations under Section 4 shall survive
the expiration or termination of the Term, irrespective of the reasons for such
expiration or termination, and shall not in any way be modified, altered or
otherwise affected by such expiration or termination.
(g) GOVERNING LAW. This Agreement shall be governed by the laws of the
State of New Hampshire
<PAGE>
In Witness Whereof, the parties hereto have executed this Agreement as of
February 17, 2000.
WHITE PINE SOFTWARE, INC. ARTHUR H. BRUNO
By: /S/ KILLKO A. CABALLERO /S/ ARTHUR H. BRUNO
Killko A. Caballero
President and Chief Executive Officer
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Consolidated Financial Data" and "Experts" and to the use of our report dated
February 1, 2000 (except Note 10, as to which the date is February 29, 2000)
in Amendment No. 1 to the Registration Statement of Form SB-2 and related
Prospectus of White Pine Software, Inc. for the registration of 1,302,084
shares of its common stock.
/s/ ERNST & YOUNG LLP
Manchester, New Hampshire
March 23, 2000
