<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 3, 1998.
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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VIGNETTE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 7372 74-2769415
(STATE OR OTHER (PRIMARY STANDARD (I.R.S.
JURISDICTION OF INDUSTRIAL EMPLOYERIDENTIFICATION
INCORPORATION OR CLASSIFICATION CODE NUMBER)
ORGANIZATION) NUMBER)
901 SOUTH MOPAC EXPRESSWAY
AUSTIN, TEXAS 78746
(512) 306-4300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
GREGORY A. PETERS
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
VIGNETTE CORPORATION
901 SOUTH MOPAC EXPRESSWAY
AUSTIN, TEXAS 78746
(512) 306-4300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
COPIES TO:
JAY K. HACHIGIAN ALAN DEAN
BRIAN K. BEARD DAVIS POLK & WARDWELL
ANTHONY M. ALLEN 450 LEXINGTON AVENUE
GUNDERSON DETTMER STOUGH NEW YORK, NEW YORK 10017
VILLENEUVE FRANKLIN & HACHIGIAN, LLP (212) 450-4000
8911 CAPITAL OF TEXAS HIGHWAY, SUITE
4240
AUSTIN, TEXAS 78759
(512) 342-2300
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C>
Common Stock, $0.01 par value............... $30,000,000 $8,340
</TABLE>
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(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(o).
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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SUCH SECTION 8(A), MAY DETERMINE.
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- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY +
+NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN +
+OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE +
+SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)
Issued December 3,1998
Shares
[LOGO OF VIGNETTE APPEARS HERE]
COMMON STOCK
-----------
VIGNETTE CORPORATION IS OFFERING SHARES AND THE SELLING STOCKHOLDERS
ARE OFFERING SHARES. THIS IS OUR INITIAL PUBLIC OFFERING AND NO
PUBLIC MARKET CURRENTLY EXISTS FOR OUR SHARES. WE ANTICIPATE
THAT THE INITIAL PUBLIC OFFERING PRICE WILL BE BETWEEN
$ AND $ PER SHARE.
-----------
WE HAVE FILED AN APPLICATION FOR THE COMMON STOCK TO BE QUOTED ON THE
NASDAQ NATIONAL MARKET UNDER THE SYMBOL "VIGN."
-----------
INVESTING IN THE COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 4.
-----------
PRICE $ A SHARE
-----------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS COMPANY STOCKHOLDERS
-------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Per Share....................... $ $ $ $
Total........................... $ $ $ $
</TABLE>
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
Vignette Corporation has granted the underwriters the right to purchase up to
an additional shares to cover over-allotments. Morgan Stanley & Co.
Incorporated expects to deliver the shares to purchasers on , 1999.
-----------
MORGAN STANLEY DEAN WITTER
HAMBRECHT & QUIST
DAIN RAUSCHER WESSELS
a division of Dain Rauscher Incorporated
, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................. 3
Risk Factors........................ 4
Special Note Regarding Forward-
Looking Statements................. 13
Use of Proceeds..................... 14
Dividend Policy..................... 14
Capitalization...................... 15
Dilution............................ 16
Selected Consolidated Financial
Data............................... 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 18
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Business............................ 27
Management.......................... 44
Certain Transactions................ 52
Principal and Selling Stockholders.. 55
Description of Capital Stock........ 57
Shares Eligible for Future Sale..... 59
Underwriters........................ 61
Legal Matters....................... 63
Experts............................. 63
Additional Information.............. 63
Index to Consolidated Financial
Statements......................... F-1
</TABLE>
Our principal executive offices are located at 901 South MoPac Expressway,
Austin, Texas 78746 and our telephone number is (512) 306-4300. Our World Wide
Web site address is www.vignette.com. The information in the Web site is not
incorporated by reference into this Prospectus. In this Prospectus, the
"Company," "Vignette," "we," "us," and "our" refer to Vignette Corporation and
its subsidiary.
You should rely only on the information contained in this Prospectus. We
have not authorized anyone to provide you with information different from that
contained in this Prospectus. We and the selling stockholders are offering to
sell shares of Common Stock and seeking offers to buy shares of Common Stock
only in jurisdictions where offers and sales are permitted. The information
contained in this Prospectus is accurate only as of the date of this
Prospectus, regardless of the time of delivery of this Prospectus or of any
sale of the Common Stock.
Until , 1999 (25 days after the date of this Prospectus), all dealers
that buy, sell or trade in the Common Stock, whether or not participating in
this offering, may be required to deliver a Prospectus. This delivery
requirement is in addition to the dealers' obligation to deliver a Prospectus
when acting as Underwriters and with respect to their unsold allotments or
subscriptions.
2
<PAGE>
VIGNETTE: INTERNET RELATIONSHIP MANAGEMENT SOLUTIONS
It's clear that merely having a Web site on the Internet is not enough to
increase online revenues. Businesses must build relationships that deliver the
right information at the right time. In addition, to increase the return on
Internet investments businesses must create multiple contact points by
providing information on third-party Web sites. The bottom line is simple:
Vignette offers the solutions that build Internet relationships.
[Graphic of two individuals shaking hands; graphic of a computer with a
banner reading "Everyone Welcome."]
TO BUILD AN ONLINE BUSINESS, BUILD CUSTOMER RELATIONSHIPS.
To date, most businesses can't get a quality return on their Internet
investment because they aren't building relationships that turn one-time
visitors into long-term customers. To increase returns, companies must manage
content in a way that provides the value and convenience to stimulate buying
and ongoing customer loyalty.
[An arrow from the computer, labeled "One-time visitors become long-term
customers,"' points to another computer with a banner reading "Welcome Jim."
Two individuals stand at the end of a red carpet unrolling from the computer.]
VIGNETTE STORYSERVER 4. IT'S TIME TO GET PERSONAL.
With Vignette StoryServer 4, businesses can manage content in an intelligent
fashion, personalizing the experience for the Web site visitor throughout the
visitor's customer lifecycle. As a result, long-term, customer relationships
can be built and the resulting revenues offer a superior return on the
company's Internet investment.
[An arrow, labeled "Customers may not come to you, so you need to go to
them," points from the second computer to a graphic of an individual standing
before a large computer with a banner reading, "Welcome Jim" and labeled,
"Company Web Site." Six smaller graphics of an individual standing before a
computer surround the large computer; each of the six is connected to the
large computer by a double-headed arrow. Each small computer has a banner and
a label: "Hi Jim" and "Vendor," "Hey Jim" and "Distributor," "Go Jim!" and
"Online Catalog," "Enter Jim" and "Resellers," "Hello Jim" and "Retailer," and
"Jim!" and "Portal," respectively.]
VIGNETTE SYNDICATION SERVER. THE RIGHT INFORMATION, AT THE RIGHT TIME, IN THE
RIGHT PLACE.
Once StoryServer 4 is in place building relationships, companies can expand
revenue opportunities by creating additional customer contact points.
Beginning in the first quarter of 1999, companies can use the Vignette
Syndication Server to place content on third-party sites allowing them to
build a powerful distribution network that puts their products in direct
access to the customers wherever they are.
<PAGE>
PROSPECTUS SUMMARY
You should read this summary together with the more detailed information and
our consolidated financial statements and notes appearing elsewhere in this
Prospectus.
THE COMPANY
Vignette is a leading provider of Internet Relationship Management ("IRM")
software products and services. The Company's IRM solutions, which represent a
new category of enterprise applications, are designed to enable businesses to
build sustainable online customer relationships and increase Web-based revenues
and market share. Our StoryServer 4 application platform integrates advanced
content management, lifecycle personalization and decision support tools to
allow our clients to engage their Web site visitors with personalized
interactions that stimulate buying and strengthen customer loyalty. Our
Vignette Syndication Server ("VSS") platform, which we formally announced in
October 1998 and expect to ship in the first quarter of 1999, is designed to
enable a business to distribute its electronic goods and services outside of
its own Web site through a network of reseller, affiliate, and partner Web
sites, or its "Customer Chain." The capabilities of VSS will enable our clients
to establish super-distribution networks on the Internet to extend online reach
and increase Web-based revenue opportunities. We complement our products with a
professional services organization that offers strategic planning, project
management and implementation services.
To date, we have licensed the StoryServer software platform to more than 160
clients worldwide in a variety of industries including retail, financial
services, telecommunications, technology and media. Our customers include Bank
One, Bay Networks, Chicago Tribune, Lands' End, National Semiconductor, Preview
Travel, and Ziff Davis Publishing. Since shipping our first products in 1997,
we have received 11 awards for our industry leadership and product capabilities
including Best Products/Best Private Company from The Red Herring magazine and
the Editor's Choice Award from Seybold Publications.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered.... shares (including shares by Vignette and
shares by the selling stockholders)(1)
Common Stock to be
outstanding after
the offering........... shares(1)
Use of proceeds......... For working capital and general corporate purposes. See
"Use of Proceeds."
Proposed Nasdaq National VIGN
Market symbol..........
</TABLE>
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(1) Based on 11,476,133 shares outstanding as of November 30, 1998, assuming
conversion of outstanding Preferred Stock into Common Stock. Does not
include shares issuable pursuant to the Underwriter's overallotment option
or outstanding options and warrants. See "Capitalization," "Underwriters,"
"Management--Employee Benefit Plans" and Note 3 of Notes to Consolidated
Financial Statements.
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS
DECEMBER 31, ENDED SEPTEMBER 30,
---------------- --------------------
1996(1) 1997 1997 1998
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<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Total revenue.......................... $ -- $ 3,024 $ 1,716 $ 9,511
Gross profit........................... -- 1,549 1,018 3,422
Total operating expenses............... 3,688 9,192 5,494 19,920
Loss from operations................... (3,688) (7,643) (4,476) (16,498)
Net loss............................... (3,626) (7,474) (4,388) (16,294)
Pro forma basic net loss per share (2). $ (1.19) $ (1.84)
Shares used in computing pro forma
basic net loss per share (2).......... 6,259 8,861
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
--------------------------------
PRO FORMA
ACTUAL AS ADJUSTED(3)
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<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents...................... $ 12,397 $
Working capital................................ 5,468
Total assets................................... 19,447
Long-term debt, less current portion........... 2,013
Redeemable convertible preferred stock......... 27,758
Total stockholders' equity (deficit)........... (23,206)
</TABLE>
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(1) Consolidated statement of operations data for the year ended December 31,
1996 include results of operations for the period from December 19, 1995
(inception) through December 31, 1996.
(2) See Note 2 of Notes to Consolidated Financial Statements for discussion
regarding computation and presentation.
(3) Adjusted to reflect the conversion of Preferred Stock outstanding as of
September 30, 1998 into 8,098,872 shares of Common Stock and our sale of
shares of our Common Stock at an assumed public offering price of $
per share and the application of the estimated net proceeds. See "Use of
Proceeds" and "Capitalization."
3
<PAGE>
RISK FACTORS
You should carefully consider the following risks before making an
investment decision. The risks described below are not the only ones that we
face. Additional risks that we do not yet know of or that we currently think
are immaterial may also impair our business operations. Our business,
operating results or financial condition could be materially adversely
affected by any of the following risks. The trading price of our Common Stock
could decline due to any of these risks, and you may lose all or part of your
investment. You should also refer to the other information set forth in this
Prospectus, including our financial statements and the related notes.
This Prospectus contains forward-looking statements. These statements relate
to future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may," "will,"
"should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential," or "continue" or the negative of such terms and other
comparable terminology. These statements are only predictions. Actual events
or results may differ materially. In evaluating these statements, you should
specifically consider various factors, including the risks outlined below.
These factors may cause our actual results to differ materially from any
forward-looking statement. See "Special Note Regarding Forward-Looking
Statements."
LIMITED OPERATING HISTORY; HISTORY OF LOSSES AND EXPECTATION OF FUTURE LOSSES
Vignette was founded in December 1995 and has a limited operating history.
An investor in our Common Stock must consider the risks and difficulties
frequently encountered by early stage companies in new and rapidly evolving
markets. These risks include our:
. Dependence on our StoryServer product;
. Need to expand our sales and professional services organizations;
. Ability to develop and upgrade our technology;
. Ability to compete in a highly competitive market;
. Need to manage expanding operations;
. Ability to maintain sufficiently high utilization rates for professional
services personnel;
. Continued reliance on strategic relationships; and
. Dependence on key personnel.
We also depend on the growing use of the Internet for commerce and
communication and on general economic conditions. We cannot be certain that we
will successfully address any of these risks.
We incurred net losses of $3.6 million for the year ended December 31, 1996,
$7.5 million for the year ended December 31, 1997 and $16.3 million for the
nine months ended September 30, 1998. As of September 30, 1998, we had an
accumulated deficit of $27.4 million. We have not achieved profitability and
we expect to incur net losses for the foreseeable future. We expect to
continue to incur significant product development, sales and marketing, and
administrative expenses and, as a result, we will need to generate significant
revenues to achieve and maintain profitability. Although our revenues have
grown significantly in recent quarters, we cannot be certain that we can
sustain these growth rates or that we will achieve sufficient revenues for
profitability. If we do achieve profitability, we cannot be certain that we
can sustain or increase profitability on a quarterly or annual basis in the
future. See "Selected Consolidated Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
QUARTERLY FINANCIAL RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS AND
SEASONALITY
As a result of our limited operating history, we cannot forecast operating
expenses based on our historical results. Accordingly, we base our expenses in
part on future revenue projections. Most of our expenses are fixed in the
short term and we may not be able to quickly reduce spending if our revenues
are lower than we had projected. Our ability to forecast accurately our
quarterly revenue is limited because our software products have
4
<PAGE>
a long sales cycle that makes it difficult to predict the quarter in which
sales will occur. We would expect our business, operating results and
financial condition to be materially adversely affected if our revenues do not
meet our projections and that net losses in a given quarter would be even
greater than expected.
We expect our revenues and operating results may vary significantly from
quarter to quarter. A number of factors are likely to cause these variations,
including:
. Demand for our products and services;
. The timing of sales of our products and services;
. The timing of customer orders and product implementations;
. Unexpected delays in introducing new products and services;
. Increased expenses, whether related to sales and marketing, product
development or administration;
. Changes in the rapidly evolving market for IRM solutions;
. The mix of product license and services revenue, as well as the mix of
products licensed;
. The mix of domestic and international sales; and
. Costs related to possible acquisitions of technology or businesses.
Accordingly, we believe that quarter-to-quarter comparisons of our operating
results are not necessarily meaningful. Investors should not rely on the
results of one quarter as an indication of our future performance.
We plan to increase our operating expenses to expand our sales and marketing
operations, develop new distribution channels, fund greater levels of research
and development, broaden professional services and support, and improve
operational and financial systems. If our revenues do not increase along with
these expenses, our business, operating results or financial condition could
be materially adversely affected and net losses in a given quarter would be
even greater than expected.
Although we have limited historical financial data, we believe that our
quarterly operating results may experience seasonal fluctuations. For
instance, quarterly results may fluctuate based on our clients' calendar year
budgeting cycles, slow summer purchasing patterns in Europe and our
compensation policies that tend to compensate sales personnel, typically in
the latter half of the year, for achieving annual quotas.
DEPENDENCE ON SMALL NUMBER OF LARGE ORDERS
We derive a significant portion of our software license revenues in each
quarter from a small number of relatively large orders. For example, in five
of the last seven quarters in the period ended September 30, 1998, we had at
least one customer that accounted for at least 10% of total revenue in such
quarter. We do not believe that the loss of any particular customer would have
an adverse effect on our business. However, our operating results could be
materially adversely affected if we were unable to complete one or more
substantial license sales in any future period. We derive a substantial
portion of our revenue from the sale of products with related services. In
these cases, our revenue recognition policy requires us to substantially
complete the implementation of our product before we can recognize software
license revenue, and any end of quarter delays in product implementation could
materially adversely affect operating results for that quarter. As a result,
small delays in customer orders or product implementations can cause
significant variability in our license revenues and operating results for any
particular period.
DEPENDENCE ON STORYSERVER
We currently derive all of our revenues from the license and related
upgrades, professional services and support of our StoryServer software
products, and we expect that we will continue to depend on revenue related to
new and enhanced versions of our StoryServer product line for at least the
next several quarters. We cannot be certain that we will be successful in
upgrading and marketing our products or that we will successfully develop and
market new products and services. If we do not continue to increase revenue
related to our existing products or generate revenue from new products and
services, our business, operating results and financial condition would be
materially adversely affected.
5
<PAGE>
DEPENDENCE ON SUCCESSFUL INTRODUCTION OF VIGNETTE SYNDICATION SERVER
We formally announced Vignette Syndication Server, or VSS, in October 1998
and we plan to ship VSS to clients in the first quarter of 1999. This will be
the first version of a new product designed for a new market opportunity.
There are significant risks inherent in a product introduction such as VSS. We
expect that our future financial performance will depend significantly on the
successful development, introduction and market acceptance of VSS and the
related tools that we plan to develop. Market acceptance of VSS will depend on
a market developing for Internet syndication products and services and the
commercial adoption of standards on which VSS is based. We cannot be certain
that either will occur. We cannot be certain that VSS will meet customer
performance needs or expectations when shipped or that it will be free of
significant software defects or bugs. If VSS does not meet customer needs or
expectations, for whatever reason, upgrading or enhancing the product could be
costly and time consuming.
NEED TO DEVELOP SALES AND DISTRIBUTION CAPABILITIES
We will need to expand our direct and indirect sales operations in order to
increase market awareness of our products and generate increased revenue. We
have recently expanded our direct sales force and plan to hire additional
sales personnel. Our products and services require a sophisticated sales
effort targeted at the senior management of our prospective clients. New hires
will require training and take time to achieve full productivity. We cannot be
certain that our recent hires will become as productive as necessary or that
we will be able to hire enough qualified individuals in the future. We also
plan to expand our relationships with value-added resellers, systems
integrators and other third-party resellers to build an indirect sales
channel. We cannot be certain that we will be successful in these efforts. In
addition, we will need to manage potential conflicts between our direct sales
force and third-party reselling efforts.
LENGTHY SALES AND IMPLEMENTATION CYCLE
Selling IRM software requires us to educate potential clients regarding the
use and benefits of IRM applications. As a result, our software products have
a long sales cycle that makes it difficult to predict the quarter in which
sales may fall. In addition, the implementation of our products requires a
significant commitment of resources by our clients, third-party professional
services organizations or our professional services organization. In many
cases, we recognize a substantial portion of the revenue from product sales
upon implementation of our product. Delays in product implementation could
cause significant variability in our license revenues and operating results
for any particular period.
RISKS ASSOCIATED WITH PROFESSIONAL SERVICES
Clients that license our software typically engage our professional services
organization to assist with support, training, consulting and implementation.
We believe that growth in our product sales depends on our ability to provide
our clients with these services and to educate third-party resellers on how to
use our products. As a result, we plan to increase the number of service
personnel to meet these needs. New services personnel will require training
and education and take time to reach full productivity. To meet our needs for
services personnel, we may also need to use more costly third-party
consultants to supplement our own professional services organization. We
expect our services revenue to increase in absolute dollars as we continue to
provide consulting and training services that complement our products and as
our installed base of clients grows. To date, our services costs have been
significantly higher than our services revenue, and we expect that trend to
continue for the foreseeable future. We cannot be certain that our services
business will ever achieve profitability. We generally bill our clients for
our services on a "time and materials" basis. However, from time to time we
enter into fixed-price contracts for services. On occasion, the costs of
providing the services have exceeded our fees from these contracts and, from
time to time, we may misprice future contracts to our detriment. In addition,
competition for qualified services personnel is intense. We are in a new
market and there is a limited number of people who have acquired the skills
needed to provide the services that our clients demand. We cannot be certain
that we can attract or retain a sufficient number of the highly qualified
services personnel that our business needs.
RISKS ASSOCIATED WITH EMERGING MARKET
The market for IRM software is new and rapidly evolving. We expect that we
will continue to need intensive marketing and sales efforts to educate
prospective clients about the uses and benefits of our products
6
<PAGE>
and services. Enterprises that have already invested substantial resources in
other methods of conducting business may be reluctant or slow to adopt a new
approach that may replace, limit or compete with their existing systems.
Similarly, individuals have established patterns of purchasing goods and
services. They may be reluctant to alter those patterns. They may also resist
providing the personal data necessary to support our existing and potential
product uses. Any of these factors could inhibit the growth of online business
generally and the market's acceptance of our products and services in
particular. Accordingly, we cannot be certain that a viable market for our
products will emerge or be sustainable.
DEPENDENCE ON USE OF THE INTERNET FOR COMMERCE
Our future success depends heavily on the Internet being accepted and widely
used for commerce. Consumers and businesses may reject the Internet as a
viable commercial medium for a number of reasons, including potentially
inadequate network infrastructure, slow development of enabling technologies
or insufficient commercial support. The Internet infrastructure may not be
able to support the demands placed on it by increased Internet usage and
bandwidth requirements. In addition, delays in the development or adoption of
new standards and protocols required to handle increased levels of Internet
activity, or increased government regulation could cause the Internet to lose
its viability as a commercial medium. If Internet commerce does not continue
to grow or grows more slowly than expected for any of these reasons, our
business, operating results and financial condition would be materially
adversely affected. Even if the required infrastructure, standards, protocols
or complementary products, services or facilities are developed, we may incur
substantial expenses adapting our solutions to changing or emerging
technologies.
RISKS OF RAPID TECHNOLOGICAL CHANGE
The market for our products is marked by rapid technological change,
frequent new product introductions and enhancements, uncertain product life
cycles, changes in client demands and evolving industry standards. New
products based on new technologies or new industry standards can render
existing products obsolete and unmarketable. To succeed, we will need to
enhance our current products and develop new products on a timely basis to
keep pace with technological developments and to satisfy the increasingly
sophisticated requirements of our clients. Internet commerce technology,
particularly IRM technology, is complex and new products and product
enhancements can require long development and testing periods. Any delays in
developing and releasing enhanced or new products could have a material
adverse effect on our business, operating results and financial condition. We
cannot be certain that we will successfully develop and market new products or
new product enhancements that respond to technological change, evolving
industry standards or client requirements.
OUR MARKET IS HIGHLY COMPETITIVE
The Internet software market is intensely competitive. Our clients'
requirements and the technology available to satisfy those requirements
continually change. We expect competition to persist and intensify in the
future.
Our principal competitors include: in-house development efforts by potential
clients or partners; other vendors of software that directly address elements
of Internet Relationship Management, such as BroadVision; and developers of
software that address only certain technology components of IRM (e.g., content
management), such as Inso Corporation.
Many of these companies, as well as some other competitors, have longer
operating histories and significantly greater financial, technical, marketing
and other resources than we do. Many of these companies can also leverage
extensive customer bases and adopt aggressive pricing policies to gain market
share. Potential competitors such as Netscape and Microsoft may bundle their
products in a manner that may discourage users from purchasing our products.
In addition, it is possible that new competitors or alliances among
competitors may emerge and rapidly acquire significant market share.
Competitive pressures may make it difficult for us to acquire and retain
clients and may require us to reduce the price of our software. We cannot be
certain that we will be able to compete successfully with existing or
7
<PAGE>
new competitors. If we fail to compete successfully against current or future
competitors, our business, operating results and financial condition would be
materially adversely affected. See "Business--Competition."
POTENTIAL IMPACT OF PRIVACY CONCERNS
Businesses use our StoryServer product to develop and maintain profiles to
tailor the content to be provided to Web site visitors. Typically, the
software captures profile information when consumers, business customers or
employees visit a Web site and volunteer information in response to survey
questions. Usage data collected over time augments the profiles. However,
privacy concerns may nevertheless cause visitors to resist providing the
personal data necessary to support this profiling capability. More
importantly, even the perception of security and privacy concerns, whether or
not valid, may indirectly inhibit market acceptance of our products. In
addition, legislative or regulatory requirements may heighten these concerns
if businesses must notify Web site users that the data captured after visiting
certain Web sites may be used by marketing entities to unilaterally direct
product promotion and advertising to that user. We are not aware of any such
legislation or regulatory requirements currently in effect in the United
States. Certain other countries and political entities, such as the European
Economic Community, have adopted such legislation or regulatory requirements.
The United States may adopt similar legislation or regulatory requirements. If
consumer privacy concerns are not adequately addressed, our business,
financial condition and operating results could be materially adversely
affected.
Our StoryServer product uses "cookies" to track demographic information and
user preferences. A "cookie" is information keyed to a specific server, file
pathway or directory location that is stored on a user's hard drive, possibly
without the user's knowledge (but generally removable by the user). Germany
has imposed laws limiting the use of cookies, and a number of Internet
commentators, advocates and governmental bodies in the United States and other
countries have urged passage of laws limiting or abolishing the use of
cookies. If such laws are passed, our business, operating results and
financial condition could be materially adversely affected.
POTENTIAL FOR INCREASING GOVERNMENT REGULATION
As Internet commerce evolves, we expect that federal, state or foreign
agencies will adopt regulations covering issues such as user privacy, pricing,
content and quality of products and services. Although many of these
regulations may not apply to our business directly, we expect that laws
regulating the solicitation, collection or processing of personal/consumer
information could indirectly affect our business. The Telecommunications Act
of 1996 (the "Telecommunications Act") prohibits certain types of information
and content from being transmitted over the Internet. The prohibition's scope
and the liability associated with a Telecommunications Act violation are
currently unsettled. In addition, although substantial portions of the
Communications Decency Act (the "CDA") were held to be unconstitutional, we
cannot be certain that similar legislation will not be enacted and upheld in
the future. It is possible that such legislation could expose companies
involved in Internet commerce to liability, which could limit the growth of
Internet commerce generally. Legislation like the Telecommunications Act and
the CDA could dampen the growth in Web usage and decrease its acceptance as a
communications and commercial medium. If enacted, such laws, rules or
regulations could limit the market for our products and services, which could
materially adversely affect our business, financial condition and operating
results.
The United States government also regulates the export of encryption
technology, which our products incorporate. Current or future export
regulations may limit our ability to distribute our software outside the
United States. Although we take precautions against unlawful export of our
software, we cannot effectively control the unauthorized distribution of
software across the Internet. If our export authority is revoked or modified,
if our software is unlawfully exported or if the United States government
adopts new legislation or regulation restricting export of software and
encryption technology, our business, operating results and financial condition
could be materially adversely affected.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
We received 3% and 18% of our total revenue in 1997 and the nine months
ended September 30, 1998, respectively, through licenses and services sold to
clients located outside of the United States. We expect international revenue
to account for a significant percentage of total revenue in the future and we
believe that we must continue to expand our international sales activities in
order to be successful. Our international sales growth will be limited if we
are unable to establish additional foreign operations, expand international
sales channel
8
<PAGE>
management and support organizations, hire additional personnel, customize
products for local markets, develop relationships with international service
providers and establish relationships with additional distributors and third
party integrators. In that case, our business, operating results and financial
condition could be materially adversely affected. Even if we are able to
successfully expand international operations, we cannot be certain that we
will be able to maintain or increase international market demand for our
products. International operations are generally subject to a number of risks,
including:
. Expenses associated with customizing products for foreign countries;
. Protectionist laws and business practices that favor local competition;
. Dependence on local vendors;
. Multiple, conflicting and changing governmental laws and regulations;
. Longer sales cycles;
. Difficulties in collecting accounts receivable;
. Foreign currency exchange rate fluctuations; and
. Political and economic instability.
To date, a majority of our international revenues and costs have been
denominated in foreign currencies. We believe that an increasing portion of
our international revenues and costs will be denominated in foreign currencies
in the future. To date, we have not engaged in any foreign exchange hedging
transactions and we are therefore subject to foreign currency risk.
FAILURE TO PROPERLY MANAGE GROWTH COULD ADVERSELY AFFECT OUR BUSINESS
We have expanded our operations rapidly since inception. We intend to
continue to expand in the foreseeable future to pursue existing and potential
market opportunities. This rapid growth places a significant demand on
management and operational resources. In order to manage growth effectively,
we must implement and improve our operational systems, procedures and controls
on a timely basis. If we fail to implement and improve these systems, our
business, operating results and financial condition will be materially
adversely affected. In addition, we are moving to new headquarters facilities
in December 1998, which we expect will be a disruptive, time consuming and
expensive process.
LOSS OF KEY PERSONNEL COULD ADVERSELY AFFECT OUR BUSINESS
Our success depends largely on the skills, experience and performance of
some key members of our management. If we lose one or more of these key
employees, our business, operating results and financial condition could be
materially adversely affected. In addition, our future success will depend
largely on our ability to continue attracting and retaining highly skilled
personnel. Like other software companies, we face intense competition for
qualified personnel, particularly in the Austin, Texas area. We cannot be
certain that we will be successful in attracting, assimilating or retaining
qualified personnel in the future. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Management."
RISKS ASSOCIATED WITH THE YEAR 2000 PROBLEM
The "Year 2000 Issue" refers generally to the problems that some software
may have in determining the correct century for the year. For example,
software with date-sensitive functions that is not Year 2000 compliant may not
be able to distinguish whether "00" means 1900 or 2000, which may result in
failures or the creation of erroneous results.
We have conducted the first phases of a Year 2000 readiness review for the
current versions of our products. The review includes assessment,
implementation (including remediation, upgrading and replacement of certain
product versions), validation testing, and contingency planning. We continue
to respond to customer questions about prior versions of our products on a
case-by-case basis.
We have largely completed all phases of this plan, except for contingency
planning, for the current versions of our products. As a result, all current
versions of our products are "Year 2000 Compliant," as defined below, when
configured and used in accordance with the related documentation, and provided
that the underlying operating system of the host machine and any other
software used with or in the host machine or our products are also Year 2000
Compliant. We have not tested our products on all platforms or all versions of
operating
9
<PAGE>
systems that we currently support. The initial release of StoryServer 4
required a patch to fix a minor error in a third-party product included in
StoryServer 4. We have provided the patch on our Web site in order to be Year
2000 Compliant.
We have defined "Year 2000 Compliant" as the ability to:
(i) correctly handle date information needed for the December 31, 1999 to
January 1, 2000 date change;
(ii) function according to the product documentation provided for this
date change, without changes in operation resulting from the advent of a
new century, assuming correct configuration;
(iii) where appropriate, respond to two-digit date input in a way that
resolves the ambiguity as to century in a disclosed, defined, and
predetermined manner;
(iv) if the date elements in interfaces and data storage specify the
century, store and provide output of date information in ways that are
unambiguous as to century; and
(v) recognize year 2000 as a leap year.
We have tested software obtained from third parties (licensed software,
shareware, and freeware) that is incorporated into our products, and we are
seeking assurances from our vendors that licensed software is Year 2000
Compliant. Despite testing by us and by current and potential clients, and
assurances from developers of products incorporated into our products, our
products may contain undetected errors or defects associated with Year 2000
date functions. Known or unknown errors or defects in our products could
result in delay or loss of revenue, diversion of development resources, damage
to our reputation, or increased service and warranty costs, any of which could
materially adversely affect our business, operating results, or financial
condition. Some commentators have predicted significant litigation regarding
Year 2000 compliance issues, and we are aware of such lawsuits against other
software vendors. Because of the unprecedented nature of such litigation, it
is uncertain whether or to what extent we may be affected by it.
Our internal systems include both our information technology, or IT, and
non-IT systems. We have initiated an assessment of our material internal IT
systems (including both our own software products and third-party software and
hardware technology) but we have not initiated an assessment of our non-IT
systems. We expect to complete testing of our IT systems in 1998. To the
extent that we are not able to test the technology provided by third-party
vendors, we are seeking assurances from vendors that their systems are Year
2000 Compliant. We are not currently aware of any material operational issues
or costs associated with preparing our internal IT and non-IT systems for the
Year 2000. However, we may experience material unanticipated problems and
costs caused by undetected errors or defects in the technology used in our
internal IT and non-IT systems.
We do not currently have any information concerning the Year 2000 compliance
status of our customers. As is the case with other similarly situated software
companies, if our current or future customers fail to achieve Year 2000
compliance or if they divert technology expenditures (especially technology
expenditures that were reserved for enterprise software) to address Year 2000
compliance problems, our business, results of operations, or financial
condition could be materially adversely affected.
We have funded our Year 2000 plan from available cash and have not
separately accounted for these costs in the past. To date, these costs have
not been material. We will incur additional costs related to the Year 2000
plan for administrative personnel to manage the project, outside contractor
assistance, technical support for our products, product engineering and
customer satisfaction. In addition, we may experience material problems and
costs with Year 2000 compliance that could adversely affect our business,
results of operations, and financial condition.
We have not yet fully developed a contingency plan to address situations
that may result if we are unable to achieve Year 2000 readiness of our
critical operations. The cost of developing and implementing such a plan may
itself be material. Finally, we are also subject to external forces that might
generally affect industry and commerce, such as utility or transportation
company Year 2000 compliance failures and related service interruptions.
10
<PAGE>
RISK OF SOFTWARE DEFECTS; PRODUCT LIABILITY
Complex software products such as ours often contain errors or defects,
particularly when first introduced or when new versions or enhancements are
released. Despite internal testing and testing by current and potential
customers, our current and future products may contain serious defects,
including Year 2000 errors. Serious defects or errors could result in lost
revenues or a delay in market acceptance, which would have a material adverse
effect on our business, operating results and financial condition.
Since our clients use our products for mission critical applications such as
Internet commerce, errors, defects or other performance problems could result
in financial or other damages to our clients. They could seek damages for
losses, which, if successful, could have a material adverse effect on our
business, operating results or financial condition. Although our license
agreements typically contain provisions designed to limit our exposure to
product liability claims, existing or future laws or unfavorable judicial
decisions could negate such limitation of liability provisions. We have not
experienced any product liability claims to date. However, a product liability
claim brought against us, even if not successful, would likely be time
consuming and costly.
RELIANCE ON THIRD-PARTY SOFTWARE
We integrate third-party software as a component of our software. The third-
party software may not continue to be available to us on commercially
reasonable terms. For instance, we license GroupLens Express from Net
Perceptions, Inc. for certain personalization functionality in StoryServer 4.
The agreement expires in October 1999, but it is renewed automatically unless
either party gives 60 days notice prior to the renewal date. If we cannot
maintain licenses to key third-party software, such as GroupLens Express,
shipments of our products could be delayed until equivalent software could be
developed or licensed and integrated into our products, which could materially
adversely affect our business, operating results and financial condition. See
"Business--Proprietary Rights and Licensing."
RISK OF CHANGES IN ACCOUNTING STANDARDS
The American Institute of Certified Public Accountants issued Statement of
Position 97-2 ("SOP 97-2"), Software Revenue Recognition, in October 1997 and
amended it by Statement of Position 98-4 ("SOP 98-4"). We adopted SOP 97-2 and
SOP 98-4 effective January 1, 1998. We believe our current revenue recognition
policies and practices are materially consistent with SOP 97-2 and SOP 98-4.
However, full implementation guidelines for this standard have not yet been
issued. Once available, our current revenue accounting practices may need to
change and such changes could materially adversely affect our future revenue
and earnings. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
LIMITED PROTECTION OF PROPRIETARY TECHNOLOGY; RISKS OF INFRINGEMENT
In recent years, there has been significant litigation in the United States
involving patents and other intellectual property rights. We are not currently
involved in any intellectual property litigation. We may, however, be a party
to litigation in the future to protect our intellectual property or as a
result of an alleged infringement of other's intellectual property. We rely on
a combination of patent, trademark, trade secret and copyright law and
contractual restrictions to protect our technology. These legal protections
provide only limited protection. If we litigated to enforce our rights, it
would be expensive, divert management resources and may not be adequate to
protect our business.
Others asserting rights against us could force us to defend ourselves or our
clients against alleged infringement of intellectual property rights. We could
incur substantial costs to prosecute or defend any such litigation and
intellectual property litigation could force us to do one or more of the
following:
. Cease selling, incorporating or using products or services that
incorporate the challenged intellectual property;
. Obtain from the holder of the infringed intellectual property right a
license to sell or use the relevant technology, which license may not be
available on reasonable terms; and
. Redesign those products or services that incorporate such technology.
11
<PAGE>
NO PRIOR PUBLIC MARKET FOR THE COMMON STOCK; POTENTIAL VOLATILITY OF STOCK
PRICE
Prior to this offering, you could not buy or sell our Common Stock publicly.
An active public market for our Common Stock may not develop or be sustained
after the offering. Although the initial public offering price was determined
based on several factors, the initial offering price may vary from the market
price after the offering. See "Underwriters." The market price of the Common
Stock may fluctuate significantly in response to a number of factors, some of
which are beyond our control, including:
. Quarterly variations in operating results;
. Changes in financial estimates by securities analysts;
. Changes in market valuations of Internet software companies;
. Announcements by us of significant contracts, acquisitions, strategic
partnerships, joint ventures or capital commitments;
. Loss of a major client or failure to complete significant license
transactions;
. Additions or departures of key personnel;
. Future sales of Common Stock; and
. Stock market price and volume fluctuations, which are particularly common
among highly volatile securities of Internet and software companies.
In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
securities. We may in the future be the target of similar litigation.
Securities litigation could result in substantial costs and divert
management's attention and resources, which could have a material adverse
effect on our business, operating results and financial condition.
FUTURE CAPITAL NEEDS AND UNCERTAIN ADDITIONAL FINANCING
We expect the net proceeds from this offering, cash on hand, cash
equivalents and commercial credit facilities to meet our working capital and
capital expenditure needs for at least the next 12 months. After that, we may
need to raise additional funds and we cannot be certain that we would be able
to obtain additional financing on favorable terms, if at all. Further, if we
issue equity securities, stockholders may experience additional dilution or
the new equity securities may have rights, preferences or privileges senior to
those of existing holders of Common Stock. If we cannot raise funds, if
needed, on acceptable terms, we may not be able to develop or enhance our
products, take advantage of future opportunities or respond to competitive
pressures or unanticipated requirements, which could have a material adverse
effect on our business, operating results and financial condition. See "Use of
Proceeds," "Dilution" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
CONTROL OF COMPANY BY EXISTING STOCKHOLDERS
On completion of this offering, executive officers and directors and their
affiliates will beneficially own, in the aggregate, approximately % of our
outstanding Common Stock. As a result, these stockholders will be able to
exercise control over all matters requiring stockholder approval, including
the election of directors and approval of significant corporate transactions,
which could delay or prevent someone from acquiring or merging with us. See
"Principal and Selling Stockholders."
ANTI-TAKEOVER PROVISIONS
Certain provisions of our Certificate of Incorporation and Bylaws may
discourage, delay or prevent a merger or acquisition that a stockholder may
consider favorable. Such provisions include:
. Authorizing the issuance of "blank check" preferred stock;
. Providing for a classified Board of Directors with staggered, three-year
terms;
. Prohibiting cumulative voting in the election of directors;
. Requiring super-majority voting to effect certain amendments to our
Certificate of Incorporation and Bylaws;
12
<PAGE>
. Limiting the persons who may call special meetings of stockholders;
. Prohibiting stockholder action by written consent; and
. Establishing advance notice requirements for nominations for election to
the Board of Directors or for proposing matters that can be acted on by
stockholders at stockholder meetings.
Certain provisions of Delaware law and our stock incentive plans may also
discourage, delay or prevent someone from acquiring or merging with us. See
"Management--Employee Benefit Plans" and "Description of Capital Stock--Anti-
takeover Effects of Provisions of the Certificate of Incorporation, Bylaws and
Delaware Law."
POTENTIAL EFFECT OF SHARES COMING AVAILABLE FOR FUTURE SALE
Sales of a substantial number of shares of Common Stock after the offering
could adversely affect the market price of the Common Stock and could impair
our ability to raise capital through the sale of additional equity securities.
On completion of this offering, we will have shares of Common Stock
outstanding or subject to currently exercisable options ( shares if the
Underwriters over-allotment option is exercised in full). The shares sold
in this offering ( shares if the Underwriter's over-allotment option is
exercised in full) will be freely tradable without restriction or further
registration under the Federal securities laws unless purchased by
"affiliates" of the Company as that term is defined in Rule 144. The remaining
11,476,133 shares of Common Stock outstanding on completion of the offering
will be "restricted securities" as that term is defined in Rule 144.
Stockholders holding more than % of the outstanding Common Stock and
currently exercisable options to purchase Common Stock have executed lock-up
agreements that limit their ability to sell Common Stock. These stockholders
have agreed not to sell or otherwise dispose of any shares of Common Stock for
a period of at least 180 days after the date of this Prospectus without the
prior written approval of Morgan Stanley & Co. Incorporated. When the lock-up
agreements expire, these shares and the shares underlying the options will
become eligible for sale, in some cases only pursuant to the volume, manner of
sale and notice requirements of Rule 144. See "Management--Employee Benefits
Plans" and "Shares Eligible for Future Sale."
IMMEDIATE SUBSTANTIAL DILUTION
The initial public offering price is expected to be substantially higher
than the book value per share of the outstanding Common Stock. As a result,
investors purchasing Common Stock in this offering will incur immediate
substantial dilution. In addition, we have issued options to acquire Common
Stock at prices significantly below the initial public offering price. To the
extent such outstanding options are ultimately exercised, there will be
further dilution to investors in this offering. See "Dilution."
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business," and elsewhere in this Prospectus constitute forward-
looking statements. These statements involve known and unknown risks,
uncertainties, and other factors that may cause our or our industry's actual
results, levels of activity, performance, or achievements to be materially
different from any future results, levels of activity, performance, or
achievements expressed or implied by such forward-looking statements. Such
factors include, among other things, those listed under "Risk Factors" and
elsewhere in this Prospectus.
In some cases, you can identify forward-looking statements by terminology
such as "may," "will," "should," "expects," "plans," "anticipates,"
"believes," "estimates," "predicts," "potential," or "continue" or the
negative of such terms or other comparable terminology.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance, or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of such
statements. We are under no duty to update any of the forward-looking
statements after the date of this Prospectus to conform such statements to
actual results.
13
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common
Stock offered by the Company hereby are estimated to be approximately $
million ($ million if the Underwriters' over-allotment option is exercised
in full), at an assumed initial public offering price of $ share and after
deducting estimated offering expenses of $ and underwriting discounts and
commissions payable by the Company. The Company will not receive any of the
proceeds from the sale of shares of Common Stock by the Selling Stockholders.
The primary purposes of this offering are to obtain additional working
capital, create a public market for the Company's Common Stock, facilitate
future access by the Company to public capital markets and provide liquidity
to existing stockholders.
The Company intends to use the proceeds of the offering received by it for
working capital and general corporate purposes. Although the Company may use a
portion of the net proceeds to acquire technology or businesses that are
complementary to the Company's business, there are no current plans in this
regard. Pending such uses, the Company plans to invest the net proceeds in
short-term, interest-bearing, investment grade securities.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its Common
Stock or other securities and does not anticipate paying cash dividends in the
foreseeable future. The Company's lines of credit currently prohibit the
payment of dividends.
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<PAGE>
CAPITALIZATION
Unless otherwise specifically stated, the information in this Prospectus has
been adjusted to reflect the conversion of all outstanding shares of Preferred
Stock into Common Stock on the completion of the offering, but does not take
into account the possible issuance of additional shares of Common Stock to the
underwriters pursuant to their right to purchase additional shares to cover
overallotments.
The following table sets forth the capitalization of the Company as of
September 30, 1998, (i) on an actual basis; (ii) on a pro forma basis to
reflect (A) the filing of an amendment to the Company's Amended and Restated
Certificate of Incorporation to provide for authorized capital stock of
80,000,000 shares of Common Stock and 10,000,000 shares of undesignated
Preferred Stock and (B) the conversion of all shares of Preferred Stock
outstanding as of September 30, 1998 into 8,098,872 shares of Common Stock on
completion of this offering; and (iii) on a pro forma as adjusted basis to
reflect the sale of the shares of Common Stock offered by the Company hereby
(assuming an initial public offering price of $ per share) and the
application of the net proceeds therefrom. See "Use of Proceeds." This table
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements and the Notes thereto.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
--------------------------------
PRO
FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE
AND PER SHARE DATA)
<S> <C> <C> <C>
Long-term debt, less current portion........... $ 2,013 $ 2,013 $
Redeemable Convertible Preferred Stock, $0.01
par value, 5,984,982 shares authorized,
5,977,482 issued and outstanding, actual; no
shares authorized, issued and outstanding, pro
forma and pro forma as adjusted............... 27,758 --
Stockholders' equity (deficit):
Convertible Preferred Stock, $0.01 par value,
2,256,022 shares authorized, 2,121,390 issued
and outstanding, actual; no shares
authorized, issued and outstanding, pro forma
and pro forma as adjusted.................... 21 --
Preferred Stock, $0.01 par value, no shares
authorized, issued or outstanding, actual;
10,000,000 shares authorized pro forma and
pro forma as adjusted, no shares issued or
outstanding, pro forma and pro forma as
adjusted..................................... -- --
Common Stock, $0.01 par value, 16,500,000
shares authorized, 2,862,078 shares issued
and outstanding (net of 77,820 treasury
shares), actual; 80,000,000 shares
authorized, 10,960,950 shares issued and
outstanding, pro forma; 80,000,000 shares
authorized, issued and outstanding, pro
forma as adjusted(1)......................... 29 110
Additional paid-in capital.................... 4,707 32,405
Notes receivable for purchase of Common Stock. (182) (182)
Deferred stock compensation................... (382) (382)
Accumulated deficit........................... (27,399) (27,399)
-------- -------- ----
Total stockholders' equity (deficit)........... (23,206) 4,552
-------- -------- ----
Total capitalization........................... $ 6,565 $ 6,565 $
======== ======== ====
</TABLE>
- --------
(1) Excludes 1,962,394 shares of Common Stock issuable on exercise of
outstanding options as of September 30, 1998 with a weighted exercise
price of $3.38 per share, 158,708 shares of Common Stock reserved for
issuance under the Company's stock plans as of September 30, 1998 (863,040
shares of Common Stock reserved for issuance under the Company's stock
plans as of November 30, 1998), and 7,500 shares of Common Stock issuable
upon exercise of an outstanding warrant at an exercise price of $1.00 per
share. Also excludes 520,516 shares of Series H Preferred Stock sold on
November 30, 1998 and 45,926 shares of Common Stock issuable upon exercise
of warrants issued on December 3, 1998 at an exercise price of $16.33 per
share. See "Management--Employee Benefits Plans" and Note 3 of Notes to
Consolidated Financial Statements.
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<PAGE>
DILUTION
The pro forma net tangible book value of the Company's Common Stock as of
September 30, 1998, giving effect to the conversion of all shares of Preferred
Stock outstanding as of September 30, 1998 into Common Stock on the closing of
this offering, was $4,552,000, or approximately $.42 per share. "Pro forma net
tangible book value" per share represents the amount of total tangible assets
of the Company less total liabilities, divided by 10,960,950 shares of Common
Stock outstanding after giving effect to the conversion of the Preferred Stock
outstanding as of September 30, 1998 into Common Stock. After giving effect to
the issuance and sale of shares of Common Stock offered by the Company
(based on an assumed initial public offering price of $ per share and after
deducting estimated underwriting discounts and commissions and estimated
offering expenses payable by the Company), the pro forma net tangible book
value of the Company as of September 30, 1998 would have been $ , or $
per share. This represents an immediate increase in pro forma net tangible
book value of $ per share to existing stockholders and an immediate
dilution in net tangible book value of $ per share to new investors.
Investors participating in this offering will incur immediate, substantial
dilution. The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share...................... $
Pro forma net tangible book value per share as of September 30,
1998.............................................................. $.42
Increase in pro forma net tangible book value per share
attributable to new investors.....................................
----
Pro forma net tangible book value per share after offering...........
----
Dilution per share to new investors.................................. $
====
</TABLE>
The following table summarizes on a pro forma basis, giving effect to the
conversion of all outstanding shares of Preferred Stock into Common Stock on
the closing of this offering, as of September 30, 1998, the difference between
the existing stockholders and the purchasers of shares of Common Stock in this
offering (at an assumed initial public offering price of $ per share) with
respect to the number of shares of Common Stock purchased from the Company,
the total consideration paid and the average price paid per share:
<TABLE>
<CAPTION>
SHARES PURCHASED (1) TOTAL CONSIDERATION
------------------------------------------ AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ --------------------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders... 10,960,950 % $32,230,000 % $2.94
New investors...........
------------ ------- ----------- -----
Total................. 100.0% $ 100.0% $
============ ======= =========== =====
</TABLE>
- --------
(1) Sales by the Selling Stockholders in this offering will reduce the number
of shares held by existing stockholders to , or % of the total number
of shares of Common Stock outstanding after this offering ( or %
assuming the Underwriters' over-allotment option is exercised in full),
and will increase the number of shares held by new investors to
shares, or %, of the total number of shares of Common Stock outstanding
after this offering ( shares or % assuming the Underwriters' over-
allotment option is exercised in full). See "Principal and Selling
Stockholders."
As of September 30, 1998, there were approximately 1,962,394 shares subject
to outstanding options at a weighted exercise price of approximately $3.38 per
share; 158,708 shares reserved for issuance under the Company's stock plans
(863,040 shares reserved for issuance under the Company's stock plans as of
November 30, 1998); and 7,500 shares of Common Stock issuable on exercise of
an outstanding warrant at an exercise price of $1.00 per share. In addition,
on November 30, 1998, the Company sold 520,516 shares of Series H Preferred
Stock at $16.33 per share and, on December 3, 1998, reserved 45,926 shares of
Common Stock for issuance on exercise of warrants issued on that date at an
exercise price of $16.33 per share. To the extent outstanding options and
warrants are exercised, there will be further dilution to new investors. See
"Management--Employee Benefits Plans" and Note 3 of Notes to Consolidated
Financial Statements.
16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the Consolidated Financial Statements and Notes thereto and
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and other financial data included elsewhere in this Prospectus.
The consolidated statement of operations data for the years ended December 31,
1996 and 1997 and the consolidated balance sheet data at December 31, 1996 and
1997 are derived from audited consolidated financial statements included
elsewhere in this Prospectus. The consolidated statements of operations data
for the nine months ended September 30, 1997 and 1998, and the consolidated
balance sheet data at September 30, 1998 are derived from unaudited
consolidated financial statements included elsewhere in this Prospectus and,
in the opinion of the Company, include all adjustments consisting solely of
normal recurring accruals which are necessary to present fairly the data for
such period. Historical results are not necessarily indicative of future
results and the results for interim periods are not necessarily indicative of
results to be expected for the entire year.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER NINE MONTHS ENDED
31, SEPTEMBER 30,
-------------------- ---------------------
1996(1) 1997 1997 1998
-------------------- --------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERA-
TIONS DATA:
Revenue:
Product license.................. $ -- $ 1,943 $ 1,179 $ 5,152
Services......................... -- 1,081 537 4,359
--------- --------- --------- ----------
Total revenue..................... -- 3,024 1,716 9,511
Cost of revenue:
Product license.................. -- 37 24 510
Services......................... -- 1,438 674 5,579
--------- --------- --------- ----------
Total cost of revenue............. -- 1,475 698 6,089
--------- --------- --------- ----------
Gross profit...................... -- 1,549 1,018 3,422
Operating expenses:
Research and development......... 892 2,895 1,906 4,840
Sales and marketing.............. 428 4,964 2,870 9,398
General and administrative....... 503 1,333 718 3,451
Write-off of acquired in-process
research and development........ 1,865 -- -- 2,089
Amortization of deferred stock
compensation.................... -- -- -- 142
--------- --------- --------- ----------
Total operating expenses.......... 3,688 9,192 5,494 19,920
--------- --------- --------- ----------
Loss from operations.............. (3,688) (7,643) (4,476) (16,498)
Other income, net................. 62 169 88 204
--------- --------- --------- ----------
Net loss.......................... $ (3,626) $ (7,474) $ (4,388) $ (16,294)
========= ========= ========= ==========
Basic net loss per share (2)...... $ (11.33) $ (8.22) $ (4.79) $ (11.74)
========= ========= ========= ==========
Shares used in computing basic net
loss per share (2)............... 320 909 917 1,388
Pro forma basic net loss per
share(2)......................... $ (1.19) $ (1.84)
========= ==========
Shares used in computing pro forma
basic net loss per share(2)...... 6,259 8,861
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER
31, AS OF
--------------- SEPTEMBER 30,
1996 1997 1998
------- ------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents....................... $ 1,863 $6,865 $ 12,397
Working capital................................. 1,583 4,255 5,468
Total assets.................................... 2,229 8,499 19,447
Long-term debt and capital lease obligations,
less current portion........................... 198 833 2,013
Redeemable convertible preferred stock.......... 3,458 13,458 27,758
Total stockholders' equity (deficit)............ (1,770) (9,248) (23,206)
</TABLE>
- --------
(1) Consolidated statement of operations data for the year ended December 31,
1996 include results of operations for the period from December 19, 1995
(inception) through December 31, 1996.
(2) See Note 2 of Notes to Consolidated Financial Statements for discussion
regarding computation and presentation.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Prospectus contains forward-looking statements that involve risks and
uncertainties. Actual results may differ materially from those indicated in
such forward-looking statements. See "Special Note Regarding Forward-Looking
Statements."
OVERVIEW
Vignette is a leading global provider of Internet Relationship Management
software products and services, a new category of enterprise solutions
designed to enable businesses to build sustainable online customer
relationships, increase the returns on their Internet-related investments and
capitalize on Internet business opportunities. The Company was founded in
December 1995. From December 1995 through December 1996, Vignette devoted its
efforts principally to raising capital, research and development activities,
and establishing markets for its products. As a result, the Company was
considered a "development stage enterprise" during this period. Beginning in
January 1997, the Company actively began selling its products. To date,
Vignette has developed and released several versions of its StoryServer
product and has sold its products and services to over 160 clients. The
Company markets and sells its products worldwide primarily through its direct
sales force. The Company has its principal office in Austin, Texas and also
has offices in Atlanta, Georgia; Boston, Massachusetts; Chicago, Illinois;
Dallas, Texas; Newport Beach, California; New York, New York; San Mateo,
California; Valencia, California; Hamburg, Germany; London, England; and
Sydney, Australia.
The Company derives its revenue from the sale of software product licenses
and from professional consulting, maintenance and support services. Product
license revenue is recognized when persuasive evidence of an agreement exists,
the product has been delivered, no significant Company obligations with regard
to implementation remain, the license fee is fixed or determinable and
collection of the fee is probable. Services revenue consists of fees from
professional services and from maintenance and telephone support. Professional
services include integration of software, application development, training
and software installation. Professional services fees are billed either on a
time and materials basis or on a fixed-price schedule. Professional services
fees billed on a time and materials basis are recognized as the services are
performed. The Company recognizes professional services fees on fixed-price
service arrangements on the completion of specific contractual milestone
events, or based on an estimated percentage of completion as work progresses.
Maintenance agreements are typically purchased annually and are priced based
on a percentage of the product license fee. Telephone support is priced based
on differing levels of support. Clients purchasing maintenance agreements
receive unspecified product upgrades and electronic, Web-based technical
support, while purchasers of support contracts receive additional telephone
support. Revenue from maintenance and support agreements is recognized ratably
over the term of the agreement, typically one year. Cash receipts from clients
and billed amounts due from clients in excess of revenue recognized are
recorded as deferred revenue. The timing and amount of cash receipts from
clients can vary significantly depending on specific contract terms and can
therefore have a significant impact on the amount of deferred revenue in any
given period.
Cost of revenue consists of costs to manufacture, package and distribute the
Company's products and related documentation, as well as personnel and other
expenses related to providing professional services. Since its inception, the
Company has incurred substantial costs to develop its technology and products,
to recruit and train personnel for its engineering, sales and marketing and
professional services departments, and to establish an administrative
organization. As a result, the Company has incurred net losses in each fiscal
quarter since inception and, as of September 30, 1998, had an accumulated
deficit of $27.4 million. The Company anticipates that its operating expenses
will increase substantially in future quarters as it increases sales and
marketing operations, develops new distribution channels, funds greater levels
of research and development, broadens professional services and support, and
improves operational and financial systems. Accordingly, the Company expects
to incur additional losses for the foreseeable future. In addition, the
Company's limited operating history makes the prediction of future results of
operations difficult and, accordingly, there can be no assurance that the
Company will achieve or sustain revenue growth or profitability.
18
<PAGE>
The Company had 219 full-time employees at September 30, 1998, up from 79
and 26 at December 31, 1997 and 1996, respectively. This rapid growth places a
significant demand on the Company's management and operational resources. In
order to manage growth effectively, the Company must implement and improve its
operational systems, procedures and controls on a timely basis. In addition,
the Company expects that future expansion will continue to challenge the
Company's ability to hire, train, motivate, and manage its employees.
Competition is intense for highly qualified technical, sales and marketing and
management personnel. If the Company's total revenue does not increase
relative to its operating expenses, the Company's management systems do not
expand to meet increasing demands, the Company fails to attract, assimilate
and retain qualified personnel, or the Company's management otherwise fails to
manage the Company's expansion effectively, there would be a material adverse
effect on the Company's business, financial condition and operating results.
RESULTS OF OPERATIONS
REVENUE
Total revenue increased from $1.7 million for the nine months ended
September 30, 1997 to $9.5 million for the nine months ended September 30,
1998. This increase was attributable to an increase in the Company's client
base resulting in substantial growth in product license and services revenue.
No one client accounted for greater than 10% of total revenue during the nine
months ended September 30, 1997 and 1998. The Company's total revenue in 1997
was $3.0 million. Two clients accounted for 24% of total revenue in 1997. The
Company did not have any revenue in 1996, as the Company was in the
development stage.
Product License. Product license revenue increased from $1.2 million for the
nine months ended September 30, 1997 to $5.2 million for the nine months ended
September 30, 1998, representing 69% and 54% of total revenue, respectively.
The increase in product license revenue in absolute dollars was due primarily
to an increase in the number of clients resulting from growing market
acceptance of the Company's StoryServer product after the release of
StoryServer 3 in September 1997. Product license revenue decreased as a
percentage of total revenue due to the increase in services revenue during the
same period. The Company first began shipping its products in January 1997.
Product license revenue was $1.9 million in 1997, representing 64% of total
revenue in 1997.
Services. Services revenue increased from $537,000 for the nine months ended
September 30, 1997 to $4.4 million for the nine months ended September 30,
1998, representing 31% and 46% of total revenue, respectively. Services
revenue from professional services fees increased from $479,000 for the nine
months ended September 30, 1997 to $3.5 million for the nine months ended
September 30, 1998. Services revenue from maintenance and support agreements
increased from $58,000 for the nine months ended September 30, 1997 to
$841,000 for the nine months ended September 30, 1998. The increase in all
types of services revenue was due primarily to an increase in the number of
clients and sale of product licenses, which generally include or lead to
contracts to perform professional services and purchases of software
maintenance and technical support service agreements. In 1997, the Company
recognized $1.1 million in services revenue, representing 36% of total
revenue. Of this amount, professional services fees accounted for $941,000 and
maintenance and support agreements accounted for $140,000.
The Company expects that professional services-related revenue will increase
in absolute dollars in the future to the extent that additional clients
license the Company's products and as the Company expands both its capacity
for the delivery of professional services as well as the scope of its
professional services offerings. The Company expects that services revenue
from maintenance and support agreements will increase in absolute dollars in
the future due to the maintenance components of new and existing license
agreements.
COST OF REVENUE
Product License. Product license costs consist of expenses incurred by the
Company to manufacture, package and distribute its products and related
documentation and costs of licensing third-party software incorporated in its
products. Product license costs increased from $24,000 for the nine months
ended September 30, 1997 to $510,000 for the nine months ended September 30,
1998, representing 2% and 10% of product license revenue, respectively. The
increase in absolute dollars and as a percentage of product license revenue
during the nine months ended
19
<PAGE>
September 30, 1998 was primarily attributable to the Company entering into an
OEM license with Net Perceptions for its GroupLens Express software that
allows the Company to embed certain personalization functionality into
StoryServer. Product license costs were $37,000 in 1997, representing 2% of
product license revenue. The Company expects product license costs to increase
in the future in absolute dollar terms due to additional clients licensing the
Company's products and the Company acquiring OEM licenses to third party
technology that it may choose to embed in its product offerings.
Services. Services costs include salary expense and other related costs for
the Company's professional service, maintenance and telephone support staffs,
as well as third-party contractor expenses. Services costs increased from
$674,000 for the nine months ended September 30, 1997 to $5.6 million for the
nine months ended September 30, 1998, representing 126% and 128% of services
revenue, respectively. The increase in dollar amount was primarily due to
startup costs incurred in connection with beginning and expanding the
Company's professional services organization, and to a lesser extent, the
increase in the number of product license clients, which generally require
professional services provided by the Company. To date, the Company's services
costs have been significantly higher than its services revenue, and the
Company expects that trend to continue for the foreseeable future as the
Company continues to expand its professional services organization. Services
costs related to professional services increased from $630,000 for the nine
months ended September 30, 1997 to $5.3 million for the nine months ended
September 30, 1998, representing 132% and 149% of professional services-
related revenue. Services costs related to maintenance and support agreements
increased from $44,000 for the nine months ended September 30, 1997 to
$328,000 for the nine months ended September 30, 1998. Services costs were
$1.4 million in 1997, representing 133% of services revenue, substantially all
of which were amounts associated with professional services.
The Company expects services costs to increase in the future in absolute
dollars to the extent that the Company continues to generate new clients and
associated product license and services revenue. Services costs as a
percentage of services revenue can be expected to vary significantly from
period to period depending on the mix of services provided by the Company,
whether such services are provided by the Company or third-party contractors,
and overall utilization rates.
OPERATING EXPENSES
Research and Development. Research and development expenses consist
primarily of personnel costs to support product development. Research and
development expenses increased from $1.9 million for the nine months ended
September 30, 1997 to $4.8 million for the nine months ended September 30,
1998, representing 111% and 51% of total revenue, respectively. Research and
development expenses increased from $892,000 in 1996 to $2.9 million in 1997.
The increase in absolute dollars in these periods was due to increases in
internal engineering personnel.
The Company believes that continued investment in research and development
is critical to attaining its strategic objectives, and, as a result, expects
research and development expenses to increase significantly in absolute
dollars in future periods. To date, all software development costs have been
expensed in the period incurred.
Sales and Marketing. Sales and marketing expenses consist primarily of
salaries and other related costs for sales and marketing personnel, sales
commissions, travel, public relations and marketing materials and tradeshows.
Sales and marketing expenses increased from $2.9 million for the nine months
ended September 30, 1997 to $9.4 million for the nine months ended September
30, 1998, representing 167% and 99% of total revenue, respectively. The
increase in absolute dollars was due to a significant increase in sales and
marketing personnel and the Company's increased marketing program
expenditures.
Sales and marketing expenses increased from $428,000 in 1996 to $5.0 million
in 1997. The increase was due to a substantial increase in sales and marketing
personnel and the commencement of the sales and marketing of the Company's
products in January 1997.
The Company believes these expenses will continue to increase in future
periods as it expects to continue to expand its sales and marketing efforts.
The Company also anticipates that sales and marketing expenses may fluctuate
as a percentage of total revenue from period to period as new sales personnel
are hired and begin to achieve productivity.
20
<PAGE>
General and Administrative. General and administrative expenses consist
primarily of salaries and other related costs for operations and finance
employees, legal and accounting services and certain facilities-related
expenses. General and administrative expenses increased from $718,000 for the
nine months ended September 30, 1997 to $3.5 million for the nine months ended
September 30, 1998, representing 42% and 36% of total revenue, respectively.
General and administrative expenses increased from $503,000 in 1996 to $1.3
million in 1997. The increase in absolute dollars for these periods was due to
increased personnel and facility expenses necessary to support the Company's
expanding operations and, to a lesser extent, costs related to the
establishment of European operations in November 1997.
The Company believes general and administrative expenses will increase in
absolute dollars as the Company expects to add personnel to support its
expanding operations, incur additional costs related to the growth of its
business, and assume the responsibilities of a public company.
Write-Off of Acquired In-Process Research and Development. During May 1998,
the Company acquired from RandomNoise, Inc. certain in-process research and
development effort, a developed product and an insignificant amount of
equipment in exchange for 191,022 shares of the Company's Series G Convertible
Preferred Stock valued at $2.0 million and for $100,000 in cash. The in-
process research and development effort related to the development of a visual
development tool using graphical user interface ("GUI") technology not
possessed by the Company. The results of the in-process research and
development effort at the time of purchase had not progressed to a stage where
they met technological feasibility as they lacked many key elements including:
the ability to integrate with database oriented dynamic publishing systems;
database interfacing capabilities; enhanced and consistent application
performance; memory requirements consistent with those of the Company's other
products; multiple Internet browser recognition capabilities; standardized
documentation; and automated testing capabilities. The Company believes that
the acquisition of the in-process research and development effort
significantly accelerated the development of a new GUI-based technology tool,
the beta version of which is expected to be released in February 1999.
Substantially all of the $2.1 million purchase price was allocated to the
acquired in-process research and development effort based upon the following:
the Company assigned no value to the developed product as the Company does not
intend to sell, support or enhance such product and the Company believes it
has no alternative future use; the $2.0 million value ascribed to the 191,022
shares of the Company's Series G Convertible Preferred Stock was based on the
value per share received from the issuance of Series F Redeemable Convertible
Preferred Stock, which occurred in April 1998; and further, the allocation of
the entire $2.1 million purchase price was determined to be reasonable based
on the Company's estimate of costs it would incur if it had performed this
effort internally.
During July 1996, the Company acquired from CNET certain software related to
intellectual property rights for 1,865,000 shares of the Company's Series C
Convertible Preferred Stock valued at approximately $1.9 million. The
technology purchased from CNET lacked many key elements essential to the
ultimate product to be released by the Company, such as an enhanced user
interface, expansion to additional database platforms, an automated install
feature, and automated testing capabilities. The Company incurred significant
costs to complete the key elements and the beta version of the product, which
was released in December 1996. All of the approximately $1.9 million purchase
price was allocated to acquired in-process research and development efforts.
Amortization of Deferred Stock Compensation. In 1998, the Company recorded
total deferred stock compensation of $524,000 in connection with stock options
granted during 1998. Such amount is being amortized over the vesting periods
of the applicable options, resulting in amortization of $142,000 for the nine
months ended September 30, 1998. These amounts represent the difference
between the exercise price of certain stock option grants and the deemed fair
value of the Company's Common Stock at the time of such grants.
OTHER INCOME, NET
Other income, net consists of interest income and expense and gain or loss
on disposals of equipment. Other income, net increased from $88,000 for the
nine months ended September 30, 1997 to $204,000 for the nine months ended
September 30, 1998. The increase was due to increased interest income earned
from cash balances on hand, partially offset by loss on disposals of equipment
and increased interest expense for the period. Other income net increased from
$62,000 in 1996 to $169,000 in 1997. The increase was due to increased
interest income earned from cash balances on hand, partially offset by loss on
disposals of equipment and increased
21
<PAGE>
interest expense for the period. Proceeds from the private sale of equity
securities in 1997 and in the nine months ended September 30, 1998 caused cash
and short-term investment balances in these periods to be higher than the
comparable prior periods.
QUARTERLY RESULTS
The following tables set forth certain unaudited consolidated statements of
operations data both in absolute dollars and as a percentage of total revenue
for each of the Company's last seven quarters. This data has been derived from
unaudited consolidated financial statements that have been prepared on the
same basis as the annual audited consolidated financial statements and, in the
opinion of the Company, include all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of such information.
These unaudited quarterly results should be read in conjunction with the
consolidated financial statements and notes thereto appearing elsewhere in the
Prospectus. The consolidated results of operations for any quarter are not
necessarily indicative of the results for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30,
1997 1997 1997 1997 1998 1998 1998
--------- -------- --------- -------- --------- -------- ---------
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Revenue:
Product license........ $ 249 $ 402 $ 528 $ 764 $ 1,293 $ 1,629 $ 2,230
Services............... 7 75 455 544 958 1,293 2,108
------- ------- ------- ------- ------- ------- -------
Total revenue........... 256 477 983 1,308 2,251 2,922 4,338
------- ------- ------- ------- ------- ------- -------
Cost of revenue:
Product license........ 3 8 13 13 25 219 266
Services............... 111 174 389 764 850 1,867 2,862
------- ------- ------- ------- ------- ------- -------
Total cost of revenue... 114 182 402 777 875 2,086 3,128
------- ------- ------- ------- ------- ------- -------
Gross profit............ 142 295 581 531 1,376 836 1,210
------- ------- ------- ------- ------- ------- -------
Operating expenses:
Research and
development........... 539 630 737 989 1,112 1,867 1,861
Sales and marketing.... 516 919 1,435 2,094 1,677 3,324 4,397
General and
administrative........ 157 202 359 615 698 1,134 1,619
Write-off of acquired
in-process research
and development....... -- -- -- -- -- 2,089 --
Amortization of
deferred stock
compensation.......... -- -- -- -- 6 68 68
------- ------- ------- ------- ------- ------- -------
Total operating
expenses............... 1,212 1,751 2,531 3,698 3,493 8,482 7,945
------- ------- ------- ------- ------- ------- -------
Loss from operations.... (1,070) (1,456) (1,950) (3,167) (2,117) (7,646) (6,735)
Other income, net....... 8 6 74 81 38 25 141
------- ------- ------- ------- ------- ------- -------
Net loss................ $(1,062) $(1,450) $(1,876) $(3,086) $(2,079) $(7,621) $(6,594)
======= ======= ======= ======= ======= ======= =======
AS A PERCENTAGE OF TOTAL
REVENUE:
Revenue:
Product license........ 97% 84% 54% 59% 58% 56% 51%
Services............... 3 16 46 41 42 44 49
------- ------- ------- ------- ------- ------- -------
Total revenue........... 100 100 100 100 100 100 100
------- ------- ------- ------- ------- ------- -------
Cost of revenue:
Product license........ 1 2 1 1 1 7 6
Services............... 44 36 40 58 38 64 66
------- ------- ------- ------- ------- ------- -------
Total cost of revenue... 45 38 41 59 39 71 72
------- ------- ------- ------- ------- ------- -------
Gross profit............ 55 62 59 41 61 29 28
------- ------- ------- ------- ------- ------- -------
Operating expenses:
Research and
development........... 210 132 75 76 49 64 43
Sales and marketing.... 202 193 146 160 75 114 101
General and
administrative........ 61 42 37 47 31 39 37
Write-off of acquired
in-process research
and development....... -- -- -- -- -- 72 --
Amortization of
deferred stock
compensation.......... -- -- -- -- -- 2 2
------- ------- ------- ------- ------- ------- -------
Total operating
expenses............... 473 367 258 283 155 291 183
------- ------- ------- ------- ------- ------- -------
Loss from operations.... (418) (305) (199) (242) (94) (262) (155)
Other income, net....... 3 1 8 6 2 1 3
------- ------- ------- ------- ------- ------- -------
Net loss................ (415)% (304)% (191)% (236)% (92)% (261)% (152)%
======= ======= ======= ======= ======= ======= =======
</TABLE>
The Company's total revenue has increased in each quarter following
commercial release of its StoryServer software in January 1997. The increase
in each quarter is due to the increase in the number of customers resulting
22
<PAGE>
from increased market awareness and acceptance of the Company's software,
expansion of the Company's sales organization, including the establishment of
European sales operations in November 1997, and increased maintenance and
support and service revenues reflecting the growth in the installed base of
product licenses.
Cost of revenue has increased each quarter in conjunction with the Company's
increases in total revenue. Product license costs were higher in the quarters
ended June 30, 1998 and September 30, 1998 primarily due to the Company
entering into an OEM license with Net Perceptions in the quarter ended June
30, 1998. Services costs increased during the quarter ended December 31, 1997
due to increased services performed by Vignette staff and increased usage of
third-party consultants. Services costs increased during the quarters ended
June 30, 1998 and September 30, 1998 due to increased usage of third-party
consultants and salaries and related costs for increased professional service
personnel in each period.
Operating expenses have generally increased in absolute dollars each quarter
as the Company has increased staffing in sales and marketing, product
development and general and administrative functions. During the quarter ended
June 30, 1998, the Company purchased in-process research and development from
RandomNoise for $2.1 million, which was immediately expensed to acquired in-
process research and development. Sales and marketing expenses increased in
the quarter ended December 31, 1997 due to the sales staff achieving sales
quotas for the year ended 1997, which resulted in sales commissions and
incentives being paid in the fourth quarter. Sales and marketing expenses
increased during the quarter ended June 30, 1998 due to increased travel and
presales costs in conjunction with increased client sales efforts in the
period, costs incurred for the recruitment of additional sales and marketing
staff and increases in sales and marketing personnel. Sales and marketing
expenses increased during the quarter ended September 30, 1998 due to
increases in sales and marketing personnel and the Company's increased
marketing program expenditures.
As a result of its limited operating history, the Company cannot forecast
operating expenses based on historical results. Accordingly, the Company bases
its expenses in part on future revenue projections. Most of these expenses are
fixed in the short term and the Company may not be able to quickly reduce
spending if revenues are lower than the Company has projected. The Company's
ability to forecast accurately its quarterly revenue is limited due to the
long sales cycle of its software products, which makes it difficult to predict
the quarter in which license sales will occur, and the variability of client
demand for professional services. The Company would expect its business,
operating results and financial condition to be materially adversely affected
if revenues do not meet projections and that net losses in a given quarter
would be even greater than expected.
The Company expects its revenues and operating results may vary
significantly from quarter to quarter. A number of factors are likely to cause
these variations, including:
. Demand for the Company's products and services;
. The timing of sales of the Company's products and services;
. Unexpected delays in introducing new products and services;
. Increased expenses, whether related to sales and marketing, product
development or administration;
. Changes in the rapidly evolving market for IRM solutions;
. The mix of product license and services revenue, as well as the mix of
products licensed;
. The mix of domestic and international sales; and
. Costs related to possible acquisitions of technology or businesses.
Accordingly, the Company believes that quarter-to-quarter comparisons of its
operating results are not necessarily meaningful. Investors should not rely on
the results of one quarter as an indication of future performance.
The Company plans to increase its operating expenses to expand sales and
marketing operations, develop new distribution channels, fund greater levels
of research and development, broaden professional services and support and
improve operational and financial systems. If the Company's revenues do not
increase along with these expenses, its business, operating results or
financial condition could be materially adversely affected and net losses in a
given quarter would be even greater than expected.
23
<PAGE>
Although it has a limited operating history, the Company believes that
quarterly operating results may experience seasonal fluctuations. For
instance, quarterly results may fluctuate based on client calendar year
budgeting cycles, slow summer purchasing patterns in Europe and the Company's
compensation policies that tend to compensate sales personnel, typically in
the latter half of the year, for achieving annual quotas.
NET OPERATING LOSSES AND TAX CREDIT CARRYFORWARDS
As of September 30, 1998, the Company had net operating loss and research
and development carryforwards of approximately $22.8 million and $352,000,
respectively. The net operating loss and credit carryforwards will expire at
various dates, beginning 2011, if not utilized. The Tax Reform Act of 1986
imposes substantial restrictions on the utilization of net operating losses
and tax credits in the event of an "ownership change" of a corporation. The
Company's ability to utilize net operating loss carryforwards on an annual
basis will be limited as a result of a prior "ownership change" in connection
with private sales of equity securities. The Company has provided a full
valuation allowance on the deferred tax asset because of the uncertainty
regarding its realization. The Company's accounting for deferred taxes under
Statement of Financial Accounting Standards No. 109 involves the evaluation of
a number of factors concerning the realizability of the Company's deferred tax
assets. In concluding that a full valuation allowance was required, management
primarily considered such factors as the Company's history of operating losses
and expected future losses and the nature of the Company's deferred tax
assets. See Note 6 of Notes to Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has funded its operations and met its
capital expenditure requirements through the private sale of equity
securities, totaling $27.7 million, net through September 30, 1998. Cash used
in operating activities was $1.5 million, $4.9 million, and $9.7 million in
1996, 1997, and the nine months ended September 30, 1998, respectively.
To date, the Company's investing activities have consisted primarily of
capital expenditures totaling $318,000, $694,000 and $1.0 million in 1996,
1997, and the nine months ended September 30, 1998, respectively, to acquire
property and equipment, mainly computer hardware and software, for the
Company's growing employee base. The Company expects that its capital
expenditures will increase as the Company's employee base grows. At September
30, 1998, the Company did not have any material commitments for capital
expenditures.
At September 30, 1998, the Company had $12.4 million in cash and cash
equivalents and $5.5 million in working capital. Net cash provided by
financing activities in 1996, 1997 and the first nine months of 1998 were $3.7
million, $10.6 million and $16.3 million, respectively. The Company has a $3.0
million revolving line of credit and a $2.0 million equipment line of credit
with Imperial Bank that each bear interest at the bank's prime rate plus
0.75%. At September 30, 1998, $1.5 million and $1.2 million are outstanding
under the revolving and equipment lines of credit, respectively. The Company's
lines of credit are secured by all of its tangible and intangible personal
property. The Company is currently in compliance with all related financial
covenants and restrictions.
On November 30, 1998, the Company completed the sale of 520,516 shares of
Series H Preferred Stock at a price of $16.33 per share for aggregate
consideration of approximately $8,500,000. The Series H Preferred Stock is
convertible into 520,516 shares of Common Stock upon completion of this
offering, subject to adjustment upwards under certain provisions of the
Company's Fourth Amended and Restated Certificate of Incorporation.
In addition, on December 3, 1998, the Company entered into agreements with
Comdisco, Inc. providing for available credit of up to $5 million over a
period of 36 months at an interest rate of 12% per year, an equipment lease
line of $1.25 million and the issuance to Comdisco, Inc. of warrants to
purchase 45,926 shares of Series H Preferred Stock at an exercise price of
$16.33 per share. The line of credit with Comdisco, Inc. is secured by
receivables, equipment, fixtures, inventory and all other tangible property of
the Company and is subordinated to the Company's indebtedness to Imperial
Bank. The warrants will expire three years from the date of this offering.
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<PAGE>
In addition, Comdisco, Inc. has the right to purchase additional warrants in
the event the Company increases its equipment lease line or fails to repay its
credit line by the maturity date.
The Company believes that the net proceeds of this offering, together with
cash on hand, cash equivalents, short-term investments and commercial credit
facilities will be sufficient to meet its working capital requirements for at
least the next 12 months. Thereafter, the Company may require additional funds
to support its working capital requirements or for other purposes and may seek
to raise such additional funds through public or private equity financings or
from other sources. There can be no assurance that additional financing will
be available at all or that, if available, such financing will be obtainable
on terms favorable to the Company or that any additional financing will not be
dilutive.
RECENT ACCOUNTING PRONOUNCEMENTS
As of January 1, 1998, the Company has adopted Statement of Position 97-2,
Software Revenue Recognition ("SOP 97-2"), and SOP 98-4, Deferral of the
Effective Date of SOP 97-2, Software Revenue Recognition ("SOP 98-4"). SOP 97-
2 and SOP 98-4 provide guidance for recognizing revenue on software
transactions and supercede SOP 91-1. The adoption of SOP 97-2 and SOP 98-4 did
not have a material impact on the Company's financial results. However, full
implementation guidelines for this standard have not yet been issued. Once
available, our current revenue accounting practices may need to change and
such changes could affect our future revenue and earnings. Effective January
1, 1998, the Company adopted Statement of Financial Accounting Standard No.
130, Reporting Comprehensive Income (SFAS 130). SFAS 130 requires disclosures
of total non-stockholder changes in equity in interim periods and additional
disclosures of components of non-stockholder changes in equity on an annual
basis. See Note 2 of Notes to the Consolidated Financial Statements. In June
1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 131, Disclosures about Segments of an Enterprise and
Related Information (SFAS 131). SFAS 131 is effective for the year ended
December 31, 1998. The Company expects that the implementation of this
standard will not have a material effect on its financial disclosures.
YEAR 2000 COMPLIANCE
The "Year 2000 Issue" refers generally to the problems that some software
may have in determining the correct century for the year. For example,
software with date-sensitive functions that is not Year 2000 compliant may not
be able to distinguish whether "00" means 1900 or 2000, which may result in
failures or the creation of erroneous results.
The Company has conducted the first phases of a Year 2000 readiness review
for the current versions of its products. The review includes assessment,
implementation (including remediation, upgrading and replacement of certain
product versions), validation testing, and contingency planning. The Company
continues to respond to customer questions about prior versions of its
products on a case-by-case basis.
Vignette has largely completed all phases of its plan, except for
contingency planning, with respect to the current versions of all of its
products. As a result, the current versions of each of its products are "Year
2000 Compliant," as defined below, when configured and used in accordance with
the related documentation, and provided that the underlying operating system
of the host machine and any other software used with or in the host machine or
the Company's products are also Year 2000 Compliant. The initial release of
StoryServer 4 required a patch to fix a minor error in a third-party product
included in StoryServer 4. The Company has provided the patch on its Web site
in order to be Year 2000 Compliant.
The Company has defined "Year 2000 Compliant" as the ability to: (i)
correctly handle date information needed for the December 31, 1999 to January
1, 2000 date change; (ii) function according to the product documentation
provided for this date change, without changes in operation resulting from the
advent of a new century, assuming correct configuration; (iii) where
appropriate, respond to two-digit date input in a way that resolves the
ambiguity as to century in a disclosed, defined, and predetermined manner;
(iv) if the date elements in interfaces and data storage specify the century,
store and provide output of date information in ways that are unambiguous as
to century; and (v) recognize year 2000 as a leap year. The Company has not
tested its products on all platforms or all versions of operating systems that
it currently supports.
The Company has tested software obtained from third parties (licensed
software, shareware, and freeware) that is incorporated into its products, and
is seeking assurances from its vendors that licensed software is Year
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2000 Compliant. Despite testing by Vignette and current and potential clients,
and assurances from developers of products incorporated into its products, the
Company's products may contain undetected errors or defects associated with
Year 2000 date functions. Known or unknown errors or defects in the Company's
products could result in delay or loss of revenue, diversion of development
resources, damage to the Company's reputation, or increased service and
warranty costs, any of which could materially adversely affect the Company's
business, operating results, or financial condition. Some commentators have
predicted significant litigation regarding Year 2000 compliance issues, and
the Company is aware of such lawsuits against other software vendors. Because
of the unprecedented nature of such litigation, it is uncertain whether or to
what extent the Company may be affected by it.
Vignette's internal systems include both its information technology ("IT")
and non-IT systems. The Company has initiated an assessment of its material
internal IT systems (including both its own software products and third-party
software and hardware technology) but has not initiated an assessment of its
non-IT systems. The Company expects to complete testing of its IT systems in
1998. To the extent that the Company is not able to test the technology
provided by third-party vendors, the Company is seeking assurances from such
vendors that their systems are Year 2000 Compliant. Although the Company is
not currently aware of any material operational issues or costs associated
with preparing its internal IT and non-IT systems for the Year 2000, the
Company may experience material unanticipated problems and costs caused by
undetected errors or defects in the technology used in its internal IT and
non-IT systems.
Vignette does not currently have any information concerning the Year 2000
compliance status of its customers. As is the case with other similarly
situated software companies, if the Company's current or future customers fail
to achieve Year 2000 compliance or if they divert technology expenditures
(especially technology expenditures that were reserved for enterprise
software) to address Year 2000 compliance problems, the Company's business,
results of operations or financial condition could be materially adversely
affected.
The Company has funded its Year 2000 plan from available cash and has not
separately accounted for these costs in the past. To date, these costs have
not been material. The Company will incur additional costs related to the Year
2000 plan for administrative personnel to manage the project, outside
contractor assistance, technical support for its products, product engineering
and customer satisfaction. The Company may experience material problems and
costs with Year 2000 compliance that could adversely affect its business,
results of operations and financial condition.
The Company has not yet fully developed a contingency plan to address
situations that may result if the Company is unable to achieve Year 2000
readiness of its critical operations. The cost of developing and implementing
such a plan may itself be material. Finally, the Company is also subject to
external forces that might generally affect industry and commerce, such as
utility or transportation company Year 2000 compliance failures and related
service interruptions.
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BUSINESS
This Prospectus contains forward-looking statements that involve risks and
uncertainties. Actual results may differ materially from those indicated in
such forward-looking statements. See "Special Note Regarding Forward-Looking
Statements."
OVERVIEW
Vignette is a leading global provider of Internet Relationship Management
software products and services, a new category of enterprise solutions
designed to enable businesses to build sustainable online customer
relationships, increase the returns on their Internet-related investments and
capitalize on Internet business opportunities. The Company's IRM solutions
allow businesses to create and manage Internet business channels that attract,
engage and retain online customers. By using Vignette's solutions, the
Company's clients can build IRM applications that convert more Web site
visitors into long-term customers and generate increased Web-based revenue and
market share. Since shipping its first products in 1997, the Company has
received 11 awards for its industry leadership and product capabilities
including Best Products/Best Private Company from The Red Herring magazine and
the Editor's Choice Award from Seybold Publications.
The Company's StoryServer 4 application platform incorporates an enterprise-
class architecture and leading-edge Internet technology that enables companies
to develop, deploy and manage advanced online businesses that increase
Internet-based revenue opportunities and permit superior relationship
management on the Web. Through the integration of advanced content management,
lifecycle personalization and decision support tools, StoryServer 4 allows the
Company's clients to engage their Web site visitors with personalized
interactions that provide value and convenience to stimulate buying and
ongoing customer loyalty. The Company also provides a set of tools built for
the StoryServer 4 platform that enables both business and technical managers
to interact with customers through the Web site and efficiently control the
operation of the site. The Company will further enhance its solution set with
Vignette Syndication Server, a new software platform formally announced in
October 1998 and expected to be shipped in the first quarter of 1999. VSS is
designed to enable businesses to build and manage value-added distribution
networks whereby a company can distribute its electronic goods and services
outside of its own Web site through a network of reseller, affiliate, and
partner Web sites, or its "Customer Chain." These super-distribution
capabilities will enable the Company's clients to extend their online reach
and increase Web-based revenue opportunities. The Company complements its
products with a professional services organization that offers a range of
services including strategic planning, project management and implementation.
These services improve the Company's clients' competitive position, shorten
time-to-market and reduce project implementation risk. Vignette's ability to
successfully deliver an integrated solution to its clients provides the
Company with a significant competitive advantage in the market for IRM
products and services.
The Company markets its products and services globally through its direct
sales force, resellers and systems integrators to businesses seeking to
enhance the value of their Web-based relationships, maximize the return on
their Internet-related investments and capitalize on the substantial growth of
the Internet as a new marketing and distribution channel. The Company also
leverages strategic alliances with a number of technology and Internet
organizations to increase the penetration and market acceptance of its IRM
platform, development tools and professional services. To date, the Company
has licensed the StoryServer software platform to more than 160 clients
worldwide in a variety of industries including retail, financial services,
telecommunications, technology and media. The Company's clients include Bank
One, Bay Networks, Chicago Tribune, Lands' End, National Semiconductor,
Preview Travel and Ziff Davis Publishing.
INDUSTRY BACKGROUND
The emergence and acceptance of the Internet and the World Wide Web has
fundamentally changed the way that consumers and businesses communicate,
obtain information, purchase goods and transact business. International Data
Corporation ("IDC") estimates that the number of Internet users worldwide will
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grow from approximately 69 million in 1997 to 320 million in 2002. IDC also
estimates that revenue generated from Internet commerce will exceed $400
billion by 2002. As the Internet has become more accessible, functional and
widely used, it has emerged as a primary business channel alongside the
telephone, paper-based communication and face-to-face interaction. For
instance, businesses are increasingly using the Web as both a marketing tool
and distribution channel to communicate and conduct business with partners,
customers and employees.
Origins of Online Business
The growth in the number of Internet users, as well as the open nature of
the Internet, has led many businesses to seek new ways to take advantage of
this global platform. The earliest business use of the Internet was the
creation of informational Web sites, which typically involved merely
reformatting existing marketing materials to create an online brochure. This
simple use of the Internet to present static information was quickly
supplanted by the first generation of electronic commerce businesses. The
introduction of new technology enabled businesses to create Web sites for
online publishing, which were financed by advertising, and electronic catalog
businesses where hard goods such as books or computers could be sold. These
Internet businesses focused on developing a basic advertising and transaction
infrastructure rather than capitalizing on the unique aspects of Internet
commerce. In addition, these first generation online businesses were based on
traditional, physical world business models and were differentiated only by
wider selection and lower prices. Success for these businesses was measured by
the total amount of Web site traffic.
Advertising- and transaction-based Internet business models have been
successful in generating online transactions. However, as the number of
companies attempting to conduct business online has increased, the Web has
become a highly competitive business environment in which customers have a
large number of easily accessible choices, eroding customer loyalty. As a
result, it is becoming increasingly difficult for businesses on the Internet
to reach their target audiences, build customer loyalty and differentiate
themselves from their competitors using business strategies taken from the
physical world. Consequently, online businesses are finding it increasingly
expensive to locate and attract the right types of Web site visitors and
increasingly difficult to convert these visitors into profitable and long-term
customers.
Evolution of Online Business
As the next generation of online business models evolve, companies are
changing the ways they measure their success online. Both advertising- and
commerce-based businesses have begun to use the percentage of Web site
visitors that actually transact business, or the conversion rate, as the key
gauge of their effectiveness in attracting and retaining loyal customers out
of their total Web site visitor population. According to Forrester Research,
the current average conversion rate for first-time visitors to an electronic
commerce Web site is 2.7%, a rate similar to unsolicited direct mailings. To
address this problem, businesses are beginning to focus their strategies on
increasing online conversion rates by more effectively engaging a new type of
"connected customer." Connected customers are individuals who place more value
on information convenience, online advisory services and improved access to
products and services, than on price and physical geographic location.
To capture the connected customer, businesses must focus on developing and
executing a new set of online strategies to build long-term customer
relationships and strengthen customer loyalty. To attract connected customers,
businesses must provide users with more relevant and targeted experiences each
time they interact with the company online. To achieve this objective,
businesses must provide potential customers with greater information
convenience, online advisory services and improved access to products and
services.
For the connected customer, information convenience means having all of the
data necessary to make a decision at one Web site. As a result, businesses are
finding it necessary to broaden their Web offerings beyond their own products
and services. Many online businesses are acquiring rich, third-party content
and product lines that allow them to deliver highly interactive, topical
portals that provide the convenience of one-stop shopping. For example, an
online stock brokerage firm might license daily industry news, company
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analyses, and financial planning articles to provide their customers with a
complete set of financial management information on a single Web site.
Increasingly, businesses must also offer online advisory services to provide
the expertise the customer needs to make an informed purchasing decision. For
example, an online travel agency might add advisory services that help
vacation travelers perform extensive pre-purchase research on their favorite
destinations. Through highly personalized services based on the collection and
analysis of customer profiles, businesses can enhance the lifetime value of
each customer, increase customer switching costs and create strong competitive
barriers.
Businesses also are extending their online reach to engage potential
customers in more online locations than just their own Web sites. To increase
Web-based revenues, businesses need to maximize not only the number of
visitors and customers coming to their own Web sites, but also their total
online reach across their entire Customer Chain. For example, a business that
sells books online needs to reach not only the buyers that come to its own Web
site, but also visitors to other book-related sites, such as locations
dedicated to authors, book reviews and literature. In effect, it is as
necessary for businesses to create broad distribution and reseller
relationships online as it is in the physical world in order to have as many
points of contact with the customer as possible. The creation of such a super-
distribution model forms an instantaneous, worldwide distribution system. The
Internet has made it possible for all companies to have a worldwide online
distribution system, a system that was previously available only to large
companies that could afford to build out such a network in the physical world.
Need for Comprehensive IRM Solutions
As online business models evolve and the amount of business transacted on
the Web increases, enterprises are seeking new Internet solutions that will
enable them to develop, maintain and leverage relationships with customers and
affiliates. Much as companies adopted Enterprise Resource Planning software in
the late-1980s to manage back-office operations and Sales Force Automation
software in the mid-1990s to manage front-office operations, many businesses
are now searching for IRM software solutions to help them manage their online
customer relationships. Businesses realize that IRM solutions, like other
enterprise solutions, are mission-critical and pose significant technological
challenges that require large resource commitments. For example, early
adopters of IRM strategies, such as Amazon.com, built in-house solutions that
required significant custom development, evaluation, implementation and
integration of disparate technologies and platforms. Companies building these
solutions internally face long development cycles, high ongoing maintenance
costs, and limited functionality and scalability.
Accelerated adoption of the Internet as a business channel is driving
businesses to seek enterprise software providers that have the expertise to
deliver solutions that minimize their time to market and maximize the value of
their Internet investment. To date, software providers have focused on
developing applications that managed discrete portions of IRM, such as
transaction management, catalog tools, collaborative
filtering/personalization, authoring, site management and application
development. Today, however, businesses are increasingly demanding an
integrated package of platforms, tools and applications that address all
aspects of IRM, rather than point products and toolkits. A fully integrated
IRM solution must include the ability to attract, engage and retain customers
and understand their needs and preferences via a direct relationship through a
company's Web site. This solution also must enable companies to create and
manage Customer Chains, value-added distribution networks whereby a company
can distribute its electronic goods and services outside of its own Web site
through a network of reseller, affiliate and partner Web sites. These
requirements demand an IRM solution that supports advanced content management
and syndication, personalization and decision support capabilities.
THE VIGNETTE SOLUTION
Vignette is a leading global provider of IRM software products and services
specifically designed to enable businesses to enhance the value of their Web-
based relationships, maximize the return on their Internet-related investments
and capitalize on the substantial growth of the Internet as a new business
channel. The Company's
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IRM solutions enable businesses to create and manage Internet business
channels that attract, engage and retain online customers. Vignette believes
its solutions allow its clients to increase their online effectiveness and
improve customer conversion rates, resulting in greater Web-based revenues and
market share. The Company's integrated solution set includes an enterprise-
class Internet application platform, as well as a set of tools for business
and technical managers to interact with customers through the Web site and
control its operation. Vignette Syndication Server, formally announced in
October 1998, will extend the Company's application platform to enable the
Company's clients to create and manage Customer Chains. Vignette is focused on
continuing to develop and extend its product and service offerings to provide
its clients with a comprehensive means for building, managing and delivering
sophisticated IRM solutions, thereby increasing its clients' return on their
Internet investments.
The Company believes its comprehensive, integrated IRM solutions represent a
fundamentally new approach to doing business on the Internet and provide its
clients with the following benefits:
Higher Customer Conversion and Retention Rates. The Company's products and
services enable its clients to use the Internet as a channel to build
profitable, long-term customer relationships and to use those relationships to
create new marketing opportunities to drive revenue growth. Businesses that
use the Company's solutions can develop Internet applications that interact,
as opposed to solely transact, with Web visitors. For instance, the Company's
IRM platform incorporates unique lifecycle personalization technology that
allows the Company's clients to create personalized Web experiences that
engage visitors and encourage return visits through tailored, customized
interactions. The Company believes that these personalized experiences enhance
customer loyalty, satisfaction and retention, resulting in higher conversion
rates. By creating Internet applications that are designed to appeal to new
customers and promote long-term, online customer relationships, businesses are
better positioned to capture increased online revenues.
Increased Revenue Opportunities through More Flexible Business Model. The
Company's solutions are designed to enable its clients to pursue a broad range
of business opportunities that enhance Web-based revenues, such as co-
branding, multiple Web site production and super-distribution. The Company's
clients have obtained partner license fees in return for co-branding their Web
sites with partner logos, content and navigation. For example, a major portal
provider has co-branded its destination with over 100 Internet Service
Providers ("ISPs"), with each version of the Web site targeted specifically
for that ISP's customer base. In return, this portal receives significant
royalty payments from each ISP with very little actual cost to produce the
branded Web site. Vignette's multiple Web site production capabilities have
enabled a major online news provider to use a small team to create over 200
online community Web sites that are specific to urban areas in and around
their local community. Each community has its own Web site that contains local
advertising and content. The news provider was able to generate increased
advertising revenue from these localized Web sites.
Rapid Time To Market. Businesses using Vignette solutions can develop IRM
applications more rapidly than most other third-party or in-house
alternatives. As a result, Vignette's solutions permit businesses to expand
their existing online business and enter into new online markets on an
accelerated time frame. Clients benefit from Vignette's component-based
application architecture that maximizes content and application reusability
and Web site performance. Many of the Company's clients take an integrated
approach to the construction and delivery of their relationship management
applications. Vignette's professional services organization provides these
clients with business strategy consulting, project management and application
development implementation. Vignette's integrated approach to delivering its
products and services permits its clients to deploy IRM solutions quickly and
cost effectively, thereby increasing online revenues and market share.
Increased Operational Control of Internet Applications at a Lower Effective
Cost. The Company's IRM solutions permit clients to manage their Internet
business channels more efficiently and with greater control than most in-house
or other third-party alternatives. Vignette's product features also
dramatically reduce the amount of labor and capital expenditure required to
operate and maintain sites on the Internet. The Company's solutions
incorporate: (i) content management capabilities designed to increase the
efficiency of team-based Web site
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production, enhance application developer productivity and reduce maintenance
costs; (ii) decision support capabilities that allow businesses to analyze
customer preferences, examine demographic segmentation and determine the
popularity of individual products and services; and (iii) a scalable
application server platform which is capable of handling a very large number
of Web site visitors with optimized performance while substantially curtailing
Web server hardware expenditures. Vignette's products and services provide
clients with greater operational control and compelling cost advantages in
operating and maintaining their Web sites, as well as in the cost of customer
acquisition and retention.
STRATEGY
The Company's objective is to enhance its position as a leading global
provider of IRM solutions. To achieve this objective, the Company has adopted
the following strategies:
Maintain Leadership in IRM Solutions Market. Vignette's industry-leading IRM
solutions enable enterprises to build and deploy effective online businesses.
Vignette's StoryServer 4 application platform allows businesses to maximize
their online potential by offering relevant products and services to the
appropriate customer audience, thereby increasing customer conversion rates
and strengthening customer loyalty. With its recently announced Vignette
Syndication Server, the Company will offer a platform for creating a new
category of easily-deployed, enterprise applications that will enable
businesses of any size to achieve instantaneous, online distribution of their
products and services across an extensive network of reseller, affiliate and
partner Web sites. In the future, the Company intends to maintain its
leadership position by developing new IRM products and services to help
businesses generate new online revenue opportunities.
Expand Sales Channels to Drive Market Penetration. The Company is working to
increase customer adoption of its solutions by expanding its direct sales
operations and its indirect sales channels through additional relationships
and strategic alliances with key systems integrators, value-added resellers
("VARs") and original equipment manufacturers ("OEMs"). The Company believes
that a multi-channel sales effort will broaden customer awareness of the
Company's products and will allow it to effectively target a wide variety of
industries that would benefit from the Company's solutions.
Expand International Presence. Vignette believes that there will be
significant international opportunities for its products and services and
continues to expand its global marketing and distribution efforts to address
the range of markets and applications for its IRM solutions. The Company plans
to continue aggressive expansion of its international presence by adding
direct sales personnel and increasing its indirect sales channels to fully
capitalize on international market opportunities. The Company has opened sales
offices in Hamburg, Germany and London, England and intends to continue its
expansion throughout Europe, Asia and those regions where businesses and other
institutional clients are using distributed networks and the Internet to
create sales opportunities.
Leverage Professional Services Capabilities. Vignette has established
successful relationships with its clients by serving as an advisor in
developing and deploying IRM solutions. The Company is extending its direct
professional services capabilities to provide an expanded set of services to
address such areas as online business strategy, project management and
application development. In addition, the Company intends to offer similar
high-quality professional services capabilities through third-party alliances
and is currently focused on the development of relationships with VARs and
systems integrators. By offering its clients a full range of professional
services on a global basis, the Company believes it can broaden market
awareness about the advantages of its IRM solutions and create opportunities
to sell new or enhanced products to clients.
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PRODUCTS
The Company's integrated solution set includes an enterprise-class Internet
application platform, tools for both business and technical managers to
interact with customers through the Web site and its recently announced
Vignette Syndication Server that is designed to enable businesses to create
and manage Customer Chains. The following table summarizes the Company's
current and future products:
<TABLE>
<CAPTION>
CATEGORY FEATURES SHIPMENT DATES
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
PLATFORMS
. StoryServer 4 Designed to develop and manage IRM Available July 1998.
applications. Runs on Sun Solaris or First version of
Windows NT servers and supports Oracle, StoryServer shipped in
Sybase, Informix and Microsoft SQL January 1997.
databases.
. Vignette Syndication Designed to enable businesses to create and Anticipated first quarter
Server manage Customer Chains - the distribution 1999.
and resale of online products and services
through reseller, affiliate and partner Web
sites.
TOOLS
. Production Center Designed for team-based project and content Shipped with StoryServer
management. Allows authors, editors, 4 in July 1998. First
designers, developers and business managers version shipped in
to work collaboratively in the production September 1997.
of the IRM application and Web site.
. Business Center Enables business managers to analyze and
report on Web site visitor demographics and Shipped with StoryServer
behavior data. 4 in July 1998.
. Development Center A visual development tool designed to Anticipated first half of
reduce the time to deploy critical Web 1999.
business applications by simplifying
programming and permitting a wider range of
users to develop IRM applications.
. Distribution Center Enables a business manager to create online Anticipated first quarter
build-to-order products for affiliates and 1999.
manage the distribution of those products
across affiliated Web sites.
</TABLE>
Platforms
StoryServer 4. StoryServer 4 is an IRM application platform that enables the
Company's clients to create and manage customer relationships online.
StoryServer 4 incorporates three key capabilities: advanced content
management, lifecycle personalization and decision support. StoryServer 4
enables businesses to create and manage mission critical Internet applications
that attract, engage and retain online customers. The Company believes that
StoryServer 4 increases Web site visitor conversion rates and strengthens
customer loyalty, resulting in higher Web-based revenues for its clients.
Vignette Syndication Server. In October 1998, the Company formally announced
VSS and plans to ship the product in early 1999. VSS is designed to enable
businesses to create and manage integrated Customer Chains. There can be no
assurance that the Company will be successful in developing and marketing VSS
or its related tools on a timely basis or that VSS will achieve commercial
acceptance.
Tools
Production Center. Production Center provides an environment for team-based
project and content management by centralizing the elements of content
application development and deployment. This tool allows
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authors, editors, designers, developers and business managers to work
collaboratively. With Production Center, each type of user involved in content
development and deployment is dedicated a different area of the desktop
application.
Business Center. Business Center enables business managers to analyze and
report on visitor demographic and behavior data collected by StoryServer 4.
This tool allows business managers to gain an in-depth understanding of the
needs and preferences of their Web site visitors and customers. With this
knowledge, managers can improve the design of and visitor interaction with the
Web site, thereby increasing conversion rates and revenues.
Development Center. In the first half of 1999, the Company plans to
introduce and ship Development Center, a visual environment for building
Internet applications. Development Center is being designed to reduce the time
to deploy IRM solutions by simplifying programming and permitting a wider
range of users to develop IRM applications.
Distribution Center. Distribution Center, expected to be shipped in the
first quarter of 1999 as part of VSS, is being designed to enable business
managers to develop online products and content for distribution to resellers,
affiliates and partners in their Customer Chains. Distribution Center is also
being designed to allow these managers to create and manage the business rules
and relationships associated with each of the resellers, affiliates and
partners in their Customer Chains.
VIGNETTE PROFESSIONAL SERVICES
The Vignette Professional Services ("VPS") organization is integral to the
Company's ability to provide its clients with an innovative and comprehensive
IRM solution. VPS has over 100 staff years of combined software project
management experience. VPS helps clients define, design and rapidly implement
successful Internet businesses with innovative IRM applications. VPS focuses
its consulting services on influencing the client's ability to understand and
build online relationships with their customers. The goals of the VPS
organization are to mitigate initial implementation risks, improve the time to
market and integrity of the solution and provide competitive advantages to and
share best practices with client project teams. The Company charges for its
services on either a time and materials basis or on a fixed fee basis, and
provides its services through its VPS practices in San Francisco, California;
Austin, Texas; Boston, Massachusetts; New York, New York; and London, England.
The Company currently offers its customers a broad spectrum of services
across the design, implementation and ongoing support stages of an IRM system
deployment including the following:
. strategic business consultation;
. needs analysis;
. architectural analysis and performance planning;
. IRM project management;
. technical site design;
. development and deployment;
. software integration; and
. client education and training.
In the design stage, VPS provides a variety of services that help ensure
that the client and VPS understand the client's business objectives and
determine the technical requirements of the IRM application implementation. In
the implementation stage, the Company utilizes its Site Development
Methodology to ensure that the project is well managed. At this stage, VPS's
extensive experience with Web site design reduces technical project risk and
ensures proper integration of any third-party software. Finally, VPS offers
comprehensive education and training to enable a client's internal team to
seamlessly assume control over ongoing support of the Web site.
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The following graphic depicts the services that the Company provides across
the three stages of an IRM system deployment:
[GRAPHIC APPEARS HERE]
Vignette has established complementary relationships with several service
partners including Pencom, WebWorks, Perficient, Octane, North American Media
Engines, as well as a number of leading graphic design firms and business
integrators. These partners provide VPS with a substantial network of
expertise, as well as the ability to lead large and complex projects and
deliver a complete solution.
CLIENTS
To date, Vignette had licensed versions of its products to over 160 clients.
Chicago Tribune and Preview Travel accounted for approximately 13% and 11%,
respectively, of the Company's total revenue for 1997. No one client accounted
for more than 10% of the total revenue for the nine months ended September 30,
1998. The Company's clients represent a broad spectrum of enterprises within
diverse sectors, including financial services, health, education and
government, media, retail, services, technology and telecommunications.
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The following is a partial list of the Company's clients that have purchased
licenses and/or services from the Company and that the Company believes are
representative of its overall client base.
FINANCIAL SERVICES Time Inc. New Media
Bank One Tribune Media Services
Ceridian The Trip.Com
Citicorp World Media Online
First Chicago Ziff Davis Publishing
Interactive Investor International RETAIL
Massachusetts Mutual Life Insurance Bookcraft
Company Lands' End
The Mutual Life Insurance Company Wherehouse Entertainment
of New York Whole Foods
New York Life Insurance Company SERVICES
PaineWebber American Business Information
RBC Dominion (Royal Bank of Canada)
Atevo
HEALTH, EDUCATION, AND GOVERNMENT Browning-Ferris Services
American Medical Association DHL Worldwide Express
City of San Carlos EDS
Columbia University Forrester Research
The Family Education Co. Hoover's
Kaplan Education Centers Intelliquest
National Cancer Institute Lufthansa Executive Network
United Healthcare Services PECO Energy
USDA Graduate School
Preview Travel
MEDIA TECHNOLOGY
Bertelsmann Advanced Micro Devices
CBS Sportsline Bay Networks
Chicago Tribune Cendant Software Online Services
City Online BV Emprise Corporation
CNET Excite
Deseret News Publishing I3S
Direct Medical Knowledge National Semiconductor
Electronic Newsstand Seagate Technology
Guardian Newspapers Siemens Business Communication
Hollywood Online Systems
The Houston Chronicle Sun Microsystems
IDG Corporation Sybase
iVillage TELECOMMUNICATIONS
Lycos Ameritech
Mecklermedia Corporation AT&T
On Health Networks British Telecom
Orlando Sentinel Nokia
Playboy Enterprises Sonera
Road Runner Group Sprint
The Seattle Times
Simon & Schuster
Spiegel Online
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CASE STUDIES
The following case studies illustrate the use of StoryServer by three of the
Company's clients.
Online Travel Services Company
A highly successful online travel services company selling an increasingly
commoditized product faced intense competition from two large online
competitors. The firm elected to focus its business on vacation travelers who
make highly considered purchases and need value-added travel planning
assistance before making purchasing decisions. To increase its revenue targets
and customer conversion rates, the firm needed an IRM system that delivered
interactive travel planning assistance to facilitate vacation purchases
through its Web site. Such a system would have to handle a multi-million
member customer base and support tens of thousands of personalized visitor
sessions each day. In addition, to meet the firm's application goals, the
system also would have to automatically integrate a series of travel-related
resources licensed and syndicated from other Web sites, and integrate this
content within the firm's travel planning application. An internally-built
system would have been too expensive, and most packaged solutions did not
provide an application architecture that would accommodate the necessary
content flexibility or deliver adequate system performance.
The travel services firm deployed StoryServer and worked with Vignette
Professional Services to launch a major new version of their Web site in less
than six months. The firm was first to market with a Web-based vacation travel
planning service that integrated syndicated travel guide content and delivered
it as an integral part of their IRM application. The firm was immediately able
to process significantly more visitor sessions because Web server utilization
dropped from 90% to 10%. By reducing Web server utilization, the firm was able
to delay significant planned hardware expenditures. StoryServer also enabled
the firm to reduce its time to deployment for new versions of the travel
planning application, creating significant advantages over its online
competitors. The firm's marketing staff is now considering additional
syndication arrangements to further increase the customer value of the travel
planning application. StoryServer provided the company with an IRM solution
that significantly increased its customer conversion rates.
Financial Services Company
A major retail banking company planned an extensive Internet banking
initiative in which the Internet would become a primary business channel for
its retail customers. The bank's existing Web site was a simple system that
allowed customers to check account balances and read information about its
banking products. The bank needed to position the new version of its Web site
as a daily financial gateway that would assist customers with loan selection,
college planning, house purchases and managing personal stock portfolios. The
problem was that the bank's existing Web systems were designed as either a
means of delivering simple brochure content, or as Web-enabled front ends on
top of its proprietary transaction systems. Neither of these systems by
themselves could create an integrated advisory experience that would
reasonably engage clients on a daily basis and allow the bank to better retain
customers. The bank's new Web-based business required an Internet application
platform that could deliver a set of highly interactive, content-rich
applications to a large, diverse population of customers, and be managed on a
real-time basis by the bank's marketing managers. The bank knew that its
competitors were working on a similar project, and that time to market was
critical in order to increase market share and establish itself as an Internet
banking leader.
The bank selected Vignette's StoryServer product as the strategic technology
platform for the future of its relationship-based banking business on the Web.
By engaging VPS, the bank was able to meet its application functional
requirements and launch dates, going online within months of its investment in
the Vignette solution. The bank's new Web site delivers a broad personal
banking experience, offering planning tools for products and services ranging
from money management to auto loans to insurance, as well as an individual
investor portfolio management system. In addition, the Web site delivers a
news and research section that syndicates daily investor information from the
Dow Jones news service. The success of this venture recently resulted in the
bank's new parent deciding to invest in another deployment of StoryServer for
its next generation retail banking Web site due to be launched early next
year.
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Worldwide Provider of News and Information
A major news and information publishing company planned on entering the
online regional communities business to compete with CitySearch and
Microsoft's Sidewalk. The company's business plan called for a major regional
Web site accompanied by up to 250 local community Web sites targeted to reach
the local online communities. Existing technologies made delivering multiple
online communities cost-prohibitive because the cost of producing and managing
each new Web site outweighed the revenue potential. The company needed a
platform that would enable it to rapidly and cost-effectively deliver new
online services across dozens of regional Web sites, target local businesses
as advertisers and let local community leaders as well as staff editors
produce editorial content while controlling the overall production of each
property at a central location. Likewise, the development team needed a highly
scalable application architecture that would allow new online properties to be
designed and deployed using reusable applications and content yet allow each
online community Web site to uniquely interact with its visitors on topics of
local interest.
The client chose Vignette because StoryServer offered a complete end-to-end
solution for hosting multiple Web sites from a single platform and content
base, and automating content management so that the control over the
production of each property was centralized. Using StoryServer, the company
was able to build a broad base of advertising slots and maximize the revenue
potential of each Web site without the expense of running each property
individually. The production team now produces enhanced application
functionality from a central location for the various Web sites. At the same
time, community leaders retain control over their own presentation, navigation
and content. As a result, the company has been able to increase its market
share position for interactive community Web sites in its region. It has
rapidly deployed dozens of local properties, and established a fixed cost
business model that limits the growth in developer, producer and editor
headcount required to support the opportunity.
TECHNOLOGY
The Company believes its advanced technology enables its clients, partners
and consultants to build, deliver and manage enterprise-class IRM systems into
the market in less time, at lower cost and with better business results than
existing alternatives.
Product Architecture
The Company believes that it has developed a unique architecture for meeting
the technical demands of applications designed for Internet Relationship
Management. By emphasizing an application architecture based on content
management; a lifecycle personalization model that effectively accommodates
both Web customer acquisition and retention; and a patented design for
extremely scalable and high-performance Web page delivery, the Vignette
solution provides an efficient architecture for clients to build and deploy
highly scalable IRM applications quickly and cost-effectively. The Company
believes that this architecture also provides a strong foundation on which the
Company can develop future products.
Content Management. The Company has developed proprietary content management
technology designed to manage the high volume of dynamic interactions that
occur between many concurrent Web site visitors and the relationship
management application. The content management system provides three key
functions:
. Content Abstraction Services. Allow application developers to build and
deploy applications that can access and manage any type of content (such
as relational data, flat files, or XML (Extensible Markup Language) data)
through a single API (Application Programming Interface) model. This
simplifies application development and significantly reduces time-to-
deployment by uncoupling decisions about storage repositories and data
formats from application logic and protects existing database repository
investments. The Company plans to further enhance the system's rapid
application development capabilities in early 1999 with its Development
Center tool, a visual data modeling and drag-and-drop application builder
tool that will take further advantage of these content abstraction
services.
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. Automated Asset Management. Provides a broad set of functionality for
managing and automating most tasks associated with managing content
assets, including production team access control, asset-specific
workflow, version control, launch and expiration scheduling, and visual
project management.
. Content Components. Greatly enhance the template-based approach to
Internet application development. Components allow Internet applications
to be built and operated in an object-oriented fashion, with components
serving as the building blocks for dynamic assembly and adaptive
navigation. Unlike other products that require complex programming to
support interactivity, StoryServer 4 provides native support for
interactive content components. This approach eliminates the problem of
inflexible application structures associated with existing template-based
dynamic architectures.
Lifecycle Personalization. The Company's lifecycle personalization services
are designed to help clients substantially increase their conversion rates and
increase the lifetime value of the typical online customer by managing
relationships through their complete lifecycle. These services (described
below) enable clients to personalize Web experiences by adapting the site's
presentation, navigation and content based on implicitly observed behavior and
explicitly stated preferences as the relationship evolves over a number of
interactions from anonymous visitor to well-known customer. The Company
believes that its approach requires less time and effort to deploy and
maintain, and requires substantially less investment in Web server hardware
than competing alternatives.
The Company's lifecycle personalization tools consist of five primary
components, which when utilized in combination with content management
functions, enable clients and partners to develop applications that are
effective for both online customer acquisition and customer retention.
. Presentation Agent for System Targeting. Automatically adapts the
application's presentation to accommodate a new, anonymous visitor's
environment to present content that is suited to the visitor's browser
capabilities, operating system, and local language.
. Matching Agent for Behavior Targeting. As a new visitor becomes familiar
with the site, the Matching Agent uses observations about a visitor's
behavior on the Web site to infer the visitor's interest and to adapt
navigation and content to observed affinities. With the Matching Agent,
businesses can implement merchandising over the Web without requiring
visitors to explicitly divulge information about themselves.
. Recommendation Agent for Needs Targeting. The Recommendation Agent is
utilized when visitors become sufficiently familiar with the site to
facilitate targeted suggestions. The Recommendation Agent recommends
content to a visitor that others with similar tastes found interesting.
. Personal Pages for Customization. Useful at the well-known stage, the
site can offer the capability for visitors to define personal pages that
are explicitly tailored to their needs each time they return to the site.
. Open Profiling Services. Open Profiling Services manage and populate a
centralized repository of visitor profile and content information. This
feature provides a visitor registry for storing visitor information, a
content catalog for creating taxonomy of content on the Web site for use
in personalization, and an Observation Manager that observes, tracks and
records visitor behavior and preferences without impacting site
performance.
Syndication Services. The forthcoming Vignette Syndication Server will
utilize a proprietary set of technologies that allows customers to build
online reseller channels through affiliate Web sites. VSS allows the creation
of these channels by using a logical set of content ("packages"), business
rules for governing affiliate relationships ("subscriptions") and automated
remote management services for managing its content within its affiliate Web
sites. These proprietary services have been based on the emerging Information
and Content Exchange ("ICE") specification standard for content syndication,
which is an XML-based specification being
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jointly developed by the Company and over seventy other companies including
Microsoft, Sun Microsystems and Adobe. The Company believes that by fostering
the creation and adoption of an open standard for content syndication, and
being the first company to provide proprietary value-added services in the
delivery of a product that embodies these concepts, it will be able to quickly
establish technology leadership in this arena.
Scalability and Performance
The Company believes that one of its key technological strengths is
StoryServer 4's ability to deliver industry-leading Web page delivery
performance and scalability while running on low cost Web server hardware.
Internet applications that are built with competing products that dynamically
generate Web pages can be significantly slower (depending on the server
configuration) than first generation static Web sites. This degrades the
overall Web site experience for the site visitor, lowers the visitor's
interest in returning to the Web site, reduces the client's ability to handle
large visitor traffic volumes, and creates a requirement for the client to
significantly increase Web server capital equipment expenditures.
StoryServer 4's ability to deliver unique performance characteristics is
achieved using three techniques:
. A patented caching mechanism is integrated with the product's content
component architecture and allows applications to deliver dynamically
generated and personalized Web pages at speeds nearly equivalent to the
performance of static Web page delivery.
. Integration of this patented caching mechanism with the Company's
personalization technologies, so highly personalized Web pages can be
delivered without the cost and real-time delay of significant
transactional computation required by other solutions attempting to offer
personalization capabilities.
. The ability to distribute application server components of the platform
product across multiple physical Web servers allows high-end sites to
scale up performance and gain increased system availability as a result.
Adherence to Industry Standards
The Company has invested significant resources in developing its
architecture to comply with widely accepted commercial software industry
standards for building large scale Internet applications. The Company's
products use SQL (Structured Query Language) for accessing RDBMSs (Relational
Database Management Systems), HTTP (Hypertext Transfer Protocol) for Internet
access, NSAPI (Netscape Application Programming Interface) for access to
Netscape's Internet servers, ISAPI (Information Server Application Programming
Interface) for access to Microsoft's Internet servers, and XML for
representing and processing content. Adherence to these industry standards
provides compatibility with existing applications, enables ease of
modification and reduces the need for software to be rewritten, thus
protecting the client's investment. Furthermore, the Company's products can be
operated in conjunction with RDBMSs provided by Oracle, Microsoft, Informix or
Sybase, utilizing their native, high-performance interfaces.
The Company has focused its investments in particular on developing its
architecture to comply with XML, a recently approved standard for data
representation being adopted by the industry. Software systems that are XML-
compliant provide customers with the ability to reduce application development
time, easily integrate with legacy enterprise systems, and build applications
that span the business processes of the company, its suppliers, distributors
and customers. The Company believes that its rapid adoption of XML and its
leadership position in building applications based on XML will allow it to
further its technology leadership as this standard becomes the de facto data
representation model for enterprise applications delivery. Specifically, the
Company first introduced XML services in the 3.2 release of StoryServer and is
building its forthcoming Vignette Syndication Server on top of an XML-based
protocol known as ICE. The Company continues to invest in XML technologies and
participate as a member of the World Wide Web Consortium ("W3C") standards
committee, with representation on the W3C Advisory Committee.
The Company develops most of its software in Java or C++, two widely
accepted standard programming languages for developing object-oriented
applications. The Company chooses whichever language is best suited
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to the requirements of a particular component. The Company generally uses Java
to develop client programs, where the Company can benefit from the rapid
development capabilities and heterogeneous platform support capabilities of
Java. The Company actively supports its Java products on Sun Solaris, Windows
95, Windows NT, and Macintosh platforms, and continuously evaluates new
platforms as justified by the business. The Company generally uses C++ for
server programs, because of the Company's high scalability and performance
requirements.
RESEARCH AND DEVELOPMENT
The Company has made substantial investments in research and development
through both internal development and technology acquisition. Although the
Company plans to continue to evaluate externally developed technologies for
integration into its product lines, the Company expects that most enhancements
to existing and new products will be developed internally.
The majority of the Company's research and development activity has been
directed towards feature extensions to its family of products. This
development consists primarily of adding new competitive product features and
additional tools and products as the Company expands into new markets.
The Company's research and development expenditures, including the write-off
of acquired in-process research and development, for fiscal 1996, 1997 and for
the nine months ended September 30, 1998 were approximately $2.8 million, $2.9
million and $6.9 million, respectively. The Company expects that it will
continue to commit significant resources to research and development in the
future. All research and development expenses have been expensed as incurred.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
The market for the Company's products and services is characterized by rapid
technological change, frequent new product introductions and enhancements,
evolving industry standards, and rapidly changing customer requirements. The
introduction of products incorporating new technologies and the emergence of
new industry standards could render existing products obsolete and
unmarketable. The Company's future success will depend in part on its ability
to anticipate changes, enhance its current products, develop and introduce new
products that keep pace with technological advancements and address the
increasingly sophisticated needs of its customers. See "Risk Factors--Risks of
Rapid Technological Change."
SALES AND MARKETING
The Company markets its products primarily through its direct sales force
and also intends to expand its indirect sales through additional relationships
with systems integrators, VARs and OEMs. The Company generates leads from a
variety of sources, including businesses seeking partners to develop
interactive marketing and selling applications. Initial sales activities
typically include a demonstration of the Company's product capabilities
followed by one or more detailed technical reviews. As of September 30, 1998,
the direct sales force consisted of 48 sales executives and support personnel.
The Company seeks to establish partnerships with major industry vendors that
will add value to the Company's products and expand distribution
opportunities. The Company also pursues marketing agreements with premier
content authoring vendors, site usage analysis vendors and vertically aligned
Web server vendors.
The Company uses a variety of marketing programs to build market awareness
of the Company, its brand name and its products, as well as to attract
potential customers for its products. A broad mix of programs are used to
accomplish these goals, including market research, product and strategy
updates with industry analysts, public relations activities, direct mail and
relationship marketing programs, seminars, trade shows, speaking engagements
and Web site marketing. The Company's marketing organization also produces
marketing materials in support of sales to prospective customers that include
brochures, data sheets, white papers, presentations and demonstrations.
STRATEGIC ALLIANCES
A critical element of the Company's sales strategy is to establish strategic
alliances to assist the Company in marketing, selling and developing customer
applications, as well as to increase product interoperability within the
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industry. This approach is intended to increase the number of personnel
available to perform application design and development services for the
Company's customers; and provide additional marketing expertise and technical
expertise in certain vertical industry segments. These alliances fall into
four categories: (i) the Information & Content Exchange alliance, (ii)
platform alliances, (iii) technology alliances and (iv) design alliances.
Information and Content Exchange Alliance
To facilitate the adoption of Web-based content syndication technologies in
the marketplace, the Company co-founded the ICE working group to create an
industry-standard protocol for enabling cross-Website syndication
capabilities. In January 1998, the Company formed the ICE Authoring Group
comprising 12 additional companies: Adobe, CNET, Firefly, Hollinger
International, Microsoft, National Semiconductor, Net Perceptions, News
Internet Services, Preview Travel, Sun Microsystems (JavaSoft), Tribune Media
Services and Ziff Davis. In support of this protocol creation, the Company has
also co-founded the ICE Advisory Council comprising over 70 companies that
provide input and feedback to the Authoring Group during the creation of the
protocol.
Platform Alliances
To ensure that the Company's products are based on industry standards and
take advantage of current and emerging technologies, the Company emphasizes
strategic platform alliances. The benefits of this approach include enabling
the Company to focus on its core competencies, reducing time to market and
simplifying the task of designing and developing applications by both the
Company and its customers. Key strategic platform alliances to date have
included strategic relationships with Sun Microsystems, developer of the Java
language; Oracle and Sybase, providers of industry-standard relational
databases; and Hewlett-Packard, a leading Internet server hardware
manufacturer.
Technology Alliances
To assure that the Company's products are compatible with the latest
technology, the Company has formed technology alliances with many of the
leading technology companies serving the Web. The Company and its partners
exchange marketing and sales information, sales leads, and technology
integration practices. The Company's technology alliance categories include:
e-commerce transactions; ad management; site traffic and management; multi-
lingual site support and translations; personalization; operations management;
security; information architecture and navigation; high value content loading
and maintenance and building online communities.
Design Alliances
Prospective customers of the Company often retain the services of Web design
firms. These companies' primary business is to provide design services rather
than software resale. However, many are regarded as thought leaders in the
field and have influence over technology choices for the customer. The Company
has established relationships with 36 of these design firms.
The Company's strategy is to establish additional design alliances as new
technologies and standards emerge, although no assurance can be given that the
Company will be successful in establishing such alliances.
COMPETITION
The market for IRM products is intensely competitive, subject to rapid
technological change and significantly affected by new product introduction
and other market activities of industry participants. The Company expects
competition to persist and intensify in the future. The Company has three
primary sources of competition: in-house development efforts by potential
clients or partners; other vendors of software that directly address IRM, such
as BroadVision; and developers of point solution software that address only
certain technology components of IRM (e.g., content management), such as Inso
Corporation.
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Many of the Company's competitors have longer operating histories and
significantly greater financial, technical, marketing and other resources than
the Company and thus may be able to respond more quickly to new or changing
opportunities, technologies and customer requirements. Also, many current and
potential competitors have wider name recognition and more extensive customer
bases that could be leveraged, thereby gaining market share to the Company's
detriment. Such competitors may be able to undertake more extensive
promotional activities, adopt more aggressive pricing policies, and offer more
attractive terms to purchasers than the Company. In addition, current and
potential competitors have established or may establish cooperative
relationships among themselves or with third parties to enhance their
products. Accordingly, it is possible that new competitors or alliances among
competitors may emerge and rapidly acquire significant market share.
Such competition could materially and adversely affect the Company's ability
to obtain revenues from license fees from new or existing customers and
professional service fee revenues from existing customers on terms favorable
to the Company. Further, competitive pressures may require the Company to
reduce the price of its software. In either case, the Company's business,
operating results and financial condition would be materially and adversely
affected. There can be no assurance that the Company will be able to compete
successfully with existing or new competitors or that competition will not
have a material adverse effect on the Company's business, financial condition
and operating results. See "Risk Factors--Our Market is Highly Competitive."
PROPRIETARY RIGHTS AND LICENSING
The Company's success and ability to compete is dependent on its ability to
develop and maintain the proprietary aspects of its technology and operate
without infringing on the proprietary rights of others. The Company relies on
a combination of patent, trademark, trade secret, and copyright law and
contractual restrictions to protect the proprietary aspects of its technology.
These legal protections afford only limited protection for its technology. The
Company presently owns one patent and has a single patent application and nine
trademark applications pending in the United States. The Company seeks to
protect its source code for its software, documentation and other written
materials under trade secret and copyright laws. The Company licenses its
software pursuant to signed license or "shrinkwrap" agreements, which impose
certain restrictions on the licensee's ability to utilize the software.
Finally, the Company seeks to avoid disclosure of its intellectual property by
requiring employees and consultants with access to the Company's proprietary
information to execute confidentiality agreements with the Company and by
restricting access to the Company source code. Due to rapid technological
change, the Company believes that factors such as the technological and
creative skills of its personnel, new product developments and enhancements to
existing products are more important than the various legal protections of its
technology to establishing and maintaining a technology leadership position.
Despite the Company's efforts to protect its proprietary rights,
unauthorized parties may attempt to copy aspects of the Company's products or
to obtain and use information that the Company regards as proprietary.
Policing unauthorized use of the Company's products is difficult and while the
Company is unable to determine the extent to which piracy of its software
exists, software piracy can be expected to be a persistent problem. Litigation
may be necessary in the future to enforce the Company's intellectual property
rights, to protect the Company's trade secrets, to determine the validity and
scope of the proprietary rights of others or to defend against claims of
infringement or invalidity. However, the laws of many countries do not protect
the Company's proprietary rights to as great an extent as do the laws of the
United States. Any such resulting litigation could result in substantial costs
and diversion of resources and could have a material adverse effect on the
Company's business, operating results and financial condition. There can be no
assurance that the Company's means of protecting its proprietary rights will
be adequate or that the Company's competitors will not independently develop
similar technology. Any failure by the Company to meaningfully protect its
property could have a material adverse effect on the Company's business,
operating results and financial condition.
To date, the Company has not been notified that its products infringe the
proprietary rights of third parties, but there can be no assurance that third
parties will not claim infringement by the Company with respect to the
Company's current or future products. The Company expects that developers of
Web-based commerce software
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products will increasingly be subject to infringement claims as the number of
products and competitors in the Company's industry segment grows and as the
functionality of products in different segments of the software industry
increasingly overlaps. Any such claims, with or without merit, could be time-
consuming to defend, result in costly litigation, divert management's
attention and resources, cause product shipment delays or require the Company
to enter into royalty or licensing agreements. Such royalty or licensing
agreements, if required, may not be available on terms acceptable to the
Company or at all. A successful claim of product infringement against the
Company and the failure or inability of the Company to license the infringed
technology or develop or license technology with comparable functionality
could have a material adverse effect on the Company's business, financial
condition and operating results. See "Risk Factors--Limited Protection of
Proprietary Technology; Risks of Infringement."
The Company integrates third-party software into its products. This third-
party software may not continue to be available on commercially reasonable
terms. For instance, the Company licenses GroupLens Express from Net
Perceptions for certain personalization functionality in StoryServer. The
agreement expires in October 1999, but it is renewed automatically unless
either party gives 60 days notice prior to the renewal date. If the Company
cannot maintain licenses to key third-party software, such as GroupLens
Express, shipments of its products could be delayed until equivalent software
could be developed or licensed and integrated into its products, which could
materially adversely affect its business, operating results and financial
condition.
EMPLOYEES
As of September 30, 1998, the Company had a total of 219 employees. Of the
total employees, 69 were in engineering, 72 in sales and marketing, 48 in
professional services and 30 in finance and administration. The Company's
future success will depend in part on its ability to attract, retain and
motivate highly qualified technical and management personnel, for whom
competition is intense. From time to time the Company also employs independent
contractors to support its professional services, product development, sales,
marketing and business development organizations. The Company's employees are
not represented by any collective bargaining unit, and the Company has never
experienced a work stoppage. The Company believes its relations with its
employees are good.
PROPERTIES
The Company's headquarters are currently located in a leased facility in
Austin, Texas, consisting of approximately 25,000 square feet of office space,
substantially all of which is under a three-year lease expiring December 31,
2000. The Company has an additional facility in Austin, Texas, of
approximately 12,000 square feet which is under a six-month sub-lease expiring
in December 1998. The Company is relocating and consolidating its operations
in December 1998 to a new facility in Austin, Texas. The new facility consists
of approximately 79,000 square feet under a five-year lease with expansion
options. The Company also has leased offices for sales and support personnel
in Atlanta, Georgia; Boston, Massachusetts; Chicago, Illinois; Dallas, Texas;
Newport Beach, California; New York, New York; San Mateo, California;
Valencia, California; and Sydney, Australia.
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding the executive
officers and directors of the Company as of November 30, 1998.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Gregory A. Peters....... 38 Chief Executive Officer, President, and Director
Ross B. Garber.......... 32 Co-founder, Chairman of the Board and Director
Neil Webber............. 36 Co-founder, Chief Technology Officer and Director
Sherry A. Atherton...... 39 Vice President, Engineering and Customer Support
Pany Christoforou....... 41 Vice President, Europe
William R. Daniel....... 42 Vice President, Business Development
Bradley V. Husick....... 34 Vice President, Global Network Development
Peter T. Klante......... 35 Vice President, Marketing
Jack F. Lynch........... 37 Vice President, Finance and Operations and Secretary
Philip C. Powers........ 39 Vice President, Professional Services
Michael J. Vollman...... 41 Vice President, North American Sales and Professional Services
Robert E. Davoli(2)..... 50 Director
Steven G.
Papermaster(1)......... 40 Director
John D. Thornton(1)(2).. 33 Director
</TABLE>
- --------
(1) Member of Audit Committee
(2) Member of Compensation Committee
Gregory A. Peters has served as Chief Executive Officer, President, and
director of the Company since June 1998. From October 1997 to May 1998, Mr.
Peters served as Chief Executive Officer and President of Logic Works, Inc., a
software company. Mr. Peters joined Logic Works as Chief Financial Officer and
Executive Vice President, Finance and Operations in August 1996 and was named
Acting President and Chief Executive Officer in April 1997. From April 1994 to
August 1996, Mr. Peters served as Chief Financial Officer, Treasurer and
Senior Vice President, and from 1992 to March 1994, as Controller and
Treasurer, at Micrografx, Inc., a Windows-based graphics software company.
From 1990 to 1992, Mr. Peters held various financial positions at DSC
Communications Corporation, a telecommunications company. Mr. Peters is a
Certified Public Accountant and received his Bachelor of Arts degree in
Business Administration from Rhodes College in Memphis, Tennessee.
Ross B. Garber co-founded the Company in December 1995 and has served as a
director since that time. From December 1995 to June 1998, he served as Chief
Executive Officer and President of the Company. Since June 1998, Mr. Garber
has served as Chairman of the Board. From July 1994 to December 1995, Mr.
Garber served as Director of Worldwide Channel Sales with DAZEL Corporation, a
client/server software company. From 1990 to July 1994, he served as Director
of Business Development with Epoch Systems, a client/server software company.
He received a Bachelor of Arts degree in Finance from the University of
Massachusetts, Amherst.
Neil Webber co-founded the Company in December 1995 and has served as a
director since that time. He has served as the Company's Chief Technology
Officer since February 1997, served as Vice President, Development of the
Company from December 1995 to February 1997 and served as Secretary of the
Company from December 1995 to September 1998. Previously, Mr. Webber served as
Chief Architect at DAZEL Corporation, a client/server software company, from
January 1995 to October 1995. From November 1993 to January 1995, he served as
a System Architect at IBM. Prior to that, Mr. Webber held various positions at
Epoch Systems, a client/server software company, from March 1987 to November
1993. Mr. Webber received a Bachelor of Science degree in Computer Science and
Engineering from Massachusetts Institute of Technology.
44
<PAGE>
Sherry A. Atherton has served as Vice President, Engineering and Customer
Support of the Company since February 1997. From June 1995 to February 1997,
Ms. Atherton managed the enterprise engineering, program management, and
technical publications groups at Documentum, Inc., a document management
company. From May 1992 to June 1995, she held several management positions in
engineering at Sybase, Inc., a database company. Ms. Atherton received a
Honours Bachelor of Mathematics degree from the University of Waterloo.
Pany Christoforou is an employee of Protege Software Limited ("Protege")
and, pursuant to the Company's agreement with Protege, has served as the
Company's Vice President, Europe since January 1998 when Vignette opened its
European operation. From September 1997 to December 1997, he served as
European General manager for Webline Communications Corp., a developer of
solutions for customer interaction organizations. From December 1992 to August
1997, he served as U.K. General Manager for Neuron Data, a supplier of
business rules automation software. Prior to that time, Mr. Christoforou spent
four years as salesman and divisional manager at Ingres, a database company.
He received a Bachelor of Science degree in Mathematics from Hatfield
Polytechnic.
William R. Daniel has served as Vice President, Business Development of the
Company since November 1998. From August 1995 to May 1998, Mr. Daniel served
as President, Chief Operating Officer, and was a co-founder of Wallop
Software, Inc., a provider of web application development and assembly
solutions. From June 1988 until July 1995, he served as Chief Operating
Officer and Senior Vice President with Datis Corporation (acquired by HCIA,
Inc. in 1995), a healthcare information provider. Mr. Daniel received a
Bachelor of Arts degree in Engineering Sciences with honors from Dartmouth
College and a Masters of Business Administration degree in finance with honors
from the Haas School of Business at the University of California, Berkeley.
Bradley V. Husick has served as Vice President, Global Network Development
since November 1998 and served as Vice President, Business Development of the
Company from June 1997 to November 1998. Before joining Vignette, Mr. Husick
was a co-founder of NetGravity, Inc., an Internet ad management software
provider. From September 1995 to November 1996, he served as Vice President of
Marketing and Business Development for NetGravity. From April 1993 to August
1995, Mr. Husick served as Vice President of Marketing for Clement Mok
Designs, an interactive design firm, where he also served as Director of
Marketing for CMCD, Inc., a CD-ROM publishing company affiliated with Clement
Mok Designs. From May 1991 to March 1993, Mr. Husick served as Group Product
Manager for Macromedia, a multimedia software company. Mr. Husick received a
Bachelor of Science in Astrophysics with honors from Rice University and a
Master of Business Administration with honors from Columbia University.
Peter T. Klante has served as Vice President, Marketing of the Company since
May 1998. From May 1996 to April 1998, Mr. Klante served as Vice President of
Worldwide Marketing for Fulcrum Technologies, a provider of knowledge
management and information retrieval solutions. From March 1994 to April 1996,
he was at Lotus Development where he served as the senior director of the
Notes Product Group and prior to that as the Marketing Director for the Notes
Companion Products. From January 1993 to February 1994, Mr. Klante served as
Vice President of the Client/Server Business Unit for Cognos, Inc., an
application development and business intelligence software company. Mr. Klante
received a Bachelor of Mathematics degree from the University of Waterloo.
Jack F. Lynch has served as Vice President, Operations of the Company since
July 1997 and Vice President, Finance and Operations and Secretary since
September 1998. From March 1993 to July 1997, Mr. Lynch served as Controller
of Trilogy Software, Inc., a sales force automation software company. In
addition, Mr. Lynch previously served in various financial capacities with
Legent Corporation (formerly Goal Systems, Inc.), a systems software company,
Litel Telecommunications and Andersen Consulting, and is a veteran of the
United States Marine Corps. He received a Bachelor in Science in Accounting
and Business Administration from the University of Kansas and a Masters of
Business Administration from Ohio State University.
Philip C. Powers has served as Vice President, Professional Services of the
Company since August 1998. From February 1997 to August 1998 he served as Vice
President, Worldwide Professional Services at Tivoli Systems, Inc., a
client/server software company. From January 1981 to February 1997 he held
several
45
<PAGE>
management roles at IBM which most recently included Director of Worldwide
Channel Marketing for IBM's software group and Director of Worldwide
Marketing, LAN systems for IBM's personal software products division. Mr.
Powers received a Bachelor of Arts in Marketing and Business Management from
the University of Dayton.
Michael J. Vollman has served as Vice President, North American Operations
of the Company since April 1998 and Vice President, North American Sales and
Professional Services since September 1998. From February 1997 to January
1998, Mr. Vollman served as Practice Director within the Central Region
Consulting Business for Oracle Corporation, an enterprise database company.
From June 1985 to January 1997, he served in various account leadership and
business development roles for Electronic Data Systems, an information
technology services company. He received a Bachelor of Science degree in
Computer Science from Lawrence Technological University and a Master of
Business Administration in Marketing from the University of Michigan.
Robert E. Davoli has served as a director of the Company since February
1996. Mr. Davoli has served as General Partner of Sigma Partners, a venture
capital firm since 1995. He served as President and Chief Executive Officer of
Epoch Systems, a client-server software company, from February 1993 to
September 1994. From May 1986 through June 1992, Mr. Davoli was the President
and Chief Executive Officer of SQL Solutions, a relational database management
systems consulting and tools company that he founded and sold to Sybase, Inc.
in January 1990. He is a director of Internet Security Systems, Inc., a
network security software company, which is publicly held, and he serves as a
director of several privately held companies. Mr. Davoli received a Bachelor
of Arts in History from Ricker College.
Steven G. Papermaster has served as a director of the Company since
September 1998. Mr. Papermaster has served as the Chairman of Powershift
Group, a technology venture development group, since 1996. Mr. Papermaster was
the Founder, Chairman and Chief Executive Officer of BSG Corporation, a system
integration company, from 1987 to 1996. Mr. Papermaster also founded
Enterprise Technology Institute in 1990. He received his Bachelor of Arts in
Finance from the University of Texas at Austin.
John D. Thornton has served as a director of the Company since February
1996. Mr. Thornton is a General Partner of Austin Ventures, a venture capital
firm, where he has been employed since 1991. Mr. Thornton serves as a director
of several privately held companies. He joined Austin Ventures from McKinsey &
Co., where he served clients in the U.S. and Europe. He received a Bachelor of
Arts with honors from Trinity University and a Master of Business
Administration from the Stanford Graduate School of Business.
BOARD OF DIRECTORS
The Company currently has authorized seven directors. Upon the completion of
the offering, the terms of the office of the Board of Directors will be
divided into three classes: Class I, whose term will expire at the annual
meeting of the stockholders to be held in 1999; Class II, whose term will
expire at the annual meeting of stockholders to be held in 2000; and Class
III, whose term will expire at the annual meeting of the stockholders to be
held in 2001. The Class I directors are Ross B. Garber and Steven G.
Papermaster, the Class II directors are Neil Webber and Robert E. Davoli, and
the Class III directors are Gregory A. Peters and John D. Thornton. At each
annual meeting of stockholders after the initial classification, the
successors to directors whose term will then expire will be elected to serve
from the time of election and qualification until the third annual meeting
following election. This classification of the Board of Directors may have the
effect of delaying or preventing changes in control or management of the
Company. Each officer serves at the discretion of the Board of Directors.
There are no family relationships among any of the directors or officers of
the Company.
Board Committees. The Audit Committee consists of Mr. Thornton and Mr.
Papermaster. The Audit Committee makes recommendations to the Board of
Directors regarding the selection of independent accountants, reviews the
results and scope of audit and other services provided by the Company's
independent accountants and reviews and evaluates the Company's audit and
control functions. The Compensation Committee consists of Mr. Davoli and Mr.
Thornton. The Compensation Committee makes recommendations regarding the
Company's stock plans and makes decisions concerning salaries and incentive
compensation for the Company's employees.
46
<PAGE>
Director Compensation. Directors currently do not receive any cash
compensation from the Company for their services as members of the Board of
Directors, although members are reimbursed for actual and reasonable out of
pocket expenses in connection with attendance at Board of Directors and
Committee meetings. Directors are eligible to participate in the Company's
stock plans, and beginning in 1998, employee directors will also be able to
participate in the Company's 1998 Equity Incentive Plan and non-employee
directors will receive periodic option grants under the Company's 1998 Non-
Employee Director Stock Option Plan. In August 1998, Mr. Papermaster was
granted an option to purchase 25,000 shares of the Company's Common Stock at
an exercise price of $9.50 per share subject to a four year vesting schedule
in connection with his appointment to the Board. See "--Employee Benefit
Plans."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation Committee is currently or has been,
at any time since the formation of the Company, an officer or employee of the
Company. No member of the Compensation Committee of the Company serves as a
member of the Board of Directors or compensation committee of any entity that
has one or more executive officers serving as a member of the Company's Board
or Compensation Committee.
EXECUTIVE COMPENSATION
The following table sets forth information with respect to compensation for
the fiscal year ended December 31, 1997 paid by the Company for services to
the Company by the Company's Chief Executive Officer and the Company's four
other highest-paid executive officers whose total salary and bonus for such
fiscal year exceeded $100,000 plus one additional officer who ceased to be an
officer in 1997 and whose total salary and bonus for such fiscal year exceeded
$100,000 (collectively, the "Named Executive Officers"):
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
--------------------
ANNUAL COMPENSATION AWARDS
-------------------- --------------------
NUMBER OF SECURITIES OTHER
SALARY BONUS UNDERLYING OPTIONS COMPENSATION(5)
---------- --------- -------------------- ---------------
<S> <C> <C> <C> <C>
Ross B. Garber......... $ 127,083 $ 80,000 0 $ 227
Chairman of the
Board(1)
Neil Webber............ 118,161 48,625 0 251
Chief Technology Offi-
cer
Sherry A. Atherton..... 109,963 49,531 70,820 13,373
Vice President,
Engineering and
Customer Support
Bradley V. Husick(2)... 72,115 40,105 118,007 126
Vice President, Busi-
ness Development
Janice Ryan(3)......... 121,193 74,219 70,820 306
Former Vice President,
Sales
Jeffry Erramouspe(4)... 106,507 45,636 98,050 8,244
Former Vice President,
Marketing
</TABLE>
- --------
(1) Mr. Garber served as Chief Executive Officer of the Company until June
1998. Mr. Peters became President and Chief Executive Officer effective
June 1998 at an annual salary of $175,000.
(2) Mr. Husick's employment commenced on June 2, 1997 at an annual base
salary of $125,000.
(3) Ms. Ryan's employment with the Company ended on August 31, 1998.
(4) Mr. Erramouspe's employment with the Company ended on November 7, 1997.
(5) Includes cost of term life insurance and relocation expenses. The amount
for Ms. Atherton includes $13,143 in relocation expenses and the amount
for Mr. Erramouspe includes $8,002 in relocation expenses.
47
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options during the fiscal
year ended December 31, 1997 to each of the Named Executive Officers. No stock
appreciation rights were granted during such fiscal year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES PERCENT OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OPTION TERM (4)
OPTIONS TO EMPLOYEES IN PRICE (3) EXPIRATION ---------------------
GRANTED (1) FISCAL 1997 (2) ($/SHARE) DATE 5% 10%
----------- ---------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ross B. Garber.......... 0 -- -- -- -- --
Neil Webber............. 0 -- -- -- -- --
Sherry A. Atherton...... 70,820 5.6% $0.24 3/24/05 $ 8,115 $ 19,437
Bradley V. Husick....... 102,087 8.0 0.42 7/7/05 20,472 49,033
15,920 1.3 0.42 10/9/05 3,192 7,646
Janice Ryan............. 70,820 5.6 0.24 3/24/05 8,115 19,437
Jeffry Erramouspe....... 98,050 7.7 0.17 1/22/05 7,958 19,062
</TABLE>
- --------
(1) Each of the options listed in the table is immediately exercisable. The
shares purchasable thereunder are subject to repurchase by the Company at
the original exercise price paid per share upon the optionee's cessation
of service prior to vesting in such shares. The repurchase right lapses
and the optionee vests as to 25% of the option shares upon completion of
one year of service from the date of grant and the balance in a series of
equal quarterly installments over the next three years of service
thereafter. The option shares will vest upon an acquisition of the Company
by merger or asset sale, unless the Company's repurchase right with
respect to the unvested option shares is transferred to the acquiring
entity. The option shares will also vest should the optionee's employment
or service be involuntarily terminated within 18 months following an
acquisition of the Company by merger or asset sale. Each of the options
has an eight year term, subject to earlier termination in the event of the
optionee's cessation of service with the Company.
(2) Based on an aggregate of 1,268,352 options granted to employees of the
Company under the 1995 Stock Option/Stock Issuance Plan during the 12
months ended December 31, 1997.
(3) The exercise price was equal to the fair market value of the Company's
Common Stock as valued by the Board of Directors on the date of grant. The
exercise price may be paid in cash, in shares of the Company's Common
Stock valued at fair market value on the exercise date or through a
cashless exercise procedure involving a same-day sale of the purchased
shares. The Company may also finance the option exercise by lending the
optionee sufficient funds to pay the exercise price for the purchased
shares, together with any federal and state income tax liability incurred
by the optionee in connection with such exercise.
(4) The potential realizable value is calculated based on the term of the
option at the time of grant (eight years). Stock price appreciation of 5%
and 10% is assumed pursuant to rules promulgated by the Securities and
Exchange Commission and does not represent the Company's prediction of its
stock price performance. The potential realizable values at 5% and 10%
appreciation are calculated by assuming that the exercise price on the
date of grant appreciates at the indicated rate for the entire term of the
option and that the option is exercised at the exercise price and sold on
the last day of its term at the appreciated price.
In addition to the options listed in the table, stock options were granted
in 1998 to certain of the Named Executive Officers and to other executive
officers under the Company's 1995 Stock Option/Stock Issuance Plan for the
following number of shares and at the exercise prices indicated: Mr. Peters,
593,845 shares at $2.09 per share; Ms. Atherton, 34,180 shares at $0.42 per
share; Mr. Garber, 103,600 shares at $0.42 per share; Mr. Klante, 105,105
shares at $0.42 per share; Mr. Lynch, 42,324 shares at $0.42 per share; Mr.
Vollman, 105,105 shares at $0.42 per share, 35,035 shares at $0.42 per share,
and 30,401 shares at $7.00 per share; and Mr. Webber, 25,000 shares at $0.42
per share. Each of the options is immediately exercisable. The shares
purchasable thereunder are subject to repurchase by the Company at the
original exercise price paid per share upon the optionee's cessation of
service prior to vesting in such shares. The repurchase right lapses as to 25%
of the shares upon completion
48
<PAGE>
of one year of service from the grant date and the balance in a series of
equal quarterly installments over the next three years of service thereafter.
OPTION VALUES
The following table sets forth for each of the Named Executive Officers
options exercised and the number and value of securities underlying
unexercised options that are held by the Named Executive Officers as of
December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-
NUMBER OF UNEXERCISED OPTIONS AT MONEY OPTIONS AT
SHARES DECEMBER 31, 1997(2) DECEMBER 31, 1997(3)
ACQUIRED VALUE ------------------------ ----------------------
NAME ON EXERCISE REALIZED (1) VESTED UNVESTED VESTED UNVESTED
- ---- ----------- ------------ ------ ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Ross B. Garber.......... 0 -- 410,640 389,360 $ 167,336 $ 158,664
Neil Webber............. 0 -- 410,640 389,360 167,336 158,664
Sherry A. Atherton...... 0 -- 0 70,820 0 12,748
Bradley V. Husick....... 0 -- 9,442 108,565 0 0
Janice Ryan............. 0 -- 0 70,820 0 12,748
Jeffry Erramouspe....... 20,000 $5,000 20,000 0 0 0
</TABLE>
- --------
(1) Equal to the fair market value of the purchased shares on the option
exercise date, less the exercise price paid for such shares.
(2) The options are immediately exercisable for all the option shares, but any
shares purchased under those options will be subject to repurchase by the
Company, at the original exercise price paid per share, upon the
optionee's cessation of service with the Company, prior to the vesting in
such shares. The heading "Vested" refers to shares no longer subject to
repurchase; the heading "Unvested" refers to shares subject to repurchase
as of December 31, 1997.
(3) Based on the fair market value of the Company's Common Stock at the end of
1997 ($.42 per share), less the exercise price payable for such shares.
CHANGE OF CONTROL ARRANGEMENTS
The Compensation Committee of the Board of Directors, as Plan Administrator
of the 1998 Equity Incentive Plan, has the authority to provide for
accelerated vesting of the shares of Common Stock subject to outstanding
options held by the Named Executive Officers and any other executive officer
or director in connection with certain changes in control of the Company or
the subsequent termination of the officer's employment following the change in
control event. Except for Greg Peters, none of the Named Executive Officers
have employment agreements with the Company, and their employment may be
terminated at any time. The Company has entered into an agreement with Mr.
Peters, the Company's President and Chief Executive Officer, dated April 30,
1998, which provides for a severance payment in the amount of six months of
base salary in the event that Mr. Peters' employment is involuntarily
terminated without cause and a severance payment equal to one year of base
salary plus target bonus in the event that Mr. Peters' employment is
involuntarily terminated without cause following certain changes in control of
the Company. The letter agreement also provides for acceleration of vesting of
option shares as if Mr. Peters remained employed for two additional years in
the event that his employment is involuntarily terminated following certain
changes in control of the Company. However, if a change in control occurs
after the offering at a price per share higher than the price for the
offering, then Mr. Peters will fully vest in his option shares.
EXECUTIVE BONUS PLAN
The Company has adopted a bonus program pursuant to which selected officers
and other full-time employees are eligible for annual cash bonuses based upon
a combination of the Company achieving specified objects and the employee
meeting specified individual performance objectives.
EMPLOYEE BENEFIT PLANS
1998 Equity Incentive Plan
The Company's 1998 Equity Incentive Plan (the "Equity Plan") was adopted by
the Board on September 9, 1998, subject to stockholder approval. The number of
shares of Common Stock reserved for issuance under
49
<PAGE>
the Equity Plan is equal to 1,000,000 shares plus the aggregate number of
shares remaining available for grant under the Company's 1995 Stock
Option/Stock Issuance Plan (the "Predecessor Plan"), plus an additional number
of shares equal to the number of shares reserved for issuance against options
outstanding under the Predecessor Plan as of the date of the Offering. As of
January 1 of each year, commencing with the year 1999, the number of shares
reserved for issuance under the Equity Plan will be increased automatically by
the lesser of (i) 5% of the total number of shares of Common Stock then
outstanding or (ii) 1,000,000 shares. As of September 30, 1998, no options had
been granted under the Equity Plan. Under the Equity Plan, employees, non-
employee members of the Board ("Outside Directors") and consultants may be
awarded options to purchase shares of Common Stock, stock appreciation rights
("SARs"), restricted shares or stock units (collectively, the "Awards").
Options may be incentive stock options designed to satisfy Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code") or nonstatutory stock
options not designed to meet such requirements. If restricted shares or shares
issued upon the exercise of options granted under this Plan or the Predecessor
Plan are forfeited, then such shares will again become available for awards
under the Equity Plan. If stock units, options or SARs granted under the
Equity Plan or the Predecessor Plan are forfeited or terminate for any other
reason before being exercised, then the corresponding shares will again become
available for awards under the Equity Plan.
The Equity Plan is administered by the Company's Compensation Committee (the
"Committee"). The Committee has the complete discretion to determine which
eligible individuals are to receive any award, determine the type, number,
vesting requirements and other features and conditions of such award,
interpret the Equity Plan and make all other decisions relating to the
operation of the Equity Plan.
The exercise price for non-qualified and incentive stock options granted
under the Equity Plan may not be less than 85% or 100%, respectively, of the
fair market value of the Common Stock on the option grant date and may be paid
in cash or in outstanding shares of Common Stock. Options may also be
exercised by using a cashless exercise method, a pledge of shares to a broker
or promissory note. The payment for the award of newly issued restricted
shares will be made in cash, by promissory note or the rendering of past or
future services.
The Committee has the authority to modify, extend or assume outstanding
options and SARs or may accept the cancellation of outstanding options or SARs
in return for the grant of new options or SARs for the same or a different
number of shares and at the same or a different exercise price.
Upon a Change in Control, an Award will become fully exercisable as to all
shares subject to such Award if such Award is not assumed by the surviving
corporation or its parent and the surviving corporation or its parent does not
substitute such Award with another award of substantially the same terms. In
the event of an involuntary termination of service within 18 months following
a Change in Control, the vesting of an Award will accelerate in full.
A Change in Control includes (i) a merger or consolidation of the Company
after which the Company's then current stockholders own less than 50% of the
surviving corporation, (ii) sale of all or substantially all of the assets of
the Company, (iii) a proxy contest that results in replacement of more than
one-third of the directors over a 24-month period or (iv) acquisition of 50%
or more of the Company's outstanding stock by a person other than a trustee of
any of the Company's employee benefit plans or a corporation owned by the
stockholders of the Company in substantially the same proportions as their
stock ownership in the Company. In the event of a merger or other
reorganization, outstanding options, SARs, restricted shares and stock units
will be subject to the agreement of merger or reorganization, which may
provide for the assumption of outstanding Awards by the surviving corporation
or its parent, for their continuation by the Company (if the Company is a
surviving corporation), for accelerated vesting and accelerated expiration,
for settlement in cash followed by cancellation of the outstanding Awards.
The Board may amend or terminate the Equity Plan at any time. Amendments may
be subject to stockholder approval to the extent required by applicable laws.
The Equity Plan will continue in effect unless otherwise terminated by the
Board.
50
<PAGE>
Employee Stock Purchase Plan
The Board adopted the Company's Employee Stock Purchase Plan (the "Purchase
Plan") on September 9, 1998, subject to stockholder approval. A total of
750,000 shares of Common Stock have been reserved for issuance under the
Purchase Plan. As of January 1 each year, the number of shares reserved for
issuance under the Purchase Plan will be increased automatically by the lesser
of (i) 2% of the total number of shares of Common Stock outstanding or (ii)
750,000 shares. The Purchase Plan is intended to qualify under Section 423 of
the Code. Each calendar year, two overlapping offering periods each with a
duration of 24 months will commence on May 1 and November 1 (except that the
first offering period will commence on the effective date of the offering and
end on April 30, 2000). Each offering period contains four six-month
accumulation periods, with purchases occurring at the end of each six-month
accumulation period. However, the initial accumulation period will begin on
the effective date of the offering and end on April 30, 1999. The Purchase
Plan will be administered by the Committee. Each employee will be eligible to
participate after 90 days of employment if he or she is employed by the
Company for at least 20 hours per week and for more than five months per year.
The Purchase Plan permits each eligible employee to purchase Common Stock
through payroll deductions, which may not exceed 15% of an employee's cash
compensation. No more than 2,000 shares may be purchased on any purchase date.
The price of each share of Common Stock purchased under the Purchase Plan will
be 85% of the lower of (i) the fair market value per share of Common Stock on
the date immediately prior to the first date of the applicable offering period
(except that in the case of the first offering period, the price per share
will be the price offered to the public in the offering) or (ii) the fair
market value per share of Common Stock on the date at the end of the
applicable accumulation period. Employees may end their participation in the
Purchase Plan at any time during the accumulation period, and participation
ends automatically upon termination of employment with the Company.
In the event of a Change in Control, all offering periods and accumulation
periods will terminate and each outstanding purchase right will be exercised.
The Board may amend or terminate the Purchase Plan at any time. However, the
Board may not, without stockholder approval, increase the number of shares of
Common Stock reserved for issuance under the Purchase Plan.
1998 Non-Employee Directors Option Plan
The Company's 1998 Non-Employee Directors Option Plan (the "Directors Option
Plan") was adopted by the Board of Directors on September 9, 1998, subject to
approval by the stockholders. Under the Directors Option Plan, non-employee
members of the Board of Directors will be eligible for automatic option
grants.
A maximum of 250,000 shares of Common Stock has been authorized for issuance
under the Directors Option Plan. No shares have been issued under the
Directors Option Plan.
The Directors Option Plan is self-administering but any administrative
determinations will be made by the Compensation Committee of the Board.
The exercise price for options granted under the Directors Option Plan may
be paid in cash or in outstanding shares of Common Stock. Options may also be
exercised on a cashless basis through the same-day sale of the purchased
shares.
Each individual who first joins the Board as a non-employee director on or
after the effective date of the Directors Option Plan and after the date of
this offering, whether through election or appointment, will receive at that
time an automatic option grant for 25,000 shares of Common Stock. In addition,
at each annual stockholders meeting, beginning in 1999, each non-employee
director will automatically be granted at that meeting, whether or not he or
she is standing for re-election at that particular meeting, a stock option to
purchase 2,500 shares of Common Stock. Automatic option grants will become
exercisable for 25% of the shares after one year of Board service and in a
series of equal quarterly installments over the next three years of service
thereafter. Each option will have an exercise price equal to the fair market
value of the Common Stock on the automatic grant date and a maximum term of
ten years, subject to earlier termination following the optionee's cessation
of Board service. However, vesting will automatically accelerate in full upon
a Change in Control.
The Board may amend or modify the Directors Option Plan at any time. The
Directors Option Plan will terminate on September 8, 2008, unless sooner
terminated by the Board.
51
<PAGE>
CERTAIN TRANSACTIONS
TRANSACTIONS WITH DIRECTORS AND OFFICERS
In February 1996, the Company sold 400,000 shares of Series A Preferred
Stock to the following stockholders for $1.00 per share:
<TABLE>
<S> <C>
Austin Ventures IV-A, L.P. ..................................... 80,697.5
Austin Ventures IV-B, L.P. ..................................... 169,302.5
Sigma Partners III, L.P. ....................................... 125,250
Sigma Associates III, L.P. ..................................... 22,800
Sigma Investors III, L.P. ...................................... 1,950
---------
Total......................................................... 400,000
=========
</TABLE>
In February, June and July 1996, the Company sold an aggregate of 1,853,182
shares of Series B Preferred Stock to the following stockholders for $1.65 per
share:
<TABLE>
<S> <C>
Austin Ventures IV-A, L.P. ..................................... 302,249
Austin Ventures IV-B, L.P. ..................................... 634,115
Sigma Partners III, L.P. ....................................... 503,841
Sigma Associates III, L.P. ..................................... 92,054
Sigma Investors III, L.P. ...................................... 10,923
CNET, Inc. ..................................................... 310,000
---------
Total......................................................... 1,853,182
=========
</TABLE>
In July 1996, the Company sold 1,865,000 shares of Series C Preferred Stock,
to CNET, Inc. ("CNET") in exchange for certain intellectual property rights as
set forth in the Stock Purchase Agreement dated July 19, 1996. In connection
with the sale the Company entered into the Prism Development and Marketing
Agreement (the "Prism Agreement") with CNET dated July 19, 1996 whereby CNET
licensed certain intellectual property rights surrounding its "Prism"
technology. Pursuant to the Prism Agreement, the Company agreed to license
certain of the Company's products royalty free on a limited number of CNET Web
sites and both parties agreed to share in product enhancements. Pursuant to
the Amended and Restated Stockholders' Agreement, dated as of July 19, 1996,
Halsey M. Minor became a director of the Company. Mr. Minor resigned from the
Company's Board of Directors in September 1998. Mr. Minor currently serves as
Chairman and Chief Executive Officer of CNET, Inc.
In June and July 1997, the Company sold 837,265 shares and 40,496 shares,
respectively, of Series E Preferred Stock, to the following stockholders for
$4.24 per share:
<TABLE>
<S> <C>
Austin Ventures IV-A, L.P......................................... 143,570
Austin Ventures IV-B, L.P. ....................................... 301,207
Sigma Partners III, L.P. ......................................... 339,590
Sigma Associates III, L.P. ....................................... 84,042
Sigma Investors III, L.P. ........................................ 9,352
-------
Total........................................................... 877,761
=======
</TABLE>
On April 21, 1998, the Company loaned $58,858.80 to Michael J. Vollman, Vice
President, North American Operations in connection with Mr. Vollman's exercise
of an option to purchase 140,140 shares of Common Stock. Mr. Vollman issued a
promissory note to the Company bearing interest at the rate of 5.70% per
annum, which note is secured by a pledge of the shares acquired and is payable
in full by April 21, 1999. On April 24, 1998, the Company loaned Mr. Vollman
$60,000 for the purchase of Mr. Vollman's residence in the Austin area. Mr.
Vollman issued a promissory note to the Company bearing interest at the rate
of 5.70% per annum, which
52
<PAGE>
note is payable in full by December 31, 1998. The largest aggregate amount of
indebtedness outstanding and the amount outstanding on November 30, 1998 under
each loan was approximately $50,450 and $60,910, respectively.
In April 1998, the Company sold 167,144 shares of Series F Preferred Stock
to the following stockholders for $10.47 per share:
<TABLE>
<S> <C>
Austin Ventures IV-A, L.P......................................... 30,830
Austin Ventures IV-B, L.P. ....................................... 64,681
Sigma Partners III, L.P. ......................................... 56,182
Sigma Associates III, L.P. ....................................... 13,904
Sigma Investors III, L.P. ........................................ 1,547
-------
Total........................................................... 167,144
=======
</TABLE>
Pursuant to the Stockholders' Agreement, dated as of February 5, 1996, John
D. Thornton and Robert E. Davoli became directors of the Company. Mr. Thornton
is a General Partner of AV Partners IV, L.P., which is the General Partner of
Austin Ventures IV-A, L.P. and Austin Ventures IV-B, L.P. Mr. Davoli is a
General Partner of Sigma Management III, L.P., which is the General Partner of
Sigma Partners III, L.P., Sigma Associates III, L.P. and Sigma Investors III,
L.P. In addition, pursuant to the Stockholder's Agreement dated April 22,
1998, the holders of Series F Preferred Stock and certain holders of Series E
Preferred Stock have a right to purchase up to 10% of the shares of common
stock in this offering subject to certain limitations. On September 25, 1998
Messrs. Thornton and Davoli each were granted an option to purchase 25,000
shares of the Company's Common Stock at an exercise price of $12.50 per share
subject to a four year vesting schedule in connection with their service as
members of the Board. See "Principal and Selling Stockholders" for more
information regarding securities held by these purchasers.
In August 1998, CNET and the Company amended the Prism Agreement to provide
that CNET's and NBC Multimedia's jointly owned subsidiary, Snap! LLC, may use
an undefined number of copies of StoryServer for (i) Snap!'s Internet sites
accessible through www.snap.com and (ii) for certain Snap! LLC co-branded
sites. Such amendment also provides that if CNET no longer holds a 50% or more
ownership interest in Snap! LLC, any subsequent copies installed and used
after that time must be purchased from the Company. In consideration, CNET
assigned to the Company all rights and title to and interest in U.S. Patent
No. 5,740,430, issued on April 14, 1998, "Method and apparatus for server-
independent caching of dynamically-generated customized pages," and provided
$100,000 of advertising on CNET's Web site for the Company's use.
In August 1998, Mr. Papermaster, a director of the Company, was granted an
option to purchase 25,000 shares of the Company's Common Stock at an exercise
price of $9.50 per share subject to a four year vesting schedule in connection
with his appointment to the Board. See "Management--Employee Benefit Plans."
INDEMNIFICATION
The Company's Certificate of Incorporation limits the liability of its
directors for monetary damages arising from a breach of their fiduciary duty
as directors, except to the extent otherwise required by the Delaware General
Corporation Law. Such limitation of liability does not affect the availability
of equitable remedies such as injunctive relief or rescission.
The Company's Bylaws provide that the Company shall indemnify its directors
and officers to the fullest extent permitted by Delaware law, including in
circumstances in which indemnification is otherwise discretionary under
Delaware law. The Company has also entered into indemnification agreements
with its officers and directors containing provisions that may require the
Company, among other things, to indemnify such officers and directors against
certain liabilities that may arise by reason of their status or service as
directors or officers
53
<PAGE>
(other than liabilities arising from willful misconduct of a culpable nature),
to advance their expenses incurred as a result of any proceeding against them
as to which they could be indemnified, and to obtain directors' and officers'
insurance if available on reasonable terms.
The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions, including loans between
the Company and its officers, directors, principal stockholders and their
affiliates will be approved by a majority of the Board of Directors, including
a majority of the independent and disinterested outside directors on the Board
of Directors, and will continue to be on terms no less favorable to the
Company than could be obtained from unaffiliated third parties.
PROTEGE SOFTWARE PROFESSIONAL SERVICES AGREEMENT
In November 1997, the Company and Protege Software (Holdings) Limited
("Protege") entered into a professional services agreement (the "Professional
Services Agreement") under which Protege agreed to perform certain
professional services for the Company's European subsidiary, Vignette Europe
Ltd. ("Vignette Europe"). Protege provides Vignette Europe with its back-
office and administrative functions such as payroll, invoicing and accounting.
In addition, Protege provides general consulting services to Vignette Europe.
These services include assisting Vignette Europe with the development of its
business plans, implementation of its marketing strategy, localization of its
products and organization of training courses and seminars regarding the
Company's products. The Professional Services Agreement expires on December
31, 1998, and is automatically renewable for successive 12-month periods. It
may be terminated by either party, without cause, on three months' written
notice. Protege is in the business of providing similar services to technology
companies seeking to establish European operations.
Under the terms of the Professional Services Agreement, the Company agreed
to pay Protege, in addition to its costs of providing the services, management
fees for the operations of Vignette Europe. Protege is entitled, at its
option, to convert up to 55% of a portion of the management fees into fully
paid voting stock of the Company at a price of $10.25 per share.
Pany Christouforou, an employee of Protege, has served as the Company's Vice
President, Europe pursuant to the Professional Services Agreement since
January 1998.
54
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information known to the Company
regarding beneficial ownership of its Common Stock as of November 30, 1998,
and as adjusted to reflect the sale of shares offered hereby and the
conversion of all outstanding shares of Preferred Stock into shares of Common
Stock, by (i) each person who is known by the Company to own beneficially more
than five percent of the Company's Common Stock, (ii) each of the Company's
directors, (iii) each of the Company's executive officers and (iv) all current
executive officers and directors as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE NUMBER OF OWNED AFTER
THE OFFERING SHARES THE OFFERING (2)
NAME AND ADDRESS OF --------------------- BEING ------------------------
BENEFICIAL OWNER(1) NUMBER PERCENT (3) OFFERED NUMBER PERCENT (3)
------------------- --------- ----------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
Funds affiliated with
Austin Ventures(4) .... 2,132,574 18.58% %
114 West Seventh Street
1300 Norwood Tower
Austin, TX 78701
Sigma Entities(5) ...... 1,261,435 10.99
2884 Sand Hill Road,
Suite 121
Menlo Park, CA 94025
CNET, Inc. ............. 1,176,186 10.25
150 Chestnut Street
San Francisco, CA 94111
Adobe Ventures II, L.P.
....................... 567,209 4.94
One Bush Street
San Francisco, CA 94104
Charles River
Entities(6)............ 898,569 7.83
1000 Winter Street,
Suite 3300
Waltham, MA 02154
Gregory A. Peters(7).... 603,396 5.00
Ross B. Garber(8)....... 816,497 7.11
Neil Webber(9).......... 807,000 7.02
Sherry A. Atherton...... 107,005 *
Pany Christoforou(10)... 20,000 *
William R. Daniel(11)... 90,000 *
Bradley V. Husick....... 119,186 1.04
Peter T. Klante......... 105,105 *
Jack F. Lynch........... 96,226 *
Philip C. Powers(12).... 70,000 *
Michael J. Vollman(13).. 170,541 1.48
Robert E. Davoli(5)..... 1,286,435 11.19
Steven G.
Papermaster(14)........ 25,000 *
John D. Thornton(4)..... 2,157,574 18.76
All directors and
executive officers as a
group (13 persons)(15). 6,473,965 52.29%
</TABLE>
- --------
* Represents beneficial ownership of less than 1% of the outstanding shares
of Common Stock.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment
power with respect to securities. Unless otherwise indicated, the address
for each listed stockholder is: c/o Vignette Corporation, 901 South MoPac
Expressway, Austin, Texas 78746. To the Company's knowledge, except as
indicated in the footnotes to this table and pursuant to applicable
community property laws, the persons named in the table have sole voting
and investment power with respect to all shares of Common Stock.
55
<PAGE>
(2) Assumes no exercise of the Underwriters' over-allotment option. See
"Underwriters."
(3) Percentage of beneficial ownership is based on 11,476,133 shares of
Common Stock outstanding as of November 30, 1998 (assuming conversion of
all outstanding shares of Preferred Stock into Common Stock), and
shares of Common Stock outstanding after the completion of this offering.
The number of shares of Common Stock beneficially owned includes the
shares issuable pursuant to stock options that are exercisable within 60
days of November 30, 1998. Shares issuable pursuant to stock options are
deemed outstanding for computing the percentage of the person holding
such options but are not outstanding for computing the percentage of any
other person. The number of shares of Common Stock outstanding after this
offering includes shares of Common Stock being offered for sale by
the Company in this offering.
(4) Includes 577,385.5 shares held by Austin Ventures IV-A, L.P. and
1,211,348.5 shares held by Austin Ventures IV-B, L.P. Also includes
327,466 shares held by Austin Ventures V, L.P. and 16,374 shares held by
Austin Ventures V Affiliates Fund, L.P. Mr. Thornton, a director of the
Company, is a General Partner of AV Partners IV, L.P., which is the
general partner of Austin Ventures IV-A, L.P. and Austin Ventures IV-B,
L.P., and is a General Partner of AV Partners V, L.P., which is the
general partner of Austin Ventures V, L.P. and Austin Ventures V
Affiliates Fund, L.P. Mr. Thornton disclaims beneficial ownership of the
shares held by Austin Ventures IV-A, L.P., Austin Ventures IV-B, L.P.,
Austin Ventures V, L.P. and Austin Ventures V Affiliates Fund, L.P.
except to the extent of his pecuniary interest therein arising from his
partnership interest in AV Partners IV, L.P. or AV Partners V, L.P., as
the case may be. Amount shown for Mr. Thornton includes options
immediately exercisable for 25,000 shares.
(5) Includes 1,024,863 shares held by Sigma Partners III, L.P., 212,800
shares held by Sigma Associates III, L.P. and 23,772 shares held by Sigma
Investors III, L.P. Mr. Davoli, a director of the Company, is a General
Partner of Sigma Management III, L.P., which is the general partner of
Sigma Partners III, L.P., Sigma Associates III, L.P. and Sigma Investors
III, L.P. Mr. Davoli disclaims beneficial ownership of the shares held by
Sigma Partners III, L.P., Sigma Associates III, L.P. and Sigma Investors
III, L.P. except to the extent of his pecuniary interest therein arising
from his general partnership interest in Sigma Partners. Amount shown for
Mr. Davoli includes options immediately exercisable for 25,000 shares.
(6) Includes 801,329 shares held by Charles River Partnership VIII, a limited
partnership and 1,729 shares held by Charles River VIII-A LLC.
(7) Includes options immediately exercisable for 593,845 shares.
(8) Includes 23,810 shares owned by Hailey Garber and 23,810 shares owned by
Harrison Garber.
(9) Includes options immediately exercisable for 25,000 shares.
(10) Includes options immediately exercisable for 20,000 shares.
(11) Includes options immediately exercisable for 90,000 shares.
(12) Includes options immediately exercisable for 70,000 shares.
(13) Includes options immediately exercisable for 30,401 shares.
(14) Includes options immediately exercisable for 25,000 shares.
(15) Includes options immediately exercisable for 904,246 shares of Common
Stock.
56
<PAGE>
DESCRIPTION OF CAPITAL STOCK
On the closing of this offering, the authorized capital stock of the Company
will consist of 80,000,000 shares of Common Stock, $0.01 par value, and
10,000,000 shares of Preferred Stock, $0.01 par value.
COMMON STOCK
As of November 30, 1998, there were 2,856,745 shares of Common Stock
outstanding that were held of record by approximately 150 stockholders. There
will be shares of Common Stock outstanding (assuming no exercise of the
Underwriters' over-allotment option and assuming no exercise after November
30, 1998 of outstanding options) after giving effect to the sale of the shares
of Common Stock to the public offered hereby and the conversion of the
Company's Preferred Stock into Common Stock at a one-to-one ratio. The holders
of Common Stock are entitled to one vote per share on all matters to be voted
on by the stockholders. Subject to preferences that may be applicable to any
outstanding Preferred Stock, the holders of Common Stock are entitled to
receive ratably such dividends, if any, as may be declared from time to time
by the Board of Directors out of funds legally available therefor. See
"Dividend Policy." In the event of the liquidation, dissolution, or winding up
of the Company, the holders of Common Stock are entitled to share ratably in
all assets remaining after payment of liabilities, subject to prior
distribution rights of Preferred Stock, if any, then outstanding. The Common
Stock has no preemptive or conversion rights or other subscription rights.
There are no redemption or sinking fund provisions applicable to the Common
Stock. All outstanding shares of Common Stock are fully paid and
nonassessable, and the shares of Common Stock to be issued on completion of
this offering will be fully paid and nonassessable.
PREFERRED STOCK
On the closing of this offering, 10,000,000 shares of Preferred Stock will
be authorized and no shares will be outstanding. The Board of Directors has
the authority to issue the Preferred Stock in one or more series and to fix
the rights, preferences, privileges and restrictions thereof, including
dividend rights, dividend rates, conversion rights, voting rights, terms of
redemption, redemption prices, liquidation preferences and the number of
shares constituting any series or the designation of such series, without
further vote or action by the stockholders. The issuance of Preferred Stock
may have the effect of delaying, deferring or preventing a change in control
of the Company without further action by the stockholders and may adversely
affect the voting and other rights of the holders of Common Stock. The
issuance of Preferred Stock with voting and conversion rights may adversely
affect the voting power of the holders of Common Stock, including the loss of
voting control to others. At present, the Company has no plans to issue any of
the Preferred Stock.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION,
BYLAWS AND DELAWARE LAW
Certificate of Incorporation and Bylaws
The Company's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") to be effective on the closing of this
offering provides that the Board of Directors will be divided into three
classes of directors, with each class serving a staggered three-year term. The
classification system of electing directors may tend to discourage a third
party from making a tender offer or otherwise attempting to obtain control of
the Company and may maintain the incumbency of the Board of Directors, as the
classification of the Board of Directors generally increases the difficulty of
replacing a majority of the directors. The Certificate of Incorporation also
provides that, effective on the closing of this offering, all stockholder
actions must be effected at a duly called meeting and not by a consent in
writing. Further, provisions of the Bylaws and the Certificate of
Incorporation provide that the stockholders may amend the Bylaws or certain
provisions of the Certificate of Incorporation only with the affirmative vote
of 75% of the Company's capital stock. These provisions of the Certificate of
Incorporation and Bylaws could discourage potential acquisition proposals and
could delay or prevent a change in control of the Company. These provisions
are intended to enhance the likelihood of continuity and stability in the
composition of the Board of Directors and in the policies formulated by the
Board of Directors and to discourage certain types of transactions that may
involve an actual or threatened change of control of the Company. These
provisions are designed to reduce the vulnerability of the Company to an
unsolicited acquisition proposal. The provisions also are intended to
discourage certain tactics that may be used
57
<PAGE>
in proxy fights. However, such provisions could have the effect of
discouraging others from making tender offers for the Company's shares and, as
a consequence, they also may inhibit fluctuations in the market price of the
Company's shares that could result from actual or rumored takeover attempts.
Such provisions also may have the effect of preventing changes in the
management of the Company. See "Risk Factors--Anti-Takeover Provisions."
Delaware Takeover Statute
The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203"), which, subject to certain exceptions, prohibits a
Delaware corporation from engaging in any business combination with any
interested stockholder for a period of three years following the date that
such stockholder became an interested stockholder, unless: (i) prior to such
date, the board of directors of the corporation approved either the business
combination or the transaction that resulted in the stockholder becoming an
interested stockholder; (ii) on consummation of the transaction that resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned (x) by persons
who are directors and also officers and (y) by employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer; or (iii) on or subsequent to such date, the business
combination is approved by the board of directors and authorized at an annual
or special meeting of stockholders, and not by written consent, by the
affirmative vote of at least 66 2/3% of the outstanding voting stock that is
not owned by the interested stockholder.
Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii)
any sale, transfer, pledge or other disposition of 10% or more of the assets
of the corporation involving the interested stockholder; (iii) subject to
certain exceptions, any transaction that results in the issuance or transfer
by the corporation of any stock of the corporation to the interested
stockholder; (iv) any transaction involving the corporation that has the
effect of increasing the proportionate share of the stock of any class or
series of the corporation beneficially owned by the interested stockholder; or
(v) the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation. In general, Section 203 defines an interested
stockholder as any entity or person beneficially owning 15% or more of the
outstanding voting stock of the corporation and any entity or person
affiliated with or controlling or controlled by such entity or person.
REGISTRATION RIGHTS
After this offering, the holders of approximately 10,115,500 shares of
Common Stock and rights to acquire Common Stock will be entitled to certain
rights with respect to the registration of such shares under the Securities
Act. Under the terms of the agreement between the Company and the holders of
such registrable securities, if the Company proposes to register any of its
securities under the Securities Act, either for its own account or for the
account of other security holders exercising registration rights, such holders
are entitled to notice of such registration and are entitled to include shares
of such Common Stock therein. Additionally, such holders are also entitled to
certain demand registration rights pursuant to which they may require the
Company on up to four occasions to file a registration statement under the
Securities Act at its expense with respect to their shares of Common Stock,
and the Company is required to use its best efforts to effect such
registration. Further, holders may require the Company to file an unlimited
number of additional registration statements on Form S-3 at the Company's
expense. All of these registration rights are subject to certain conditions
and limitations, among them the right of the underwriters of an offering to
limit the number of shares included in such registration and the right of the
Company not to effect a requested registration within six months following an
offering of the Company's securities, including the offering made hereby. In
addition, the holders of registration rights have agreed not to exercise such
rights for at least 180 days after the offering without the prior written
consent of Morgan Stanley & Co. Incorporated.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is ChaseMellon
Shareholder Services, L.L.C., and its telephone number is (214) 965-2235.
58
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
On completion of this offering, the Company will have shares of Common
Stock outstanding. Of this amount, the shares offered hereby will be
available for immediate sale in the public market as of the date of this
Prospectus. Approximately 9,043,000 additional shares will be available for
sale in the public market following the expiration of 180-day lockup
agreements with the Representatives of the Underwriters or the Company,
subject in some cases to compliance with the volume and other limitations of
Rule 144.
<TABLE>
<CAPTION>
DAYS AFTER DATE OF APPROXIMATE SHARES
THIS PROSPECTUS ELIGIBLE FOR FUTURE SALE COMMENT
------------------ ------------------------ -------
<S> <C> <C>
On Effectiveness........ Freely tradable shares sold in offering and shares
salable under Rule 144(k) that are not subject to
180-day lockup
180 days................ 9,043,000 Lockup released; shares salable under Rule 144,
144(k) or 701
Thereafter.............. 2,433,000 Restricted securities held for one year or less
</TABLE>
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned shares for at least
one year is entitled to sell within any three-month period commencing 90 days
after the date of this Prospectus a number of shares that does not exceed the
greater of (i) 1% of the then outstanding shares of Common Stock
(approximately shares immediately after the offering) or (ii) the average
weekly trading volume during the four calendar weeks preceding such sale,
subject to the filing of a Form 144 with respect to such sale. A person (or
persons whose shares are aggregated) who is not deemed to have been an
affiliate of the Company at any time during the 90 days immediately preceding
the sale who has beneficially owned his or her shares for at least two years
is entitled to sell such shares pursuant to Rule 144(k) without regard to the
limitations described above. Persons deemed to be affiliates must always sell
pursuant to Rule 144, even after the applicable holding periods have been
satisfied.
The Company is unable to estimate the number of shares that will be sold
under Rule 144, since this will depend on the market price for the Common
Stock of the Company, the personal circumstances of the sellers and other
factors. Prior to this offering, there has been no public market for the
Common Stock, and there can be no assurance that a significant public market
for the Common Stock will develop or be sustained after the offering. Any
future sale of substantial amounts of the Common Stock in the open market may
adversely affect the market price of the Common Stock offered hereby.
The Company, its directors, executive officers, stockholders with
registration rights and certain other stockholders have agreed pursuant to the
Underwriting Agreement and other agreements that they will not sell any Common
Stock without the prior consent of Morgan Stanley & Co. Incorporated for a
period of 180 days from the date of this Prospectus (the "180-day Lockup
Period"), except that the Company may, without such consent, grant options and
sell shares pursuant to the Company's stock plans.
Any employee or consultant to the Company who purchased his or her shares
pursuant to a written compensatory plan or contract is entitled to rely on the
resale provisions of Rule 701, which permits nonaffiliates to sell their Rule
701 shares without having to comply with the public information, holding
period, volume limitation or notice provisions of Rule 144 and permits
affiliates to sell their Rule 701 shares without having to comply with the
Rule 144 holding period restrictions, in each case commencing 90 days after
the date of this Prospectus. As of the date of this Prospectus, the holders of
options exercisable into approximately 2,255,062 shares of Common Stock will
be eligible to sell their shares on the expiration of the 180-day Lockup
Period, or subject in certain cases to vesting of such options.
The Company intends to file a registration statement on Form S-8 under the
Securities Act to register shares of Common Stock issued or reserved for
issuance under the Company's stock plans within 180 days after the date of
this Prospectus, thus permitting the resale of such shares by nonaffiliates in
the public market without restriction under the Securities Act. The Company
intends to register these shares on Form S-8, along with options that have not
been issued under the Company's stock plans as of the date of this Prospectus.
59
<PAGE>
In addition, after this offering, the holders of approximately 10,511,500
shares of Common Stock will be entitled to certain rights with respect to
registration of such shares under the Securities Act. Registration of such
shares under the Securities Act would result in such shares becoming freely
tradable without restriction under the Securities Act (except for shares
purchased by affiliates of the Company) immediately on the effectiveness of
such registration. See "Description of Capital Stock--Registration Rights."
60
<PAGE>
UNDERWRITERS
Under the terms and subject to the conditions contained in the Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), the
underwriters named below, for whom Morgan Stanley & Co. Incorporated,
Hambrecht & Quist LLC and Dain Rauscher Wessels, a division of Dain Rauscher
Incorporated ("Dain Rauscher Wessels") are acting as representatives, have
severally agreed to purchase, and the Company and the selling stockholders
have agreed to sell to them an aggregate of shares of Common Stock. The
number of shares of Common Stock that each underwriter has agreed to purchase
is set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated..................................
Hambrecht & Quist LLC..............................................
Dain Rauscher Wessels..............................................
---
Total............................................................
===
</TABLE>
The underwriters are offering the shares subject to their acceptance of the
shares from the Company and the selling stockholders and subject to prior
sale. The Underwriting Agreement provides that the obligations of the several
underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The underwriters are obligated to
take and pay for all of the shares of Common Stock offered hereby (other than
those covered by the over-allotment option described below) if any such shares
are taken.
The underwriters initially propose to offer part of the shares of Common
Stock directly to the public at the public offering price set forth on the
cover page hereof and part to certain dealers at a price that represents a
concession not in excess of $ a share under the public offering price. Any
underwriters may allow, and such dealers may reallow, a concession not in
excess of $ a share to other underwriters or to certain other dealers.
After the initial offering of the shares of Common Stock, the offering price
and other selling terms may from time to time be varied by the representatives
of the underwriters.
Pursuant to the underwriting agreement, the Company has granted to the
underwriters an option, exercisable for 30 days from the date of this
prospectus, to purchase up to an aggregate of additional shares of Common
Stock at the public offering price set forth on the cover page hereof, less
underwriting discounts and commissions. The underwriters may exercise such
option solely for the purpose of covering over-allotments, if any, made in
connection with the offering of the shares of Common Stock offered hereby. To
the extent such option is exercised, each underwriter will become obligated,
subject to certain conditions, to purchase approximately the same percentage
of such additional shares of Common Stock as the number set forth next to such
underwriter's name in the preceding table bears to the total number of shares
of Common Stock set forth next to the names of all underwriters in the
preceding table. If the underwriter's over-allotment option is exercised in
full, the total price to public would be $ , the total underwriters'
discounts and commissions would be $ , and the total proceeds to the Company
would be $ .
At the request of the Company, the underwriters have reserved up to
shares of Common Stock to be issued by the Company and offered hereby for
sale, at the public offering price, to directors, officers, employees,
business associates and related persons of the Company. The number of shares
of Common Stock available for sale to the general public will be reduced to
the extent such individuals purchase such reserved
61
<PAGE>
shares. Any reserved shares which are not so purchased will be offered by the
underwriters to the general public on the same basis as the other shares
offered hereby.
Each of the Company, and the directors, officers and certain other
stockholders of the Company has agreed that, without the prior written consent
of Morgan Stanley & Co. Incorporated on behalf of the underwriters, during the
period ending 180 days after the date of this prospectus, it will not,
directly or indirectly (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, lend or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock
(whether such shares or any such securities are then owned by such person or
are thereafter acquired directly from the Company), or (ii) enter into any
swap or other arrangement that transfers to another, in whole or in part, any
of the economic consequences of ownership of Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The
restrictions described in this paragraph do not apply to (a) the sale to the
underwriters of the shares of Common Stock under the underwriting agreement,
(b) the issuance by the Company of shares of Common Stock upon the exercise of
an option or a warrant or the conversion of a security outstanding on the date
of this prospectus of which the underwriters have been advised in writing, (c)
transactions by any person other than the Company relating to shares of Common
Stock or other securities acquired in open market transactions after the
completion of the offering of the shares of Common Stock or (d) issuances of
shares of Common Stock or options to purchase shares of Common Stock pursuant
to the Company's employee benefit plans as in existence on the date of the
Prospectus and consistent with past practices.
The underwriters have informed the Company that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
Common Stock offered by them.
The Company has submitted an application to have its Common Stock approved
for quotation on the Nasdaq National Market under the symbol "VIGN."
In order to facilitate the offering of the Common Stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the underwriters may over-allot in
connection with the offering, creating a short position in the Common Stock
for their own account. In addition, to cover over-allotments or to stabilize
the price of the Common Stock, the underwriters may bid for, and purchase,
shares of Common Stock in the open market. Finally, the underwriting syndicate
may reclaim selling concessions allowed to an underwriter or a dealer for
distributing the Common Stock in the offering if the syndicate repurchases
previously distributed shares of Common Stock in transactions to cover
syndicate short positions, in stabilization transactions or otherwise. Any of
these activities may stabilize or maintain the market price of the Common
Stock above independent market levels. The underwriters are not required to
engage in these activities and may end any of these activities at any time.
The Company, the selling stockholders and the underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.
In April 1998, the Company sold shares of its Series F Preferred Stock in a
private placement. In this private placement, Hambrecht & Quist California
purchased 42,980 shares of Series F Preferred Stock, which are convertible
into 42,980 shares of Common Stock, for approximately $450,000 and H&Q
Vignette Investors L.P. purchased 100,287 shares of Series F Preferred Stock,
which are convertible into 100,287 shares of Common Stock, for approximately
$1.1 million. Hambrecht & Quist California and H&Q Vignette Investors, L.P.
purchased these shares on the same terms as the other investors in the private
placement. Hambrecht & Quist LLC, one of the underwriters in this offering, is
wholly owned by Hambrecht & Quist California. H&Q Vignette Investors, L.P. is
a California limited partnership with two general partners. One of the general
partners is a wholly owned subsidiary of Hambrecht & Quist California and the
other is a limited liability company of which two of the three members are
employees of Hambrecht & Quist LLC. In addition, approximately half of the
limited partners of H&Q Vignette Investors, L.P. are employees of Hambrecht &
Quist LLC or directors of Hambrecht & Quist Group, the parent corporation of
Hambrecht & Quist California.
62
<PAGE>
In November 1998, the Company sold shares of its Series H Preferred Stock in
a private placement. In this private placement, Morgan Stanley Dean Witter
Equity Funding, Inc. ("MSDW Equity Funding") purchased 91,856 shares of Series
H Preferred Stock, which are convertible into 91,856 shares of Common Stock
(subject to adjustment), for approximately $1,500,000. MSDW Equity Funding
purchased these shares on the same terms as the other investors in the private
placement. Morgan Stanley & Co. Incorporated, one of the underwriters in this
offering, and MSDW Equity Funding are both wholly owned subsidiaries of Morgan
Stanley Dean Witter & Co.
PRICING OF THE OFFERING
Prior to this offering, there has been no public market for the shares of
Common Stock. Consequently, the public offering price for the shares of Common
Stock will be determined by negotiations between the Company, the selling
stockholders and the representatives of the underwriters. Among the factors to
be considered in determining the public offering price will be the Company's
record of operations, the Company's current financial position and future
prospects, the experience of its management, the general condition of the
equity securities markets, sales, earnings and certain other financial and
operating information of the Company in recent periods, the price-earnings
ratios, price-sales ratios, market prices of securities and certain financial
and operating information of companies engaged in activities similar to those
of the Company. The estimated public offering price range set forth on the
cover page of this prospectus is subject to change as a result of market
conditions and other factors.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed on for the
Company by Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP,
Austin, Texas. Certain legal matters in connection with the offering will be
passed on for the Underwriters by Davis Polk & Wardwell, New York, New York.
EXPERTS
Ernst & Young LLP, independent auditors, have audited the Company's
consolidated financial statements for the years ended December 31, 1996 and
1997, as set forth in their report, which is included in this Prospectus. The
Company's consolidated financial statements are included in this Prospectus in
reliance on their report, given on their authority as experts in accounting
and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1
under the Securities Act with respect to the Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules to the Registration
Statement. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement and the
exhibits and schedules filed as a part of the Registration Statement.
Statements contained in this Prospectus concerning the contents of any
contract or any other document to which this Prospectus refers are not
necessarily complete; in each instance where a copy of such contract or
document has been filed as an exhibit to the Registration Statement, reference
is made to the copy of the contract or document that has been filed. Each such
statement is qualified in all respects by such reference to such exhibit. The
Registration Statement, including exhibits and schedules thereto, may be
inspected without charge at the Commission's principal office in Washington,
D.C., and copies of all or any part thereof may be obtained from such office
after payment of fees prescribed by the Commission. The Commission maintains a
Web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission
at http://www.sec.gov.
The Company intends to provide its stockholders with annual reports
containing consolidated financial statements audited by an independent public
accounting firm and quarterly reports containing unaudited consolidated
financial data for the first three quarters of each year.
The Company's logo and certain titles and logos of the Company's products
mentioned in this Prospectus are either (i) the Company's trademarks or (ii)
trademarks that have been licensed to the Company. Each trademark, trade name
or service mark of any other company appearing in this Prospectus belongs to
its holder.
63
<PAGE>
VIGNETTE CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors......................... F-2
Consolidated Balance Sheets............................................... F-3
Consolidated Statements of Operations..................................... F-4
Consolidated Statements of Changes in Redeemable Convertible Preferred
Stock and Stockholders' Equity (Deficit)................................. F-5
Consolidated Statements of Cash Flows..................................... F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Stockholders
Vignette Corporation
We have audited the accompanying consolidated balance sheets of Vignette
Corporation and Subsidiary as of December 31, 1996 and 1997, the related
consolidated statements of operations, changes in redeemable convertible
preferred stock and stockholders' equity (deficit) 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Vignette
Corporation and Subsidiary at December 31, 1996 and 1997, and the consolidated
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Austin, Texas
March 13, 1998
F-2
<PAGE>
VIGNETTE CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA REDEEMABLE
CONVERTIBLE PREFERRED
STOCK AND
DECEMBER 31, STOCKHOLDERS' EQUITY AT
----------------- SEPTEMBER 30, SEPTEMBER 30, 1998
1996 1997 1998 (NOTE 10)
------- -------- ------------- -----------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents.......... $ 1,863 $ 6,865 $ 12,397
Accounts receivable,
net of allowance of
$-0- in 1996, $37 in
1997, and $151 in
1998................. -- 650 4,983
Note receivable from
employee............. -- -- 89
Prepaid expenses and
other................ 63 196 881
------- -------- --------
Total current
assets............. 1,926 7,711 18,350
Property and equipment:
Equipment............. 44 71 80
Computers and
purchased software... 258 834 1,823
Furniture and
fixtures............. 16 16 16
Leasehold
improvements......... -- 50 --
------- -------- --------
318 971 1,919
Accumulated
depreciation......... (41) (227) (964)
------- -------- --------
277 744 955
Other assets.......... 26 44 142
------- -------- --------
Total assets........ $ 2,229 $ 8,499 $ 19,447
======= ======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Accounts payable...... $ 215 $ 433 $ 879
Accrued expenses...... 86 1,785 6,280
Deferred revenue...... -- 1,163 4,835
Current portion of
capital lease
obligation........... 21 23 13
Current portion of
long-term debt....... 21 24 674
Other current
liabilities.......... -- 28 201
------- -------- --------
Total current
liabilities........ 343 3,456 12,882
Capital lease
obligation, less
current portion........ 30 7 --
Long-term debt, less
current portion........ 168 826 2,013
------- -------- --------
Total liabilities... 541 4,289 14,895
Redeemable Convertible
Preferred Stock........ 3,458 13,458 27,758 $ --
Stockholders' equity
(deficit):
Convertible Preferred
Stock................ 19 19 21 --
Common Stock--$.01 par
value; 16,500,000
shares authorized;
1,715,220 shares in
1996, 1,774,922
shares in 1997,
2,862,078 shares in
1998; 10,960,950
shares on a pro forma
basis (net of
treasury shares of
71,860 in 1997 and
77,820 in 1998 and on
a pro forma basis)
issued and
outstanding.......... 17 18 29 110
Additional paid-in
capital.............. 1,820 1,818 4,707 32,405
Notes receivable for
purchase of Common
Stock................ -- -- (182) (182)
Deferred stock
compensation......... -- -- (382) (382)
Accumulated deficit... (3,626) (11,103) (27,399) (27,399)
------- -------- -------- --------
Total stockholders'
equity (deficit)... (1,770) (9,248) (23,206) $ 4,552
------- -------- -------- ========
Total liabilities
and stockholders'
equity (deficit)... $ 2,229 $ 8,499 $ 19,447
======= ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE>
VIGNETTE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS
DECEMBER 31, ENDED SEPTEMBER 30,
---------------- ---------------------
1996 1997 1997 1998
------- ------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue:
Product license..................... $ -- $ 1,943 $ 1,179 $ 5,152
Services............................ -- 1,081 537 4,359
------- ------- --------- ----------
Total revenue......................... -- 3,024 1,716 9,511
Cost of revenue:
Product license..................... -- 37 24 510
Services............................ -- 1,438 674 5,579
------- ------- --------- ----------
Total cost of revenue................. -- 1,475 698 6,089
------- ------- --------- ----------
Gross profit.......................... -- 1,549 1,018 3,422
Operating expenses:
Research and development............ 892 2,895 1,906 4,840
Sales and marketing................. 428 4,964 2,870 9,398
General and administrative.......... 503 1,333 718 3,451
Write-off of acquired in-process
research and development........... 1,865 -- -- 2,089
Amortization of deferred stock
compensation....................... -- -- -- 142
------- ------- --------- ----------
Total operating expenses.............. 3,688 9,192 5,494 19,920
------- ------- --------- ----------
Loss from operations.................. (3,688) (7,643) (4,476) (16,498)
Other income (expenses):
Interest income..................... 71 245 147 424
Interest expense.................... (9) (47) (30) (128)
Other............................... -- (29) (29) (92)
------- ------- --------- ----------
62 169 88 204
------- ------- --------- ----------
Net loss.............................. $(3,626) $(7,474) $ (4,388) $ (16,294)
======= ======= ========= ==========
Basic net loss per share.............. $(11.33) $ (8.22) $ (4.79) $ (11.74)
======= ======= ========= ==========
Shares used in computing basic net
loss per share....................... 320 909 917 1,388
Pro forma basic net loss per share.... $ (1.19) $ (1.84)
======= ==========
Shares used in computing pro forma
basic net loss per share............. 6,259 8,861
</TABLE>
See accompanying notes.
F-4
<PAGE>
VIGNETTE CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE
CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<S> <C> <C>
<CAPTION>
REDEEMABLE CONVER-
TIBLE PREFERRED STOCK
---------------------
NUMBER OF
SHARES VALUE
---------------------
<S> <C> <C>
Stock options
exercised...... -- $ --
Issuance of
Series A Stock. 400,000 400
Series A
issuance costs. -- --
Issuance of
Series B Stock. 1,853,182 3,058
Series B
issuance costs. -- --
Issuance of
Series C Stock. -- --
Series C
issuance costs. -- --
Stock grants.... -- --
Net loss........ -- --
----------- ---------
Balance at
December 31,
1996........... 2,253,182 3,458
Exercise of
Series D
warrant........ -- --
Issuance of
Series E Stock. 2,358,492 10,000
Series E
issuance costs. -- --
Stock options
exercised...... -- --
Repurchase of
unvested stock. -- --
Compensation
expense from
stock options
granted........ -- --
Net loss........ -- --
Foreign currency
translation
adjustment..... -- --
----------- ---------
Balance at
December 31,
1997........... 4,611,674 13,458
Issuance of
Series F Stock. 1,365,808 14,300
Series F
issuance costs. -- --
Issuance of
Series G Stock. -- --
Series G
issuance costs. -- --
Stock options
exercised...... -- --
Repurchase of
unvested stock. -- --
Deferred stock
compensation
related to
stock options.. -- --
Amortization of
deferred stock
compensation... -- --
Payments
received on
notes
receivable for
purchase of
Common Stock... -- --
Net loss........ -- --
Foreign currency
translation
adjustment,
cumulative
translation
loss of $5 at
September 30,
1998........... -- --
----------- ---------
Balance at
September 30,
1998
(unaudited).... 5,977,482 $27,758
=========== =========
Pro forma
Redeemable
Convertible
Preferred Stock
and
Stockholders'
Equity at
September 30,
1998 (Note 10)
(unaudited).... -- $ --
=========== =========
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STOCKHOLDERS' EQUITY (DEFICIT)
---------------------------------------------------------------------------------------------------
<CAPTION>
CONVERTIBLE NOTES
PREFERRED STOCK COMMON STOCK RECEIVABLE
--------------- ----------------- ADDITIONAL FOR PURCHASE DEFERRED TOTAL
NUMBER OF NUMBER OF PAID- OF COMMON STOCK ACCUMULATED STOCKHOLDERS'
SHARES VALUE SHARES VALUE IN CAPITAL STOCK COMPENSATION DEFICIT EQUITY (DEFICIT)
--------- ----- ----------- ----- ---------- ------------ ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock options
exercised...... -- $ -- 1,715,120 $ 17 $ 19 $ -- $ -- $ -- $ 36
Issuance of
Series A Stock. -- -- -- -- -- -- -- -- --
Series A
issuance costs. -- -- -- -- (18) -- -- -- (18)
Issuance of
Series B Stock. -- -- -- -- -- -- -- -- --
Series B
issuance costs. -- -- -- -- (2) -- -- -- (2)
Issuance of
Series C Stock. 1,865,000 19 -- -- 1,846 -- -- -- 1,865
Series C
issuance costs. -- -- -- -- (25) -- -- -- (25)
Stock grants.... -- -- 100 -- -- -- -- -- --
Net loss........ -- -- -- -- -- -- -- (3,626) (3,626)
--------- ----- ----------- ----- ---------- ------------ ------------ ----------- ----------------
Balance at
December 31,
1996........... 1,865,000 19 1,715,220 17 1,820 -- -- (3,626) (1,770)
Exercise of
Series D
warrant........ 65,368 -- -- -- 107 -- -- -- 107
Issuance of
Series E Stock. -- -- -- -- -- -- -- -- --
Series E
issuance costs. -- -- -- -- (126) -- -- -- (126)
Stock options
exercised...... -- -- 131,562 1 23 -- -- -- 24
Repurchase of
unvested stock. -- -- (71,860) -- (11) -- -- -- (11)
Compensation
expense from
stock options
granted........ -- -- -- -- 5 -- -- -- 5
Net loss........ -- -- -- -- -- -- -- (7,474) (7,474)
Foreign currency
translation
adjustment..... -- -- -- -- -- -- -- (3) (3)
--------- ----- ----------- ----- ---------- ------------ ------------ ----------- ----------------
Balance at
December 31,
1997........... 1,930,368 19 1,774,922 18 1,818 -- -- (11,103) (9,248)
Issuance of
Series F Stock. -- -- -- -- -- -- -- -- --
Series F
issuance costs. -- -- -- -- (54) -- -- -- (54)
Issuance of
Series G Stock. 191,022 2 -- -- 1,998 -- -- -- 2,000
Series G
issuance costs. -- -- -- -- (14) -- -- -- (14)
Stock options
exercised...... -- -- 1,093,116 11 436 (192) -- -- 255
Repurchase of
unvested stock. -- -- (5,960) -- (1) -- -- -- (1)
Deferred stock
compensation
related to
stock options.. -- -- -- -- 524 -- (524) -- --
Amortization of
deferred stock
compensation... -- -- -- -- -- -- 142 -- 142
Payments
received on
notes
receivable for
purchase of
Common Stock... -- -- -- -- -- 10 -- -- 10
Net loss........ -- -- -- -- -- -- -- (16,294) (16,294)
Foreign currency
translation
adjustment,
cumulative
translation
loss of $5 at
September 30,
1998........... -- -- -- -- -- -- -- (2) (2)
--------- ----- ----------- ----- ---------- ------------ ------------ ----------- ----------------
Balance at
September 30,
1998
(unaudited).... 2,121,390 $ 21 2,862,078 $ 29 $ 4,707 $(182) $(382) $(27,399) $(23,206)
========= ===== =========== ===== ========== ============ ============ =========== ================
Pro forma
Redeemable
Convertible
Preferred Stock
and
Stockholders'
Equity at
September 30,
1998 (Note 10)
(unaudited).... -- $ -- 10,960,950 $110 $32,405 $(182) $(382) $(27,399) $ 4,552
========= ===== =========== ===== ========== ============ ============ =========== ================
</TABLE>
See accompanying notes.
F-5
<PAGE>
VIGNETTE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
---------------- -----------------
1996 1997 1997 1998
------- ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.................................. $(3,626) $(7,474) $(4,388) $(16,294)
Adjustment to reconcile net loss to cash
used in operating activities:
Depreciation............................ 41 198 122 737
Noncash compensation expense............ -- 5 -- 142
Acquired in-process research and
development............................ 1,865 -- -- 2,000
Loss on disposal of fixed assets........ -- 29 29 101
Changes in operating assets and
liabilities:
Accounts receivable, net.............. -- (650) (735) (4,333)
Note receivable from employee......... -- -- -- (89)
Prepaid expenses and other assets..... (88) (151) (22) (783)
Accounts payable...................... 215 218 (6) 446
Accrued expenses...................... 86 1,700 852 4,495
Deferred revenue...................... -- 1,163 1,147 3,672
Other liabilities..................... -- 28 -- 173
------- ------- ------- --------
Net cash used in operating
activities......................... (1,507) (4,934) (3,001) (9,733)
INVESTING ACTIVITIES
Purchase of property and equipment........ (318) (694) (539) (1,049)
------- ------- ------- --------
Net cash used in investing
activities......................... (318) (694) (539) (1,049)
FINANCING ACTIVITIES
Proceeds from long-term debt and capital
lease obligation......................... 279 701 299 1,837
Payments on long-term debt and capital
lease obligation......................... (40) (62) (30) (17)
Proceeds from issuance of Series A
Convertible Preferred Stock, net......... 382 -- -- --
Proceeds from issuance of Series B
Convertible Preferred Stock, net......... 3,056 -- -- --
Series C Convertible Preferred Stock
issuance costs........................... (25) -- -- --
Proceeds from exercise of Series D
Convertible Preferred Stock warrant...... -- 107 107 --
Proceeds from issuance of Series E
Convertible Preferred Stock, net......... -- 9,874 9,874 --
Proceeds from issuance of Series F
Convertible Preferred Stock, net......... -- -- -- 14,246
Series G Convertible Preferred Stock
issuance cost............................ -- -- -- (14)
Proceeds from issuance of Common Stock.... 16 24 19 265
Payments for repurchase of unvested Common
Stock.................................... -- (11) -- (1)
------- ------- ------- --------
Net cash provided by financing
activities......................... 3,668 10,633 10,269 16,316
Effect of exchange rate changes on cash
and cash equivalents..................... -- (3) -- (2)
------- ------- ------- --------
Net increase in cash and cash equivalents. 1,843 5,002 6,729 5,532
Cash and cash equivalents at beginning of
year or period........................... 20 1,863 1,863 6,865
------- ------- ------- --------
Cash and cash equivalents at end of year
or period................................ $ 1,863 $ 6,865 $ 8,592 $ 12,397
======= ======= ======= ========
Supplemental disclosure of cash flow
information:
Interest paid........................... $ 7 $ 48 $ 29 $ 128
======= ======= ======= ========
Noncash activities:
Convertible Preferred Stock issued to
acquire in-process research and
development............................ $ 1,865 $ -- $ -- $ 2,000
======= ======= ======= ========
</TABLE>
See accompanying notes.
F-6
<PAGE>
VIGNETTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(INFORMATION WITH RESPECT TO THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1998 IS UNAUDITED)
1. BUSINESS
Vignette Corporation (the "Company") is a global provider of Internet
Relationship Management software products and services, a new category of
enterprise solutions designed to enable businesses to build sustainable online
customer relationships, increase returns on their Internet-related investments
and capitalize on Internet business opportunities. The consolidated financial
statements include the accounts of the Company and its wholly-owned foreign
subsidiary. All material intercompany accounts and transactions have been
eliminated in consolidation.
The Company was incorporated in Delaware on December 19, 1995. Operations
for the period from December 19, 1995 to December 31, 1995 were not
significant.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Information
The financial information for the nine months ended September 30, 1997 and
1998 is unaudited but includes all adjustments, consisting only of normal
recurring adjustments, which the Company considers necessary for a fair
presentation of the financial position, operating results and cash flows for
the period. Results for the nine months ended September 30, 1998 are not
necessarily indicative of the results for the entire year.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates, and such
differences could be material to the financial statements.
Revenue Recognition
Revenue from license fees and from sales of software products is recognized
when persuasive evidence of an agreement exists, delivery of the product has
occurred, no significant Company obligations with regard to implementation
remain, the fee is fixed or determinable and collectibility is probable.
Services revenue is primarily comprised of revenue from consulting fees,
maintenance agreements and training. Services revenue from consulting and
training billed on a time and materials basis is recognized as performed.
Services revenue on fixed price service arrangements is recognized upon
completion of specific contractual milestone events, or based on an estimated
percentage of completion as work progresses. Maintenance agreements include
the right to unspecified upgrades on an if-and-when available basis.
Maintenance revenue is deferred and recognized on a straight-line basis as
services revenue over the life of the related agreement, which is typically
one year.
Customer advances and billed amounts due from customers in excess of revenue
recognized are recorded as deferred revenue.
The Company adopted Statement of Position 97-2, Software Revenue Recognition
("SOP 97-2") and Statement of Position 98-4, Deferral of the Effective Date of
a Provision of SOP 97-2, Software Revenue Recognition ("SOP 98-4") as of
January 1, 1998. SOP 97-2 and SOP 98-4 provide guidance for recognizing
revenue on software transactions and supersede SOP 91-1. The adoption of SOP
97-2 and SOP 98-4 did not have a material impact on the Company's financial
results. However, full implementation guidelines for this standard have not
yet been issued. Once available, our current revenue accounting practices may
need to change and such changes could affect our future revenues and earnings.
F-7
<PAGE>
VIGNETTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash Equivalents
Cash equivalents consist primarily of cash deposits and investments with
original maturities of ninety days or less when purchased.
Property and Equipment
Property and equipment are carried at cost less accumulated depreciation.
Depreciation of property and equipment is computed using the straight-line
method over the useful lives of the assets (generally 1.5 to 3 years).
Amortization of assets recorded under capital leases is computed using the
straight-line method over the shorter of the asset's useful life or the term
of the lease and such amortization is included with depreciation expense.
Research and Development
Research and development expenditures are expensed to operations as
incurred. Statement of Financial Accounting Standards No. 86, Accounting for
the Costs of Computer Software to be Sold, Leased or Otherwise Marketed,
requires capitalization of certain software development costs subsequent to
the establishment of technological feasibility. Based on the Company's product
development process, technological feasibility is established upon completion
of a working model. Costs incurred by the Company between completion of the
working model and the point at which the product is ready for general release
have been insignificant. Through September 30, 1998, all software development
costs have been expensed.
Advertising Costs
The Company expenses advertising costs as incurred. These expenses were
approximately $1,000 and $158,000 for the years ended December 31, 1996 and
1997, respectively, and $-0- and $50,000 for the nine months ended September
30, 1997 and 1998, respectively.
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes.
This Statement prescribes the use of the liability method whereby deferred tax
asset and liability account balances 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.
Foreign Currency Transactions
For the Company's foreign subsidiary, the functional currency has been
determined to be the local currency, and therefore, assets and liabilities are
translated at year end or period end exchange rates, and income statement
items are translated at average exchange rates prevailing during the year or
period. Such translation adjustments are recorded in aggregate as a component
of stockholders' equity. Gains and losses from foreign currency denominated
transactions are included in other income (expense) and are not material. No
foreign operations existed for the year ended December 31, 1996 or for nine
months ended September 30, 1997.
Stock-Based Compensation
FASB Statement No. 123, Accounting for Stock-Based Compensation, (SFAS 123)
prescribes accounting and reporting standards for all stock-based compensation
plans, including employee stock options. As allowed by SFAS 123, the Company
has elected to continue to account for its employee stock-based compensation
in accordance with Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees (APB 25).
Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist of short-term investments and trade
receivables. The Company's short-term investments, which are included in cash
F-8
<PAGE>
VIGNETTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
and cash equivalents for reporting purposes, are placed with high credit
quality financial institutions and issuers. The Company performs periodic
credit evaluations of its customers' financial condition and generally does
not require collateral. The following table summarizes the changes in
allowance for doubtful accounts for trade receivables (in thousands):
<TABLE>
<S> <C>
Balance at January 1, 1996......................................... $ --
Additions charged to costs and expenses............................ --
Write-off of uncollectible accounts................................ --
------
Balance at December 31, 1996....................................... --
Additions charged to costs and expenses............................ 92
Write-off of uncollectible accounts................................ (55)
------
Balance at December 31, 1997....................................... 37
Additions charged to costs and expenses............................ 117
Write-off of uncollectible accounts................................ (3)
------
Balance at September 30, 1998 (unaudited).......................... $ 151
======
</TABLE>
Customers A and B accounted for 13% and 11%, respectively, of the Company's
total revenue for the year ended December 31, 1997. No customers accounted for
more than 10% of the Company's total revenue during the nine months ended
September 30, 1998.
Net Loss Per Share
The Company follows the provisions of Statement of Financial Accounting
Standards No. 128, Earnings Per Share (SFAS 128). Basic net loss per share is
computed by dividing net loss available to common stockholders by the weighted
average number of common shares outstanding during the period. Diluted net
loss per share has not been presented as the effect of the assumed exercise of
stock options, warrants and contingently issued shares is antidilutive due to
the Company's net loss.
The Company's historical capital structure is not indicative of its
prospective structure due to the automatic conversion of all shares of
Convertible Preferred Stock and Redeemable Convertible Preferred Stock into
Common Stock concurrent with the closing of the Company's anticipated initial
public offering. Accordingly, a pro forma calculation assuming the conversion
of all outstanding shares as of September 30, 1998 of Convertible Preferred
Stock and Redeemable Convertible Preferred Stock into Common Stock upon the
Company's initial public offering using the if-converted method from their
respective dates of issuance is presented.
The following table presents the calculation of basic and pro forma basic
net loss per share (in thousands, except per share data):
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
---------------- -------------------
1996 1997 1997 1998
------- ------- -------- ---------
<S> <C> <C> <C> <C>
Net loss................................ $(3,626) $(7,474) $ (4,388) $ (16,294)
======= ======= ======== =========
Basic:
Weighted-average shares of common stock
outstanding........................... 1,658 1,766 1,777 2,372
Weighted-average shares of common stock
subject to repurchase................. (1,338) (857) (860) (984)
------- ------- -------- ---------
Shares used in computing basic net loss
per share............................. 320 909 917 1,388
======= ======= ======== =========
Basic net loss per share............... $(11.33) $ (8.22) $ (4.79) $ (11.74)
======= ======= ======== =========
Pro forma:
Shares used above...................... 909 1,388
Pro forma adjustment to reflect
weighted effect of assumed conversion
of convertible preferred stock........ 5,350 7,473
------- ---------
Shares used in computing pro forma
basic net loss per share.............. 6,259 8,861
======= =========
Pro forma basic net loss per share..... $ (1.19) $ (1.84)
======= =========
</TABLE>
F-9
<PAGE>
VIGNETTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Comprehensive Loss
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standard No. 130, Reporting Comprehensive Income. SFAS 130 requires
disclosure of total non-stockholder changes in equity in interim periods and
additional disclosures of the components of non-stockholder changes in equity
on an annual basis. Total comprehensive loss was as follows (in thousands):
<TABLE>
<CAPTION>
NINE
YEAR ENDED MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
---------------- -----------------
1996 1997 1997 1998
------- ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net loss............................... $(3,626) $(7,474) $(4,388) $(16,294)
Foreign currency translation loss...... -- (3) -- (2)
------- ------- ------- --------
Comprehensive loss..................... $(3,626) $(7,477) $(4,388) $(16,296)
======= ======= ======= ========
</TABLE>
Segments
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information (SFAS 131). SFAS 131 is effective for the
year ending December 31, 1998. The Company expects that implementation of this
standard will not have a material effect on its financial disclosures.
Financial Presentation
Certain reclassifications have been made to prior periods' financial
statements to conform to the December 31, 1997 presentation.
3. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Summary of Preferred Stock
As of September 30, 1998, there were 8,500,000 shares authorized to be
designated as Preferred Stock. The seven classes of Preferred Stock designated
as of September 30, 1998 are as follows (258,996 shares remain undesignated):
<TABLE>
<CAPTION>
SHARES ISSUED CONSIDERATION PER
SHARES AND SHARE RECEIVED ON
PAR VALUE DESIGNATED OUTSTANDING ISSUANCE
--------- ---------- ------------- -----------------
<S> <C> <C> <C> <C>
Redeemable Convertible
Preferred Stock:
Series A.............. $.01 407,500 400,000 $ 1.00 cash
Series B.............. $.01 1,853,182 1,853,182 1.65 cash
Series E.............. $.01 2,358,492 2,358,492 4.24 cash
Series F.............. $.01 1,365,808 1,365,808 10.47 cash
--------- ---------
5,984,982 5,977,482
========= =========
Convertible Preferred
Stock:
Series C.............. $.01 1,865,000 1,865,000 $ 1.00 technology
Series D.............. $.01 200,000 65,368 1.65 cash
Series G.............. $.01 191,022 191,022 10.47 technology
--------- ---------
2,256,022 2,121,390
========= =========
</TABLE>
F-10
<PAGE>
VIGNETTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (CONTINUED)
Each holder of Series A, B, E and F Preferred Stock may elect to require the
Company to redeem on or after the dates specified below, and in the amounts
specified below, any such shares which were purchased by the stockholder, net
of any shares previously redeemed, plus any accrued and unpaid dividends:
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
ACQUIRED WHICH MAY REDEMPTION
MANDATORY REDEMPTION DATE BE REDEEMED AMOUNT
------------------------- -------------------- --------------
(IN THOUSANDS)
<S> <C> <C>
April 22, 2005 50% $13,879
April 22, 2006 75% 20,819
April 22, 2007 100% 27,758
</TABLE>
The Company's Preferred Stock has the following characteristics at September
30, 1998:
<TABLE>
<CAPTION>
DESCRIPTION DIVIDEND FEATURES LIQUIDATION PREFERENCE CONVERSION FEATURES REDEMPTION FEATURES
- ----------- ----------------- ---------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Series A Cumulative at an $1.00 per One for one subject $1.00 per share
annual rate of share plus to certain plus accrued and
$.06 per share accrued and antidilution unpaid dividends
beginning unpaid adjustments, as
January 1, 1999 dividends (1) defined
payable upon
liquidation or
conversion
Series B Cumulative at an $1.65 per One for one subject $1.65 per share
annual rate of share plus to certain plus accrued and
$.10 per share accrued and antidilution unpaid dividends
beginning unpaid adjustments, as
January 1, 1999 dividends (1) defined
payable upon
liquidation or
conversion
Series C Cumulative at an $1.00 per One for one subject None
annual rate of share plus to certain
$.06 per share accrued and antidilution
beginning unpaid adjustments, as
January 1, 1999 dividends (1) defined
payable upon
liquidation or
conversion
Series D Non-cumulative $1.65 per One for one subject None
at the same rate share plus to certain
as dividends accrued and antidilution
paid on Common unpaid adjustments, as
Stock payable dividends defined
upon liquidation
or conversion
Series E Cumulative at an $4.24 per One for one subject $4.24 per share
annual rate of share plus to certain plus accrued and
$.254 per share accrued and antidilution unpaid dividends
beginning June unpaid adjustments, as
6, 2000 payable dividends (1) defined
upon liquidation
or conversion
Series F Cumulative at an $10.47 per One for one subject $10.47 per share
annual rate of share plus to certain plus accrued and
$.628 per share accrued and antidilution unpaid dividends
beginning April unpaid adjustments, as
22, 2001 payable dividends (1) defined
upon liquidation
or conversion
Series G Same as Series D $10.47 per One for one subject None
share plus to certain
accrued and antidilution
unpaid adjustments, as
dividends defined
</TABLE>
- --------
(1) In addition to the liquidation preference amount shown, the preferred
stockholder also participates on a pro rata basis with common stockholders
in the liquidation of additional proceeds, if any, as specified by the
preferred stock agreement.
F-11
<PAGE>
VIGNETTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (CONTINUED)
Voting Rights
Each share of Common Stock has one voting right. Each series of Redeemable
Convertible Preferred Stock and Convertible Preferred Stock have voting rights
equal to the number of common shares into which all shares of a particular
series of Preferred Stock could then be converted.
Stock Option/Stock Issuance Plan
The Company has a 1995 Stock Option/Stock Issuance Plan (the "Plan") whereby
employees, members of the Board of Directors, and independent advisors may be
granted options to purchase shares of the Company's Common Stock or may be
issued shares of the Company's Common Stock directly. Options are immediately
exercisable subject to a repurchase agreement. The stock options and the
related exercised stock will generally vest over a four year cumulative
period. The term of each option is no more than ten years from the date of
grant. Options authorized under the Plan were 5,061,000 at September 30, 1998.
Stock issuances may be for purchase or as a bonus for services rendered to the
Company.
Upon certain events, the Company has repurchase rights for unvested shares
equal to the original exercise price. The Company also has the right of first
refusal for any proposed disposition of shares issued under the Plan.
In 1998, the Company recorded total deferred stock compensation of $524,000
in connection with stock options granted during the nine months ended
September 30, 1998. Such amount is being amortized over the vesting periods of
the applicable options, resulting in amortization of $142,000 for the nine
months ended September 30, 1998. These amounts represent the difference
between the exercise price of certain stock option grants and the deemed fair
value of the Company's Common Stock at the time of such grants.
A summary of the Company's stock option activity and related information
through September 30, 1998 follows:
<TABLE>
<CAPTION>
RANGE OF WEIGHTED-
NUMBER OF EXERCISE AVERAGE
SHARES PRICES EXERCISE PRICE
---------- ------------- --------------
<S> <C> <C> <C>
Options outstanding--January 1,
1996.............................. -- $ -- $ --
Granted.......................... 2,002,599 .0125 - .17 .04
Exercised........................ (1,715,120) .0125 - .17 .02
Canceled......................... -- -- --
----------
Options outstanding--December 31,
1996.............................. 287,479 .10 - .17 .16
Granted.......................... 1,268,352 .17 - .42 .32
Exercised........................ (131,562) .17 - .42 .18
Canceled......................... (318,020) .17 - .42 .20
----------
Options outstanding--December 31,
1997.............................. 1,106,249 .10 - .42 .33
Granted.......................... 2,106,206 .42 - 12.50 3.18
Exercised........................ (1,093,116) .17 - 12.50 .42
Canceled......................... (156,945) .17 - 2.09 .40
----------
Options outstanding, September 30,
1998 (unaudited).................. 1,962,394 .10 - 12.50 3.38
==========
Options available for grant at
December 31, 1997................. 2,323,688
==========
Options available for grant at Sep-
tember 30, 1998 (unaudited)....... 158,708
==========
</TABLE>
F-12
<PAGE>
VIGNETTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (CONTINUED)
The following is a summary of options outstanding and exercisable as of
December 31, 1997:
<TABLE>
<CAPTION>
NUMBER OF OPTIONS WEIGHTED-AVERAGE
OUTSTANDING AND EXERCISABLE REMAINING CONTRACTUAL LIFE WEIGHTED-AVERAGE
RANGE OF EXERCISE PRICES AT DECEMBER 31, 1997 (IN YEARS) EXERCISE PRICE
------------------------ --------------------------- -------------------------- ----------------
<S> <C> <C> <C>
$.10
to
$.24 431,461 6.8 $.20
$ .42 674,788 7.6 $.42
---------
1,106,249
=========
</TABLE>
A total of 872,900 shares were unvested at December 31, 1997 and may be
repurchased by the Company should vesting requirements not be fulfilled.
Pro forma information regarding net loss is required by Statement No. 123,
and has been determined as if the Company had accounted for its employee stock
options under the fair value method of that Statement. The fair value for
these options was estimated at the date of grant using a minimum value option
pricing model with the following assumptions:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS
DECEMBER 31, ENDED
--------------- SEPTEMBER 30,
1996 1997 1998
------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Risk-free interest rate....................... 6% 6% 6%
Weighted-average expected life of the options. 4 years 4 years 4 years
Dividend rate................................. 0% 0% 0%
Assumed volatility............................ 0% 0% 0%
Weighted average fair value of options
granted:
Exercise price equal to fair value of stock
on date of grant........................... $.01 $.03 $.04
Exercise price less than fair value of stock
on date of grant........................... -- -- $.66
</TABLE>
For purposes of pro forma disclosure, the estimated fair value of the
options is amortized to expense over the options' vesting period. The
Company's pro forma information follows (in thousands, except per share data):
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
---------------- -------------------
1996 1997 1997 1998
------- ------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Pro forma stock-based compensation
expense............................ $ 1 $ 11 $ 8 $ 51
Pro forma net loss.................. $(3,627) $(7,485) $ (4,396) $ (16,345)
Pro forma basic net loss per share.. -- $ (1.20) -- $ (1.84)
</TABLE>
Warrants
A warrant to purchase 7,500 shares of Series A Preferred Stock at $1.00 per
share was outstanding at September 30, 1998. The warrant is exercisable at any
time before the later to occur of March 2006 or five years after a Qualified
Public Offering, as that term is defined.
A warrant to purchase 65,368 shares of Series D Preferred Stock was granted
to a Board member at $1.65 per share during 1996. The warrant was exercised in
1997.
Reserved Shares of Common Stock
At September 30, 1998, the Company had reserved 8,106,372 shares of its
Common Stock for issuance upon conversion of its various series of Preferred
Stock and exercise of its warrants. At September 30, 1998, another 2,126,302
shares of Common Stock were reserved for issuance under the Company's 1995
Stock Option/Stock Issuance Plan.
F-13
<PAGE>
VIGNETTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------- SEPTEMBER 30,
1996 1997 1998
------ ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Bank line of credit of $3,000--outstanding
principal balance payable in thirty-six
equal monthly installments beginning
December 1998. Line bears interest at prime
+ .75% and is due monthly. ................ $ 189 $ -- $1,500
Bank line of credit of $2,000--outstanding
principal balance payable monthly in
thirty-six equal installments beginning
December 1998. Line bears interest at prime
+ .75% and is due monthly. ................ -- 850 1,187
----- ------- ------
189 850 2,687
Less current portion........................ (21) (24) (674)
----- ------- ------
Long-term portion........................... $ 168 $ 826 $2,013
===== ======= ======
Available for future borrowings............. $2,150 $2,313
======= ======
</TABLE>
The borrowings under the lines of credit are collateralized by all tangible
and intangible property of the Company.
The aggregate maturities of long-term debt at December 31, 1997 are as
follows (in thousands):
<TABLE>
<S> <C>
1998.................................... $ 24
1999.................................... 283
2000.................................... 283
2001.................................... 260
----
$850
====
</TABLE>
5. LEASE COMMITMENTS
The Company has financed the acquisition of certain computers and equipment
through sale-leaseback transactions which are accounted for as financings.
Included in property and equipment at December 31, 1996 and 1997 and at
September 30, 1998 are the following assets held under capital leases (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------- SEPTEMBER 30,
1996 1997 1998
------ ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Property and equipment......................... $ 65 $ 65 $ 65
Less accumulated depreciation.................. (10) (31) (65)
------ ------ -----
$ 55 $ 34 $ --
====== ====== =====
</TABLE>
Future minimum lease payments for assets under capital leases at December
31, 1997 are as follows (in thousands):
<TABLE>
<S> <C>
1998.................................................................. $25
1999.................................................................. 8
---
Total minimum lease payments.......................................... 33
Less amount representing interest..................................... (3)
---
Present value of net minimum lease payments........................... 30
Less current maturities............................................... 23
---
Long-term obligation.................................................. $ 7
===
</TABLE>
F-14
<PAGE>
VIGNETTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. LEASE COMMITMENTS (CONTINUED)
The Company leases its office facilities and office equipment under various
operating lease agreements. Future minimum payments as of December 31, 1997
(which includes commitments for new space for corporate headquarters which is
expected to be occupied in December 1998), under these leases, are as follows
(in thousands):
<TABLE>
<S> <C>
1998.................................. $1,467
1999.................................. 1,781
2000.................................. 1,588
2001.................................. 1,120
2002.................................. 1,171
Thereafter............................ 976
------
$8,103
======
</TABLE>
Rent expense for the years ended December 31, 1996 and 1997 and for the nine
months ended September 30, 1998 was $95,000, $263,000 and $931,000,
respectively.
6. INCOME TAXES
As of December 31, 1997, the Company had net operating loss and research and
development credit carryforwards of approximately $9,770,000 and $92,000,
respectively. The net operating loss and credit carryforwards will expire at
various dates, beginning in 2011, if not utilized.
The Tax Reform Act of 1986 imposes substantial restrictions on the
utilization of net operating losses and tax credits in the event of an
"ownership change" of a corporation. The Company's utilization of the net
operating losses will be subject to a substantial annual limitation due to an
"ownership change" resulting from the sales of private equity securities. The
annual limitation may result in the expiration of net operating losses before
utilization.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred taxes as of December 31, 1996 and 1997 and as of
September 30, 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- SEPTEMBER 30,
1996 1997 1998
------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax liabilities:
Depreciable assets........................ $ (4) $ (19) $ --
Other..................................... -- (9) (22)
------- ------- -------
(4) (28) (22)
Deferred tax assets:
Depreciable assets........................ -- -- 128
Tax carryforwards......................... 724 3,704 8,775
Software development costs................ 614 383 211
Accrued liabilities and other............. 12 92 384
------- ------- -------
1,350 4,179 9,498
------- ------- -------
Net deferred tax assets..................... 1,346 4,151 9,476
Valuation allowance for net deferred tax
assets..................................... (1,346) (4,151) (9,476)
------- ------- -------
Net deferred taxes.......................... $ -- $ -- $ --
======= ======= =======
</TABLE>
F-15
<PAGE>
VIGNETTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. INCOME TAXES (CONTINUED)
The Company has established a valuation allowance equal to the net deferred
tax asset due to uncertainties regarding the realization of deferred tax
assets based on the Company's lack of earnings history. The valuation
allowance increased by approximately $2,805,000 during the year ended December
31, 1997 and $5,325,000 during the nine months ended September 30, 1998.
Undistributed earnings of the Company's foreign subsidiary were immaterial
as of December 31, 1997. Those earnings are considered to be permanently
reinvested and, accordingly, no provision for U.S. federal and/or state income
taxes has been provided thereon.
The Company's provision for income taxes differs from the expected tax
benefit amount computed by applying the statutory federal income tax rate of
34% to income before income taxes as a result of the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------- NINE MONTHS ENDED
1996 1997 SEPTEMBER 30, 1998
------ ------ ------------------
(UNAUDITED)
<S> <C> <C> <C>
Federal statutory rate.................. (34.0)% (34.0)% (34.0)%
State taxes, net of federal benefit..... (3.0) (3.0) (2.5)
In-process research and development..... -- -- 4.4
Change in valuation allowance........... 37.0 37.0 32.6
Other................................... -- -- (.5)
------ ------ -----
0 % 0 % 0 %
====== ====== =====
</TABLE>
7. ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT
During May 1998, the Company acquired from RandomNoise, Inc. certain in-
process research and development effort, a developed product and an
insignificant amount of equipment in exchange for $100,000 in cash and 191,022
shares of the Company's Series G Convertible Preferred Stock valued at $10.47
share or $2,000,000. Substantially all of the $2,100,000 purchase price was
allocated to the acquired in-process research and development efforts based
upon the following: (i) the Company assigned no value to the developed product
as the Company does not intend to sell, support or enhance such product and
the Company believes it has no alternative future use; (ii) the $10.47 per
share ascribed to the Company's Series G Convertible Preferred Stock was based
on the value per share received from the issuance of Series F Redeemable
Convertible Preferred Stock, which occurred in April 1998; and (iii) the
allocation of the entire $2,100,000 purchase price was determined to be
reasonable based on the Company's estimate of costs it would incur if it had
performed this effort internally. The in-process research and development
effort relates to the development of visual development tool technology using
graphical user interface ("GUI") technology not possessed by the Company and
at the time of purchase the results of the in-process research and development
effort had not progressed to a stage where they met technological feasibility.
During July 1996, the Company acquired from CNET, certain software related
to intellectual property rights for 1,865,000 shares of the Company's Series C
Convertible Preferred Stock valued at $1,865,000. The technology purchased
from CNET lacked many key elements essential to the ultimate product to be
released by the Company such as an enhanced user interface, expansion to
additional database platforms, an automated install feature, and automated
testing capabilities. These key elements were subsequently developed by the
Company and led to a beta product released in December 1996. All of the
$1,865,000 purchase price was allocated to acquired in-process research and
development efforts.
F-16
<PAGE>
VIGNETTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. EMPLOYEE 401(K) PLAN
In 1997, the Company established a voluntary defined contribution retirement
plan (the "401(k) Plan") qualifying under Section 401(k) of the Internal
Revenue Code of 1986. The Company made no contributions in the year ended
December 31, 1997 or in the nine months ended September 30, 1998.
9. SEGMENTS OF BUSINESS AND GEOGRAPHIC AREA INFORMATION
The Company considers its business activities to constitute a single
segment.
A summary of the Company's operations by geographic area follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS
DECEMBER 31, ENDED SEPTEMBER 30,
---------------- ---------------------
1996 1997 1997 1998
------- ------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue:
United States
Domestic........................ $ -- $ 2,948 $ 1,716 $ 7,753
Other........................... -- 76 -- 301
------- ------- --------- ----------
Total United States........... -- 3,024 1,716 8,054
Europe............................ -- -- -- 1,457
------- ------- --------- ----------
Total revenue................. $ -- $ 3,024 $ 1,716 $ 9,511
======= ======= ========= ==========
Net loss:
United States..................... $(3,626) $(7,447) $ (4,388) $ (16,085)
Europe............................ -- (27) -- (209)
------- ------- --------- ----------
Total......................... $(3,626) $(7,474) $ (4,388) $ (16,294)
======= ======= ========= ==========
Identifiable assets:
United States..................... $ 2,229 $ 8,417 $ 17,995
Europe............................ -- 82 1,452
------- ------- ----------
Total......................... $ 2,229 $ 8,499 $ 19,447
======= ======= ==========
</TABLE>
10. SUBSEQUENT EVENTS
On September 9, 1998, the Board of Directors approved, subject to
stockholder approval, an amendment to the articles of incorporation to change
the number of authorized shares to 80,000,000 shares of Common Stock and
10,000,000 shares of Preferred Stock upon the closing of the offering.
On November 30, 1998, the Company issued 520,516 shares of Series H
Redeemable Convertible Preferred Stock for approximately $8,500,000 in cash.
On December 2, 1998, the Board of Directors authorized management of the
Company to file a registration statement with the Securities and Exchange
Commission permitting the Company to sell shares of its Common Stock to the
public. If the Offering is consummated under the terms presently anticipated,
all of the currently outstanding Preferred Stock as of November 30, 1998 will
convert to 8,619,388 shares of Common Stock. Unaudited pro forma stockholders'
equity as adjusted for the conversion of the 8,098,872 shares of Preferred
Stock outstanding as of September 30, 1998 is set forth in the accompanying
Consolidated Balance Sheet and Consolidated Statements of Changes in
Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit).
F-17
<PAGE>
VIGNETTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In addition, on December 2, 1998, the Company entered into agreements with
Comdisco, Inc. providing for available credit of up to $5 million over a
period of 36 months at an interest rate of 12% per year, an equipment lease
line of $1.25 million and the issuance to Comdisco, Inc. of warrants to
purchase 45,926 shares of Series H Preferred Stock at an exercise price of
$16.33 per share.
F-18
<PAGE>
[Logo of The Red Herring magazine, with the words "DIGITAL UNIVERSE TOP 100
COMPANIES," "Best Overall" and "Best Products;" graphic reading "UPSIDE'S 1998
HOT 100 PRIVATE COMPANIES;" graphic reading "SEYBOLD PUBLICATIONS 97 EDITORS'
AWARD."]
OUR AWARDS CAN'T DELIVER THE SOLUTIONS THAT BUILD ONLINE RELATIONSHIPS AND
MAXIMIZE WEB-BASED REVENUES, BUT OUR PRODUCTS CAN.
At Vignette, we realize that it takes more than awards to help businesses
build their online revenues. It takes a commitment to industry leadership as
well as top-notch products and services continuously provided to outstanding
clients. At Vignette, we take those commitments seriously. And yes, we'll
continue to take the awards.
Customers include: [Logos of National Semiconductor, Bank One, Bay Networks,
ZDNet, CBS Sports Line, Chicago Tribune, Lands' End, Citibank, CNET, Preview
Travel, AMD and Pathfinder]
<PAGE>
[LOGO OF VIGNETTE APPEARS HERE]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of Common Stock being registered. All amounts are estimates
except the SEC registration fee, the NASD filing fee and the Nasdaq National
Market listing fee.
<TABLE>
<S> <C>
SEC Registration fee....................................................... $
NASD fee...................................................................
Nasdaq National Market listing fee.........................................
Printing and engraving expenses............................................
Legal fees and expenses....................................................
Accounting fees and expenses...............................................
Blue sky fees and expenses.................................................
Transfer agent fees........................................................
Miscellaneous fees and expenses............................................
----
Total.................................................................... $
====
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes a court to
award or a corporation's Board of Directors to grant indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). Article VII, Section 6, of the Registrant's
Bylaws provides for mandatory indemnification of its directors and officers
and permissible indemnification of employees and other agents to the maximum
extent permitted by the Delaware General Corporation Law. The Registrant's
Certificate of Incorporation provides that, pursuant to Delaware law, its
directors shall not be liable for monetary damages for breach of the
directors' fiduciary duty as directors to the Company and its stockholders.
This provision in the Certificate of Incorporation does not eliminate the
directors' fiduciary duty, and in appropriate circumstances equitable remedies
such as injunctive or other forms of non-monetary relief will remain available
under Delaware law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the Company for acts
or omissions not in good faith or involving intentional misconduct, for
knowing violations of law, for actions leading to improper personal benefit to
the director, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws. The Registrant has
entered into Indemnification Agreements with its officers and directors, a
form of which is attached as Exhibit 10.1 hereto and incorporated herein by
reference. The Indemnification Agreements provide the Registrant's officers
and directors with further indemnification to the maximum extent permitted by
the Delaware General Corporation Law. Reference is made to the Underwriting
Agreement contained in Exhibit 1.1 hereto, which contains provisions
indemnifying officers and directors of the Registrant against certain
liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since inception, the Company has issued and sold the following securities:
1. The Company granted stock options to purchase 5,710,007 shares of Common
Stock at exercise prices ranging from $.0125 to $12.50 per share to
employees, consultants and directors pursuant to its 1995 Stock
Option/Stock Issuance Plan.
II-1
<PAGE>
2. From inception through November 30, 1998, the Company issued and sold
an aggregate of 2,942,898 shares of its Common Stock to employees,
consultants and directors for aggregate consideration of approximately
$537,528 pursuant to exercises of options granted under its 1995 Stock
Option/Stock Issuance Plan.
3. In February 1996, the Company issued and sold 400,000 shares of its
Series A Preferred Stock for an aggregate purchase price of $400,000.
4. In February, June and July 1996, the Company issued and sold 1,853,182
shares of its Series B Preferred Stock for an aggregate purchase price of
approximately $3,057,750.
5. In July 1996, the Company issued and sold 1,865,000 shares of its
Series C Preferred Stock and for technology valued at approximately
$1,865,000.
6. In December 1996, the Company issued a warrant to purchase 65,368
shares of its Series D Preferred Stock. In August 1997, this warrant was
exercised in full for an aggregate purchase price of approximately
$107,857.
7. In June and July 1997, the Company issued and sold 2,358,492 shares of
its Series E Preferred Stock for an aggregate purchase price of
approximately $10,000,006.
8. In April 1998, the Company issued and sold 1,365,808 shares of its
Series F Preferred Stock for an aggregate purchase price of approximately
$14,300,010.
9. In May 1998, the Company issued and sold 191,022 shares of its Series G
Preferred Stock valued at approximately $2,000,000 for technology.
10. In November 1998, the Company issued and sold 520,516 shares of its
Series H Preferred Stock for an aggregate purchase price of approximately
$8,500,000.
11. In December 1998, the Company issued warrants to purchase 45,926 shares
of Series H Preferred Stock at an exercise price of $16.33 per share.
The issuances described in Items 15(1) and (2) were deemed exempt from
registration under the Securities Act in reliance on Rule 701 promulgated
under the Securities Act or Section 4(2) of the Securities Act. The issuances
of the securities described in Items 15(3)-(9) were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of such Act
as transactions by an issuer not involving any public offering. In addition,
the recipients of securities in each such transaction represented their
intentions to acquire the securities for investment only and not with a view
to or for sale in connection with any distribution thereof and appropriate
legends were affixed to the share certificates issued in such transactions.
All recipients had adequate access, through their relationships with the
Registrant, to information about the Registrant.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO DESCRIPTION
---------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Certificate of Incorporation of the Registrant, as amended to date.
3.2* Form of Amended and Restated Certificate of Incorporation to be
filed on the closing of the offering made hereby.
3.3 Bylaws of the Registrant.
3.4 Form of Bylaws to be filed on the closing of the offering made
hereby.
4.1 Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4.
4.2* Specimen Common Stock certificate.
4.3 Sixth Amended and Restated Stockholders Agreement dated November
30, 1998.
4.4 Fifth Amended and Restated Registration Rights Agreement dated
November 30, 1998.
5.1* Opinion of Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian, LLP.
10.1 Form of Indemnification Agreements.
10.2 1995 Stock Option/Stock Issuance Plan and forms of agreements
thereunder.
10.3 1998 Equity Incentive Plan.
10.4 Employee Stock Purchase Plan.
10.5 1998 Non-Employee Directors Option Plan.
10.6 Security and Loan Agreement dated March 24, 1998 between the
Registrant and Imperial Bank.
10.7 Lease Agreement dated June 20, 1996 between the Registrant and
David B. Barrow, Jr.
10.8 First Supplement to Lease Agreement dated November 4, 1997 between
Registrant and 3410 Far West, Ltd.
10.9 Second Supplement to Lease Agreement dated February 23, 1998
between Registrant and 3410 Far West, Ltd.
10.10 Office Lease Agreement dated August 4, 1998 between Registrant and
B.O. III, Ltd.
10.11** "Prism" Development and Marketing Agreement dated July 19, 1996
between the Registrant and CNET, Inc.
10.12** Letter Amendment to "Prism" Development and Marketing Agreement
between the Registrant and CNET, Inc. dated August 15, 1998 and
attachments thereto.
10.13** Software License Agreement dated April 6, 1998 between Registrant
and Net Perceptions, Inc.
10.14** StoryServer Q2 Volume Purchase Agreement between Registrant and
Tribune Interactive Inc.
10.15** Protege Software (Holdings) Confidential Professional Services
Agreement dated November 15, 1997.
10.16 Subordinated Loan and Security Agreement dated December 3, 1998
between Registrant and Comdisco, Inc.
10.17 Master Lease Agreement dated December 3, 1998 between Registrant
and Comdisco, Inc.
21.1* Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2* Consent of Counsel. Reference is made to Exhibit 5.1.
24.1 Power of Attorney (see page II-5).
27.1 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
** Confidential treatment has been requested for certain portions of this
exhibit. Omitted portions have been filed separately with the Securities and
Exchange Commission.
II-3
<PAGE>
(b) FINANCIAL STATEMENT SCHEDULES
All schedules have been omitted because the information required to be set
forth therein is not applicable or is shown in the consolidated financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the Delaware General Corporation Law, the Certificate
of Incorporation or the Bylaws of the Registrant, the Underwriting Agreement,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act, and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer, or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered
hereunder, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance on Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF AUSTIN,
STATE OF TEXAS, ON THIS 2ND DAY OF DECEMBER, 1998.
Vignette Corporation
/s/ Gregory A. Peters
By: _________________________________
GREGORY A. PETERS
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Gregory A. Peters and Jack F. Lynch,
and each of them, his true and lawful attorneys-in-fact and agents with full
power of substitution, for him and in his name, place and stead, in any and
all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to sign any registration
statement for the same offering covered by this Registration Statement that is
to be effective on filing pursuant to Rule 462(b) promulgated under the
Securities Act of 1933, and all post-effective amendments thereto, and to file
the same, with all exhibits thereto and all documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys-in-
fact and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or his or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Gregory A. Peters President, Chief Executive December 2, 1998
______________________________________ Officer and Director
GREGORY A. PETERS (Principal Executive
Officer)
/s/ Jack F. Lynch Vice President, Finance December 2, 1998
______________________________________ and Operations (Principal
JACK F. LYNCH Financial and Accounting
Officer) and Secretary
/s/ Ross B. Garber Chairman of the Board and December 2, 1998
______________________________________ Director
ROSS B. GARBER
/s/ Neil Webber Chief Technology Officer December 2, 1998
______________________________________ and Director
NEIL WEBBER
/s/ Robert E. Davoli Director December 2, 1998
______________________________________
ROBERT E. DAVOLI
/s/ Steven G. Papermaster Director December 2, 1998
______________________________________
STEVEN G. PAPERMASTER
/s/ John D. Thornton Director December 2, 1998
______________________________________
JOHN D. THORNTON
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO DESCRIPTION
---------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Certificate of Incorporation of the Registrant, as amended to date.
3.2* Form of Amended and Restated Certificate of Incorporation to be
filed on the closing of the offering made hereby.
3.3 Bylaws of the Registrant.
3.4 Form of Bylaws to be filed on the closing of the offering made
hereby.
4.1 Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4.
4.2* Specimen Common Stock certificate.
4.3 Sixth Amended and Restated Stockholders Agreement dated November
30, 1998.
4.4 Fifth Amended and Restated Registration Rights Agreement dated
November 30, 1998.
5.1* Opinion of Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian, LLP.
10.1 Form of Indemnification Agreements.
10.2 1995 Stock Option/Stock Issuance Plan and forms of agreements
thereunder.
10.3 1998 Equity Incentive Plan.
10.4 Employee Stock Purchase Plan.
10.5 1998 Non-Employee Directors Option Plan.
10.6 Security and Loan Agreement dated March 24, 1998 between the
Registrant and Imperial Bank.
10.7 Lease Agreement dated June 20, 1996 between the Registrant and
David B. Barrow, Jr.
10.8 First Supplement to Lease Agreement dated November 4, 1997 between
Registrant and 3410 Far West, Ltd.
10.9 Second Supplement to Lease Agreement dated February 23, 1998
between Registrant and 3410 Far West, Ltd.
10.10 Office Lease Agreement dated August 4, 1998 between Registrant and
B.O. III, Ltd.
10.11** "Prism" Development and Marketing Agreement dated July 19, 1996
between the Registrant and CNET, Inc.
10.12** Letter Amendment to "Prism" Development and Marketing Agreement
between the Registrant and CNET, Inc. dated August 15, 1998 and
attachments thereto.
10.13** Software License Agreement dated April 6, 1998 between Registrant
and Net Perceptions, Inc.
10.14** StoryServer Q2 Volume Purchase Agreement between Registrant and
Tribune Interactive Inc.
10.15** Protege Software (Holdings) Confidential Professional Services
Agreement dated November 15, 1997.
10.16 Subordinated Loan and Security Agreement dated December 3, 1998
between Registrant and Comdisco, Inc.
10.17 Master Lease Agreement dated December 3, 1998 between Registrant
and Comdisco, Inc.
21.1* Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2* Consent of Counsel. Reference is made to Exhibit 5.1.
24.1 Power of Attorney (see page II-5).
27.1 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
** Confidential treatment has been requested for certain portions of this
exhibit. Omitted portions have been filed separately with the Securities and
Exchange Commission.
<PAGE>
EXHIBIT 3.1
FOURTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
of
VIGNETTE CORPORATION,
A DELAWARE CORPORATION
(Pursuant to Sections 228, 242 and 245 of the
General Corporation Law of the State of Delaware)
Vignette Corporation, a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "General Corporation Law")
DOES HEREBY CERTIFY:
FIRST: That the name of this corporation is Vignette Corporation, and
that this corporation was originally incorporated on December 19, 1995, pursuant
to the General Corporation Law.
SECOND: That the Board of Directors duly adopted resolutions
proposing to amend and restate the Third Amended and Restated Certificate of
Incorporation and Certificate of Designation of Preferences of Series G
Convertible Preferred Stock (collectively, the "Prior Certificate") of this
corporation, declaring said amendment and restatement to be advisable and in the
best interests of this corporation and its stockholders, and authorizing the
appropriate officers of this corporation to solicit the consent of the
stockholders therefore, which resolution setting forth the proposed amendment
and restatement is as follows:
"RESOLVED, that the Prior Certificate of this corporation be amended
and restated in its entirety as follows:
ARTICLE I.
The name of this Corporation shall be: Vignette Corporation.
ARTICLE II.
The address of the registered office of the Corporation in the State of
Delaware is The Corporation Trust Center, 1209 Orange Street, City of
Wilmington, County of New Castle, Delaware. The name of the registered agent at
that address is The Corporation Trust Company.
ARTICLE III.
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
<PAGE>
ARTICLE IV.
The name and mailing address of the incorporator of the Corporation is:
Ross B. Garber
One Far West Plaza
3410 Far West Boulevard, Suite 300
Austin, Texas 78731
ARTICLE V.
A. Authorized Shares. The aggregate number of shares that the
Corporation shall have authority to issue is 26,000,000 shares, (i) 17,000,000
shares of which shall be Common Stock, with a par value of $0.01 per share, and
(ii) 9,000,000 shares of which shall be Preferred Stock, with a par value of
$0.01 per share.
B. Preferred Stock. The Preferred Stock may be issued from time to time
in one or more series. All shares of Preferred Stock shall be of equal rank and
shall be identical, except in respect of the matters that may be fixed by the
Board of Directors as hereinafter provided, and each share of each series shall
be identical with all other shares of such series. Subject to the provisions of
Part 4, the Board of Directors of the Corporation is expressly authorized to
provide for the issuance of all or any of the shares of Preferred Stock in one
or more series, and to fix the number of shares and to determine or (so long as
no shares of such series are then outstanding) alter for each such series, such
voting powers, full or limited, or no voting powers, and such designations,
preferences and relative, participating, optional or other rights and such
qualifications, limitations, or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions adopted by the Board of Directors
providing for the issuance of such shares and as may be permitted by the General
Corporation Law of the State of Delaware. Subject to the provisions of Part 4,
the Board of Directors is also expressly authorized to increase or decrease (but
not below the number of shares of such series then outstanding) the number of
shares of any series of Preferred Stock subsequent to the issuance of shares of
that series. In case the number of shares of any such series is so decreased,
the shares constituting such decrease shall resume the status that they had
prior to the adoption of the resolution or resolutions originally fixing the
number of shares of such series. The rights, preferences, restrictions and
other matters relating to the Series A Convertible Preferred Stock (the "Series
A Preferred Stock"), which series shall consist of 407,500 shares, the Series B
Convertible Preferred Stock (the "Series B Preferred Stock"), which series shall
consist of 1,853,182 shares, the Series C Convertible Preferred Stock (the
"Series C Preferred Stock"), which series shall consist of 1,865,000 shares, the
Series D Convertible Preferred Stock (the "Series D Preferred Stock"), which
series shall consist of 200,000 shares, the Series E Convertible Preferred Stock
(the "Series E Preferred Stock"), which series shall consist of 2,358,492
shares, the Series F Convertible Preferred Stock (the "Series F Preferred
Stock"), which series shall consist of 1,365,808 shares, the Series G
Convertible Preferred Stock (the "Series G Preferred Stock"), which series shall
consist of 191,022 shares, and the Series H Convertible Preferred Stock (the
"Series H Preferred Stock"), which series shall consist of 580,000 shares, are
as set forth below in this Article V.B.
2
<PAGE>
Part 1. Dividends.
1A. (i) From and after January 1, 1999, (a) the holders of the then
outstanding Series A Preferred Stock shall be entitled to receive, when and as
declared by the Board, and out of any funds legally available therefor,
cumulative dividends at the annual rate of $0.06 per share, (b) the holders of
the then outstanding Series B Preferred Stock shall be entitled to receive, when
and as declared by the Board, and out of any funds legally available therefor,
cumulative dividends at the annual rate of $0.10 per share and (c) the holders
of the then outstanding Series C Preferred Stock shall be entitled to receive,
when and as declared by the Board, and out of any funds legally available
therefor, cumulative dividends at the annual rate of $0.06 per share. Dividends
on the shares of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock shall accumulate and accrue on each such share from January 1,
1999 and shall accumulate and accrue from day to day thereafter, whether or not
earned or declared. Such dividends shall be cumulative so that, except as
provided in paragraph 1B, if such dividends in respect of any previous or
current quarterly dividend period, at the annual rate specified above, shall not
have been paid or declared and a sum sufficient for the payment thereof set
apart, the deficiency shall first be fully paid before any dividend or other
distribution shall be paid or declared and set apart for the Common Stock.
(ii) The holders of the outstanding Series D Preferred Stock shall be
entitled to receive dividends on such shares when and as declared by the Board,
and out of any funds legally available therefor; provided, however, that
dividends shall accumulate and accrue at the same time or times and the same
rate as dividends are paid on the Corporation's outstanding Common Stock.
Dividends payable with respect to the Series D Preferred Stock shall be non-
cumulative.
(iii) From and after June 6, 2000, the holders of the then
outstanding Series E Preferred Stock shall be entitled to receive, when and as
declared by the Board, and out of any funds legally available therefor,
cumulative dividends at the annual rate of $0.254 per share. Dividends on the
Series E Preferred Stock shall accumulate and accrue on each such share from
June 6, 2000 and shall accumulate and accrue from day to day thereafter, whether
or not earned or declared. Such dividends shall be cumulative so that, except
as provided in paragraph 1B, if such dividends in respect of any previous or
current quarterly dividend period, at the annual rate specified above, shall not
have been paid or declared and a sum sufficient for the payment thereof set
apart, the deficiency shall first be fully paid before any dividend or other
distribution shall be paid or declared and set apart for the Common Stock.
(iv) From and after April 22, 2001, the holders of the then
outstanding Series F Preferred Stock shall be entitled to receive, when and as
declared by the Board, and out of any funds legally available therefor,
cumulative dividends at the annual rate of $0.628 per share. Dividends on the
Series F Preferred Stock shall accumulate and accrue on each such share from
April 22, 2001 and shall accumulate and accrue from day to day thereafter,
whether or not earned or declared. Such dividends shall be cumulative so that,
except as provided in paragraph 1B, if such dividends in respect of any previous
or current quarterly dividend period, at the annual rate specified above, shall
not have been paid or declared and a sum sufficient for the payment thereof set
apart, the deficiency shall first be fully paid before any dividend or other
distribution shall be paid or declared and set apart for the Common Stock.
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(v) The holders of the outstanding Series G Preferred Stock shall be
entitled to receive dividends on such shares when and as declared by the Board,
and out of any funds legally available therefor; provided, however, that
dividends shall accumulate and accrue at the same time or times and the same
rate as dividends are paid on the Company's outstanding Common Stock. Dividends
payable with respect to the Series G Preferred Stock shall be non-cumulative.
(vi) From and after November 30, 2001, the holders of the then
outstanding Series H Preferred Stock shall be entitled to receive, when and as
declared by the Board, and out of any funds legally available therefor,
cumulative dividends at the annual rate of $.98 per share. Dividends on the
Series H Preferred Stock shall accumulate and accrue on each such share from
November 30, 2001 and shall accumulate and accrue from day to day thereafter,
whether or not earned or declared. Such dividends shall be cumulative so that,
except as provided in paragraph 1B, if such dividends in respect of any previous
or current quarterly dividend period, at the annual rate specified above, shall
not have been paid or declared and a sum sufficient for the payment thereof set
apart, the deficiency shall first be fully paid before any dividend or other
distribution shall be paid or declared and set apart for the Common Stock.
1B. Each share of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series E Preferred Stock, Series F Preferred Stock and
Series H Preferred Stock shall rank equally in all respects with respect to
dividends; provided, however, that, except as set forth in paragraphs 2A and 3C,
the Corporation shall not declare or pay dividends which are insufficient to pay
all accrued dividends on each class or series of Preferred Stock outstanding
unless such dividends are declared and paid to each class or series of Preferred
Stock pro rata based on the accrued dividends with respect to such class or
series as a percentage of accrued dividends for all classes or series of
Preferred Stock. Unless full dividends on the Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock, Series E Preferred Stock, Series F
Preferred Stock and Series H Preferred Stock for all past dividend periods and
the then current dividend period shall have been paid or declared and a sum
sufficient for the payment thereof set apart, (i) no dividend whatsoever other
than a dividend payable solely in Common Stock shall be paid or declared, and no
distribution shall be made, on any Common Stock, and (ii) no shares of Common
Stock shall be purchased, redeemed or acquired by the Corporation and no monies
shall be paid into or set aside or made available for a sinking fund for the
purchase, redemption or acquisition thereof; provided, however, that this
restriction shall not apply to the repurchase of shares of Common Stock from
directors or employees of or consultants or advisors to the Corporation or any
Subsidiary pursuant to any Approved Plan or under the terms of the Stockholders
Agreement, as amended.
Part 2. Liquidation Preference.
2A. In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, the holders of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock, Series F Preferred Stock and Series H
Preferred Stock shall be entitled to receive, prior and in preference to any
payment or distribution and setting apart for payment or distribution of any of
the assets or surplus funds of the Corporation to the holders of the Common
Stock, (i) an amount for each share of Series A Preferred Stock then held by
them equal to $1.00 (as adjusted for any stock dividends, combinations or splits
with respect to such shares), (ii) an amount for each share of Series B
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Preferred Stock then held by them equal to $1.65 (as adjusted for any stock
dividends, combinations or splits with respect to such shares), (iii) an amount
for each share of Series C Preferred Stock then held by them equal to $1.00 (as
adjusted for any stock dividends, combinations or splits with respect to such
shares), (iv) an amount for each share of Series D Preferred Stock then held by
them equal to $1.65 (as adjusted for any stock dividends, combinations or splits
with respect to such shares), (v) an amount for each share of Series E Preferred
Stock then held by them equal to $4.24 (as adjusted for any stock dividends,
combinations or splits with respect to such shares, (vi) an amount for each
share of Series F Preferred Stock then held by them equal to $10.47 (as adjusted
for any stock dividends, combinations or splits with respect to such shares) and
(vii) an amount for each share of Series H Preferred Stock then held by them
equal to $16.33 (as adjusted for any stock dividends, combinations or splits
with respect to such shares), plus, in each case, any accrued and unpaid
dividends on each such series of Preferred Stock, whether or not earned or
declared, up to and including the date of full payment of such amount. If upon
the occurrence of such event, the assets and funds thus distributed among the
holders of each such series of Preferred Stock shall be insufficient to permit
the payment to such holders of the full respective preferential amounts due with
respect to the shares held by each such holder, then the entire assets and funds
of the Corporation legally available for distribution shall be distributed
ratably among the holders of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock, Series F Preferred Stock and Series H Preferred Stock in proportion to
the relative liquidation preference of the shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock, Series F Preferred Stock and Series H Preferred Stock
then held by them.
2B. In the event of any liquidation, dissolution or winding up of the
Company, either voluntary or involuntary, if the assets and surplus funds of the
Company available for distribution to the Company's stockholders exceed the
aggregate amount payable to the holders of the Company's Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock, Series F Preferred Stock and Series H Preferred
Stock, pursuant to paragraph 2A, then after the payments required by paragraph
2A shall have been made or irrevocably set apart for payment, the holders of the
Series G Preferred Stock shall be entitled to receive, prior and in preference
to any payment or distribution and setting apart for payment or distribution of
any of the assets or surplus funds of the Company to the holders of the Common
Stock and any other series of Preferred Stock, an amount for each share of
Series G Preferred Stock then held by them equal to $10.47 plus any declared but
unpaid dividends on the Series G Preferred Stock, up to and including the date
of full payment of such amount. If, after the distribution of assets and funds
to the holders of the Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, Series F
Preferred Stock and Series H Preferred Stock pursuant to paragraph 2A, the
assets and funds thus distributed among the holders of the Series G Preferred
Stock shall be insufficient to permit the payment to such holders of Series G
Preferred Stock of the full respective preferential amounts due with respect to
the shares held by each such holder, then the entire assets and funds of the
Company legally available for distribution remaining after such distribution
pursuant to paragraph 2A shall be distributed ratably among the holders of the
Series G Preferred Stock in proportion to the shares of Series G Preferred Stock
then held by them.
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2C. If the assets of the Corporation available for distribution to the
Corporation's stockholders exceed the aggregate amount payable to the holders of
the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock, Series F Preferred
Stock and Series H Preferred Stock pursuant to paragraphs 2A and 2B above, then
after the payments required by paragraphs 2A and 2B shall have been made or
irrevocably set apart for payment, such assets shall be distributed ratably
among the holders of the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series E Preferred Stock, Series F Preferred Stock and
Series H Preferred Stock (as if fully converted into Common Stock pursuant to
part 5 hereof) and the holders of Common Stock; provided, that the amount which
the holders of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series E Preferred Stock, Series F Preferred Stock and Series H
Preferred Stock shall be entitled to receive (including any accrued and unpaid
dividends) pursuant to paragraph 2A above and this paragraph 2C, if any, in the
aggregate shall not exceed $3.00 for each share of Series A Preferred Stock (as
adjusted for any stock dividends, combinations or splits with respect to such
shares), $4.95 for each share of Series B Preferred Stock (as adjusted for any
stock dividends, combinations or splits with respect to such shares), $2.00 for
each share of Series C Preferred Stock (as adjusted for any stock dividends,
combinations or splits with respect to such shares), $8.48 for each share of
Series E Preferred Stock (as adjusted for any stock dividends, combinations or
splits with respect to such shares), $20.94 for each share of Series F Preferred
Stock (as adjusted for any stock dividends, combinations, or splits with respect
to such shares) and $32.66 for each share of Series H Preferred Stock (as
adjusted for any stock dividends, combinations or splits with respect to such
shares).
2D. (i) A consolidation, merger or share exchange of the Corporation in
which the holders of the Corporation's voting stock outstanding immediately
prior to such consolidation, merger or share exchange do not hold a majority of
the voting stock of the surviving or resulting entity outstanding immediately
following such consolidation, merger or share exchange, and (ii) a sale, lease
or transfer of all or substantially all of the assets of the Corporation, shall
in any case be deemed to be a liquidation, dissolution or winding up within the
meaning of this part 2.
2E. The Corporation will give written notice of any liquidation,
dissolution or winding up (or any transaction deemed to be a liquidation,
dissolution or winding up pursuant to paragraph 2C above) to each record holder
of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock, Series F Preferred Stock,
Series G Preferred Stock and Series H Preferred Stock not less than 60 days
prior to the date stated therein for the distribution and payment of the amounts
provided in this part 2. Such notice shall include an estimate of the amounts
distributable in respect of each share of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock, Series G Preferred Stock and Series H
Preferred Stock (assuming no conversion of outstanding shares of any class or
series of Preferred Stock) and each share of Common Stock (assuming conversion
of all outstanding shares of each class or series of convertible Preferred
Stock). Each holder of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred, Stock, Series E Preferred Stock,
Series F Preferred Stock, Series G Preferred Stock and Series H Preferred Stock
may convert all or any portion of each such series of Preferred Stock into
Common Stock pursuant to part 5 at any time on or prior to the date fixed in
such notice for distribution and payment or the date of a merger, consolidation,
share
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exchange or sale, lease or transfer of assets deemed to be a liquidation,
dissolution or winding up of the Corporation as described in paragraph 2C above.
Part 3. Redemptions.
3A. Each holder of Series A Preferred Stock with respect to Series A
Preferred Stock only, each holder of Series B Preferred Stock with respect to
Series B Preferred Stock only, each holder of Series E Preferred Stock with
respect to Series E Preferred Stock only, each holder of Series F Preferred
Stock with respect to Series F Preferred Stock only and each holder of Series H
Preferred Stock with respect to Series H Preferred Stock only may elect to
require the Corporation to redeem (the "Mandatory Redemptions") on or after the
dates specified below (each a "Mandatory Redemption Date") up to (i) with
respect to such holder of Series A Preferred Stock (A) that percentage of the
shares of Series A Preferred Stock acquired by such holder (or its predecessors)
pursuant to the February Purchase Agreement as set forth below opposite such
Mandatory Redemption Date, less (B) the number of shares of Series A Preferred
Stock redeemed by the Corporation pursuant to this paragraph 3A from such holder
(or its predecessors) prior to the date of such election, (ii) with respect to
such holder of Series B Preferred Stock (A) that percentage of the shares of
Series B Preferred Stock acquired by such holder (or its predecessors) pursuant
to the February Purchase Agreement or the July Purchase Agreement, as the case
may be, as set forth below opposite such Mandatory Redemption Date, less (B) the
number of shares of Series B Preferred Stock redeemed by the Corporation
pursuant to this paragraph 3A from such holder (or its predecessors) prior to
the date of such election, (iii) with respect to such holder of Series E
Preferred Stock (A) that percentage of the shares of Series E Preferred Stock
acquired by such holder (or its predecessors) pursuant to the June Purchase
Agreement as set forth below opposite such Mandatory Redemption Date, less (B)
the number of shares of Series E Preferred Stock redeemed by the Corporation
pursuant to this paragraph 3A from such holder (or its predecessors) prior to
the date of such election, (iv) with respect to such holder of Series F
Preferred Stock (A) that percentage of the shares of Series F Preferred Stock
acquired by such holder (or its predecessors) pursuant to the April Purchase
Agreement as set forth below opposite such Mandatory Redemption Date, less (B)
the number of shares of Series F Preferred Stock redeemed by the Corporation
pursuant to this paragraph 3A from such holder (or its predecessors) prior to
the date of such election and (v) with respect to such holder of Series H
Preferred Stock (A) that percentage of the shares of Series H Preferred Stock
acquired by such holder (or its predecessors) pursuant to the November Purchase
Agreement as set forth below opposite such Mandatory Redemption Date, less (B)
the number of shares of Series H Preferred Stock redeemed by the Corporation
pursuant to this paragraph 3A from such holder (or its predecessors) prior to
the date of such election:
Mandatory Percentage of Shares Acquired
Redemption Date Which May be Redeemed
--------------- ---------------------
April 22, 2005 50%
April 22, 2006 75%
April 22, 2007 100%
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A holder of shares of Series A Preferred Stock, Series B Preferred Stock, Series
E Preferred Stock, Series F Preferred Stock or Series H Preferred Stock may
require the Corporation to make a Mandatory Redemption by giving written notice
to the Corporation of such election not less than 30 nor more than 90 days prior
to a Mandatory Redemption Date. Upon receipt of such election, the Corporation
(and such holder) will be obligated as provided in this paragraph 3A to redeem
the number of shares of Series A Preferred Stock, Series B Preferred Stock,
Series E Preferred Stock, Series F Preferred Stock or Series H Preferred Stock
as applicable, specified therein on such Mandatory Redemption Date. The Series
C Preferred Stock, Series D Preferred Stock and Series G Preferred Stock shall
not be redeemable hereunder.
3B. The holders of Series A Preferred Stock who elect to redeem shares of
Series A Preferred Stock as provided in paragraph 3A shall be entitled to
receive from the Corporation on a Mandatory Redemption Date cash in an amount
equal to $1.00 plus any accrued and unpaid dividends on the Series A Preferred
Stock for each share of Series A Preferred Stock to be redeemed on such
Mandatory Redemption Date. The holders of Series B Preferred Stock who elect to
redeem shares of Series B Preferred Stock as provided in paragraph 3A shall be
entitled to receive from the Corporation on a Mandatory Redemption Date cash in
an amount equal to $1.65 plus any accrued and unpaid dividends on the Series B
Preferred Stock for each share of Series B Preferred Stock to be redeemed on
such Mandatory Redemption Date. The holders of Series E Preferred Stock who
elect to redeem shares of Series E Preferred Stock as provided in paragraph 3A
shall be entitled to receive from the Corporation on a Mandatory Redemption Date
cash in an amount equal to $4.24 plus any accrued and unpaid dividends on the
Series E Preferred Stock for each share of Series E Preferred Stock to be
redeemed on such Mandatory Redemption Date. The holders of Series F Preferred
Stock who elect to redeem shares of Series F Preferred Stock as provided in
paragraph 3A shall be entitled to receive from the Corporation on a Mandatory
Redemption Date cash in an amount equal to $10.47 plus any accrued and unpaid
dividends on the Series F Preferred Stock for each share of Series F Preferred
Stock to be redeemed on such Mandatory Redemption Date. The holders of Series H
Preferred Stock who elect to redeem shares of Series H Preferred Stock as
provided in paragraph 3A shall be entitled to receive from the Corporation on a
Mandatory Redemption Date cash in an amount equal to $16.33 plus any accrued and
unpaid dividends on the Series H Preferred Stock for each share of Series H
Preferred Stock to be redeemed on such Mandatory Redemption Date.
3C. If the funds of the Corporation legally available for redemption of
Series A Preferred Stock, Series B Preferred Stock, Series E Preferred Stock,
Series F Preferred Stock and Series H Preferred Stock on any Mandatory
Redemption Date are insufficient to redeem the total number of shares of Series
A Preferred Stock, Series B Preferred Stock, Series E Preferred Stock, Series F
Preferred Stock and Series H Preferred Stock to be redeemed on such Mandatory
Redemption Date, those funds that are legally available shall be used to redeem
the maximum possible number of shares of Series A Preferred Stock, Series B
Preferred Stock, Series E Preferred
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Stock, Series F Preferred Stock and Series H Preferred Stock ratably among the
holders of such shares of Preferred Stock electing to have their shares redeemed
on the basis of the respective redemption amounts due with respect to the shares
held by each such holder. At any time and from time to time thereafter when
additional funds of the Corporation are legally available for redemption of
shares of Series A Preferred Stock, Series B Preferred Stock Series E Preferred
Stock, Series F Preferred Stock and Series H Preferred Stock such funds
immediately will be used to redeem the balance of the shares of such Preferred
Stock which the Corporation has become obligated to redeem on any Mandatory
Redemption Date but which it has not redeemed and such funds will not be used
for any other purpose, including to redeem any shares of Series A Preferred
Stock, Series B Preferred Stock, Series E Preferred Stock, Series F Preferred
Stock, Series H Preferred Stock or any other series of Preferred Stock which the
Corporation is obligated to redeem on any subsequent date.
3D. No share of Series A Preferred Stock, Series B Preferred Stock, Series
E Preferred Stock, Series F Preferred Stock or Series H Preferred Stock is
entitled to any dividends accruing after the date on which the redemption amount
as provided in paragraph 3B with respect to such share of Preferred Stock is
paid. On such date, all rights of the holder of such share of Series A
Preferred Stock, Series B Preferred Stock, Series E Preferred Stock, Series F
Preferred Stock or Series H Preferred Stock will cease, and such shares of
Preferred Stock will not be deemed to be outstanding.
3E. Any shares of Series A Preferred Stock, Series B Preferred Stock,
Series E Preferred Stock, Series F Preferred Stock or Series H Preferred Stock
which are redeemed or otherwise acquired by the Corporation will be canceled and
will not be reissued, sold or transferred. If fewer than the total number of
shares of Series A Preferred Stock, Series B Preferred Stock, Series E Preferred
Stock, Series F Preferred Stock or Series H Preferred Stock represented by any
certificate are redeemed, a new certificate representing the number of
unredeemed shares of such Preferred Stock will be issued to the holder thereof
without cost to such holder within three business days after surrender of the
certificate representing the redeemed shares.
3F. Neither the Corporation nor any Subsidiary will redeem or otherwise
acquire any shares of Series A Preferred Stock, Series B Preferred Stock, Series
E Preferred Stock, Series F Preferred Stock or Series H Preferred Stock except
as expressly authorized herein or pursuant to a purchase offer made pro-rata to
all holders of such shares of Preferred Stock electing to be redeemed hereunder
on the basis of the respective redemption amounts due with respect to the shares
of Series A Preferred Stock, Series B Preferred Stock, Series E Preferred Stock,
Series F Preferred Stock and Series H Preferred Stock owned by each such holder.
Part 4. Voting Rights.
4A. Each holder of shares of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock, Series F Preferred Stock, Series G Preferred Stock and Series H Preferred
Stock shall be entitled to vote on all matters to come before the stockholders
of the Corporation and, except as otherwise expressly provided herein, shall be
entitled to the number of votes equal to the largest number of full shares of
Common Stock into which all shares of each such series of Preferred Stock held
of record by such holder could then be converted, pursuant to part 5, at the
record date for the determination of the stockholders entitled to vote on such
matters or, if no such record date is established, at the date such vote is
taken or any written consent of stockholders is first executed. Except as
otherwise expressly provided herein, in the Stockholders Agreement, in the
resolutions establishing any other class or series of Preferred Stock or as
required by law, the holders of Preferred Stock and Common
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Stock shall vote together and not as a separate class on all matters to come
before the stockholders of the Corporation.
4B. Without the affirmative vote of the holders of shares of Preferred
Stock and Common Stock representing at least a majority of the votes represented
by all shares of Preferred Stock and Common Stock outstanding, voting together
as a single class, the Corporation shall not:
(i) purchase, redeem or otherwise acquire for value (or pay into or
set aside as a sinking fund for such purpose) any of the Common Stock; provided,
that this provision shall not apply to the repurchase of shares of Common Stock
from directors, officers, employees or consultants of or advisors to the
Corporation or any Subsidiary pursuant to any Approved Plan or under the terms
of the Stockholders Agreement; or
(ii) increase or decrease (other than by the redemption or conversion
of the Preferred Stock) the total number of authorized shares of Common Stock.
4C. Without the affirmative vote of (i) the holders of then outstanding
shares of Preferred Stock and Common Stock representing at least a majority of
the votes represented by all then outstanding shares of Preferred Stock and
Common Stock, voting together as a single class, (ii) the holders of 95% the
shares of Series E Preferred Stock then outstanding, voting as a separate class,
(iii) the holders of 95% of the shares of Series F Preferred Stock then
outstanding, voting as a separate class, and (iv) the holders of 80% of the
shares of Series H Preferred Stock then outstanding, voting as a separate class,
the Corporation shall not increase or decrease (other than by the redemption or
conversion of the Preferred Stock) the total number of authorized shares of
Preferred Stock or any series of Preferred Stock.
4D. Without the affirmative vote of the holders of at least a majority of
the then outstanding shares of Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock, each voting as a separate class, the
Corporation shall not authorize the issuance of any new class or series of stock
or reclassify any existing stock into stock having rights and preferences prior
and superior to each such series of Preferred Stock.
4E. Without the affirmative vote of the holders of at least 95% of the
shares of Series E Preferred Stock then outstanding, voting as a separate class,
the Corporation shall not:
(i) authorize the issuance of any new class or series of stock or
reclassify any existing stock into stock having rights and preferences prior and
superior to such series of Preferred Stock; or
(ii) make any amendment to the Certificate of Incorporation of the
Corporation that would adversely affect the rights, preferences, privileges or
restrictions of or on the holders of the Series E Preferred Stock.
4F. Without the affirmative vote of the holders of at least 80% of the
shares of Series F Preferred Stock then outstanding, voting as a separate class,
the Corporation shall not:
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(i) authorize the issuance of any new class or series of stock or
reclassify any existing stock into stock having rights and preferences prior and
superior to such series of Preferred Stock; or
(ii) make any amendment to the Certificate of Incorporation of the
Corporation that would adversely affect the rights, preferences, privileges or
restrictions of or on the holders of the Series F Preferred Stock.
4G. Without the affirmative vote of the holders of at least 80% of the
shares of Series H Preferred Stock then outstanding, voting as a separate class,
the Corporation shall not:
(i) authorize the issuance of any new class or series of stock or
reclassify any existing stock into stock having rights and preferences prior and
superior to such series of Preferred Stock; or
(ii) make any amendment to the Certificate of Incorporation of the
Corporation that would adversely affect the rights, preferences, privileges or
restrictions of or on the holders of the Series H Preferred Stock.
Part 5. Conversion.
5A. Conversion Procedure.
(i) Any holder of shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock, Series G Preferred Stock or Series H
Preferred Stock may convert all or any portion of the shares of each such series
of Preferred Stock (including any fraction of a share) held by such holder into
a number of shares of Common Stock computed (i) with respect to shares of Series
A Preferred Stock, by multiplying the number of shares of Series A Preferred
Stock to be converted by an amount equal to $1.00 plus any accrued and unpaid
dividends on each such share and dividing the result by the "Series A Conversion
Price" (as defined below) then in effect; (ii) with respect to shares of Series
B Preferred Stock, by multiplying the number of shares of Series B Preferred
Stock to be converted by an amount equal to $1.65 plus any accrued and unpaid
dividends on each such share and dividing the result by the "Series B Conversion
Price" (as defined below) then in effect, (iii) with respect to shares of Series
C Preferred Stock, by multiplying the number of shares of Series C Preferred
Stock to be converted by an amount equal to $1.00 and dividing the result by the
"Series C Conversion Price" (as defined below) then in effect, (iv) with respect
to shares of Series D Preferred Stock, by multiplying the number of shares of
Series D Preferred Stock to be converted by an amount equal to $1.65 and
dividing the result by the "Series D Conversion Price" (as defined below) then
in effect, (v) with respect to shares of Series E Preferred Stock, by
multiplying the number of shares of Series E Preferred Stock to be converted by
an amount equal to $4.24 plus any accrued and unpaid dividends on each such
share and dividing the result by the "Series E Conversion Price" (as defined
below) then in effect (vi) with respect to shares of Series F Preferred Stock,
by multiplying the number of shares of Series F Preferred Stock to be converted
by an amount equal to $10.47 plus any accrued and unpaid dividends on each such
share and dividing the result by the "Series F Conversion Price" (as defined
below) then in effect, (vii) with respect to
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shares of Series G Preferred Stock, by multiplying the number of shares of
Series G Preferred Stock to be converted by an amount equal to $10.47 and
dividing the result by the "Series G Conversion Price" then in effect and (viii)
with respect to shares of Series H Preferred Stock, by multiplying the number of
shares of Series H Preferred Stock to be converted by an amount equal to $16.33
plus any accrued and unpaid dividends on each such share and dividing the result
by the "Series H Conversion Price" (as defined below) then in effect.
(ii) Each conversion of shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock, Series G Preferred Stock and Series H
Preferred Stock will be deemed to have been effected as of the close of business
on the date on which the certificate or certificates representing the shares of
such Preferred Stock to be converted, together with properly executed conversion
instructions or powers, have been surrendered for conversion at the principal
office of the Corporation. At such time as such conversion has been effected,
the rights of the holder of such shares of Preferred Stock as such holder will
cease and the Person or Persons in whose name or names any certificate or
certificates for shares of Common Stock are to be issued upon such conversion
will be deemed to have become the holder or holders of record of the shares of
Common Stock represented thereby.
(iii) As soon as possible after a conversion has been effected (but
in any event within three business days in the case of subparagraph (a) below),
the Corporation will deliver to the converting holder:
(a) a certificate or certificates representing the number of
shares of Common Stock issuable by reason of such conversion in such name or
names and such denomination or denominations as the converting holder has
specified; and
(b) a certificate representing any shares of Preferred Stock
which were represented by the certificate or certificates delivered to the
Corporation in connection with such conversion but which were not converted.
(iv) The issuance of certificates for shares of Common Stock upon
conversion of shares of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock,
Series F Preferred Stock, Series G Preferred Stock or Series H Preferred Stock
will be made without charge to the holders of such shares of Preferred Stock for
any issuance tax in respect thereof or other cost incurred by the Corporation in
connection with such conversion and the related issuance of shares of Common
Stock. Upon conversion of each share of each such series of Preferred Stock,
the Corporation will take all such actions as are necessary in order to insure
that the Common Stock issuable with respect to such conversion will be validly
issued, fully paid and nonassessable.
(v) If any fractional interest in a share of Common Stock would,
except for the provisions of this subparagraph (v), be deliverable upon any
conversion of shares of Series A Preferred Stock, Series B Preferred Stock,
Series E Preferred Stock, Series F Preferred Stock, Series G Preferred Stock or
Series H Preferred Stock the Corporation, in lieu of delivering the
12
<PAGE>
fractional share therefor, will pay an amount to the holder thereof equal to the
Fair Market Value of such fractional interest as of the date of conversion.
5B. Conversion Price.
(i) The initial "Series A Conversion Price" will be $1.00 per share
of Series A Preferred Stock. The initial "Series B Conversion Price" will be
$1.65 per share of Series B Preferred Stock. The initial "Series C Conversion
Price" will be $1.00 per share of Series C Preferred Stock. The initial "Series
D Conversion Price" will be $1.65 per share of Series D Preferred Stock. The
initial "Series E Conversion Price" will be $4.24 per share of Series E
Preferred Stock. The initial "Series F Conversion Price" will be $10.47 per
share of Series F Preferred Stock. The initial "Series G Conversion Price" will
be $10.47 per share of Series G Preferred Stock. The initial "Series H
Conversion Price" will be $16.33 per share of Series H Preferred Stock. In order
to prevent dilution of the conversion rights granted under this subdivision, the
Series A Conversion Price, the Series B Conversion Price, the Series E
Conversion Price, the Series F Conversion Price and the Series H Conversion
Price (but not the Series C Conversion Price, the Series D Conversion Price or
the Series G Conversion Price) also will be subject to adjustment from time to
time pursuant to this part 5B.
(ii) If and whenever on or after the date hereof, the Corporation
issues or sells, or is deemed to have issued or sold, any shares of its Common
Stock for consideration per share less than the Series A Conversion Price in
effect immediately prior to the time of such issue or sale, then immediately
upon such issue or sale the Series A Conversion Price will be reduced to the
price determined by multiplying the Series A Conversion Price then in effect by
a fraction, the numerator of which shall be (a) the number of shares of Common
Stock outstanding immediately prior to such issue or sale, plus (b) the number
of shares of Common Stock which the aggregate consideration received by the
Corporation for the total number of additional shares of Common Stock so issued
or sold would purchase at such Series A Conversion Price, and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issue or sale plus the number of additional shares of Common Stock
so issued. For example, if there are 1,600,000 shares of Common Stock
outstanding and, after the date hereof, the Corporation issues 1,000,000 shares
of Common Stock for consideration per share of $0.50, the Series A Conversion
Price immediately would be reduced to the price determined by multiplying $1.00,
the Series A Conversion Price then in effect, by the following fraction:
1,600,000.00 + $ 500,000.00
------------------
$ 1.00
---------------------------------------
1,600,000.00 + 1,000,000
= 1,600,000.00 + 500,000.00
---------------------------------------
2,600,000
= 2,100,000.00
------------------
2,600,000
= 0.8077,
13
<PAGE>
resulting in an adjusted Series A Conversion Price of $0.8077 ($1.00 x 0.8077).
The following transactions shall not result in any adjustment of the Series A
Conversion Price: (i) the issuance of Common Stock and the grant of options,
warrants or rights and the issuance of Common Stock upon exercise thereof
pursuant to any Approved Plan; (ii) the grant of warrants and the issuance of
Common Stock upon exercise thereof pursuant to paragraph 8E(ii)(c) of the
February Purchase Agreement; (iii) the issuance of shares of the Corporation's
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock and the issuance of Common Stock upon conversion
thereof and (iv) the issuance of Common Stock upon conversion of the Series A
Preferred Stock.
(iii) If and whenever on or after the date hereof, the Corporation
issues or sells, or is deemed to have issued or sold, any shares of its Common
Stock for consideration per share less than the Series B Conversion Price in
effect immediately prior to the time of such issue or sale, then immediately
upon such issue or sale the Series B Conversion Price will be reduced to the
price determined by multiplying the Series B Conversion Price then in effect by
a fraction, the numerator of which shall be (a) the number of shares of Common
Stock outstanding immediately prior to such issue or sale, plus (b) the number
of shares of Common Stock which the aggregate consideration received by the
Corporation for the total number of additional shares of Common Stock so issued
or sold would purchase at such Series B Conversion Price, and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issue or sale plus the number of additional shares of Common Stock
so issued. For example, if there are 1,600,000 shares of Common Stock
outstanding and, after the date hereof, the Corporation issues 1,000,000 shares
of Common Stock for consideration per share of $0.50, the Series B Conversion
Price immediately would be reduced to the price determined by multiplying $1.65,
the Series B Conversion Price then in effect, by the following fraction:
1,600,000.00 + $ 500,000.00
------------------
$ 1.65
----------------------------------------
1,600,000.00 + 1,000,000
= 1,600,000.00 + 303,030.30
----------------------------------------
2,600,000
= 1,903,030.30
------------------
2,600,000
= 0.7319,
resulting in an adjusted Series B Conversion Price of $1.21 ($1.65 x 0.7319).
The following transactions shall not result in any adjustment of the Series B
Conversion Price: (i) the issuance of Common Stock and the grant of options,
warrants or rights and the issuance of Common Stock upon exercise thereof
pursuant to any Approved Plan; (ii) the issuance of shares of the Corporation's
Series A Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock and the issuance of Common Stock upon conversion
thereof and (iii) the issuance of Common Stock upon conversion of the Series B
Preferred Stock.
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<PAGE>
(iv) (a) If and whenever on or after the date hereof, the
Corporation issues or sells, or is deemed to have issued or sold, any shares of
its Common Stock for consideration per share less than the Series E Conversion
Price in effect immediately prior to the time of such issue or sale, then
immediately upon such issue or sale the Series E Conversion Price will be
reduced to the price determined by multiplying the Series E Conversion Price
then in effect by a fraction, the numerator of which shall be (a) the number of
shares of Common Stock outstanding immediately prior to such issue or sale, plus
(b) the number of shares of Common Stock which the aggregate consideration
received by the Corporation for the total number of additional shares of Common
Stock so issued or sold would purchase at such Series E Conversion Price, and
the denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issue or sale plus the number of
additional shares of Common Stock so issued. For example, if there are 1,600,000
shares of Common Stock outstanding and, after the date hereof, the Corporation
issues 1,000,000 shares of Common Stock for consideration per share of $0.50,
the Series E Conversion Price immediately would be reduced to the price
determined by multiplying $4.24, the Series E Conversion Price then in effect,
by the following fraction:
1,600,000.00 + $ 500,000.00
------------------
$ 4.24
----------------------------------------
1,600,000.00 + 1,000,000
= 1,600,000.00 + 117,924.53
----------------------------------------
2,600,000
= 1,717,924.53
------------------
2,600,000
= 0.6607,
resulting in an adjusted Series E Conversion Price of $2.80 ($4.24 x 0.6607).
The following transactions shall not result in any adjustment of the Series E
Conversion Price: (i) the issuance of Common Stock and the grant of options,
warrants or rights and the issuance of Common Stock upon exercise thereof
pursuant to any Approved Plan; (ii) the issuance of shares of Common Stock upon
conversion of the Corporation's Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock; (iii) the issuance
of up to 7,500 shares of the Corporation's Series A Preferred Stock and up to
65,368 shares of the Corporation's Series D Preferred Stock pursuant to
outstanding warrants and the issuance of Common Stock upon conversion thereof
and (iv) the issuance of Common Stock upon conversion of the Series E Preferred
Stock.
(b) Notwithstanding the foregoing subparagraph (a), if (X) the
gross proceeds of sales of Series E Preferred Stock on or within 60 days
following June 6, 1997 are less than $6,000,000 and (Y) prior to the earlier of
(1) June 6, 1998 or (2) a subsequent equity financing of the Corporation at a
price per share of at least $4.24 and in which the gross proceeds to the
Corporation are at least $4,000,000, the Corporation issues or sells, or is
deemed to have issued or sold, any shares of its Common Stock for consideration
per share less than the Series E Conversion
15
<PAGE>
Price in effect immediately prior to the time of such issue or sale (a "Lesser
Issuance"), then immediately upon such Lesser Issuance the Series E Conversion
Price will be reduced to a price equal to the price paid per share in such
Lesser Issuance; provided, however, that the following transactions shall not
result in any adjustment of the Series E Conversion Price: (i) the issuance of
Common Stock and the grant of options, warrants or rights and the issuance of
Common Stock upon exercise thereof pursuant to any Approved Plan; (ii) the
issuance of shares of Common Stock upon conversion of the Corporation's Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock; (iii) the issuance of up to 7,500 shares of the Corporation's
Series A Preferred Stock and up to 65,368 shares of the Corporation's Series D
Preferred Stock pursuant to outstanding warrants and the issuance of Common
Stock upon conversion thereof and (iv) the issuance of Common Stock upon
conversion of the Series E Preferred Stock; and provided, further, that the
provisions of this subparagraph (b) shall apply to each Lesser Issuance until
the occurrence of the first Lesser Issuance, if any, in which the gross proceeds
to the Corporation are at least $4,000,000. The adjusted Series E Conversion
Price following any subsequent Lesser Issuance shall be determined by the
foregoing subparagraph (a).
(v) (a) Subject to the application of subsection (v)(b) below, if
and whenever on or after the date hereof, the Corporation issues or sells, or is
deemed to have issued or sold, any shares of its Common Stock for consideration
per share less than the Series F Conversion Price in effect immediately prior to
the time of such issue or sale, then immediately upon such issue or sale the
Series F Conversion Price will be reduced to the price determined by multiplying
the Series F Conversion Price then in effect by a fraction, the numerator of
which shall be (a) the number of shares of Common Stock outstanding immediately
prior to such issue or sale, plus (b) the number of shares of Common Stock which
the aggregate consideration received by the Corporation for the total number of
additional shares of Common Stock so issued or sold would purchase at such
Series F Conversion Price, and the denominator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issue or sale plus
the number of additional shares of Common Stock so issued. For example, if
there are 1,600,000 shares of Common Stock outstanding and, after the date
hereof, the Corporation issues 1,000,000 shares of Common Stock for
consideration per share of $0.50, the Series F Conversion Price immediately
would be reduced to $8.38 per share pursuant to subparagraph (v)(b) below and
would be further reduced pursuant to this subparagraph (v)(a) to the price
determined by multiplying $8.38, the Series F Conversion Price then in effect,
by the following fraction:
1,600,000 + $ 500,000.00
------------------
$ 8.38
--------------------------------------
1,600,000 + 1,000,000
= 1,600,000 + 59,665.87
--------------------------------------
2,600,000
= 1,659,665.87
------------------
2,600,000
= 0.6383,
16
<PAGE>
resulting in an adjusted Series F Conversion Price of $5.35 ($8.38 x 0.6383).
The following transactions shall not result in any adjustment of the Series F
Conversion Price: (i) the issuance of Common Stock and the grant of options,
warrants or rights and the issuance of Common Stock upon exercise thereof
pursuant to any Approved Plan; (ii) the issuance of shares of Common Stock upon
conversion of the Corporation's Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred
Stock; (iii) the issuance of up to 7,500 shares of the Corporation's Series A
Preferred Stock and up to 65,368 shares of the Corporation's Series D Preferred
Stock pursuant to outstanding warrants and the issuance of Common Stock upon
conversion thereof and (iv) the issuance of Common Stock upon conversion of the
Series F Preferred Stock.
(b) If at any time during which the Series F Conversion Price
is greater than $8.38 the Corporation shall issue additional shares of Common
Stock without consideration or for a consideration per share less than the
Series F Conversion Price in effect on the date of and immediately prior to such
issue, then and in such event, such Series F Conversion Price shall be reduced,
concurrently with such issue, to a price equal to the greater of (i) the price
per share for such additional shares of Common Stock or (ii) $8.38. In the event
that the price per share for such additional shares of Common Stock is lower
than $8.38, then the Series F Conversion Price shall first be adjusted to $8.38
pursuant to this subsection (b), and any additional adjustment shall be made
pursuant to the provisions of subsection (a). For example, if 1,000,000
additional shares of Common Stock are issued at price per share of $5.00 at a
time when the Series F Conversion Price is $10.47, then (x) the Series F
Conversion Price shall first be reduced to $8.38 pursuant to the application of
this subsection (b), then (y) the Series F Conversion Price (as so adjusted)
shall be subject to further adjustment under subsection (a) above, assuming an
initial Series F Conversion Price of $8.38 for the purposes of applying the
formula required thereby. All per share prices in this subsection shall be
appropriately adjusted to reflect any stock dividends, combinations or splits
with respect to such shares.
(vi) (a) If and whenever on or after the date hereof, the
Corporation issues or sells, or is deemed to have issued or sold, any shares of
its Common Stock for consideration per share less than the Series H Conversion
Price in effect immediately prior to the time of such issue or sale, then
immediately upon such issue or sale the Series H Conversion Price will be
reduced to the price determined by multiplying the Series H Conversion Price
then in effect by a fraction, the numerator of which shall be (a) the number of
shares of Common Stock outstanding immediately prior to such issue or sale, plus
(b) the number of shares of Common Stock which the aggregate consideration
received by the Corporation for the total number of additional shares of Common
Stock so issued or sold would purchase at such Series H Conversion Price, and
the denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issue or sale plus the number of
additional shares of Common Stock so issued. For example, if there are 1,600,000
shares of Common Stock outstanding and, after the date hereof, the Corporation
issues 1,000,000 shares of Common Stock for consideration per share of $0.50,
the Series H Conversion Price immediately would be reduced to the price
determined by multiplying $16.33, the Series H Conversion Price then in effect,
by the following fraction:
17
<PAGE>
1,600,000.00 + $ 500,000.00
------------------
$ 16.33
---------------------------------------
1,600,000.00 + 1,000,000
= 1,600,000.00 + 30,618.49
---------------------------------------
2,600,000
= 1,630,618.49
------------------
2,600,000
= .6272,
resulting in an adjusted Series H Conversion Price of $10.24 ($16.33 x .6272).
The following transactions shall not result in any adjustment of the Series H
Conversion Price: (i) the issuance of Common Stock and the grant of options,
warrants or rights and the issuance of Common Stock upon exercise thereof
pursuant to any Approved Plan; (ii) the issuance of Common Stock upon conversion
of the Corporation's Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, Series F
Preferred Stock, and Series G Preferred Stock and (iii) the issuance of Common
Stock upon conversion of the Series H Preferred Stock.
(b) (i) If, on or prior to June 30, 1999, the Corporation
issues shares of Common Stock (or securities convertible into or exchangeable
for Common Stock) in its first underwritten offering by the Corporation of
shares of Common Stock to the public pursuant to an effective registration
statement under the Securities Act of 1933, as amended, then in effect, or any
comparable statement under any similar federal statute then in effect (an
"IPO"), the Series H Conversion Price will be adjusted to the greater of $10.47
and a price equal to 80% of the per share IPO price; provided, however, that the
Series H Conversion Price will not be adjusted to a number greater than a price
equal to $230 million divided by the number of shares of Common Stock of the
Corporation then outstanding (assuming the conversion or exchange of all
outstanding securities convertible into or exchangeable for Common Stock of the
Corporation, the issuance of all shares reserved for issuance under an Approved
Plan and the exercise of all outstanding warrants to purchase capital stock of
the Corporation but excluding the shares issued by the Corporation in the IPO)
(for purposes of this subsection (b), the "Fully Diluted Shares Outstanding").
(ii) If the Corporation completes the IPO after June 30,
1999 the Series H Conversion Price will be adjusted to the greater of $10.47 and
a price equal to (x) the sum of (1) $137 million and (2) the product of .40611
and the amount by which the valuation of the Corporation in the IPO exceeds $171
million, divided by (y) the Fully Diluted Shares Outstanding; provided, however,
that the Series H Conversion Price will not be adjusted to a number greater than
a price equal to $230 million divided by the Fully Diluted Shares Outstanding.
(iii) Adjustments made pursuant to the provisions of this
subsection (b) shall be effective immediately prior to the IPO and shall be made
before giving effect to any additional adjustments in connection with the IPO
pursuant to subsection (a).
18
<PAGE>
(iv) For purposes of this subsection (b), the valuation of
the Corporation in the IPO is equal to the product of (A) the per share IPO
price and (B) the Fully Diluted Shares Outstanding.
5C. Effect on Conversion Price of Certain Events. For purposes of
determining the adjusted Series A Conversion Price, Series B Conversion Price,
Series E Conversion Price, Series F Conversion Price and Series H Conversion
Price under paragraph 5B, the following will be applicable:
(i) If the Corporation in any manner grants any Options or Options to
purchase Convertible Securities and the price per share for which Common Stock
is issuable upon the exercise of such Options or upon conversion or exchange of
such Convertible Securities is less than the Series A Conversion Price in effect
immediately prior to the time of the granting of such Options, then the total
maximum number of shares of Common Stock issuable upon the exercise of such
Options or upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options will be deemed
to be outstanding and to have been issued and sold by the Corporation for such
price per share. If the Corporation in any manner grants any Options or Options
to purchase Convertible Securities and the price per share for which Common
Stock is issuable upon the exercise of such Options or upon conversion or
exchange of such Convertible Securities is less than the Series B Conversion
Price in effect immediately prior to the time of the granting of such Options,
then the total maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon conversion or exchange of the total maximum
amount of such Convertible Securities issuable upon the exercise of such Options
will be deemed to be outstanding and to have been issued and sold by the
Corporation for such price per share. If the Corporation in any manner grants
any Options or Options to purchase Convertible Securities and the price per
share for which Common Stock is issuable upon the exercise of such Options or
upon conversion or exchange of such Convertible Securities is less than the
Series E Conversion Price in effect immediately prior to the time of the
granting of such Options, then the total maximum number of shares of Common
Stock issuable upon the exercise of such Options or upon conversion or exchange
of the total maximum amount of such Convertible Securities issuable upon the
exercise of such Options will be deemed to be outstanding and to have been
issued and sold by the Corporation for such price per share. If the Corporation
in any manner grants any Options or Options to purchase Convertible Securities
and the price per share for which Common Stock is issuable upon the exercise of
such Options or upon conversion or exchange of such Convertible Securities is
less than the Series F Conversion Price in effect immediately prior to the time
of the granting of such Options, then the total maximum number of shares of
Common Stock issuable upon the exercise of such Options or upon conversion or
exchange of the total maximum amount of such Convertible Securities issuable
upon the exercise of such Options will be deemed to be outstanding and to have
been issued and sold by the Corporation for such price per share. If the
Corporation in any manner grants any Options or Options to purchase Convertible
Securities and the price per share for which Common Stock is issuable upon the
exercise of such Options or upon conversion or exchange of such Convertible
Securities is less than the Series H Conversion Price in effect immediately
prior to the time of the granting of such Options, then the total maximum number
of shares of Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options will be deemed to be
outstanding and to have been issued and sold by
19
<PAGE>
the Corporation for such price per share. For purposes of this paragraph, the
"price per share for which Common Stock is issuable" will be determined by
dividing (a) the total amount, if any, received or receivable by the Corporation
as consideration for the granting of such Options, plus the minimum aggregate
amount of additional consideration payable to the Corporation upon exercise of
all such Options, plus, in the case of such Options which relate to Convertible
Securities, the minimum aggregate amount of additional consideration, if any,
payable to the Corporation upon the issuance of sale or such Convertible
Securities and the conversion or exchange thereof, by (b) the total maximum
number of shares of Common Stock issuable upon the exercise of such Options and
upon the conversion or exchange of all such Convertible Securities issuable upon
the exercise of such Options. No further adjustment of the Series A Conversion
Price will be made when Convertible Securities are actually issued upon the
exercise of such Options or when Common Stock is actually issued upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities. No further adjustment of the Series B Conversion Price will be made
when Convertible Securities are actually issued upon the exercise of such
Options or when Common Stock is actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities. No further
adjustment of the Series E Conversion Price will be made when Convertible
Securities are actually issued upon the exercise of such Options or when Common
Stock is actually issued upon the exercise of such Options or the conversion or
exchange of such Convertible Securities. No further adjustment of the Series F
Conversion Price will be made when Convertible Securities are actually issued
upon the exercise of such Options or when Common Stock is actually issued upon
the exercise of such Options or the conversion or exchange of such Convertible
Securities. No further adjustment of the Series H Conversion Price will be made
when Convertible Securities are actually issued upon the exercise of such
Options or when Common Stock is actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities.
(ii) If the Corporation in any manner issues or sells any Convertible
Securities and the price per share for which Common Stock is issuable upon such
conversion or exchange is less than the Series A Conversion Price in effect
immediately prior to the time of such issue or sale, then the maximum number of
shares of Common Stock issuable upon conversion or exchange of such Convertible
Securities will be deemed to be outstanding and to have been issued and sold by
the Corporation for such price per share. If the Corporation in any manner
issues or sells any Convertible Securities and the price per share for which
Common Stock is issuable upon such conversion or exchange is less than the
Series B Conversion Price in effect immediately prior to the time of such issue
or sale, then the maximum number of shares of Common Stock issuable upon
conversion or exchange of such
20
<PAGE>
Convertible Securities will be deemed to be outstanding and to have been issued
and sold by the Corporation for such price per share. If the Corporation in any
manner issues or sells any Convertible Securities and the price per share for
which Common Stock is issuable upon such conversion or exchange is less than the
Series E Conversion Price in effect immediately prior to the time of such issue
or sale, then the maximum number of shares of Common Stock issuable upon
conversion or exchange of such Convertible Securities will be deemed to be
outstanding and to have been issued and sold by the Corporation for such price
per share. If the Corporation in any manner issues or sells any Convertible
Securities and the price per share for which Common Stock is issuable upon such
conversion or exchange is less than the Series F Conversion Price in effect
immediately prior to the time of such issue or sale, then the maximum number of
shares of Common Stock issuable upon conversion or exchange of such Convertible
Securities will be deemed to be outstanding and to have been issued and sold by
the Corporation for such price per share. If the Corporation in any manner
issues or sells any Convertible Securities and the price per share for which
Common Stock is issuable upon such conversion or exchange is less than the
Series H Conversion Price in effect immediately prior to the time of such issue
or sale, then the maximum number of shares of Common Stock issuable upon
conversion or exchange of such Convertible Securities will be deemed to be
outstanding and to have been issued and sold by the Corporation for such price
per share. For the purposes of this paragraph, the "price per share for which
Common Stock is issuable" will be determined by dividing (a) the total amount
received or receivable by the Corporation as consideration for the issue or sale
of such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (b) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities. No
further adjustment of the Series A Conversion Price will be made when Common
Stock is actually issued upon the conversion or exchange of such Convertible
Securities, and if any such issue or sale of such Convertible Securities is made
upon exercise of any Options for which adjustments of the Series A Conversion
Price had been or are to be made pursuant to other provisions of this part 5, no
further adjustment of the Series A Conversion Price will be made by reason of
such issue or sale. No further adjustment of the Series B Conversion Price will
be made when Common Stock is actually issued upon the conversion or exchange of
such Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustments of the
Series B Conversion Price had been or are to be made pursuant to other
provisions of this part 5, no further adjustment of the Series B Conversion
Price will be made by reason of such issue or sale. No further adjustment of the
Series E Conversion Price will be made when Common Stock is actually issued upon
the conversion or exchange of such Convertible Securities, and if any such issue
or sale of such Convertible Securities is made upon exercise of any Options for
which adjustments of the Series E Conversion Price had been or are to be made
pursuant to other provisions of this part 5, no further adjustment of the Series
E Conversion Price will be made by reason of such issue or sale. No further
adjustment of the Series F Conversion Price will be made when Common Stock is
actually issued upon the conversion or exchange of such Convertible Securities,
and if any such issue or sale of such Convertible Securities is made upon
exercise of any Options for which adjustments of the Series F Conversion Price
had been or are to be made pursuant to other provisions of this part 5, no
further adjustment of the Series F Conversion Price will be made by reason of
such issue or sale. No further adjustment of the Series H Conversion Price will
be made when Common Stock is actually issued upon the conversion or exchange of
such Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustments of the
Series H Conversion Price had been or are to be made pursuant to other
provisions of this part 5, no further adjustment of the Series H Conversion
Price will be made by reason of such issue or sale.
(iii) If the purchase price provided for in any Options, the
additional consideration, if any, payable upon the conversion or exchange of any
Convertible Securities, or the rate at which any Convertible Securities are
convertible into or exchangeable for Common Stock changes at any time, the
Series A Conversion Price in effect at the time of such change will be
readjusted to the Series A Conversion Price which would have been in effect at
such time had such Options or Convertible Securities still outstanding provided
for such changed purchase price, additional consideration or changed conversion
rate, as the case may be, at the time initially granted, issued or sold. If the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the conversion or exchange of any Convertible Securities, or
the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock changes at any time, the Series B Conversion Price
in effect at the time of such change will be readjusted to the Series B
Conversion Price which would have been in effect at such time had such Options
or Convertible Securities still outstanding provided for such changed purchase
price,
21
<PAGE>
additional consideration or changed conversion rate, as the case may be, at the
time initially granted, issued or sold. If the purchase price provided for in
any Options, the additional consideration, if any, payable upon the conversion
or exchange of any Convertible Securities, or the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock changes at any
time, the Series E Conversion Price in effect at the time of such change will be
readjusted to the Series E Conversion Price which would have been in effect at
such time had such Options or Convertible Securities still outstanding provided
for such changed purchase price, additional consideration or changed conversion
rate, as the case may be, at the time initially granted, issued or sold. If the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the conversion or exchange of any Convertible Securities, or
the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock changes at any time, the Series F Conversion Price
in effect at the time of such change will be readjusted to the Series F
Conversion Price which would have been in effect at such time had such Options
or Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold. If the purchase price provided
for in any Options, the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock
changes at any time, the Series H Conversion Price in effect at the time of such
change will be readjusted to the Series H Conversion Price which would have been
in effect at such time had such Options or Convertible Securities still
outstanding provided for such changed purchase price, additional consideration
or changed conversion rate, as the case may be, at the time initially granted,
issued or sold.
(iv) Upon the expiration of any Option or the termination of any right
to convert or exchange any Convertible Security without the exercise of any such
Option or right, the Series A Conversion Price then in effect hereunder will be
adjusted to the Series A Conversion Price which would have been in effect at the
time of such expiration or termination had such Option or Convertible Security,
to the extent outstanding immediately prior to such expiration or termination,
never been issued. Upon the expiration of any Option or the termination of any
right to convert or exchange any Convertible Security without the exercise of
any such Option or right, the Series B Conversion Price then in effect hereunder
will be adjusted to the Series B Conversion Price which would have been in
effect at the time of such expiration or termination had such Option or
Convertible Security, to the extent outstanding immediately prior to such
expiration or termination,
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<PAGE>
never been issued. Upon the expiration of any Option or the termination of any
right to convert or exchange any Convertible Security without the exercise of
any such Option or right, the Series E Conversion Price then in effect hereunder
will be adjusted to the Series E Conversion Price which would have been in
effect at the time of such expiration or termination had such Option or
Convertible Security, to the extent outstanding immediately prior to such
expiration or termination, never been issued. Upon the expiration of any Option
or the termination of any right to convert or exchange any Convertible Security
without the exercise of any such Option or right, the Series F Conversion Price
then in effect hereunder will be adjusted to the Series F Conversion Price which
would have been in effect at the time of such expiration or termination had such
Option or Convertible Security, to the extent outstanding immediately prior to
such expiration or termination, never been issued. Upon the expiration of any
Option or the termination of any right to convert or exchange any Convertible
Security without the exercise of any such Option or right, the Series H
Conversion Price then in effect hereunder will be adjusted to the Series H
Conversion Price which would have been in effect at the time of such expiration
or termination had such Option or Convertible Security, to the extent
outstanding immediately prior to such expiration or termination, never been
issued.
(v) If any Common Stock, Option or Convertible Security is issued
or sold or deemed to have been issued or sold for cash, the consideration
received therefor will be deemed to be the net amount received by the
Corporation therefor. In case any Common Stock, Options or Convertible
Securities are issued or sold for a consideration other than cash, the amount of
the consideration other than cash received by the Corporation will be the Fair
Market Value thereof as of the date of receipt. If any Common Stock, Option or
Convertible Security is issued in connection with any merger in which the
Corporation is the surviving corporation, the amount of consideration therefor
will be deemed to be the Fair Market Value of such portion of the net assets and
business of the non-surviving corporation as is attributable to such Common
Stock, Options or Convertible Securities, as the case may be.
(vi) In case any Option is issued in connection with the issue or
sale of other securities of the Corporation, together comprising one integrated
transaction in which no specific consideration is allocated to such Option by
the parties thereto, the Option will be deemed to have been issued for a
consideration of $0.01.
(vii) The number of shares of Common Stock outstanding at any given
time does not include shares owned or held by or for the account of the
Corporation or any Subsidiary, and the disposition of any shares so owned or
held will be considered an issue or sale of Common Stock.
(viii) If the Corporation takes a record of the holders of Common
Stock for the purpose of entitling them (a) to receive a dividend or other
distribution payable in Common Stock, Options or Convertible Securities or (b)
to subscribe for or purchase Common Stock, Options or Convertible Securities,
then such record date will be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon the declaration
of such dividend or upon the making of such other distribution or the date of
the granting of such right of subscription or purchase, as the case may be.
5D. Subdivision or Combination of Common Stock. If the Corporation at
any time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Series A Conversion Price, Series B Conversion
Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion
Price, Series F Conversion Price, Series G Conversion Price and Series H
Conversion Price in effect immediately prior to such subdivision will be
proportionately reduced, and if the
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Corporation at any time combines (by reverse stock split or otherwise) one or
more classes of its outstanding shares of Common Stock into a smaller number of
shares, the Series A Conversion Price, Series B Conversion Price, Series C
Conversion Price, Series D Conversion Price, Series E Conversion Price, Series F
Conversion Price, Series G Conversion Price and Series H Conversion Price in
effect immediately prior to such combination will be proportionately increased.
5E. Certain Events. If any event occurs of the type contemplated by the
provisions of this part 5 but not expressly provided for by such provisions
(excluding for purposes of the Series C Conversion Price, the Series D
Conversion Price and the Series G Conversion Price the matters described in
subparts 5B and 5C), then the Board of Directors will make an appropriate
adjustment in the Series A Conversion Price, Series B Conversion Price, Series C
Conversion Price, Series D Conversion Price, Series E Conversion Price, Series F
Conversion Price, Series G Conversion Price and Series H Conversion Price so as
to protect the rights of the holders of shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock, Series F Preferred Stock, Series G Preferred Stock and
Series H Preferred Stock; provided that no such adjustment will increase the
Series A Conversion Price, Series B Conversion Price, Series C Conversion Price,
Series D Conversion Price, Series E Conversion Price, Series F Conversion Price,
Series G Conversion Price or Series H Conversion Price as otherwise determined
pursuant to this part 5 or decrease the number of shares of Common Stock
issuable upon conversion of each share of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock, Series G Preferred Stock and Series H
Preferred Stock.
5F. Notices.
(i) Immediately upon any adjustment of the Series A Conversion
Price, the Corporation will give written notice thereof to all holders of shares
of Series A Preferred Stock. Immediately upon any adjustment of the Series B
Conversion Price, the Corporation will give written notice thereof to all
holders of shares of Series B Preferred Stock. Immediately upon any adjustment
of the Series C Conversion Price, the Corporation will give written notice
thereof to all holders of shares of Series C Preferred Stock. Immediately upon
any adjustment of the Series D Conversion Price, the Corporation will give
written notice thereof to all holders of shares of Series D Preferred Stock.
Immediately upon any adjustment of the Series E Conversion Price, the
Corporation will give written notice thereof to all holders of shares of Series
E Preferred Stock. Immediately upon any adjustment of the Series F Conversion
Price, the Corporation will give written notice thereof to all holders of shares
of Series F Preferred Stock. Immediately upon any adjustment of the Series G
Conversion Price, the Corporation will give written notice thereof to all
holders of shares of Series G Preferred Stock. Immediately upon any adjustment
of the Series H Conversion Price, the Corporation will give written notice
thereof to all holders of shares of Series H Preferred Stock.
(ii) The Corporation will give written notice to all holders of
shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock, Series F Preferred
Stock, Series G Preferred Stock and Series H Preferred Stock at least 10 days
prior to the date on which the Corporation closes its books or takes a record
(a) with respect to any dividend or distribution upon Common Stock, (b) with
respect to any pro
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<PAGE>
rata subscription offer to holders of Common Stock or (c) for determining rights
to vote with respect to any matter referred to in paragraph 4B, 4C, 4D, 4E or 4F
hereof, as applicable.
5G. Automatic Conversion. All of the outstanding shares of Series A
Preferred Stock shall be converted into Common Stock at the Series A Conversion
Price then in effect without any further action on the part of the Corporation
or any holder at the earlier to occur of (i) the closing and funding of a
Qualified Public Offering or (ii) the date that through the redemption or
conversion of Series A Preferred Stock, fewer than 266,666 shares of Series A
Preferred Stock remain outstanding. All of the outstanding shares of Series B
Preferred Stock shall be converted into Common Stock at the Series B Conversion
Price then in effect without any further action on the part of the Corporation
or any holder at the earlier to occur of (i) the closing and funding of a
Qualified Public Offering or (ii) the date that through the redemption or
conversion of Series B Preferred Stock, fewer than 55-2/3% of the total number
of shares of Series B Preferred Stock issued and sold pursuant to paragraph 1C
of the February Purchase Agreement remain outstanding. All of the outstanding
shares of Series C Preferred Stock shall be converted into Common Stock at the
Series C Conversion Price then in effect without any further action on the part
of the Corporation or any holder at the earlier to occur of (i) the closing and
funding of a Qualified Public Offering or (ii) upon the date that the Series B
Preferred Stock is otherwise automatically converted into Common Stock. All of
the outstanding shares of Series D Preferred Stock shall be converted into
Common Stock at the Series D Conversion Price then in effect without any further
action on the part of the Corporation or any holder at the earlier to occur of
(i) the closing and funding of a Qualified Public Offering or (ii) the date that
the Series B Preferred Stock is otherwise automatically converted into Common
Stock. All of the outstanding shares of Series E Preferred Stock shall be
converted into Common Stock at the Series E Conversion Price then in effect
without any further action on the part of the Corporation or any holder at the
closing and funding of a Qualified Public Offering. All of the outstanding
shares of Series F Preferred Stock shall be converted into Common Stock at the
Series F Conversion Price then in effect without any further action on the part
of the Corporation or any holder at the closing and funding of a Qualified
Public Offering. All of the outstanding shares of Series H Preferred Stock
shall be converted into Common Stock at the Series H Conversion Price then in
effect without any further action on the part of the Corporation or any holder
at the closing and funding of a Qualified Public Offering. All of the
outstanding shares of Series G Preferred Stock shall be converted into Common
Stock at the Series G Conversion Price then in effect without any further action
on the part of the Company or any holder at the earlier to occur of (i) the
closing and funding of a Qualified Public Offering, (ii) the date that the
Series F Preferred Stock is automatically converted into Common Stock or (iii)
such time as fewer than 25,000 shares of Series G Preferred Stock remain
outstanding.
Part 6. Registration of Transfer.
The Corporation will keep at its principal office a register for the
registration of shares of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock,
Series F Preferred Stock, Series G Preferred Stock and Series H Preferred Stock.
Upon the surrender of any certificate representing shares of any such series of
Preferred Stock at such place, the Corporation will, at the request of the
record holder of such certificate, execute and deliver (at the Corporation's
expense) a new certificate or certificates in exchange therefor representing in
the aggregate the number of shares of Preferred Stock represented
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<PAGE>
by the surrendered certificate. Each such new certificate will be registered in
such name and will represent such number of shares of Preferred Stock as is
requested by the holder of the surrendered certificate and will be substantially
identical in form to the surrendered certificate, and dividends will accrue on
the shares of Preferred Stock represented by such new certificate from the date
to which dividends have been fully paid on such shares of Preferred Stock
represented by the surrendered certificate.
Part 7. Replacement.
Upon receipt of evidence reasonably satisfactory to the Corporation (an
affidavit of the registered holder will be satisfactory) of the ownership and
the loss, theft, destruction or mutilation of any certificate evidencing shares
of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock, Series F Preferred Stock,
Series G Preferred Stock and Series H Preferred Stock, and in the case of any
such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Corporation or, in the case of any mutilation, upon
surrender of such certificate the Corporation will (at its expense) execute and
deliver in lieu of such certificate a new certificate of like kind representing
the number of shares of Preferred Stock represented by such lost, stolen,
destroyed or mutilated certificate, and dividends will accrue on the shares of
Preferred Stock represented by such new certificate from the date to which
dividends have been fully paid on such lost, stolen, destroyed or mutilated
certificate.
Part 8. Definitions.
"Approved Plan" means the Corporation's 1995 Stock Option/Stock Issuance
Plan as in effect as of the date hereof, as amended from time to time, and any
other written stock option, stock purchase or similar incentive plan; provided
that any such amendment or other plan is approved by a majority of the Board of
Directors, with a majority of the Purchaser Directors concurring.
"April Purchase Agreement" means the Stock Purchase Agreement, dated as of
April 22, 1998 by and among the Corporation, the original purchasers of the
Series F Preferred Stock, as such agreement may from time to time be amended in
accordance with its terms.
"Board of Directors" shall mean the board of directors of the Corporation.
"Common Stock" means, collectively, the Corporation's Common Stock, par
value $0.01 per share, and any capital stock of any class of the Corporation
hereafter authorized which is not limited to a fixed sum or percentage of par or
stated value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Corporation.
"Convertible Securities" means securities convertible into or exchangeable
for Common Stock or other Equity Securities.
"Equity Security" means any stock or similar security, including without
limitation, securities containing equity features and securities containing
profit participation features, or any security convertible or exchangeable, with
or without consideration, into or for any stock or similar
26
<PAGE>
security, or any security carrying any warrant or right to subscribe for or
purchase any stock or similar security, or any such warrant or right; provided,
that the term "Equity Security" shall exclude the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock, Series F Preferred Stock, Series G Preferred Stock and
Series H Preferred Stock and the Common Stock issuable upon conversion thereof.
"February Purchase Agreement" means the Stock Purchase Agreement, dated as
of February 5, 1996, by and among the Corporation, the original purchasers of
the Series A Preferred Stock and Series B Preferred Stock and certain other
persons named therein, as such agreement may from time to time be amended in
accordance with its terms.
"Fair Market Value" means the fair market value as determined by a majority
of the Board of Directors with a majority of the Purchaser Directors concurring.
"July Purchase Agreement" means the Stock Purchase Agreement, dated as of
July 19, 1996, by and among the Corporation and CNET, Inc., as such agreement
may from time to time be amended in accordance with its terms.
"June Purchase Agreement" means the Stock Purchase Agreements, dated as of
June 6, 1997 and July 17, 1997, by and among the Corporation and the original
purchasers of the Series E Preferred Stock, as each such agreement may be
amended from time to time in accordance with its terms.
"November Purchase Agreement" means the Stock Purchase Agreement, dated as
of November 30, 1998, by and among the Corporation and the original purchasers
of the Series H Preferred Stock, as each such agreement may be amended from time
to time in accordance with its terms.
"Options" means any rights or options to subscribe for or to purchase
Common Stock or other Equity Securities.
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization
and a governmental entity or any department, agency or political subdivision
thereof.
"Purchaser Directors" means the directors designated by the holders of
Preferred Stock pursuant to the Stockholders Agreement.
"Qualified Public Offering" means any underwritten offering by the
Corporation of shares of Common Stock to the public pursuant to an effective
registration statement under the Securities Act of 1933, then in effect, or any
comparable statement under any similar federal statute then in force, in which
(i) the aggregate cash proceeds to be received by the Corporation and selling
stockholders from such offering (without deducting underwriting discounts,
expenses and commissions) are at least $20,000,000, and (ii) the price per share
paid by the public for such shares is at least $3.00 if determined with respect
to Series A Preferred Stock, Series C Preferred Stock or Series D Preferred
Stock (as adjusted for any stock dividends, combinations or splits with respect
to
27
<PAGE>
such shares), $4.95 if determined with respect to Series B Preferred Stock (as
adjusted for any stock dividends, combinations or splits with respect to such
shares), $8.48 if determined with respect to Series E Preferred Stock (as
adjusted for any stock dividends, combinations or splits with respect to such
shares), $13.09 if determined with respect to Series F Preferred Stock or Series
G Preferred Stock (as adjusted for any stock dividends, combinations or splits
with respect to such shares) or $13.07 if determined with respect to Series H
Preferred Stock (as adjusted for any stock dividends, combinations or splits
with respect to such shares).
"Significant Subsidiary" means any Subsidiary which would constitute a
significant subsidiary within the meaning of Rule 1-02 of Regulation S-X
promulgated by the Securities and Exchange Commission or any successor rule.
"Stockholders Agreement" means the Sixth Amended and Restated Stockholders
Agreement dated November 30, 1998 by and among the Corporation, the original
purchasers of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series E Preferred Stock, Series F Preferred Stock and Series H
Preferred Stock, Ross B. Garber and Neil Webber and such other parties as may
from time to time and with the consent of the Corporation becomes parties
thereto, as such agreement may be amended from time to time.
"Subsidiary" means any corporation more than 50% of the outstanding voting
securities are owned by the Corporation or any Subsidiary, directly or
indirectly, or a partnership or limited liability company in which the
Corporation or any Subsidiary is a general partner or manager or holds interests
entitling it to receive more than 50% of the profits or losses of the
partnership or limited liability company.
Part 9. Amendment and Waiver.
No amendment, modification or waiver of this Article V.B will be binding or
effective with respect to any provision of these terms without the affirmative
vote of the holders of at least a majority of the shares of each such series of
Preferred Stock outstanding at the time such action is taken, in each case,
voting separately as a class and subject to any more protective requirements
contained in Part 4 hereof; provided that no such action will change (a) the
rate at which or the manner in which dividends on the shares of each such series
of Preferred Stock accrue or the times at which such dividends become payable,
(b) the amount payable to holders of each such series of Preferred Stock or the
participation by the holders of shares of each such series of Preferred Stock in
payments or distributions of any assets or surplus funds of the Corporation upon
the liquidation, dissolution or winding up of the Corporation (provided that
this clause (b) shall not require the approval of the holders of any such series
of Preferred Stock prior to the authorization, designation or issuance of any
class or series of stock ranking on a parity with any such series of Preferred
Stock as to participation in payments or distributions upon any such
liquidation, dissolution or winding up), (c) the amount payable on redemption of
the shares of Series A Preferred Stock, Series B Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock or Series H Preferred Stock or the
times at which redemption of shares of Series A Preferred Stock, Series B
Preferred Stock, Series E Preferred Stock, Series F Preferred Stock or Series H
Preferred Stock is to occur, (d) the Series A Conversion Price, the Series B
Conversion Price, the Series C Conversion Price, the Series D Conversion Price,
the Series E Conversion Price, the Series F Conversion Price, the
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<PAGE>
Series G Conversion Price or the Series H Conversion Price or the number of
shares or class of stock into which the shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock, Series F Preferred Stock, Series G Preferred Stock or
Series H Preferred Stock are convertible, or (e) the percentage required to
approve any change described in this part 9, without (i) the affirmative vote of
the holders of all the shares of Series A Preferred Stock then outstanding,
voting separately as a class, as to such matters directly affecting the Series A
Preferred Stock, (ii) the affirmative vote of the holders of all the shares of
Series B Preferred Stock then outstanding, voting separately as a class, as to
such matters directly affecting the Series B Preferred Stock, (iii) the
affirmative vote of the holders of all of the shares of Series C Preferred Stock
then outstanding, voting separately as a class, as to such matters directly
affecting the Series C Preferred Stock, (iv) the affirmative vote of the holders
of all of the Series D Preferred Stock then outstanding, voting separately as a
class, as to such matters directly affecting the Series D Preferred Stock, (v)
the affirmative vote of the holders of all of the Series E Preferred Stock then
outstanding, voting separately as a class, as to such matters directly affecting
the Series E Preferred Stock, (vi) the affirmative vote of the holders of all of
the shares of Series F Preferred Stock then outstanding, voting separately as a
class, as to such matters directly affecting the Series F Preferred Stock, (vii)
the affirmative vote of the holders of all of the shares of Series G Preferred
Stock then outstanding, voting separately as a class, as to such matters
directly affecting the Series G Preferred Stock, (viii) the affirmative vote of
the holders of all of the shares of Series H Preferred Stock then outstanding,
voting separately as a class, as to such matters directly affecting the Series H
Preferred Stock; and provided further that no change in the terms of this part 9
may be accomplished by merger or consolidation of the Corporation with another
corporation unless the Corporation has obtained the prior approval of the
holders of the applicable percentage of the shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock, Series F Preferred Stock, Series G Preferred Stock and
Series H Preferred Stock then outstanding.
C. Common Stock. The Common Stock shall be subject to the prior and
superior rights of the Preferred Stock and of any series thereof. Each share of
Common Stock shall be equal to every other share of Common Stock. The holders
of shares of Common Stock shall be entitled to one vote of each share of such
stock upon matters presented to the stockholders.
ARTICLE VI.
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived any improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article to authorize Corporation action
further eliminating or limiting the personal liability of directors then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law as so amended.
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<PAGE>
ARTICLE VII.
The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the whole Board of Directors shall be fixed by, or in the
manner provided in, the Bylaws of the Corporation.
ARTICLE VIII.
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE IX.
Election of directors at an annual or special meeting of stockholders need
not be by written ballot unless the Bylaws of the Corporation shall so provide.
ARTICLE X.
The Corporation expressly elects not to be governed by Section 203 of the
Delaware General Corporation Law.
ARTICLE XI.
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Amended and Restated Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
on stockholders herein are granted subject to this reservation.
ARTICLE XII.
Except as otherwise provided in this Amended and Restated Certificate of
Incorporation, in furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, repeal, alter,
amend and rescind any or all of the Bylaws of the Corporation."
* * *
THIRD: That the foregoing amendment and restatement was approved by
the holders of the requisite number of shares of said corporation in accordance
with Section 228 of the General Corporation Law.
FOURTH: That said amendment and restatement was duly adopted in
accordance with the provisions of Section 242 and 245 of the General Corporation
Law.
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<PAGE>
IN WITNESS WHEREOF, Vignette Corporation has caused this Certificate
to be executed by Gregory A. Peters, its President, this 30th day of November,
1998.
VIGNETTE CORPORATION
By: /s/ Gregory A. Peters
---------------------------------------------
Gregory A. Peters,
President and Chief Executive Officer
31
<PAGE>
EXHIBIT 3.3
AMENDED AND RESTATED BYLAWS
OF
VIGNETTE CORPORATION,
A DELAWARE CORPORATION
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office shall be at the
-----------------
office of The Corporation Trust Company.
Section 2. Other Offices. The corporation may also have offices at
-------------
such other places both within and without the State of Delaware as the Board of
Directors may on an annual basis determine or the business of the corporation
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Annual Meeting. An annual meeting of the stockholders for
--------------
the election of directors shall be held at such place either within or without
the State of Delaware as shall be designated on an annual basis by the Board of
Directors and stated in the notice of the meeting. Meetings of stockholders for
any other purpose may be held at such time and place, within or without the
State of Delaware, as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
Section 2. Notice of Annual Meeting. Written notice of the annual
------------------------
meeting stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten (10) nor more
than sixty (60) days before the date of the meeting.
Section 3. Voting List. The officer who has charge of the stock
-----------
ledger of the corporation shall prepare and make, or cause a third party to
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
<PAGE>
Section 4. Special Meetings. Special meetings of the stockholders of
----------------
this corporation, for any purpose or purposes, unless otherwise prescribed by
statute or by the Certificate of Incorporation, shall be called by the President
or Secretary at the request in writing of the President, a majority of the
members of the Board of Directors or holders of at least 10% of the total voting
power of all outstanding shares of stock of this corporation then entitled to
vote, and may not be called absent such a request. Such request shall state the
purpose or purposes of the proposed meeting.
Section 5. Notice of Special Meetings. As soon as reasonably
--------------------------
practicable after receipt of a request as provided in Section 4 of this Article
II, written notice of a special meeting, stating the place, date (which shall be
not less than ten (10) nor more than sixty (60) days from the date of the
notice) and hour of the special meeting and the purpose or purposes for which
the special meeting is called, shall be given to each stockholder entitled to
vote at such special meeting.
Section 6. Scope of Business at Special Meeting. Business transacted
------------------------------------
at any special meeting of stockholders shall be limited to the purposes stated
in the notice.
Section 7. Quorum. The holders of a majority of the stock issued and
------
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business, except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the chairman of the meeting or
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting as provided in Section 5
of this Article II.
Section 8. Qualifications to Vote. The stockholders of record on the
----------------------
books of the corporation at the close of business on the record date as
determined by the Board of Directors and only such stockholders shall be
entitled to vote at any meeting of stockholders or any adjournment thereof.
Section 9. Record Date. The Board of Directors may fix a record date
-----------
for the determination of the stockholders entitled to notice of or to vote at
any stockholders' meeting and at any adjournment thereof, and to fix a record
date for any other purpose. The record date shall not be more than sixty (60)
nor less than ten (10) days before the date of such meeting. If no record date
is fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given, or
if notice is waived, at the close of business on the day next
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preceding the day on which the meeting is held. A determination of stockholders
of record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 10. Action at Meetings. When a quorum is present at any
------------------
meeting, the vote of the holders of a majority of the stock having voting power
present in person or represented by proxy shall decide any question brought
before such meeting, unless the question is one upon which by express provision
of applicable law or of the Certificate of Incorporation, a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
Section 11. Voting and Proxies. Unless otherwise provided in the
------------------
Certificate of Incorporation, each stockholder shall at every meeting of the
stockholders be entitled to one (1) vote in person or by proxy for each share of
the capital stock having voting power held by such stockholder, but no proxy
shall be voted on after three (3) years from its date, unless the proxy provides
for a longer period. Each proxy shall be revocable unless expressly provided
therein to be irrevocable and unless it is coupled with an interest sufficient
in law to support an irrevocable power.
Section 12. Nominations for Board of Directors. Nominations for
----------------------------------
election to the Board of Directors must be made by the Board of Directors or by
any stockholder of any outstanding class of capital stock of the corporation
entitled to vote for the election of directors. Nominations, other than those
made by the Board of Directors of the corporation, must be preceded by
notification in writing in fact received by the Secretary of the corporation not
less than sixty (60) days prior to any meeting of stockholders called for the
election of directors. Such notification shall contain the written consent of
each proposed nominee to serve as a director if so elected and the following
information as to each proposed nominee and as to each person, acting alone or
in conjunction with one or more other persons as a partnership, limited
partnership, syndicate or other group, who participates or is expected to
participate in making such nomination or in organizing, directing or financing
such nomination or solicitation of proxies to vote for the nominee:
(a) the name, age, residence, address, and business address
of each proposed nominee and of each such person;
(b) the principal occupation or employment, the name, type
of business and address of the corporation or other organization
in which such employment is carried on of each proposed nominee
and of each such person;
(c) the amount of stock of the corporation owned
beneficially, either directly or indirectly, by each proposed
nominee and each such person; and
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(d) a description of any arrangement or understanding of
each proposed nominee and of each such person with each other or
any other person regarding future employment or any future
transaction to which the corporation will or may be a party.
The presiding officer of the meeting shall have the authority to
determine and declare to the meeting that a nomination not preceded by
notification made in accordance with the foregoing procedure shall be
disregarded.
Section 13. Stockholder Proposals for Meetings. At any meeting of the
----------------------------------
stockholders, only such business shall be conducted as shall be properly before
the meeting. To be properly before a meeting, business must be (a) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (b) otherwise properly brought before the meeting by
or at the direction of the Board of Directors, or (c) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought before
a meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary. To be timely, a stockholder's notice must
be delivered to or mailed and received at the principal place of business of the
corporation not less than thirty (30) days nor more than sixty (60) days prior
to the meeting; provided, however, that in the event that less than forty (40)
days notice or prior public disclosure of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must be received
not later than the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made. A stockholder's written notice to the Secretary shall set forth as to
each matter the stockholder proposes to bring before the meeting (a) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting, (b) the name and address as
they appear on the corporation's books of the stockholder proposing such
business, (c) the class and number of shares of the corporation which are
beneficially owned by such stockholder, and (d) any material interest of such
stockholder in such business. Notwithstanding anything in these Bylaws to the
contrary, no business shall be conducted at a meeting unless properly brought
before such meeting in accordance with the procedures set forth in this Section
13 of Article II. The chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section 13 of
Article II and if it shall be so determined, the chairman of the meeting shall
so declare this to the meeting and such business not properly brought before the
meeting shall not be transacted.
Section 14. Action Without a Meeting. Unless otherwise provided in
------------------------
the Certificate of Incorporation, any action required to be taken at any annual
or special meeting of stockholders of the corporation, or any action which may
be taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take
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such action at a meeting at which all shares entitled to vote thereon were
present and voted. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. Powers. The business of the corporation shall be managed
------
by or under the direction of its Board of Directors, which may exercise all such
powers of the corporation and do all such lawful acts and things as are not by
applicable law or by the Certificate of Incorporation or by these Bylaws
directed or required to be exercised or done by the stockholders.
Section 2. Number; Election; Tenure and Qualification. The number of
------------------------------------------
directors which shall constitute the whole Board of Directors shall be fixed
from time to time by resolution of the Board of Directors or by the Stockholders
at an annual meeting of the Stockholders provided that the number of directors
shall be not less than one (1) nor more than seven (7). With the exception of
the first Board of Directors, which shall be named in the Certificate of
Incorporation, and except as provided in the corporation's Certificate of
Incorporation or in Section 3 of this Article III, the directors shall be
elected at the annual meeting of the stockholders by a plurality vote of the
shares represented in person or by proxy and each director elected shall hold
office until his successor is elected and qualified unless he shall resign,
become disqualified, disabled, or otherwise removed. Directors need not be
stockholders.
Section 3. Vacancies and Newly Created Directorships. Unless
-----------------------------------------
otherwise provided in the Certificate of Incorporation, vacancies and newly-
created directorships resulting from any increase in the authorized number of
directors may be filled by a majority of the directors then in office, though
less than a quorum, or by a sole remaining director. The directors so chosen
shall serve for the remainder of the term of the vacated directorships being
filled and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by statute.
Section 4. Location of Meetings. The Board of Directors of the
--------------------
corporation may hold meetings, both regular and special, either within or
without the State of Delaware.
Section 5. Meeting of Newly Elected Board of Directors. The first
-------------------------------------------
meeting of each newly elected Board of Directors shall be held immediately
following the annual meeting of stockholders and no notice of such meeting shall
be necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event such meeting is not
held at such time, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
Board of Directors, or as shall be specified in a written waiver signed by all
of the directors.
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Section 6. Regular Meetings. Regular meetings of the Board of
----------------
Directors may be held upon at least seven (7) days prior written notice at such
time and at such place as shall from time to time be determined by the Board of
Directors; provided that any director who is absent
when such a determination is made shall be given notice of such location.
Notice may be waived in accordance with Section 229 of the Delaware General
Corporation Law.
Section 7. Special Meetings. Special meetings of the Board of
----------------
Directors may be called by the President on seven (7) days' notice to each
director by mail or two (2) days' notice to each director by overnight courier
service or facsimile; special meetings shall be called by the President or
Secretary in a like manner and on like notice on the written request of two (2)
directors unless the Board of Directors consists of only one (1) director, in
which case special meetings shall be called by the President or Secretary in a
like manner and on like notice on the written request of the sole director.
Notice may be waived in accordance with Section 229 of the Delaware General
Corporation Law.
Section 8. Quorum and Action at Meetings. At all meetings of the
-----------------------------
Board of Directors, a majority of the directors then in office shall constitute
a quorum for the transaction of business, and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors, except as may be otherwise specifically provided by
statute or by the Certificate of Incorporation. If a quorum shall not be
present at any meeting of the Board of Directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 9. Action Without a Meeting. Unless otherwise restricted by
------------------------
the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all members of the board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 10. Telephonic Meeting. Unless otherwise restricted by the
------------------
Certificate of Incorporation or these Bylaws, members of the Board of Directors,
or any committee designated by the Board of Directors, may participate in a
meeting of the Board of Directors, or any committee, upon proper notice duly
given, by means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other, and
such participation in a meeting shall constitute presence in person at the
meeting.
Section 11. Committees. The Board of Directors may, by resolution
----------
passed by a majority of the whole board, designate one or more committees, each
committee to consist of one (1) or more of the directors of the corporation.
The Board of Directors may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence of disqualification of a member of a
committee, the member or members thereof present at any meeting and not
disqualified from
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voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
Section 12. Committee Authority. Any such committee, to the extent
-------------------
provided in the resolution of the Board of Directors, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, recommending to the
stockholders a dissolution of the corporation or a revocation of a dissolution,
amending the Bylaws of the corporation, or any action requiring unanimous
consent of the Board of Directors pursuant to the terms of the Certificate of
Incorporation; and, unless the resolution or the Certificate of Incorporation
expressly so provides, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the Board of Directors.
Section 13. Committee Minutes. Each committee shall keep regular
-----------------
minutes of its meetings and report the same to the Board of Directors when
required.
Section 14. Compensation of Directors. Unless otherwise restricted by
-------------------------
the Certificate of Incorporation or these Bylaws, the Board of Directors shall
have the authority to fix the compensation of directors. The directors may be
paid their expenses, if any, of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated salary as director. No such payment shall
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
Section 15. Resignation. Any director or officer of the corporation
-----------
may resign at any time. Each such resignation shall be made in writing and
shall take effect at the time specified therein, or, if no time is specified, at
the time of its receipt by either the Board of Directors, the President or the
Secretary. The acceptance of a resignation shall not be necessary to make it
effective unless expressly so provided in the resignation.
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ARTICLE IV
NOTICES
Section 1. Notice to Directors and Stockholders. Whenever, under the
------------------------------------
provisions of the statutes or of the Certificate of Incorporation or of these
Bylaws, notice is required to be given to any director or stockholder, it shall
not be construed to mean personal notice, but such notice may be given in
writing, by mail, addressed to such director or stockholder, at his address as
it appears on the records of the corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. An affidavit of the Secretary or an
Assistant Secretary or of the transfer agent of the corporation that the notice
has been given shall in the absence of fraud, be prima facie evidence of the
facts stated therein. Notice to directors may also be given by telephone,
facsimile or telegram.
Section 2. Waiver. Whenever any notice is required to be given under
------
the provisions of the statutes or of the Certificate of Incorporation or of
these Bylaws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto. The written waiver need not specify the business
to be transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors, or members of a committee of directors. Attendance of
a person at a meeting shall constitute a waiver of notice of such meeting,
except when the person attends a meeting for the express purpose of objecting at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
ARTICLE V
OFFICERS
Section 1. Enumeration. The officers of the corporation shall be
-----------
chosen by the Board of Directors and shall be a President, a Secretary, or a
Treasurer and such other officers with such other titles as the Board of
Directors shall determine. The Board of Directors may elect from among its
members a Chairman or Chairmen of the Board and a Vice Chairman of the Board.
The Board of Directors may also choose one (1) or more Vice-Presidents and
Assistant Secretaries. Any number of offices may be held by the same person,
unless the Certificate of Incorporation or these Bylaws otherwise provide.
Section 2. Election. The Board of Directors at its first meeting
--------
after each annual meeting of stockholders shall elect a President, a Secretary,
a Treasurer and such other officers with such other titles as the Board of
Directors shall determine.
Section 3. Appointment of Other Agents. The Board of Directors may
---------------------------
appoint such other officers and agents as it shall deem necessary, who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the Board of Directors.
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Section 4. Compensation. The salaries of all officers of the
------------
corporation shall be fixed by the Board of Directors or a committee thereof.
The salaries of agents of the corporation shall, unless fixed by the Board of
Directors, be fixed by the President or any Vice-President of the corporation.
Section 5. Tenure. The officers of the corporation shall hold office
------
until their successors are chosen and qualify. Any officer elected or appointed
by the Board of Directors may be removed at any time by the affirmative vote of
a majority of the directors of the Board of Directors. Any vacancy occurring in
any office of the corporation shall be filled by the Board of Directors.
Section 6. Chairman of the Board and Vice-Chairman of the Board. The
----------------------------------------------------
Chairman or Chairmen of the Board, if any, shall preside at all meetings of the
Board of Directors and of the stockholders at which he or they shall be present.
He or they shall have and may exercise such powers as are, from time to time,
assigned to him or them by the Board and as may be provided by law. In the
absence of the Chairman of the Board, the Vice Chairman of the Board, if any,
shall preside at all meetings of the Board of Directors and of the stockholders
at which he shall be present. He shall have and may exercise such powers as
are, from time to time, assigned to him by the Board of Directors and as may be
provided by law.
Section 7. President. The President shall be the Chief Operating
---------
Officer of the corporation and the Chief Executive Officer of the corporation
unless such titles are assigned to a Chairman of the Board; and in the absence
of a Chairman and Vice Chairman of the Board he shall preside as the chairman of
meetings of the stockholders and the Board of Directors; he shall have general
and active management of the business of the corporation and shall see that all
orders and resolutions of the Board of Directors are carried into effect. The
President or any Vice-President shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
Board of Directors to some other officer or agent of the corporation.
Section 8. Vice-President. In the absence of the President or in the
--------------
event of his inability or refusal to act, the Vice-President, if any (or in the
event there be more than one Vice-President, the Vice-Presidents in the order
designated by the Board of Directors, or in the absence of any designation, then
in the order of their election) shall perform the duties of the President, and
when so acting shall have all the powers of and be subject to all the
restrictions upon the President. The Vice-President shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
Section 9. Secretary. The Secretary shall attend all meetings of the
---------
Board of Directors and all meetings of the stockholders and record all the
proceedings of the meetings of the corporation and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings
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of the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
President, under whose supervision he shall be subject. He shall have custody of
the corporate seal of the corporation and he, or an Assistant Secretary, shall
have authority to affix the same to any instrument requiring it and when so
affixed, it may be attested by his signature or by the signature of such
Assistant Secretary. The Board of Directors may give general authority to any
other officer to affix the seal of the corporation and to attest the affixing by
his signature.
Section 10. Assistant Secretary. The Assistant Secretary, or if
-------------------
there be more than one (1), the Assistant Secretaries in the order determined by
the Board of Directors (or if there be no such determination, then in the order
of their election) shall, in the absence of the Secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
Section 11. Treasurer. The Treasurer shall have the custody of the
---------
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the corporation as may be
ordered by the Board of Directors, President or Chief Operating Officer, taking
proper vouchers for such disbursements, and shall render to the President, Chief
Operating Officer and the Board of Directors, at its regular meetings, or when
the Board of Directors so requires, an account of all his transactions as
Treasurer and of the financial condition of the corporation. If required by the
Board of Directors, the Treasurer shall give the corporation a bond (which shall
be renewed every six (6) years) in such sum and with such surety or sureties as
shall be satisfactory to the Board of Directors for the faithful performance of
the duties of his office and for the restoration to the corporation, in case of
his death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
ARTICLE VI
CAPITAL STOCK
Section 1. Certificates. Every holder of stock in the corporation
------------
shall be entitled to have a certificate, signed by, or in the name of the
corporation by, the Chairman or Vice-Chairman of the Board of Directors, or the
President or a Vice-President and the Treasurer or the Secretary or an Assistant
Secretary of the corporation, certifying the number of shares owned by him in
the corporation. Certificates may be issued for partly paid shares and in such
case upon the face or back of the certificates issued to represent any such
partly paid shares, the total amount of the consideration to be paid therefor
and the amount paid thereon shall be specified.
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Section 2. Class or Series. If the corporation shall be authorized
---------------
to issue more than one class of stock or more than one series of any class, the
powers, designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate which the
corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided in Section 202 of the General Corporation Law
of Delaware, in lieu of the foregoing requirements, there may be set forth on
the face or back of the certificate which the corporation shall issue to
represent such class or series of stock, a statement that the corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
Section 3. Signature. Any of or all of the signatures on the
---------
certificate may be facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 4. Lost Certificates. The Board of Directors may direct a
-----------------
new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 5. Transfer of Stock. Upon surrender to the corporation or
-----------------
the transfer agent of the corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 6. Record Date. In order that the corporation may determine
-----------
the stockholders entitled to notice of or to vote at any meeting of stockholder
or any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting, nor more than sixty (60) days prior
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to any other action. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
Section 7. Registered Stockholders. The corporation shall be
-----------------------
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
---------
corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property or in
shares of capital stock, subject to the provisions of the Certificate of
Incorporation. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
Board of Directors from time to time, in their absolute discretion, think proper
as a reserve or reserves to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the corporation, or for such other
purposes as the Board of Directors shall think conducive to the interest of the
corporation, and the Board of Directors may modify or abolish any such reserve
in the manner in which it was created.
Section 2. Checks. All checks or demands for money and notes of the
------
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the corporation shall be
-----------
fixed by resolution of the Board of Directors.
Section 4. Seal. The Board of Directors may adopt a corporate seal
----
having inscribed thereon the name of the corporation, the year of its
organization and the words "Corporate Seal, Delaware". The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
Section 5. Loans. The Board of Directors of this corporation may,
-----
without stockholder approval, authorize loans to, or guaranty obligations of, or
otherwise assist, including, without limitation, the adoption of employee
benefit plans under which loans and guarantees may be made, any officer or other
employee of the corporation or of its subsidiary, including any officer or
employee who is a director of the corporation or its subsidiary, whenever, in
the judgment of the
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Board of Directors, such loan, guaranty or assistance may reasonably be expected
to benefit the corporation. The loan, guaranty or other assistance may be with
or without interest, and may be unsecured, or secured in such manner as the
Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation.
ARTICLE VIII
INDEMNIFICATION
Section 1. Scope. The corporation shall, to the fullest extent
-----
permitted by Section 145 of the Delaware General Corporation Law, as that
Section may be amended and supplemented from time to time, indemnify any
director, officer, employee or agent of the corporation, against expenses
(including attorneys' fees), judgments, fines, amounts paid in settlement and/or
other matters referred to in or covered by that Section, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise.
Section 2. Advancing Expenses. Expenses incurred by a director of
------------------
the corporation in defending a civil or criminal action, suit or proceeding by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation (or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise) shall be paid by the corporation in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized by relevant provisions of the Delaware General
Corporation Law; provided, however, the corporation shall not be required to
advance such expenses to a director (i) who commences any action, suit or
proceeding as a plaintiff unless such advance is specifically approved by a
majority of the Board of Directors, or (ii) who is a party to an action, suit or
proceeding brought by the corporation and approved by a majority of the Board of
Directors which alleges willful misappropriation of corporate assets by such
director, disclosure of confidential information in violation of such director's
fiduciary or contractual obligations to the corporation, or any other willful
and deliberate breach in bad faith of such director's duty to the corporation or
its stockholders.
Section 3. Liability Offset. The corporation's obligation to provide
----------------
indemnification under this Article VIII shall be offset to the extent the
indemnified party is indemnified by any other source including, but not limited
to, any applicable insurance coverage under a policy maintained by the
corporation, the indemnified party or any other person.
Section 4. Continuing Obligation. The provisions of this Article
---------------------
VIII shall be deemed to be a contract between the corporation and each director
of the corporation who serves in such capacity at any time while this bylaw is
in effect, and any repeal or modification thereof shall not affect any rights or
obligations then existing with respect to any state of facts then or theretofore
existing or
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any action, suit or proceeding theretofore or thereafter brought based in whole
or in part upon any such state of facts.
Section 5. Nonexclusive. The indemnification and advancement of
------------
expenses provided for in this Article VIII shall (i) not be deemed exclusive of
any other rights to which those indemnified may be entitled under any by-law,
agreement or vote of stockholders or disinterested directors or otherwise, both
as to action in their official capacities and as to action in another capacity
while holding such office, (ii) continue as to a person who has ceased to be a
director and (iii) inure to the benefit of the heirs, executors and
administrators of such a person.
Section 6. Other Persons. In addition to the indemnification rights
-------------
of directors, officers, employees, or agents of the corporation, the Board of
Directors in its discretion shall have the power on behalf of the corporation to
indemnify any other person made a party to any action, suit or proceeding who
the corporation may indemnify under Section 145 of the Delaware General
Corporation Law.
Section 7. Definitions. The phrases and terms set forth in this
-----------
Article VIII shall be given the same meaning as the identical terms and phrases
are given in Section 145 of the Delaware General Corporation Law, as that
Section may be amended and supplemented from time to time.
ARTICLE IX
AMENDMENTS
Except as otherwise provided in the Certificate of Incorporation,
these Bylaws may be altered, amended or repealed, or new Bylaws may be adopted,
by the holders of a majority of the outstanding voting shares or by the Board of
Directors, when such power is conferred upon the Board of Directors by the
Certificate of Incorporation, at any regular meeting of the stockholders or of
the Board of Directors or at any special meeting of the stockholders or of the
Board of Directors if notice of such alteration, amendment, repeal or adoption
of new Bylaws be contained in the notice of such special meeting. If the power
to adopt, amend or repeal Bylaws is conferred upon the Board of Directors by the
Certificate of Incorporation, it shall not divest or limit the power of the
stockholders to adopt, amend or repeal Bylaws.
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CERTIFICATE OF SECRETARY
The undersigned certifies:
(1) That the undersigned is the duly elected and acting Secretary
of Vignette Corporation, a Delaware corporation (the "Corporation"); and
(2) That the foregoing Amended and Restated Bylaws constitute the
Bylaws of the Corporation as duly adopted by the Action by Unanimous
Written Consent by the Board of Directors of Vignette Corporation, dated
the 31st day of December, 1996.
IN WITNESS WHEREOF, I have hereunto subscribed my name and
affixed the seal of the Corporation as of this 31st day of December, 1996.
/s/ Neil Webber
----------------------------
Neil Webber, Secretary
[SEAL]
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EXHIBIT 3.4
BYLAWS
OF
VIGNETTE CORPORATION
A DELAWARE CORPORATION
ARTICLE I
OFFICES
SECTION 1. The registered office shall be in the City of
Wilmington, County of New Castle, State of Delaware.
SECTION 2. The corporation may also have offices at such other
places both within and without the State of Delaware as the Board of Directors
may from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. All meetings of the stockholders for the election of
directors shall be held at such time and place, within or without the State of
Delaware, as may be fixed from time to time by the Board of Directors, and
stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such time and place, within or without the State of
Delaware, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
SECTION 2.
(a) Annual meetings of stockholders, commencing with the year 1999,
shall be held at such date and time as shall be designated from time to time by
the Board of Directors and stated in the notice of the meeting, at which they
shall elect by a plurality vote a board of directors, and transact such other
business as may properly be brought before the meeting.
(b) Nominations of persons for election to the Board of Directors of
the Corporation and the proposal of business to be considered by the
stockholders may be made at an annual meeting of stockholders (i) pursuant to
the Corporation's notice of meeting, (ii) by or at the direction of the Board of
Directors or (iii) by any stockholder of the Corporation who was a stockholder
of record at the time of giving of the notice provided for in this by-law, who
is entitled to vote at the meeting and who complied with the notice procedures
set forth in this by-law.
(c) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (iii) of paragraph (b) of
this by-law, the stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation and any such
<PAGE>
business must otherwise be a proper matter for stockholder action under Delaware
law. To be timely, a stockholder's notice shall be delivered to the Secretary at
the principal executive offices of the Corporation not less than 60 days nor
more than 90 days prior to the first anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the annual
meeting is advanced by more than 30 days or delayed by more than 60 days from
such anniversary date, notice by the stockholder to be timely must be so
delivered not earlier than the 90/th/ day prior to such annual meeting and not
later than the close of business on the later of the 60/th/ day prior to such
annual meeting or the 10/th/ day following the day on which public announcement
of the date of such meeting is first made. Such stockholder's notice shall set
forth (i) as to each person whom the stockholder proposes to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); (ii) as to any other
business that the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (iii) as to the stockholder giving the notice
and the beneficial owner, if any, on whose behalf the nomination or proposal is
made (a) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner and (b) the class and number
of shares of the Corporation which are owned beneficially and of record by such
stockholder and such beneficial owner.
(d) Notwithstanding anything in the second sentence of paragraph (c)
of this by-law to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the Corporation is increased and there is
no public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the Corporation at least 70
days prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice required by this by-law shall also be considered timely,
but only with respect to nominees for any new positions created by such
increase, if it shall be delivered to the Secretary at the principal executive
offices of the Corporation not later than the close of business on the 10/th/
day following the day on which such public announcement is first made by the
Corporation.
(e) Only such persons who are nominated in accordance with the
procedures set forth in these By-laws shall be eligible to serve as directors
and only such business shall be conducted at an annual meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in these By-laws. The chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made in accordance with the procedures set forth
in these By-laws. The chairman of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be brought before the
meeting was made in accordance with the procedures set forth in these By-laws,
and, if any proposed nomination or business is not in compliance with these By-
laws, to declare that such defective proposed business or nomination shall be
disregarded.
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(f) For purposes of these By-laws, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or a comparable national news service or in a document publicly filed by
the Corporation with the Securities and Exchange Commission pursuant to Section
13, 14 or 15(d) of the Exchange Act.
(g) Notwithstanding the foregoing provisions of this by-law, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this by-law. Nothing in this by-law shall be deemed to affect any
rights of stockholders to request inclusion of proposals in the Corporation's
proxy statement pursuant to Rule 14a-8 under the Exchange Act.
SECTION 3. Written notice of the annual meeting stating the place,
date and hour of the meeting shall be given to each stockholder entitled to vote
at such meeting not fewer than ten (10) nor more than sixty (60) days before the
date of the meeting.
SECTION 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten (10) days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
SECTION 5. Special meetings of the stockholders, for any purpose
or purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called at any time by the Board of Directors pursuant to a
resolution approved by a majority of the whole Board of Directors. Such
resolution shall state the purpose or purposes of the proposed meeting.
SECTION 6. Written notice of a special meeting stating the place,
date and hour of the meeting and the purpose or purposes for which the meeting
is called, shall be given not fewer than ten (10) nor more than sixty (60) days
before the date of the meeting, to each stockholder entitled to vote at such
meeting.
SECTION 7. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
SECTION 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or
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represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted that might have been transacted at
the meeting as originally notified. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 9. When a quorum is present at any meeting, the vote of
the holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
SECTION 10. Unless otherwise provided in the certificate of
incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three (3) years from its date, unless the proxy provides for a longer
period.
ARTICLE III
DIRECTORS
SECTION 1. The number of directors shall be fixed from time to
time exclusively by the Board of Directors pursuant to a resolution adopted by a
vote of 75% of the total number of authorized directors (whether or not there
exist any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board for adoption). Directors shall be divided
into three classes, as nearly equal in number as reasonably possible, with the
term of office of the first class to expire at the 1999 annual meeting of
stockholders, the term of office of the second class to expire at the 2000
annual meeting of stockholders and the term of office of the third class to
expire at the 2001 annual meeting of stockholders. At each annual meeting of
stockholders following such initial classification and election, directors
elected to succeed those directors whose terms expire shall be elected for a
term of office to expire at the third succeeding annual meeting of stockholders
after their election. All directors shall hold office until the expiration of
term for which elected, and until their respective successors are elected and
qualified, except in the case of the death, resignation or removal of any
director. Directors need not be stockholders.
SECTION 2. Vacancies and newly created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, though less than a quorum, or by a sole
remaining director, and not by stockholders, and the directors so chosen shall
hold office until the next annual election and until their successors are duly
elected and shall qualify, unless sooner displaced. If there are no directors in
office, then an election of directors may be held in the manner provided by
statute.
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SECTION 3. The business of the corporation shall be managed by or
under the direction of its board of directors, which may exercise all such
powers of the corporation and do all such lawful acts and things as are not by
statute or by the certificate of incorporation or by these bylaws directed or
required to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
SECTION 4. The Board of Directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
SECTION 5. The first meeting of each newly elected Board of
Directors shall be held at such time and place as shall be fixed by the vote of
the stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
Board of Directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the directors.
SECTION 6. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
SECTION 7. Special meetings of the Board of Directors may be
called by the president on ten (10) days' notice to each director by mail or
forty-eight (48) hours notice to each director either personally or by
telephone, telegram or facsimile; special meetings shall be called by the
president or secretary in like manner and on like notice on the written request
of two (2) directors unless the board consists of only one director, in which
case special meetings shall be called by the president or secretary in like
manner and on like notice on the written request of the sole director.
SECTION 8. At all meetings of the board a majority of the directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
SECTION 9. Unless otherwise restricted by the certificate of
incorporation of these bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
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SECTION 10. Unless otherwise restricted by the certificate of
incorporation or these bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
SECTION 11. The Board of Directors may, by resolution passed by a
majority of the whole board, designate one (1) or more committees, each
committee to consist of one (1) or more of the directors of the corporation.
The board may designate one (1) or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee.
In the absence of disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or she or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers that may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the bylaws of the corporation; and,
unless the resolution or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the Board of Directors.
SECTION 12. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
SECTION 13. Unless otherwise restricted by the certificate of
incorporation or these bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving
the corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like compensation for
attending committee meetings.
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ARTICLE IV
NOTICES
SECTION 1. Whenever, under the provisions of the statutes or of
the certificate of incorporation or of these bylaws, notice is required to be
given to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram, telephone or facsimile.
SECTION 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
SECTION 1. The officers of the corporation shall be chosen by the
Board of Directors and shall be a president, treasurer and a secretary. The
Board of Directors may elect from among its members a Chairman of the Board and
a Vice Chairman of the Board. The Board of Directors may also choose one or
more vice-presidents, assistant secretaries and assistant treasurers. Any
number of offices may be held by the same person, unless the certificate of
incorporation or these bylaws otherwise provide.
SECTION 2. The Board of Directors at its first meeting after each
annual meeting of stockholders shall choose a president, a treasurer, and a
secretary, and may choose vice presidents, assistant secretaries and assistant
treasurers.
SECTION 3. The Board of Directors may appoint such other officers
and agents as it shall deem necessary who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board.
SECTION 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
SECTION 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by
the Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
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THE CHAIRMAN OF THE BOARD
SECTION 6. The Chairman of the Board, if any, shall preside at all
meetings of the Board of Directors and of the stockholders at which he or she
shall be present. He or she shall have and may exercise such powers as are,
from time to time, assigned to him or her by the Board and as may be provided by
law.
SECTION 7. In the absence of the Chairman of the Board, the Vice
Chairman of the Board, if any, shall preside at all meetings of the Board of
Directors and of the stockholders at which he or she shall be present. He or
she shall have and may exercise such powers as are, from time to time, assigned
to him or her by the Board and as may be provided by law.
THE PRESIDENT AND VICE-PRESIDENTS
SECTION 8. The president shall be the chief operating officer of
the corporation; and in the absence of the Chairman and Vice Chairman of the
Board the president shall preside at all meetings of the stockholders and the
Board of Directors; the president shall have general and active management of
the business of the corporation and shall see that all orders and resolutions of
the Board of Directors are carried into effect.
SECTION 9. The president shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
Board of Directors to some other officer or agent of the corporation.
SECTION 10. In the absence of the president or in the event of the
president's inability or refusal to act, the vice-president, if any, (or in the
event there be more than one vice-president, the vice-presidents in the order
designated by the directors, or in the absence of any designation, then in the
order of their election) shall perform the duties of the president, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the president. The vice-presidents shall perform such other duties and have
such other powers as the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
SECTION 11. The secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. The secretary or she shall give, or cause to be given, notice of
all meetings of the stockholders and special meetings of the Board of Directors,
and shall perform such other duties as may be prescribed by the Board of
Directors or president, under whose supervision he or she shall be. The
secretary shall have custody of the corporate seal of the corporation and the
secretary, or an assistant secretary, shall have authority to affix the same to
any instrument requiring it and when so affixed, it may be attested by his
signature or by the signature of such assistant secretary. The Board of
Directors may give general authority to any other officer to affix the seal of
the corporation and to attest the affixing by his signature.
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SECTION 12. The assistant secretary, or if there be more than one,
the assistant secretaries in the order determined by the Board of Directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the secretary or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
TREASURER AND ASSISTANT TREASURERS
SECTION 13. The treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors. Unless
otherwise appointed, the chief financial officer shall be the treasurer.
SECTION 14. The treasurer shall disburse the funds of the corporation
as may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his or her transactions as treasurer and of the financial condition of the
corporation.
SECTION 15. If required by the Board of Directors, the treasurer
shall give the corporation a bond (which shall be renewed every six years) in
such sum and with such surety or sureties as shall be satisfactory to the Board
of Directors for the faithful performance of the duties of the treasurer's
office and for the restoration to the corporation, in case of the treasurer's
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in the treasurer's
possession or under the treasurer's control belonging to the corporation.
SECTION 16. The assistant treasurer, or if there shall be more than
one, the assistant treasurers in the order determined by the Board of Directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the treasurer or in the event of the treasurer's
inability or refusal to act, perform the duties and exercise the powers of the
treasurer and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
ARTICLE VI
CERTIFICATE OF STOCK
SECTION 1. Every holder of stock in the corporation shall be entitled
to have a certificate, signed by, or in the name of the corporation by, the
chairman or vice-chairman of the Board of Directors, or the president or a vice-
president and the treasurer or an assistant treasurer, or the secretary or an
assistant secretary of the corporation, certifying the number of shares owned by
such stockholder in the corporation.
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Certificates may be issued for partly paid shares and in such case
upon the face or back of the certificates issued to represent any such partly
paid shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate that the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
SECTION 2. Any of or all the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he or she
were such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
SECTION 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
SECTION 4. Upon surrender to the corporation or the transfer agent
of the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
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FIXING RECORD DATE
SECTION 5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholder or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting, nor more than sixty (60) days prior to any other action.
A determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
SECTION 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
SECTION 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the certificate of incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of incorporation.
SECTION 2. Before payment of any dividend, there may be set aside
out of any funds of the corporation available for dividends such sum or sums as
the directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purposes as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
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CHECKS
SECTION 3. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
FISCAL YEAR
SECTION 4. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
SEAL
SECTION 5. The Board of Directors may adopt a corporate seal having
inscribed thereon the name of the corporation, the year of its organization and
the words "Corporate Seal, Delaware." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
SECTION 6. The corporation shall, to the fullest extent authorized
under the laws of the State of Delaware, as those laws may be amended and
supplemented from time to time, indemnify any director made, or threatened to be
made, a party to an action or proceeding, whether criminal, civil,
administrative or investigative, by reason of being a director of the
corporation or a predecessor corporation or, at the corporation's request, a
director or officer of another corporation, provided, however, that the
corporation shall indemnify any such agent in connection with a proceeding
initiated by such agent only if such proceeding was authorized by the Board of
Directors of the corporation. The indemnification provided for in this Section
6 shall: (i) not be deemed exclusive of any other rights to which those
indemnified may be entitled under any bylaw, agreement or vote of stockholders
or disinterested directors or otherwise, both as to action in their official
capacities and as to action in another capacity while holding such office, (ii)
continue as to a person who has ceased to be a director, and (iii) inure to the
benefit of the heirs, executors and administrators of such a person. The
corporation's obligation to provide indemnification under this Section 6 shall
be offset to the extent of any other source of indemnification or any otherwise
applicable insurance coverage under a policy maintained by the corporation or
any other person.
Expenses incurred by a director or officer of the corporation in
defending a civil or criminal action, suit or proceeding by reason of the fact
that he or she is or was a director or officer of the corporation (or was
serving at the corporation's request as a director or officer of another
corporation) shall be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that such director or officer is not entitled to be
indemnified by the corporation as authorized by relevant sections of the General
Corporation Law of Delaware. Notwithstanding the foregoing, the corporation
shall not be required to advance such expenses to an agent who is a party to an
action, suit or proceeding
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brought by the corporation and approved by a majority of the Board of Directors
of the corporation that alleges willful misappropriation of corporate assets by
such agent, disclosure of confidential information in violation of such agent's
fiduciary or contractual obligations to the corporation or any other willful and
deliberate breach in bad faith of such agent's duty to the corporation or its
stockholders.
The foregoing provisions of this Section 6 shall be deemed to be a
contract between the corporation and each director or officer who serves in such
capacity at any time while this bylaw is in effect, and any repeal or
modification thereof shall not affect any rights or obligations then existing
with respect to any state of facts then or theretofore existing or any action,
suit or proceeding theretofore or thereafter brought based in whole or in part
upon any such state of facts.
The Board of Directors in its discretion shall have power on behalf of
the corporation to indemnify any person, other than a director or officer, made
a party to any action, suit or proceeding by reason of the fact that such
person, their testator or intestate, is or was an officer or employee of the
corporation.
To assure indemnification under this Section 6 of all directors,
officers and employees who are determined by the corporation or otherwise to be
or to have been "fiduciaries" of any employee benefit plan of the corporation
that may exist from time to time, Section 145 of the General Corporation Law of
Delaware shall, for the purposes of this Section 6, be interpreted as follows:
an "other enterprise" shall be deemed to include such an employee benefit plan,
including without limitation, any plan of the corporation that is governed by
the Act of Congress entitled "Employee Retirement Income Security Act of 1974,"
as amended from time to time; the corporation shall be deemed to have requested
a person to serve an employee benefit plan where the performance by such person
of his duties to the corporation also imposes duties on, or otherwise involves
services by, such person to the plan or participants or beneficiaries of the
plan; excise taxes assessed on a person with respect to an employee benefit plan
pursuant to such Act of Congress shall be deemed "fines."
ARTICLE VIII
AMENDMENTS
SECTION 1. These bylaws may be altered, amended or repealed or new
bylaws may be adopted by stockholders holding at least seventy-five percent
(75%) of the Company's outstanding capital stock ("Amending Stockholders") or by
the Board of Directors, when such power is conferred upon the Board of Directors
by the certificate of incorporation at any regular meeting of the stockholders
or of the Board of Directors or by the Amending Stockholders at any special
meeting of the stockholders or by the Board of Directors at any special meeting
of the Board of Directors if notice of such alteration, amendment, repeal or
adoption of new bylaws be contained in the notice of such special meeting. If
the power to adopt, amend or repeal bylaws is conferred upon the Board of
Directors by the certificate or incorporation it shall not divest or limit the
power of the stockholders to adopt, amend or repeal bylaws.
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CERTIFICATE OF SECRETARY OF
VIGNETTE CORPORATION
The undersigned, Neil Webber, hereby certifies that he is the duly
elected and acting Secretary of Vignette Corporation, a Delaware corporation
(the "Corporation"), and that the Bylaws attached hereto constitute the Bylaws
of said Corporation as duly adopted by the Directors on September 9, 1998.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his name
this 9/th/ day of September, 1998.
__________________________________________
Neil Webber
Secretary
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EXHIBIT 4.3
SIXTH AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT
THIS SIXTH AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this
"Agreement") is entered into as of November 30, 1998 among Vignette Corporation,
a Delaware corporation (the "Company") and the Stockholders on Exhibit A and
Exhibit B attached hereto (individually a "Purchaser" and collectively the
"Purchasers") and such other parties ("Other Parties") as may from time to time
and with the consent of the Company become parties hereto. Ross B. Garber and
Neil Webber are referred to herein individually as a "Founder" and together as
the "Founders." The Founders, the Stockholders on Exhibit B attached hereto and
such Other Parties are collectively referred to as the "Common Stockholders."
RECITALS:
WHEREAS, the Company and certain of the Purchasers are parties to a
Fifth Amended and Restated Stockholders Agreement, dated as of April 22, 1998
(the "Prior Stockholders Agreement");
WHEREAS, the Company and Olympus Growth Fund II, L.P., Olympus
Executive Fund, L.P., Axa U.S. Growth Fund LLC, U.S. Growth Fund Partners C.V.,
Double Black Diamond II LLC, 45th Parallel LLC, Almanori Limited, Multinvest
LLC, Parallel Capital I LLC, Vendome Capital LLC, Attractor Dearborn Partners,
LP, Attractor Institution LP, Attractor LP, East Peak Partners, Pivotal
Partners, L.P., Ralph H. Cechettini 1985 Trust, James Stableford, Emeric
McDonald, ATGF II and Morgan Stanley Dean Witter Equity Funding, Inc.
(collectively, the "Series H Purchasers") have entered into a Stock Purchase
Agreement, dated the date hereof (the "Purchase Agreement"), providing, among
other things, for the purchase by the Series H Purchasers of shares of the
Company's Series H Convertible Preferred Stock, par value $0.01 per share (the
"Series H Preferred Stock");
WHEREAS, the Company, the Purchasers and the Series H Purchasers
desire to amend the Prior Stockholders Agreement on the terms hereinafter set
forth; and
WHEREAS, the execution and delivery of this Agreement by the Company
and by such Purchasers as are necessary to amend and restate the Prior
Stockholders Agreement is a condition to the closing of the issuance, sale and
purchase of the Series H Preferred Stock pursuant to the Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Voting Provisions.
A. Composition of Board of Directors. The shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock and Series H Preferred Stock and,
unless the context requires otherwise,
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the shares of Common Stock (as such terms are defined in paragraph 4K) issued or
issuable upon the conversion of such shares of Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock, Series E Preferred Stock, Series F
Preferred Stock and Series H Preferred Stock are referred to in this Agreement
as the "Shares." The Purchasers and the Common Stockholders agree that in any
election of directors of the Company, they shall vote all shares of capital
stock of the Company owned or controlled by them, including all Shares, to elect
a Board of Directors comprising six directors (unless reduced to a fewer number
of directors as described below) designated as follows:
(i) two shall be directors designated by the holders of a
majority of the Common Stock held by the Common Stockholders;
(ii) one shall be designated by Austin Ventures, one shall
be designated by Sigma and one shall be designated by CNET (as such terms are
defined in Exhibit A hereto); and
(iii) one shall be designated by the holders of a majority
of the Common Stock held by the Common Stockholders and the Shares, voting
together as a single class.
In the event shares of Series A Preferred Stock or Series B Preferred
Stock are redeemed in a Mandatory Redemption (as defined in part 3 of Article
V.B of the Company's Fourth Amended and Restated Certificate of Incorporation,
as hereafter amended or restated), Austin Ventures, Sigma and CNET shall cause
the directors designated by them in (ii) above to resign, and the number of
directors constituting the entire Board of Directors shall be reduced by three
directors.
Each director designated in (i) above is referred to as a "Common
Stockholder Director." Each director designated in (ii) above is referred to as
a "Purchaser Director." The director designated in (iii) above is referred to
as the "At Large Director." Until notice is given to the contrary, the
Purchaser Director designated by Austin Ventures shall be John D. Thornton, the
Purchaser Director designated by Sigma shall be Robert E. Davoli, the Purchaser
Director position to be designated by CNET shall be vacant and the Common
Stockholder Directors shall be Ross B. Garber and Neil Webber.
The obligation to vote shares in accordance with this paragraph 1A
shall be specifically applicable to and enforceable against any transferees of
the parties hereto.
B. Compensation Committee. The Board of Directors shall
establish and maintain a compensation committee comprised of two of the
Purchaser Directors and a director designated by the chief executive officer of
the Company. The compensation committee of the Board of Directors shall be
vested with the authority to approve salaries, bonuses and other compensation
and benefits of officers and key employees of the Company and its subsidiaries,
and will administer the Approved Plans (as defined in paragraph 4K) and any
other stock option, incentive or compensation plans or arrangements.
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C. Vacancies; Removal. In the event of any vacancy in the Board
of Directors, each of the Purchasers and the Common Stockholders agrees to vote
all Shares and shares of Common Stock owned or controlled by them and to
otherwise use their best efforts to fill such vacancy so that the Board of
Directors of the Company will include directors designated as provided in
paragraph 1A. Each of the Purchasers and the Common Stockholders agrees to vote
all Shares and shares of Common Stock owned or controlled by them for the
removal of a director whenever (but only whenever) there shall be presented to
the Board of Directors the written direction that such director be removed,
signed by the holders of a majority of the Shares, in the case of a Purchaser
Director, or by the holders of a majority of the Common Stock held by the Common
Stockholders, in the case of a Common Stockholder Director, or by the holders of
a majority of the Common Stock held by the Common Stockholders and the Shares,
in the case of the At Large Director. Each of the parties agrees to use its best
efforts to cause designees to be elected to the Board of Directors as provided
in paragraph 1A.
D. Meetings; Quorum. The Company agrees to hold regularly
scheduled meetings of the Board of Directors as determined by a majority of the
Board of Directors. The Company will give each Purchaser that is entitled
hereunder to either appoint a Purchaser Director or designate an observer
pursuant to paragraph 1E below (so long as such Purchaser holds any Shares)
written notice at least three days (24 hours, in the case of a telephone
meeting) in advance of all meetings of the Board of Directors and all meetings
of committees of the Board of Directors. If the Purchaser Director designated by
a Purchaser is not able to attend a Board of Directors meeting or a meeting of a
committee on which he serves, such Purchaser may designate any one person to
attend as an observer. The Company shall furnish each such Purchaser with a copy
of the minutes and other records of all meetings and other actions taken by the
Board of Directors and its committees and all written material given to
directors in connection with such meeting at the same time such materials and
information are given to the directors. If the Company proposes to take any
action by written consent in lieu of a meeting of its Board of Directors or any
committee thereof, the Company shall give written notice thereof to each
Purchaser Director prior to the effective date of such consent describing in
reasonable detail the nature and the substance of such action.
E. Special Board Observation Privileges. Adobe, Charles River,
a representative designated by GSCPLP and a representative designated by the
Series H Purchaser entities managed by Partech International (as such terms are
defined in Exhibit A hereto) shall each receive notices of each meeting of the
Company's Board of Directors and any committee thereof, and each shall be
entitled to designate a representative to attend all such Board of Directors and
committee meetings and to speak at or otherwise participate in such meetings to
the extent permitted from time to time by the Board of Directors or such
committee.
F. Expenses. The Company shall reimburse all Persons (as
defined in paragraph 4K) serving as directors for their actual and reasonable
out-of-pocket expenses incurred in attending meetings of the Board of Directors
and all committees thereof and otherwise incurred in fulfilling their duties as
directors. If the Purchaser Director designated by a Purchaser is unable to
attend a meeting of the Board of Directors or a committee on which he serves,
the Company shall reimburse one representative of such Purchaser for actual and
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reasonable out-of-pocket expenses incurred in attending meetings of the Board of
Directors and such committees.
G. Indemnification Agreements. At the date hereof and on each
later date that a Purchaser Director or any other director is first elected or
appointed to the Board of Directors, the Company shall enter into an
indemnification agreement in substantially the form attached as Exhibit A with
each Purchaser Director and each other director of the Company who is elected or
appointed to the Board of Directors on such date.
H. Material Transactions with CNET. The unanimous approval of
the Board of Directors shall be required for all material transactions between
the Company and CNET. For purposes of this paragraph 1H, the term "material
transaction" shall mean any of the following:
(i) any transaction, or series of similar transactions,
to which the Company is to be a party, in which the amount involved exceeds 5%
of the consolidated assets of the Company and its Subsidiaries as of the end of
the Company's most recently completed fiscal quarter and in which CNET, any of
its subsidiaries, officers or directors or nominees for director, any beneficial
holder of five percent or more of CNET's outstanding capital stock, or CNET's
designee to the Company's Board of Directors will have a direct or indirect
material interest; or
(ii) indebtedness owed by CNET, any of its subsidiaries,
officers or directors or nominees for director, any beneficial holder of five
percent or more of CNET's outstanding capital stock, or CNET's designee to the
Company's Board of Directors, to the Company in an amount in excess of 5% of the
consolidated assets of the Company and its Subsidiaries as of the end of the
Company's most recently completed fiscal quarter.
2. Provisions Relating to Restricted Stock.
A. General Restrictions on Transfer of Capital Stock;
Dividends.
(i) For purposes of this Agreement, "Restricted Stock" is
Common Stock now owned or subsequently acquired by any Common Stockholder or a
transferee of a Common Stockholder in a Permitted Transfer (as defined below).
During the term of this Agreement, none of the shares of Restricted Stock may be
sold, assigned, transferred, pledged, encumbered or otherwise disposed of (a
"transfer") except in a "Permitted Transfer" or a transfer that complies with
the provisions of paragraphs 2B and 2C.
(ii) Any attempted transfer of shares of Restricted Stock
other than in accordance with this Agreement shall be null and void and the
Company shall refuse to recognize any such transfer and shall not reflect on its
records any change in record ownership of shares of Restricted Stock pursuant to
any such transfer.
(iii) The following transfers of Restricted Stock (each
such transfer being a "Permitted Transfer", and each transferee in such transfer
being a "Permitted Transferee") may be made free of the restrictions and
requirements of paragraphs 2B and 2C
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hereof: (a) an individual holder of Restricted Stock may transfer any or all of
the shares of Restricted Stock owned by him to his spouse or children, or to
trusts established for the benefit of his spouse or children, provided that the
transferee grants to the transferor an irrevocable proxy coupled with an
interest to vote all of the shares of Restricted Stock so transferred and agrees
to be bound by the provisions of this Agreement, including, without limitation,
paragraphs 2B and 2C; (b) provided that the transferee agrees to be bound by the
provisions of this Agreement, a partnership, corporation or trust holding
Restricted Stock may transfer any shares of Restricted Stock owned by such
holder (1) to its Affiliates (as defined under the Securities Act of 1933), (2)
to its general or limited partners, shareholders or beneficiaries, or (3) to an
entity owned by or organized for the benefit of the general or limited partners,
shareholders, officers, directors, employees, Affiliates or beneficiaries of
such holder, as applicable, (c) a holder of Restricted Stock may pledge any
shares of Restricted Stock owned by such holder to secure the repayment of any
bona fide indebtedness owing by such holder, the Company or any Subsidiary to a
financial institution, provided that such holder retains the power to vote the
shares of Restricted Stock so pledged until such time as the pledgee shall have
realized upon the pledge and that the provisions of this Agreement, including,
without limitation, paragraphs 2B and 2C, shall be applicable to the shares of
Restricted Stock so pledged and (iv) a holder of Restricted Stock may sell
Restricted Stock to the Company pursuant to an agreement under which the Company
has the option to repurchase such Restricted Stock upon the occurrence of
certain events, including the termination of employment by or service to the
Company or any subsidiary of the Company.
B. Right of First Refusal.
(i) Subject to paragraph 2B(v), whenever and as often as
any Common Stockholder or a Permitted Transferee of a Common Stockholder desires
to sell any shares of Restricted Stock pursuant to a bona fide written offer to
purchase such shares, such Common Stockholder (the "Selling Holder" for purposes
of this paragraph 2B) shall give written notice (the "Notice," for purposes of
this paragraph 2B) to the Company, to each Founder who on the date of such
Notice is a full-time employee of the Company and each holder of Shares (each an
"Offeree," for the purposes of this paragraph 2B) to such effect, enclosing a
copy of such offer and specifying the number of shares of Restricted Stock which
the Selling Holder desires to sell, the name of the person or persons to whom
the Selling Holder desires to make such sale and the consideration per share of
Common Stock which has been offered in connection with such offer.
(ii) Upon receipt of the Notice, the Offerees shall
initially have the first right and option to purchase the shares proposed to be
sold for cash at the same purchase price and on the same terms as specified in
the Notice, pro rata according to their respective holdings of Common Stock and
Shares, exercisable for seven days after receipt of the Notice. Failure of any
Offeree to respond to the Notice within the seven-day period shall be deemed to
constitute a notification to the Selling Holder of such Offeree's decision not
to exercise the first right and option to purchase shares of Restricted Stock
under this paragraph 2B. If any Offeree fails to exercise its first right and
option, the Selling Holder shall give written notice to each of the other
Offerees who has elected to purchase his or her or its pro rata share of the
shares of Restricted Stock proposed to be transferred, and each such Offeree
shall have the right, exercisable for a period of three days from the date of
receipt of such Notice, to purchase the remaining shares of Restricted Stock,
pro rata according to the Common Stock and Shares held
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by all such electing Offerees or in such other proportions as they may agree
upon. In the event such consideration includes non-cash consideration, the
dollar value of such non-cash consideration shall be its Fair Market Value (as
defined in paragraph 4K). The Offerees may exercise the right and option
provided above by giving written notice of exercise to the Selling Holder within
such seven-day period, specifying the date (not later than three days from the
date of expiration of all applicable first right and options to purchase shares
under this paragraph) upon which payment of the purchase price for the shares
purchased pursuant to this paragraph shall be made. The Selling Holder shall
deliver to the Offeree(s) at the Company's principal office, at least one day
prior to the payment date, wire transfer instructions, and on the payment date
specified in such notice, the certificate or certificates representing such
shares, properly endorsed for transfer, against payment of the purchase price
therefor by the Offeree(s) in immediately available funds.
(iii) In the event that all of the shares of Restricted
Stock proposed to be transferred are not purchased by the Offerees, the Company
shall have the right and option to purchase the balance of the shares proposed
to be sold for cash at the purchase price per share specified in the Notice,
exercisable for seven days after expiration of the option period set forth in
paragraph 2B(ii). The Company may assign its right and option to purchase such
Restricted Stock to any other person. Failure of the Company to respond to such
Notice within such seven-day period shall be deemed to constitute a notification
to the Selling Holder of the Company's decision not to exercise the first right
and option to purchase such shares under this paragraph. The Company may
exercise its right and option to purchase such Restricted Stock by giving
written notice of exercise to the Selling Holder within such seven-day period,
specifying the date (not later than three days from the date of such notice)
upon which payment of the purchase price for the shares shall be made. The
Selling Holder shall deliver to the Company's principal office, on or before the
payment date specified in such notice, the certificate or certificates
representing the shares being purchased by the Company, properly endorsed for
transfer, against payment of the purchase price therefor by the Company in
immediately available funds.
(iv) If all the shares of Restricted Stock proposed to be
transferred are not purchased by the Offerees and the Company in accordance with
this paragraph 2B, the Selling Holder shall not be required to sell any of the
shares of Restricted Stock proposed to be transferred to the Offerees or to the
Company, and during the 60-day period commencing on the expiration of the rights
and options provided for in this paragraph, may sell all (but not less than all)
of such shares to the transferee named in the Notice for a consideration equal
to or greater than the consideration specified in the Notice, free of the
restrictions contained in paragraphs 2B and 2C (but subject to the other terms
and conditions of this Agreement).
(v) Whenever and as often as any Common Stockholder shall
receive a bona fide offer to purchase any shares of Restricted Stock from a
prospective purchaser which the Selling Holder wishes to accept, each Purchaser
shall have the right, at such Purchaser's option, either to exercise its rights
under paragraph 2B(ii) or to participate in the sale to the prospective
purchaser pursuant to this paragraph 2B(v). The Selling Holder will use
reasonable best efforts to arrange for the sale to the prospective purchaser of
the number of each
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such Purchaser's shares of Common Stock, Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series E Preferred Stock, Series F
Preferred Stock and Series H Preferred Stock which bears the same proportion to
the total number of shares of Common Stock, Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series E Preferred Stock, Series F
Preferred Stock and Series H Preferred Stock owned by such Purchaser as the
number of shares of Restricted Stock being sold by the Selling Holder bears to
the total number of shares of Restricted Stock owned by the Selling Holder, as
applicable, at the purchase price per share and on the terms and conditions
specified in the Notice. For purposes of this paragraph 2B(v), a Purchaser may
elect to sell Common Stock at the purchase price per share specified for the
Common Stock in the Notice, and may elect to sell Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series E Preferred Stock,
Series F Preferred Stock or Series H Preferred Stock at the purchase price per
share of Common Stock specified for the Common Stock in the Notice multiplied by
the number of shares of Common Stock into which a share of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series E Preferred
Stock, Series F Preferred Stock or Series H Preferred Stock, as applicable, is
then convertible. If the prospective purchaser will not purchase all the shares
which the Selling Holder and the Purchasers wish to sell pursuant to this
paragraph 2B(v), the number of shares which the Selling Holder and Purchasers
shall be entitled to sell to such prospective purchaser shall be a number of
shares equal to the number of shares which the prospective purchaser desires to
purchase times a fraction, the numerator of which is the number of shares of
Restricted Stock beneficially owned by the Selling Holder or the number of
shares of Common Stock, Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series E Preferred Stock, Series F Preferred Stock and
Series H Preferred Stock beneficially owned by each selling Purchaser, as
appropriate, and the denominator of which is the aggregate number of shares of
Restricted Stock, Common Stock, Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series E Preferred Stock, Series F Preferred
Stock and Series H Preferred Stock beneficially owned by the Selling Holder and
all such selling Purchasers. An Offeree may exercise his or her or its right
under this paragraph by written notice given within seven days after receipt of
the Notice.
C. Voting of Restricted Stock.
(i) In the event that a Founder is no longer employed by
the Company, such holder shall vote all his shares in accordance with the other
Founder, as long as such other Founder is employed by the Company.
(ii) In the event that neither Founder is employed by the
Company, all the Founders shall vote their shares as directed by the chief
executive officer of the Company on the date of such vote.
3. Preemptive Rights.
A. Pre-Qualified Public Offering. If, prior to a Qualified
Public Offering (as defined in paragraph 4K), the Company shall issue any Equity
Securities (as defined in paragraph 4K) consisting of Common Stock or other
Equity Securities, each Founder who on the date of the notice of such proposed
issuance referred to below is a full-time employee of the Company and each
holder of shares of Series A Preferred Stock, Series B Preferred Stock,
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Series C Preferred Stock, Series E Preferred Stock, Series F Preferred Stock and
Series H Preferred Stock shall be entitled to purchase the portion of such
Common Stock or Equity Securities to be issued necessary in order that the
aggregate shares of Common Stock and Shares held by such holder constitute the
same percentage of all Common Stock (assuming the conversion, exercise or
exchange of all Equity Securities) after the issuance of such Common Stock or
Equity Securities as before the issuance thereof; provided, however, that such
preemptive right shall not apply to (a) issuances of Common Stock or Equity
Securities pursuant to an Approved Plan (as defined in paragraph 4K), (b)
issuances of Common Stock or Equity Securities pursuant to warrants granted in
connection with a capital equipment financing, (c) issuances of Common Stock or
Equity Securities upon the conversion, exercise or exchange of Equity Securities
to which the preemptive right was applicable, (d) issuances of Common Stock or
Equity Securities in connection with an exercise of the preemptive rights
granted hereunder, (e) issuances of Shares pursuant to the Stock Purchase
Agreement, dated as of February 5, 1996, among the Company, Austin Ventures,
Sigma and the Founders, (f) issuances of Shares pursuant to the Stock Purchase
Agreement, dated as of July 19, 1996, among the Company and CNET, (g) issuances
of Shares pursuant to the Stock Purchase Agreement, dated as of June 6, 1997,
among the Company, Attractor (as such term is defined in Exhibit A hereto),
Austin Ventures and Sigma, (h) issuances of Shares pursuant to the Stock
Purchase Agreement, dated as of July 17, 1997, among the Company, Adobe, Austin
Ventures, Charles River, Sigma, the Founders and certain other parties, (i)
issuances of Shares pursuant to the Purchase Agreement, dated as of April 22,
1998 among the Company, Adobe, Amerindo, Attractor, Austin Ventures, Charles
River, GSCP, H&Q and Sigma (as such terms are defined in Exhibit A hereto), (j)
issuances of Shares pursuant to the Purchase Agreement (k) issuances of Series D
Warrants from time to time by the Company or issuances of Equity Securities upon
exercise thereof, or (l) issuances of Common Stock upon conversion of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock, Series F Preferred Stock and Series H
Preferred Stock. The price of securities which each holder becomes entitled to
purchase by reason hereof shall be the same price at which such securities are
proposed to be offered to others.
B. First Qualified Public Offering. In the Company's first
Qualified Public Offering, each Purchaser of Series F Preferred Stock and Series
H Preferred Stock shall be entitled to purchase a portion (the "Proportionate
Share") of such Equity Securities to be issued in such offering. Subject to the
limitations of the following sentence, for Purchasers of Series F Preferred
Stock other than Attractor, the Proportionate Share shall be that portion of the
shares to be issued in such offering, necessary in order that (I) the sum of (A)
the Proportionate Share and (B) the number of shares of Common Stock issuable
upon conversion of the Series F Preferred Stock held by such Purchaser divided
by (II) the number of shares of Common Stock outstanding immediately after such
offering (assuming the full conversion, exercise or exchange of all Equity
Securities) equals (x) the number of shares of Common Stock issuable upon
conversion of the Series F Preferred Stock held by such Purchaser divided by (y)
the number of shares of Common Stock outstanding immediately before such
offering (assuming the full conversion, exercise or exchange of all Equity
Securities); for Attractor, the Proportionate Share shall be that portion of the
shares to be issued in such offering, necessary in order that (I) the sum of (A)
the Proportionate Share and (B) the number of shares of Common Stock issuable
upon conversion of the Series E Preferred Stock and Series F Preferred Stock
held by Attractor divided by (II) the
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<PAGE>
number of shares of Common Stock outstanding immediately after such offering
(assuming the full conversion, exercise or exchange of all Equity Securities)
equals (x) the number of shares of Common Stock issuable upon conversion of the
Series E Preferred Stock and Series F Preferred Stock held by Attractor divided
by (y) the number of shares of Common Stock outstanding immediately before such
offering (assuming the full conversion, exercise or exchange of all Equity
Securities); for Purchasers of Series H Preferred Stock, the Proportionate Share
shall be that portion of the shares to be issued in such offering, necessary in
order that (I) the sum of (A) the Proportionate Share and (B) the number of
shares of Common Stock issuable upon conversion of the Series H Preferred Stock
held by such Purchaser divided by (II) the number of shares of Common Stock
outstanding immediately after such offering (assuming the full conversion,
exercise or exchange of all Equity Securities) equals (x) the number of shares
of Common Stock issuable upon conversion of the Series H Preferred Stock held by
such Purchaser divided by (y) the number of shares of Common Stock outstanding
immediately before such offering (assuming the full conversion, exercise or
exchange of all Equity Securities). Notwithstanding the foregoing sentence, (i)
the Proportionate Shares of Purchasers of Series F Preferred Stock, in the
aggregate, as Purchasers of Series F Preferred Stock, may not exceed 10% of such
offering, (ii) the Proportionate Shares of Purchasers of Series H Preferred
Stock, in the aggregate, as Purchasers of Series H Preferred Stock, may not
exceed the lesser of (x) the percentage of such offering sold by selling
stockholders of the Company and (y) 2.5% of such offering, (iii) except as
provided below, Amerindo shall not be entitled to purchase a Proportionate Share
hereunder with respect to its Series H Preferred Stock, and, with respect to
this paragraph 3B only, the number of shares of Series H Preferred Stock
outstanding immediately before the offering shall not include the Series H
Preferred Stock held by Amerindo, (iv) in the event that any holder of Series H
Preferred Stock does not purchase its full Proportionate Share, the
Proportionate Share of each purchasing holder of Series H Preferred Stock shall
increase by the product of (A) the portion of shares not purchased, and (B) (x)
the number of shares of Series H Preferred Stock held by such purchasing holder
of Series H Preferred Stock divided by (y) the number of shares of Series H
Preferred Stock outstanding immediately before the offering less the number of
shares of Series H Preferred Stock of the holders not purchasing their
Proportionate Share, (v) in the event that all holders of Series H Preferred
Stock other than Amerindo do not purchase the full number of shares available
for purchase by the holders of Series H Purchasers under (ii) above, Amerindo
shall be entitled to purchase the number of Equity Securities equal to the
difference between (x) the aggregate amount of shares purchased by all other
holders of Series H Preferred Stock, in the aggregate, as Purchasers of Series H
Preferred Stock and (y) the maximum number of shares available for purchase by
the holders of Series H Purchasers under (ii) above, (vi) any holder of Series H
Preferred Stock may assign the right to purchase its Proportionate Share to an
Affiliate of such Series H Purchaser or to an entity managed by Partech
International, and (vii) the Proportionate Shares may be cut back to the extent
deemed necessary to the success of such offering by the managing underwriter
thereof in its reasonable opinion confirmed in writing to the Purchasers not
less than two weeks prior to the effective date of the registration statement
covering such securities; provided, however, in the event of an oversubscription
of the Proportionate Shares, such shares shall be allocated first so that each
of Attractor, Amerindo and the Series H Purchasers receives its full
Proportionate Share (and in the event that such shares are insufficient for each
of Attractor, Amerindo and the Series H Purchasers to receive their full
Proportionate Share, then each of Attractor's, Amerindo's and the Series H
Purchasers' Proportionate Share
9
<PAGE>
shall be cut back pro rata, based upon their full Proportionate Share) and
second, among the remaining Series F Purchasers pro rata based upon their
respective holdings of Series F Preferred Stock. The price of securities which
each such Purchaser of Series F Preferred Stock and Series H Preferred Stock
becomes entitled to purchase by reason hereof shall be the same price at which
such securities are initially offered to the public.
C. Procedures. A holder may exercise its right under paragraph
3A to purchase Equity Securities by paying the purchase price therefor at the
principal office of the Company within ten days after receipt of notice from the
Company (which notice by the Company shall be given at least 15 days before the
issuance of the Equity Securities) stating the number or amount of Equity
Securities it intends to issue and the price and characteristics thereof. In the
first Qualified Public Offering, the Company shall give notice to the holders of
Series E Preferred Stock, Series F Preferred Stock and Series H Preferred Stock
at least 15 days prior to the filing of the registration statement relating to
such offering stating the number or amount of Equity Securities the Company
intends to issue and the anticipated offering price and characteristics thereof.
A Purchaser may exercise his or its right under paragraph 3B to purchase Equity
Securities by giving notice to the Company of his or its commitment to purchase
within ten days after receipt of the Company's notice and paying the purchase
price therefor on the date and at the place of the closing of such offering. The
holder shall pay such purchase price in cash or by check; provided, however,
that if the Company is indebted to such holder, the holder shall be entitled, at
the holder's sole option, to credit against the purchase price all or any
portion of the Company's indebtedness to such holder which is then due (accrued
but unpaid dividends on the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series E Preferred Stock, Series F Preferred Stock and
Series H Preferred Stock shall not be deemed to be indebtedness for purposes of
such credit). A holder's contractual preemptive rights hereunder shall be deemed
to be exercised immediately prior to the close of business on the day of payment
of the purchase price in accordance with the foregoing provisions, and at such
time such holder shall be treated for all purposes as the record holder of the
Equity Securities, as the case may be. As promptly as practicable (and in any
event within ten days) on or after the purchase date, the Company shall issue
and deliver at its principal office a certificate or certificates for the number
of full shares of Common Stock or the number of full shares or amount, whichever
is applicable, of Equity Securities together with cash for any fraction of a
share or portion of an Equity Security at the purchase price to which the holder
is entitled hereunder.
4. General Provisions.
A. Legends on Certificates. During the term of this Agreement,
each certificate representing shares of Common Stock or Shares will bear a
legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SALE, ASSIGNMENT,
TRANSFER, PLEDGE OR OTHER DISPOSITION AND VOTING THEREOF ARE SUBJECT TO
CERTAIN RESTRICTIONS AND AGREEMENTS CONTAINED IN A STOCKHOLDERS AGREEMENT
AMONG THE COMPANY AND CERTAIN OF ITS STOCKHOLDERS, AS AMENDED FROM TIME TO
TIME. A COPY OF THE STOCKHOLDERS AGREEMENT AND ALL APPLICABLE AMENDMENTS
THERETO WILL
10
<PAGE>
BE FURNISHED BY THE COMPANY TO THE RECORD HOLDER OF THIS CERTIFICATE
WITHOUT CHARGE UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE
OF BUSINESS OR REGISTERED OFFICE."
The Company shall make a notation on its records and give instructions to any
transfer agent of the Shares or Common Stock in order to implement the
restrictions on transfer established in this Agreement.
B. Termination; Amendment.
(i) This Agreement shall terminate upon the earlier to
occur of (a) a Qualified Public Offering, (b) the written agreement of the
Company and the holders of 80% or more of the Shares then outstanding and the
holders of at least a majority of the Common Stock outstanding, or (c) the
acquisition by a single purchaser of all of the issued and outstanding shares of
the Common Stock and the Shares. Notwithstanding the foregoing sentence, this
Agreement shall survive a Qualified Public Offering to the extent necessary to
satisfy paragraph 3B. hereof.
(ii) This Agreement may be amended by the written
agreement of the Company and the holders of 80% or more of the Shares then
outstanding.
(iii) Notwithstanding the foregoing paragraphs 4B(i) and
(ii), this Agreement may not be amended to materially and adversely affect the
holders of Series E Preferred Stock and/or Series F Preferred Stock without the
affirmative vote of the holders of at least 95% of the Series E Preferred Stock
and/or Series F Preferred Stock, respectively, then outstanding, voting as a
separate class.
(iv) Notwithstanding the foregoing paragraphs 4B(i) and
(ii), this Agreement may not be amended to materially and adversely affect the
holders of Series H Preferred Stock without the affirmative vote of the holders
of at least 80% of the Series H Preferred Stock then outstanding, voting as a
separate class.
C. Notices. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be delivered
personally, by facsimile transmission, by overnight delivery service or by first
class certified or registered U.S. mail, return receipt requested, postage
prepaid:
If to the Company, at Vignette Corporation, 3410 Far West Boulevard,
Suite 300, Austin, Texas 78731, Attention: Gregory A. Peters, President and
Chief Executive Officer, (fax (512) 502-0280); or at such other address or
addresses as may have been furnished in writing by the Company to the
Purchasers, with a copy to Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian, LLP, 8911 Capital of Texas Highway, Suite 4240, Austin, Texas 78759,
Attention: Brian K. Beard (fax (512) 342-8181);
11
<PAGE>
If to Adobe, at 1 Bush Street, San Francisco, California 94104
Attention: Chris Hollenbeck (fax (415) 439-3621); or at such other address or
addresses as may have been furnished to the Company in writing by Adobe.
If to Amerindo, at One Embarcadero Center, Suite 2300, San Francisco,
California 94111, Attention: Jeff Pressman (fax (415) 834-3581); or at such
other address as may have been furnished in writing to the Company by Amerindo,
with a copy to Buchalter, Nemer, Fields & Younger, P.C., 601 South Figueroa,
Suite 2400, Los Angeles, California 90017, Attention: Rick Cohen (fax (213) 896-
0400).
If to Attractor, at 1110 Burlingame Avenue, Suite 211, Burlingame,
California 94010, Attention: Harvey Allison (fax (650) 685-8545); or at such
other address or addresses as may have been furnished to the Company in writing
by Attractor, with a copy to Buchalter, Nemer, Fields & Younger, P.C., 601 South
Figueroa, Suite 2400, Los Angeles, California 90017, Attention: Rick Cohen (fax
(213) 896-0400).
If to Austin Ventures, at 1300 Norwood Tower, 114 West 7th Street,
Austin, Texas 78701, Attention: John D. Thornton (fax (512) 476-3952); or at
such other address or addresses as may have been furnished to the Company in
writing by Austin Ventures, with a copy to Hughes & Luce, L.L.P., 111 Congress
Avenue, Suite 900, Austin, Texas 78701, Attention: William R. Volk (fax (512)
482-6859).
If to Charles River, at 1000 Winter Street, Suite 3300, Bay Colony
Corporate Center, Waltham, Massachusetts 02154, Attention: Ted Dintersmith (fax
(781) 487-7065); or at such other address or addresses as may have been
furnished to the Company in writing by Charles River.
If to CNET, at 150 Chestnut Street, San Francisco, California 94111,
Attention: Shelby W. Bonnie (fax (415) 395-9330); or at such other address or
addresses as may have been furnished to the Company in writing by CNET, with a
copy to Hughes & Luce, L.L.P., 1717 Main Street, Suite 2800, Dallas, Texas
75201, Attention: Jon L. Mosle (fax (214) 939-6100).
If to GSCP, at 85 Broad Street, New York, New York 10004, Attention:
Eve M. Gerriets (fax (212) 357-5505); or at such other address or addresses as
may have been furnished to the Company in writing by GSCP, with a copy to
Venture Law Group, 2800 Sand Hill Road, Menlo Park, California 94025, Attention:
Robert Zipp (fax (650) 233-8386).
If to H&Q, at 1 Bush Street, 15th Floor, San Francisco, California
94104, Attention: Charlie Walker (fax (415) 439-3621); or at such other address
or addresses as may have been furnished to the Company in writing by H&Q.
If to Sigma, c/o Sigma Partners at 20 Custom House Street, Suite 830,
Boston, Massachusetts 02110, Attention: Robert E. Davoli (fax (617) 330-7975);
or at such other address or addresses as may have been furnished to the Company
in writing by Sigma, with a copy to Hughes & Luce, L.L.P., 111 Congress Avenue,
Suite 900, Austin, Texas 78701, Attention: William R. Volk (fax (512) 482-6859).
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<PAGE>
If to the Series H Purchasers, at the respective addresses provided on
the signature page attached hereto; or at such other address or addresses as may
have been furnished to the Company in writing, with a copy to Wilson Sonsini
Goodrich & Rosati, Professional Corporation, 9020-I Capital of Texas Highway
North, Building I, Suite 220, Austin, Texas 78759, Attention: Paul Tobias (fax
(512) 231-1432).
If to a Founder or other Purchaser, at the address specified for such
person in the Purchase Agreement; or at such other address as may have been
furnished to the Company in writing by such person.
Notices provided in accordance with this paragraph 4C shall be deemed
delivered upon personal delivery or two business days after deposit in the mail.
D. Governing Law. The construction, validity and interpretation
of this Agreement will be governed by the internal laws of the State of Texas
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Texas or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Texas.
E. 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.
F. Reorganization. The provisions of this Agreement shall apply
to any shares or other securities resulting from any stock split or reverse
split, stock dividend, reclassification, subdivision, consolidation or
reorganization of any shares or other equity securities of the Company and to
any shares or other securities of the Company or of any successor company which
may be received by any of the parties hereto by virtue of their respective
ownership of any shares of Common Stock and Shares of the Company.
G. Headings. The headings of this Agreement are for convenience
only and do not constitute a part of this Agreement.
H. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
I. Binding Effect. The rights and obligations of each Purchaser
under this Agreement may be assigned by such Purchaser to any person or entity
to which Shares are transferred by such Purchaser, and such transferee shall be
deemed a "Purchaser" for purposes of this Agreement, provided that the
transferee provides written notice of such assignment to the Company.
J. Entire Agreement. This Agreement is intended to be the sole
agreement of the parties as it relates to this subject matter and does hereby
supersede all other agreements of the parties relating to the subject matter
hereof including, without limitation, the Prior Stockholders Agreement.
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<PAGE>
K. Definitions. For purposes of this Agreement, the following
terms shall have the meanings indicated:
"Approved Plan" means the Company's 1995 Stock Option/Stock Issuance
Plan as in effect on the date hereof, as amended from time to time and any other
written stock option purchase or similar incentive plan; provided that any such
amendment or other plan is approved by a majority of the Board of Directors,
with a majority of the Purchaser Directors concurring.
"Board of Directors" shall mean the board of directors of the Company.
"Common Stock" means, collectively, the Company's Common Stock, par
value $0.01 per share, and any capital stock of any class of the Company
hereafter authorized which is not limited to a fixed sum or percentage of par or
stated value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Company.
"Equity Security" means any stock or similar security, including
without limitation, securities containing equity features and securities
containing profit participation features, or any security convertible or
exchangeable, with or without consideration, into or for any stock or similar
security, or any security carrying any warrant or right to subscribe for or
purchase any stock or similar security, or any such warrant or right.
"Fair Market Value" means the fair market value as determined by a
majority of the Board of Directors with a majority of the Purchaser Directors
concurring.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political
subdivision thereof.
"Qualified Public Offering" means any underwritten offering by the
Company of shares of Common Stock to the public pursuant to an effective
registration statement under the Securities Act of 1933, then in effect, or any
comparable statement under any similar federal statute then in force, in which
(i) the aggregate cash proceeds to be received by the Company and selling
stockholders from such offering (without deducting underwriting discounts,
expenses and commissions) are at least $20,000,000, and (ii) the price per share
paid by the public for such shares is at least $3.00 if determined with respect
to Series A Preferred Stock or Series C Preferred Stock (as adjusted for stock
dividends, combinations and splits with respect to such shares), $4.95 if
determined with respect to Series B Preferred Stock (as adjusted for stock
dividends, combinations and splits with respect to such shares), $8.48 if
determined with respect to Series E Preferred Stock, $13.09 if determined with
respect to Series F Preferred Stock or $13.07 if determined with respect to
Series H Preferred Stock (as adjusted for stock dividends, combinations and
splits with respect to such shares).
"Series A Preferred Stock" means the Company's Series A Preferred
Stock, par value $0.01 per share.
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<PAGE>
"Series B Preferred Stock" means the Company's Series B Convertible
Preferred Stock, par value $0.01 per share.
"Series C Preferred Stock" means the Company's Series C Convertible
Preferred Stock, par value $0.01 per share.
"Series D Preferred Stock" means the Company's Series D Convertible
Preferred Stock, par value $0.01 per share.
"Series D Warrants" means warrants to purchase Series D Preferred
Stock issued from time to time by the Company including, without limitation,
that certain Warrant to Purchase 65,368 shares of Series D Convertible Preferred
Stock, dated December 31, 1996, originally issued to James Treybig.
"Series E Preferred Stock" means the Company's Series E Convertible
Preferred Stock, par value $0.01 per share.
"Series F Preferred Stock" means the Company's Series F Convertible
Preferred Stock, par value $0.01 per share.
"Series H Preferred Stock" means the Company's Series H Convertible
Preferred Stock, par value $0.01 per share.
15
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the date first written above.
VIGNETTE CORPORATION
By: /s/ Gregory A. Peters
-----------------------------------------------
Gregory A. Peters,
President and Chief Executive Officer
SIGNATURE PAGE TO VIGNETTE CORPORATION
SIXTH AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
<PAGE>
PURCHASER:
--------------------------------------------------
(Name of Purchaser)
--------------------------------------------------
(Signature of Purchaser or Authorized Signatory)
--------------------------------------------------
(Print or Type Name and Title if Purchaser is not
an Individual)
Address:
--------------------------------------
--------------------------------------
--------------------------------------
Telephone:
--------------------------------------
Facsimile:
--------------------------------------
with a copy to:
Name:
--------------------------------------
Address:
--------------------------------------
--------------------------------------
--------------------------------------
Telephone:
--------------------------------------
Facsimile:
--------------------------------------
PLEASE PROVIDE ALL OF THE ABOVE-REQUESTED INFORMATION
SIGNATURE PAGE TO VIGNETTE CORPORATION
SIXTH AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
<PAGE>
EXHIBIT A
PURCHASERS
Adobe
Adobe Ventures II, L.P. ("Adobe Ventures")
Adobe Incentive Partners, L.P. ("Adobe Incentive")
H&Q Adobe Ventures Management II, L.L.C. ("H&Q Adobe" and together with
Adobe Ventures and Adobe Incentive, "Adobe")
Amerindo
ATGF II ("ATGF")
Pivotal Partners, L.P. ("Pivotal")
James Stableford ("Stableford")
Emeric McDonald ("McDonald")
Litton Master Trust ("LMT")
Ralph H. Cechettini 1995 Trust ("RHC Trust")
Irene Yu ("Yu" and together with ATGF, Pivotal, Stableford, McDonald,
LMT and RHC Trust, "Amerindo")
Attractor
Attractor LP ("ALP")
Attractor Dearborn Partners LP ("ADP")
Attractor Institution LP ("AILP" and together with ALP and ADP,
"Attractor")
Austin Ventures
Austin Ventures IV-A, L.P. ("Austin A")
Austin Ventures IV-B, L.P. ("Austin B")
Austin Ventures V Affiliates Fund, LP ("Austin V Affiliates")
Austin Ventures V, L.P. ("Austin V" and together with Austin A, Austin B
and Austin V Affiliates, "Austin Ventures")
Murray Bodine
Charles River
Charles River Partnership VIII ("CRP VIII")
Charles River VIII-A LLC ("CR VIII-A and together with CRP VIII, "Charles
River")
CNET
CNET, Inc. ("CNET")
Charles Conn
David Duffield
East Peak Partners
Timothy Emanuels
Ross B. Garber
A-1
<PAGE>
GSCP
GS Capital Partners II, L.P. ("GSCPLP")
GS Capital Partners II Offshore, L.P. ("GSCPO")
Goldman, Sachs & Co. Verwaltungs GmbH ("GSCV" and together with GSCPLP and
GSCPO, "GSCP")
H&Q
Hambrecht & Quist California ("H&QC")
H&Q Vignette Investors ("H&QVI" and together with H&QC, "H&Q")
Phil Hempleman
Tom Kudrycki
Thomas Layton
Morgan Stanley Dean Witter Equity Funding, Inc.
Olympus Growth Fund II, L.P.
Olympus Executive Fund, L.P.
David Overmeyer
Partech
Axa U.S. Growth Fund LLC
U.S. Growth Fund Partners C.V.
Double Black Diamond II LLC
45th Parallel LLC
Almanori Limited
Multinvest LLC
Parallel Capital I LLC
Vendome Capital LLC
Gregory A. Peters
Richard Petit
Jonathan Rosenberg
Sigma
Sigma Partners III, L.P. ("Sigma Partners")
Sigma Associates III, L.P. ("Sigma Associates")
Sigma Investors III, L.P. ("Sigma Investors")
John Mandile ("Mandile," and together with Sigma Partners, Sigma Associates
and Sigma Investors, "Sigma")
George Still
A-2
<PAGE>
Margaret L. Taylor
Christopher J. Traynor
Neil Webber
Andrew Werth
A-3
<PAGE>
EXHIBIT B
TRANSFEREES OF FOUNDERS STOCK
Jarred Bressner
Ryan Bressner
Joel Cohen
Chris Corona
Nancy Corona
Adele Garber
Hailey Garber
Harrison Garber
Marvyn Garber
Scott Garber
Marcia Hill
Mark and Renee Levitz
Jose Rodrigues
Jose Rodrigues, Jr.
Arthur and Adrian Webber
B-1
<PAGE>
EXHIBIT 4.4
FIFTH AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
THIS FIFTH AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this
"Agreement") is entered into as of November 30, 1998, among Vignette
Corporation, a Delaware corporation (the "Company") and the Stockholders on
Exhibit A and Exhibit B attached hereto (individually a "Holder" and
collectively the "Holders").
RECITALS:
WHEREAS, the Company and certain of the Holders have entered into a
Fourth Amended and Restated Registration Rights Agreement, dated April 22, 1998
(the "Prior Registration Agreement"), providing for the registration of the
offering of certain shares of the Company's capital stock held by certain of the
Holders;
WHEREAS, the Company and Olympus Growth Fund II, L.P., Olympus
Executive Fund, L.P., Axa U.S. Growth Fund LLC, U.S. Growth Fund Partners C.V.,
Double Black Diamond II LLC, 45th Parallel LLC, Almanori Limited, Multinvest
LLC, Parallel Capital I LLC, Vendome Capital LLC, Attractor Dearborn Partners,
LP, Attractor Institution LP, Attractor LP, East Peak Partners, Pivotal
Partners, L.P., Ralph J. Cechettini 1995 Trust, James Stableford, Emeric
McDonald, ATGF II, and Morgan Stanley Dean Witter Equity Funding, Inc.
(collectively, the "Series H Purchasers") have entered into a Stock Purchase
Agreement, dated the date hereof (the "Purchase Agreement"), providing, among
other things, for the purchase by the Series H Purchasers of shares of the
Company's Series H Convertible Preferred Stock, par value $0.01 per share (the
"Series H Preferred Stock");
WHEREAS, the Company, the Holders and the Series H Purchasers desire
to amend the Prior Registration Agreement on the terms hereinafter set forth;
and
WHEREAS, the execution and delivery of this Agreement by the Company
and by such number of Holders as are necessary to amend and restate the Prior
Registration Agreement is a condition to the closing of the issuance, sale and
purchase of the Series H Preferred Stock pursuant to the Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall have the meanings indicated:
"Commission" means the United States Securities and Exchange
Commission.
"Common Stock" means the Company's Common Stock, par value $0.01 per
share.
<PAGE>
"Founder" means Ross Garber, Neil Webber and the Holders on Exhibit B
attached hereto.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political
subdivision thereof.
"Registrable Founders Stock" means all Common Stock and other capital
stock of the Company now or hereafter owned and held by any Founder and
transferee of any Founder.
"Registrable Series A and Series B Stock" means all Series A Preferred
Stock and Series B Preferred Stock and all Common Stock and other capital stock
of the Company acquired upon the conversion of such Preferred Stock by any
Holder and transferee of any Holder.
"Registrable Series C Stock" means all Series C Preferred Stock and
all Common Stock and other capital stock of the Company acquired upon the
conversion of such Preferred Stock by CNET and any permitted transferee of CNET.
"Registrable Series E Stock" means all Series E Preferred Stock and
all Common Stock and other capital stock of the Company acquired upon the
conversion of such Preferred Stock by any Holder and any permitted transferee of
any Holder.
"Registrable Series F Stock" means all Series F Preferred Stock and
all Common Stock and other capital stock of the Company acquired upon the
conversion of such Preferred Stock by any Holder and any permitted transferee of
any Holder.
"Registrable Series H Stock" means all Series H Preferred Stock and
all Common Stock and other capital stock of the Company acquired upon the
conversion of such Preferred Stock by any Holder and any permitted transferee of
any Holder.
"Registrable Stock" means all Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series E Preferred Stock, Series F
Preferred Stock, Series H Preferred Stock, Common Stock and other capital stock
of the Company now or hereafter owned and held by any Holder and transferee of
any Holder.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Preferred Stock" means the Company's Series A Convertible
Preferred Stock, par value $0.01 per share.
"Series B Preferred Stock" means the Company's Series B Convertible
Preferred Stock, par value $0.01 per share.
"Series C Preferred Stock" means the Company's Series C Convertible
Preferred Stock, par value $0.01 per share.
"Series E Preferred Stock" means the Company's Series E Convertible
Preferred Stock, par value $0.01 per share.
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"Series F Preferred Stock" means the Company's Series F Convertible
Preferred Stock, par value $0.01 per share.
"Series H Preferred Stock" means the Company's Series H Convertible
Preferred Stock, par value $0.01 per share.
2. Demand Registrations.
A. Requests for Registration.
(i) At any time and from time to time after January 31,
2001, the holders of at least 66-2/3% of the Registrable Series A and Series B
Stock then outstanding may request registration under the Securities Act of the
offering of all or any part of the Registrable Stock held by such Holders (each,
a "Demand Registration"), subject to the terms and conditions of this Agreement.
Any request (a "Registration Request") for a Demand Registration shall specify
(a) the approximate number of shares of Registrable Series A and Series B Stock
requested to be registered (but not less than a majority of the total number of
shares of Registrable Series A and Series B Stock then outstanding), and (b) the
intended method of distribution of such shares. Within ten days after the date
of its receipt of such request, the Company will give written notice of such
requested registration to all other Holders of Registrable Stock and, subject to
paragraph 2A(vi), will include in such registration all shares of Registrable
Stock which Holders of Registrable Stock request the Company to include in such
registration by written notice given to the Company within 15 days after the
date of sending of the Company's notice.
(ii) At any time and from time to time after January 31,
2001, the holders of at least 66-2/3% of the Registrable Series E Stock then
outstanding may request registration under the Securities Act of the offering of
all or any part of the Registrable Stock held by such Holders (each, a "Demand
Registration"), subject to the terms and conditions of this Agreement. Any
request (a "Registration Request") for a Demand Registration shall specify (a)
the approximate number of shares of Registrable Series E Stock requested to be
registered (but not less than a majority of the total number of shares of
Registrable Series E Stock then outstanding), and (b) the intended method of
distribution of such shares. Within ten days after the date of its receipt of
such request, the Company will give written notice of such requested
registration to all other Holders of Registrable Stock and, subject to paragraph
2A(vi), will include in such registration all shares of Registrable Stock which
Holders of Registrable Stock request the Company to include in such registration
by written notice given to the Company within 15 days after the date of sending
of the Company's notice.
(iii) At any time and from time to time after January 31,
2001, the holders of at least 66-2/3% of the Registrable Series F Stock then
outstanding may request registration under the Securities Act of the offering of
all or any part of the Registrable Stock held by such Holders (each, a "Demand
Registration"), subject to the terms and conditions of this Agreement. Any
request (a "Registration Request") for a Demand Registration shall specify (a)
the approximate number of shares of Registrable Series F Stock requested to be
registered (but not less than a majority of the total number of shares of
Registrable Series F Stock then outstanding), and (b) the intended method of
distribution of such shares. Within ten days after
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the date of its receipt of such request, the Company will give written notice of
such requested registration to all other Holders of Registrable Stock and,
subject to paragraph 2A(vi), will include in such registration all shares of
Registrable Stock which Holders of Registrable Stock request the Company to
include in such registration by written notice given to the Company within 15
days after the date of sending of the Company's notice.
(iv) At any time and from time to time after January 31,
2001, the holders of at least 66-2/3% of the Registrable Series H Stock then
outstanding may request registration under the Securities Act of the offering of
all or any part of the Registrable Stock held by such Holders (each, a "Demand
Registration"), subject to the terms and conditions of this Agreement. Any
request (a "Registration Request") for a Demand Registration shall specify (a)
the approximate number of shares of Registrable Series H Stock requested to be
registered (but not less than a majority of the total number of shares of
Registrable Series H Stock then outstanding), and (b) the intended method of
distribution of such shares. Within ten days after the date of its receipt of
such request, the Company will give written notice of such requested
registration to all other Holders of Registrable Stock and, subject to paragraph
2A(vi), will include in such registration all shares of Registrable Stock which
Holders of Registrable Stock request the Company to include in such registration
by written notice given to the Company within 15 days after the date of sending
of the Company's notice.
(v) Subject to paragraph 4, the Holders of Registrable
Series A and Series B Stock will be entitled to request up to two Demand
Registrations at any time and from time to time and the Holders of Registrable
Series E Stock, Registrable Series F Stock and Registrable Series H Stock will
be entitled to request up to two Demand Registrations at any time and from time
to time.
(vi) In connection with a Demand Registration with respect
to Registrable Series A and Series B Stock, a registration will not count as one
of the Demand Registrations paid for by the Company (as provided in paragraph 4)
unless the holders of Registrable Series A and Series B Stock are able to
register the offering of and sell at least 50% of the shares of Registrable
Series A and Series B Stock requested to be included in such registration. In
connection with a Demand Registration with respect to Registrable Series E
Stock, a registration will not count as one of the Demand Registrations paid for
by the Company (as provided in paragraph 4) unless the holders of Registrable
Series E Stock are able to register the offering of and sell at least 50% of the
shares of Registrable Series E Stock requested to be included in such
registration. In connection with a Demand Registration with respect to
Registrable Series F Stock, a registration will not count as one of the Demand
Registrations paid for by the Company (as provided in paragraph 4) unless the
holders of Registrable Series F Stock are able to register the offering of and
sell at least 50% of the shares of Registrable Series F Stock requested to be
included in such registration. In connection with a Demand Registration with
respect to Registrable Series H Stock, a registration will not count as one of
the Demand Registrations paid for by the Company (as provided in paragraph 4)
unless the holders of Registrable Series H Stock are able to register the
offering of and sell at least 50% of the shares of Registrable Series H Stock
requested to be included in such registration.
(vii) The Company will not include in any Demand Registration
the offering of any securities other than shares of Registrable Stock and
securities to be
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registered for offering and sale on behalf of the Company without the prior
written consent of the Holders of a majority of the shares of Registrable Series
A and Series B Stock, Registrable Series E Stock, Registrable Series F Stock or
Registrable Series H Stock, as the case may be, included in such registration.
If the managing underwriter(s) of any such offering advise the Company in
writing that in their opinion the number of shares of Registrable Stock and, if
permitted hereunder, other securities in such offering, exceeds the number of
shares of Registrable Stock and other securities, if any, which can be sold in
an orderly manner in such offering within a price range acceptable to the
Holders of a majority of the shares of Registrable Series A and Series B Stock,
Registrable Series E Stock, Registrable Series F Stock or Registrable Series H
Stock, as the case may be, initially requesting registration, the Company will
include in such registration, prior to the inclusion of any securities which are
not shares of Registrable Series A and Series B Stock, Registrable Series E
Stock, Registrable Series F Stock or Registrable Series H Stock, as the case may
be, subject to a Registration Request the number of shares requested to be
included which in the opinion of such underwriters can be sold in an orderly
manner within the price range of such offering, in the following order of
priority: (i) first, pro rata among the Holders of Registrable Series A and
Series B Stock, Registrable Series E Stock, Registrable Series F Stock or
Registrable Series H Stock, as the case may be, making the Registration Request
on the basis of the number of shares that such Holders have requested be
included in the registration, (ii) second, to the Company, (iii) third, pro rata
among the Holders of other Registrable Stock requesting to be included in such
registration on the basis of the number of shares that such holders have
requested be included in the registration, and (iv) fourth, pro rata among the
holders of the other securities, if any, requested to be included in such
registration on the basis of the number of shares that such holders have
requested be included in the registration.
B. Selection of Managing Underwriter(s). The holders of a majority of
the then outstanding shares of Registrable Series A and Series B Stock,
Registrable Series E Stock, Registrable Series F Stock or Registrable Series H
Stock, as the case may be, requesting a registration will have the right to
select one or more underwriters to manage any offering which is the subject of a
Demand Registration, subject to the Company's approval which will not be
unreasonably withheld.
C. Registrations on Forms S-2 and S-3. Following its initial public
offering of securities under the Securities Act, the Company shall use its
reasonable best efforts to qualify for registration on Forms S-2 or S-3 or any
comparable or successor form or forms. After the Company has qualified for the
use of Form S-2 or S-3, in addition to the rights contained in paragraph 2A, the
Holders of at least 25% of the Registrable Series A and Series B Stock shall
have the right at any time and from time to time to request up to two
registrations on Form S-2 and an unlimited number of registrations on Form S-3.
After the Company has qualified for the use of Form S-2 or S-3, in addition to
the rights contained in paragraph 2A, the Holders of at least 25% of the
Registrable Series E Stock shall have the right at any time and from time to
time to request up to two registrations on Form S-2 and an unlimited number of
registrations on Form S-3. After the Company has qualified for the use of Form
S-2 or S-3, in addition to the rights contained in
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paragraph 2A, the Holders of at least 25% of the Registrable Series F Stock
shall have the right at any time and from time to time to request up to two
registrations on Form S-2 and an unlimited number of registrations on Form S-3.
After the Company has qualified for the use of Form S-2 or S-3, in addition to
the rights contained in paragraph 2A, the Holders of at least 25% of the
Registrable Series H Stock shall have the right at any time and from time to
time to request up to two registrations on Form S-2 and an unlimited number of
registrations on Form S-3. After the Company has qualified for the use of Form
S-3, (i) the holders of at least 25% of the Registrable Series C Stock shall
have the right at any time and from time to time to request an unlimited number
of registrations on Form S-3 and (iii) the holders of at least 25% of the
Registrable Founders Stock shall have the right at any time and from time to
time to request an unlimited number of registrations on Form S-3. Such requests
shall be in writing and shall state the number of shares of Registrable Stock
proposed to be disposed of and the intended method of distribution of such
shares by such Holder or Holders.
D. Right to Defer Registration. The Company shall not be obligated to
effect any registration on behalf of any Holder or transferee thereof within 180
days after the effective date of a previous registration in which such Holder or
transferee participated. The Company may postpone for up to 180 days the filing
or the effectiveness of a registration statement for a Demand Registration set
forth above if (i) the Company determines that such registration might have an
adverse effect on any proposal or plan by the Company to engage in any
acquisition of assets (other than in the ordinary course) or any merger,
consolidation, tender offer or similar transaction or (ii) any other material,
nonpublic development or transaction is pending; provided that the Company may
not postpone the filing or effectiveness of a registration statement pursuant to
this sentence more frequently than once during any period of 12 consecutive
months.
3. Piggyback Registrations.
A. Right to Piggyback. If the Company proposes to register any
offering of its securities under the Securities Act (other than pursuant to a
Demand Registration or registration solely in connection with an employee
benefit or stock ownership plan) and the registration form to be used may be
used for the registration of Registrable Stock (a "Piggyback Registration"), the
Company will give prompt written notice to all Holders of Registrable Stock of
its intention to effect such a registration (each a "Piggyback Notice"). Subject
to subparagraph 3B below, the Company will include in such registration all
shares of Registrable Stock which Holders of Registrable Stock request the
Company to include in such registration by written notice given to the Company
within 15 days after the date of sending of the Company's notice.
B. Priority on Primary Registrations. If a Piggyback Registration
relates to an underwritten public offering of equity securities by the Company
and the managing underwriters of such offering advise the Company in writing
that in their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in an orderly manner in such
offering within a price range acceptable to the Company, the Company will
include in such registration (i) first, the securities proposed to be sold by
the Company, (ii) second, the Registrable Series A and Series B Stock,
Registrable Series E Stock, Registrable Series F Stock and Registrable Series H
Stock requested to be included in such registration, pro rata among the Holders
of such Registrable Series A and Series B Stock, Registrable Series E Stock,
Registrable Series F Stock and Registrable Series H Stock on the basis of the
number of shares owned by each such Holder, (iii) third, the Registrable
Founders Stock and Registrable Series C Stock requested to be included in such
registration, pro rata
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among the Holders of such Registrable Founders Stock and Registrable Series C
Stock on the basis of the number of shares owned by each such Holder, and (iv)
fourth, other securities requested to be included in such registration.
C. Priority on Secondary Registrations. If a Piggyback Registration
relates to an underwritten public offering of equity securities by holders of
the Company's securities and the managing underwriters of such offering advise
the Company in writing that in their opinion the number of securities requested
to be included in such registration exceeds the number which can be sold in an
orderly manner in such offering within a price range acceptable to the holders
initially requesting such registration, the Company will include in such
registration (i) first, the securities requested to be included therein by the
holders requesting such registration, (ii) second, the Registrable Series A and
Series B Stock, Registrable Series E Stock, Registrable Series F Stock and
Registrable Series H Stock requested to be included in such registration, pro
rata among the Holders of such Registrable Series A and Series B Stock,
Registrable Series E Stock, Registrable Series F and Registrable Series H Stock
on the basis of the number of shares owned by each such Holder, and (iii) third,
the Registrable Founders Stock and Registrable Series C Stock requested to be
included in such registration, pro rata among the Holders of such Registrable
Founders Stock and Registrable Series C Stock on the basis of the number of
shares owned by each such Holder.
4. Registration Procedures. Whenever the Holders of Registrable Stock have
requested that any Registrable Stock be registered pursuant to this Agreement,
the Company will use its best efforts to effect the registration and the sale of
such Registrable Stock in accordance with the intended method of distribution
thereof and will as expeditiously as possible:
(i) prepare and file with the Commission a registration statement
with respect to such Registrable Stock and use its best efforts to cause such
registration statement to become effective, provided, that before filing a
registration statement or prospectus or any amendments or supplements thereto,
the Company will furnish to the counsel selected by the Holders of a majority of
the Registrable Stock covered by such registration statement copies of all such
documents proposed to be filed, which documents will be subject to the review of
such counsel;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
a period of up to six months, and comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by such
registration statement during such period in accordance with the intended
methods of distribution by the sellers thereof set forth in such registration
statement;
(iii) furnish to each seller of Registrable Stock included in such
registration such number of copies of such registration statement, each
amendment and supplement thereto, the prospectus included in such registration
statement (including each preliminary prospectus) and such other documents as
such seller may reasonably request in order to facilitate the disposition of
such Registrable Stock by such seller;
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(iv) use its best efforts to register or qualify such Registrable
Stock under such other securities or blue sky laws of such jurisdictions as any
seller reasonably requests and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Stock owned by such seller,
provided, that the Company will not be required (i) to qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this subparagraph, (ii) to subject itself to taxation in any such
jurisdiction or (iii) to consent to general service of process in any such
jurisdiction;
(v) notify each seller of such Registrable Stock, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading and, at the request of any such seller, the Company will prepare
a supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Stock, such prospectus will not contain an
untrue statement of a material fact or omit to state any fact necessary to make
the statements therein, in light of the circumstances under which such
statements are made, not misleading;
(vi) cause all such Registrable Stock to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and to be qualified for trading on each system on which similar
securities issued by the Company are from time to time qualified;
(vii) provide a transfer agent and registrar for all such
Registrable Stock not later than the effective date of such registration
statement and thereafter maintain such a transfer agent and registrar;
(viii) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the shares of Registrable Stock being sold or the underwriters, if
any, reasonably request in order to expedite or facilitate the disposition of
such Registrable Stock;
(ix) make available for inspection by any underwriter
participating in any disposition pursuant to such registration statement and any
attorney, accountant or other agent retained by any such underwriter, all
financial and other records, pertinent corporate documents and properties of the
Company, and cause the Company's officers, directors, employees and independent
accountants to supply all information reasonably requested by any such
underwriter, attorney, accountant or agent in connection with such registration
statement;
(x) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least 12 months beginning with the first day of the Company's first
full calendar quarter after the effective date of the registration statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder;
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(xi) permit any Holder of Registrable Stock which might be deemed,
in the sole and exclusive judgment of such Holder, to be an underwriter or a
controlling person of the Company, to participate in the preparation of such
registration or comparable statement and to require the insertion therein of
material, furnished to the Company in writing, which in the reasonable judgment
of such Holder and its counsel should be included; and
(xii) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any Registrable Stock included in such registration statement for sale in any
jurisdiction, the Company will use its reasonable best efforts promptly to
obtain the withdrawal of such order.
If any such registration or comparable statement refers to any Holder by name or
otherwise as the holder of any securities of the Company and if, in such
Holder's sole and exclusive judgment, such Holder is or might be deemed to be a
controlling person of the Company, such Holder shall have the right to require
(a) the inclusion in such registration statement of language, in form and
substance reasonably satisfactory to such Holder, to the effect that the holding
of such securities by such Holder is not to be construed as a recommendation by
such Holder of the investment quality of the Company's securities covered
thereby and that such holding does not imply that such Holder will assist in
meeting any future financial requirements of the Company, or (b) in the event
that such reference to such Holder by name or otherwise is not required by the
Securities Act or any similar federal statute then in force, the deletion of the
reference to such Holder; provided, that with respect to this clause (b) such
Holder shall furnish to the Company an opinion of counsel to such effect, which
opinion and counsel shall be reasonably satisfactory to the Company.
5. Registration Expenses.
A. Definitions. The term "Registration Expenses" means all expenses
incident to the Company's performance of or compliance with this Agreement,
including without limitation all registration and filing fees, fees and expenses
of compliance with securities or blue sky laws, printing expenses, messenger and
delivery expenses, and fees and expenses of counsel for the Company and all
independent certified public accountants, underwriters (excluding discounts and
commissions, which shall be paid by the selling shareholders out of the proceeds
of the applicable offering) and other Persons retained by the Company.
B. Payment. The Company shall pay the Registration Expenses (other
than fees and disbursements of counsel for the Holders, except as set forth in
the following sentence) in connection with two Demand Registrations requested by
Holders of Registrable Series A and B Stock, two Demand Registrations requested
by Holders of Registrable Series E Stock, two Demand Registrations requested by
Holders of Registrable Series F Stock, two Demand Registrations requested by
Holders of Registrable Series H Stock, up to two registrations on Form S-2 and
any and all registrations on Form S-3 pursuant to paragraph 2C and any and all
Piggyback Registrations. In connection with each Demand Registration and each
Piggyback Registration, the Company will reimburse the Holders of Registrable
Stock covered by such registration for the reasonable fees and disbursements of
one counsel chosen by the Holders of a majority of the Registrable Stock
initially requesting such registration.
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6. Indemnification.
A. Indemnification by the Company. The Company agrees to indemnify, to
the extent permitted by law, each Holder, its officers and directors and each
Person who controls such Holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such Holder expressly for use
therein or by such Holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished such Holder with a sufficient number of copies of the
same. In connection with an underwritten offering, the Company will indemnify
such underwriters, their officers and directors and each Person who controls
such underwriters (within the meaning of the Securities Act) to the same extent
as provided above with respect to the indemnification of the Holders.
B. Indemnification by Holders. In connection with any registration
statement in which a Holder is participating, each such Holder will furnish to
the Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, will indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading (but only to the extent that such
untrue statement or omission is contained in any information or affidavit so
furnished in writing by such Holder) and any failure by each such Holder to
deliver a copy of the registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished such Holder with a
sufficient number of copies of the same; provided, that the obligation to
indemnify will be individual to each Holder and will be limited to the net
amount of proceeds received by such Holder from the sale of Registrable Stock
pursuant to such registration statement.
C. Notice: Defense of Claims. Any Person entitled to indemnification
hereunder will (i) give prompt written notice to the indemnifying party of any
claim with respect to which it seeks indemnification and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party will not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a
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conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim.
D. Survival; Contribution. The indemnification provided for under this
Agreement will remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified party or any officer, director or
controlling Person of such indemnified party and will survive the transfer of
securities. The Company also agrees to make such provisions as are reasonably
requested by any indemnified party for contribution to such party in the event
the Company's indemnification is unavailable for any reason.
7. Participation in Underwritten Registrations. No Person may participate
in any registration hereunder which is underwritten unless such Person (i)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements; (ii) completes and executes all questionnaires,
powers of attorney, indemnities, standstill or holdback agreements, underwriting
agreements and other documents required under the terms of such underwriting
arrangements, provided, that no Holder of Registrable Stock included in any
underwritten registration shall be required to make any representations or
warranties to the Company or the underwriters other than representations and
warranties regarding such Holder and such Holder's intended method of
distribution. In any case, each Holder, if requested by the managing underwriter
or underwriters, agrees not to sell Registrable Stock or other securities held
by such Holder in any transaction other than pursuant to such underwriting for
such period (not to exceed 180 days) as determined at the discretion of the
Board of Directors of the Company, provided, that no holder of Registrable Stock
shall be required to enter into such an agreement unless each other Holder of
Registrable Stock, each director and executive officer of the Company and each
other holder of at least five percent of the Common Stock then outstanding
enters into a substantially identical agreement relating to such underwriting.
8. Miscellaneous.
A. No Inconsistent Agreements. The Company will not hereafter enter
into any agreement with respect to its securities which is inconsistent with or
violates the rights granted to the Holders of Registrable Stock in this
Agreement.
B. Adjustments Affecting Registrable Stock. The Company will not take
any action, or permit any change to occur, with respect to its securities for
the purpose of materially and adversely affecting the ability of the Holders of
Registrable Stock to include such Registrable Stock in a registration undertaken
pursuant to this Agreement or materially and adversely affecting the
marketability of such Registrable Stock in any such registration (including,
without limitation, effecting a stock split or a combination of shares),
provided, that this subparagraph 8B shall not apply to actions or changes with
respect to the Company's business, balance sheet, earnings or revenues where the
effect of such actions or changes on the Registrable Stock is merely incidental.
C. Notices. All notices, requests, consents, and other communications
under this Agreement shall be in writing and shall be delivered personally or by
facsimile transmission or by overnight delivery service or mailed by first class
certified or registered U.S.
11
<PAGE>
mail, return receipt requested, postage prepaid (capitalized entity names other
than "Company" are defined in Exhibit A hereto):
If to the Company, at Vignette Corporation, 3410 Far West Boulevard,
Suite 300, Austin, Texas 78731, Attention: Gregory A. Peters, President and
Chief Executive Officer (fax (512) 502-0280), or at such other address or
addresses as may have been furnished in writing by the Company to the Holders,
with a copy to Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP,
8911 Capital of Texas Highway, Suite 4240, Austin, Texas 78759, Attention: Brian
K. Beard (fax (512) 342-8181).
If to Adobe, at 1 Bush Street, San Francisco, California 94104 (fax
(415) 439-3621); or at such other address or addresses as may have been
furnished to the Company in writing by Adobe.
If to Amerindo, at One Embarcadero Center, Suite 2300, San Francisco,
California 94111, Attention: Jeff Pressman (fax (415) 834-3581); or at such
other address as may have been furnished in writing to the Company by Amerindo,
with a copy to Buchalter, Nomer, Fields & Younger, P.C., 601 South Figueroa,
Suite 2400, Los Angeles, California 90017, Attention: Rick Cohen (fax (213) 896-
0400).
If to Attractor, at 1110 Burlingame Avenue, Suite 211, Burlingame,
California 94010, Attention: Harvey Allison (fax (650) 685-8545); or at such
other address or addresses as may have been furnished to the Company in writing
by Attractor, with a copy to Buchalter, Nomer, Fields & Younger, P.C., 601 South
Figueroa, Suite 2400, Los Angeles, California 90017, Attention: Rick Cohen (fax
(213) 896-0400).
If to Austin Ventures, at 1300 Norwood Tower, 114 West 7th Street,
Austin, Texas 78701, Attention: John Thornton (fax (512) 476-3952); or at such
other address or addresses as may have been furnished to the Company in writing
by Austin Ventures, with a copy to Hughes & Luce, L.L.P., 111 Congress Avenue,
Suite 900, Austin, Texas 78701, Attention: William R. Volk (fax (512) 482-6859).
If to Charles River, at 1000 Winter Street, Suite 3300, Bay Colony
Corporate Center, Waltham, Massachusetts 02154, Attention: Ted Dintersmith (fax
(781) 487-7065); or at such other address or addresses as may have been
furnished to the Company in writing by Charles River.
If to CNET, at 150 Chestnut Street, San Francisco, California 94111,
Attention: Shelby W. Bonnie (fax (415) 395-9330); or at such other address or
addresses as may have been furnished to the Company in writing by CNET, with a
copy to Hughes & Luce, L.L.P., 1717 Main Street, Suite 2800, Dallas, Texas
75201, Attention: Jon L. Mosle (fax (214) 939-6100).
If to GSCP, at 85 Broad Street, New York, New York 10004, Attention:
Eve M. Gerriets (fax (212) 357-5505); or at such other address or addresses as
may have been furnished to the Company in writing by GSCP, with a copy to
Venture Law Group, 2800 Sand Hill Road, Menlo Park, California 94025, Attention:
Robert Zipp (fax (650) 233-8386).
12
<PAGE>
If to H&Q, at 1 Bush Street, 15th Floor, San Francisco, California
94104, Attention: Charlie Walker (fax (415) 439-3621); or at such other address
or addresses as may have been furnished to the Company in writing by H&Q.
If to Sigma, c/o Sigma Partners at 20 Custom House Street, Suite 830,
Boston, Massachusetts 02110, Attention: Robert E. Davoli (fax (617) 330-7975);
or at such other address or addresses as may have been furnished to the Company
in writing by Sigma, with a copy to Hughes & Luce, L.L.P., 111 Congress Avenue,
Suite 900, Austin, Texas 78701, Attention: William R. Volk (fax (512) 482-6859).
If to the Series H Purchasers, to the respective addresses shown on
the signature page attached hereto, or at such other address as may have been
furnished to the Company in writing, with a copy to Wilson Sonsini Goodrich &
Rosati, Professional Corporation, 9020-I Capital of Texas Highway North,
Building I, Suite 220, Austin, Texas 78759, Attention: Paul Tobias (fax (512)
231-1432).
If to a Founder or other Holder not listed above, at the address
specified for such person in the Purchase Agreement; or at such other address or
addresses as may have been furnished to the Company in writing by such person.
Notices provided in accordance with this paragraph 8C shall be deemed
delivered upon personal delivery or two business days after deposit in the mail.
D. Remedies. Any Person having rights under any provision of
this Agreement will be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
E. Amendments and Waivers. Except as otherwise provided
herein, no amendment, modification, termination or cancellation of this
Agreement shall be effective as to (i) the Company, unless made in writing
signed by the Company, (ii) the Holders of Registrable Series A and Series B
Stock, unless made in writing signed by the Holders of a majority of the then
outstanding shares of Registrable Series A and Series B Stock, (iii) the Holders
of Registrable Series C Stock, unless made in writing signed by the Holders of a
majority of the then outstanding shares of Registrable Series C Stock, (iv) the
Holders of Registrable Series E Stock, unless made in writing signed by the
Holders of 66-2/3% of the then outstanding shares of Registrable Series E Stock;
provided, however, that no amendment, modification, termination or cancellation
of this Agreement that materially and adversely affects the Holders of the
Registrable Series E Stock shall be effective unless made in writing signed by
the Holders of 95% of the then outstanding shares of Registrable Series E Stock,
(v) the Holders of Registrable Series F Stock, unless made in writing signed by
the Holders 66-2/3% of the then outstanding shares of Registrable Series F
Stock; provided, however, that no amendment, modification, termination or
cancellation of this Agreement that materially and adversely affects
13
<PAGE>
the Holders of the Registrable Series F Stock shall be effective unless made in
writing signed by the Holders of 95% of the then outstanding shares of
Registrable Series F Stock; (vi) the Holders of Registrable Series H Stock,
unless made in writing signed by the Holders of 66-2/3% of the then outstanding
shares of Registrable Series H Stock; provided, however, that no amendment,
modification, termination or cancellation of this Agreement that materially and
adversely affects the Holders of the Series H Stock shall be effective unless
made in writing signed by the Holders of 80% of the then outstanding shares of
Registrable Series H Stock; or (vii) the Holders of Registrable Founders Stock,
unless made in writing signed by the Holders of a majority of the then
outstanding shares of Registrable Founders Stock.
F. Successors and Assigns. This Agreement, and the rights and
obligations of each Holder hereunder, may be assigned by such Holder to any
person or entity to which Registrable Stock is transferred by such Holder, and
such transferee shall be deemed a "Holder" for purposes of this Agreement;
provided that the transferee provides written notice of such assignment to the
Company.
G. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
H. Entire Agreement. This Agreement embodies the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter including, without limitation, the Prior
Registration Agreement; provided, however, that the parties hereto acknowledge
and agree that Phoenix Leasing Incorporated ("Phoenix") holds rights as a Holder
in accordance with that certain First Amendment to the Registration Rights
Agreement, dated as of July 19, 1996, by and among Phoenix, Austin Ventures,
Sigma, CNET and the Company.
I. Headings. The headings of this Agreement are for
convenience only and do not constitute a part of this Agreement.
J. Governing Law. The construction, validity and
interpretation of this Agreement will be governed by the internal laws of the
State of Texas without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Texas or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the State
of Texas.
K. Further Assurances. Each party to this Agreement hereby
covenants and agrees, without the necessity of any further consideration, to
execute and deliver any and all such further documents and take any and all such
other actions as may be necessary to appropriately carry out the intent and
purposes of this Agreement and to consummate the transactions contemplated
hereby.
L. 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.
14
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the date first written above.
VIGNETTE CORPORATION
By: /s/ Gregory A. Peters
---------------------------------------
Gregory A. Peters,
President and Chief Executive Officer
SIGNATURE PAGE TO VIGNETTE CORPORATION
FIFTH AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
<PAGE>
HOLDER
-------------------------------------------------
(Name of Holder)
-------------------------------------------------
(Signature of Holder or Authorized Signatory)
-------------------------------------------------
(Print or Type Name and Title if Holder is not an
Individual)
Address:
-------------------------------------
-------------------------------------
-------------------------------------
Telephone:
-------------------------------------
Facsimile:
-------------------------------------
with a copy to:
Name:
-------------------------------------
Address:
-------------------------------------
-------------------------------------
-------------------------------------
Telephone:
-------------------------------------
Facsimile:
-------------------------------------
PLEASE PROVIDE ALL OF THE ABOVE-REQUESTED INFORMATION
SIGNATURE PAGE TO VIGNETTE CORPORATION
FIFTH AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
<PAGE>
EXHIBIT A
HOLDERS
Adobe
Adobe Ventures II, L.P. ("Adobe Ventures")
Adobe Incentive Partners, L.P. ("Adobe Incentive")
H&Q Adobe Ventures Management II, L.L.C. ("H&Q Adobe" and together with
Adobe Ventures and Adobe Incentive, "Adobe")
Amerindo
ATGF II ("ATGF")
Pivotal Partners, L.P. ("Pivotal")
James Stableford ("Stableford")
Emeric McDonald ("McDonald")
Litton Master Trust ("LMT")
Ralph H. Cechettini 1995 Trust ("RHC Trust")
Irene Yu ("Yu" and together with ATGF, Pivotal, Stableford, McDonald,
LMT and RHC Trust, "Amerindo")
Sherry Atherton
Attractor
Attractor LP ("ALP")
Attractor Dearborn Partners LP ("ADP")
Attractor Institution LP ("AILP" and together with ALP and ADP,
"Attractor")
Austin Ventures
Austin Ventures IV-A, L.P. ("Austin A")
Austin Ventures IV-B, L.P. ("Austin B")
Austin Ventures V Affiliates Fund, LP ("Austin V Affiliates")
Austin Ventures V, L.P. ("Austin V" and together with Austin A, Austin B
and Austin V Affiliates, "Austin Ventures")
Murray Bodine
Charles River
Charles River Partnership VIII ("CRP VIII")
Charles River VIII-A LLC ("CR VIII-A and together with CRP VIII, "Charles
River")
CNET
CNET, Inc. ("CNET")
Charles Conn
David Duffield
East Peak Partners
Timothy Emanuels
A-1
<PAGE>
Jeff Erramouspe
Ross B. Garber
GSCP
GS Capital Partners II, L.P. ("GSCPLP")
GS Capital Partners II Offshore, L.P. ("GSCPO")
Goldman, Sachs & Co. Verwaltungs GmbH ("GSCV" and together with GSCPLP and
GSCPO, "GSCP")
H&Q
Hambrecht & Quist California ("H&QC")
H&Q Vignette Investors ("H&QVI" and together with H&QC, "H&Q")
Phil Hempleman
Bradley Husick
Charles B. Husick
Erik Josowitz
Tom Kudrycki
Thomas Layton
Jack Lynch
Morgan Stanley Dean Witter Equity Funding, Inc.
Olympus Growth Fund II, L.P.
Olympus Executive Fund, L.P.
David Overmeyer
Partech
Axa U.S. Growth Fund LLC
U.S. Growth Fund Partners C.V.
Double Black Diamond II LLC
45th Parallel LLC
Almanori Limited
Multinvest LLC
Parallel Capital I LLC
Vendome Capital LLC
Mary Lou Patino
Gregory A. Peters
A-2
<PAGE>
Richard Petit
Phoenix Leasing Incorporated
Marisa Prasifka
Jonathan Rosenberg
Janice Ryan
Sigma
Sigma Partners III, L.P. ("Sigma Partners")
Sigma Associates III, L.P. ("Sigma Associates")
Sigma Investors III, L.P. ("Sigma Investors")
John Mandile ("Mandile," and together with Sigma Partners, Sigma Associates
and Sigma Investors, "Sigma")
George Still
Margaret L. Taylor
Christopher J. Traynor
Mike Vollman
Neil Webber
Andrew Werth
A-3
<PAGE>
EXHIBIT B
TRANSFEREES OF REGISTRABLE FOUNDERS STOCK
Jarred Bressner
Ryan Bressner
Joel Cohen
Chris Corona
Nancy Corona
Adele Garber
Hailey Garber
Harrison Garber
Marvyn Garber
Scott Garber
Marcia Hill
Mark and Renee Levitz
Jose Rodrigues
Jose Rodrigues, Jr.
Arthur and Adrian Webber
B-1
<PAGE>
Exhibit 10.1
INDEMNIFICATION AGREEMENT
-------------------------
This Indemnification Agreement ("Agreement") is made as of by and
between Vignette Corporation, a Delaware corporation (the "Company"), and
("Director").
Recitals:
--------
The Company and Director recognize the increasing difficulty in obtaining
directors' and officers' liability insurance, the significant increases in the
cost of such insurance and the general reductions in the coverage of such
insurance;
The Company and Director further recognize the substantial increase in
corporate litigation in general, subjecting officers and directors to expensive
litigation risks at the same time as the availability and coverage of liability
insurance has been severely limited;
Director does not regard the current protection available as adequate under
the present circumstances, and Director and other officers and directors of the
Company may not be willing to serve or continue to serve as officers and
directors without additional protection; and
The Company desires to attract and retain the services of highly qualified
individuals, such as Director, to serve as officers and directors of the Company
and to indemnify its officers and directors so as to provide them with the
maximum protection permitted by law.
The Company and Director hereby agree as follows:
1. Indemnification.
---------------
(a) Third Party Proceedings. The Company shall indemnify Director and
-----------------------
any partnership, corporation, trust or other entity of which Director is or was
a partner, shareholder, trustee, director, officer, employee or agent (Director
and each such partnership, corporation, trust or other entity being referred to
as an "Indemnitee") if Indemnitee is or was a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Company) by reason of the fact that Director is or was
a director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Director while an
officer or director or by reason of the fact that Director is or was serving at
the request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) actually and reasonably incurred by
Indemnitee in connection with such action, suit or proceeding, if Director
acted in good faith and in a manner Director reasonably believed to be in or not
opposed to the
<PAGE>
best interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe Director's conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of no contest or its equivalent, shall
not, of itself, create a presumption that Director did not act in good faith and
in a manner which Director reasonably believed to be in or not opposed to the
best interests of the Company, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that Director's conduct was
unlawful.
(b) Proceedings By or in the Right of the Company. The Company shall
---------------------------------------------
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in the
right of the Company or any subsidiary of the Company to procure a judgment in
its favor by reason of the fact that Director is or was a director, officer,
employee or agent of the Company, or any subsidiary of the Company, by reason of
any action or inaction on the part of Director while an officer or director or
by reason of the fact that Director is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees) and, to the fullest extent permitted by law, amounts
paid in settlement, in each case to the extent actually and reasonably incurred
by Indemnitee in connection with the defense or settlement of such action or
suit, if Director acted in good faith and in a manner Director reasonably
believed to be in or not opposed to the best interests of the Company, except
that no indemnification shall be made in respect of any claim, issue or matter
as to which Director shall have been adjudged to be liable to the Company unless
and only to the extent that the Court of Chancery of the State of Delaware or
the court in which such action or suit was brought shall determine, upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, Indemnitee is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery of the State of
Delaware or such other court shall deem proper.
(c) Mandatory Payment of Expenses. To the extent that Indemnitee has
-----------------------------
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Sections 1 (a) and (b) or the defense of any claim,
issue or matter therein, Indemnitee shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by Indemnitee in
connection therewith.
2. Expenses: Indemnification Procedure.
-----------------------------------
(a) Advancement of Expenses. The Company shall advance all expenses
-----------------------
incurred by Indemnitee, and, to the fullest extent permitted by law, amounts
paid in settlement by Indemnitee, in connection with the investigation, defense,
settlement or appeal of any civil or criminal action, suit or proceeding
referenced in Section 1(a) or (b) hereof. Indemnitee hereby undertakes to repay
such amounts advanced only if, and to the extent that, it shall ultimately be
determined that Indemnitee is not entitled to be indemnified by the Company as
authorized hereby. The advances to be made hereunder shall be paid by the
Company to Indemnitee within 20 days following delivery of a written request
therefor by Indemnitee to the Company.
2
<PAGE>
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
--------------------------------
condition precedent to his or its right to be indemnified under this Agreement,
give the Company notice in writing as soon as practicable of any claim made
against Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to the President of the
Company at the address shown on the signature page of this Agreement, or such
other address as the Company shall designate in writing to Indemnitee. Notice
shall be deemed received three business days after the date postmarked if sent
by domestic certified or registered mail, properly addressed; otherwise notice
shall be deemed received when such notice shall actually be received by the
Company. In addition, Indemnitee shall give the Company such information and
cooperation as it may reasonably require and as shall be within Indemnitee's
power.
(c) Procedure. Any indemnification and advances provided for in
---------
Section 1 and this Section 2 shall be made no later than 45 days after receipt
of the written request of Indemnitee. If a claim under this Agreement, under any
statute, or under any provision of the Company's Certificate of Incorporation or
Bylaws providing for indemnification, is not paid in full by the Company within
45 days after a written request for payment thereof has first been received by
the Company, Indemnitee may, but need not, at any time thereafter bring an
action against the Company to recover the unpaid amount of the claim and,
subject to Section 12 of this Agreement, Indemnitee shall also be entitled to be
paid for the expenses (including attorneys' fees) of bringing such action. It
shall be a defense to any such action (other than an action brought to enforce a
claim for expenses incurred in connection with any action, suit or proceeding in
advance of its final disposition) that Indemnitee has not met the standards of
conduct which make it permissible under applicable law for the Company to
indemnify Indemnitee for the amount claimed, but the burden of proving such
defense shall be on the Company and Indemnitee shall be entitled to receive
interim payments of expenses pursuant to Subsection 2(a) unless and until such
defense may be finally adjudicated by court order or judgment from which no
further right of appeal exists. It is the parties' intention that if the Company
contests Indemnitee's right to indemnification, the question of Indemnitee's
right to indemnification shall be for the court to decide, and neither the
failure of the Company (including its Board of Directors, any committee or
subgroup of the Board of Directors, independent legal counsel, or its
stockholders) to have made a determination that indemnification of Indemnitee is
proper in the circumstances because Indemnitee has met the applicable standard
of conduct required by applicable law, nor an actual determination by the
Company (including its Board of Directors, any committee or subgroup of the
Board of Directors, independent legal counsel, or its stockholders) that
Indemnitee has not met such applicable standard of conduct, shall create a
presumption that Indemnitee has or has not met the applicable standard of
conduct.
(d) Notice to Insurers. If, at the time of the receipt of a notice of
------------------
a claim pursuant to Section 2(b) hereof, the Company has director and officer
liability insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
3
<PAGE>
(e) Selection of Counsel. In the event the Company shall be obligated
--------------------
under Section 2(a) hereof to pay the expenses of any proceeding against
Indemnitee, the Company, if appropriate, shall be entitled to assume the defense
of such proceeding, with counsel approved by Indemnitee, upon the delivery to
Indemnitee of written notice of its election so to do. After delivery of such
notice, approval of such counsel by Indemnitee and the retention of such counsel
by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees of counsel subsequently incurred by Indemnitee with
respect to the same proceeding, provided that (i) Indemnitee shall have the
right to employ his counsel in any such proceeding at Indemnitee's expense; and
(ii) if (A) the employment of counsel by Indemnitee has been previously
authorized by the Company, (B) Indemnitee shall have reasonably concluded that
there may be a conflict of interest between the Company and Indemnitee in the
conduct of any such defense, or (C) the Company shall not, in fact, have
employed counsel to assume the defense of such proceeding, then the fees and
expenses of Indemnitee's counsel shall be at the expense of the Company.
3. Additional Indemnification Rights: Nonexclusivity.
------------------------------------------------
(a) Scope. Notwithstanding any other provision of this Agreement, the
-----
Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's certificate
of incorporation~ the Company's by-laws or by statute. In the event of any
change, after the date of this Agreement, in any applicable law, statute, or
rule which expands the right of a Delaware corporation to indemnify a member of
its board of directors or an officer, such changes shall be, ipso facto, within
the purview of Indemnitee's rights and Company's obligations, under this
Agreement. In the event of any change in any applicable law, statute or rule
which narrows the right of a Delaware corporation to indemnify a member of its
board of directors or an officer, such changes, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement, shall
have no effect on this Agreement or the parties' rights and obligations
hereunder.
(b) Nonexclusivity. The indemnification provided by this Agreement
--------------
shall not be deemed exclusive of any rights to which Director or any other
Indemnitee may be entitled under the Company's certificate of incorporation, its
by-laws, any agreement, any vote of stockholders or disinterested directors, the
General Corporation Law of the State of Delaware, or otherwise, both as to
action in Director's official capacity and as to action in another capacity
while holding such office. The indemnification provided under this Agreement
shall continue as to Director and each other Indemnitee for any action taken or
not taken while Director is or was serving in an indemnified capacity even
though he may have ceased to serve in such capacity at the time of any action,
suit or other covered proceeding.
4. Partial Indemnification. If Indemnitee is entitled under any
-----------------------
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred by Indemnitee in the investigation, defense, appeal or settlement of
any civil or criminal action, suit or proceeding, but not, however, for the
4
<PAGE>
total amount thereof, the Company shall nevertheless indemnify Indemnitee for
the portion of such expenses, judgments, fines or penalties to which Indemnitee
is entitled.
5. Mutual Acknowledgment. Both the Company and Director acknowledge that
---------------------
in certain instances federal law or applicable public policy may prohibit the
Company from indemnifying its directors and officers under this Agreement or
otherwise, in which event, notwithstanding any other provisions of this
Agreement to the contrary, the indemnification provided by this Agreement shall
be limited to such extent as is necessary to comply with applicable Federal law
or public policy. For example, the Company and the Director acknowledge that the
Securities and Exchange Commission has taken the position that indemnification
is not permissible for liabilities arising under certain federal securities
laws, and federal legislation prohibits indemnification for certain ERISA
violations. Director understands and acknowledges that in the event the Company
undertakes a public offering of its securities pursuant to a registration with
the Securities and Exchange Commission (the "SEC"), the Company may be required
to undertake with the SEC to submit the question of indemnification to a court
in certain circumstances for a determination of the Company's right under public
policy to indemnify Director or any other Indemnitee.
6. Officer and Director Liability Insurance. The Company shall, from
----------------------------------------
time to time, make the good faith determination whether or not it is practicable
for the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the Company's
performance of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. In all policies of
director and officer liability insurance, Director and each other Indemnitee
shall be named as an insured in such a manner as to provide Director the same
rights and benefits as are accorded to the most favorably insured of the
Company's directors, if the Indemnitee is a director; or of the Company's
officers, if the Indemnitee is not a director of the Company but is an officer,
or of the Company's key employees, if Indemnitee is not an officer or director
but is a key employee. Notwithstanding the foregoing, the Company shall have no
obligation to obtain or maintain such insurance if the Company determines in
good faith that such insurance is not reasonably available, the premium costs
for such insurance are disproportionate to the amount of coverage provided, the
coverage provided by such insurance is limited by exclusions so as to provide an
insufficient benefit, or Indemnitee is covered by similar insurance maintained
by a subsidiary or parent of the Company.
7. Severability. Nothing in this Agreement is intended to require or
------------
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 7. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Director and each other Indemnitee to the full extent
permitted by any applicable portion of this Agreement that shall not have been
invalidated, and the balance of this Agreement not so invalidated shall be
enforceable in accordance with its terms.
5
<PAGE>
8. Exceptions. Any other provision herein to the contrary
----------
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Claims Initiated by Indemnitee. To indemnify or advance expenses
------------------------------
to Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way, of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Section 145 of the Delaware General Corporation Law, but such indemnification or
advancement of expenses may be provided by the Company in specific cases if the
Board of Directors finds it to be appropriate;
(b) Lack of Good Faith. To indemnify Indemnitee for any expenses
------------------
incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous;
(c) Insured Claims. To indemnify Indemnitee for expenses or
--------------
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA, excise taxes or penalties, and amounts paid in settlement) which
have been paid directly to Indemnitee by an insurance carrier under a policy of
officers' and directors' liability insurance maintained by the Company; or
(d) Claims Under Section 166(b~. To indemnify Indemnitee for expenses
--------------------------
and the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
9. Construction of Certain Phrases.
-------------------------------
(a) For purposes of this Agreement, references to the "Company" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger, so that if Indemnitee is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, Indemnitee
shall stand in the same position under the provisions of this Agreement with
respect to the resulting or surviving corporation as Indemnitee would have with
respect to such constituent corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on Indemnitee with respect to an employee benefit plan;
and references to "serving at the request of the Company" shall include any
service as a director, officer, employee or agent of the Company which imposes
duties on, or involves services by, such director, officer, employee or agent
with
6
<PAGE>
respect to an employee benefit plan, its participants, or beneficiaries; and if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to
be in the interest of the participants and beneficiaries of an employee benefit
plan, Indemnitee shall be deemed to have acted in a manner "not opposed to the
best interests of the Company" as referred to in this Agreement.
10. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall constitute an original.
11. Successors and Assigns. This Agreement shall be binding upon the
----------------------
Company and its successors and assigns, and shall inure to the benefit of
Director and each other Indemnitee and their respective estates, heirs,
successors, legal representatives and assigns.
12. Attorneys' Fees. In the event that any action is instituted by
---------------
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement or to enforce
or interpret any of the terms of this Agreement, Indemnitee shall be entitled to
be paid all court costs and expenses, including attorneys' fees, incurred by
Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action), unless as a part of such
action the court determines that each of Indemnitee's material defenses to such
action were made in bad faith or were frivolous.
13. Notice. All notices, requests, demands and other communications under
------
this Agreement shall be in writing and shall be deemed duly given on the third
business day after the date postmarked, if marked by domestic certified or
registered mail with postage prepaid, or, if delivered by other means, on the
date actual notice is received. Addresses for notice to either party are as
shown on the signature page of this Agreement, or as subsequently modified by
written notice.
14. Consent to Jurisdiction. The Company and Indemnitee each hereby
-----------------------
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the state courts of the State of Delaware.
15. Choice of Law. This Agreement shall be governed by and its provisions
-------------
construed in accordance with the laws of the State of Delaware, as applied to
contracts between Delaware residents entered into and to be performed entirely
within Delaware.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
DIRECTOR: COMPANY:
Vignette Corporation
By:
- --------------------------- -------------------------
Name: Name:
---------------------- -------------------------
Address: Address: One Far West Plaza
------------------- 3410 Far West Blvd., Suite 300
Austin, Texas 78731
<PAGE>
EXHIBIT 10.2
VIGNETTE CORPORATION
1995 STOCK OPTION/STOCK ISSUANCE PLAN
-------------------------------------
ARTICLE ONE
GENERAL PROVISIONS
------------------
I. PURPOSE OF THE PLAN
This 1995 Stock Option/Stock Issuance Plan is intended to promote the
interests of Vignette Corporation, a Delaware corporation, by providing eligible
persons with the opportunity to acquire a proprietary interest, or otherwise
increase their proprietary interest, in the Corporation as an incentive for them
to remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into two (2) separate equity programs:
(i) the Option Grant Program under which eligible persons
may, at the discretion of the Plan Administrator, be granted options to
purchase shares of Common Stock, and
(ii) the Stock Issuance Program under which eligible persons
may, at the discretion of the Plan Administrator, be issued shares of
Common Stock directly, either through the immediate purchase of such shares
or as a bonus for services rendered the Corporation (or any Parent or
Subsidiary).
B. The provisions of Articles One and Four shall apply to both the
equity programs under the Plan and shall accordingly govern the interests of all
persons under the Plan.
III. ADMINISTRATION OF THE PLAN
A. The Plan shall be administered by the Board. However, any or all
administrative functions otherwise exercisable by the Board may be delegated to
the Committee. Members of the Committee shall serve for such period of time as
the Board may determine and may be removed by the Board at any time. The Board
may also at any time terminate the functions of the Committee and reassume all
powers and authority previously delegated to the Committee.
B. The Plan Administrator shall have full power and authority to
establish such rules and regulations as it may deem appropriate for proper
administration of the Plan and
<PAGE>
to make such determinations under, and issue such interpretations of, the Plan
and any outstanding options or stock issuances thereunder as it may deem
necessary or advisable. Decisions of the Plan Administrator shall be final and
binding on all parties who have an interest in the Plan or any option or stock
issuance thereunder.
IV. ELIGIBILITY
A. The persons eligible to participate in the Plan are as follows:
(i) Employees,
(ii) non-employee members of the Board or the board of
directors of any Parent or Subsidiary, and
(iii) consultants and other independent advisors who
provide services to the Corporation (or any Parent or Subsidiary).
B. The Plan Administrator shall have full authority to determine,
(i) with respect to the option grants under the Option Grant Program, which
eligible persons are to receive option grants, the time or times when such
option grants are to be made, the number of shares to be covered by each such
grant, the status of the granted option as either an Incentive Option or a Non-
Statutory Option, the time or times at which each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding and (ii) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive stock issuances, the time or times when such issuances
are to be made, the number of shares to be issued to each Participant, the
vesting schedule (if any) applicable to the issued shares and the consideration
to be paid for such shares.
C. The Plan Administrator shall have the absolute discretion either
to grant options in accordance with the Option Grant Program or to effect stock
issuances in accordance with the Stock Issuance Program.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock. The maximum number of shares of Common
Stock which may be issued over the term of the Plan shall not exceed 6,061,000
shares.
B. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) the options
expire or terminate for any reason prior to exercise in full or (ii) the options
are cancelled in accordance with the cancellation-regrant provisions of Article
Two. All shares issued under the Plan, whether or not those shares are
subsequently repurchased or cancelled by the Corporation pursuant to its
repurchase or cancellation rights under the Plan, shall reduce on a share-for-
share basis the number of shares of Common Stock available for subsequent
issuance under the Plan.
2
<PAGE>
C. Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and/or class of securities issuable
under the Plan and (ii) the number and/or class of securities and the exercise
price per share in effect under each outstanding option in order to prevent the
dilution or enlargement of benefits thereunder. The adjustments determined by
the Plan Administrator shall be final, binding and conclusive. In no event
shall any such adjustments be made in connection with the conversion of one or
more outstanding shares of the Corporation's preferred stock into shares of
Common Stock.
ARTICLE TWO
OPTION GRANT PROGRAM
--------------------
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
--------
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. EXERCISE PRICE.
--------------
1. The exercise price per share shall be fixed by the Plan
Administrator and may be less than, equal to or greater than the Fair Market
Value per share of Common Stock on the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Four and the documents evidencing the option, be payable in cash or
check made payable to the Corporation. Should the Common Stock be registered
under Section 12(g) of the 1934 Act at the time the option is exercised, then
the exercise price may also be paid as follows:
(i) in shares of Common Stock held for the requisite period
necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date, or
(ii) to the extent the option is exercised for vested
shares, through a special sale and remittance procedure pursuant to which
the Optionee shall concurrently provide irrevocable written instructions to
(a) a Corporation-designated brokerage firm to effect the immediate sale of
the purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price
3
<PAGE>
payable for the purchased shares plus all applicable Federal, state and
local income and employment taxes required to be withheld by the
Corporation by reason of such exercise and (b) the Corporation to deliver
the certificates for the purchased shares directly to such brokerage firm
in order to complete the sale.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable at
----------------------------
such time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of ten (10) years
measured from the option grant date.
C. EFFECT OF TERMINATION OF SERVICE.
--------------------------------
1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:
(i) Any option outstanding at the time of the Optionee's
cessation of Service for any reason shall remain exercisable for such
period of time thereafter as shall be determined by the Plan Administrator
and set forth in the documents evidencing the option, but no such option
shall be exercisable after the expiration of the option term.
(ii) Each option held by the Optionee at the time of
cessation of Service by reason of death shall become fully exercisable for
all of the shares of the Common stock at the time subject to the option and
each such option may be exercised for those Option Shares as fully-vested
shares. Any option exercisable by the Optionee at the time of death may be
exercised subsequently by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the laws of descent
and distribution.
(iii) During the applicable post-Service exercise period,
the option may not be exercised in the aggregate for more than the number
of vested shares for which the option is exercisable on the date of the
Optionee's cessation of Service. Upon the expiration of the applicable
exercise period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be outstanding for any vested shares
for which the option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation of Service, terminate and cease
to be outstanding to the extent the option is not otherwise at that time
exercisable for vested shares.
(iv) Should the Optionee's Service be terminated for
Misconduct, then all outstanding options held by the Optionee shall
terminate immediately and cease to be outstanding.
4
<PAGE>
(v) In the event of an Involuntary Termination following
a Corporate Transaction, the provisions of Section III of this Article Two
shall govern the period for which the outstanding options are to remain
exercisable following the Optionee's cessation of Service and shall
supersede any provisions to the contrary in this section.
2. The Plan Administrator shall have the discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:
(i) extend the period of time for which the option is to
remain exercisable following the Optionee's cessation of Service from the
period otherwise in effect for that option to such greater period of time
as the Plan Administrator shall deem appropriate, but in no event beyond
the expiration of the option term, and/or
(ii) permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the
number of vested shares of Common Stock for which such option is
exercisable at the time of the Optionee's cessation of Service but also
with respect to one or more additional installments in which the Optionee
would have vested under the option had the Optionee continued in Service.
D. STOCKHOLDER RIGHTS. The holder of an option shall have no
------------------
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
E. REPURCHASE RIGHTS. The Plan Administrator shall have the
-----------------
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares,
the Corporation shall have the right to repurchase, at the exercise price paid
per share, any or all of those unvested shares. The terms upon which such
repurchase right shall be exercisable (including the period and procedure for
exercise and the appropriate vesting schedule for the purchased shares) shall be
established by the Plan Administrator and set forth in the document evidencing
such repurchase right.
F. FIRST REFUSAL RIGHTS. Until such time as the Common Stock is
--------------------
first registered under Section 12(g) of the 1934 Act, the Corporation shall have
the right of first refusal with respect to any proposed disposition by the
Optionee (or any successor in interest) of any shares of Common Stock issued
under the Option Grant Program. Such right of first refusal shall be
exercisable in accordance with the terms established by the Plan Administrator
and set forth in the document evidencing such right.
G. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
----------------------------------
Optionee, the option shall be exercisable only by the Optionee and shall not be
assignable or transferable other than by will or by the laws of descent and
distribution following the Optionee's death. However, a Non-Statutory Option
may be assigned in whole or in part during the Optionee's
5
<PAGE>
lifetime in accordance with the terms of a Qualified Domestic Relations Order.
The assigned portion may only be exercised by the person or persons who acquire
a proprietary interest in the option pursuant to such Qualified Domestic
Relations Order. The terms applicable to the assigned portion shall be the same
as those in effect for the option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Four shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options
when issued under the Plan shall not be subject to the terms of this Section II.
---
A. ELIGIBILITY. Incentive Options may only be granted to Employees.
-----------
B. EXERCISE PRICE. The exercise price per share shall not be less
--------------
than one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date.
C. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares
-----------------
of Common Stock (determined as of the respective date or dates of grant) for
which one or more options granted to any Employee under the Plan (or any other
option plan of the Corporation or any Parent or Subsidiary) may for the first
time become exercisable as Incentive Options during any one (1) calendar year
shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) or more such options which become exercisable
for the first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
D. 10% STOCKHOLDER. If any Employee to whom an Incentive Option is
---------------
granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date and the option term shall not exceed five
(5) years measured from the option grant date.
III. CORPORATE TRANSACTION
A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the shares of Common Stock at the time subject to
such option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. However, an outstanding option shall not so accelerate
if and to the extent: (i) such option is, in connection with the Corporate
Transaction, either to be assumed by the successor corporation (or parent
thereof) or to be replaced with a comparable option to purchase shares of the
capital stock of the successor corporation (or parent thereof), (ii) such option
is to be replaced with a cash incentive program of the successor corporation
which
6
<PAGE>
preserves the spread existing on the unvested option shares at the time of the
Corporate Transaction and provides for subsequent payout in accordance with the
same vesting schedule applicable to such option or (iii) the acceleration of
such option is subject to other limitations imposed by the Plan Administrator at
the time of the option grant. The determination of option comparability under
clause (i) above shall be made by the Plan Administrator, and its determination
shall be final, binding and conclusive.
B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction,
except to the extent: (i) those repurchase rights are to be assigned to the
successor corporation (or parent thereof) in connection with such Corporate
Transaction or (ii) such accelerated vesting is precluded by other limitations
imposed by the Plan Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to (i) the number and class of
securities available for issuance under the Plan following the consummation of
such Corporate Transaction and (ii) the exercise price payable per share under
each outstanding option, provided the aggregate exercise price payable for such
--------
securities shall remain the same.
E. Any options which are assumed or replaced in the Corporate
Transaction and do not otherwise accelerate at that time shall automatically
accelerate (and any of the Corporation's outstanding repurchase rights which do
not otherwise terminate at the time of the Corporate Transaction shall
automatically terminate and the shares of Common Stock subject to those
terminated rights shall immediately vest in full) in the event the Optionee's
Service should subsequently terminate by reason of an Involuntary Termination
within eighteen (18) months following the effective date of such Corporate
Transaction. Any options so accelerated shall remain exercisable for fully-
vested shares until the earlier of (i) the expiration of the option term or (ii)
-------
the expiration of the one (1)-year period measured from the effective date of
the Involuntary Termination.
F. The Plan Administrator shall have the discretion, exercisable
either at the time the option is granted or at any time while the option remains
outstanding, to provide for the automatic acceleration of one or more
outstanding options (and the automatic termination of one or more outstanding
repurchase rights with the immediate vesting of the shares of Common Stock
subject to those rights) upon the occurrence of a Corporate Transaction, whether
or not those options are to be assumed or replaced (or those repurchase rights
are to be assigned) in the Corporate Transaction. The Plan Administrator shall
also have the discretion to grant options
7
<PAGE>
which do not accelerate (and to provide for repurchase rights which do not
terminate) upon a Corporate Transaction or an Involuntary Termination following
a Corporate Transaction.
G. The portion of any Incentive Option accelerated in connection
with a Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
($100,000) limitation is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated portion of such option shall be exercisable as a Non-
Statutory Option under the Federal tax laws.
H. The grant of options under the Plan shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Option Grant Program
and to grant in substitution new options covering the same or different number
of shares of Common Stock but with an exercise price per share based on the Fair
Market Value per share of Common Stock on the new grant date.
ARTICLE THREE
STOCK ISSUANCE PROGRAM
----------------------
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below.
A. PURCHASE PRICE.
--------------
1. The purchase price per share shall be fixed by the Plan
Administrator and may be less than, equal to or greater than the Fair Market
Value per share of Common Stock on the stock issuance date.
2. Subject to the provisions of Section I of Article Four,
shares of Common Stock may be issued under the Stock Issuance Program for one or
both of the following items of consideration which the Plan Administrator may
deem appropriate in each individual instance:
(i) cash or check made payable to the Corporation, or
8
<PAGE>
(ii) past services rendered to the Corporation (or any
Parent or Subsidiary).
B. VESTING PROVISIONS.
------------------
1. Shares of Common Stock issued under the Stock Issuance
Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified performance
objectives. The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Stock Issuance Program, namely:
(i) the Service period to be completed by the Participant or
the performance objectives to be attained,
(ii) the number of installments in which the shares are to
vest,
(iii) the interval or intervals (if any) which are to lapse
between installments, and
(iv) the effect which death, Permanent Disability or other
event designated by the Plan Administrator is to have upon the vesting
schedule,
shall be determined by the Plan Administrator and incorporated into the Stock
Issuance Agreement.
2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.
3. The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to the Participant under the Stock
Issuance Program, whether or not the Participant's interest in those shares is
vested. Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested
9
<PAGE>
shares of Common Stock, then those shares shall be immediately surrendered to
the Corporation for cancellation, and the Participant shall have no further
stockholder rights with respect to those shares. To the extent the surrendered
shares were previously issued to the Participant for consideration paid in cash
or cash equivalent (including the Participant's purchase-money indebtedness),
the Corporation shall repay to the Participant the cash consideration paid for
the surrendered shares and shall cancel the unpaid principal balance of any
outstanding purchase-money note of the Participant attributable to the
surrendered shares.
5. The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Common Stock (or
other assets attributable thereto) which would otherwise occur upon the
cessation of the Participant's Service or the non-attainment of the performance
objectives applicable to such shares. Such waiver shall result in the immediate
vesting of the Participant's interest in the shares of Common Stock as to which
the waiver applies. Such waiver may be effected at any time, whether before or
after the Participant's cessation of Service or the attainment or non-attainment
of the applicable performance objectives.
C. FIRST REFUSAL RIGHTS. Until such time as the Common Stock is
--------------------
first registered under Section 12(g) of the 1934 Act, the Corporation shall have
the right of first refusal with respect to any proposed disposition by the
Participant (or any successor in interest) of any shares of Common Stock issued
under the Stock Issuance Program. Such right of first refusal shall be
exercisable in accordance with the terms established by the Plan Administrator
and set forth in the document evidencing such right.
II. CORPORATE TRANSACTION
A. All of the outstanding cancellation rights under the Stock
Issuance Program shall terminate automatically, and all the shares of Common
Stock subject to those terminated rights shall immediately vest in full, in the
event of any Corporate Transaction, except to the extent (i) those cancellation
rights are assigned to the successor corporation (or parent thereof) in
connection with such Corporate Transaction or (ii) such accelerated vesting is
precluded by other limitations imposed in the Stock Issuance Agreement.
B. Any cancellation rights that are assigned in the Corporate
Transaction shall automatically terminate, and the shares of Common Stock
subject to those terminated rights shall immediately vest in full, in the event
the Participant's Service should subsequently terminate by reason of an
Involuntary Termination within eighteen (18) months following the effective date
of such Corporate Transaction.
C. The Plan Administrator shall have the discretion, exercisable
either at the time the unvested shares are issued or at any time while the
Corporation's cancellation right remains outstanding, to provide for the
automatic termination of one or more outstanding cancellation rights, and the
immediate vesting of the shares of Common Stock subject to those rights, upon
the occurrence of a Corporate Transaction, whether or not those cancellation
rights are assigned in connection with the Corporate Transaction.
10
<PAGE>
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held
in escrow by the Corporation until the Participant's interest in such shares
vests or may be issued directly to the Participant with restrictive legends on
the certificates evidencing those unvested shares.
ARTICLE FOUR
MISCELLANEOUS
-------------
I. FINANCING
A. The Plan Administrator may permit any Optionee or Participant to
pay the option exercise price or the purchase price for shares issued under the
Plan by delivering a promissory note payable in one or more installments. The
terms of any such promissory note (including the interest rate and the terms of
repayment) shall be established by the Plan Administrator in its sole
discretion. Promissory notes may be authorized with or without security or
collateral. In all events, the maximum credit available to the Optionee or
Participant may not exceed the sum of (i) the aggregate option exercise price or
---
purchase price payable for the purchased shares plus (ii) any Federal, state and
local income and employment tax liability incurred by the Optionee or the
Participant in connection with the option exercise or share purchase.
B. The Plan Administrator may, in its discretion, determine that one
or more such promissory notes shall be subject to forgiveness by the Corporation
in whole or in part upon such terms as the Plan Administrator may deem
appropriate.
II. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective when adopted by the Board, but no
option granted under the Plan may be exercised, and no shares shall be issued
under the Plan, until the Plan is approved by the Corporation's stockholders.
If such stockholder approval is not obtained within twelve (12) months after the
date of the Board's adoption of the Plan, then all options previously granted
under the Plan shall terminate and cease to be outstanding, and no further
options shall be granted and no shares shall be issued under the Plan. Subject
to such limitation, the Plan Administrator may grant options and issue shares
under the Plan at any time after the effective date of the Plan and before the
date fixed herein for termination of the Plan.
B. The Plan shall terminate upon the earliest of (i) the expiration
--------
of the ten (10)-year period measured from the date the Plan is adopted by the
Board, (ii) the date on which all shares available for issuance under the Plan
shall have been issued pursuant to the exercise of options or the issuance of
shares (whether vested or unvested) under the Plan or (iii) the termination of
all outstanding options in connection with a Corporate Transaction. Upon such
Plan termination, all options and unvested stock issuances outstanding under the
Plan shall
11
<PAGE>
continue to have full force and effect in accordance with the provisions of the
documents evidencing such options or issuances.
III. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects. However, no such amendment
or modification shall adversely affect any rights and obligations with respect
to options or unvested stock issuances at the time outstanding under the Plan,
unless the Optionee or the Participant consents to such amendment or
modification. In addition, the Board shall not, without the approval of the
Corporation's stockholders, (i) increase the maximum number of shares issuable
under the Plan, except for permissible adjustments in the event of certain
changes in the Corporation's capitalization, (ii) materially modify the
eligibility requirements for Plan participation or (iii) materially increase the
benefits accruing to Plan participants.
B. Options to purchase shares of Common Stock may be granted under
the Plan and shares of Common Stock may be issued under the Plan that are in
each instance in excess of the number of shares then available for issuance
under the Plan, provided any excess shares actually issued under the Plan are
--------
held in escrow until there is obtained stockholder approval of an amendment
sufficiently increasing the number of shares of Common Stock available for
issuance under the Plan. If such stockholder approval is not obtained within
twelve (12) months after the date the first such excess grants or issuances are
made, then (i) any unexercised options granted on the basis of such excess
shares shall terminate and cease to be outstanding and (ii) the Corporation
shall promptly refund to the Optionees and the Participants the exercise or
purchase price paid for any excess shares issued under the Plan and held in
escrow, together with interest (at the applicable Short-Term Federal Rate) for
the period the shares were held in escrow, and such shares shall thereupon be
automatically cancelled and cease to be outstanding.
IV. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
of Common Stock under the Plan shall be used for general corporate purposes.
V. WITHHOLDING
The Corporation's obligation to deliver shares of Common Stock upon
the exercise of any options or upon the issuance or vesting of such shares
issued under the Plan shall be subject to the satisfaction of all applicable
Federal, state and local income and employment tax withholding requirements.
VI. REGULATORY APPROVALS
The implementation of the Plan, the granting of any option under the
Plan and the issuance of any shares of Common Stock (i) upon the exercise of any
option or (ii) under the Stock Issuance Program shall be subject to the
Corporation's procurement of all approvals and
12
<PAGE>
permits required by regulatory authorities having jurisdiction over the Plan,
the options granted under it and the shares of Common Stock issued pursuant to
it.
VII. NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant
any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
13
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
-----
B. CODE shall mean the Internal Revenue Code of 1986, as amended.
----
C. COMMITTEE shall mean a committee of two (2) or more Board members
---------
appointed by the Board to exercise one or more administrative functions under
the Plan.
D. COMMON STOCK shall mean the Corporation's common stock.
------------
E. CORPORATE TRANSACTION shall mean either of the following
---------------------
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
F. CORPORATION shall mean Vignette Corporation, a Delaware
-----------
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Vignette Corporation which shall by appropriate action
adopt the Plan.
G. DOMESTIC RELATIONS ORDER shall mean any judgment, decree or order
------------------------
(including approval of a property settlement agreement) which provides or
otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of the Optionee.
H. EMPLOYEE shall mean an individual who is in the employ of the
--------
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
I. EXERCISE DATE shall mean the date on which the Corporation shall
-------------
have received written notice of the option exercise.
J. FAIR MARKET VALUE per share of Common Stock on any relevant date
-----------------
shall be determined in accordance with the following provisions:
14
<PAGE>
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market or any successor system. If there is no closing selling
price for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for
which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be
the closing selling price on the last preceding date for which such
quotation exists.
(iii) If the Common Stock is at the time neither listed on any
Stock Exchange nor traded on the Nasdaq National Market, then the Fair
Market Value shall be determined by the Plan Administrator after taking
into account such factors as the Plan Administrator shall deem appropriate.
K. INCENTIVE OPTION shall mean an option which satisfies the
----------------
requirements of Code Section 422.
L. INVOLUNTARY TERMINATION shall mean the termination of the Service
-----------------------
of any individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by
the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a
change in his or her position with the Corporation which materially reduces
his or her level of responsibility, (B) a reduction in his or her level of
compensation (including base salary, fringe benefits and participation in
corporate-performance based bonus or incentive programs) by more than
fifteen percent (15%) or (C) a relocation of such individual's place of
employment by more than fifty (50) miles, provided and only if such change,
reduction or relocation is effected by the Corporation without the
individual's consent.
M. MISCONDUCT shall mean the commission of any act of fraud,
----------
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation
15
<PAGE>
(or any Parent or Subsidiary) may consider as grounds for the dismissal or
discharge of any Optionee, Participant or other person in the Service of the
Corporation (or any Parent or Subsidiary).
N. 1934 ACT shall mean the Securities Exchange Act of 1934, as
--------
amended.
O. NON-STATUTORY OPTION shall mean an option not intended to satisfy
--------------------
the requirements of Code Section 422.
P. OPTION GRANT PROGRAM shall mean the option grant program in
--------------------
effect under the Plan.
Q. OPTIONEE shall mean any person to whom an option is granted under
--------
the Option Grant Program.
R. PARENT shall mean any corporation (other than the Corporation) in
------
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
S. PARTICIPANT shall mean any person who is issued shares of Common
-----------
Stock under the Stock Issuance Program.
T. PERMANENT DISABILITY shall mean the inability of the Optionee or
--------------------
the Participant to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment expected to result in death
or to be of continuous duration of twelve (12) months or more.
U. PLAN shall mean the Corporation's 1995 Stock Option/Stock
----
Issuance Plan, as set forth in this document.
V. PLAN ADMINISTRATOR shall mean either the Board or the Committee,
------------------
to the extent the Committee is at the time responsible for the administration of
the Plan.
W. QUALIFIED DOMESTIC RELATIONS ORDER shall mean a Domestic
----------------------------------
Relations Order which substantially complies with the requirements of Code
Section 414(p). The Plan Administrator shall have the sole discretion to
determine whether a Domestic Relations Order is a Qualified Domestic Relations
Order.
X. SERVICE shall mean the provision of services to the Corporation
-------
(or any Parent or Subsidiary) by a person in the capacity of an Employee, a non-
- -employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant or stock issuance.
16
<PAGE>
Y. STOCK EXCHANGE shall mean either the American Stock Exchange or
--------------
the New York Stock Exchange.
Z. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into by
------------------------
the Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.
AA. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in
----------------------
effect under the Plan.
AB. SUBSIDIARY shall mean any corporation (other than the
----------
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
AC. 10% STOCKHOLDER shall mean the owner of stock (as determined
---------------
under Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
17
<PAGE>
Grant No. _______________
VIGNETTE CORPORATION
NOTICE OF GRANT OF STOCK OPTION
-------------------------------
Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of Vignette Corporation (the "Corporation"):
Optionee:_____________________________________________________________
--------
Grant Date:___________________________________________________________
----------
Vesting Commencement Date:____________________________________________
-------------------------
Exercise Price: $________per share
--------------
Number of Option Shares: _____________________ shares
-----------------------
Expiration Date:______________________________________________________
---------------
Type of Option: _______ Incentive Stock Option
--------------
______ Non-Statutory Stock Option
Date Exercisable: Immediately Exercisable
----------------
Vesting Schedule: The Option Shares shall be unvested and subject to
----------------
repurchase by the Corporation at the Exercise Price paid per share.
Optionee shall acquire a vested interest in, and the Corporation's
repurchase right shall accordingly lapse with respect to, (i) sixteen
percent (16%) of the Option Shares upon Optionee's completion of one
(1) year of Service measured from the Vesting Commencement Date and
(ii) the balance of the Option Shares in six (6) equal successive
installments upon Optionee's completion of each six (6)-month period
of Service over such three (3)-year period measured from and after the
first anniversary of the Vesting Commencement Date. In no event shall
any additional Option Shares vest after Optionee's cessation of
Service.
Optionee understands and agrees that the Option is granted subject to
and in accordance with the terms of the Vignette Corporation 1995 Stock
Option/Stock Issuance Plan (the "Plan"). Optionee further agrees to be bound by
the terms of the Plan and the terms of the Option as set forth in the Stock
Option Agreement attached hereto as Exhibit A. Optionee understands that any
Option Shares purchased under the Option will be subject to the terms set forth
in the Stock Purchase Agreement attached hereto as Exhibit B.
Optionee hereby acknowledges receipt of a copy of the Plan in the form
attached hereto as Exhibit C.
<PAGE>
REPURCHASE RIGHTS. OPTIONEE HEREBY AGREES THAT ALL OPTION SHARES
-----------------
ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO CERTAIN REPURCHASE
RIGHTS AND RIGHTS OF FIRST REFUSAL EXERCISABLE BY THE CORPORATION AND ITS
ASSIGNS. THE TERMS OF SUCH RIGHTS ARE SPECIFIED IN THE ATTACHED STOCK PURCHASE
AGREEMENT.
No Employment or Service Contract. Nothing in this Notice or in the
---------------------------------
attached Stock Option Agreement or Plan shall confer upon Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining Optionee) or of Optionee, which rights are
hereby expressly reserved by each, to terminate Optionee's Service at any time
for any reason, with or without cause.
Definitions. All capitalized terms in this Notice shall have the
-----------
meaning assigned to them in this Notice or in the attached Stock Option
Agreement.
____________, 199____
Date
VIGNETTE CORPORATION
By:_______________________________
Title:____________________________
__________________________________
OPTIONEE
Address:__________________________
__________________________________
ATTACHMENTS
- -----------
Exhibit A - Stock Option Agreement
Exhibit B - Stock Purchase Agreement
Exhibit C - 1995 Stock Option/Stock Issuance Plan
2.
<PAGE>
EXHIBIT A
---------
STOCK OPTION AGREEMENT
----------------------
<PAGE>
EXHIBIT B
---------
STOCK PURCHASE AGREEMENT
------------------------
<PAGE>
EXHIBIT C
---------
1995 STOCK OPTION/STOCK ISSUANCE PLAN
-------------------------------------
<PAGE>
VIGNETTE CORPORATION
STOCK OPTION AGREEMENT
----------------------
RECITALS
- --------
A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board or the board
of directors of any Parent or Subsidiary and consultants and other independent
advisors who provide services to the Corporation (or any Parent or Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as
---------------
of the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.
2. OPTION TERM. This option shall have a term of eight (8) years
-----------
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5, 6 or 17.
3. LIMITED TRANSFERABILITY. This option shall be neither
-----------------------
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee. However, if this option is designated a
Non-Statutory Option in the Grant Notice, then this option may also be assigned
in whole or in part during Optionee's lifetime in accordance with the terms of a
Qualified Domestic Relations Order. The assigned portion shall be exercisable
only by the person or persons who acquire a proprietary interest in the option
pursuant to such Qualified Domestic Relations Order. The terms applicable to the
assigned portion shall be the same as those in effect for this option
immediately prior to such assignment and shall be set forth in such documents
issued to the assignee as the Plan Administrator may deem appropriate.
<PAGE>
4. EXERCISABILITY/VESTING.
----------------------
(a) This option shall be immediately exercisable for any or all
of the Option Shares, whether or not the Option Shares are vested in accordance
with the Vesting Schedule, and shall remain so exercisable until the Expiration
Date or sooner termination of the option term under Paragraph 5, 6 or 17. Any
unvested Option Shares purchased under this option shall be subject to
repurchase by the Corporation, at the Exercise Price paid per share, upon
Optionee's cessation of Service prior to vesting in those Option Shares.
(b) Optionee shall, in accordance with the Vesting Schedule,
vest in the Option Shares in one or more installments over his or her period of
Service. Vesting in the Option Shares may be accelerated pursuant to the
provisions of Paragraph 6. In no event, however, shall any additional Option
Shares vest following Optionee's cessation of Service.
5. CESSATION OF SERVICE. The option term specified in Paragraph 2
--------------------
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date and the Vesting Schedule shall accelerate should any of the
following provisions become applicable:
(i) Should Optionee cease to remain in Service for any
reason (other than death, Permanent Disability or Misconduct) while this
option is outstanding, then Optionee shall have a period of three (3)
months (commencing with the date of such cessation of Service) during which
to exercise this option, but in no event shall this option be exercisable
at any time after the Expiration Date.
(ii) Should Optionee cease Service by reason of death,
then all the Option Shares at the time subject to this option shall vest so
that this option shall immediately become exercisable for all the Option
Shares as fully-vested shares.
(iii) Should Optionee die while this option is outstanding,
then the personal representative of Optionee's estate or the person or
persons to whom the option is transferred pursuant to Optionee's will or in
accordance with the laws of descent and distribution shall have the right
to exercise this option. Such right shall lapse and this option shall cease
to be outstanding upon the earlier of (A) the expiration of the twelve
-------
(12)-month period measured from the date of Optionee's death or (B) the
Expiration Date.
(iv) Should Optionee cease Service by reason of Permanent
Disability while this option is outstanding, then Optionee shall have a
period of twelve (12) months (commencing with the date of such cessation of
Service) during which to exercise this option. In no event shall this
option be exercisable at any time after the Expiration Date.
2.
<PAGE>
(v) Should Optionee's Service be terminated for
Misconduct, then this option shall terminate immediately and cease to
remain outstanding.
(vi) During the limited post-Service exercise period, this
option may not be exercised in the aggregate for more than the number of
Option Shares in which Optionee is, at the time of Optionee's cessation of
Service, vested in accordance with the Vesting Schedule. Upon the
expiration of such limited exercise period or (if earlier) upon the
Expiration Date, this option shall terminate and cease to be outstanding
for any vested Option Shares for which the option has not been exercised.
To the extent Optionee is not vested in the Option Shares at the time of
Optionee's cessation of Service, this option shall immediately terminate
and cease to be outstanding with respect to those shares.
(vii) In the event of a Corporate Transaction, the
provisions of Paragraph 6 shall govern the period for which this option is
to remain exercisable following Optionee's cessation of Service and shall
supersede any provisions to the contrary in this paragraph.
6. SPECIAL TERMINATION OF OPTION.
-----------------------------
(a) All the Option Shares subject to this option at the time of
a Corporate Transaction but not otherwise vested shall automatically vest and
the Corporation's repurchase rights with respect to those Option Shares shall
immediately terminate so that this option shall, immediately prior to the
effective date of the Corporate Transaction, become exercisable for all of the
Option Shares as fully-vested shares of Common Stock and may be exercised for
any or all of those Option Shares. No such accelerated vesting of the Option
Shares, however, shall occur if and to the extent: (i) this option is, in
connection with the Corporate Transaction, either to be assumed by the successor
corporation (or parent thereof) or to be replaced with a comparable option to
purchase shares of the capital stock of the successor corporation (or parent
thereof), and the Corporation's repurchase rights with respect to the unvested
Option Shares are to be assigned to such successor corporation (or parent
thereof) or (ii) this option is to be replaced with a cash incentive program of
the successor corporation which preserves the spread existing on the unvested
Option Shares at the time of the Corporate Transaction (the excess of the Fair
Market Value of those Option Shares over the Exercise Price payable for such
shares) and provides for subsequent payout in accordance with the Vesting
Schedule.
(b) Immediately following the Corporate Transaction, this option
shall terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof) in connection with the Corporate
Transaction.
(c) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to
3.
<PAGE>
apply to the number and class of securities which would have been issuable to
Optionee in consummation of such Corporate Transaction had the option been
exercised immediately prior to such Corporate Transaction, and appropriate
adjustments shall also be made to the Exercise Price, provided the aggregate
--------
Exercise Price shall remain the same.
(d) Should there occur an Involuntary Termination of Optionee's
Service within eighteen (18) months following a Corporate Transaction in which
this option is assumed or replaced and the Corporation's repurchase rights with
respect to the unvested Option Shares are assigned, all the Option Shares at the
time subject to this option but not otherwise vested shall automatically vest
and the Corporation's repurchase rights with respect to those Option Shares
shall terminate so that this option shall immediately become exercisable for all
those Option Shares as fully-vested shares of Common Stock and may be exercised
for any or all of those vested Option Shares at any time prior to the earlier of
-------
(i) the Expiration Date or (ii) the expiration of the one (l)-year period
measured from the date of such Involuntary Termination.
(e) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
7. ADJUSTMENT IN OPTION SHARES. Should any change be made to the
---------------------------
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
8. STOCKHOLDER RIGHTS. The holder of this option shall not have any
------------------
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
9. MANNER OF EXERCISING OPTION.
---------------------------
(a) In order to exercise this option with respect to all or any
part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:
(i) Execute and deliver to the Corporation a
Purchase Agreement for the Option Shares for which the option is exercised.
(ii) Pay the aggregate Exercise Price for the
purchased shares in one or more of the following forms:
(A) cash or check made payable to the Corporation;
or
4.
<PAGE>
(B) a promissory note payable to the Corporation,
but only to the extent authorized by the Plan Administrator in
accordance with Paragraph 14.
Should the Common Stock be registered under Section 12(g) of the
1934 Act at the time the option is exercised, then the Exercise Price
may also be paid as follows:
(C) in shares of Common Stock held by Optionee (or
any other person or persons exercising the option) for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date; or
(D) to the extent the option is exercised for vested
Option Shares, through a special sale and remittance procedure
pursuant to which Optionee (or any other person or persons exercising
the option) shall concurrently provide irrevocable written
instructions (I) to a Corporation-designated brokerage firm to effect
the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate Exercise Price payable
for the purchased shares plus all applicable Federal, state and local
income and employment taxes required to be withheld by the Corporation
by reason of such exercise and (II) to the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm
in order to complete the sale.
Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Purchase Agreement delivered to the
Corporation in connection with the option exercise.
(iii) Furnish to the Corporation appropriate documentation
that the person or persons exercising the option (if other than Optionee)
have the right to exercise this option.
(iv) Execute and deliver to the Corporation such written
representations as may be requested by the Corporation in order for it to
comply with the applicable requirements of Federal and state securities
laws.
(v) Make appropriate arrangements with the Corporation
(or Parent or Subsidiary employing or retaining Optionee) for the
satisfaction of all Federal, state and local income and employment tax
withholding requirements applicable to the option exercise.
5.
<PAGE>
(b) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto. To the extent any such Option
Shares are unvested, the certificates for those Option Shares shall be endorsed
with an appropriate legend evidencing the Corporation's repurchase rights and
may be held in escrow with the Corporation until such shares vest.
(c) In no event may this option be exercised for any fractional
shares.
10. REPURCHASE RIGHTS. ALL OPTION SHARES ACQUIRED UPON THE EXERCISE
-----------------
OF THIS OPTION SHALL BE SUBJECT TO CERTAIN RIGHTS OF THE CORPORATION AND ITS
ASSIGNS TO REPURCHASE THOSE SHARES IN ACCORDANCE WITH THE TERMS SPECIFIED IN THE
PURCHASE AGREEMENT.
11. COMPLIANCE WITH LAWS AND REGULATIONS.
------------------------------------
(a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.
(b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
12. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
----------------------
in Paragraphs 3 and 6, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and Optionee, Optionee's assigns and the legal representatives, heirs and
legatees of Optionee's estate.
13. NOTICES. Any notice required to be given or delivered to the
-------
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to
be given or delivered to Optionee shall be in writing and addressed to Optionee
at the address indicated below Optionee's signature line on the Grant Notice.
All notices shall be deemed effective upon personal delivery or upon deposit in
the U.S. mail, postage prepaid and properly addressed to the party to be
notified.
6.
<PAGE>
14. FINANCING. The Plan Administrator may, in its absolute
---------
discretion and without any obligation to do so, permit Optionee to pay the
Exercise Price for the purchased Option Shares by delivering a promissory note.
The terms of any such promissory note (including the interest rate, the
requirements for collateral and the terms of repayment) shall be established by
the Plan Administrator in its sole discretion./1/
-
15. CONSTRUCTION. This Agreement and the option evidenced hereby are
------------
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.
16. GOVERNING LAW. The interpretation, performance and enforcement
-------------
of this Agreement shall be governed by the laws of the State of Texas without
resort to that State's conflict-of-laws rules.
17. STOCKHOLDER APPROVAL.
--------------------
(a) The grant of this option is subject to approval of the Plan
by the Corporation's stockholders within twelve (12) months after the adoption
of the Plan by the Board. Notwithstanding any provision of this Agreement to the
------------------------------------------------------
contrary, this option may not be exercised in whole or in part until such
- -------------------------------------------------------------------------
stockholder approval is obtained. In the event that such stockholder approval
- --------------------------------
is not obtained, then this option shall terminate in its entirety and Optionee
shall have no further rights to acquire any Option Shares hereunder.
(b) If the Option Shares covered by this Agreement exceed, as of
the Grant Date, the number of shares of Common Stock which may without
stockholder approval be issued under the Plan, then this option shall be void
with respect to such excess shares, unless stockholder approval of an amendment
sufficiently increasing the number of shares of Common Stock issuable under the
Plan is obtained in accordance with the provisions of the Plan.
18. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION. In the event
--------------------------------------------------
this option is designated an Incentive Option in the Grant Notice, the following
terms and conditions shall also apply to the grant:
(i) This option shall cease to qualify for favorable tax
treatment as an Incentive Option if (and to the extent) this option is
exercised for one or more Option Shares: (A) more than three (3) months
after the date Optionee ceases to be an Employee for any reason other than
death or
____________________________
/1/ Authorization of payment of the Exercise Price by a promissory note
-
may, under currently proposed Treasury Regulations, result in the loss of
incentive stock option treatment under the Federal tax laws.
7.
<PAGE>
Permanent Disability or (B) more than twelve (12) months after the date Optionee
ceases to be an Employee by reason of Permanent Disability.
(ii) This option shall not become exercisable in the
calendar year in which granted if (and to the extent) the aggregate Fair
Market Value (determined at the Grant Date) of the Common Stock for which
this option would otherwise first become exercisable in such calendar year
would, when added to the aggregate value (determined as of the respective
date or dates of grant) of the Common Stock and any other securities for
which one or more other Incentive Options granted to Optionee prior to the
Grant Date (whether under the Plan or any other option plan of the
Corporation or any Parent or Subsidiary) first become exercisable during
the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in
the aggregate. To the extent the exercisability of this option is deferred
by reason of the foregoing limitation, the deferred portion shall become
exercisable in the first calendar year or years thereafter in which the One
Hundred Thousand Dollar ($100,000) limitation of this Paragraph 18(ii)
would not be contravened, but such deferral shall in all events end
immediately prior to the effective date of a Corporate Transaction in which
this option is not to be assumed or the Optionee's Involuntary Termination
in connection with a Corporate Transaction, whereupon the option shall
become immediately exercisable as a Non-Statutory Option for the deferred
portion of the Option Shares.
(iii) Should Optionee hold, in addition to this option, one
or more other options to purchase Common Stock which become exercisable for
the first time in the same calendar year as this option, then the foregoing
limitations on the exercisability of such options as Incentive Options
shall be applied on the basis of the order in which such options are
granted.
8.
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Option Agreement.
---------
B. BOARD shall mean the Corporation's Board of Directors.
-----
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
----
D. COMMON STOCK shall mean the Corporation's common stock.
------------
E. CORPORATE TRANSACTION shall mean either of the following stockholder-
---------------------
approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of
the Corporation.
F. CORPORATION shall mean Vignette Corporation, a Delaware corporation.
-----------
G. DOMESTIC RELATIONS ORDER shall mean any judgment, decree or order
------------------------
(including approval of a property settlement agreement) which provides or
otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of the Optionee.
H. EMPLOYEE shall mean an individual who is in the employ of the
--------
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
I. EXERCISE DATE shall mean the date on which the option shall have been
-------------
exercised in accordance with Paragraph 9 of the Agreement.
J. EXERCISE PRICE shall mean the exercise price per share as specified in
--------------
the Grant Notice.
K. EXPIRATION DATE shall mean the date on which the option expires as
---------------
specified in the Grant Notice.
A-1.
<PAGE>
L. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
-----------------
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq National
Market, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question, as the price is reported by
the National Association of Securities Dealers on the Nasdaq National
Market or any successor system. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
(ii) If the Common Stock is at the time listed on any Stock Exchange,
then the Fair Market Value shall be the closing selling price per share of
Common Stock on the date in question on the Stock Exchange determined by
the Plan Administrator to be the primary market for the Common Stock, as
such price is officially quoted in the composite tape of transactions on
such exchange. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation exists.
(iii) If the Common Stock is at the time neither listed on any Stock
Exchange nor traded on the Nasdaq National Market, then the Fair Market
Value shall be determined by the Plan Administrator after taking into
account such factors as the Plan Administrator shall deem appropriate.
M. GRANT DATE shall mean the date of grant of the option as specified in
----------
the Grant Notice.
N. GRANT NOTICE shall mean the Notice of Grant of Stock Option
------------
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
O. INCENTIVE OPTION shall mean an option which satisfies the requirements
----------------
of Code Section 422.
P. INVOLUNTARY TERMINATION shall mean the termination of Optionee's
-----------------------
Service which occurs by reason of:
(i) Optionee's involuntary dismissal or discharge by the Corporation
for reasons other than Misconduct, or
(ii) Optionee's voluntary resignation following (A) a change in
Optionee's position with the Corporation (or Parent or Subsidiary employing
Optionee) which materially reduces Optionee's level of responsibility, (B)
a
A-2.
<PAGE>
reduction in Optionee's level of compensation (including base salary,
fringe benefits and participation in corporate-performance based bonus or
incentive programs) by more than fifteen percent (15%) or (C) a relocation
of Optionee's place of employment by more than fifty (50) miles, provided
and only if such change, reduction or relocation is effected by the
Corporation without Optionee's consent.
Q. MISCONDUCT shall mean the commission of any act of fraud, embezzlement
----------
or dishonesty by Optionee, any unauthorized use or disclosure by Optionee of
confidential information or trade secrets of the Corporation (or any Parent or
Subsidiary), or any other intentional misconduct by Optionee adversely affecting
the business or affairs of the Corporation (or any Parent or Subsidiary) in a
material manner. The foregoing definition shall not be deemed to be inclusive
of all the acts or omissions which the Corporation (or any Parent or Subsidiary)
may consider as grounds for the dismissal or discharge of Optionee or any other
individual in the Service of the Corporation (or any Parent or Subsidiary).
R. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
--------
S. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
--------------------
requirements of Code Section 422.
T. OPTION SHARES shall mean the number of shares of Common Stock subject
-------------
to the option as specified in the Grant Notice.
U. OPTIONEE shall mean the person to whom the option is granted as
--------
specified in the Grant Notice.
V. PARENT shall mean any corporation (other than the Corporation) in an
------
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
W. PERMANENT DISABILITY shall mean the inability of Optionee to engage in
--------------------
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which is expected to result in death or has lasted
or can be expected to last for a continuous period of twelve (12) months or
more.
X. PLAN shall mean the Corporation's 1995 Stock Option/Stock Issuance
----
Plan.
Y. PLAN ADMINISTRATOR shall mean either the Board or a committee of Board
------------------
members, to the extent the committee is at the time responsible for the
administration of the Plan.
Z. PURCHASE AGREEMENT shall mean the stock purchase agreement in
------------------
substantially the form of Exhibit B to the Grant Notice.
A-3.
<PAGE>
AA. QUALIFIED DOMESTIC RELATIONS ORDER shall mean a Domestic Relations
----------------------------------
Order which substantially complies with the requirements of Code Section 414(p).
The Plan Administrator shall have the sole discretion to determine whether a
Domestic Relations Order is a Qualified Domestic Relations Order.
BB. SERVICE shall mean Optionee's performance of services for the
-------
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a non-
employee member of the board of directors or a consultant or independent
advisor.
CC. STOCK EXCHANGE shall mean the American Stock Exchange or the New York
--------------
Stock Exchange.
DD. SUBSIDIARY shall mean any corporation (other than the Corporation) in
----------
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
EE. VESTING SCHEDULE shall mean the vesting schedule specified in the
----------------
Grant Notice, as such vesting schedule is subject to acceleration in the event
of death or a Corporate Transaction.
A-4.
<PAGE>
VIGNETTE CORPORATION
STOCK ISSUANCE AGREEMENT
------------------------
AGREEMENT made as of this ___ day of ________ 19 __, by and between
Vignette Corporation, a Delaware corporation and _______________________,
Participant in the Corporation's 1995 Stock Option/Stock Issuance Plan.
All capitalized terms in this Agreement shall have the meaning
assigned to them in this Agreement or in the attached Appendix.
A. PURCHASE OF SHARES
------------------
1. PURCHASE. Participant hereby purchases ____________ shares of
--------
Common Stock (the "Purchased Shares") pursuant to the provisions of the Stock
Issuance Program at the purchase price of $______ per share (the "Purchase
Price").
2. PAYMENT. Concurrently with the delivery of this Agreement to the
-------
Corporation, Participant shall pay the Purchase Price for the Purchased Shares
in cash or check payable to the Corporation and shall deliver a duly-executed
blank Assignment Separate from Certificate (in the form attached hereto as
Exhibit I) with respect to the Purchased Shares.
3. STOCKHOLDER RIGHTS. Until such time as the Corporation exercises
------------------
the Repurchase Right or the First Refusal Right, Participant (or any successor
in interest) shall have all the rights of a stockholder (including voting,
dividend and liquidation rights) with respect to the Purchased Shares, subject,
however, to the transfer restrictions of Articles B and C.
B. SECURITIES LAW COMPLIANCE
-------------------------
1. RESTRICTED SECURITIES. The Purchased Shares have not been
---------------------
registered under the 1933 Act and are being issued to Participant in reliance
upon the exemption from such registration provided by SEC Rule 701 for stock
issuances under compensatory benefit plans such as the Plan. Participant hereby
confirms that Participant has been informed that the Purchased Shares are
restricted securities under the 1933 Act and may not be resold or transferred
unless the Purchased Shares are first registered under the Federal securities
laws or unless an exemption from such registration is available. Accordingly,
Participant hereby acknowledges that Participant is prepared to hold the
Purchased Shares for an indefinite period and that Participant is aware that SEC
Rule 144 issued under the 1933 Act which exempts certain resales of unrestricted
securities is not presently available to exempt the resale of the Purchased
Shares from the registration requirements of the 1933 Act.
2. RESTRICTIONS ON DISPOSITION OF PURCHASED SHARES. Participant
-----------------------------------------------
shall make no disposition of the Purchased Shares (other than a Permitted
Transfer) unless and until there is compliance with all of the following
requirements:
<PAGE>
(i) Participant shall have provided the Corporation with a
written summary of the terms and conditions of the proposed disposition.
(ii) Participant shall have complied with all requirements of
this Agreement applicable to the disposition of the Purchased Shares.
(iii) Participant shall have provided the Corporation with
written assurances, in form and substance satisfactory to the Corporation,
that (a) the proposed disposition does not require registration of the
Purchased Shares under the 1933 Act or (b) all appropriate action necessary
for compliance with the registration requirements of the 1933 Act or any
exemption from registration available under the 1933 Act (including Rule
144) has been taken.
The Corporation shall not be required (i) to transfer on its books any
---
Purchased Shares which have been sold or transferred in violation of the
provisions of this Agreement or (ii) to treat as the owner of the Purchased
--
Shares, or otherwise to accord voting, dividend or liquidation rights to, any
transferee to whom the Purchased Shares have been transferred in contravention
of this Agreement.
3. RESTRICTIVE LEGENDS. The stock certificates for the Purchased
-------------------
Shares shall be endorsed with the following restrictive legends:
(i) "The shares represented by this certificate have not been
registered under the Securities Act of 1933. The shares may not be sold or
offered for sale in the absence of (a) an effective registration statement
for the shares under such Act, (b) a 'no action' letter of the Securities
and Exchange Commission with respect to such sale or offer or (c)
satisfactory assurances to the Corporation that registration under such Act
is not required with respect to such sale or offer."
(ii) "The shares represented by this certificate are unvested and
are subject to certain repurchase rights and rights of first refusal
granted to the Corporation and accordingly may not be sold, assigned,
transferred, encumbered, or in any manner disposed of except in conformity
with the terms of a written agreement dated ____________, 199__ between the
Corporation and the registered holder of the shares (or the predecessor in
interest to the shares). A copy of such agreement is maintained at the
Corporation's principal corporate
C. TRANSFER RESTRICTIONS
---------------------
1. RESTRICTION ON TRANSFER. Except for any Permitted Transfer,
-----------------------
Participant shall not transfer, assign, encumber or otherwise dispose of any of
the Purchased Shares which are subject to the Repurchase Right. In addition,
Purchased Shares which are released from the Repurchase Right shall not be
transferred, assigned, encumbered or otherwise disposed of in contravention of
the First Refusal Right or the Market Stand-Off.
2
<PAGE>
2. TRANSFEREE OBLIGATIONS. Each person (other than the Corporation)
----------------------
to whom the Purchased Shares are transferred by means of a Permitted Transfer
must, as a condition precedent to the validity of such transfer, acknowledge in
writing to the Corporation that such person is bound by the provisions of this
Agreement and that the transferred shares are subject to (i) the Repurchase
Right, (ii) the First Refusal Right and (iii) the Market Stand-Off, to the same
extent such shares would be so subject if retained by Participant.
3. MARKET STAND-OFF.
----------------
(a) In connection with any underwritten public offering by the
Corporation of its equity securities pursuant to an effective registration
statement filed under the 1933 Act, including the Corporation's initial public
offering, Owner shall not sell, make any short sale of, loan, hypothecate,
pledge, grant any option for the purchase of, or otherwise dispose or transfer
for value or otherwise agree to engage in any of the foregoing transactions with
respect to, any Purchased Shares without the prior written consent of the
Corporation or its underwriters. Such restriction (the "Market Stand-Off")
shall be in effect for such period of time from and after the effective date of
the final prospectus for the offering as may be requested by the Corporation or
such underwriters. In no event, however, shall such period exceed one hundred
eighty (180) days and the Market Stand-Off shall in all events terminate two (2)
years after the effective date of the Corporation's initial public offering.
(b) Owner shall be subject to the Market Stand-Off provided and
------------
only if the officers and directors of the Corporation are also subject to
- -------
similar restrictions.
(c) Any new, substituted or additional securities which are by
reason of any Recapitalization or Reorganization distributed with respect to the
Purchased Shares shall be immediately subject to the Market Stand-Off, to the
same extent the Purchased Shares are at such time covered by such provisions.
(d) In order to enforce the Market Stand-Off, the Corporation
may impose stop-transfer instructions with respect to the Purchased Shares until
the end of the applicable stand-off period.
D. REPURCHASE RIGHT
-----------------
1. GRANT. The Corporation is hereby granted the right (the
-----
"Repurchase Right"), exercisable at any time during the ninety (90)-day period
following the date Participant ceases for any reason to remain in Service, to
repurchase at the Purchase Price all or any portion of the Purchased Shares in
which Participant is not, at the time of his or her cessation of Service, vested
in accordance with the Vesting Schedule (such shares to be hereinafter referred
to as the "Unvested Shares").
2. EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right shall be
--------------------------------
exercisable by written notice delivered to each Owner of the Unvested Shares
prior to the expiration of the ninety (90)-day exercise period. The notice
shall indicate the number of
3
<PAGE>
Unvested Shares to be repurchased and the date on which the repurchase is to be
effected, such date to be not more than thirty (30) days after the date of such
notice. The certificates representing the Unvested Shares to be repurchased
shall be delivered to the Corporation prior to the close of business on the date
specified for the repurchase. Concurrently with the receipt of such stock
certificates, the Corporation shall pay to Owner, in cash or cash equivalents
(including the cancellation of any purchase-money indebtedness), an amount equal
to the Purchase Price previously paid for the Unvested Shares which are to be
repurchased from Owner.
3. TERMINATION OF THE REPURCHASE RIGHT. The Repurchase Right shall
-----------------------------------
terminate with respect to any Unvested Shares for which it is not timely
exercised under Paragraph D.2. In addition, the Repurchase Right shall
terminate and cease to be exercisable with respect to any and all Purchased
Shares in which Participant vests in accordance with the following Vesting
Schedule:
(i) Upon Participant's completion of one (1) year of Service
measured from ______________, 199__, Participant shall acquire a vested
interest in, and the Repurchase Right shall lapse with respect to, sixteen
percent (16%) of the Purchased Shares.
(ii) Participant shall acquire a vested interest in, and the
Repurchase Right shall lapse with respect to, the remaining Purchased
Shares in a series of six (6) successive equal installments upon
Participant's completion of each six (6)-month period of Service measured
from the initial vesting date under subparagraph (i) above.
(iii) Participant shall become fully-vested in, and the
Repurchase Right shall lapse with respect to, all the Purchased Shares upon
Participant's cessation of Service by reason of death.
All Purchased Shares as to which the Repurchase Right lapses shall,
however, remain subject to (i) the First Refusal Right and (ii) the Market
Stand-Off.
4. RECAPITALIZATION. Any new, substituted or additional securities
----------------
or other property (including cash paid other than as a regular cash dividend)
which is by reason of any Recapitalization distributed with respect to the
Purchased Shares shall be immediately subject to the Repurchase Right, but only
to the extent the Purchased Shares are at the time covered by such right.
Appropriate adjustments to reflect such distribution shall be made to the number
and/or class of Purchased Shares subject to this Agreement and to the price per
share to be paid upon the exercise of the Repurchase Right in order to reflect
the effect of any such Recapitalization upon the Corporation's capital
structure; provided, however, that the aggregate purchase price shall remain the
--------
same.
4
<PAGE>
5. CORPORATE TRANSACTION.
---------------------
(a) Immediately prior to the consummation of any Corporate
Transaction, the Repurchase Right shall automatically lapse in its entirety,
except to the extent the Repurchase Right is assigned to the successor
corporation (or parent thereof) in connection with the Corporate Transaction.
(b) To the extent the Repurchase Right remains in effect
following a Corporate Transaction, such right shall apply to the new capital
stock or other property (including any cash payments) received in exchange for
the Purchased Shares in consummation of the Corporate Transaction, but only to
the extent the Purchased Shares are at the time covered by such right.
Appropriate adjustments shall be made to the price per share payable upon
exercise of the Repurchase Right to reflect the effect of the Corporate
Transaction upon the Corporation's capital structure; provided, however, that
--------
the aggregate purchase price shall remain the same.
(c) The Repurchase Right shall automatically lapse in its
entirety, and all the Purchased Shares shall immediately vest in full, upon an
Involuntary Termination of Participant's Service within eighteen (18) months
following the effective date of a Corporate Transaction in which the Repurchase
Right has been assigned.
E. RIGHT OF FIRST REFUSAL
----------------------
1. GRANT. The Corporation is hereby granted the right of first
-----
refusal (the "First Refusal Right"), exercisable in connection with any proposed
transfer of the Purchased Shares in which Participant has vested in accordance
with the Vesting Schedule. For purposes of this Article E, the term "transfer"
shall include any sale, assignment, pledge, encumbrance or other disposition of
the Purchased Shares intended to be made by Owner, but shall not include any
Permitted Transfer.
2. NOTICE OF INTENDED DISPOSITION. In the event any Owner of
------------------------------
Purchased Shares in which Participant has vested desires to accept a bona fide
third-party offer for the transfer of any or all of such shares (the Purchased
Shares subject to such offer to be hereinafter referred to as the "Target
Shares"), Owner shall promptly (i) deliver to the Corporation written notice
(the "Disposition Notice") of the terms of the offer, including the purchase
price and the identity of the third-party offeror, and (ii) provide satisfactory
proof that the disposition of the Target Shares to such third-party offeror
would not be in contravention of the provisions set forth in Articles B and C.
3. EXERCISE OF THE FIRST REFUSAL RIGHT. The Corporation shall, for a
-----------------------------------
period of forty-five (45) days following receipt of the Disposition Notice, have
the right to repurchase any or all of the Target Shares subject to the
Disposition Notice upon the same terms as those specified therein or upon such
other terms (not materially different from those specified in the Disposition
Notice) to which Owner consents. Such right shall be exercisable by delivery of
written notice (the "Exercise Notice") to Owner prior to the expiration of the
forty-five (45)-day exercise period. If such right is exercised with respect to
all the Target Shares, then the
5
<PAGE>
Corporation shall effect the repurchase of such shares, including payment of the
purchase price, not more than fifteen (15) business days after delivery of the
Exercise Notice; and at such time the certificates repre-senting the Target
Shares shall be delivered to the Corporation.
Should the purchase price specified in the Disposition Notice be
payable in property other than cash or evidences of indebtedness, the
Corporation shall have the right to pay the purchase price in the form of cash
equal in amount to the value of such property. If Owner and the Corporation
cannot agree on such cash value within thirty (30) days after the Corporation's
receipt of the Disposition Notice, the valuation shall be made by an appraiser
of recognized standing selected by Owner and the Corporation or, if they cannot
agree on an appraiser within forty-five (45) days after the Corporation's
receipt of the Disposition Notice, each shall select an appraiser of recognized
standing and the two (2) appraisers shall designate a third appraiser of
recognized standing, whose appraisal shall be determinative of such value. The
cost of such appraisal shall be shared equally by Owner and the Corporation.
The closing shall then be held on the later of (i) the fifteenth (15th) business
-----
day following delivery of the Exercise Notice or (ii) the fifteenth (15th)
business day after such valuation shall have been made.
4. NON-EXERCISE OF THE FIRST REFUSAL RIGHT. In the event the
---------------------------------------
Exercise Notice is not given to Owner prior to the expiration of the forty-five
(45)-day exercise period, Owner shall have a period of thirty (30) days
thereafter in which to sell or otherwise dispose of the Target Shares to the
third-party offeror identified in the Disposition Notice upon terms (including
the purchase price) no more favorable to such third-party offeror than those
specified in the Disposition Notice; provided, however, that any such sale or
--------
disposition must not be effected in contravention of the provisions of Articles
B and C. The third-party offeror shall acquire the Target Shares free and clear
of the Repurchase Right and the First Refusal Right, but the acquired shares
shall remain subject to the provisions of Article B and Paragraph C.3. In the
event Owner does not effect such sale or disposition of the Target Shares within
the specified thirty (30)-day period, the First Refusal Right shall continue to
be applicable to any subsequent disposition of the Target Shares by Owner until
such right lapses.
5. PARTIAL EXERCISE OF THE FIRST REFUSAL RIGHT. In the event the
-------------------------------------------
Corporation makes a timely exercise of the First Refusal Right with respect to a
portion, but not all, of the Target Shares specified in the Disposition Notice,
Owner shall have the option, exercisable by written notice to the Corporation
delivered within fifteen (15) business days after Owner's receipt of the
Exercise Notice, to effect the sale of the Target Shares pursuant to either of
the following alternatives:
(i) sale or other disposition of all the Target Shares to the
third-party offeror identified in the Disposition Notice, but in full
compliance with the requirements of Paragraph E.4, as if the Corporation
did not exercise the First Refusal Right; or
(ii) sale to the Corporation of the portion of the Target Shares
which the Corporation has elected to purchase, such sale to be effected in
substantial conformity with the provisions of Paragraph E.3. The First
Refusal Right shall
6
<PAGE>
continue to be applicable to any subsequent disposition of the remaining Target
Shares until such right lapses.
Failure of Owner to deliver timely notification to the Corporation
shall be deemed to be an election by Owner to sell the Target Shares pursuant to
alternative (i) above.
6. RECAPITALIZATION/REORGANIZATION.
-------------------------------
(a) Any new, substituted or additional securities or other
property which is by reason of any Recapitalization distributed with respect to
the Purchased Shares shall be immediately subject to the First Refusal Right,
but only to the extent the Purchased Shares are at the time covered by such
right.
(b) In the event of a Reorganization, the First Refusal Right
shall remain in full force and effect and shall apply to the new capital stock
or other property received in exchange for the Purchased Shares in consummation
of the Reorganization, but only to the extent the Purchased Shares are at the
time covered by such right.
7. LAPSE. The First Refusal Right shall lapse upon the earliest to
----- --------
occur of (i) the first date on which shares of the Common Stock are held of
record by more than five hundred (500) persons, (ii) a determination is made by
the Board that a public market exists for the outstanding shares of Common Stock
or (iii) a firm commitment underwritten public offering, pursuant to an
effective registration statement under the 1933 Act, covering the offer and sale
of the Common Stock in the aggregate amount of at least ten million dollars
($10,000,000). However, the Market Stand-Off shall continue to remain in full
force and effect following the lapse of the First Refusal Right.
F. SPECIAL TAX ELECTION
--------------------
1. SECTION 83(B) ELECTION. Under Code Section 83, the excess of the
-----------------------
fair market value of the Purchased Shares on the date any forfeiture
restrictions applicable to such shares lapse over the Purchase Price paid for
such shares will be reportable as ordinary income on the lapse date. For this
purpose, the term "forfeiture restrictions" includes the right of the
Corporation to repurchase the Purchased Shares pursuant to the Repurchase Right.
Participant may elect under Code Section 83(b) to be taxed at the time the
Purchased Shares are acquired, rather than when and as such Purchased Shares
cease to be subject to such forfeiture restrictions. Such election must be
filed with the Internal Revenue Service within thirty (30) days after the date
of this Agreement. Even if the fair market value of the Purchased Shares on the
date of this Agreement equals the Purchase Price paid (and thus no tax is
payable), the election must be made to avoid adverse tax consequences in the
future. THE FORM FOR MAKING THIS ELECTION IS ATTACHED AS EXHIBIT II HERETO.
PARTICIPANT UNDERSTANDS THAT FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE
THIRTY (30)-DAY PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY INCOME AS THE
FORFEITURE RESTRICTIONS LAPSE.
7
<PAGE>
2. FILING RESPONSIBILITY. PARTICIPANT ACKNOWLEDGES THAT IT IS
---------------------
PARTICIPANT'S SOLE RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A TIMELY
ELECTION UNDER CODE SECTION 83(B), EVEN IF PARTICIPANT REQUESTS THE CORPORATION
OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.
G. GENERAL PROVISIONS
------------------
1. ASSIGNMENT. The Corporation may assign the Repurchase Right
----------
and/or the First Refusal Right to any person or entity selected by the Board,
including (without limitation) one or more stockholders of the Corporation.
2. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement or
---------------------------------
in the Plan shall confer upon Participant any right to continue in Service for
any period of specific duration or interfere with or otherwise restrict in any
way the rights of the Corporation (or any Parent or Subsidiary employing or
retaining Participant) or of Participant, which rights are hereby expressly
reserved by each, to terminate Participant's Service at any time for any reason,
with or without cause.
3. NOTICES. Any notice required to be given under this Agreement
-------
shall be in writing and shall be deemed effective upon personal delivery or upon
deposit in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other address as such
party may designate by ten (10) days advance written notice under this paragraph
to all other parties to this Agreement.
4. NO WAIVER. The failure of the Corporation in any instance to
---------
exercise the Repurchase Right or the First Refusal Right shall not constitute a
waiver of any other repurchase rights and/or rights of first refusal that may
subsequently arise under the provisions of this Agreement or any other agreement
between the Corporation and Participant. No waiver of any breach or condition
of this Agreement shall be deemed to be a waiver of any other or subsequent
breach or condition, whether of like or different nature.
5. CANCELLATION OF SHARES. If the Corporation shall make available,
----------------------
at the time and place and in the amount and form provided in this Agreement, the
consideration for the Purchased Shares to be repurchased in accordance with the
provisions of this Agreement, then from and after such time, the person from
whom such shares are to be repurchased shall no longer have any rights as a
holder of such shares (other than the right to receive payment of such
consideration in accordance with this Agreement). Such shares shall be deemed
purchased in accordance with the applicable provisions hereof, and the
Corporation shall be deemed the owner and holder of such shares, whether or not
the certificates therefor have been delivered as required by this Agreement.
6. PARTICIPANT UNDERTAKING. Participant hereby agrees to take
-----------------------
whatever additional action and execute whatever additional documents the
Corporation may deem necessary or advisable in order to carry out or effect one
or more of the obligations or restrictions
8
<PAGE>
imposed on either Participant or the Purchased Shares pursuant to the provisions
of this Agreement.
7. GOVERNING LAW. This Agreement shall be governed by, and construed
-------------
in accordance with, the laws of the State of Texas without resort to that
State's conflict-of-laws rules.
8. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
----------------------
inure to the benefit of, and be binding upon, the Corporation and its successors
and assigns and upon Participant, Participant's assigns and the legal
representatives, heirs and legatees of Participant's estate, whether or not any
such person shall have become a party to this Agreement and have agreed in
writing to join herein and be bound by the terms hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.
VIGNETTE CORPORATION
By:______________________________
Title:___________________________
Address:_________________________
_________________________________
PARTICIPANT
Address:
9
<PAGE>
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED ______________________ hereby sell(s), assign(s)
and transfer(s) unto Vignette Corporation (the "Corporation"),
______________________ (_______) shares of the Common Stock of the Corporation
standing in his or her name on the books of the Corporation represented by
Certificate No. ___________________ herewith and do(es) hereby irrevocably
constitute and appoint _______________________________ Attorney to transfer the
said stock on the books of the Corporation with full power of substitution in
the premises.
Dated: _______________
________________________________
Signature
INSTRUCTION: Please do not fill in any blanks other than the signature line.
Please sign exactly as you would like your name to appear on the issued stock
certificate. The purpose of this assignment is to enable the Corporation to
exercise the Repurchase Right without requiring additional signatures on the
part of Participant.
10
<PAGE>
EXHIBIT II
SECTION 83(B) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is
___________ shares of the common stock of Vignette Corporation
(3) The property was issued on ____________, 199 __.
(4) The taxable year in which the election is being made is the calendar year
199__.
(5) The property is subject to a repurchase right pursuant to which the issuer
has the right to acquire the property at the original purchase price if for
any reason taxpayer's employment with the issuer is terminated. The
issuer's repurchase right lapses in a series of installments over a four
(4)-year period ending on _____________, 199__.
(6) The fair market value at the time of transfer (determined without regard to
any restriction other than a restriction which by its terms will never
lapse) is $ ____________per share.
(7) The amount paid for such property is $ ___________ per share.
(8) A copy of this statement was furnished to Vignette Corporation for whom
taxpayer rendered the services underlying the transfer of property.
(9) This statement is executed on ________________________, 199_.
Spouse (if any) Taxpayer
This election must be filed with the Internal Revenue Service Center with which
taxpayer files his or her Federal income tax returns and must be made within
thirty (30) days after the execution date of the Stock Issuance Agreement. This
filing should be made by registered or certified mail, return receipt requested.
Participant must retain two (2) copies of the completed form for filing with his
or her Federal and state tax returns for the current tax year and an additional
copy for his or her records.
11
<PAGE>
EXHIBIT III
1995 STOCK OPTION/STOCK ISSUANCE PLAN
APPENDIX
--------
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Issuance Agreement.
---------
B. BOARD shall mean the Corporation's Board of Directors.
-----
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
----
D. COMMON STOCK shall mean the Corporation's common stock.
------------
E. CORPORATE TRANSACTION shall mean either of the following stockholder-
---------------------
approved transactions:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of
the Corporation.
F. CORPORATION shall mean Vignette Corporation, a Delaware corporation.
-----------
G. DISPOSITION NOTICE shall have the meaning assigned to such term in
------------------
Paragraph E.2.
H. EXERCISE NOTICE shall have the meaning assigned to such term in
---------------
Paragraph E.3.
I. FAIR MARKET VALUE of a share of Common Stock on any relevant date
-----------------
prior to the initial public offering of the Common Stock shall be determined by
the Plan Administrator after taking into account such factors as it shall deem
appropriate.
J. FIRST REFUSAL RIGHT shall mean the right granted to the Corporation in
-------------------
accordance with Article E.
K. INVOLUNTARY TERMINATION shall mean the termination of Participant's
-----------------------
Service which occurs by reason of:
12
<PAGE>
(i) Participant's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
(ii) Participant's voluntary resignation following (A) a change
in Participant's position with the Corporation which materially reduces
Participant's level of responsibility, (B) a reduction in Participant's
level of compensation (including base salary, fringe benefits and
participation in corporate-performance based bonus or incentive programs)
by more than fifteen percent (15%) or (C) a relocation of Participant's
place of employment by more than fifty (50) miles, provided and only if
such change, reduction or relocation is effected by the Corporation without
Participant's consent.
L. MARKET STAND-OFF shall mean the market stand-off restriction specified
----------------
in Paragraph C.3.
M. MISCONDUCT shall mean the commission of any act of fraud, embezzlement
----------
or dishonesty by Participant, any unauthorized use or disclosure by Participant
of confidential information or trade secrets of the Corporation (or any Parent
or Subsidiary), or any other intentional misconduct by Participant adversely
affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the dismissal or discharge of
Participant or any other person in the Service of the Corporation (or any Parent
or Subsidiary).
N. 1933 ACT shall mean the Securities Act of 1933, as amended.
--------
O. OWNER shall mean Participant and all subsequent holders of the
-----
Purchased Shares who derive their chain of ownership through a Permitted
Transfer from Participant.
P. PARENT shall mean any corporation (other than the Corporation) in an
------
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
Q. PARTICIPANT shall mean the person to whom shares are issued under the
-----------
Stock Issuance Program.
R. PERMITTED TRANSFER shall mean (i) a gratuitous transfer of the
------------------
Purchased Shares, provided and only if Participant obtains the Corporation's
--------------------
prior written consent to such transfer, (ii) a transfer of title to the
Purchased Shares effected pursuant to Participant's will or the laws of
intestate succession following Participant's death or (iii) a transfer to the
Corporation in pledge as security for any purchase-money indebtedness incurred
by Participant in connection with the acquisition of the Purchased Shares.
13
<PAGE>
S. PLAN shall mean the Corporation's 1995 Stock Option/Stock Issuance
----
Plan attached hereto as Exhibit III.
T. PLAN ADMINISTRATOR shall mean either the Board or a committee of Board
------------------
members, to the extent the committee is at the time responsible for
administration of the Plan.
U. PURCHASE PRICE shall have the meaning assigned to such term in
--------------
Paragraph A.1.
V. PURCHASED SHARES shall have the meaning assigned to such term in
----------------
Paragraph A.1.
W. RECAPITALIZATION shall mean any stock split, stock dividend,
----------------
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration.
X. REORGANIZATION shall mean any of the following transactions:
--------------
(i) a merger or consolidation in which the Corporation is not
the surviving entity,
(ii) a sale, transfer or other disposition of all or
substantially all of the Corporation's assets,
(iii) a reverse merger in which the Corporation is the surviving
entity but in which the Corporation's outstanding voting securities are
transferred in whole or in part to a person or persons different from the
persons holding those securities immediately prior to the merger, or
(iv) any transaction effected primarily to change the state in
which the Corporation is incorporated or to create a holding company
structure.
Y. REPURCHASE RIGHT shall mean the right granted to the Corporation in
----------------
accordance with Article D.
Z. SEC shall mean the Securities and Exchange Commission.
---
AA. SERVICE shall mean the Participant's provision of services to the
-------
Corporation (or any Parent or Subsidiary) in the capacity of an employee,
subject to the control and direction of the employer entity as to both the work
to be performed and the manner and method of performance, a non-employee member
of the board of directors or a consultant or independent advisor.
AB. STOCK ISSUANCE PROGRAM shall mean the Stock Issuance Program under the
----------------------
Plan.
AC. SUBSIDIARY shall mean any corporation (other than the Corporation) in
----------
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other
14
<PAGE>
than the last corporation) in the unbroken chain owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
AD. TARGET SHARES shall have the meaning assigned to such term in
-------------
Paragraph E.2.
AE. VESTING SCHEDULE shall mean the vesting schedule specified in
----------------
Paragraph D.3, subject to the acceleration provisions upon an Involuntary
Termination following a Corporate Transaction.
AF. UNVESTED SHARES shall have the meaning assigned to such term in
---------------
Paragraph D.1.
15
<PAGE>
VIGNETTE CORPORATION
STOCK PURCHASE AGREEMENT
------------------------
AGREEMENT made as of this ______ day of ___________ 19____, by and between
Vignette Corporation, a Delaware corporation, ____________________ _____,
Optionee under the Corporation's 1995 Stock Option/Stock Issuance Plan, and
__________ __________, Optionee's spouse.
All capitalized terms in this Agreement shall have the meaning assigned to
them in this Agreement or in the attached Appendix.
A. EXERCISE OF OPTION
------------------
1. EXERCISE. Optionee hereby purchases ____ ______ shares of
--------
Common Stock (the "Purchased Shares") pursuant to that certain option (the
"Option") granted Optionee on _______________, 199__ (the "Grant Date") to
purchase up to __________ shares of Common Stock under the Plan at the exercise
price of $__________ per share (the "Exercise Price").
2. PAYMENT. Concurrently with the delivery of this Agreement to the
-------
Corporation, Optionee shall pay the Exercise Price for the Purchased Shares in
accordance with the provisions of the Option Agreement and shall deliver
whatever additional documents may be required by the Option Agreement as a
condition for exercise, together with a duly-executed blank Assignment Separate
from Certificate (in the form attached hereto as Exhibit I) with respect to the
Purchased Shares.
3. STOCKHOLDER RIGHTS. Until such time as the Corporation exercises
------------------
the Repurchase Right or the First Refusal Right, Optionee (or any successor in
interest) shall have all the rights of a stockholder (including voting, dividend
and liquidation rights) with respect to the Purchased Shares, subject, however,
to the transfer restrictions of Articles B and C.
B. SECURITIES LAW COMPLIANCE
-------------------------
1. RESTRICTED SECURITIES. The Purchased Shares have not been
---------------------
registered under the 1933 Act and are being issued to Optionee in reliance upon
the exemption from such registration provided by SEC Rule 701 for stock
issuances under compensatory benefit plans such as the Plan. Optionee hereby
confirms that Optionee has been informed that the Purchased Shares are
restricted securities under the 1933 Act and may not be resold or transferred
unless the Purchased Shares are first registered under the Federal securities
laws or unless an exemption from such registration is available. Accordingly,
Optionee hereby acknowledges that Optionee is prepared to hold the Purchased
Shares for an indefinite period and that Optionee is aware that SEC Rule 144
issued under the 1933 Act which exempts certain resales of unrestricted
securities is not
<PAGE>
presently available to exempt the resale of the Purchased Shares from the
registration requirements of the 1933 Act.
2. RESTRICTIONS ON DISPOSITION OF PURCHASED SHARES. Optionee shall make
-----------------------------------------------
no disposition of the Purchased Shares (other than a Permitted Transfer) unless
and until there is compliance with all of the following requirements:
(i) Optionee shall have provided the Corporation with a written
summary of the terms and conditions of the proposed disposition.
(ii) Optionee shall have complied with all requirements of this
Agreement applicable to the disposition of the Purchased Shares.
(iii) Optionee shall have provided the Corporation with written
assurances, in form and substance satisfactory to the Corporation, that (a)
the proposed disposition does not require registration of the Purchased
Shares under the 1933 Act or (b) all appropriate action necessary for
compliance with the registration requirements of the 1933 Act or any
exemption from registration available under the 1933 Act (including Rule
144) has been taken.
The Corporation shall not be required (i) to transfer on its books any
---
Purchased Shares which have been sold or transferred in violation of the
provisions of this Agreement or (ii) to treat as the owner of the Purchased
--
Shares, or otherwise to accord voting, dividend or liquidation rights to, any
transferee to whom the Purchased Shares have been transferred in contravention
of this Agreement.
3. RESTRICTIVE LEGENDS. The stock certificates for the Purchased
-------------------
Shares shall be endorsed with the following restrictive legends:
(i) "The shares represented by this certificate have not been
registered under the Securities Act of 1933. The shares may not be sold or
offered for sale in the absence of (a) an effective registration statement
for the shares under such Act, (b) a 'no action' letter of the Securities
and Exchange Commission with respect to such sale or offer or (c)
satisfactory assurances to the Corporation that registration under such Act
is not required with respect to such sale or offer."
(ii) "The shares represented by this certificate are unvested and
are subject to certain repurchase rights and rights of first refusal
granted to the Corporation and accordingly may not be sold, assigned,
transferred, encumbered, or in any manner disposed of except in conformity
with the terms of a written agreement dated ____________, 199__ between the
Corporation and the registered holder of the shares (or the predecessor in
interest to the shares). A copy of such agreement is maintained at the
Corporation's principal corporate offices."
2.
<PAGE>
C. TRANSFER RESTRICTIONS
---------------------
1. RESTRICTION ON TRANSFER. Except for any Permitted Transfer,
-----------------------
Optionee shall not transfer, assign, encumber or otherwise dispose of any of the
Purchased Shares which are subject to the Repurchase Right. In addition,
Purchased Shares which are released from the Repurchase Right shall not be
transferred, assigned, encumbered or otherwise disposed of in contravention of
the First Refusal Right or the Market Stand-Off.
2. TRANSFEREE OBLIGATIONS. Each person (other than the Corporation)
----------------------
to whom the Purchased Shares are transferred by means of a Permitted Transfer
must, as a condition precedent to the validity of such transfer, acknowledge in
writing to the Corporation that such person is bound by the provisions of this
Agreement and that the transferred shares are subject to (i) the Repurchase
Right, (ii) the First Refusal Right and (iii) the Market Stand-Off, to the same
extent such shares would be so subject if retained by Optionee.
3. MARKET STAND-OFF.
----------------
(a) In connection with any underwritten public offering by the
Corporation of its equity securities pursuant to an effective registration
statement filed under the 1933 Act, including the Corporation's initial public
offering, Owner shall not sell, make any short sale of, loan, hypothecate,
pledge, grant any option for the purchase of, or otherwise dispose or transfer
for value or otherwise agree to engage in any of the foregoing transactions with
respect to, any Purchased Shares without the prior written consent of the
Corporation or its underwriters. Such restriction (the "Market Stand-Off")
shall be in effect for such period of time from and after the effective date of
the final prospectus for the offering as may be requested by the Corporation or
such underwriters. In no event, however, shall such period exceed one hundred
eighty (180) days and the Market Stand-Off shall in all events terminate two (2)
years after the effective date of the Corporation's initial public offering.
(b) Owner shall be subject to the Market Stand-Off provided and
------------
only if the officers and directors of the Corporation are also subject to
- -------
similar restrictions.
(c) Any new, substituted or additional securities which are by
reason of any Recapitalization or Reorganization distributed with respect to the
Purchased Shares shall be immediately subject to the Market Stand-Off, to the
same extent the Purchased Shares are at such time covered by such provisions.
(d) In order to enforce the Market Stand-Off, the Corporation
may impose stop-transfer instructions with respect to the Purchased Shares until
the end of the applicable stand-off period.
3.
<PAGE>
D. REPURCHASE RIGHT
----------------
1. GRANT. The Corporation is hereby granted the right (the
-----
"Repurchase Right"), exercisable at any time during the ninety (90)-day period
following the date Optionee ceases for any reason to remain in Service or (if
later) during the ninety (90)-day period following the execution date of this
Agreement, to repurchase at the Exercise Price all or any portion of the
Purchased Shares in which Optionee is not, at the time of his or her cessation
of Service, vested in accordance with the Vesting Schedule (such shares to be
hereinafter referred to as the "Unvested Shares").
2. EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right shall be
--------------------------------
exercisable by written notice delivered to each Owner of the Unvested Shares
prior to the expiration of the ninety (90)-day exercise period. The notice
shall indicate the number of Unvested Shares to be repurchased and the date on
which the repurchase is to be effected, such date to be not more than thirty
(30) days after the date of such notice. The certificates representing the
Unvested Shares to be repurchased shall be delivered to the Corporation prior to
the close of business on the date specified for the repurchase. Concurrently
with the receipt of such stock certificates, the Corporation shall pay to Owner,
in cash or cash equivalents (including the cancellation of any purchase-money
indebtedness), an amount equal to the Exercise Price previously paid for the
Unvested Shares which are to be repurchased from Owner.
3. TERMINATION OF THE REPURCHASE RIGHT. The Repurchase Right shall
-----------------------------------
terminate with respect to any Unvested Shares for which it is not timely
exercised under Paragraph D.2. In addition, the Repurchase Right shall
terminate and cease to be exercisable with respect to any and all Purchased
Shares in which Optionee vests in accordance with the Vesting Schedule. All
Purchased Shares as to which the Repurchase Right lapses shall, however, remain
subject to (i) the First Refusal Right and (ii) the Market Stand-Off.
4. AGGREGATE VESTING LIMITATION. If the Option is exercised in more
----------------------------
than one increment so that Optionee is a party to one or more other Stock
Purchase Agreements (the "Prior Purchase Agreements") which are executed prior
to the date of this Agreement, then the total number of Purchased Shares as to
which Optionee shall be deemed to have a fully-vested interest under this
Agreement and all Prior Purchase Agreements shall not exceed in the aggregate
the number of Purchased Shares in which Optionee would otherwise at the time be
vested, in accordance with the Vesting Schedule, had all the Purchased Shares
(including those acquired under the Prior Purchase Agreements) been acquired
exclusively under this Agreement.
5. RECAPITALIZATION. Any new, substituted or additional securities
----------------
or other property (including cash paid other than as a regular cash dividend)
which is by reason of any Recapitalization distributed with respect to the
Purchased Shares shall be immediately subject to the Repurchase Right, but only
to the extent the Purchased Shares are at the time covered by such right.
Appropriate adjustments to reflect such distribution shall be made to the number
and/or class of Purchased Shares subject to this Agreement and to the price per
share to be paid upon the exercise of the Repurchase Right in order to reflect
the effect of any such Recapitalization upon the Corporation's capital
structure; provided, however, that the aggregate purchase price shall remain the
--------
same.
4.
<PAGE>
6. CORPORATE TRANSACTION.
---------------------
(a) Immediately prior to the consummation of any Corporate
Transaction, the Repurchase Right shall automatically lapse in its entirety,
except to the extent the Repurchase Right is to be assigned to the successor
corporation (or parent thereof) in connection with the Corporate Transaction.
(b) To the extent the Repurchase Right remains in effect
following a Corporate Transaction, such right shall apply to the new capital
stock or other property (including any cash payments) received in exchange for
the Purchased Shares in consummation of the Corporate Transaction, but only to
the extent the Purchased Shares are at the time covered by such right.
Appropriate adjustments shall be made to the price per share payable upon
exercise of the Repurchase Right to reflect the effect of the Corporate
Transaction upon the Corporation's capital structure; provided, however, that
the aggregate purchase price shall
--------
remain the same.
(c) The Repurchase Right shall automatically lapse in its
entirety, and all the Purchased Shares shall immediately vest in full, upon an
Involuntary Termination of Optionee's Service within eighteen (18) months
following the effective date of a Corporate Transaction in which the Repurchase
Right has been assigned.
E. RIGHT OF FIRST REFUSAL
----------------------
1. GRANT. A right of first refusal (the "First Refusal Right")
-----
shall be granted to the Company, to each Founder, and to each holder of
Preferred Stock under the terms set forth in the Stockholders Agreement dated
February 2, 1996.
F. SPECIAL TAX ELECTION
--------------------
The acquisition of the Purchased Shares may result in adverse tax
consequences which may be avoided or mitigated by filing an election under Code
Section 83(b). Such election must be filed within thirty (30) days after the
date of this Agreement. A description of the tax consequences applicable to the
acquisition of the Purchased Shares and the form for making the Code Section
83(b) election are set forth in Exhibit II. OPTIONEE SHOULD CONSULT WITH HIS OR
HER TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES OF ACQUIRING THE PURCHASED
SHARES AND THE ADVANTAGES AND DISADVANTAGES OF FILING THE CODE SECTION 83(B)
ELECTION. OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE RESPONSIBILITY, AND
NOT THE CORPORATION'S, TO FILE A TIMELY ELECTION UNDER CODE SECTION 83(B), EVEN
IF OPTIONEE REQUESTS THE CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING
ON HIS OR HER BEHALF.
5.
<PAGE>
G. MARITAL DISSOLUTION OR LEGAL SEPARATION
---------------------------------------
In connection with the settlement of any community property or other
marital property rights upon dissolution of Optionee's marriage or the legal
separation of Optionee and Optionee's spouse, all Purchased Shares owned by
Optionee and Optionee's spouse as community property shall be awarded to
Optionee. In the event any Purchased Shares are awarded to Optionee's spouse by
court decree, order resolving the property rights of Optionee and Optionee's
spouse or otherwise or in the event of exercise of any portion of the Option
awarded to Optionee's spouse by such court decree or order, then Optionee and
Optionee's spouse shall automatically become subject to the Voting Agreement in
connection with such shares.
H. GENERAL PROVISIONS
------------------
1. ASSIGNMENT. The Corporation may assign the Repurchase Right
----------
and/or the First Refusal Right to any person or entity selected by the Board,
including (without limitation) one or more stockholders of the Corporation.
2. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement or
---------------------------------
in the Plan shall confer upon Optionee any right to continue in Service for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Parent or Subsidiary employing or
retaining Optionee) or of Optionee, which rights are hereby expressly reserved
by each, to terminate Optionee's Service at any time for any reason, with or
without cause.
3. NOTICES. Any notice required to be given under this Agreement
-------
shall be in writing and shall be deemed effective upon personal delivery or upon
deposit in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other address as such
party may designate by ten (10) days advance written notice under this paragraph
to all other parties to this Agreement.
4. NO WAIVER. The failure of the Corporation in any instance to
---------
exercise the Repurchase Right or the First Refusal Right shall not constitute a
waiver of any other repurchase rights and/or rights of first refusal that may
subsequently arise under the provisions of this Agreement or any other agreement
between the Corporation and Optionee. No waiver of any breach or condition of
this Agreement shall be deemed to be a waiver of any other or subsequent breach
or condition, whether of like or different nature.
5. CANCELLATION OF SHARES. If the Corporation shall make available,
----------------------
at the time and place and in the amount and form provided in this Agreement, the
consideration for the Purchased Shares to be repurchased in accordance with the
provisions of this Agreement, then from and after such time, the person from
whom such shares are to be repurchased shall no longer have any rights as a
holder of such shares (other than the right to receive payment of such
consideration in accordance with this Agreement). Such shares shall be deemed
purchased in accordance with the applicable provisions hereof, and the
Corporation shall be deemed the owner and holder of such shares, whether or not
the certificates therefor have been delivered as required by this Agreement.
6.
<PAGE>
6. OPTIONEE UNDERTAKING. Optionee hereby agrees to take whatever
--------------------
additional action and execute whatever additional documents the Corporation may
deem necessary or advisable in order to carry out or effect one or more of the
obligations or restrictions imposed on either Optionee or the Purchased Shares
pursuant to the provisions of this Agreement.
7. GOVERNING LAW. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Texas without resort to
that State's conflict-of-laws rules.
8. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
----------------------
inure to the benefit of, and be binding upon, the Corporation and its successors
and assigns and upon Optionee, Optionee's permitted assigns and the legal
representatives, heirs and legatees of Optionee's estate, whether or not any
such person shall have become a party to this Agreement and have agreed in
writing to join herein and be bound by the terms hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.
VIGNETTE CORPORATION
By:_______________________________________
Title: President & CEO
---------------
Address: 3410 Far West Plaza, Suite 300
------------------------------
Austin, Texas 78731
--------------------
__________________________________________
[OPTIONEE'S NAME], OPTIONEE
Address:__________________________________
__________________________________________
7.
<PAGE>
SPOUSAL ACKNOWLEDGMENT
The undersigned spouse of Optionee has read and hereby approves the
foregoing Stock Purchase Agreement. In consideration of the Corporation's
granting Optionee the right to acquire the Purchased Shares in accordance with
the terms of such Agreement, the undersigned hereby agrees to be irrevocably
bound by all the terms of such Agreement, including (without limitation) the
right of the Corporation (or its assigns) to purchase any Purchased Shares in
which Optionee is not vested and the right of Optionee to receive the Purchased
Shares in connection with the dissolution of Optionee's marriage or the legal
separation of Optionee and Optionee's spouse. The undersigned also agrees to be
bound by the Voting Agreement in connection with any Purchased Shares that are
awarded to the undersigned or acquired by the undersigned in connection with the
exercise of any portion of the Option assigned to the undersigned.
__________________________________________________
[NAME OF OPTIONEE SPOUSE], Optionee's Spouse
Address:__________________________________________
__________________________________________________
8.
<PAGE>
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED ______________________ hereby sell(s), assign(s)
and transfer(s) unto Vignette Corporation (the "Corporation"),
_______________________ (________) shares of the Common Stock of the Corporation
standing in his or her name on the books of the Corporation represented by
Certificate No. ___________________ herewith and do(es) hereby irrevocably
constitute and appoint _______________________________ Attorney to transfer the
said stock on the books of the Corporation with full power of substitution in
the premises.
Dated: ________________
Signature____________________________________
Print name___________________________________
INSTRUCTION: Please do not fill in any blanks other than the signature line.
Please sign exactly as you would like your name to appear on the issued stock
certificate. The purpose of this assignment is to enable the Corporation to
exercise the Repurchase Right without requiring additional signatures on the
part of Optionee.
<PAGE>
EXHIBIT II
FEDERAL INCOME TAX CONSEQUENCES AND
SECTION 83(B) TAX ELECTION
I. FEDERAL INCOME TAX CONSEQUENCES AND SECTION 83(B) ELECTION FOR
--------------------------------------------------------------
EXERCISE OF NON-STATUTORY OPTION. If the Purchased Shares are acquired pursuant
- --------------------------------
to the exercise of a Non-Statutory Option, as specified in the Grant Notice,
then under Code Section 83, the excess of the Fair Market Value of the Purchased
Shares on the date any forfeiture restrictions applicable to such shares lapse
over the Exercise Price paid for such shares will be reportable as ordinary
income on the lapse date. For this purpose, the term "forfeiture restrictions"
includes the right of the Corporation to repurchase the Purchased Shares
pursuant to the Repurchase Right. However, Optionee may elect under Code
Section 83(b) to be taxed at the time the Purchased Shares are acquired, rather
than when and as such Purchased Shares cease to be subject to such forfeiture
restrictions. Such election must be filed with the Internal Revenue Service
within thirty (30) days after the date of the Agreement. Even if the Fair
Market Value of the Purchased Shares on the date of the Agreement equals the
Exercise Price paid (and thus no tax is payable), the election must be made to
avoid adverse tax consequences in the future. The form for making this election
is attached as part of this exhibit. FAILURE TO MAKE THIS FILING WITHIN THE
APPLICABLE THIRTY (30)-DAY PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY
INCOME BY OPTIONEE AS THE FORFEITURE RESTRICTIONS LAPSE.
II. FEDERAL INCOME TAX CONSEQUENCES AND CONDITIONAL SECTION 83(B) ELECTION
----------------------------------------------------------------------
FOR EXERCISE OF INCENTIVE OPTION. If the Purchased Shares are acquired pursuant
- --------------------------------
to the exercise of an Incentive Option, as specified in the Grant Notice, then
the following tax principles shall be applicable to the Purchased Shares:
(i) For regular tax purposes, no taxable income will be
recognized at the time the Option is exercised.
(ii) The excess of (a) the Fair Market Value of the Purchased
Shares on the date the Option is exercised or (if later) on the date any
forfeiture restrictions applicable to the Purchased Shares lapse over (b)
the Exercise Price paid for the Purchased Shares will be includible in
Optionee's taxable income for alternative minimum tax purposes.
(iii) If Optionee makes a disqualifying disposition of the
Purchased Shares, then Optionee will recognize ordinary income in the year
of such disposition equal in amount to the excess of (a) the Fair Market
Value of the Purchased Shares on the date the Option is exercised or (if
later) on the date any forfeiture restrictions applicable to the Purchased
Shares lapse over (b) the Exercise Price paid for the Purchased Shares. Any
additional gain recognized upon the disqualifying disposition will be
either short-term or long-term capital gain depending upon the period for
which the Purchased Shares are held prior to the
II-1.
<PAGE>
disposition.
(iv) For purposes of the foregoing, the term "forfeiture restrictions"
will include the right of the Corporation to repurchase the Purchased
Shares pursuant to the Repurchase Right. The term "disqualifying
disposition" means any sale or other disposition /1/ of the Purchased
-
Shares within two (2) years after the Grant Date or within one (1) year
after the exercise date of the Option.
(v) In the absence of final Treasury Regulations relating to
Incentive Options, it is not certain whether Optionee may, in connection
with the exercise of the Option for any Purchased Shares at the time
subject to forfeiture restrictions, file a protective election under Code
Section 83(b) which would limit (a) Optionee's alternative minimum taxable
income upon exercise and (b) Optionee's ordinary income upon a
disqualifying disposition to the excess of the Fair Market Value of the
Purchased Shares on the date the Option is exercised over the Exercise
Price paid for the Purchased Shares. Accordingly, such election if properly
filed will only be allowed to the extent the final Treasury Regulations
permit such a protective election. Page 2 of the attached form for making
the election should be filed with any election made in connection with the
exercise of an Incentive Option.
__________________________
/1/ Generally, a disposition of shares purchased under an Incentive Option
-
includes any transfer of legal title, including a transfer by sale, exchange or
gift, but does not include a transfer to the Optionee's spouse, a transfer into
joint ownership with right of survivorship if Optionee remains one of the joint
owners, a pledge, a transfer by bequest or inheritance or certain tax free
exchanges permitted under the Code.
II-2.
<PAGE>
SECTION 83(B) ELECTION
This statement is being made under Section 83(b) of the Internal
Revenue Code, pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is
____________ shares of the common stock of Vignette Corporation
(3) The property was issued on _____________, 199__.
(4) The taxable year in which the election is being made is the calendar year
199__.
(5) The property is subject to a repurchase right pursuant to which the issuer
has the right to acquire the property at the original purchase price if for
any reason taxpayer's employment with the issuer is terminated. The
issuer's repurchase right lapses in a series of installments over a forty-
eight (48) month period ending on _____________, 20__.
(6) The fair market value at the time of transfer (determined without regard to
any restriction other than a restriction which by its terms will never
lapse) is $_____________per share.
(7) The amount paid for such property is $____________ per share.
(8) A copy of this statement was furnished to Vignette Corporation for whom
taxpayer rendered the services underlying the transfer of property.
(9) This statement is executed on _______________________, 199__.
_________________________ _________________________________________________
Spouse (if any) Taxpayer
This election must be filed with the Internal Revenue Service Center with which
taxpayer files his or her Federal income tax returns and must be made within
thirty (30) days after the execution date of the Stock Purchase Agreement. This
filing should be made by registered or certified mail, return receipt requested.
Optionee must retain two (2) copies of the completed form for filing with his or
her Federal and state tax returns for the current tax year and an additional
copy for his or her records.
<PAGE>
The property described in the above Section 83(b) election is comprised of
shares of common stock acquired pursuant to the exercise of an incentive stock
option under Section 422 of the Internal Revenue Code (the "Code").
Accordingly, it is the intent of the Taxpayer to utilize this election to
achieve the following tax results:
1. The purpose of this election is to have the alternative minimum
taxable income attributable to the purchased shares measured by the amount by
which the fair market value of such shares at the time of their transfer to the
Taxpayer exceeds the purchase price paid for the shares. In the absence of this
election, such alternative minimum taxable income would be measured by the
spread between the fair market value of the purchased shares and the purchase
price which exists on the various lapse dates in effect for the forfeiture
restrictions applicable to such shares. The election is to be effective to the
full extent permitted under the Code.
2. Section 421(a)(1) of the Code expressly excludes from income any
excess of the fair market value of the purchased shares over the amount paid for
such shares. Accordingly, this election is also intended to be effective in the
event there is a "disqualifying disposition" of the shares, within the meaning
of Section 421(b) of the Code, which would otherwise render the provisions of
Section 83(a) of the Code applicable at that time. Consequently, the Taxpayer
hereby elects to have the amount of disqualifying disposition income measured by
the excess of the fair market value of the purchased shares on the date of
transfer to the Taxpayer over the amount paid for such shares. Since Section
421(a) presently applies to the shares which are the subject of this Section
83(b) election, no taxable income is actually recognized for regular tax
purposes at this time, and no income taxes are payable, by the Taxpayer as a
result of this election.
THIS PAGE 2 IS TO BE ATTACHED TO ANY SECTION 83(B) ELECTION FILED IN CONNECTION
WITH THE EXERCISE OF AN INCENTIVE STOCK OPTION UNDER THE FEDERAL TAX LAWS.
2.
<PAGE>
EXHIBIT III
VOTING AGREEMENT
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Purchase Agreement.
---------
B. BOARD shall mean the Corporation's Board of Directors.
-----
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
----
D. COMMON STOCK shall mean the Corporation's common stock.
------------
E. CORPORATE TRANSACTION shall mean either of the following stockholder-
---------------------
approved transactions:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of
the Corporation.
F. CORPORATION shall mean Vignette Corporation, a Delaware corporation.
-----------
G. DISPOSITION NOTICE shall have the meaning assigned to such term in
------------------
Paragraph E.2.
H. EXERCISE NOTICE shall have the meaning assigned to such term in
---------------
Paragraph E.3.
I. EXERCISE PRICE shall have the meaning assigned to such term in
--------------
Paragraph A.1.
J. FAIR MARKET VALUE of a share of Common Stock on any relevant date
-----------------
prior to the initial public offering of the Common Stock shall be determined by
the Plan Administrator after taking into account such factors as it shall deem
appropriate.
K. FIRST REFUSAL RIGHT shall mean the right granted to the Corporation in
-------------------
accordance with Article E.
L. GRANT DATE shall have the meaning assigned to such term in Paragraph
----------
A.1.
M. GRANT NOTICE shall mean the Notice of Grant of Stock Option pursuant
------------
to which Optionee has been informed of the basic terms of the Option.
A-1.
<PAGE>
N. INCENTIVE OPTION shall mean an option which satisfies the requirements
----------------
of Code Section 422.
O. INVOLUNTARY TERMINATION shall mean the termination of Optionee's
-----------------------
Service which occurs by reason of:
(i) Optionee's involuntary dismissal or discharge by the Corporation
for reasons other than Misconduct, or
(ii) Optionee's voluntary resignation following (A) a change in
Optionee's position with the Corporation which materially reduces
Optionee's level of responsibility, (B) a reduction in Optionee's level of
compensation (including base salary, fringe benefits and participation in
corporate-performance based bonus or incentive programs) by more than
fifteen percent (15%) or (C) a relocation of Optionee's place of employment
by more than fifty (50) miles, provided and only if such change, reduction
or relocation is effected by the Corporation without Optionee's consent.
P. MARKET STAND-OFF shall mean the market stand-off restriction specified
----------------
in Paragraph C.3.
Q. MISCONDUCT shall mean the commission of any act of fraud, embezzlement
----------
or dishonesty by Optionee, any unauthorized use or disclosure by Optionee of
confidential information or trade secrets of the Corporation (or any Parent or
Subsidiary), or any other intentional misconduct by Optionee adversely affecting
the business or affairs of the Corporation (or any Parent or Subsidiary) in a
material manner. The foregoing definition shall not be deemed to be inclusive
of all the acts or omissions which the Corporation (or any Parent or Subsidiary)
may consider as grounds for the dismissal or discharge of Optionee or any other
person in the Service of the Corporation (or any Parent or Subsidiary).
R. 1933 ACT shall mean the Securities Act of 1933, as amended.
--------
S. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
--------------------
requirements of Code Section 422.
T. OPTION shall have the meaning assigned to such term in Paragraph A.1.
------
U. OPTION AGREEMENT shall mean all agreements and other documents
----------------
evidencing the Option.
V. OPTIONEE shall mean the person to whom the Option is granted under the
--------
Plan.
W. OWNER shall mean Optionee and all subsequent holders of the Purchased
-----
Shares who derive their chain of ownership through a Permitted Transfer from
Optionee.
A-2.
<PAGE>
X. PARENT shall mean any corporation (other than the Corporation) in an
------
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
Y. PERMITTED TRANSFER shall mean (i) a gratuitous transfer of the
------------------
Purchased Shares, provided and only if Optionee obtains the Corporation's prior
written consent to such transfer, (ii) a transfer of title to the Purchased
Shares effected pursuant to Optionee's will or the laws of intestate succession
following Optionee's death or (iii) a transfer to the Corporation in pledge as
security for any purchase-money indebtedness incurred by Optionee in connection
with the acquisition of the Purchased Shares.
Z. PLAN shall mean the Corporation's 1995 Stock Option/Stock Issuance
----
Plan.
AA. PLAN ADMINISTRATOR shall mean either the Board or a committee of Board
------------------
members, to the extent the committee is at the time responsible for
administration of the Plan.
BB. PRIOR PURCHASE AGREEMENT shall have the meaning assigned to such term
------------------------
in Paragraph D.4.
CC. PURCHASED SHARES shall have the meaning assigned to such term in
----------------
Paragraph A.1.
DD. RECAPITALIZATION shall mean any stock split, stock dividend,
----------------
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration.
EE. REORGANIZATION shall mean any of the following transactions:
--------------
(i) a merger or consolidation in which the Corporation is not the
surviving entity,
(ii) a sale, transfer or other disposition of all or substantially
all of the Corporation's assets,
(iii) a reverse merger in which the Corporation is the surviving
entity but in which the Corporation's outstanding voting securities are
transferred in whole or in part to a person or persons different from the
persons holding those securities immediately prior to the merger, or
(iv) any transaction effected primarily to change the state in which
the Corporation is incorporated or to create a holding company structure.
A-3.
<PAGE>
FF. REPURCHASE RIGHT shall mean the right granted to the Corporation in
----------------
accordance with Article D.
GG. SEC shall mean the Securities and Exchange Commission.
---
HH. SERVICE shall mean Optionee's provision of services to the Corporation
-------
(or any Parent or Subsidiary) in the capacity of an employee, subject to the
control and direction of the employer entity as to both the work to be performed
and the manner and method of performance, a non-employee member of the board of
directors or a consultant or independent advisor.
II. SUBSIDIARY shall mean any corporation (other than the Corporation) in
----------
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
JJ. TARGET SHARES shall have the meaning assigned to such term in
-------------
Paragraph E.2.
KK. VESTING SCHEDULE shall mean the vesting schedule specified in the
----------------
Grant Notice, subject to the acceleration provisions upon Optionee's death while
in Service or an Involuntary Termination following a Corporate Transaction.
LL. VOTING AGREEMENT shall mean the Voting Agreement in the form attached
----------------
hereto as Exhibit III.
MM. UNVESTED SHARES shall have the meaning assigned to such term in
---------------
Paragraph D.1.
A-4.
<PAGE>
EXHIBIT 10.3
Vignette Corporation
1998 Equity Incentive Plan
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1. INTRODUCTION................................................ 1
ARTICLE 2. ADMINISTRATION.............................................. 1
2.1 Committee Composition......................................... 1
2.2 Committee Responsibilities.................................... 1
2.3 Committee for Non-Officer Grants.............................. 1
ARTICLE 3. SHARES AVAILABLE FOR GRANTS................................. 2
3.1 Basic Limitation.............................................. 2
3.2 Annual Increase in Shares..................................... 2
3.3 Additional Shares............................................. 2
3.4 Dividend Equivalents.......................................... 2
ARTICLE 4. ELIGIBILITY................................................. 2
4.1 Incentive Stock Options....................................... 2
4.2 Other Grants.................................................. 3
ARTICLE 5. OPTIONS..................................................... 3
5.1 Stock Option Agreement........................................ 3
5.2 Number of Shares.............................................. 3
5.3 Exercise Price................................................ 3
5.4 Exercisability and Term....................................... 3
5.6 Modification or Assumption of Options......................... 3
5.7 Buyout Provisions............................................. 4
ARTICLE 6. PAYMENT FOR OPTION SHARES................................... 4
6.1 General Rule.................................................. 4
6.2 Surrender of Common Stock..................................... 4
6.3 Exercise/Sale................................................. 4
6.4 Exercise/Pledge............................................... 4
6.5 Promissory Note............................................... 5
6.6 Other Forms of Payment........................................ 5
ARTICLE 7. STOCK APPRECIATION RIGHTS................................... 5
7.1 SAR Agreement................................................. 5
7.2 Number of Shares.............................................. 5
7.3 Exercise Price................................................ 5
7.4 Exercisability and Term....................................... 5
7.5 Exercise of SARs.............................................. 5
7.6 Modification or Assumption of SARs............................ 6
i
<PAGE>
ARTICLE 8. RESTRICTED SHARES........................................... 6
8.1 Restricted Stock Agreement.................................... 6
8.2 Payment for Awards............................................ 6
8.3 Vesting Conditions............................................ 6
8.4 Voting and Dividend Rights.................................... 6
ARTICLE 9. STOCK UNITS................................................. 7
9.1 Stock Unit Agreement.......................................... 7
9.2 Payment for Awards............................................ 7
9.3 Vesting Conditions............................................ 7
9.4 Voting and Dividend Rights.................................... 7
9.5 Form and Time of Settlement of Stock Units.................... 7
9.6 Death of Recipient............................................ 7
9.7 Creditors' Rights............................................. 8
ARTICLE 10. CHANGE IN CONTROL.......................................... 8
10.1 Effect of Change in Control.................................. 8
10.2 Involuntary Termination...................................... 8
ARTICLE 11. PROTECTION AGAINST DILUTION................................ 8
11.1 Adjustments.................................................. 8
11.2 Dissolution or Liquidation................................... 9
11.3 Reorganizations.............................................. 9
ARTICLE 12. DEFERRAL OF AWARDS......................................... 9
ARTICLE 13. AWARDS UNDER OTHER PLANS................................... 10
ARTICLE 14. PAYMENT OF DIRECTOR'S FEES IN SECURITIES................... 10
14.1 Effective Date............................................... 10
14.2 Elections to Receive NSOs, Restricted Shares or Stock Units.. 10
14.3 Number and Terms of NSOs, Restricted Shares or Stock Units... 10
ARTICLE 15. LIMITATION ON RIGHTS....................................... 10
15.1 Retention Rights............................................. 10
15.2 Stockholders' Rights......................................... 11
15.3 Regulatory Requirements...................................... 11
ARTICLE 16. WITHHOLDING TAXES.......................................... 11
16.1 General...................................................... 11
16.2 Share Withholding............................................ 11
ARTICLE 17. FUTURE OF THE PLAN......................................... 11
17.1 Term of the Plan............................................. 11
17.2 Amendment or Termination..................................... 11
ii
<PAGE>
ARTICLE 18. LIMITATION ON PAYMENTS..................................... 12
18.1 Scope of Limitation.......................................... 12
18.2 Basic Rule................................................... 12
18.3 Reduction of Payments........................................ 12
18.4 Overpayments and Underpayments............................... 13
18.5 Related Corporations......................................... 13
ARTICLE 19. DEFINITIONS................................................ 13
iii
<PAGE>
Vignette Corporation
1998 Equity Incentive Plan
ARTICLE 1. INTRODUCTION.
The Plan was adopted by the Board to be effective as of the date of
the IPO. The purpose of the Plan is to promote the long-term success of the
Corporation and the creation of stockholder value by (a) encouraging Employees,
Outside Directors and Consultants to focus on critical long-range objectives,
(b) encouraging the attraction and retention of Employees, Outside Directors and
Consultants with exceptional qualifications and (c) linking Employees, Outside
Directors and Consultants directly to stockholder interests through increased
stock ownership. The Plan seeks to achieve this purpose by providing for Awards
in the form of Restricted Shares, Stock Units, Options (which may constitute
incentive stock options or nonstatutory stock options) or stock appreciation
rights.
The Plan shall be governed by, and construed in accordance with, the
laws of the State of Delaware (except their choice-of-law provisions).
ARTICLE 2. ADMINISTRATION.
2.1 Committee Composition. The Plan shall be administered by the
Committee. The Committee shall consist exclusively of two or more directors of
the Corporation, who shall be appointed by the Board. In addition, the
composition of the Committee shall satisfy:
(a) Such requirements as the Securities and Exchange Commission may
establish for administrators acting under plans intended to qualify for
exemption under Rule 16b-3 (or its successor) under the Exchange Act; and
(b) Such requirements as the Internal Revenue Service may establish
for outside directors acting under plans intended to qualify for exemption
under Section 162(m)(4)(C) of the Code.
2.2 Committee Responsibilities. The Committee shall (a) select the
Employees, Outside Directors and Consultants who are to receive Awards under the
Plan, (b) determine the type, number, vesting requirements and other features
and conditions of such Awards, (c) interpret the Plan and (d) make all other
decisions relating to the operation of the Plan. The Committee may adopt such
rules or guidelines as it deems appropriate to implement the Plan. The
Committee's determinations under the Plan shall be final and binding on all
persons.
2.3 Committee for Non-Officer Grants. The Board may also appoint a
secondary committee of the Board, which shall be composed of one or more
directors of the Corporation who need not satisfy the requirements of Section
2.1. Such secondary committee may administer the Plan with respect to Employees
and Consultants who are not considered officers or directors
<PAGE>
of the Corporation under Section 16 of the Exchange Act, may grant Awards under
the Plan to such Employees and Consultants and may determine all features and
conditions of such Awards. Within the limitations of this Section 2.3, any
reference in the Plan to the Committee shall include such secondary committee.
ARTICLE 3. SHARES AVAILABLE FOR GRANTS.
3.1 Basic Limitation. Shares of Common Stock issued pursuant to the Plan
may be authorized but unissued shares or treasury shares. The aggregate number
of Options, SARs, Stock Units and Restricted Shares awarded under the Plan shall
not exceed (a) [_________], plus shares remaining available for issuance under
the Predecessor Plan, plus (b) the additional shares of Common Stock described
in Sections 3.2 and 3.3. The limitation of this Section 3.1 shall be subject to
adjustment pursuant to Article 11.
3.2 Annual Increase in Shares. As of January 1 of each year, commencing
with the year 1999 and ending with the year 2002, the aggregate number of
Options, SARs, Stock Units and Restricted Shares that may be awarded under the
Plan shall automatically increase by a number equal to the lesser of (a) 5% of
the total number of shares of Common Stock then outstanding or (b) 1,000,000
shares.
3.3 Additional Shares. If Restricted Shares or shares of Common Stock
issued upon the exercise of Options are forfeited (including any options
incorporated from the Predecessor Plan), then such shares of Common Stock shall
again become available for Awards under the Plan. If Stock Units, Options or
SARs are forfeited or terminate for any other reason before being exercised,
then the corresponding shares of Common Stock shall again become available for
Awards under the Plan. If Stock Units are settled, then only the number of
shares of Common Stock (if any) actually issued in settlement of such Stock
Units shall reduce the number available under Section 3.1 and the balance shall
again become available for Awards under the Plan. If SARs are exercised, then
only the number of shares of Common Stock (if any) actually issued in settlement
of such SARs shall reduce the number available under Section 3.1 and the balance
shall again become available for Awards under the Plan. The foregoing
notwithstanding, the aggregate number of shares of Common Stock that may be
issued under the Plan upon the exercise of ISOs shall not be increased when
Restricted Shares or other shares of Common Stock are forfeited.
3.4 Dividend Equivalents. Any dividend equivalents paid or credited under
the Plan shall not be applied against the number of Restricted Shares, Stock
Units, Options or SARs available for Awards, whether or not such dividend
equivalents are converted into Stock Units.
ARTICLE 4. ELIGIBILITY.
4.1 Incentive Stock Options. Only Employees who are common-law employees
of the Corporation, a Parent or a Subsidiary shall be eligible for the grant of
ISOs. In addition, an Employee who owns more than 10% of the total combined
voting power of all classes of outstanding stock of the Corporation or any of
its Parents or Subsidiaries shall not be eligible for
2
<PAGE>
the grant of an ISO unless the requirements set forth in Section 422(c)(6) of
the Code are satisfied.
4.2 Other Grants. Only Employees, Outside Directors and Consultants shall
be eligible for the grant of Restricted Shares, Stock Units, NSOs or SARs.
ARTICLE 5. OPTIONS.
5.1 Stock Option Agreement. Each grant of an Option under the Plan shall
be evidenced by a Stock Option Agreement between the Optionee and the
Corporation. Such Option shall be subject to all applicable terms of the Plan
and may be subject to any other terms that are not inconsistent with the Plan.
The Stock Option Agreement shall specify whether the Option is an ISO or an NSO.
The provisions of the various Stock Option Agreements entered into under the
Plan need not be identical. Options may be granted in consideration of a
reduction in the Optionee's other compensation. A Stock Option Agreement may
provide that a new Option will be granted automatically to the Optionee when he
or she exercises a prior Option and pays the Exercise Price in the form
described in Section 6.2.
5.2 Number of Shares. Each Stock Option Agreement shall specify the
number of shares of Common Stock subject to the Option and shall provide for the
adjustment of such number in accordance with Article 11. Options granted to any
Optionee in a single fiscal year of the Corporation shall not cover more than
1,000,000 shares [post-split] of Common Stock, except that Options granted to a
new Employee in the fiscal year of the Corporation in which his or her service
as an Employee first commences shall not cover more than 1,250,000 shares [post-
split] of Common Stock. The limitations set forth in the preceding sentence
shall be subject to adjustment in accordance with Article 11.
5.3 Exercise Price. Each Stock Option Agreement shall specify the
Exercise Price; provided that the Exercise Price under an ISO shall in no event
be less than 100% of the Fair Market Value of a share of Common Stock on the
date of grant and the Exercise Price under an NSO shall in no event be less than
85% of the Fair Market Value of a share of Common Stock on the date of grant.
In the case of an NSO, a Stock Option Agreement may specify an Exercise Price
that varies in accordance with a predetermined formula while the NSO is
outstanding.
5.4 Exercisability and Term. Each Stock Option Agreement shall specify
the date or event when all or any installment of the Option is to become
exercisable. The Stock Option Agreement shall also specify the term of the
Option; provided that the term of an ISO shall in no event exceed 10 years from
the date of grant. A Stock Option Agreement may provide for accelerated
exercisability in the event of the Optionee's death, disability or retirement or
other events and may provide for expiration prior to the end of its term in the
event of the termination of the Optionee's service. Options may be awarded in
combination with SARs, and such an Award may provide that the Options will not
be exercisable unless the related SARs are forfeited.
5.5 Modification or Assumption of Options. Within the limitations of the
Plan, the Committee may modify, extend or assume outstanding options or may
accept the cancellation of
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outstanding options (whether granted by the Corporation or by another issuer) in
return for the grant of new options for the same or a different number of shares
and at the same or a different exercise price. The foregoing notwithstanding, no
modification of an Option shall, without the consent of the Optionee, alter or
impair his or her rights or obligations under such Option.
5.6 Buyout Provisions. The Committee may at any time (a) offer to buy out
for a payment in cash or cash equivalents an Option previously granted or (b)
authorize an Optionee to elect to cash out an Option previously granted, in
either case at such time and based upon such terms and conditions as the
Committee shall establish.
ARTICLE 6. PAYMENT FOR OPTION SHARES.
6.1 General Rule. The entire Exercise Price of shares of Common Stock
issued upon exercise of Options shall be payable in cash or cash equivalents at
the time when such shares of Common Stock are purchased, except as follows:
(a) In the case of an ISO granted under the Plan, payment shall be
made only pursuant to the express provisions of the applicable Stock Option
Agreement. The Stock Option Agreement may specify that payment may be made
in any form(s) described in this Article 6.
(b) In the case of an NSO, the Committee may at any time accept
payment in any form(s) described in this Article 6.
6.2 Surrender of Common Stock. To the extent that this Section 6.2 is
applicable, all or any part of the Exercise Price may be paid by surrendering,
or attesting to the ownership of, shares of Common Stock that are already owned
by the Optionee. Such shares of Common Stock shall be valued at their Fair
Market Value on the date when the new shares of Common Stock are purchased under
the Plan. The Optionee shall not surrender, or attest to the ownership of,
shares of Common Stock in payment of the Exercise Price if such action would
cause the Corporation to recognize compensation expense (or additional
compensation expense) with respect to the Option for financial reporting
purposes.
6.3 Exercise/Sale. To the extent that this Section 6.3 is applicable, all
or any part of the Exercise Price and any withholding taxes may be paid by
delivering (on a form prescribed by the Corporation) an irrevocable direction to
a securities broker approved by the Corporation to sell all or part of the
shares of Common Stock being purchased under the Plan and to deliver all or part
of the sales proceeds to the Corporation.
6.4 Exercise/Pledge. To the extent that this Section 6.4 is applicable,
all or any part of the Exercise Price and any withholding taxes may be paid by
delivering (on a form prescribed by the Corporation) an irrevocable direction to
pledge all or part of the shares of Common Stock being purchased under the Plan
to a securities broker or lender approved by the Corporation, as security for a
loan, and to deliver all or part of the loan proceeds to the Corporation.
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6.5 Promissory Note. To the extent that this Section 6.5 is applicable,
all or any part of the Exercise Price and any withholding taxes may be paid by
delivering (on a form prescribed by the Corporation) a full-recourse promissory
note. However, the par value of the shares of Common Stock being purchased
under the Plan, if newly issued, shall be paid in cash or cash equivalents.
6.6 Other Forms of Payment. To the extent that this Section 6.6 is
applicable, all or any part of the Exercise Price and any withholding taxes may
be paid in any other form that is consistent with applicable laws, regulations
and rules.
ARTICLE 7. STOCK APPRECIATION RIGHTS.
7.1 SAR Agreement. Each grant of a SAR under the Plan shall be evidenced
by an SAR Agreement between the Optionee and the Corporation. Such SAR shall be
subject to all applicable terms of the Plan and may be subject to any other
terms that are not inconsistent with the Plan. The provisions of the various
SAR Agreements entered into under the Plan need not be identical. SARs may be
granted in consideration of a reduction in the Optionee's other compensation.
7.2 Number of Shares. Each SAR Agreement shall specify the number of
shares of Common Stock to which the SAR pertains and shall provide for the
adjustment of such number in accordance with Article 11. SARs granted to any
Optionee in a single calendar year shall in no event pertain to more than
1,000,000 shares [post-split] of Common Stock, except that SARs granted to a new
Employee in the fiscal year of the Corporation in which his or her service as an
Employee first commences shall not pertain to more than 1,250,000 shares [post-
split] of Common Stock. The limitations set forth in the preceding sentence
shall be subject to adjustment in accordance with Article 11.
7.3 Exercise Price. Each SAR Agreement shall specify the Exercise Price.
A SAR Agreement may specify an Exercise Price that varies in accordance with a
predetermined formula while the SAR is outstanding.
7.4 Exercisability and Term. Each SAR Agreement shall specify the date
when all or any installment of the SAR is to become exercisable. The SAR
Agreement shall also specify the term of the SAR. An SAR Agreement may provide
for accelerated exercisability in the event of the Optionee's death, disability
or retirement or other events and may provide for expiration prior to the end of
its term in the event of the termination of the Optionee's service. SARs may be
awarded in combination with Options, and such an Award may provide that the SARs
will not be exercisable unless the related Options are forfeited. An SAR may be
included in an ISO only at the time of grant but may be included in an NSO at
the time of grant or thereafter. A SAR granted under the Plan may provide that
it will be exercisable only in the event of a Change in Control.
7.5 Exercise of SARs. Upon exercise of a SAR, the Optionee (or any person
having the right to exercise the SAR after his or her death) shall receive from
the Corporation (a) shares of Common Stock, (b) cash or (c) a combination of
shares of Common Stock and cash, as the
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Committee shall determine. The amount of cash and/or the Fair Market Value of
shares of Common Stock received upon exercise of SARs shall, in the aggregate,
be equal to the amount by which the Fair Market Value (on the date of surrender)
of the shares of Common Stock subject to the SARs exceeds the Exercise Price.
If, on the date when an SAR expires, the Exercise Price under such SAR is less
than the Fair Market Value on such date but any portion of such SAR has not been
exercised or surrendered, then such SAR shall automatically be deemed to be
exercised as of such date with respect to such portion.
7.6 Modification or Assumption of SARs. Within the limitations of the
Plan, the Committee may modify, extend or assume outstanding SARs or may accept
the cancellation of outstanding SARs (whether granted by the Corporation or by
another issuer) in return for the grant of new SARs for the same or a different
number of shares and at the same or a different exercise price. The foregoing
notwithstanding, no modification of an SAR shall, without the consent of the
Optionee, alter or impair his or her rights or obligations under such SAR.
ARTICLE 8. RESTRICTED SHARES.
8.1 Restricted Stock Agreement. Each grant of Restricted Shares under the
Plan shall be evidenced by a Restricted Stock Agreement between the recipient
and the Corporation. Such Restricted Shares shall be subject to all applicable
terms of the Plan and may be subject to any other terms that are not
inconsistent with the Plan. The provisions of the various Restricted Stock
Agreements entered into under the Plan need not be identical.
8.2 Payment for Awards. Subject to the following sentence, Restricted
Shares may be sold or awarded under the Plan for such consideration as the
Committee may determine, including (without limitation) cash, cash equivalents,
full-recourse promissory notes, past services and future services. To the
extent that an Award consists of newly issued Restricted Shares, the Award
recipient shall furnish consideration with a value not less than the par value
of such Restricted Shares in the form of cash, cash equivalents or past services
rendered to the Corporation (or a Parent or Subsidiary), as the Committee may
determine.
8.3 Vesting Conditions. Each award of Restricted Shares may or may not be
subject to vesting. Vesting shall occur, in full or in installments, upon
satisfaction of the conditions specified in the Restricted Stock Agreement. A
Restricted Stock Agreement may provide for accelerated vesting in the event of
the Participant's death, disability or retirement or other events.
8.4 Voting and Dividend Rights. The holders of Restricted Shares awarded
under the Plan shall have the same voting, dividend and other rights as the
Corporation's other stockholders. A Restricted Stock Agreement, however, may
require that the holders of Restricted Shares invest any cash dividends received
in additional Restricted Shares. Such additional Restricted Shares shall be
subject to the same conditions and restrictions as the Award with respect to
which the dividends were paid.
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ARTICLE 9. STOCK UNITS.
9.1 Stock Unit Agreement. Each grant of Stock Units under the Plan shall
be evidenced by a Stock Unit Agreement between the recipient and the
Corporation. Such Stock Units shall be subject to all applicable terms of the
Plan and may be subject to any other terms that are not inconsistent with the
Plan. The provisions of the various Stock Unit Agreements entered into under
the Plan need not be identical. Stock Units may be granted in consideration of
a reduction in the recipient's other compensation.
9.2 Payment for Awards. To the extent that an Award is granted in the
form of Stock Units, no cash consideration shall be required of the Award
recipients.
9.3 Vesting Conditions. Each Award of Stock Units may or may not be
subject to vesting. Vesting shall occur, in full or in installments, upon
satisfaction of the conditions specified in the Stock Unit Agreement. A Stock
Unit Agreement may provide for accelerated vesting in the event of the
Participant's death, disability or retirement or other events.
9.4 Voting and Dividend Rights. The holders of Stock Units shall have no
voting rights. Prior to settlement or forfeiture, any Stock Unit awarded under
the Plan may, at the Committee's discretion, carry with it a right to dividend
equivalents. Such right entitles the holder to be credited with an amount equal
to all cash dividends paid on one share of Common Stock while the Stock Unit is
outstanding. Dividend equivalents may be converted into additional Stock Units.
Settlement of dividend equivalents may be made in the form of cash, in the form
of shares of Common Stock, or in a combination of both. Prior to distribution,
any dividend equivalents which are not paid shall be subject to the same
conditions and restrictions as the Stock Units to which they attach.
9.5 Form and Time of Settlement of Stock Units. Settlement of vested
Stock Units may be made in the form of (a) cash, (b) shares of Common Stock or
(c) any combination of both, as determined by the Committee. The actual number
of Stock Units eligible for settlement may be larger or smaller than the number
included in the original Award, based on predetermined performance factors.
Methods of converting Stock Units into cash may include (without limitation) a
method based on the average Fair Market Value of shares of Common Stock over a
series of trading days. Vested Stock Units may be settled in a lump sum or in
installments. The distribution may occur or commence when all vesting
conditions applicable to the Stock Units have been satisfied or have lapsed, or
it may be deferred to any later date. The amount of a deferred distribution may
be increased by an interest factor or by dividend equivalents. Until an Award
of Stock Units is settled, the number of such Stock Units shall be subject to
adjustment pursuant to Article 11.
9.6 Death of Recipient. Any Stock Unit Award that becomes payable after
the recipient's death shall be distributed to the recipient's beneficiary or
beneficiaries. Each recipient of a Stock Unit Award under the Plan shall
designate one or more beneficiaries for this purpose by filing the prescribed
form with the Corporation. A beneficiary designation may be changed by filing
the prescribed form with the Corporation at any time before the Award
recipient's death. If no beneficiary was designated or if no designated
beneficiary survives the
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Award recipient, then any Stock Unit Award that becomes payable after the
recipient's death shall be distributed to the recipient's estate.
9.7 Creditors' Rights. A holder of Stock Units shall have no rights other
than those of a general creditor of the Corporation. Stock Units represent an
unfunded and unsecured obligation of the Corporation, subject to the terms and
conditions of the applicable Stock Unit Agreement.
ARTICLE 10. CHANGE IN CONTROL
10.1 Effect of Change in Control. In the event of any Change in Control,
each outstanding Award shall automatically accelerate so that each such Award
shall, immediately prior to the effective date of the Change in Control, become
fully exercisable for all of the shares of Common Stock at the time subject to
such Award and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. However, an outstanding Award shall not so accelerate
if and to the extent such Award is, in connection with the Change in Control,
either to be assumed by the successor corporation (or parent thereof) or to be
replaced with a comparable Award for shares of the capital stock of the
successor corporation (or parent thereof). The determination of Award
comparability shall be made by the Plan Administrator, and its determination
shall be final, binding and conclusive.
10.2 Involuntary Termination. In addition, in the event that the Award is
assumed by the successor corporation (or parent thereof) and the Participant
experiences an Involuntary Termination within eighteen months following a Change
in Control, each outstanding Award shall automatically accelerate so that each
such Award shall, immediately prior to the effective date of the Involuntary
Termination, become fully exercisable for all of the shares of Common Stock at
the time subject to such Award and may be exercised for any or all of those
shares as fully-vested shares of Common Stock.
ARTICLE 11. PROTECTION AGAINST DILUTION.
11.1 Adjustments. In the event of a subdivision of the outstanding shares
of Common Stock, a declaration of a dividend payable in shares of Common Stock,
a declaration of a dividend payable in a form other than shares of Common Stock
in an amount that has a material effect on the price of shares of Common Stock,
a combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise) into a lesser number of shares of Common Stock, a
recapitalization, a spin-off or a similar occurrence, the Committee shall make
such adjustments as it, in its sole discretion, deems appropriate in one or more
of:
(a) The number of Options, SARs, Restricted Shares and Stock Units
available for future Awards under Article 3;
(b) The limitations set forth in Sections 5.2 and 8.2;
(c) The number of shares of Common Stock covered by each outstanding
Option and SAR;
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(d) The Exercise Price under each outstanding Option and SAR; or
(e) The number of Stock Units included in any prior Award which has
not yet been settled.
Except as provided in this Article 11, a Participant shall have no rights by
reason of any issue by the Corporation of stock of any class or securities
convertible into stock of any class, any subdivision or consolidation of shares
of stock of any class, the payment of any stock dividend or any other increase
or decrease in the number of shares of stock of any class.
11.2 Dissolution or Liquidation. To the extent not previously exercised or
settled, Options, SARs and Stock Units shall terminate immediately prior to the
dissolution or liquidation of the Corporation.
11.3 Reorganizations. In the event that the Corporation is a party to a
merger or other reorganization, outstanding Awards shall be subject to the
agreement of merger or reorganization. Such agreement shall provide for (a) the
continuation of the outstanding Awards by the Corporation, if the Corporation is
a surviving corporation, (b) the assumption of the outstanding Awards by the
surviving corporation or its parent or subsidiary, (c) the substitution by the
surviving corporation or its parent or subsidiary of its own awards for the
outstanding Awards, (d) full exercisability or vesting and accelerated
expiration of the outstanding Awards or (e) settlement of the full value of the
outstanding Awards in cash or cash equivalents followed by cancellation of such
Awards.
ARTICLE 12. DEFERRAL OF AWARDS.
The Committee (in its sole discretion) may permit or require a
Participant to:
(a) Have cash that otherwise would be paid to such Participant as a
result of the exercise of an SAR or the settlement of Stock Units credited
to a deferred compensation account established for such Participant by the
Committee as an entry on the Corporation's books;
(b) Have shares of Common Stock that otherwise would be delivered to
such Participant as a result of the exercise of an Option or SAR converted
into an equal number of Stock Units; or
(c) Have shares of Common Stock that otherwise would be delivered to
such Participant as a result of the exercise of an Option or SAR or the
settlement of Stock Units converted into amounts credited to a deferred
compensation account established for such Participant by the Committee as
an entry on the Corporation's books. Such amounts shall be determined by
reference to the Fair Market Value of such shares of Common Stock as of the
date when they otherwise would have been delivered to such Participant.
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A deferred compensation account established under this Article 12 may be
credited with interest or other forms of investment return, as determined by the
Committee. A Participant for whom such an account is established shall have no
rights other than those of a general creditor of the Corporation. Such an
account shall represent an unfunded and unsecured obligation of the Corporation
and shall be subject to the terms and conditions of the applicable agreement
between such Participant and the Corporation. If the deferral or conversion of
Awards is permitted or required, the Committee (in its sole discretion) may
establish rules, procedures and forms pertaining to such Awards, including
(without limitation) the settlement of deferred compensation accounts
established under this Article 12.
ARTICLE 13. AWARDS UNDER OTHER PLANS.
The Corporation may grant awards under other plans or programs. Such
awards may be settled in the form of shares of Common Stock issued under this
Plan. Such shares of Common Stock shall be treated for all purposes under the
Plan like shares of Common Stock issued in settlement of Stock Units and shall,
when issued, reduce the number of shares of Common Stock available under
Article 3.
ARTICLE 14. PAYMENT OF DIRECTOR'S FEES IN SECURITIES.
14.1 Effective Date. No provision of this Article 14 shall be effective
unless and until the Board has determined to implement such provision.
14.2 Elections to Receive NSOs, Restricted Shares or Stock Units. An
Outside Director may elect to receive his or her annual retainer payments and/or
meeting fees from the Corporation in the form of cash, NSOs, Restricted Shares
or Stock Units, or a combination thereof, as determined by the Board. Such
NSOs, Restricted Shares and Stock Units shall be issued under the Plan. An
election under this Article 14 shall be filed with the Corporation on the
prescribed form.
14.3 Number and Terms of NSOs, Restricted Shares or Stock Units. The
number of NSOs, Restricted Shares or Stock Units to be granted to Outside
Directors in lieu of annual retainers and meeting fees that would otherwise be
paid in cash shall be calculated in a manner determined by the Board. The terms
of such NSOs, Restricted Shares or Stock Units shall also be determined by the
Board.
ARTICLE 15. LIMITATION ON RIGHTS.
15.1 Retention Rights. Neither the Plan nor any Award granted under the
Plan shall be deemed to give any individual a right to remain an Employee,
Outside Director or Consultant. The Corporation and its Parents, Subsidiaries
and Affiliates reserve the right to terminate the service of any Employee,
Outside Director or Consultant at any time, with or without cause, subject to
applicable laws, the Corporation's certificate of incorporation and by-laws and
a written employment agreement (if any).
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15.2 Stockholders' Rights. A Participant shall have no dividend rights,
voting rights or other rights as a stockholder with respect to any shares of
Common Stock covered by his or her Award prior to the time when a stock
certificate for such shares of Common Stock is issued or, if applicable, the
time when he or she becomes entitled to receive such shares of Common Stock by
filing any required notice of exercise and paying any required Exercise Price.
No adjustment shall be made for cash dividends or other rights for which the
record date is prior to such time, except as expressly provided in the Plan.
15.3 Regulatory Requirements. Any other provision of the Plan
notwithstanding, the obligation of the Corporation to issue shares of Common
Stock under the Plan shall be subject to all applicable laws, rules and
regulations and such approval by any regulatory body as may be required. The
Corporation reserves the right to restrict, in whole or in part, the delivery of
shares of Common Stock pursuant to any Award prior to the satisfaction of all
legal requirements relating to the issuance of such shares of Common Stock, to
their registration, qualification or listing or to an exemption from
registration, qualification or listing.
ARTICLE 16. WITHHOLDING TAXES.
16.1 General. To the extent required by applicable federal, state, local
or foreign law, a Participant or his or her successor shall make arrangements
satisfactory to the Corporation for the satisfaction of any withholding tax
obligations that arise in connection with the Plan. The Corporation shall not
be required to issue any shares of Common Stock or make any cash payment under
the Plan until such obligations are satisfied.
16.2 Share Withholding. The Committee may permit a Participant to satisfy
all or part of his or her withholding or income tax obligations by having the
Corporation withhold all or a portion of any shares of Common Stock that
otherwise would be issued to him or her or by surrendering all or a portion of
any shares of Common Stock that he or she previously acquired. Such shares of
Common Stock shall be valued at their Fair Market Value on the date when taxes
otherwise would be withheld in cash.
ARTICLE 17. FUTURE OF THE PLAN.
17.1 Term of the Plan. The Plan, as set forth herein, shall become
effective as of the date of the IPO. The Plan shall remain in effect until it
is terminated under Section 17.2, except that no ISOs shall be granted on or
after the 10/th/ anniversary of the later of (a) the date when the Board adopted
the Plan or (b) the date when the Board adopted the most recent increase in the
number of shares of Common Stock available under Article 3 which was approved by
the Corporation's stockholders.
17.2 Amendment or Termination. The Board may, at any time and for any
reason, amend or terminate the Plan. An amendment of the Plan shall be subject
to the approval of the Corporation's stockholders only to the extent required by
applicable laws, regulations or rules. No Awards shall be granted under the
Plan after the termination thereof. The termination of the Plan, or any
amendment thereof, shall not affect any Award previously granted under the Plan.
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ARTICLE 18. LIMITATION ON PAYMENTS.
18.1 Scope of Limitation. This Article 18 shall apply to an Award only if:
(a) The independent auditors most recently selected by the Board
(the "Auditors") determine that the after-tax value of such Award to the
Participant, taking into account the effect of all federal, state and local
income taxes, employment taxes and excise taxes applicable to the
Participant (including the excise tax under Section 4999 of the Code), will
be greater after the application of this Article 18 than it was before the
application of this Article 18; or
(b) The Committee, at the time of making an Award under the Plan or
at any time thereafter, specifies in writing that such Award shall be
subject to this Article 18 (regardless of the after-tax value of such Award
to the Participant).
If this Article 18 applies to an Award, it shall supersede any contrary
provision of the Plan or of any Award granted under the Plan.
18.2 Basic Rule. In the event that the Auditors determine that any payment
or transfer by the Corporation under the Plan to or for the benefit of a
Participant (a "Payment") would be nondeductible by the Corporation for federal
income tax purposes because of the provisions concerning "excess parachute
payments" in Section 280G of the Code, then the aggregate present value of all
Payments shall be reduced (but not below zero) to the Reduced Amount. For
purposes of this Article 18, the "Reduced Amount" shall be the amount, expressed
as a present value, which maximizes the aggregate present value of the Payments
without causing any Payment to be nondeductible by the Corporation because of
Section 280G of the Code.
18.3 Reduction of Payments. If the Auditors determine that any Payment
would be nondeductible by the Corporation because of Section 280G of the Code,
then the Corporation shall promptly give the Participant notice to that effect
and a copy of the detailed calculation thereof and of the Reduced Amount, and
the Participant may then elect, in his or her sole discretion, which and how
much of the Payments shall be eliminated or reduced (as long as after such
election the aggregate present value of the Payments equals the Reduced Amount)
and shall advise the Corporation in writing of his or her election within 10
days of receipt of notice. If no such election is made by the Participant
within such 10-day period, then the Corporation may elect which and how much of
the Payments shall be eliminated or reduced (as long as after such election the
aggregate present value of the Payments equals the Reduced Amount) and shall
notify the Participant promptly of such election. For purposes of this Article
18, present value shall be determined in accordance with Section 280G(d)(4) of
the Code. All determinations made by the Auditors under this Article 18 shall
be binding upon the Corporation and the Participant and shall be made within 60
days of the date when a Payment becomes payable or transferable. As promptly as
practicable following such determination and the elections hereunder, the
Corporation shall pay or transfer to or for the benefit of the Participant such
amounts as are then due to him or her under the Plan and shall promptly pay or
transfer to or for the benefit of the Participant in the future such amounts as
become due to him or her under the Plan.
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18.4 Overpayments and Underpayments. As a result of uncertainty in the
application of Section 280G of the Code at the time of an initial determination
by the Auditors hereunder, it is possible that Payments will have been made by
the Corporation which should not have been made (an "Overpayment") or that
additional Payments which will not have been made by the Corporation could have
been made (an "Underpayment"), consistent in each case with the calculation of
the Reduced Amount hereunder. In the event that the Auditors, based upon the
assertion of a deficiency by the Internal Revenue Service against the
Corporation or the Participant which the Auditors believe has a high probability
of success, determine that an Overpayment has been made, such Overpayment shall
be treated for all purposes as a loan to the Participant which he or she shall
repay to the Corporation, together with interest at the applicable federal rate
provided in Section 7872(f)(2) of the Code; provided, however, that no amount
shall be payable by the Participant to the Corporation if and to the extent that
such payment would not reduce the amount which is subject to taxation under
Section 4999 of the Code. In the event that the Auditors determine that an
Underpayment has occurred, such Underpayment shall promptly be paid or
transferred by the Corporation to or for the benefit of the Participant,
together with interest at the applicable federal rate provided in Section
7872(f)(2) of the Code.
18.5 Related Corporations. For purposes of this Article 18, the term
"Corporation" shall include affiliated corporations to the extent determined by
the Auditors in accordance with Section 280G(d)(5) of the Code.
ARTICLE 19. DEFINITIONS.
19.1 "Affiliate" means any entity other than a Subsidiary, if the
Corporation and/or one or more Subsidiaries own not less than 50% of such
entity.
19.2 "Award" means any award of an Option, an SAR, a Restricted Share or a
Stock Unit under the Plan.
19.3 "Board" means the Corporation's Board of Directors, as constituted
from time to time.
19.4 "Change in Control" shall mean:
(a) The consummation of a merger or consolidation of the Corporation
with or into another entity or any other corporate reorganization, if more
than 50% of the combined voting power of the continuing or surviving
entity's securities outstanding immediately after such merger,
consolidation or other reorganization is owned by persons who were not
stockholders of the Corporation immediately prior to such merger,
consolidation or other reorganization;
(b) The sale, transfer or other disposition of all or substantially
all of the Corporation's assets;
(c) A change in the composition of the Board, as a result of which
fewer than two-thirds of the incumbent directors are directors who either
(i) had
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been directors of the Corporation on the date 24 months prior to the date
of the event that may constitute a Change in Control (the "original
directors") or (ii) were elected, or nominated for election, to the Board
with the affirmative votes of at least a majority of the aggregate of the
original directors who were still in office at the time of the election or
nomination and the directors whose election or nomination was previously so
approved; or
(d) Any transaction as a result of which any person is the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Corporation representing at
least 50% of the total voting power represented by the Corporation's then
outstanding voting securities. For purposes of this Paragraph (d), the term
"person" shall have the same meaning as when used in Sections 13(d) and
14(d) of the Exchange Act but shall exclude (i) a trustee or other
fiduciary holding securities under an employee benefit plan of the
Corporation or of a Parent or Subsidiary and (ii) a corporation owned
directly or indirectly by the stockholders of the Corporation in
substantially the same proportions as their ownership of the common stock
of the Corporation.
A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Corporation's incorporation or to create a holding
company that will be owned in substantially the same proportions by the persons
who held the Corporation's securities immediately before such transaction.
19.5 "Code" means the Internal Revenue Code of 1986, as amended.
19.6 "Committee" means a committee of the Board, as described in
Article 2.
19.7 "Common Stock" means the common stock of the Corporation.
19.8 "Consultant" means a consultant or adviser who provides bona fide
services to the Corporation, a Parent, a Subsidiary or an Affiliate as an
independent contractor. Service as a Consultant shall be considered employment
for all purposes of the Plan, except as provided in Section 4.1.
19.9 "Corporation" means Vignette Corporation, a Delaware corporation.
19.10 "Employee" means a common-law employee of the Corporation, a Parent,
a Subsidiary or an Affiliate.
19.11 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
19.12 "Exercise Price," in the case of an Option, means the amount for
which one share of Common Stock may be purchased upon exercise of such Option,
as specified in the applicable Stock Option Agreement. "Exercise Price," in the
case of an SAR, means an amount, as specified in the applicable SAR Agreement,
which is subtracted from the Fair Market Value of one Common Share in
determining the amount payable upon exercise of such SAR.
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19.13 "Fair Market Value" means the market price of shares of Common
Stock, determined by the Committee in good faith on such basis as it deems
appropriate. Whenever possible, the determination of Fair Market Value by the
Committee shall be based on the prices reported in The Wall Street Journal.
-----------------------
Such determination shall be conclusive and binding on all persons.
19.14 "Involuntary Termination" means the termination of the Service of
any individual which occurs by reason of:
(a) such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
(b) such individual's voluntary resignation following (A) a change
in his or her position with the Corporation which materially reduces his or
her level of responsibility, (B) a reduction in his or her level of
compensation (including base salary, fringe benefits and participation in
bonus or incentive programs) or (C) a relocation of such individual's place
of employment by more than fifty (50) miles, provided and only if such
change, reduction or relocation is effected by the Corporation without the
individual's consent.
19.15 "IPO" means the initial offering of Common Stock to the public
pursuant to a registration statement filed by the Corporation with the
Securities and Exchange Commission.
19.16 "ISO" means an incentive stock option described in Section 422(b) of
the Code.
19.17 "Misconduct" means the commission of any act of fraud, embezzlement
or dishonesty by the Optionee or Participant, any unauthorized use or disclosure
by such person of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by such
person adversely affecting the business or affairs of the Corporation (or any
Parent or Subsidiary) in a material manner. The foregoing definition shall not
be deemed to be inclusive of all the acts or omissions which the Corporation (or
any Parent or Subsidiary) may consider as grounds for the dismissal or discharge
of any Optionee or Participant or other person in the Service of the Corporation
(or any Parent or Subsidiary).
19.18 "NSO" means a stock option not described in Sections 422 or 423 of
the Code.
19.19 "Option" means an ISO or NSO granted under the Plan and entitling
the holder to purchase shares of Common Stock.
19.20 "Optionee" means an individual or estate who holds an Option or SAR.
19.21 "Outside Director" shall mean a member of the Board who is not an
Employee. Service as an Outside Director shall be considered employment for all
purposes of the Plan, except as provided in Section 4.1.
19.22 "Parent" means any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, if each of the
corporations other than the
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Corporation owns stock possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain. A
corporation that attains the status of a Parent on a date after the adoption of
the Plan shall be considered a Parent commencing as of such date.
19.23 "Participant" means an individual or estate who holds an Award.
19.24 "Plan" means this Vignette Corporation 1998 Equity Incentive Plan,
as amended from time to time.
19.25 "Predecessor Plan" means the Corporation's existing 1995 Stock
Option/Stock Issuance Plan.
19.26 "Restricted Share" means a Common Share awarded under the Plan.
19.27 "Restricted Stock Agreement" means the agreement between the
Corporation and the recipient of a Restricted Share which contains the terms,
conditions and restrictions pertaining to such Restricted Share.
19.28 "SAR" means a stock appreciation right granted under the Plan.
19.29 "SAR Agreement" means the agreement between the Corporation and an
Optionee which contains the terms, conditions and restrictions pertaining to his
or her SAR.
19.30 "Stock Option Agreement" means the agreement between the Corporation
and an Optionee that contains the terms, conditions and restrictions pertaining
to his or her Option.
19.31 "Stock Unit" means a bookkeeping entry representing the equivalent
of one Common Share, as awarded under the Plan.
19.32 "Stock Unit Agreement" means the agreement between the Corporation
and the recipient of a Stock Unit which contains the terms, conditions and
restrictions pertaining to such Stock Unit.
19.33 "Subsidiary" means any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain. A corporation that
attains the status of a Subsidiary on a date after the adoption of the Plan
shall be considered a Subsidiary commencing as of such date.
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EXHIBIT 10.4
VIGNETTE CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
<PAGE>
TABLE OF CONTENTS
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Page
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SECTION 1. PURPOSE OF THE PLAN................................................1
SECTION 2. ADMINISTRATION OF THE PLAN.........................................1
(a) Committee Composition................................................1
(b) Committee Responsibilities...........................................1
SECTION 3. ENROLLMENT AND PARTICIPATION.......................................1
(a) Offering Periods.....................................................1
(b) Accumulation Periods.................................................1
(c) Enrollment...........................................................1
(d) Duration of Participation............................................2
(e) Applicable Offering Period...........................................2
SECTION 4. EMPLOYEE CONTRIBUTIONS.............................................2
(a) Frequency of Payroll Deductions......................................2
(b) Amount of Payroll Deductions.........................................2
(c) Changing Withholding Rate............................................3
(d) Discontinuing Payroll Deductions.....................................3
(e) Limit on Number of Elections.........................................3
SECTION 5. WITHDRAWAL FROM THE PLAN...........................................3
(a) Withdrawal...........................................................3
(b) Re-Enrollment After Withdrawal.......................................3
SECTION 6. CHANGE IN EMPLOYMENT STATUS........................................3
(a) Termination of Employment............................................3
(b) Leave of Absence.....................................................3
(c) Death................................................................4
SECTION 7. PLAN ACCOUNTS AND PURCHASE OF SHARES...............................4
(a) Plan Accounts........................................................4
(b) Purchase Price.......................................................4
(c) Number of Shares Purchased...........................................4
(d) Available Shares Insufficient........................................4
(e) Issuance of Common Stock.............................................5
(f) Unused Cash Balances.................................................5
(g) Stockholder Approval.................................................5
SECTION 8. LIMITATIONS ON STOCK OWNERSHIP.....................................5
(a) Five Percent Limit...................................................5
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(b) Dollar Limit.........................................................6
SECTION 9. RIGHTS NOT TRANSFERABLE............................................6
SECTION 10. NO RIGHTS AS AN EMPLOYEE...........................................7
SECTION 11. NO RIGHTS AS A STOCKHOLDER.........................................7
SECTION 12. SECURITIES LAW REQUIREMENTS........................................7
SECTION 13. STOCK OFFERED UNDER THE PLAN.......................................7
(a) Authorized Shares....................................................7
(b) Anti-Dilution Adjustments............................................7
(c) Reorganizations......................................................7
SECTION 14. AMENDMENT OR DISCONTINUANCE........................................8
SECTION 15. DEFINITIONS........................................................8
(a) Accumulation Period..................................................8
(b) Board................................................................8
(c) Code.................................................................8
(d) Committee............................................................8
(e) Common Stock.........................................................8
(f) Corporation..........................................................8
(g) Compensation.........................................................8
(h) Corporate Reorganization.............................................8
(i) Eligible Employee....................................................9
(j) Exchange Act.........................................................9
(k) Fair Market Value....................................................9
(l) IPO..................................................................9
(m) Offering Period......................................................9
(n) Participant..........................................................9
(o) Participating Corporation............................................9
(p) Plan.................................................................9
(q) Plan Account........................................................10
(r) Purchase Price......................................................10
(s) Subsidiary..........................................................10
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VIGNETTE CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
SECTION 1. PURPOSE OF THE PLAN.
The Plan was adopted by the Board on September __, 1998, to be effective as
of the date of the IPO. The purpose of the Plan is to provide Eligible
Employees with an opportunity to increase their proprietary interest in the
success of the Corporation by purchasing Common Stock from the Corporation on
favorable terms and to pay for such purchases through payroll deductions. The
Plan is intended to qualify under Section 423 of the Code.
SECTION 2. ADMINISTRATION OF THE PLAN.
(a) Committee Composition. The Plan shall be administered by the
Committee. The Committee shall consist exclusively of one or more directors of
the Corporation, who shall be appointed by the Board.
(b) Committee Responsibilities. The Committee shall interpret the Plan and
make all other policy decisions relating to the operation of the Plan. The
Committee may adopt such rules, guidelines and forms as it deems appropriate to
implement the Plan. The Committee's determinations under the Plan shall be
final and binding on all persons.
SECTION 3. ENROLLMENT AND PARTICIPATION.
(a) Offering Periods. While the Plan is in effect, two overlapping
Offering Periods shall commence in each calendar year. The Offering Periods
shall consist of the 24-month periods commencing on each May 1 and November 1,
except that the first Offering Period shall commence on the date of the IPO and
end on April 30, 2000.
(b) Accumulation Periods. While the Plan is in effect, two Accumulation
Periods shall commence in each calendar year. The Accumulation Periods shall
consist of the six-month periods commencing on each May 1 and November 1, except
that the first Accumulation Period shall commence on the date of the IPO and end
on April 30, 1999.
(c) Enrollment. Any individual who, on the 90th day prior to the first day
of an Offering Period, qualifies as an Eligible Employee may elect to become a
Participant in the Plan for such Offering Period by executing the enrollment
form prescribed for this purpose by the Committee. The enrollment form shall be
filed with the Corporation at the prescribed location not later than one
business day prior to the commencement of such Offering Period.
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(d) Duration of Participation. Once enrolled in the Plan, a Participant
shall continue to participate in the Plan until he or she ceases to be an
Eligible Employee, withdraws from the Plan under Section 5(a) or reaches the end
of the Accumulation Period in which his or her employee contributions were
discontinued under Section 4(d) or 8(b). A Participant who discontinued
employee contributions under Section 4(d) or withdrew from the Plan under
Section 5(a) may again become a Participant, if he or she then is an Eligible
Employee, by following the procedure described in Subsection (c) above. A
Participant whose employee contributions were discontinued automatically under
Section 8(b) shall automatically resume participation at the beginning of the
earliest Accumulation Period ending in the next calendar year, if he or she then
is an Eligible Employee.
(e) Applicable Offering Period. For purposes of calculating the Purchase
Price under Section 7(b), the applicable Offering Period shall be determined as
follows:
(i) Once a Participant is enrolled in the Plan for an Offering Period,
such Offering Period shall continue to apply to him or her until the earliest of
(A) the end of such Offering Period, (B) the end of his or her participation
under Subsection (d) above or (C) re-enrollment for a subsequent Offering Period
under Paragraph (ii) or (iii) below.
(ii) In the event that the Fair Market Value of the Common Stock on the
last trading day before the commencement of the Offering Period for which the
Participant is enrolled is higher than on the last trading day before the
commencement of any subsequent Offering Period, the Participant shall
automatically be re-enrolled for such subsequent Offering Period.
(iii) Any other provision of the Plan notwithstanding, the Corporation (at
its sole discretion) may determine prior to the commencement of any new Offering
Period that all Participants shall be re-enrolled for such new Offering Period.
(iv) When a Participant reaches the end of an Offering Period but his or
her participation is to continue, then such Participant shall automatically be
re-enrolled for the Offering Period that commences immediately after the end of
the prior Offering Period.
SECTION 4. EMPLOYEE CONTRIBUTIONS.
(a) Frequency of Payroll Deductions. A Participant may purchase shares of
Common Stock under the Plan solely by means of payroll deductions. Payroll
deductions, as designated by the Participant pursuant to Subsection (b) below,
shall occur on each payday during participation in the Plan.
(b) Amount of Payroll Deductions. An Eligible Employee shall designate on
the enrollment form the portion of his or her Compensation that he or she elects
to have withheld for
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the purchase of Common Stock. Such portion shall be a whole percentage of the
Eligible Employee's Compensation, but not less than 1% nor more than 15% or such
lesser percentage established by the Committee from time to time.
(c) Changing Withholding Rate. If a Participant wishes to change the rate
of payroll withholding, he or she may do so by filing a new enrollment form with
the Corporation at the prescribed location at any time. The new withholding
rate shall be effective as soon as reasonably practicable after such form has
been received by the Corporation. The new withholding rate shall be a whole
percentage of the Eligible Employee's Compensation, but not less than 1% nor
more than 15%.
(d) Discontinuing Payroll Deductions. If a Participant wishes to
discontinue employee contributions entirely, he or she may do so by filing a new
enrollment form with the Corporation at the prescribed location at any time.
Payroll withholding shall cease as soon as reasonably practicable after such
form has been received by the Corporation. (In addition, employee contributions
may be discontinued automatically pursuant to Section 8(b).) A Participant who
has discontinued employee contributions may resume such contributions by filing
a new enrollment form with the Corporation at the prescribed location. Payroll
withholding shall resume as soon as reasonably practicable after such form has
been received by the Corporation.
(e) Limit on Number of Elections. No Participant shall make more than one
election under Subsection (c) or (d) above during any Accumulation Period.
SECTION 5. WITHDRAWAL FROM THE PLAN.
(a) Withdrawal. A Participant may elect to withdraw from the Plan by
filing the prescribed form with the Corporation at the prescribed location at
any time before the last day of an Accumulation Period. As soon as reasonably
practicable thereafter, payroll deductions shall cease and the entire amount
credited to the Participant's Plan Account shall be refunded to him or her in
cash, without interest. No partial withdrawals shall be permitted.
(b) Re-Enrollment After Withdrawal. A former Participant who has withdrawn
from the Plan shall not be a Participant until he or she re-enrolls in the Plan
under Section 3(c). Re-enrollment may be effective only at the commencement of
an Offering Period.
SECTION 6. CHANGE IN EMPLOYMENT STATUS.
(a) Termination of Employment. Termination of employment as an Eligible
Employee for any reason, including death, shall be treated as an automatic
withdrawal from the Plan under Section 5(a). (A transfer from one Participating
Corporation to another shall not be treated as a termination of employment.)
(b) Leave of Absence. For purposes of the Plan, employment shall not be
deemed to terminate when the Participant goes on a military leave, a sick leave
or another bona fide leave of
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absence, if the leave was approved by the Corporation in writing. Employment,
however, shall be deemed to terminate 90 days after the Participant goes on a
leave, unless a contract or statute guarantees his or her right to return to
work. Employment shall be deemed to terminate in any event when the approved
leave ends, unless the Participant immediately returns to work.
(c) Death. In the event of the Participant's death, the amount credited to
his or her Plan Account shall be paid to a beneficiary designated by him or her
for this purpose on the prescribed form or, if none, to the Participant's
estate. Such form shall be valid only if it was filed with the Corporation at
the prescribed location before the Participant's death.
SECTION 7. PLAN ACCOUNTS AND PURCHASE OF SHARES.
(a) Plan Accounts. The Corporation shall maintain a Plan Account on its
books in the name of each Participant. Whenever an amount is deducted from the
Participant's Compensation under the Plan, such amount shall be credited to the
Participant's Plan Account. Amounts credited to Plan Accounts shall not be
trust funds and may be commingled with the Corporation's general assets and
applied to general corporate purposes. No interest shall be credited to Plan
Accounts.
(b) Purchase Price. The Purchase Price for each share of Common Stock
purchased at the close of an Accumulation Period shall be the lower of:
(i) 85% of the Fair Market Value of such share on the last trading day
in such Accumulation Period; or
(ii) 85% of the Fair Market Value of such share on the last trading day
before the commencement of the applicable Offering Period (as determined under
Section 3(e)) or, in the case of the first Offering Period under the Plan, 85%
of the price at which one share of Common Stock is offered to the public in the
IPO.
(c) Number of Shares Purchased. As of the last day of each Accumulation
Period, each Participant shall be deemed to have elected to purchase the number
of shares of Common Stock calculated in accordance with this Subsection (c),
unless the Participant has previously elected to withdraw from the Plan in
accordance with Section 5(a). The amount then in the Participant's Plan Account
shall be divided by the Purchase Price, and the number of shares that results
shall be purchased from the Corporation with the funds in the Participant's Plan
Account. The foregoing notwithstanding, no Participant shall purchase more than
2,000 shares [post-split] of Common Stock with respect to any Accumulation
Period nor more than the amounts of Common Stock set forth in Sections 8(b) and
13(a). The Committee may determine with respect to all Participants that any
fractional share, as calculated under this Subsection (c), shall be (i) rounded
down to the next lower whole share or (ii) credited as a fractional share.
(d) Available Shares Insufficient. In the event that the aggregate number
of shares that all Participants elect to purchase during an Accumulation Period
exceeds the maximum number of shares remaining available for issuance under
Section 13(a), then the number of shares
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to which each Participant is entitled shall be determined by multiplying the
number of shares available for issuance by a fraction, the numerator of which is
the number of shares that such Participant has elected to purchase and the
denominator of which is the number of shares that all Participants have elected
to purchase.
(e) Issuance of Common Stock. Certificates representing the shares of
Common Stock purchased by a Participant under the Plan shall be issued to him or
her as soon as reasonably practicable after the close of the applicable
Accumulation Period, except that the Committee may determine that such shares
shall be held for each Participant's benefit by a broker designated by the
Committee (unless the Participant has elected that certificates be issued to him
or her). Shares may be registered in the name of the Participant or jointly in
the name of the Participant and his or her spouse as joint tenants with right of
survivorship or as community property. The Committee may impose such
restrictions on the transfer or resale of issued shares as it may deem
advisable.
(f) Unused Cash Balances. An amount remaining in the Participant's Plan
Account that represents the Purchase Price for any fractional share shall be
carried over in the Participant's Plan Account to the next Accumulation Period.
Any amount remaining in the Participant's Plan Account that represents the
Purchase Price for whole shares that could not be purchased by reason of
Subsection (c) above, Section 8(b) or Section 13(a) shall be refunded to the
Participant in cash, without interest.
(g) Stockholder Approval. Any other provision of the Plan notwithstanding,
no shares of Common Stock shall be purchased under the Plan unless and until the
Corporation's stockholders have approved the adoption of the Plan.
SECTION 8. LIMITATIONS ON STOCK OWNERSHIP.
(a) Five Percent Limit. Any other provision of the Plan notwithstanding,
no Participant shall be granted a right to purchase Common Stock under the Plan
if such Participant, immediately after his or her election to purchase such
Common Stock, would own stock possessing more than 5% of the total combined
voting power or value of all classes of stock of the Corporation or any parent
or Subsidiary of the Corporation. For purposes of this Subsection (a), the
following rules shall apply:
(i) Ownership of stock shall be determined after applying the
attribution rules of section 424(d) of the Code;
(ii) Each Participant shall be deemed to own any stock that he or she
has a right or option to purchase under this or any other plan; and
(iii) Each Participant shall be deemed to have the right to purchase
2,000 shares [post-split] of Common Stock under this Plan with respect to each
Accumulation Period.
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(b) Dollar Limit. Any other provision of the Plan notwithstanding, no
Participant shall purchase Common Stock with a Fair Market Value in excess of
the following limit:
(i) In the case of Common Stock purchased during an Offering Period
that commenced in the current calendar year, the limit shall be equal to (A)
$25,000 minus (B) the Fair Market Value of the Common Stock that the Participant
previously purchased in the current calendar year (under this Plan and all other
employee stock purchase plans of the Corporation or any parent or Subsidiary of
the Corporation).
(ii) In the case of Common Stock purchased during an Offering Period
that commenced in the immediately preceding calendar year, the limit shall be
equal to (A) $50,000 minus (B) the Fair Market Value of the Common Stock that
the Participant previously purchased (under this Plan and all other employee
stock purchase plans of the Corporation or any parent or Subsidiary of the
Corporation) in the current calendar year and in the immediately preceding
calendar year.
(iii) In the case of Common Stock purchased during an Offering Period
that commenced in the second preceding calendar year, the limit shall be equal
to (A) $75,000 minus (B) the Fair Market Value of the Common Stock that the
Participant previously purchased (under this Plan and all other employee stock
purchase plans of the Corporation or any parent or Subsidiary of the
Corporation) in the current calendar year and in the two preceding calendar
years.
For purposes of this Subsection (b), the Fair Market Value of Common Stock shall
be determined in each case as of the beginning of the Offering Period in which
such Common Stock is purchased. Employee stock purchase plans not described in
section 423 of the Code shall be disregarded. If a Participant is precluded by
this Subsection (b) from purchasing additional Common Stock under the Plan, then
his or her employee contributions shall automatically be discontinued and shall
resume at the beginning of the earliest Accumulation Period ending in the next
calendar year (if he or she then is an Eligible Employee).
SECTION 9. RIGHTS NOT TRANSFERABLE.
The rights of any Participant under the Plan, or any Participant's interest
in any Common Stock or moneys to which he or she may be entitled under the Plan,
shall not be transferable by voluntary or involuntary assignment or by operation
of law, or in any other manner other than by beneficiary designation or the laws
of descent and distribution. If a Participant in any manner attempts to
transfer, assign or otherwise encumber his or her rights or interest under the
Plan, other than by beneficiary designation or the laws of descent and
distribution, then such act shall be treated as an election by the Participant
to withdraw from the Plan under Section 5(a).
6
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SECTION 10. NO RIGHTS AS AN EMPLOYEE.
Nothing in the Plan or in any right granted under the Plan shall confer
upon the Participant any right to continue in the employ of a Participating
Corporation for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Participating Corporations or of the
Participant, which rights are hereby expressly reserved by each, to terminate
his or her employment at any time and for any reason, with or without cause.
SECTION 11. NO RIGHTS AS A STOCKHOLDER.
A Participant shall have no rights as a stockholder with respect to any
shares of Common Stock that he or she may have a right to purchase under the
Plan until such shares have been purchased on the last day of the applicable
Accumulation Period.
SECTION 12. SECURITIES LAW REQUIREMENTS.
Shares of Common Stock shall not be issued under the Plan unless the
issuance and delivery of such shares comply with (or are exempt from) all
applicable requirements of law, including (without limitation) the Securities
Act of 1933, as amended, the rules and regulations promulgated thereunder, state
securities laws and regulations, and the regulations of any stock exchange or
other securities market on which the Corporation's securities may then be
traded.
SECTION 13. STOCK OFFERED UNDER THE PLAN.
(a) Authorized Shares. The aggregate number of shares of Common Stock
available for purchase under the Plan shall be 750,000 [post-split], subject to
adjustment pursuant to this Section 13. In addition, the number of shares of
Common Stock available for purchase under the Plan shall automatically increase
by the lesser of (i) 2% of the total number of shares of Common Stock
outstanding or (ii) 750,000 shares [post-split] on January 1, 1999, January 1,
2000, January 1, 2001, and January 1, 2002.
(b) Anti-Dilution Adjustments. The aggregate number of shares of Common
Stock offered under the Plan, the number of shares by which the share reserve is
to increase each calendar year, the 2,000-share [post-split] limitation
described in Section 7(c) and the price of shares that any Participant has
elected to purchase shall be adjusted proportionately by the Committee for any
increase or decrease in the number of outstanding shares of Common Stock
resulting from a subdivision or consolidation of shares or the payment of a
stock dividend, any other increase or decrease in such shares effected without
receipt or payment of consideration by the Corporation, the distribution of the
shares of a Subsidiary to the Corporation's stockholders or a similar event.
(c) Reorganizations. Any other provision of the Plan notwithstanding,
immediately prior to the effective time of a Corporate Reorganization, the
Offering Period and Accumulation Period then in progress shall terminate and
shares shall be purchased pursuant to Section 7, unless the Plan is assumed by
the surviving corporation or its parent corporation pursuant to the
7
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plan of merger or consolidation. The Plan shall in no event be construed to
restrict in any way the Corporation's right to undertake a dissolution,
liquidation, merger, consolidation or other reorganization.
SECTION 14. AMENDMENT OR DISCONTINUANCE.
The Board shall have the right to amend, suspend or terminate the Plan at
any time and without notice. Except as provided in Section 13, any increase in
the aggregate number of shares of Common Stock to be issued under the Plan shall
be subject to approval by a vote of the stockholders of the Corporation. In
addition, any other amendment of the Plan shall be subject to approval by a vote
of the stockholders of the Corporation to the extent required by an applicable
law or regulation.
SECTION 15. DEFINITIONS.
(a) "Accumulation Period" means a six-month period during which
contributions may be made toward the purchase of Common Stock under the Plan, as
determined pursuant to Section 3(b).
(b) "Board" means the Board of Directors of the Corporation, as constituted
from time to time.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a committee of the Board, as described in Section 2.
(e) "Common Stock" means the common stock of the Corporation.
(f) "Corporation" means Vignette Corporation, a Delaware corporation.
(g) "Compensation" means (i) the total compensation paid in cash to a
Participant by a Participating Corporation, including salaries, wages, bonuses,
incentive compensation, commissions, overtime pay and shift premiums, plus (ii)
any pre-tax contributions made by the Participant under section 401(k) or 125 of
the Code. "Compensation" shall exclude all non-cash items, moving or relocation
allowances, cost-of-living equalization payments, car allowances, tuition
reimbursements, imputed income attributable to cars or life insurance, severance
pay, fringe benefits, contributions or benefits received under employee benefit
plans, income attributable to the exercise of stock options, and similar items.
The Committee shall determine whether a particular item is included in
Compensation.
(h) "Corporate Reorganization" means:
(i) The consummation of a merger or consolidation of the Corporation
with or into another entity or any other corporate reorganization; or
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(ii) The sale, transfer or other disposition of all or substantially
all of the Corporation's assets or the complete liquidation or dissolution of
the Corporation.
(i) "Eligible Employee" means any employee of a Participating Corporation
if his or her customary employment is for more than five months per calendar
year and for more than 20 hours per week. The foregoing notwithstanding, an
individual shall not be considered an Eligible Employee if his or her
participation in the Plan is prohibited by the law of any country which has
jurisdiction over him or her or if he or she is subject to a collective
bargaining agreement that does not provide for participation in the Plan.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(k) "Fair Market Value" means the market price of Common Stock, determined
by the Committee as follows:
(i) If the Common Stock was traded on the Nasdaq National Market on
the date in question, then the Fair Market Value shall be equal to the last-
transaction price quoted for such date by the Nasdaq National Market;
(ii) If the Common Stock was traded on a stock exchange on the date in
question, then the Fair Market Value shall be equal to the closing price
reported by the applicable composite transactions report for such date; or
(iii) If none of the foregoing provisions is applicable, then the Fair
Market Value shall be determined by the Committee in good faith on such basis as
it deems appropriate.
Whenever possible, the determination of Fair Market Value by the Committee shall
be based on the prices reported in The Wall Street Journal or as reported
-----------------------
directly to the Corporation by Nasdaq or a stock exchange. Such determination
shall be conclusive and binding on all persons.
(l) "IPO" means the initial offering of Common Stock to the public pursuant
to a registration statement filed by the Corporation with the Securities and
Exchange Commission.
(m) "Offering Period" means a 24-month period with respect to which the
right to purchase Common Stock may be granted under the Plan, as determined
pursuant to Section 3(a).
(n) "Participant" means an Eligible Employee who elects to participate in
the Plan, as provided in Section 3(c).
(o) "Participating Corporation" means (i) the Corporation and (ii) each
present or future Subsidiary designated by the Committee as a Participating
Corporation.
(p) "Plan" means this Vignette Corporation Employee Stock Purchase Plan, as
it may be amended from time to time.
9
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(q) "Plan Account" means the account established for each Participant
pursuant to Section 7(a).
(r) "Purchase Price" means the price at which Participants may purchase
Common Stock under the Plan, as determined pursuant to Section 7(b).
(s) "Subsidiary" means any corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
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EXHIBIT 10.5
Vignette Corporation
1998 Non-Employee Directors Option Plan
<PAGE>
VIGNETTE CORPORATION
1998 NON-EMPLOYEE DIRECTORS OPTION PLAN
ARTICLE 1. PURPOSE OF THE PLAN
The Plan is intended to promote the interests of the Corporation by
providing the non-employee members of the Board with the opportunity to acquire
a proprietary interest, or otherwise increase their proprietary interest, in the
Corporation as an incentive for them to remain in the service of the
Corporation.
ARTICLE 2. ADMINISTRATION
The terms and conditions of each automatic option grant (including
the timing and pricing of the option grant) shall be determined by the express
terms and conditions of the Plan, and neither the Board nor any committee of the
Board shall exercise any discretionary functions with respect to option grants
made pursuant to the Plan.
ARTICLE 3. STOCK SUBJECT TO THE PLAN
A. Shares of Common Stock shall be available for issuance under the
Plan and shall be drawn from either the Corporation's authorized but unissued
shares of Common Stock or from reacquired shares of Common Stock, including
shares repurchased by the Corporation on the open market. The number of shares
of Common Stock reserved for issuance over the term of the Plan shall be fixed
at 250,000 shares [post-split].
B. Should one or more outstanding options under this Plan expire or
terminate for any reason prior to exercise in full, then the shares subject to
the portion of each option not so exercised shall be available for subsequent
option grant under the Plan. In addition, should the exercise price of an
outstanding option under the Plan be paid with shares of Common Stock, then the
number of shares of Common Stock available for issuance under the Plan shall be
reduced by the net number of shares of Common Stock actually issued to the
holder of such option.
C. Should any change be made to the Common Stock issuable under the
Plan by reason of any stock split, stock dividend, recapitalization, combination
of shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration, then
appropriate adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the number and/or class of securities
for which automatic option grants are to be subsequently made to each newly-
elected or continuing non-employee Board member under the Plan, and (iii) the
number and/or class of securities and price per share in effect under each
option outstanding under the Plan. The adjustments to the outstanding options
shall be made by the Board in a manner which shall preclude the enlargement or
dilution of rights and benefits under such options and shall be final, binding
and conclusive.
<PAGE>
ARTICLE 4. ELIGIBILITY
The individuals eligible to receive automatic option grants pursuant
to the provisions of this Plan shall be limited to (i) those individuals serving
as non-employee Board members on the Effective Date and (ii) those individuals
who are first elected or appointed as non-employee Board members after the
Effective Date, whether through appointment by the Board or election by the
Corporation's stockholders. A non-employee Board member shall not be eligible to
receive the initial automatic option grant if such individual has previously
been in the employ of the Corporation (or any parent or subsidiary). However, a
non-employee Board member shall be eligible to receive one or more annual option
grants, whether or not he or she has previously been in the employ of the
Corporation (or any parent or subsidiary). Each non-employee Board member
eligible to participate in the Plan pursuant to the foregoing criteria is hereby
designated an Eligible Director.
ARTICLE 5. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Grant Date. Option grants shall be made on the dates specified
----------
below:
- Each individual who first becomes an Eligible Director on or
after the Effective Date, whether through election by the Corporation's
stockholders or appointment by the Board, shall automatically be granted,
at the time of such initial election or appointment, a non-statutory option
to purchase 25,000 shares [post-split] of Common Stock.
- On the date of each Annual Meeting, beginning with the 1999
Annual Meeting, each Eligible Director who serves on the Board at the time
of that Annual Meeting, whether or not standing for re-election, shall
automatically be granted a non-statutory option to purchase 2,500 shares
[post-split] of Common Stock. An Eligible Director who resigns effective at
an Annual Meeting shall not be eligible to be granted a non-statutory
option at that time.
There shall be no limit on the number of such annual 2,500-share
[post-split] option grants any one Eligible Director may receive over his or her
period of continued Board service.
B. Exercise Price. The exercise price per share of Common Stock
--------------
subject to each automatic option grant shall be equal to one hundred percent
(100%) of the Fair Market Value per share of Common Stock on the automatic grant
date.
C. Payment.
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The exercise price shall become immediately due upon exercise of the
option and shall be payable in one of the alternative forms specified below:
(i) full payment in cash or check made payable to the
Corporation's order; or
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(ii) full payment in shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation's earnings for
financial-reporting purposes and valued at Fair Market Value on the Exercise
Date (as such term is defined below); or
(iii) full payment in a combination of shares of Common
Stock held for the requisite period necessary to avoid a charge to the
Corporation's earnings for financial-reporting purposes and valued at Fair
Market Value on the Exercise Date and cash or check payable to the Corporation's
order; or
(iv) full payment through a broker-dealer sale and
remittance procedure pursuant to which the non-employee Board member (i) shall
provide irrevocable written instructions to a Corporation-designated brokerage
firm to effect the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the purchased
shares and (ii) shall concurrently provide written directives to the Corporation
to deliver the certificates for the purchased shares directly to such brokerage
firm in order to complete the sale transaction.
For purposes of this Section 5.C, the Exercise Date shall be the date
on which written notice of the option exercise is delivered to the Corporation.
Except to the extent the sale and remittance procedure specified above is used,
payment of the exercise price for the purchased shares must accompany the
exercise notice.
D. Exercisability/Vesting. Each automatic grant shall become
----------------------
exercisable for 25% of the option shares upon the optionee's completion of one
year of Board service and for the balance of the option shares in a series of
equal quarterly installments over the next three years upon the optionee's
completion of each six-month period of Board service thereafter.
Exercisability of the option shall be subject to acceleration as
provided in Section 5.G and Article 6. In no event, however, shall the option
become exercisable for any additional option shares after the Optionee's
cessation of Board service.
E. Option Term. Each automatic grant under the Plan shall have a
-----------
maximum term of ten (10) years measured from the automatic grant date.
F. Non-Transferability. During the lifetime of the Optionee, each
-------------------
automatic option grant shall be exercisable only by the Optionee and shall not
be assignable or transferable by the Optionee other than a transfer of the
option effected by will or by the laws of descent and distribution following
Optionee's death.
G. Effect of Termination of Board Service.
--------------------------------------
1. Should the Optionee cease to serve as a Board member for
any reason (other than death) while holding one or more automatic option grants
under the Plan, then such individual shall have a twelve (12)-month period
following the date of such cessation of Board service in which to exercise each
such option for any or all of the option shares for which
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<PAGE>
the option is exercisable at the time of his or her cessation of Board service.
Each such option shall immediately terminate and cease to be outstanding, at the
time of such cessation of Board service, with respect to any option shares for
which the option is not otherwise at that time exercisable.
2. Should the Optionee die while serving as a Board member or
within twelve (12) months after cessation of Board service, then any automatic
option grant held by the Optionee at the time of death may subsequently be
exercised, for the option shares for which the option is exercisable at the time
of his or her cessation of Board service (less any option shares purchased by
the Optionee prior to death), by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred pursuant to
the Optionee's will or in accordance with the laws of descent and distribution.
The right to exercise each such option shall lapse upon the expiration of the
twelve (12)-month period measured from the date of the Optionee's cessation of
service.
3. In no event shall any automatic grant under this Plan remain
exercisable after the expiration date of the maximum ten (10)-year option term.
Upon the expiration of the applicable post-service exercise period under
subparagraphs 1 through 3 above or (if earlier) upon the expiration of the
maximum ten (10)-year option term, the automatic grant shall terminate and cease
to be outstanding for any option shares for which the option was not exercisable
at the time of the Optionee's cessation of Board service.
H. Stockholder Rights. The holder of an automatic option grant
------------------
shall have none of the rights of a stockholder with respect to any shares
subject to such option until such individual shall have exercised the option and
paid the exercise price for the purchased shares.
I. Remaining Terms. The remaining terms and conditions of each
---------------
automatic option grant shall be as set forth in the form Stock Option Agreement
approved for use under the Plan.
ARTICLE 6. SPECIAL ACCELERATION EVENTS
A. In the event of any Change in Control, the shares of Common Stock
at the time subject to each outstanding option but not otherwise fully
exercisable shall automatically accelerate in full so that each such option
shall, immediately prior to the specified effective date for the Change in
Control, become fully exercisable for all of the shares of Common Stock at the
time subject to that option. Immediately following the consummation of the
Change in Control, each automatic option grant under the Plan shall terminate
and cease to be outstanding, except to the extent assumed by the successor
corporation or its parent company.
B. The automatic option grants outstanding under the Plan shall in
no way affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
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<PAGE>
ARTICLE 7. AMENDMENT OF THE PLAN AND AWARDS
The Board has complete and exclusive power and authority to amend or
modify the Plan (or any component thereof) in any or all respects whatsoever.
However, no such amendment or modification shall adversely affect rights and
obligations with respect to options at the time outstanding under the Plan,
unless the affected Optionees consent to such amendment. Stockholder approval
shall be obtained to the extent required by applicable law.
ARTICLE 8. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan shall become effective on the Effective Date. One or more
automatic option grants may be made under the Plan at any time on or after the
Effective Date.
B. The Plan shall terminate upon the earlier of (i) September __, 2008
-------
or (ii) the date on which all shares available for issuance under the Plan shall
have been issued pursuant to the exercise of the options granted under the Plan.
If the date of termination is determined under clause (i) above, then all option
grants outstanding on such date shall thereafter continue to have force and
effect in accordance with the provisions of the agreements evidencing those
option grants.
ARTICLE 9. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
pursuant to option grants under the Plan shall be used for general corporate
purposes.
ARTICLE 10. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option under
the Plan and the issuance of Common Stock upon the exercise of the option grants
made hereunder shall be subject to the Corporation's procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options granted under it, and the Common Stock issued
pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under this Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of the Nasdaq National Market or any Stock Exchange on which the Common Stock is
then listed for trading.
ARTICLE 11. NO IMPAIRMENT OF RIGHTS
Neither the action of the Corporation in establishing the Plan nor any
provision of the Plan shall be construed or interpreted so as to affect
adversely or otherwise impair the right of
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<PAGE>
the Corporation or the stockholders to remove any individual from the Board at
any time in accordance with the provisions of applicable law.
ARTICLE 12. MISCELLANEOUS PROVISIONS
A. The right to acquire Common Stock or other assets under the Plan
may not be assigned, encumbered or otherwise transferred by any Optionee.
B. The provisions of the Plan relating to the exercise of options
shall be governed by the laws of the State of Delaware, as such laws are applied
to contracts entered into and performed in such State.
C. The provisions of the Plan shall inure to the benefit of, and be
binding upon, the Corporation and its successors or assigns, whether by Change
in Control or otherwise, and the Optionees, the legal representatives of their
respective estates, their respective heirs or legatees and their permitted
assignees.
ARTICLE 13. DEFINITIONS
Annual Meeting: the annual meeting of the Corporation's stockholders.
Board: the Corporation's Board of Directors.
Code: the Internal Revenue Code of 1986, as amended.
Common Stock: shares of the Corporation's common stock.
Corporation: Vignette Corporation, a Delaware corporation.
Change in Control: a change in ownership or control of the
Corporation effected through either of the following transactions:
a. the consummation of a merger or consolidation of the
Corporation with or into another entity or any other corporate
reorganization, if more than 50% of the combined voting power of the
continuing or surviving entity's securities outstanding immediately after
such merger, consolidation or other reorganization is owned by persons who
were not stockholders of the Corporation immediately prior to such merger,
consolidation or other reorganization;
b. the sale, transfer or other disposition of all or
substantially all of the Corporation's assets;
c. a change in the composition of the Board, as a result of
which fewer than one-third of the incumbent directors are directors who
either (i) had been directors of the Corporation on the date 24 months
prior to the date of the event that may constitute a Change in Control (the
"original directors") or
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<PAGE>
(ii) were elected, or nominated for election, to the Board with the
affirmative votes of at least a majority of the aggregate of the original
directors who were still in office at the time of the election or
nomination and the directors whose election or nomination was previously so
approved;
d. any transaction as a result of which any person is the
"beneficial owner" (as defined in Rule 13d-3 under the 1934 Act), directly
or indirectly, of securities of the Corporation representing at least 50%
of the total voting power represented by the Corporation's then outstanding
voting securities. For purposes of this Paragraph (d), the term "person"
shall have the same meaning as when used in sections 13(d) and 14(d) of the
1934 Act but shall exclude (i) a trustee or other fiduciary holding
securities under an employee benefit plan of the Corporation or of a Parent
or Subsidiary and (ii) a corporation owned directly or indirectly by the
stockholders of the Corporation in substantially the same proportions as
their ownership of the Common Stock of the Corporation; or
e. a transaction shall not constitute a Change in Control if its
sole purpose is to change the state of the Corporation's incorporation or
to create a holding company that will be owned in substantially the same
proportions by the persons who held the Corporation's securities
immediately before such transaction.
Effective Date: the date on which the Underwriting Agreement is
executed and the initial public offering price of the Common Stock is
established.
Fair Market Value: the Fair Market Value per share of Common Stock
determined in accordance with the following provisions:
a. If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market or any successor system. If there is no closing selling
price for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for
which such quotation exists.
b. If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be
the closing selling price on the last preceding date for which such
quotation exists.
c. For purposes of any option grants made on the date of
execution of the Underwriting Agreement, the Fair Market Value shall be
deemed to
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<PAGE>
be equal to the price per share at which the Common Stock is sold in the
initial public offering pursuant to the Underwriting Agreement.
1934 Act: the Securities Exchange Act of 1934, as amended.
Optionee: any person to whom an option is granted under the Plan.
Plan: this Vignette Corporation 1998 Non-Employee Directors Option
Plan.
Stock Exchange: either the American Stock Exchange or the New York
Stock Exchange.
Underwriting Agreement: the agreement between the Corporation and the
underwriter or underwriters managing the initial public offering of the Common
Stock.
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<PAGE>
EXHIBIT 10.6
IMPERIAL BANK
Member FDIC
SECURITY AND LOAN AGREEMENT
(ACCOUNTS RECEIVABLE)
This Agreement is entered into between VIGNETTE CORPORATION, a DELAWARE
CORPORATION (herein called "Borrower") and IMPERIAL BANK (herein called "Bank").
1. Bank hereby commits, subject to all the terms and conditions of this
Agreement and prior to the termination of its commitment as hereinafter
provided, to make loans to Borrower from time to time in such amounts as
may be determined by Bank up to, but not exceeding in the aggregate unpaid
principal balance, the following Borrowing Base:
80 % of Eligible Accounts
and in no event more than $ 3,000,000.00 provided herein that only
outstandings over $1,500,000.00 shall be subject to the Borrowing Base
Line.
2. The amount of each loan made by Bank to Borrower hereunder shall be debited
to the loan ledger account of Borrower maintained by Bank (herein called
"Loan Account") and Bank shall credit the Loan Account with all loan
repayments made by Borrower. Borrower promises to pay Bank (a) the unpaid
balance of Borrower's Loan Account on demand and (b) on or before the
tenth day of each month, interest on the average daily unpaid balance of
the Loan Account during the immediately preceding month at the rate of
three quarters of one percent (0.750%) per annum in excess of the rate of
interest which Bank has announced as its prime lending rate ("Prime Rate")
which shall vary concurrently with any change in such Prime Rate. Interest
shall be computed at the above rate on the basis of the actual number of
days during which the principal balance of the loan account is outstanding
divided by 360, which shall for interest computation purposes be considered
one year. Bank at its option may demand payment of any or all of the amount
due under the Loan Account including accrued but unpaid interest at any
time. Such notice may be given verbally or in writing and should be
effective upon receipt by Borrower. The amount of interest payable each
month by Borrower shall not be less than a minimum monthly charge of
$250.00. Bank is hereby authorized to charge Borrower's deposit account(s)
with Bank for all sums due Bank under this Agreement.
3. Requests for loans hereunder shall be in writing duly executed by Borrower
in a form satisfactory to Bank and shall contain a certification setting
forth the matters referred to in Section 1, which shall disclose that
Borrower is entitled to the amount of loan being requested.
4. As used in this Agreement, the following terms shall have the following
meanings:
A. "Accounts" means any right to payment for goods sold or leased, or
to be sold or to be leased, or for services rendered or to be
rendered no matter how evidenced, including accounts receivable,
contract rights, chattel paper, instruments, purchase orders,
notes, drafts, acceptances, general intangibles and other forms of
obligations and receivables.
B. "Collateral" means any and all personal property of Borrower which
is assigned or hereafter is assigned to Bank as security or in
which Bank now has or hereafter acquires a security interest.
C. "Eligible Accounts" means all of Borrower's Accounts excluding,
however, (1) all Accounts under which payment is not received
within 90 days from any invoice date, (2) all Accounts against
which the account debtor or any other person obligated to make
payment thereon asserts any defense, offset, counterclaim or other
right to avoid or reduce the liability represented by the Account
and (3) any Accounts if the account debtor or any other person
liable in connection herewith is insolvent, subject to bankruptcy
or receivership proceedings or has made an assignment for the
benefit of creditors or whose credit standing is unacceptable to
Bank and Bank has so notified Borrower. Eligible Accounts shall
only include such accounts as Bank in its sole discretion shall
determine are eligible from time to time.
5. Borrower hereby assigns to Bank all Borrower's present and future Accounts,
including all proceeds due thereunder, all guaranties and security
therefor, and hereby grants to Bank a continuing security interest in all
moneys in the Collateral Account referred to in Section 6 hereof, as
security for any and all obligations of Borrower to Bank, whether now owing
or hereafter incurred and whether direct, indirect, absolute or contingent.
So long as Borrower is indebted to Bank or Bank is committed to extend
credit to Borrower, Borrower will execute and deliver to Bank such
assignments, including Bank's standard forms of Specific or General
Assignment covering individual Accounts, notices, financing statements, and
other documents and papers as Bank may require in order to affirm,
effectuate or further assure the assignment to Bank of the Collateral or to
give any third party, including the account debtors obligated on the
Accounts, notice of Bank's interest in the Collateral.
6. Until Bank exercises its rights to collect the Accounts pursuant to
paragraph 10, Borrower will collect with diligence all Borrower's Accounts,
provided that no legal action shall be maintained thereon or in connection
therewith without Bank's prior written consent. Any collection of Accounts
by Borrower, whether in the form of cash, checks, notes, or other
instruments for the payment of money (properly endorsed or assigned where
required to enable Bank to collect same), shall be in trust for Bank, and
Borrower shall keep all such collections separate and apart from all other
funds and property so as to be capable of identification as the property of
Bank and deliver said collections daily to Bank in the identical form
received. The proceeds of such collections when received by Bank may be
applied by Bank directly to the payment of Borrower's Loan Account or any
other obligation secured hereby. Any credit given by Bank upon receipt of
said proceeds shall be conditional credit subject to collection. Returned
items at Bank's option may be charged to Borrower's general account. All
collections of the Accounts shall be set forth on an itemized schedule,
showing the name of the account debtor, the amount of each payment and such
other information as Bank may request.
7. Until Bank exercises its rights to collect the Accounts pursuant to
paragraph 10, Borrower may continue its present policies with respect to
returned merchandise and adjustments. However, Borrower shall immediately
notify Bank of all cases involving returns, repossessions, and loss or
damage of or to merchandise represented by the Accounts and of any credits,
adjustments or disputes arising in connection with the goods or services
represented by the Accounts and, in any of such events, Borrower will
immediately pay to Bank from its own funds (and not from the proceeds of
Accounts or inventory) for application to Borrower's Loan Account or any
other obligation secured hereby the amount of any credit for such returned
or repossessed merchandise and adjustments made to any of the Accounts.
8. Borrower represents and warrants to Bank: (i) if Borrower is a corporation,
that Borrower is duly organized and existing in the State of its
incorporation and the execution, delivery and performance hereof are within
Borrower's corporate powers, have been duly authorized and are not in
conflict with law or the terms of any charter, by-law or other
incorporation papers, or of any indenture, agreement or undertaking to
which Borrower is a party or by which Borrower is found or affected; (ii)
Borrower is, or at the time the collateral becomes subject to Bank's
security interest will be, the true and lawful owner of and has, or at the
time the Collateral becomes subject to Bank's security interest will have,
good and clear title to the Collateral, subject only to Bank's rights
therein; (iii) Each Account is, or at the time the Account comes into
existence will be, a true and correct statement of a bona fide indebtedness
incurred by the debtor named therein in the amount of the Account for
either merchandise sold or delivered (or being held subject to Borrower's
delivery instructions) to, or services rendered, performed and accepted by,
the account debtor; (iv) That there are or will be no defenses,
counterclaims, or setoffs which may be asserted against the Accounts; and
(v) any and all financial information, including information relating to
the Collateral submitted by Borrower to Bank, whether previously or in the
future, is or will be true and correct.
Page 1 of 2
<PAGE>
9. Borrower will: (i) Furnish Bank from time to time such financial statements
and information as Bank may reasonably request and inform Bank immediately
upon the occurrence of a material adverse change therein; (ii) Furnish
Bank periodically, in such form and detail and at such times as Bank may
require, statements showing aging and reconciliation of the Accounts and
collections thereon; (iii) Permit representatives of Bank to inspect the
Borrower's books and records relating to the Collateral and make extracts
therefrom at any reasonable time and to arrange for verification of the
Accounts, under reasonable procedures, acceptable to Bank, directly with
the account debtors or otherwise at Borrower's expense; (iv) Promptly
notify Bank of any attachment or other legal process levied against any of
the Collateral and any information received by Borrower relative to the
Collateral, including the Accounts, the account debtors or other persons
obligated in connection therewith, which may in any way affect the value of
the Collateral or the rights and remedies of Bank in respect thereto; (v)
Reimburse Bank upon demand for any and all legal costs, including
reasonable attorneys' fees, and other expense incurred in collecting any
sums payable by Borrower under Borrower's Loan Account or any other
obligation secured hereby, enforcing any term or provision of this Security
Agreement or otherwise or in the checking, handling and collection of the
Collateral and the preparation and enforcement of any agreement relating
thereto; (vi) Notify Bank of each location and of each office of Borrower
at which records of Borrower relating to the Accounts are kept; (vii)
Provide, maintain and deliver to Bank policies insuring the Collateral
against loss or damage by such risks and in such amounts, forms and
companies as Bank may require and with loss payable solely to Bank, and, in
the event Bank takes possession of the Collateral, the insurance policy or
policies and any unearned or returned premium thereon shall at the option
of Bank become the sole property of Bank, such policies and the proceeds of
any other insurance covering or in any way relating to the Collateral,
whether now in existence or hereafter obtained, being hereby assigned to
Bank; (viii) in the event the unpaid balance of Borrower's Loan Account
shall exceed the maximum amount of outstanding loans to which Borrower is
entitled under Section 1 hereof, Borrower shall immediately pay to Bank,
from its own funds and not from the proceeds of Collateral, for credit to
Borrower's Loan Account the amount of such excess.
10. Bank may at any time, without prior notice to Borrower, collect the
Accounts and may give notice of assignment to any and all account debtors,
and Borrower does hereby make, constitute and appoint Bank its irrevocable,
true and lawful attorney with power to receive, open and dispose of all
mail addressed to Borrower, to endorse the name of Borrower upon any checks
or other evidences of payment that may come into the possession of Bank
upon the Accounts to endorse the name of the undersigned upon any document
or instrument relating to the Collateral; in its name or otherwise, to
demand, sue for, collect and give acquittances for any and all moneys due
or to become due upon the Accounts; to compromise, prosecute or defend any
action, claim or proceeding with respect thereto; and to do any and all
things necessary and proper to carry out the purpose herein contemplated.
11. Until Borrower's Loan Account and all other obligations secured hereby
shall have been repaid in full, Borrower shall not sell, dispose of or
grant a security interest in any of the Collateral other than to Bank, or
execute any financing statements covering the Collateral in favor of any
secured party or person other than Bank.
12. Should: (i) Default be made in the payment of any obligation, or breach be
made in any warranty, statement, promise, term or condition, contained
herein or hereby secured; (ii) Any statement or representation made for the
purpose of obtaining credit hereunder prove false; (iii) Bank deem the
Collateral inadequate or unsafe or in danger of misuse; (iv) Borrower
become insolvent or make an assignment for the benefit of creditors; or (v)
Any proceeding be commenced by or against Borrower under any bankruptcy,
reorganization, arrangement, readjustment of debt or moratorium law or
statute; then in any such event, Bank may, at its option and without demand
first made and without notice to Borrower, do any one or more of the
following: (a) Terminate its obligation to make loans to Borrower as
provided in Section 1 hereof; (b) Declare all sums secured hereby
immediately due and payable; (c) Immediately take possession of the
Collateral wherever it may be found, using all necessary force so to do, or
require Borrower to assemble the Collateral and make it available to Bank
at a place designated by Bank which is reasonably convenient to Borrower
and Bank, and Borrower waives all claims for damages due to or arising from
or connected with any such taking; (d) Proceed in the foreclosure of Bank's
security interest and sale of the Collateral in any manner permitted by
law, or provided for herein; (e) Sell, lease or otherwise dispose of the
Collateral at public or private sale, with or without having the Collateral
at the place of sale, and upon terms and in such manner as Bank may
determine, and Bank may purchase same at any such sale; (f) Retain the
Collateral in full satisfaction of the obligations secured thereby; (g)
Exercise any remedies of a secured party under the Uniform Commercial Code.
Prior to any such disposition, Bank may, at as option, cause any of the
Collateral to be repaired or reconditioned in such manner and to such
extent as Bank may deem advisable, and any sums expended therefor by Bank
shall be repaid by Borrower and secured hereby. Bank shall have the right
to enforce one or more remedies hereunder successively or concurrently, and
any such action shall not estop or prevent Bank from pursuing any further
remedy which it may have hereunder or by law. If a sufficient sum is not
realized from any such disposition of Collateral to pay all obligations
secured by this Security Agreement, Borrower hereby promises and agrees to
pay Bank any deficiency.
13. If any writ of attachment, garnishment, execution or other legal process be
issued against any property of Borrower, or if any assessment for taxes
against Borrower, other than real property, is made by the Federal or State
government or any department thereof, the obligation of Bank to make loans
to Borrower as provided in Section 1 hereof shall immediately terminate and
the unpaid balance of the Loan Account, all other obligations secured
hereby and all other sums due hereunder shall immediately become due and
payable without demand, presentment or notice.
14. Borrower authorizes Bank to destroy all invoices, delivery receipts,
reports and other types of documents and records submitted to Bank in
connection with the transactions contemplated herein at any time subsequent
to four months from the time such items are delivered to Bank.
15. Nothing herein shall in any way limit the effect of the conditions set
forth in any other security or other agreement executed by Borrower, but
each and every condition hereof shall be in addition thereto.
*16. Additional Provisions: This Security and Loan Agreement is subject to the
terms and conditions of the Credit Terms & Conditions dated Nov. 3, 1997 as
may be amended or replaced, including the Referenced Provision therein
which are hereby incorporated and made a part hereof.
Executed this 24th day of March, 1998
VIGNETTE CORPORATION, a Delaware corporation
--------------------------------------------
(Name of Borrower)
IMPERIAL BANK BY: /s/ ILLEGIBLE VP-Operations
--------------------------------------------
(Authorized Signature and Title)
BY: BY: /s/ ILLEGIBLE COO
---------------------------- --------------------------------------------
Title (Authorized Signature and Title)
Mansoor A. Ghori, SVP and
Manager
*If none, insert "None"
Page 2 of 2
<PAGE>
IMPERIAL BANK
Member FDIC
November 3, 1997
226 Airport Parkway
San Jose, CA 95110
Subject: Credit Terms and Conditions ("Agreements")
Borrower: Vignette Corporation
Gentlemen:
To induce you to make loans to the undersigned (herein called "Borrower"), and
in consideration of any loan or loans you, in your sole discretion, may make to
Borrower, Borrower warrants and agrees as follows:
A. Borrower represents and warrants that:
1. EXISTENCE AND RIGHTS.
Borrower is a Delaware corporation.
Borrower is duly organized and existing and in good standing under the laws of
the State of Delaware and is authorized and in good standing to do business in
the State of Texas. Borrower has powers and adequate authority, rights and
franchises to own its property and to carry on its business as now conducted,
and is duly qualified and in good standing in each State in which the character
of the properties owned by it therein or the conduct of its business makes such
qualification necessary, and Borrower has the power and adequate authority to
make and carry out this Agreement. Borrower has no investment in any other
business entity.
2. AGREEMENT AUTHORIZED. The execution, delivery and performance of this
Agreement are duly authorized and do not require the consent or approval of any
governmental body or other regulatory authority; are not in contravention of or
in conflict with any law or regulation or any term or provision of Borrower's
articles of incorporation, by-laws, or Articles of Association, as the case may
be, and this Agreement is the valid, binding and legally enforceable obligation
of Borrower in accordance with its terms.
3. NO CONFLICT. The execution, delivery and performance of this Agreement
are not in contravention of or in conflict with any agreement, indenture or
undertaking to which Borrower is a party or by which it or any of its property
may be bound or affected, and do not cause any lien, charge or other encumbrance
to be created or imposed upon any such property by reason thereof.
4. LITIGATION. There is no litigation or other proceeding pending or
threatened against or affecting Borrower, and Burrower is not in default with
respect to any order, writ, injunction, decree or demand of any court or other
governmental or regulatory authority.
5. FINANCIAL CONDITION. The balance sheet of Borrower as of July 97, and
the related profit and loss statement for the 7 months ended on that date, a
copy of which has heretofore been delivered to you by Borrower, and all other
statements and data submitted in writing by Borrower to you in connection with
this request for credit are true and correct, and said balance sheet and profit
and loss statement truly present the financial condition of Borrower as of the
date thereof and the results of the operations of Borrower for the period
covered thereby, and have been prepared in accordance with generally accepted
accounting principles on a basis consistently maintained. Since such date there
have been no materially adverse changes in the financial condition or business
of Borrower. Borrower has no knowledge of any liabilities, contingent or
otherwise, at such date not reflected in said balance sheet, and Borrower has
not entered into any special commitments or substantial contracts which are not
reflected in said balance sheet, other than in the ordinary and normal course of
its business, which may have a materially adverse effect upon its financial
condition, operations or business as now conducted.
6. TITLE TO ASSETS. Borrower has good title to its assets, and the same are
not subject to any liens or encumbrances other than those permitted by Section
C.3 hereof.
7. TAX STATUS. Borrower has no liability for any delinquent state, local or
federal taxes, and if Borrower has contracted with any government agency,
Borrower has no liability for renegotiation of profits.
8. TRADEMARKS, PATENTS. Borrower, as of the date hereof, possesses all
necessary trademarks, trade names, copyrights, patents, patent rights, and
licenses to conduct its business as now operated, without any known conflict
with the valid trademarks, trade names, copyrights, patents and license rights
of others.
9. REGULATION U. The proceeds of this loan shall not be used to purchase or
carry margin stock (as defined with Regulation U of the Board of Governors of
the Federal Reserve system).
B. Borrower agrees that so long as it is indebted to you, it will, unless you
shall otherwise consent in writing:
1. RIGHTS AND FACILITIES. Maintain and preserve all rights, franchises and
other authority adequate for the conduct of its business; maintain its
properties, equipment and facilities in good order and repair; conduct its
business in an orderly manner without voluntary interruption and, if a
corporation or partnership, maintain and preserve its existence.
2. INSURANCE. Maintain public liability, property damage and workers'
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to the extent usually
maintained by similar businesses.
3. TAXES AND OTHER LIABILITIES. Pay and discharge, before the same become
delinquent and before penalties accrue thereon, all taxes, assessments and
governmental charges upon or against it or any of its properties, and all its
other liabilities at any time existing, except to the extent and so long as:
(a) The same are being contested in good faith and by appropriate
proceedings in such manners as not to cause any materially adverse effect upon
its financial condition or the loss of any right of redemption from any sale
thereunder, and
(b) It shall have set aside on its books reserves (segregated to the extent
required by generally accepted accounting practice) deemed by it adequate with
respect thereto.
4. RECORDS AND REPORTS. Maintain a standard and modern system of accounting
in accordance with generally accepted accounting principles on a basis
consistently maintained; permit your representatives to have access to, and to
examine its properties, books and records at all reasonable times; and furnish
you:
(a) As soon as available, and in any event within 30 days after the close of
each month of each fiscal year of Borrower, commencing with the month next
ending, a balance sheet, profit and loss statement and reconciliation of
Borrower's capital accounts as of the close of such period and covering
operations for the portion of Borrower's fiscal year ending on the last day of
such period, all in reasonable detail and stating in comparative form the
figures for the corresponding date and period in the previous fiscal year,
prepared in accordance with generally accepted accounting principles on a basis
consistently maintained by Borrower and certified by an appropriate officer of
Borrower, subject, however, to year-end audit adjustments;
(b) As soon as available, and in any event within 90 days after the close of
each fiscal year of Borrower, a report of annual statements of Company as of the
close of and for such fiscal year, all in reasonable detail and stating in
comparative form the figures as of the close of and for the previous fiscal
year, with the unqualified opinion of accountants satisfactory to you.
<PAGE>
(c) Within 30 days after the close of each month of each fiscal year of
Borrower, a certificate by chief financial officer or partner of Borrower,
stating that Borrower has performed and observed each and every covenant
contained in this Letter of Inducement to be performed by it and that no event
has occurred and no condition then exists which constitutes an event of default
hereunder or would constitute such an event of default upon the lapse of time or
upon the giving of notice and the lapse of time specified herein, or, if any
such event has occurred or any such condition exists, specifying the nature
thereof;
(d) Promptly after the receipt thereof by Borrower, copies of any detailed
audit reports submitted to Borrower by independent accountants in connection
with each annual or interim audit of the accounts of Borrower made by such
accountants;
(e) Promptly after the same are available, copies of all such proxy statements,
financial statements and reports as Borrower shall send to its stockholders, if
any, and copies of all reports which Borrower may file with the Securities and
Exchange Commission or any governmental authority at any time substituted
therefor; and
(f) Such other information relating to the affairs of Borrower as you
reasonably may request from time to time.
(g) Notice of Default. Promptly notify the Bank in writing of the occurrence of
any event of default hereunder or any event which upon notice and lapse of time
would be an event of default.
C. Borrower agrees that so long as it is indebted to you, it will not, without
your written consent:
1. TYPE OF BUSINESS; MANAGEMENT. Make any substantial change in
the character of its business; or make any change in its executive management,
except as necessary in the ordinary course of business.
2. OUTSIDE INDEBTEDNESS. Create, incur, assume or permit to exist
any indebtedness for borrowed moneys other than loans from you except
obligations now existing as shown in financial statement dated July 97,
excluding those being refinanced by your bank; or sell or transfer, either with
or without recourse, any accounts or notes receivable or any moneys due to
become due.
3. LIENS AND ENCUMBRANCES. Create, incur, or assume any mortgage,
pledge encumbrance, lien or charge of any kind (including the charge upon
property at any time purchased or acquired under conditional sale or other title
retention agreement) upon any asset now owned or hereafter acquired by it
including but not limited to intellectual property, other than liens for taxes
not delinquent and liens in your favor.
4. LOANS, INVESTMENTS, SECONDARY LIABILITIES. Make any loans or advances
to any person or other entity other than in the ordinary and normal course of
its business as now conducted or make any investment in securities other than
United States Government Treasuries or Agencies, Imperial Bank sponsored paper,
or the Monarch Money Market Funds; or guarantee or otherwise become liable upon
the obligation of any person or other entity, except by endorsement of
negotiable instruments for deposit or collection in the ordinary and normal
course of its business.
5. ACQUISITION OR SALE OF BUSINESS; MERGER OR CONSOLIDATION. Purchase or
otherwise acquire the assets or business of any person or other entity; or
liquidate, dissolve, merge or consolidate, or commence any proceedings therefor;
or sell any assets except in the ordinary and normal course of its business as
now conducted; or sell, lease, assign, or transfer any substantial part of its
business or fixed assets, or any property or other assets necessary for the
continuance of its business as now conducted including without limitation the
selling of any property or other asset accompanied by the leasing back of the
same.
6. DIVIDENDS, STOCK PAYMENTS. If a corporation, declare or pay any
dividend (other than dividends payable in common stock of Borrower) or make any
other distribution on any of its capital stock now outstanding or hereafter
issued or purchase, redeem or retire any of such stock.
D. The occurrence of any one of the following events of default shall, at your
option, terminate your commitment to lend and make all sums of principal and
interest then remaining unpaid on all Borrower's indebtedness to you immediately
due and payable, all without demand, presentment or notice, all of which are
hereby expressly waived.
1. FAILURE TO PAY. Failure to pay any installment of principal or of
interest on any indebtedness of Borrower to you.
2. BREACH OF COVENANT. Failure of Borrower to perform any other terms or
conditions of this Agreement or any other agreement between Borrower and Bank
binding upon Borrower.
3. BREACH OF WARRANTY. Any of Borrowers representations or warranties made
herein or any statement or certificate at any time given in writing pursuant
hereto or in connection herewith shall be false or misleading in any material
respect.
4. INSOLVENCY; RECEIVER OR TRUSTEE. Borrower shall become insolvent; or
admit its inability to pay its debts as they mature; or make an assignment for
the benefit of creditors; or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business.
5. JUDGMENTS, ATTACHMENTS. Any money judgment, writ or warrant of
attachment, or similar process shall be entered or filed against Borrower or any
of its assets and shall remain unvacated unbonded or unstayed for a period of 10
days or in any event later than five days prior to the date of any proposed sale
thereunder.
6. BANKRUPTCY. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against Borrower and, if
instituted against it, shall be consented to.
E. MISCELLANEOUS PROVISIONS.
1. FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of
your Bank or any holder of Notes issued hereunder, in the exercise of any power,
right or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege. All
rights and remedies existing under this agreement or any note issued in
connection with a loan that your Bank may make hereunder, are cumulative to, and
not exclusive of, any rights or remedies otherwise available.
The Commitment Letter dated September 29, 1997, is attached hereto and
incorporated herein by this reference for additional terms. In the event of a
conflict between this Agreement and the Letter, the terms in the Letter shall
take precedence.
Vignette Corporation
By /s/ JACK F. LYNCH
-------------------------------------
(Authorized Signature)
By Jack F. Lynch
-------------------------------------
(Print Name)
By VP - Operations
-------------------------------------
(Title)
By /s/ ROSS B. GARBER
-------------------------------------
(Authorized Signature)
By Ross B. Garber
-------------------------------------
(Print Name)
By President & CEO
-------------------------------------
(Title)
<PAGE>
Exhibit 10.7
BASIC LEASE INFORMATION
The following Basic Information is incorporated into and made a part of this
lease. Each reference in this lease to any of the Basic Lease Information shall
mean the respective information set forth below and shall be construed to
incorporate all of the terms provided under the particular lease paragraph(s)
pertaining to such information. In the event of a conflict between any Basic
Lease Information and the lease, the lease shall control.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
IDENTIFICATION DATE OF LEASE: 06/20/96 X New Renewal Expansion Other
----- ----- ----- -----
1. Name of Building: One Far West Plaza Address: 3410 Far West Boulevard / Austin, TX 78731
------------------------------ ----------------------------------------------
2. Owner/Lessor: David B. Barrow, Jr. Address: 3633 North Hills Drive / Austin, TX 78731
--------------------------------- ---------------------------------------------
3. Suite Number: 300
----------------
4. Usable SF: 10,886 Add-on Factor: 15% Rentable SF: 12,519
---------- ---------------- -------------------
5. Lessee Name: Vignette Corporation
-----------------------------------------------------------------------------------------
a) Lessee is X a corporation.
---
Lessee Address for Notice:
------------------------------------------
Lessee Contact Person: Ross Garber Phone: 512-502-9203(6) Fax: None
--------------- --------------- ---------------------------
Lessee Taxpayer ID#: 76-2769415 SS#: ###-##-#### DL#/State: 16940347 / Texas
---------------- ----------------- --------------------------
6. Lease Term: Thirty-Six (36) full calendar months
----------------
Commencement Date: 07/11/96/1/ Expiration Date: 06/30/99
-------- --------
Rent and Pass Thru Commencement Date: 07/11/96/1/ Expiration Date: 06/30/99
-------- --------
7. Base Rent: Term Monthly Rent Annual Rent Annual Rent psf of NRA
---- ------------ ----------- ----------------------
From 07/11/96 To 06/30/96 $17,735.25 $212,823.00 $17.00
From 07/01/97 To 06/30/98 $18,256.88 $219,082.56 $17.50
From 07/01/98 To 06/30/99 $18,778.50 $225,342.00 $18.00
Late Charge: 5 % of monthly base rent. Date assessed: Five (5) days after due date.
------------------------------ ----------------------------
8. Expense Stop: 1996 Base Year (estimated to be $5.75) per square foot per year
--------------------------------------
Estimated Operating Expenses Per Budget $ 1996 Base Year /sq.ft./year
-----------------------------
Less Expense Stop $ 1996 Base Year /sq.ft./year
-----------------------------
Estimated Initial Pass-Thru $ 0.00 /sq.ft./year
-------------------
Estimated Monthly Pass-Thru (actual)/2/ $ 0.00 /mo.
-----------
(Subject to annual adjustment for actual expenses)
9. Parking: Number of Spaces: Fifty (1:250 ratio) (unreserved) Rate Per Space $ 0.00 / month unreserved
--------------------- --------
10. Security Deposit: a) Amount: $17,735.25 (first month's rent)
----------
b) Paid by Cash: X Yes No
----- ----
11. Tenant Finish Out Provisions:
As Is
------------
$3.50 /sq.ft. of net usable area allowance
-----------------------
$38,101.00 allowance (actual amount)
------------
</TABLE>
- --------
/1/ - See Exhibit J, Special Conditions, Paragraph #2 "Lease Commencement".
/2/ - After 1996 the controllable expenses will be capped at 6% (cumulative)
per year.
Page 1 of 3
Lessor /s/ DB
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Lessee /s/ RBG
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<PAGE>
<TABLE>
<S> <C> <C>
Amount of coverage owed by Tenant $ Payment Schedule:
------------- ----------------
Notes: See Exhibit E.
13. Guaranty Information:
This lease is X is not (check one) guaranteed by others. The name and
----- ------
title of each guarantor is shown below a and on the signature page(s) at
the end of this lease.
14. Lessee Signature Requirements:
Lessee is (X) a corporation (check one).
Such partnership, joint venture, unincorporated association, or corporation
is organized or chartered under the laws of the State of Delaware.
---------
Lessee's name stated at the beginning of this lease ( ) is or (X) is not an assumed name. If so, has an
assumed name certificate been received? Yes No
----- -----
15. Broker Information:
a) Listing Broker: Jeff Henley/The Kucera Company
------------------------------
b) Leasing Co-Broker and Company: Keith Zimmerman
------------------------------
c) Tenant Rep letter attached: Yes No %
----- ----- -----
d) Written agreement for renewal commission: Yes No _____ %
----- -----
</TABLE>
Page 2
Lessor /s/ DB
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Lessee /s/ RBG
-------
<PAGE>
16. Signatures:
LESSOR LESSEE
David B. Barrow, Jr. Vignette Corporation
----------------------------------- -------------------------------
Printed name of company or firm Printed name of company or firm
David B. Barrow, Jr. Ross Garber
----------------------------------- -------------------------------
Printed name of person signing Printed name of person signing
/s/ David B. Barrow, Jr. /s/ Ross Garber
----------------------------------- -------------------------------
Authorized Person's Signature Authorized Person's Signature
Owner President
----------------------------------- -------------------------------
Title of person signing Title of person signing
7/1/96 6/26/96
----------------------------------- -------------------------------
Date signed (must be filled in) Date signed (must be filled in)
GUARANTOR LESSEE
----------------------------------- -------------------------------
Printed name of company or firm Printed name of company or firm
----------------------------------- -------------------------------
Printed name of person signing Printed name of person signing
----------------------------------- -------------------------------
Authorized Person's Signature Authorized Person's Signature
----------------------------------- -------------------------------
Title of person signing Title of person signing
----------------------------------- -------------------------------
Date signed (must be filled in) Date signed (must be filled in)
Page 3
Lessor /s/ DB
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Lessee /s/ RBG
-------
<PAGE>
INDEX TO OFFICE LEASE
DAVID B. BARROW JR. (Lessor) and
VIGNETTE CORPORATION (Lessee)
SECTION TITLE Lease Page
1.1 The leased premises.................................................3
1.2 Use.................................................................3
1.3 Usable area.........................................................3
1.4 Rentable area.......................................................3
2.1 Base rent and additional rents......................................3
3.1 Date and place of payment...........................................3
3.2 Late payments.......................................................4
3.3 Security deposit....................................................4
4.1 Term, possession, and anniversary...................................4
4.2 Acknowledgment of lease.............................................4
4.3 Delivery of possession..............................................4
5.1 Tenant finish-out...................................................4
6.1 Quiet possession....................................................4
7.1 Utilities and services by lessor....................................5
7.2 Utilities and services by lessee....................................5
7.3 Interruption of utilities or services...............................5
7.4 Extra electricity...................................................5
7.5 Extra heating or air conditioning...................................5
8.1 Maintenance and repairs by lessor...................................5
8.2 Maintenance and repairs by lessee...................................6
8.3 Telecommunications..................................................6
9.1 Access, keys, locks and security....................................6
9.2 Parking.............................................................6
10. Occupancy, nuisance, and hazards....................................7
11.1 Taxes...............................................................7
12.1 Insurance...........................................................7
12.2 Waiver of subrogation...............................................8
12.3 Hold harmless.......................................................8
13.1 Alterations by lessee...............................................8
13.2 Americans with disabilities act.....................................8
14.1 Removal of property by lessee.......................................9
15.1 Subletting and assignments..........................................9
16.1 Destruction by fire or other casualty...............................9
17.1 Condemnation........................................................9
18.1 Default by lessor..................................................10
19.1 Default by lessee..................................................10
20.1 Lien for rent......................................................11
21.1 Attorney's fees, interest, and other expenses......................11
22.1 Nonwaiver..........................................................12
23.1 Building rules.....................................................12
24.1 Transfer of ownership by lessor....................................12
25.1 Mortgages..........................................................12
26.1 Surrender of premises..............................................12
27.1 Holding over.......................................................12
28.1 Signs and building name............................................13
28.2 Relocation of lessee...............................................13
29.1 Notices............................................................13
30.1 Estoppel certificate...............................................13
Page 1
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Lessee /s/ RBG
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<PAGE>
31.1 Successors.........................................................13
31.2 Lease agent commissions............................................13
32.1 Building operating expense.........................................13
33.1 Representations and warranties by lessor...........................13
34.1 Representations and warranties by lessee...........................14
35.1 Place of performance...............................................14
36.1 Miscellaneous......................................................14
37.1 Special conditions.................................................14
38.1 Exhibit list.......................................................14
39.1 Lease dates and authority to sign..................................15
Exhibit Page
Exhibit A Floor Plan of Lessee's Office Space (paragraph 1.1)...........16
Exhibit B Legal Description of Office Building (paragraph 1.1)..........17
Exhibit C Building Operating Expense Passthrough Calculations
(paragraphs 2.1 and 32.1).....................................18
Exhibit D Acknowledgment of Lease (paragraph 4.2).......................20
Exhibit E Construction by Lessor (paragraph 5.1)........................22
Exhibit F-1 Office Parking Rules (paragraph 9.2)..........................24
Exhibit F-2 Office Building Rules (paragraph 9.2 and 23.1)................29
Exhibit G Estoppel Certificate (paragraph 30.1).........................27
Exhibit H Office Lease Guaranty (paragraph 37.1)........................29
Exhibit I Certificate Of Corporate Resolution
Authorizing Lease or Guaranty (paragraphs 37.1 and 39.1)......31
Exhibit J Special Conditions (paragraph 37.2) Financial
Statement requirement.........................................33
Exhibit K Hazardous Materials Statements................................34
Exhibit L Acknowledgement of Receipt of Agency Disclosure...............35
Exhibit M Renewal Option................................................37
Exhibit N Right of First Refusal........................................38
Page 2
Lessor /s/ DB
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Lessee /s/ RBG
-------
<PAGE>
OFFICE LEASE
ONE FAR WEST PLAZA
------------------
This is a Lease Agreement made and entered into between Lessor Name Specified in
------------------------
Basic Lease Information #2, as "Lessor", and Lessee Name Specified in Basic
- -------------------------- ------------------------------
Lease Information #5, as "Lessee", whether one or more.
- --------------------
1.1 THE LEASED PREMISES. Lessor hereby leases to Lessee, and Lessee hereby
leases from Lessor the "Leased Premises" which consists of "Lessee's Office
Space" and "Common Areas" as defined below.
(a) LESSEE'S OFFICE SPACE. "Lessee's Office Space", to
which Lessee shall have exclusive use rights, consists of suite(s) Specified in
------------
Basic Lease Information #3, representing the office space outlined and shaded
- --------------------------
on the floor plan contained in Exhibit A. Such space is located in the building
on a tract of land, legally described by lot and block or metes and bounds in
Exhibit B. The street address of the building is Specified in Basic Lease
------------------------
Information #1.
- ---------------
(b) COMMON AREAS. The "common area", to which Lessee
shall have non-exclusive use rights, consists of (1) the interior common area
located in the above described building, i.e., areas normally accessible to
tenants such as the hallways, stairwells, elevators, lobby, restrooms, and snack
bar areas, and (2) the exterior common area located outside the building on the
above described land, i.e., loading areas, sidewalks, driveways, parking garage,
parking areas, and other open areas (if any), subject to paragraph 9.2 on
parking.
1.2 USE. Lessee's office space may be used only for any legal purposes. The
name of Lessee's business is Specified in Basic Lease Information #5.
---------------------------------------
1.3 USABLE AREA. Lessee's approximate "usable area" is Specified in Basic
------------------
Lease Information #4. It is the office space outlined and shaded in Exhibit A.
- --------------------
Such areas is measured from the interior of the exterior walls and the exterior
glass lines of the building to the middle of the remaining perimeter walls of
the office space. This is in accordance with the BOMA International Standard of
Floor Measurement.
1.4 RENTABLE AREA. Lessee's approximate "rentable area" is Specified in Basic
------------------
Lease Information #4. It consists of Lessee's "usable area" as defined above,
- --------------------
plus Lessee's prorata share of the building common areas as set forth in Basic
--------
Lease Information #4. Building common areas are defined in all corridors,
- --------------------
restrooms, snack bars, building equipment rooms, telephone closets, janitor
closets, enclosed lobby, entrance areas, and other public areas in the building,
excluding elevator shafts, stairwells, vertical chases, and enclosed parking
areas. This is in accordance with the BOMA International Standard of Floor
Measurement.
2.1 BASE RENT AND ADDITIONAL RENTS. Lessee shall pay to Lessor a "base rent"
Specified in Basic Lease Information #7 per calendar year, which amounts to the
- ---------------------------------------
sum(s) Specified in Basic Lease Information #7 per calendar month. Such base
---------------------------------------
rent is equivalent to the sums Specified in Basic Lease Information #7 per
---------------------------------------
square foot per year for Lessee's rentable area. The base rent is subject to
adjustment as provided in paragraph 32.1. Additional rent (representing
Lessee's prorata share of building operating expenses over the expense stop
---------------------
Specified in Basic Lease Information #8 shall be paid in accordance with
- ---------------------------------------
paragraph 32.1. Building operating expenses up to such expense stop amount
shall be paid by Lessor. After 1996, controllable expenses will be capped at 6%
(cumulative) per year.
3.1 DATE AND PLACE OF PAYMENT. The monthly rent and one-twelfth of Lessee's
---------------------------
share of estimated building operating expenses under paragraph 32.1 shall be due
- -------------------------------------------------------------------
on the first day of each calendar month without demand. Partial months shall be
prorated. All rent and other sums are due in the county where the building is
located at the address designated by Lessor from time to time. All sums due by
Lessee are without right of setoff or deduction. Monies mailed are considered
timely paid only if received by Lessor by the due date; however rents postmarked
--------
one or more days before due date and received after the due date shall be
considered as timely received by Lessor. Rent and late payment charges shall be
paid without notice or demand. All other sums shall be due upon delivery of
written notice in accordance with paragraph 29.1.
Page 3
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Lessee /s/ RBG
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<PAGE>
3.2 LATE PAYMENTS. If any rent payment or other sum due by Lessee to Lessor is
received and accepted by Lessor later than five (5) days after its due date,
Lessee shall pay a late charge of 5% of such rent payment or other sum plus 1%
thereof for each day thereafter (for up to 15 days) until such rent or other sum
is paid. Late charges shall be considered liquidated damages for Lessor's time
inconvenience and overhead (except for attorneys fees and litigation costs) in
collecting late rent. Lessor's acceptance of late rent or other sum shall not
constitute permission for Lessee to pay the rent or other sum late thereafter
and shall not constitute a waiver of Lessor's remedies for subsequent late
payments. Late payment charges are due immediately upon notice or demand. All
payments shall be by check or money order on a local bank, not cash. For each
returned check, Lessee shall pay all applicable bank charges incurred by Lessor
plus $50.00. Payments of any kind received by Lessor on behalf of Lessee may be
applied at Lessor's option to nonrent items first, then to rent. Payment of
rent by Lessee shall be an independent covenant. If Lessee has not timely paid
rentals and other sums due on two or more occasions, or if a check from Lessee
is returned for insufficient funds or no account, Lessor may for the next 12
months require that all rent and other sums be due be paid by cashier's check,
certified check, or money order, without prior notice.
3.3 SECURITY DEPOSIT. At the time of execution of this lease, Lessee shall
deposit with Lessor cash in the sum Specified in Basic Lease Information #10 to
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secure performance of Lessee's obligations under this lease. Lessor shall have
a lien on the security deposit for that purpose. If Lessee fails to pay rent or
other sums when due under this lease, Lessor may apply any cash security deposit
toward amounts due and unpaid by Lessee. Lessee shall immediately restore the
security deposit to its original amount after any portion of it is applied to
amounts due and unpaid by Lessee.
4.1 TERM, POSSESSION, AND ANNIVERSARY. The initial lease term shall be for the
number of full calendar months from commencement date, plus the remainder of the
last month. The commencement date of this lease shall be the later of (a) the
date Specified in Basic Lease Information #6, (b) the date Lessee opens for
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business in Lessee's office space, or (c) five (5) days after Lessor delivers
possession of Lessor's office space to Lessee and give Lessee written notice
that Lessor's work (as described in Exhibit E) is substantially complete.
Lessor's anticipated delivery date of possession is July 11, 1996. If Lessor
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delays in delivering possession of Lessee's office space as shown on Exhibit A,
the commencement and anniversary dates shall be delayed in accordance with
Exhibit D. See Exhibit J, Special Conditions, Paragraph 2.
4.2 ACKNOWLEDGMENT OF LEASE. Upon commencement of this lease, Lessor and
Lessee shall execute a recordable acknowledgement of this lease which is
attached as Exhibit D and which will confirm the commencement date, ending date,
annual anniversary date of the lease, and approximate square footage in Lessee's
office space.
4.3 DELIVERY OF POSSESSION. Lessor shall deliver keys and/or access cards or
codes and possession of Lessee's office space to Lessee on the lease
commencement date stated in paragraph 4.1 unless otherwise agreed in writing by
the parties. Lessee shall not be liable for rent until Lessor delivers
possession of the leased premises to Lessee. If there is a delay in delivery of
possession, rent shall be abated until Lessee's office space is ready for
occupancy; and neither Lessor nor Lessor's agents shall otherwise be liable for
any damages; and the lease shall not terminate. Internal construction shall, to
the extent "readily achievable", comply with the state and federal architectural
barrier standards.
5.1 TENANT FINISH-OUT. (Check one):
(a) Lessor shall provide no tenant finish-out or improvements since
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Lessee has taken Lessee's office space "as is".
X (b) Lessor shall perform any special construction described in
----
Exhibit E. Costs of tenant finish-out or special construction shall be
paid for pursuant to such exhibit.
6.1 QUIET POSSESSION. If Lessee is current and in compliance with all of
Lessee's obligations under this lease, Lessee shall be entitled to peaceful and
quiet possession and enjoyment of Lessee's office space, subject to the terms
and conditions of this lease. Lessee shall have access to the building parking
garage, if applicable and common parking areas at all times, subject to parking
fees and the rules referred to in paragraphs 9.2 and 23.1. Lessor shall make
diligent efforts to have all other tenants in the building comply with building
rules. Otherwise, failure of other
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tenants to comply with such rules shall not be considered a default by Lessor.
Construction noise or vibrations shall not be considered a default by Lessor.
7.1 UTILITIES AND SERVICES BY LESSOR. Except where otherwise stated in
this lease, Lessor shall pay for and furnish in a timely and diligent manner to
Lessee the following utilities (subject to Lessee being required to pay for same
directly to the utility provider) and services and no others, subject to
paragraph 32.1 regarding Lessee's payment of Lessee's prorata share of building
operating expenses.
(a) air conditioning and heating as reasonably required for
comfortable use and occupancy under normal office conditions from 7:00 a.m. to
7:00 p.m. on Monday through Friday, and from 8:00 a.m. to 1:00 p.m. on Saturday
upon request, but not on Sunday, New Year's Day, Memorial Day, July 4/th/, Labor
Day, Thanksgiving or Christmas and after 6:00 p.m. on Christmas Eve and New
Year's Eve so long as these times and dates comply with present and future
governmental laws or guidelines, including utilities such as electricity, gas,
and water necessary for operation of same;
(b) water and wastewater services for common area;
(c) janitorial and cleaning services for the building five days a
week;
(d) electricity for standard office equipment and lighting;
(e) trash collection services (dumpster or garbage cans);
(f) pest control services as needed in the reasonable judgment of
Lessor;
(g) landscaping and parking lot maintenance services;
(h) repair and maintenance services pursuant to paragraph 8.1;
(i) replacement of fluorescent light bulbs and ballasts in
building standard lighting fixtures (but not incandescent light bulbs for
nonstandard fixtures or for Lessee's lamps); and
(j) elevator service, if there is an elevator in the building.
7.2 UTILITIES AND SERVICES BY LESSEE. If applicable, Lessee shall pay for all
utilities and services not expressly furnished by Lessor under paragraph 7.1.
7.3 INTERRUPTION OF UTILITIES OR SERVICES. Temporary interruption or
malfunction of utilities, services, and/or telephones shall not render Lessor
liable for damages, rent abatements, or release of any Lessee obligation.
Lessor shall use diligent efforts to have such utilities and services restored
as soon as reasonably possible. Lessee shall have the right to terminate this
Lease if an interruption in the utilities or services continues for five (5)
consecutive days, and such interruption is determined to be the result of the
negligence or willful misconduct of Lessor or its agents or employees.
7.4 EXTRA ELECTRICITY. There shall be no extra electricity charges for
typewriters, computers, servers, facsimile machines, word processors, dictating
equipment, adding machines, desk top calculators, lamps, or other standard 110
volt office equipment. However, Lessee shall pay Lessor monthly, as billed, for
charges which are separately metered or which Lessor may reasonably compute for
electricity utilized by Lessee for the following purposes: x-ray machines,
hotplates, electric heaters, 220 volt equipment, mainframe computers, or other
electrical service not standard for the building.
7.5 EXTRA HEATING OR AIR CONDITIONING. If Lessee requests air conditioning or
heating after the hours as set forth in paragraph 7.1(a), Lessor may charge
Lessee the lower of the same extra hourly fee charged by Lessor for after- hour
conditioning or heating to other tenants in the building or $5.00 per hour
during the term and any renewal.
8.1 MAINTENANCE AND REPAIRS BY LESSOR. Lessor shall repair and/or replace, as
needed, the following items as a building expense under paragraph 32.1, so long
as they are building standard items: light bulbs, ballasts, and fixtures,
plumbing; hardware; appliances; doors; and wall and window coverings. Lessor
shall use diligence to provide for the reasonable cleaning, maintenance, repair,
reconnection of interrupted utilities or services, and landscaping of common
areas, subject to any reimbursement obligations of Lessee under paragraph 8.2.
Lessor may rekey at any time. Lessor may temporarily close any part of the
common facilities if reasonably necessary for repairs or construction. Repairs
and maintenance shall be in accordance with applicable governmental
requirements. Lessor shall not change the Common Areas in a manner which
materially or unreasonably interferes with the
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Lessee's use of the Premises or allow any person or entity other than tenants of
the building and Lessee and their respective agents, employees, customers,
licensees, and invitees, to use the Common Area.
8.2 MAINTENANCE AND REPAIRS BY LESSEE. Lessee shall promptly reimburse Lessor
for the cost of repairing or replacing non-building standard items and the cost
of repairing or replacing damage which is caused inside Lessee's office space by
Lessee, Lessee's agents, employees, family, or licensees, invitees, visitors, or
customers or outside Lessee's office space by Lessee or Lessee's employee's,
agents, or contractors. Lessor may require advance payment therefor prior to
repair or replacement. Lessor shall have right of approval for all repairmen or
maintenance personnel. Lessee shall not damage or allow other persons listed
above to damage any portion of the leased premises. Lessee shall pay for
replacement of all non-building standard light bulbs and for unstopping any
drains or water closets in Lessee's office space. If Lessee or Lessee's workmen
or contractors are permitted to repair, alter, or modify Lessee's office space,
Lessee shall warrant that no mechanic or materialmen's lien shall be filed
against the leases premises and that all such contractors shall provide evidence
of liability insurance as required by Lessor. All such work shall be in
accordance with applicable governmental requirements.
8.3 TELECOMMUNICATIONS. All telecommunications equipment necessary to serve
Lessee shall be located in Lessee's office space and paid for by Lessee, or, at
Lessor's option and at Lessee's expense, in a lockable enclosure in a common
area location designated by Lessor. Lessee may not require Lessor to install or
allow others to install telecommunication lines or equipment elsewhere in the
building. Lessee expressly waives any rights to require same under any
circumstances. Lessor agrees to and acknowledges that Lessee will use the
existing telephone and computer system left by the previous tenant and that such
telecommunication equipment will continue to be located in the Common area.
9.1 ACCESS, KEYS, LOCKS AND SECURITY. (a) Access. Lessee shall have access to
Lessee's office space at all times. Lessor shall have access to Lessee's office
space at reasonable times for reasonable business purposes upon 24 hours prior
notice to Lessee except notice shall not be necessary in the event of an
emergency threatening life or property or the lawful exercise of Lessor's
remedies in case of default by Lessee. Lessor may show Lessee's office space
ninety (90) days before the lease expiration date or the date Lessee gives
notice to vacate, whichever is earlier. Lessee shall have the right to escort
prospective tenants through Lessee's office space. Lessee has the right to
refuse access to their space to a direct competitor.
(b) Keys. Lessor shall furnish Lessee up to five (5) keys or
access codes or cards for Lessee's office space, up to five (5) keys or access
codes or cards for the main exterior entry doors of the building if such door is
locked after hours, and two (2) keys or access codes or cards to Lessee's
mailbox in the building. An initial deposit of $10.00 shall be charged for each
mailbox key and office key, or access card. Additional or replacement keys or
access codes or cards shall be furnished at the same deposit charged to all
other tenants in the building at the time of Lessee's request. Lessor shall not
be liable for risk of loss resulting from Lessee's keys, access codes, or cards
being stolen, lost or used by unauthorized persons. Lessor reserves the right to
rekey or charge locks for security reasons if new keys are timely furnished to
Lessee. Lessor shall re-key the space prior to Lessee occupancy.
(c) Locks. Lessee may not add locks, change locks, or rekey locks
without written permission of Lessor. Locks may be changed at Lessee's request
and expense. If locks to the office space are changed, Lessor may specify kind
and brand of locks, placement, installation, master key compatibility, etc. If
Lessee or any of Lessee's employees lock themselves out of Lessee's suite, said
person must call a fellow-employee to gain access. Neither Lessor nor the
management company personnel are authorized to unlock a door after hours except
for emergency or cleaning purposes.
(d) Security. Lessor shall have no duty to provide any security
services of any kind unless expressly provided in this lease. Lessor shall not
be liable to Lessee or Lessee's employees, family, customers, invitees,
contractors, or agents for injury, damage, or loss to person or property caused
by criminal conduct of other persons, including theft, burglary, assault,
vandalism or other crimes. Lessee shall lock its office space doors when the
last person leaves such office space for the day.
9.2 PARKING. (a) Lessor shall have sole control over parking. Lessor agrees
to provide Lessee with at least fifty (50) surface parking spaces (based on
1:250 sf ratio) to Lessee's employees. Parking rules, if applicable, are
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contained in attached Exhibit F-1. If vehicles are parked in violation of
Lessor parking rules or in violation of state statutes, Lessor may exercise
vehicle removal remedies under Article 6701g-2 of the Texas Civil Statutes upon
compliance with statutory notice. There shall be no reserved parking spaces
unless agreed in writing by Lessor. If applicable, Lessee and Lessee's
employees and customers shall have exclusive right to park in Lessee's assigned
parking spaces which are shown on the map contained in Exhibit A.
(a)
(b) Lessee shall have the right to rent from Lessor, on a month-
to-month basis at rates in effect from time to time, one vehicle parking space
in the building's parking area (if applicable) for each 250 square feet of
Lessee's rentable area as set forth in paragraph 1.4. Such parking spaces shall
not be specified permanent spaces unless otherwise agreed in writing by Lessor.
Lessor shall have sole control over the parking of all vehicles (including but
not limited to cars, trucks, recreational vehicles, trailers, bicycles, and
motorcycles) and shall designate parking areas and building service areas.
Parking rules are contained in attached Exhibit F-1.
10.
10.1 OCCUPANCY, NUISANCE, AND HAZARDS. Lessee's office space
shall be occupied only by Lessee or Lessee's employees. Lessee and Lessee's
agents, employees, family, licensees, invitees, visitors, and contractors shall
comply with all federal, state, and local laws relating to occupancy or to
criminal conduct while such persons are on the leased premises. Lessee and the
persons listed above shall not (1) use, occupy, or permit the use or occupancy
of the leased premises for any purpose which is directly or indirectly forbidden
by such laws or which may be dangerous to life or property, (2) permit any
public or private nuisance, (3) disturb the quiet enjoyment of other tenants,
(4) do anything which might emit offensive odors or fumes, (5) make undue noise
or vibrations, (6) permit anything which would cancel insurance coverage or
increase the insurance rate on the building or contents, or (7) otherwise damage
the leased premises.
11.1 TAXES. Lessor shall be responsible for payment of all taxes and assessments
against the building subject to Lessee's obligation to pay Lessor for Lessee's
share thereof, on a prorata square foot basis, as additional rent pursuant to
paragraph 32.1. Lessee shall timely pay all taxes assessed against Lessee's
furniture, equipment, fixtures, or other personal property in Lessee's office
space.
12.1 INSURANCE. Lessor and Lessee shall comply with the respective insurance
obligations as set forth below:
(a) Lessor. Lessor shall maintain (1) fire and extended coverage
insurance, including vandalism and malicious mischief, on the office building,
and (2) comprehensive general liability insurance. The amounts shall be as
required by Lessor's mortgagee or as Lessor may deem reasonably appropriate,
whichever is greater. Lessor shall have no responsibility to maintain fire and
extended coverage insurance on Lessee's contents. The portion of Lessor's
insurance premiums reasonably due to Lessee's acts or omissions or Lessee's
special use, improvements, or tenant finish-out (over and above Lessee's normal
use as contemplated in paragraph 1.1(a)) shall be paid for by Lessee.
(b) Lessee. Lessee shall provide Lessee's own public liability
insurance for its operations on the leased premises in an amount equal to the
minimum "primary coverage" amount required by Lessee's insurance carrier as a
condition for purchasing umbrella liability insurance by Lessee. In no event
shall such coverage be less than $1,000,000. Lessee is encouraged to maintain
fire and extended coverage insurance (including theft, vandalism and malicious
mischief) on the contents in Lessee's office space, including fixtures,
furniture, equipment, supplies, inventory, and other personal property. Such
property is not covered by Lessor's insurance.
(c) Insurance certificates. Lessee shall provide Lessor with a
certificate of Lessee's insurance or a copy thereof as required above within 7
days after Lessee initially occupies Lessee's office space or any portion
thereof. Lessor and Lessor's managing agent (if any) shall be named as
additional insureds on Lessee's liability insurance policy. Upon written request
by Lessor, changes in the name of Lessor or Lessor's managing agent shall be
reflected on such certificate.
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(d) Notice from Lessee's Insurance Carrier. All policies of
insurance to be provided by Lessee shall contain a provision (to the extent
legally permitted) that the insurance company shall give Lessor 10 days' written
notice to Lessor, in advance of (1) any cancellation or non-renewal of the
policy, (2) any reduction in the policy amount, and (3) any deletion of
additional insureds.
12.2 WAIVER OF SUBROGATION. (a) If waiver of subrogation is not contained
in the form language of the insurance policy, Lessor and Lessee may require that
the other party's fire, casualty, or liability insurance policy contain a waiver
of subrogation clause. FOR PURPOSES OF WAIVER OF SUBROGATION, LESSOR AND AGENTS
FROM ANY CLAIMS FOR BASED ON NEGLIGENCE OR OTHERWISE, FOR LOSS, DAMAGE, OR
INJURY WHICH OCCUR HEREAFTER AND ARE INSURED AGAINST UNDER INSURANCE POLICIES
CARRIED BY LESSOR AND/OR LESSEE. The foregoing shall not apply to losses,
damages, or injuries that are in excess of policy limits or that are not covered
due to a deductible clause in the policy.
(b) Upon written request, Lessor and Lessee shall furnish to each
other copies of the policies of insurance referred to in this lease, including
any waiver of subrogation, or satisfactory evidence of same.
12.3 HOLD HARMLESS. Lessee shall indemnify Lessor for and shall hold
Lessor harmless from all fines, claims, liabilities, and suits (including costs
and expenses of defending against same) resulting from any breach of
nonperformance of the lease by Lessee or Lessee's agents, employees, family,
licenses, or invitees. Lessor shall indemnify Lessee for and shall hold Lessee
harmless from all fines, claims, liabilities, and suits (including costs and
expenses of defending against same) resulting from any breach or nonperformance
of the lease by Lessor or Lessor's agents, employees, family, licensees, or
invitees. Lessor and Lessee shall not be liable to the other or the other's
agents, employees, family, licensees, or invitees. Lessor and Lessee shall not
be liable to the other or the other's agents, employees, or family for any
damage or personal property resulting from any act, omission, or negligence of
any other tenant, visitor, or occupant of the office building.
13.1 ALTERATIONS BY LESSEE. Lessee may not make any alterations,
improvements, doorlock changes, or other modifications of any kind to the leased
premises without Lessor's written consent, which shall not be unreasonably
withheld. Consent for governmentally required changes may not be unreasonably
withheld. "Alterations" include but are not limited to improvements permanently
attached to the building, structural changes, roof and wall penetrations, and
all plumbing, electrical, and HVAC changes. Requests for Lessor's approval shall
be in writing and shall be detailed to Lessor's reasonable satisfaction. The
foregoing shall be done only by approval by Lessor in writing, which shall not
be unreasonably withheld. Lessee shall pay in advance for any requested
alterations, improvements, lock changes, or other modifications which are
approved and performed by Lessor. If same are performed by Lessee with Lessor's
permission, Lessee shall not allow any liens to be placed against the buildings
as a result of such additions or alterations. Alterations, improvements, and
modifications done at Lessee's request shall comply with all applicable laws.
Changes in Lessee's alterations or improvements in Lessee's space which may be
later required by governmental action shall also be paid for by Lessee if the
requirements of the government are unique to the Lessee. Lessee shall have no
obligation to restore the premises at the end of the lease term unless Lessor
specifies at the time that the plans are originally approved.
13.2 AMERICANS WITH DISABILITIES ACT. Lessor shall be responsible for any
requirements under the Americans with Disabilities Act or similar state or local
laws as relate to any common area entrance and exit doorways and elevators and
any doors into Lessee's office space and to structural building items that
Lessor is required to maintain under the terms of this lease. Lessor agrees to
indemnify Lessee for any liability Lessee shall incur as a result of Lessor's
failure to comply with the provisions of this paragraph. Lessee agrees to
cooperate fully with Lessor to enable Lessor to timely comply with the
provisions of this paragraph and to immediately forward to Lessor any notice
Lessee receives regarding complaints, injuries, or claims by anyone claiming
that those items which are the responsibility of the Lessor do not comply with
the provisions of the Americans with Disabilities Act. Lessee shall be
responsible for any requirements under such architectural barrier laws as they
relate to Lessee's use of Lessee's office space, including, but not limited to,
the positioning of Lessee's furnishings within the office space. Lessee agrees
to indemnify Lessor for any liability Lessor shall incur as a result of Lessee's
failure to comply with the provisions of this paragraph.
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14.1 REMOVAL OF PROPERTY BY LESSEE. Lessee may remove its trade fixtures,
furniture, and equipment only if (1) such removal is made prior to the end of
the lease term, (2) Lessee is not in default under this lease at time of
removal. Lessee shall pay all costs of removal. Lessee shall have no rights to
property remaining on the leased premises after moveout. Lessee may not remove
any alterations as defined in paragraph 13.1 or improvements such as wall-to-
wall carpeting, book shelves, window coverings, drapes, cabinets, paneling,
counters, kitchen or breakdown built-ins, shelving, wall covering, and anything
else attached to the floor, walls, or ceilings. If Lessor requests in writing,
Lessee shall, immediately prior to moving out, remove any alterations, fixtures,
equipment, and other property installed by Lessee that are identified at the
time of Lessor's plan approval must be removed. Lessee shall pay for cleaning or
repairing damage, normal wear and tear excepted, caused by Lessee's removal of
any property.
15.1 SUBLETTING AND ASSIGNMENTS. Lessee may not sublet, assign, pledge, or
mortgage this lease and may not grant licenses, commissions, or other rights of
occupancy to all or any part of the leased premises without Lessor's prior
written approval which all not be unreasonably withheld or delayed. Sublessee's
financial strength, reputation, personnel, and length of sublease or assignment
shall be important factors in Lessor's approval. Sale, transfer, or merger of
the majority of the voting shares or voting partnership interests in Lessee (if
a corporation or partnership) shall be considered an assignment; likewise for
issuance of treasury stock or admission of a new general partner. Lessee shall
have the right with prior written notice to Lessor to sublease or assign any
portion or all of their premises to subsidiary or affiliated company or to any
corporate successor (upon merger or consolidation) without the consent of
Lessor, however, Lessee shall not be released from liability. Lessor shall be
entitled to (1) 50% of any excess between Lessee's rental per square foot under
the lease and the rental per square foot under the sublease or assignment, and
(2) 50% of any other consideration flowing directly or indirectly from the
sublessee or assignee to Lessee or Lessee's agents. The forgoing is in
consideration of additional management performed or to be performed by Lessor
under such sublease or assignment. Violation of this lease by sublessees or
assignees shall be deemed a violation by Lessee. Approval by Lessor of any
sublease or assignment shall not release Lessee from any obligation under this
lease for all of Lessee's obligations under this lease unless otherwise
specified in writing. Upon default by Lessee, any Sublessee shall pay all
sublease rentals and other sums due Lessor, direct to Lessor, to be credited
against sums owed to Lessor by Lessee under this lease. Unless otherwise agreed
in writing, no sublease or assignment shall be valid unless (1) a copy of this
lease is attached thereto, (2) the sublessee or assignee agrees in writing to be
liable for all of Lessee's obligations under this lease, and (3) Lessor's
written approval is attached to the sublease or assignment.
16.1 DESTRUCTION BY FIRE OR OTHER CASUALTY. (a) Total destruction, rent
abatement, and restoration. If Lessee's office space is totally damaged by fire
or other casualty so that it cannot reasonably be used by Lessee and if this
lease is not terminated as provided in subparagraph (d) below, there shall be a
total abatement of Lessee's rent and Lessee's obligation to pay office building
operating expenses until Lessee's office space is restored by lessor and Lessee.
(b) Partial destruction, rent abatement, and restoration.
If Lessee's office space is partially destroyed or damaged by fire or other
hazard so that it can be only partially used by Lessee for the purposes allowed
in this lease and if this lease is not terminated as provided in subparagraph
(d) below, there shall be a partial abatement of Lessee's rent and Lessee's
obligation to pay office building operating expenses which fairly and reasonably
corresponds to the time and extent to which Lessee's office space cannot
reasonably be used by Lessee.
(c) Restoration. Lessor' s obligations to restore shall
be limited to the condition of the leased premises existing prior to the
casualty. Lessor shall proceed with diligence to restore. During restoration,
Lessee shall continue business to the extent practical in Lessee's reasonable
judgment.
(d) Lease termination. If Lessee's office space or the
office center is so badly damaged that restoration and repairs cannot be
completed within three (3) months after the fire or casualty, then this lease
may be terminated as of the date of the destruction by either Lessor or Lessee
by serving written notice upon the other. Termination notice must be delivered
within 30 days after the casualty.
17.1 CONDEMNATION. If the leased premises or any material portion thereof,
including any portion of the parking lot is taken by condemnation and if the
leased premises is thereby reasonably rendered unusable for Lessee's business
use and activities, this lease shall automatically terminate as of the date
title vests in the
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condemning authority pursuant to such taking or acquisition; and Lessor and
Lessee shall be relieved of all further obligations under this lease. Lessor
shall be entitled to recover from the condemning authority the full amount of
Lessor's interest in this lease and in the property which is taken in
condemnation; provided, however, if Lessee is not in default hereunder on the
day of taking or acquisition by the condemning authority, Lessee shall be
allowed to recover from the condemning authority, at Lessee's own expense, the
value of Lessee's remaining leasehold interest and Lessee's trade fixtures, if
any, which are taken in condemnation; but not otherwise. Lessee shall be
responsible for Lessee's own attorney's fees and for proving its own damages.
18.1 DEFAULT BY LESSOR. Lessee shall be entitled to recover actual damages
and terminate this lease if (1) Lessor fails to pay any sum due and owing to
Lessee within 7 days after written demand from Lessee, or (2) Lessor remains in
default on any other obligation for 7 days after Lessee's written demand for
performance. However, Lessor shall not be in default if Lessor promptly
commences to cure such noncompliance and diligently proceeds in good faith to
cure same after receiving written notice of such default. If taxes and utilities
are not timely paid, Lessee may pay same to the extent that it is necessary to
avert foreclosure or cutoff. If Lessor fails to perform any covenant, term or
condition of this lease that Lessor is obligate to perform and, as a consequence
of such nonperformance, Lessee shall recover a money judgment against Lessor,
such judgment shall be satisfied only out of Lessor's equity in the property.
Lessor shall have no liability whatsoever for any deficiency, and no other
property or assets of Lessor shall be subject to levy, execution or other
enforcement procedures as a result of such judgment.
19.1 DEFAULT BY LESSEE. If Lessee defaults, Lessor shall have any or all
remedies set forth below.
(a) Definition of default. the occurrence of any of the
following shall constitute a default by Lessee: (1) failure to pay rent or any
other sum due by Lessee under this lease within 7 days after written demand
therefor by Lessor; (2) failure to vacate on or before the last day of the lease
term, renewal term, or extension period; (3) failure to pay rent in advance on a
daily basis in the event of unlawful holdover by Lessee; (4) acquisition of
Lessee's interest in the lease by a third party by judicial or non-judicial
process; or (5) failure to comply with any other provision of the lease
(including rules) if such failure to comply is not cured within 30 days after
receiving notice or, if compliance is not possible within 30 days, as soon as
possible after delivery of written notice by Lessor to Lessee. However, Lessee
shall not be in default under subclause (5) above if Lessee promptly commences
to cure such noncompliance and diligently proceeds in good faith to cure same
after receiving written notice of such default.
(b) Utilities and services. If Lessee is in default for
nonpayment of rent or other sums due and if Lessee fails to pay same in full
within five (5) business days after Lessor hand delivers to Lessee or to
Lessee's representative written notice of Lessor's intent to terminate utilities
or services which are furnished by Lessor, then Lessor may terminate such
utilities or services after such five (5) business day notice period, without
further notice. Lessor's right to terminate such utilities or services shall
occur automatically and without notice if Lessee's rent is accelerated under
subparagraph (d) below, relating to unlawful early move-out.
(c) Acceleration after notice of rental delinquency. If
Lessee is in default for nonpayment of rent or other sums due and if Lessee
fails to pay same in full within five (5) business days after Lessor delivers to
Lessee or to Lessee's office space a written notice of Lessor's intent to
accelerate, then all rent for the remainder of the lease term shall be
accelerated, due, and delinquent at the end of five (5) business day notice
period without further demand or notice. Such acceleration rights are in
consideration of the rentals for the entire term being payable in monthly
installments rather than in one lump sum at the beginning of the lease term. If
Lessee has already vacated the leased premises, notice of acceleration may be
delivered to Lessee pursuant to paragraph 29.1. Liability for additional rents
accruing in the future (over and above any base rents) shall not be waived by
such acceleration.
(d) Termination of possession. If Lessee is in default as
defined in subparagraph (a) above and if Lessee remains in default for 3 days
after Lessor gives notice of such default to Lessee, or if Lessee abandons the
leased premises, Lessor may (with or without demand for performance) terminate
Lessee's right of possession by giving five (5) business day's written notice to
vacate; and Lessor shall be entitled to immediate possession without termination
of Lessee's obligations under the lease. Lessor's repossession shall not be
considered an election to terminate this lease unless written notice of such
intention to terminate is given to Lessee
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by Lessor. Repossession may be voluntary agreement or by eviction lawsuit.
Commencement of an eviction lawsuit shall not preclude other Lessor remedies
under this lease or other laws.
(e) Reletting costs. If Lessee is in default under this
lease and if Lessor terminates Lessee's rights of possession without terminating
this lease and Lessee's space is released, Lessee shall pay upon Lessor's demand
the following: (1) all costs of reletting including, leasing commissions,
utilities during the vacancy, advertising costs, administrative overhead, and
all costs of repair, remodeling, or redecorating for replacement tenants in
Lessee's office space, (2) all rent and other indebtedness due from Lessee to
Lessor through the date of termination of Lessee's right of possession, and (3)
all rent and other sums required to be paid by Lessee during the remainder of
the entire lease term, subject to the acceleration paragraphs above.
(f) Mitigation by Lessor. Upon eviction or voluntary
vacation of the leased premises by Lessee without the lease being terminated by
Lessor, Lessor shall make reasonable efforts to relet the leased premises. After
deduction of reasonable expenses incurred by Lessor, Lessee shall receive credit
for any rentals received by Lessor through reletting the leased premises during
the remainder of the lease term or renewal or extension period. Such deductible
expenses may include real estate commissions, attorney's fees, and all other
expenses in connection with reletting. Lawsuit to collect amounts due by Lessee
under this lease may be brought from time to time on one or more occasions
without the necessity of Lessor's waiting until the expiration of the lease
term. If judgment for accelerated rents is recovered, Lessor shall give credit
against such judgment for subsequent payments made by Lessee and subsequent
rentals receive by Lessor from other tenants of Lessee's office space, less
lawful deductions and expenses of reletting.
(g) Termination of lease. Lessor may terminate this lease
(as contrasted to termination of possession rights only) upon default by Lessee
or at any time after Lessor's lawful re-entry or repossession following default
by Lessee. Lessor's agents have authority to terminate the lease only by written
notice given pursuant to paragraph 29.1.
(h) Damages. In addition to other remedies, Lessor may
recover actual damages incurred.
20.1 LIEN FOR RENT. (a) Notwithstanding anything to the contrary in this
lease, Lessor's landlord lien shall be subordinate to any existing security
interest and any future purchase money security interests on Lessee's personal
property excepting all intellectual property, if such security interest is
properly perfected and timely recorded as required by the Texas Business Code.
Lessor shall cooperate in signing lien subordinations in accordance with the
forgoing. Any lien subordination shall be on forms reasonably acceptable to
Lessor.
(b) Subject to the limitations of subparagraph (a) above,
Lessee gives to Lessor a contractual lien on all of Lessee's property which may
be found on the leased premises to secure payment of all monies and damages owed
by Lessee under the lease. Such lien also covers all insurance proceeds on such
property. Lessee shall not remove such property while rent or other sums remain
due and unpaid to Lessor and such property shall not be removed until all
Lessee's obligations under the lease have been complied with. This lien is in
addition to Lessor's statutory lien under Section 54.021 of the Texas Property
Code. If Lessee is in default for nonpayment of rent or any other sums due by
Lessee, Lessor's representatives may peacefully enter the leased premises and
remove and store all property. If Lessor removes any property under this lien,
Lessor shall leave the following information in a conspicuous place inside
Lessee's office space: (1) written notice of exercise of lien, (2) a list of
items removed, (3) the name of Lessor's representative who removed such items,
and (4) the date of such removal. Lessor shall be entitled to reasonable charges
for packing, removing, or storing abandoned or seized property, and may sell
same at public or private sale (subject to any properly recorded chattel
mortgage or recorded financing statement) after 30 days written notice of tie
and place of sale is given to Lessee by certified mail, return receipt
requested. Upon request by Lessor, Lessee shall acknowledge the above lien
rights by executing a UCC-1 form or similar form reflecting same.
21.1 ATTORNEY'S FEES, INTEREST, AND OTHER EXPENSES. If Lessee or Lessor is
in default and if the nondefaulting party places the lease in the hands of an
attorney in order to enforce lease rights or remedies, the nondefaulting party
may recover reasonable attorney's fees from the defaulting party even if suit
has not been filed. In any lawsuit enforcing lease rights, the prevailing party
shall be entitled to recover reasonable attorney's fees from
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the nonprevailing party, plus all out-of-pocket expenses. Trial shall be to
court only; and all parties waive jury trial. All delinquent sums due by Lessor
or Lessee shall bear interest at the maximum lawful rate of interest, compounded
annually, from date of default until paid, plus any late payment fees. Late
payment fees as set forth in paragraph 3.2 shall be considered reasonable
liquidated damages for the time, trouble, inconvenience, and administrative
overhead expense incurred by Lessor in collecting late rentals, such elements of
damages being uncertain and difficult to ascertain. Late payment fees shall not
be liquidated damages for attorney's fees or for Lessor's loss of use of such
funds during the time of delinquency.
22.1 NONWAIVER. The acceptance of monies past due or the failure to complain
of any action, nonaction, delayed payment, or default, whether singular or
repetitive, shall not constitute a waiver of rights or obligations under the
lease. Lessor's or Lessee's wavier of any right or any default shall not
constitute waiver of other rights, violations, defaults, or subsequent rights,
violations, or defaults under this lease. No act or omission by Lessor or
Lessor's agents shall be deemed an acceptance or surrender of the leased
premises, and no agreement by Lessor to accept a surrender of the leased
premises shall be valid unless it is in writing and signed by a duly authorized
agent of Lessor.
23.1 BUILDING RULES. Lessor's rules for the office building are attached as
Exhibit F-2 and are subject to reasonable change if the changes are applicable
to all tenants of the office building. Separate parking rules are contained in
paragraph F-1. Lessee agrees to provide a copy of the Office Building Rules
(Exhibit F-2) to each of Lessee's employees.
24.1 TRANSFER OF OWNERSHIP BY LESSOR. If Lessor transfers ownership of the
office building (other than as security for a mortgage) and if Lessor has
delivered to the transferee all of Lessee's security deposits and any prepaid
rents, Lessor shall be released from all liability under the lease; and such
transferee shall become liable as Lessor. Such right to be released of liability
shall accrue to subsequent owners only if such transfer is in good faith and for
consideration.
25.1 MORTGAGES. Unless otherwise provided in this lease, Lessee shall
subordinate and attorn to mortgage liens how or hereafter on the office
building. Lessee agrees to execute, from time to time, documentation therefor
which is necessary in the reasonable judgment of Lessor. Other than the
provisions already set forth in this lease, there are no special lease
provisions which are required by lienholders of the office building. This lease
shall be subordinate to all existing and future mortgages. However, such
mortgagees may at any time subordinate their lien to this lease by filing a
subordination notice to the county real property records without necessity of
notice to Lessee. Lessee waives and holds any mortgagee or holder of a security
interest harmless from all claims of Lessee against Lessor arising prior to such
mortgagee succeeding to the Lessor's ownership interest in the property. Since a
Mortgagee Nondisturbance Agreement is contemplated, any foreclosure of such
mortgagee's lien shall not terminate this lease even if such lien is superior to
the lease.
26.1 SURRENDER OF PREMISES. When Lessee moves out, Lessee shall surrender
Lessee's office space in the same condition as on the date of lease commencement
by Lessee (as changed or improved from time to time in accordance with this
lease), less ordinary wear. Removal of property from the leased premises is
subject to paragraph 14.1. Upon surrender, Lessee shall provide Lessor with all
of Lessee's keys, access codes and cards to the Leased Premises and the
combination to all safes and vaults, if any in the Leased Premises.
27.1 HOLDING OVER. If Lessee remains in possession of the leased premises
after the expiration or mutually-agreed termination date of the lease, without
the execution by Lessor and Lessee of a new lease or a renewal or extension of
the lease, then (1) Lessee shall be deemed to be occupying the leased premises
as a tenant-at-sufferance on a daily basis subject to all obligations of the
lease, (2) Lessee shall pay rent for the entire holdover period at the rate of
125% of the then-current rental rate, (3) Lessee shall be subject to all other
remedies of Lessor as provided in paragraph 19.1, (4) Lessee shall indemnify
Lessor and/or prospective tenants for damages, including lost rentals, storage
expenses, and attorney's fees, and (5) at Lessor's sole option, Lessee may
extent the lease term for a period of one month at the then current rental rates
for the office building, as reasonably determined by Lessor, by hand delivering
written notice to Lessee or to Lessee's office space while Lessee is holding
over. Holdover rents shall be immediately due on a daily basis and delinquent
without notice or demand; and the prior written notice and waiting period
requirements of this lease shall not be necessary in order for Lessor to
exercise remedies thereunder.
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28.1 SIGNS AND BUILDING NAME. Except for standard suite signage and building
directory listings, there shall be no signs, symbols, or identifying marks on or
in the building, halls, elevators, staircases, entrances, parking areas,
landscape areas, doors, walls, or windows without prior written approval of
Lessor. If the lease term is less than twelve (12) months, the cost of initial
suite signage for Lessee's space and initial directory strips shall be at
Lessee's expense. All signs or lettering shall conform to the sign and lettering
criteria established by Lessor. Unless otherwise stated in the rules, suite
signage and building directory changes shall be done exclusively by Lessor.
Unless otherwise stated in the rules, suite signage and building directory
changes shall be done exclusively by Lessor and at Lessee's expense. Lessor may
remove all unapproved signs without prior notice to Lessee and at Lessee's
expense. Lessor may change the name of the building upon six months' written
notice to Lessee.
28.2 RELOCATION OF LESSEE.
29.1 NOTICES. Whenever written notice is required or permitted under
this lease, such notice shall be in writing and shall be either (a) hand
delivered personally to the party being notified, (b) hand delivered to or
inside such party's mailing address, or (c) delivered at such party's mailing
address by certified mail, return receipt requested, postage prepaid. The
mailing address of Lessor shall be the address to which Lessee normally mails or
delivers the monthly rent unless Lessor notifies Lessee of a different address
in writing. The mailing address of Lessee shall be Lessee's office space under
this lease. However, if Lessee moves out, it shall be Lessee's last address
known by Lessor. Hand delivered notice is required only when expressly required
in the lease. Notice by noncertified mail is sufficient if actually received by
the addressee or an employee or agent of addressee. The term "notice" shall be
inclusive of notices, billings, requests, and demands.
30.1 ESTOPPEL CERTIFICATE. From time to time, upon 7 days' prior written
request from Lessor, Lessee shall execute and deliver to Lessor the estoppel
certificate attached as Exhibit G. The form in Exhibit G may be changed as
reasonably required by a prospective purchaser or lender. If any statement in
the estoppel certificate form is contrary to the facts existing at the time of
execution of such form, Lessee may correct same before signing. Reasonable
modifications in the form may be made as requested by a prospective lienholder
or purchaser. The estoppel certificate may be conclusively relied upon by
Lessor and by any prospective lienholder or purchaser of the leased premises.
If Lessee fails to comply with the foregoing by the end of such 7-day period, it
shall be conclusively presumed that (1) this lease is in full force and effect
without any subleases or assignments and is unamended or modified except for
amendments verified by affidavit of Lessor to the prospective lienholder or
purchaser, (2) no rents, security deposits, or other charges have been prepaid,
(3) the statements contained in the estoppel certificate form (Exhibit G) are
correct, (4) there are no uncured defaults by Lessor, (5) Lessee has no right of
offset or rescission, and (6) any prospective purchaser or lienholder may
conclusively rely on such silence or noncompliance by Lessee and may
conclusively assume no Lessor defaults within the 120 days following Lessee's
receipt of Lessor's request for an estoppel certificate.
31.1 SUCCESSORS. This lease shall bind and inure to the benefit of the
parties, any guarantors of this lease, and their respective successor and
assigns.
31.2 LEASING AGENT COMMISSIONS. No leasing commission shall be due by
Lessor to any leasing agent unless in writing. Commission agreements executed by
Lessor shall be binding upon subsequent building owners if the tenant of the
lease in question is in possession at the time of transfer of building
ownership.
32.1 BUILDING OPERATING EXPENSE. In addition to the monthly base rent in
paragraph 2.1, Lessee shall pay additional rent on a monthly basis, equivalent
to Lessee's prorata share of actual building operating expenses as per Exhibit
C. Lessee's responsibility for payment of building operating costs shall be
subject to the expense stop referred to in Basic Lease Information #8.
--------------------------
33.1 REPRESENTATIONS AND WARRANTIES BY LESSOR. Lessor warrants that
Lessor is the sole owner of the land and improvements comprising the office
building and that Lessor has full right to enter into this lease. Lessor's
duties and warranties are limited to those expressly stated in this lease and
shall not include any implied duties or implied warranties, now or in the
future. No representations or warranties have been made by Lessor other than
those expressly contained in this lease.
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34.1 REPRESENTATIONS AND WARRANTIES BY LESSEE. Lessee warrants to Lessor
that (1) the financial statements of Lessee heretofore furnished to Lessor are
true and correct to the best of Lessee's knowledge, (2) there has been no
significant adverse change in Lessee's financial condition since the date of the
financial statements, (3) the financial statements fairly represent the
financial condition of Lessee upon those dates and at the time of execution
hereof, (4) there are no delinquent taxes due and unpaid by Lessee, and (5)
Lessee and none of the officers or partners of Lessee (if Lessee is a
corporation or partnership) have ever declared bankruptcy. Lessee warrants that
Lessee has disclosed in writing to Lessor all lawsuits pending or threatened
against Lessee, and Lessee has made no material misrepresentation or material
omission of facts regarding Lessee's financial condition or business operations.
All financial statements must be dated and signed by Lessee. Lessee
acknowledges that Lessor has relied on the above information furnished by Lessee
to Lessor and that Lessor would not have entered into this lease otherwise.
35.1 PLACE OF PERFORMANCE. Unless otherwise expressly stated in this
lease, all obligations under this lease, including payment of rent and other
sums due, shall be performed in the country where the office building is
located, at the address designated from time to time by Lessor.
36.1 MISCELLANEOUS. This lease contains the entire agreement of the
parties. NO OTHER WRITTEN OR ORAL PROMISES OR REPRESENTATIONS HAVE BEEN MADE,
AND NONE SHALL BE BINDING. This lease supersedes and replaces any previous
lease between the parties on Lessee's office space, including any renewals or
extensions thereunder. Except for reasonable changes in written rules, this
lease shall not be amended or changed except by written instrument, signed by
both Lessor and Lessee. LESSOR'S AND LESSEE'S AGENTS DO NOT AND WILL NOT HAVE
------------
AUTHORITY TO (1) MAKE EXCEPTIONS, CHANGES OR AMENDMENTS TO THIS LEASE, OR
FACTUAL REPRESENTATIONS NOT EXPRESSLY CONTAINED IN THIS LEASE, (2) WAIVE ANY
RIGHT, REQUIREMENT, OR PROVISION OF THIS LEASE, OR (3) RELEASE LESSEE FROM ALL
OR PART OF THIS LEASE, UNLESS SUCH ACTION IS IN WRITING AND SIGNED BY BOTH
PARTIES TO THIS LEASE. Multiple lessees shall be jointly and severally liable
under this lease. Notices, requests, or agreements to, from, or with one of
multiple lessees shall be deemed to be to, from, or with all such Lessees.
Under no circumstances shall Lessor or Lessee be considered an agent of the
other. Nonsubstantial errors in space footage calculations shall entitle the
parties to correct the rental figures in the lease and adjust rentals previously
paid to present Owner accordingly, but not to terminate the lease. The lease
shall not be construed against either party more or less favorably by reason of
who drafted the lease or changes in the lease. Texas law applies. If any date
of performance or exercise of a right ends on a Saturday, Sunday, or state
holiday, such date shall be automatically extended through the next business
day. Time is of the essence; and all performance dates, time schedules, and
conditions precedent to exercising a right shall be strictly adhered to without
delay except where otherwise expressly provided. If any provisions of this
lease is invalid under present or future laws, the remainder of this lease shall
not be affected.
37.1 SPECIAL CONDITIONS. Additional provisions of this lease are set
forth in Exhibit J.
38.1 EXHIBIT LIST. The exhibits attached to this lease are listed below.
All exhibits are a part of this lease except for those which have been lined out
or which have been shown below as omitted.
Exhibit A Floor Plan of Lessee's Office Space (paragraph 1.1)
Exhibit B Legal Description of Office Building (paragraph 1.1)
Exhibit C Building Operating Expense Passthrough Calculations
(paragraphs 2.1 and 32.1)]
Exhibit D Acknowledgements of Lease (paragraph 4.2)
Exhibit E Construction by Lessor (paragraph 5.1)
Exhibit F-1 Parking Rules (paragraphs 9.2 and 23.1)
Exhibit F-2 Building Rules (paragraph 23.1)
Exhibit G Estoppel Certificate (paragraph 30.1)
Exhibit H Lease Guaranty (paragraph 37.1)
Exhibit I Corporate Resolution Authorizing Lease or Guaranty
(paragraphs 37.1 and 39.1)
Exhibit J Special Conditions (paragraph 37.2)
Exhibit K Hazardous Materials Statement
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Exhibit L Acknowledgment of Receipt of Agency Disclosure
Exhibit M Renewal Option
Exhibit N Right of First Refusal
39.1 LEASE DATES AND AUTHORITY TO SIGN. The "identification" date of
this lease is the 20/th/ day of June 1996 (the same date as at the top of Basic
------ ---------
Lease Information). The "effective date" on which this lease becomes binding is
the date on which the lease has been signed by Lessor, Lessee, and any
guarantors. The names and signatures of all parties are shown below; and all
persons signing have been duly authorized to sign. IF LESSEE IS A CORPORATION,
--
A CORPORATE RESOLUTION AUTHORIZING LESSEE TO EXECUTE THIS LEASE IS ATTACHED AS
EXHIBIT I. Corporate seals are unnecessary under Texas law.
<TABLE>
<CAPTION>
LESSOR LESSEE
<S> <C>
DAVID B. BARROW, JR. VIGNETTE CORPORATION
- --------------------------------------------------------- ---------------------------------------------------
Printed name of company or firm (if applicable) Printed name of company or firm (if applicable)
DAVID B. BARROW, JR. ROSS GARBER
- --------------------------------------------------------- ---------------------------------------------------
Printed name of person signing Printed name of person signing
/s/ David B. Barrow, Jr. /s/ Ross Garber
- --------------------------------------------------------- ---------------------------------------------------
Signature Signature
OWNER PRESIDENT
- --------------------------------------------------------- ---------------------------------------------------
Title of person signing (if applicable) Title of person signing (if applicable)
7/1/96 6/26/96
- --------------------------------------------------------- ---------------------------------------------------
Date signed (Please initial all pages and exhibits) Date signed (Please initial all pages and exhibits)
<CAPTION>
LEASING AGENT
<S> <C>
THE KUCERA COMPANY
- ---------------------------------------------------------
Printed name of company or firm (if applicable)
STEVEN G. MCMILLON
- ---------------------------------------------------------
Printed name of person signing
- ---------------------------------------------------------
Signature
SENIOR VICE PRESIDENT
- ---------------------------------------------------------
Title of person signing (if applicable)
- ---------------------------------------------------------
Date signed
</TABLE>
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EXHIBIT A
FLOOR PLAN OF LESSEE'S OFFICE SPACE
(see paragraph 1.1 of lease)
The parties agree that the floor plan below is a true and correct diagram of
Lessee's office space referred to in paragraph 1.1
One Far West Plaza, Suite 300
10,886 usable square feet / 12,519 rentable square feet
[INSERT DIAGRAM HERE]
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EXHIBIT B
LEGAL DESCRIPTION OF OFFICE BUILDING
by lot, block, subdivision, and county or
by metes and bounds description
(see paragraph 1.1 of lease)
Lot 1, Northwest Hills, Far West Section, City of Austin, Travis County, Texas
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EXHIBIT C
Page One of Two
BUILDING OPERATING EXPENSE PASSTHROUGH CALCULATIONS
(see paragraphs 2.1 and 32.1 of lease)
(a) "ESTIMATED" PRORATA BUILDING OPERATING EXPENSES. On or before the
beginning of each calendar year, Lessor shall calculate the
estimated building operating expenses for that calendar year,
according to the criteria in subparagraph (c) below. One-twelfth
of Lessee's prorata share of estimated building operating
expenses which are in excess of any expense stop shall be due on
the first of each month as additional rent.
(b) YEAR-END ADJUSTMENT FOR OVERPAYMENT OR UNDERPAYMENT BY LESSEE
BECAUSE OF DIFFERENCES BETWEEN "ESTIMATED" AND "ACTUAL" BUILDING
OPERATING EXPENSES. After each calendar year of the lease term
and renewal or extension periods, Lessor shall determine the
actual building operating expenses for that calendar year (1996
Operating Expenses are estimated to be $5.75/sf/yr). If it is
then determined that actual building operating expenses were less
than estimated expenses and that Lessee's monthly payments of
estimated expenses over Lessee's expense stop figure were too
much, Lessor shall promptly credit to Lessee the excess amount
paid by Lessee. If it is determined that actual building
operating expenses were more than estimated expenses and that
Lessee's monthly payments of estimated expenses over Lessee's
expense stop figure were insufficient, Lessor shall invoice
Lessee for the amount of Lessee's underpayment. Payment thereof
shall be due within thirty (30) days upon delivery of invoice to
Lessee. Payment may be made prior to or with the next scheduled
rental payment, but not later. The foregoing calculations and
adjustments may also be made one or more times during the
calendar year, at Lessor's option. After 1996, the controllable
expense increases will be capped at six percent (6%) (cumulative)
per year.
(c) DEFINITION OF BUILDING OPERATING EXPENSES. Building operating
expenses for each calendar year shall include: all ad valorem
taxes, assessments and related government charges becoming due on
the building and on-site personal property used in operation of
the building in such period; utilities; insurance premiums for
fire, extended coverage, vandalism, and liability on the building
and personal property used in building management; landscape
expenses; janitorial expenses; window cleaning; supplies
painting, roof repairs, window replacement, and other maintenance
expenses; licenses; permits; advertising; maintenance salaries
and bonuses; payroll taxes; management office overhead and
management fees; and all other managerial, administrative and
operating expenses which are reasonably related to the operation
of the building and utilities serving same. No such category
shall include more than 12 months' worth of expenses. Building
operating expenses shall also include the following improvements
if amortized over the useful life of such improvements for IRS
purposes together with interest at 12% per annum on the
unamortized cost: (i) improvements to reduce operating expenses,
(ii) improvements required by governmental agencies following
completion of the building, and (iii) carpeting, floor covering,
draperies, and wall coverings for the common areas of the
building. Building operating expenses shall be calculated on an
accrual basis in accordance with generally accepted accounting
principles, consistently applied. The word "building" as referred
to above shall include the building, parking areas, parking
garage (if any), and common areas.
Building operating expenses shall not include: principal and interest payments
on mortgages; depreciation or improvements which IRS requires to be depreciated
(except as provided above); expenses of repairing damage of the type normally
covered by fire, vandalism, flood, and EC insurance; any expense paid or
reimbursed from insurance proceeds; costs of repairing damage for which Lessor
is entitled to reimbursement from others;
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EXHIBIT C (cont'd)
Page Two of Two
remodeling costs for new or existing tenants; common area improvements or
personal property required by other tenants to be made, purchased, or furnished
to such tenants; utility and air conditioning or heating costs or other expenses
which are separately billed to specific tenants; franchise and income taxes if
of Lessor; leasing commissions; expenses of marketing vacant space in the
building; legal fees; structural repairs to roof, foundation, and walls;
asbestos removal; and installation of sprinklers, fire alarms, and smoke
detector systems.
If utilities and taxes included in "Building Operating Expense" are not payable,
billed or otherwise due so as to allow an accurate calculation of said factors
annually, then Lessor, in its reasonable discretion, may estimate and prorate
said expenses on an annual basis, and said factors shall be properly adjusted by
Lessor when they actually become due and payable. Otherwise, expenses must be
supported by invoices and actually paid.
(d) DEFINITION OF PRORATA SHARE. Lessee's prorate share of estimated
and actual building operating expenses is the percentage result
of dividing "Lessee's rentable area" (which is set forth in Basic
-----
Lease Information #4) by the total rentable area in the entire
--------------------
building.
(e) DELAY IN IMPLEMENTATION. At Lessor's option, adjustments may be
delayed. Lessor's delay in implementing such adjustments shall
not waive Lessor's right thereto, and the most recent monthly
rental figures shall continue to be paid during such delay. If
Lessor delays in timely calculating adjustments, such adjustments
shall be retroactive to the respective date on which Lessor had a
right to make such adjustment; and such delayed rent adjustments
shall become due upon written notice to Lessee.
(f) EXAMINATION OF RECORDS. Upon reasonable notice to lessor in
writing, lessee may examine or audit Lessor's accounting records
for building operating expenses for the year immediately
preceding and other data used in calculating additional rents or
rent adjustments. Examination or audit of building operating
expenses for a particular year may be conducted no later than 120
days after Lessee's receipt of a reconciliation notice or
statement of building operating expenses for that year. If not
examined or audited within the 120 day period, such
reconciliation shall be deemed as accepted and agreed to by all
parties.
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<PAGE>
EXHIBIT D
Page One of Two
ACKNOWLEDGMENT OF LEASE
(TO BE SIGNED AT MOVE-IN)
The undersigned parties acknowledge that the lease described below is in full
force and effect and that Lessee has taken possession of the space.
Date of lease: June 20, 1996
-------------------------------------------------------------
Lessor: David B. Barrow, Jr.
--------------------------------------------------------------------
Lessee: Vignette Corporation
--------------------------------------------------------------------
Guarantor, if any (not Lessee's name):
-------------------------------------
Building name: One Far West Plaza
-------------------------------------------------------------
Suite No. 300
------------------------------------------------------------------
Building address: 3410 Far West Boulevard
----------------------------------------------------------
City/County/State Zip: Austin / Travis / Texas / 78731
-----------------------------------------------------
Legal description of property: See Exhibit B of Lease
---------------------------------------------
The commencement date, annual anniversary date, and ending date of the initial
lease term as defined in paragraph 4.1 of above lease are as follows:
Commencement date (month, day, year): July 1, 1996
--------------------------------------
Annual Anniversary date (month, day): July 1
--------------------------------------
Ending date (month, day, year): June 30, 1999
--------------------------------------------
The parties acknowledge that the lease has not been amended or modified and that
this acknowledgment may be filed of record with the Texas Secretary of State or
the county where the building is located in order to record (1) Lessee's
possession rights to the leased premises, and (2) Lessor's contractual landlord
lien rights over all personal property therein and any security deposit posted
by Lessee. The entire lease is hereby affirmed and incorporated herein. The
lease will cease to be an encumbrance to Lessor's title if lessor files an
affidavit of record, stating that Lessee no longer occupies the premises and
that Lessee's right of possession has been lawfully terminated.
<TABLE>
<CAPTION>
LESSOR LESSEE
(To be signed at move-in) (To be signed at move-in)
<S> <C>
DAVID B. BARROW, JR. VIGNETTE CORPORATION
- ------------------------------------------------------ ---------------------------------------------------
Printed name of company or firm (if applicable) Printed name of company or firm (if applicable)
DAVID B. BARROW, JR. ROSS GARBER
- ------------------------------------------------------ ---------------------------------------------------
Printed name of person signing Printed name of person signing
- ------------------------------------------------------ ---------------------------------------------------
Signature Signature
OWNER PRESIDENT
- ------------------------------------------------------ ---------------------------------------------------
Title of person signing (if applicable) Title of person signing (if applicable)
- ------------------------------------------------------ ---------------------------------------------------
Date signed (Please initial all pages and exhibits) Date signed (Please initial all pages and exhibits)
</TABLE>
Page 20 Lessor /s/ DB
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<PAGE>
EXHIBIT D (cont'd)
Page Two of Two
STATE OF TEXAS
COUNTY OF
-----------------------------
This instrument was acknowledged before me on ____________________ by ________
_________________________________ on behalf of the above stated LESSOR and in
the above stated capacity.
---------------------------------------------
Notary Public for the State of Texas)
Printed name of notary
----------------------
My commission expires
-----------------------
STATE OF TEXAS
COUNTY OF
------------------------------
This instrument was acknowledged before me on _____________________ by _______
___________________________________ on behalf of the above stated LESSEE and in
the above stated capacity.
---------------------------------------------
Notary Public for the State of Texas)
Printed name of notary
-----------------------
My commission expires
------------------------
Page 21 Lessor /s/ DB
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<PAGE>
EXHIBIT E
CONSTRUCTION BY LESSOR
(see paragraph 5.1 of lease)
Lessor David B. Barrow, Jr.
--------------------------------------------------------------------------
Lessee Vignette Corporation
--------------------------------------------------------------------------
Date of lease June 20, 1996
-------------------------------------------------------------------
Office space Suite 300
--------------------------------------------------------------------
Building name / address One Far West Plaza / 3410 Far West Boulevard
---------------------------------------------------------
/ Austin, Texas 78731
---------------------------------------------------------
Lessee agrees to lease Suite 300 with the following improvements listed (below)
---
or (on the attached floor plan). The cost for said improvements, including
space planning fees, and construction management fees, shall not exceed
$38,101.00 ($3.50/usf).
- ---------- ---------
Any modification to the existing improvements shall be applied against the
dollar allowance and improvement costs that exceed the above-referenced
allowance shall be payable by Lessor and repaid by Lessee with the payment
-------------------
amortized over the term of the lease at nine percent (9%) interest.
If actual costs for capital improvements based on signed construction documents
by Lessee are less than the above-referenced allowance, including space
planning, and construction management fees, the Lessee will not receive a credit
---
for the unspent portion of the allowance.
Improvements: Lessor will remove all of the wallpaper and then recarpet and
paint the entire space, demo up to seven walls, install a shower,
re-key the locks and install a fixed object to lock one
motorcycle, or more if within the dollar allowance. Lessee shall
not be required to pay for (through Operating Expenses or
otherwise) or make any structural changes or capital expenditures
in or on the premises in order to comply with any law, ordinance,
rule or regulation unless the charges or expenditures are
required by Lessee's particular use of the Premises. Lessee shall
have no obligation to restore the premises at the end of the
lease term unless Lessor specifies at the time that the plans are
originally approved.
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<PAGE>
EXHIBIT F-1
OFFICE BUILDING PARKING RULES
(see paragraph 9.2 of lease)
It is the desire of Lessor to maintain and operate the parking garage and
parking areas in an orderly manner. The following rules apply to all tenants in
the building and their agents, employees, family, licensees, invitees, visitors,
and contractors unless otherwise stated. Lessor reserves the right to rescind
these rules, make reasonable changes, or make other reasonable rules and
regulations for the safety, care, and cleanliness of the parking garage, if
applicable, and parking areas and for the preservation of good order.
1. TRAFFIC SIGNS. All persons parking in the parking areas and parking
garage shall observe posted signs and markings regarding speed, stop
signs, traffic lanes, reserved parking, no parking, parking stripes,
etc.
2. LESSEE EMPLOYEE AND CUSTOMER PARKING. Lessees and their employees and
customers X may or ____ may not parking without charge.
---
3. TRASH. All persons parking in the parking garage or parking areas
shall refrain from throwing trash, ashtray contents, or other debris
on the garage floor or parking areas.
4. FLAT TIRES. All vehicle owners and all persons parking in the parking
garage or parking areas shall be responsible for promptly repairing
flat tires or other conditions of the vehicle which cause
unsightliness in the reasonable judgment of lessor.
5. REMOVAL OF UNAUTHORIZED VEHICLES. If vehicles are blocking driveways
or passageways or parked in violation of these rules and regulations
or state statutes, Lessor may exercise vehicle removal remedies under
Article 6701g-1 and 6701g-2 upon compliance with statutory notice.
6. SECURITY. Lessor shall use reasonable diligence in maintenance of
existing lighting in the parking garage or parking areas. Lessor shall
have no duty for additional lighting or any security measures in the
parking areas, including the parking garage.
7. PARKING OF EMPLOYEE VEHICLES. Lessor may from time to time designate
specific areas in wich vehicles owned by Lessee and Lessee's
employees, sublessees, assigneees, licensees, and concessionaires
shall be parked. Lessee shall use best efforts to see that such
vehicles are parking in such areas. Upon request by Lessor, Lessee
shall furnish Lessor with a complete list of license numbers of all
vehicles operated by Lessee and the above listed persons. Lessor may
charge reasonable parking fees for such vehicles not parked in the
designated areas.
8. PARKING OF TRUCKS AND DELIVERY VEHICLES. Without Lessor's prior
written approval, no trailers or large trucks may be parked in the
parking areas except for temporary loading and unloading. Service and
delivery vehicles may be parked in loading zones only when necessary.
9. TIMELY PAYMENT OF PARKING RENT. If applicable, Lessee shall be
entitled to monthly parking rights in the parking garage only upon
timely payment of the then current monthly parking rent, in advance.
Lessee may rent less than the allowed number of spaces. Lessee may
rent more than the allowed number of spaces if available in the
reasonable judgment of Lessor.
10. CONTROL DEVICES. Lessor reserves the right to install or utilize any
reasonable system of entry and exit control devices in marked loading
areas.
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<PAGE>
EXHIBIT F-2
Page One of Three
OFFICE BUILDING RULES
(see paragraphs 9.2 and 23.1 of lease)
LESSEE AGREES TO PROVIDE A COPY OF THESE RULES TO EVERY EMPLOYEE
It is the desire of lessor to maintain in the building the highest standard of
dignity and good taste consistent with comfort and convenience for all tenants.
Any action or condition not meeting this high standard should be reported
directly to the building manager. Cooperation by all tenants will be sincerely
appreciated. The following rules and regulations apply to all tenants in the
building and their agents, employees, family, licensees, invitees, visitors, and
contractors unless otherwise stated. Pursuant to paragraph 23.1 of the lease,
Lessor reserves the right to rescind these rules, make reasonable modification
thereto, and make other reasonable rules and regulations for the safety, care,
and cleanliness of the building and for the preservation of good order.
1. DELIVERIES AND MOVEMENT OF FURNITURE. Movement into or out of the building
of furniture, equipment shall be restricted to hours, stairways, and
elevators designated by Lessor. Unless Lessor notifies Lessee otherwise,
only the freight elevator may be used for such purposes, and such elevator
may be used only during regular business hours without prior approval of
Lessor. All such movement and delivery shall be under the supervision of
the building manager and carried out in a manner agreed between Lessee and
the building manger, by prearrangement. Prearrangement shall include time,
method, routing, and any limitations imposed for reasons of safety or
nondisturbance of others. The hold harmless and indemnification provisions
of paragraph 12.2 shall apply to the foregoing. Lessor may require that
movement of furniture or equipment which interferes with normal building
traffic shall be made at hours other than normal business hours.
2. OBSTRUCTION OF PASSAGEWAYS. None of the passageways, outside entries,
exterior doors, elevators, hallways, or stairway shall be locked or
obstructed. No rubbish, trash, litter, or materials of any nature may be
emptied or thrown into these areas. These areas may be used only for
ingress and egress.
3. DOORS AND DOORLOCKS. When Lessee's corridor doors are not in use, Lessee
shall use its best efforts to keep them closed on all floors where Lessee
is a partial tenant on the floor. No additional locks shall be placed on
any doors in Lessee's office space without written consent of Lessor.
Lessee shall not change, alter, or replace locks provided by Lessor on
doors in the building, except with written permission of the building
manger. All necessary keys shall be furnished by lessor, and lessor shall
be entitled to have a key for every door in Lessee's office space. Lessee
shall surrender all keys upon termination of lessee's right of occupancy;
and at such time, Lessee shall give Lessor the combination to all vaults or
combination locks remaining in lessee's office space after surrender by
Lessee.
4. SAFES. Safes and other heavy articles shall be carried onto the leased
premises only at such items and in such manner as prescribed by Lessor.
Lessor shall have the right to specify weight limitations and positioning
of safes or other heavy articles. Any damage done to the building by
installation, presence, or removal of a safe or other article owned or
controlled by Lessee on the leased premises, shall be paid for by Lessee.
6. installation and repair work. Lessee shall refer all contractors,
contractors' representatives, and installation technicians who render any
service on or to Lessee's office space, to the building manager for
approval and supervision before performance of any service. This provision
shall apply to all work performed in the building, including installation
of telephones, electrical lines, and other electrical devices where such
installation affects the floors, walls, woodwork, trim, windows, ceilings,
mechanical equipment, or any other part o the building. If Lessee desires
telephone or other electronic connections, Lessee shall notify Lessor; and
lessor shall then direct installation servicemen as to where and how wires
may be introduced. Without such directions, no such installation shall be
permitted.
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<PAGE>
EXHIBIT F-2
Page Three of Three
7. hazardous materials. Lessee shall not place or install, on the leased
premises or any part of the building, any explosive, gasoline, kerosene,
oil, acids, caustics, or any other inflammable, explosive, or hazardous
materials without written consent of the building manager. Lessee shall not
operate electric space heaters, stoves, engines, or other equipment no
typical of an office building without written consent of the building
manager.
8. PAGE 27 OMITTED
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21. NOTICE OF PERSONAL INJURIES OR UTILITY OR MECHANICAL PROBLEMS. Lessee
shall give prompt notice to the building manager, to the best of lessee's
knowledge, of any significant accidents involving injury to persons or
property, including plumbing, electrical, heating, air conditioning,
stairwell, corridor, and elevator problems and/or personal injury and
property damage caused thereby.
22. request by lessee. Except in emergencies, requests by Lessee shall be
attended to only after written request by Lessee to the building
management. Lessor's employees are not allowed to perform or do anything
outside their regular duties unless pursuant to special orders from lessor.
Lessee may not contract with Lessor's employees for the performance of paid
or free services to Lessee. If, at the request of Lessee, lessor or
Lessor's agents furnish services, goods, labor, or material to Lessee which
are not required to be furnished by lessor under this lease, Lessee shall
pay for same upon delivery of a written statement therefor to Lessee.
23. BUILDING ACCESS. Anyone who does not reasonably satisfy a building security
guard (if any) that he has a right to enter the building may be excluded by
the guard. Lessor shall not be liable for damages for any good faith error
with regard to admission or exclusion from the building of any person. In
case of fire, destruction, invasion, mob, riot, or other commotion, Lessor
reserves the right to prevent access to the building by closing the doors
or otherwise.
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<PAGE>
EXHIBIT F-2
Page Three of Three
25. ELEVATORS. Lessor shall not be liable for damages from stoppage of
elevators for repair, service, or improvements. Nor shall Lessor be liable
for delays of any duration in connection with elevator repair, service, or
improvements.
26. SMOKING. This is non-smoking building; smoking is not permitted anywhere
inside the building.
27. ICE, SLEET, SNOW, OR WATER. Lessor shall have no duty to remove, in whole
or in part, ice, sleet, snow, or water from parking lots, walkways,
sidewalks, or stairs, regardless whether they are covered, uncovered,
inside, or outside of buildings. At Lessor's option, lessor may remove such
ice, sleet, snow, or water at any time, in whole or in part, with or
without notice to anyone.
Page 26 Lessor /s/ DB
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<PAGE>
EXHIBIT G
Page One of Two
This form is not to be executed at time of lease execution.
ESTOPPEL CERTIFICATE
(see paragraph 30.1 of lease)
The purpose of this certificate is to confirm the current status of matters
relating to the lease described below. It is for the benefit of the owner or
prospective purchaser or mortgagee of the building in which the leased premises
are located.
1. The undersigned is the Lessee under a lease between__________________,
as Lessor, and _____________________, as Lessee, dated ___________________
on leased premises locally known as the __________________________________
building and located at _______________________, in ______________________,
Texas. A copy of the fully executed lease and any amendments or
modifications thereto are attached. There are no other modifications or
amendments to the above described lease. The dates of any amendments or
modifications are: (put "none" if inapplicable)
---------------------------
.
--------------------------------------
2. There are no unfulfilled written or verbal promises, representations, or
warranties by Lessor.
3. There are no subleases of the leased premises or any portions thereof.
4. The lease (together with any amendments or modifications referred to above)
is in good standing and in full force and effect. Lessor is not in default.
Lessee agrees to give notice of any lessor default to any purchaser or
lender making written requests to Lessee for same.
5. Except for rents (if any) which may be due under the lease for the current
month, there are no rents or other charges which have been prepaid by the
undersigned Lessee to lessor under the lease other than the following:
6. The amount of security deposit currently posted by lessee with lessor is
$_________ in the form of ( ) cash or ( ) an irrevocable, unconditional
letter of credit issued by ____________________ in favor of Lessor which
is still valid.
7. Lessee acknowledges that the space being leased consists of __ rentalable
square feet according to the lease, that the improvements to be constructed
by Lessor have been satisfactorily completed, that the lease space has been
accepted by lessee, that Lessee now occupies the lease space, and that the
commencement date for the lease term was _________________________________.
8. There are no rentals which are due and unpaid. Rentals are fully paid (if
required by the lease) through the last day of the month in which this
estoppel certificate has been executed.
9. There are no known offsets or credits against rentals except as expressly
provided by the terms of the lease. There is no known right of rescission
and no known defense to Lessee's future obligations to pay the specified
rentals at the times and in accordance with the lease terms. Lessee has not
received any concession (rental or otherwise) or similar compensation not
expressed in the lease which is presently in effect.
10. Lessee has no options or rights of refusal regarding the leased premises or
additional rental space other than as set out in the lease.
11. Lessee has not: (a) made a general assignment for the benefit of creditors;
and (b) commenced any case, proceeding or other action seeking
reorganization, arrangement, adjustment, liquidation, dissolution, or
composition of its or its debts under any law relating to bankruptcy,
insolvency, reorganization, or relief of debtors; or (e) had any
involuntary case, proceeding, or other action commenced against it which
seeks to have an order for relief entered against it, as debtor, or seeks
reorganization, arrangements, adjustment, liquidation, dissolution, or
composition of its or its debts under any law relating to bankruptcy,
insolvency, reorganization, or relief of debtors;
Page 27
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<PAGE>
EXHIBIT G (cont.)
Page Two of Two
or (d) concealed, removed, or permitted to be concealed or removed, any
part of its property, with intent to hinder, delay, or defraud its
creditors or any of them, or made or suffered a transfer of any of its
property which may be fraudulent under any bankruptcy, fraudulent
conveyance, or similar law; or made any transfer of its property to or for
the benefit of a creditor at a time when other creditors similarly situated
have not been paid; or (e) had a trustee, receiver, custodian or other
similar official appointed for or take possession of all or any part of its
property or had any court take jurisdiction of any other of its property.
12. Lessee agrees to furnish Lessor with estoppel letters on this form within
10 days (stating the then-current facts) after written request by Lessor or
subsequent owners of the building.
13. Lessee acknowledges that, upon 10 days' prior written request of lessor's
mortgagee at any time after foreclosure proceedings or a deed in lieu of
foreclosure, Lessee shall attorn to the mortgage or foreclosure purchaser
by recognizing such new owner as Lessor under the lease provided that such
purchaser shall recognize the rights of tenant under the lease as long as
tenant is not in default. The agreement of Lessee to attorn shall survive
any foreclosure sale or deed in lieu of foreclosure. Lessee shall, upon 10
days' written notice from lessor's mortgagee anytime before or after
foreclosure sale, execute, acknowledge, and deliver to lessor's mortgagee
all instruments and certificates that in the reasonable judgment of
Lessor's mortgages may be necessary or proper to confirm such attornment.
14. Lessee acknowledges that this estoppel certificates and the statements
therein may be conclusively relied upon by lessor and by any prospective
purchaser or lien holder of the leased premises.
15. The form of this estoppel certificate may vary, depending on lender or
purchaser requirements. It is agreed that this certificate may be modified
to conform to reasonable requests by lenders or purchaser.
16. This agreement shall be binding upon and shall inure to the benefit of the
Lessor, any present or future mortgagee, any prospective buyer or master
Lessee of the property, and their successors and assigns.
Dated this _______________________ day of , 19 .
-------------------- --
LESSEE
------------------------------------------
By
----------------------------------------------
Printed name of signatory
----------------------
Title
------------------------------------------
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<PAGE>
EXHIBIT H
Page One of Two
OFFICE LEASE GUARANTY
(see paragraph 37.1 of lease)
[REDACTED]
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<PAGE>
EXHIBIT H (cont.)
Page Two of Two
[REDACTED]
Page 30
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<PAGE>
EXHIBIT I
CERTIFICATE OF CORPORATE RESOLUTION
AUTHORIZING LEASE OR GUARANTY
(see paragraphs 37.1 and 39.1 of lease)
The undersigned, as secretary of the corporation named below, certifies that at
a special meeting of the board of directors of the corporation, duly called and
held on the 26 day of June, 1996, at which a quorum of the directors were
present and acting throughout, the following resolutions were unanimously
adopted and are still in force and effect:
RESOLVED that the president or the vice president of the corporation shall be
authorized to execute a lease for office space on behalf of the corporation
described below:
Date of lease: June 20, 1996
------------------------------------------------------------------
Lessor: David B. Barrow, Jr.
-------------------------------------------------------------------------
Lessee: Vignette Corporation
-------------------------------------------------------------------------
Guarantor, if any (not Lessee's name):
------------------------------------------
Building name: One Far West Plaza
------------------------------------------------------------------
Suite No. 300
-----------------------------------------------------------------------
Building address: 3410 Far West Boulevard
---------------------------------------------------------------
City/County/State Zip: Austin / Travis / Texas / 78731
----------------------------------------------------------
RESOLVED FURTHER, that the president or vice president is authorized on behalf
of the Corporation to execute and deliver to the Lessor all instruments
reasonably necessary for the lease. Lessor is entitled to rely upon the above
resolutions until the board of directors of the corporation revokes or alters
same in written form, certified by the secretary of the corporation, and
delivers same, certified mail, return receipt requested, to the Lessor. The
corporation is duly organized and is in good standing under the laws of the
State of Delaware, and there are no proceedings pending to forfeit the
corporation's charter or right to do business in Texas. The undersigned further
certifies that on the meeting date referred to above, the names and respective
titles of the officers of the corporation were as follows:
/s/ Ross Garber President
- ------------------------------------------------ ----------------------------
/s/ Neil Webber Vice President
- ------------------------------------------------ ----------------------------
/s/ Neil Webber Secretary
- ------------------------------------------------ ----------------------------
Treasurer
- ------------------------------------------------ ----------------------------
WITNESS MY HAND this 26th day of June, 1996
Vignette Corporation
-------------------------------------
Typed name of corporation
-------------------------------------
Signature of secretary of corporation
-------------------------------------
Printed name of secretary
Page 31
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<PAGE>
EXHIBIT I (cont.)
Page Two of Two
STATE OF TEXAS
COUNTY OF TRAVIS
This instrument was acknowledged before me on June 26, 1996 by Neil Webber on
behalf of the above stated LESSEE and in the above stated capacity.
-------------------------------------------
Notary Public for the State of Texas)
Printed name of notary
---------------------
My commission expires
----------------------
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<PAGE>
EXHIBIT J
SPECIAL CONDITIONS
(see special conditions paragraph 37.2 of lease)
The following special conditions shall apply to this lease and shall prevail on
any other provisions to the contrary.
1. FINANCIAL STATEMENTS. Prior to the execution of this lease, Lessee shall,
upon written request, furnish to Lessor a financial statement of Lessee's
condition in a reasonably satisfactory form. All financial statements shall
be originally signed and dated by Lessee or lessee's agent and be current
within 90 days.
2. LEASE COMMENCEMENT. The commencement date of the lease, base rent and pass-
thru shall be July 11, 1996 or the date that tenant improvements are
completed and the Premises are ready for occupancy. Lessor agrees to use best
efforts ensure that the commencement date will be no later than July 16,
1996.
The terms "completed" and "ready for occupancy " shall mean the date:
(1) selected contractor has completed the tenant improvements and other work
that it is obligated to perform pursuant to the Work Letter Agreement,
notwithstanding "punch list" items which do not interfere with use of the
premises;
(2) the building elevators, HVAC, utilities, plumbing service and doors and
hardware for the Premises are sufficiently completed so as to enable
Lessee to move in and install its furniture, fixtures, machinery and
equipment in the premises and conduct normal business operations in the
Premises.
Lessee will also be allowed to install their wiring during the time that
Lessor is completing Lessee improvements through coordination with the
general contractor.
3. RIGHT TO TERMINATE. lessee shall have the right to terminate this Lease
Agreement anytime after the twenty-fourth month with ninety (90) days written
notice to Lessor and a penalty payment equal to all unamortized leasing
commissions and tenant finish-out costs.
4. LESSOR'S RIGHT OF ACCESS. Lessor shall not have access to one (1) file room
and one (1) computer room. Access to all other areas of Lessee's leased
premises shall be as set forth in Paragraph 9.1(a).
5. EMERGENCY GENERATOR. Lessee shall have the right to construct and operate,
at its expense, and in compliance with all regulations then in effect, an
emergency generator within the Property. The generator shall be at a
location acceptable to Lessor and Lessee, with Lessor and Lessee to use best
efforts to agree on the location.
6. This lease is contingent upon Lessor's receipt of release of space from
current tenant upon terms and conditions mutually agreeable to Lessor and
current tenants.
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<PAGE>
EXHIBIT K
HAZARDOUS MATERIALS STATEMENTS
Various materials utilized in the construction of any improvements to the
property or in the use thereof, past or present, may contain materials that have
been or may in the future be determined to be hazardous. For example, some
electrical transformers and other electrical components can contain PCBs, and
asbestos may have been used in a wide variety of building components such as
fire-proofing, air duct insulation, acoustical tiles, spray-on acoustical
materials, linoleum floor tiles and plaster. Such substances may be present on
or in soils, underground water, building components or other portions of the
leased premises in areas that may or may not be accessible or noticeable.
Current federal, state and local laws and regulations may require the clean-up
of such hazardous or undesirable materials.
Lessor, real estate brokers, and leasing agents in this transaction have no
expertise with respect to hazardous materials and have not made, nor will any of
their statements constitute representations, either express or implied,
regarding the existence or nonexistence of hazardous materials in or on the
leased premises.
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<PAGE>
EXHIBIT L
Page One of Two
Approved by the Texas Real Estate Commission for Voluntary Use
Texas law requires all real estate licensees to give the following information
about brokerage services to prospective buyers, tenants, sellers and landlords
- --------------------------------------------------------------------------------
Information About Brokerage Services
-------------------------------------------------------------------------------
Before working with a real estate broker, you should know that the duties of a
broker depend on whom the broker represents. If you are a prospective seller or
landlord (owner) or a prospective buyer or tenant (buyer), you should know that
the broker who lists the property for sale or lease is the owner's agent. A
broker who acts as a subagent represents the owner in cooperation with the
listing broker. A broker who acts as a buyer's agent represents the buyer. A
broker may act as an immediary between the parties if the parties consent in
writing. A broker can assist you in locating a property, preparing a contract or
lease, or obtaining financing without representing you, a broker is obligated by
law to treat you honestly.
IF THE BROKER REPRESENTS THE OWNER: The broker becomes the owner's agent by
entering into an agreement with the owner, usually through a written listing
agreement, or by agreeing to act as an subagent by accepting an offer of
subagency from the listing broker. A subagent may work in a different real
estate office. A listing broker or subagent can assist the buyer but does not
represent the buyer and must place the interests of the owner first. The buyer
should not tell the owner's agent anything the buyer would not want the owner to
know because an owner's agent must disclose to the owner any material
information known to the agent.
IF THE BROKER REPRESENTS THE BUYER: The broker becomes the buyer's agent by
entering into an agreement to represent the buyer, usually through a written
buyer representation agreement. A buyer's agent can assist the owner but does
not represent the owner and must place the interests of the buyer first. The
owner should not tell a buyer's agent anything the owner would not want the
buyer to know because a buyer's agent must disclose to the buyer any material
information known to the agent.
IF THE BROKER ACTS AS AN INTERMEDIARY: A broker may act as an intermediary
between the parties if the broker complies with The Texas Real Estate License
Act. The broker must obtain the written consent of each party to the transaction
to act as an intermediary. The written consent must state who will pay the
broker and, in conspicuous bold or underlined print, set forth the broker's
obligations as a intermediary. The broker is required to treat each party
honestly and fairly and comply with The Texas Real Estate License Act. A broker
who cast as an intermediary in a transaction:
(1) shall treat all parties honestly;
(2) may not disclose that the owner will accept a price less than the asking
price unless authorized in writing to do so by the owner;
(3) may not disclose that the buyer will pay a price greater than the price
submitted in a written offer unless authorized in writing to do so by the
buyer; and
(4) may not disclose any confidential information or any information that a
party specifically instructs the broker in writing not to disclose unless
authorized in writing to disclose the information or required to do so by The
Texas Real Estate License Act or a court order or if the information
materially relates to the condition of the property.
With the parties' consent, a broker acting as an intermediary between the
parties may appoint a person who is licensed under The Texas Real Estate License
Act and associated with the broker to communicate with and carry out instruction
so one party and another person who is licensed under that Act and associated
with the broker to communicate with an carry out instruction of the other party.
If you choose to have a broker represent you, you should enter into a written
agreement with the broker that clearly establishes the broker's obligations and
your obligations. The agreement should state how and by whom the broker will be
paid. You have the right to choose the type of representation, if any, you wish
to receive. Your payment of a fee to a broker does not necessarily
Page 35 Lessor /s/ DB
------
Lessee /s/ RBG
-------
<PAGE>
EXHIBIT L (cont.)
Page Two of Two
establish that the broker represents you. If you have any questions regarding
the duties and responsibilities of the broker, you should resolve those
questions before proceeding.
- --------------------------------------------------------------------------------
Real estate license asks that you acknowledge receipt of this Information
about brokerage services for the licensee's records.
- --------------------------------------------------------------------------------
Tenant Date
- --------------------------------------------------------------------------------
Texas Real Estate Brokers and Salesmen are licensed and regulated by the Texas
Real Estate Commission (TREC). If you have a question or complaint regarding
a real estate licensee, you should contact TREC at P.O. Box 12188, Austin,
Texas 78711-2188 or 512-465-3960.
Page 36 Lessor /s/ DB
------
Lessee /s/ RBG
-------
<PAGE>
EXHIBIT M
RENEWAL OPTION
At the end of the original lease term, Lessee shall have the right to renew this
lease for a period of thirty-six (36) months provided that Lessee delivers to
Lessor written notice of Lessee's intent to renew at least three (3) months
prior to the end of the lease term. However, Lessee shall not have such right
of renewal if Lessee is in default as defined in paragraph 19.1 (a) either at
the time of such notice of renewal or at the end of the lease term. The terms
of this lease during such renewal term shall continue except as follows:
Lessee's base rate shall adjust to the then current market rate and conditions
for like and similar space.
"Then current market terms and conditions" shall mean those terms and conditions
prevailing on the renewal deadline date for comparable space in One Far West
Plaza to tenants or prospective tenants of comparable creditworthiness. If on
or before thirty (30) days after the delivery of the renewal notice Lessor and
Lessee cannot agree in writing to the "current market terms and conditions" to
be applicable during a renewal term, then the question of what the "then current
market terms and conditions" is shall be settled by arbitration. Such
arbitration shall be before one (1) disinterested arbitrator if one can be
agreed upon, otherwise before three (3) disinterested arbitrators, one named by
the Lessor, one by the Lessee, and one by the two thus chosen. The arbitrator
or arbitrators shall determine the controversy in accordance with the
arbitration rules under the American Arbitration Association as applied to the
facts found by him, her or them. The cost of the arbitrators shall be paid 50%
by lessee and 50% by Lessor.
Page 37 Lessor /s/ DB
------
Lessee /s/ RBG
-------
<PAGE>
EXHIBIT N
RIGHT OF FIRST REFUSAL
So long as Lessee is not in default under the lease, as set forth in paragraph
19.1, Lessee will have a reoccurring "Right of First Refusal" on all of the
rentable square feet located on the third floor. In cases where an existing
tenant already has a right of first refusal or other options at the time of
lease execution, Lessee will have the second right. Lessee will have five (5)
business days upon lessee's receipt of written notice of a firm offer (with copy
of the offer included) to accept or reject the space on the same terms and
conditions as lessor is prepared to enter into by a lease with a third party,
except that the space will be coterminous with lessee's primary space. The
finish-out allowance will be modified on a pro rata basis based on the length of
the lease that lessee has remaining. Lessee has the right to amortize the
entire amount of the tenant finish-out allowance offered to the prospect by
amortizing at a nine percent (9%) discount rate the difference in the total
amount and the pro rata portion.
Page 38
Lessor /s/ DB
------
Lessee /s/ RBG
-------
<PAGE>
Exhibit 10.8
November 4, 1997
FIRST SUPPLEMENT TO LEASE AGREEMENT
Re: Lease Agreement (the "Lease Agreement") dated June 20, 1996 by and between,
David B. Barrow, Jr., as transferred to and hereinafter referred to as 3410 Far
West, Ltd. as Lessor, and Vignette Corporation, as Lessee, demising of 12,519
rentable square feet (10,886 usf) of space locally known as Suite 300 in ONE FAR
WEST office building located at 3410 Far West Boulevard, Austin, Travis County,
Texas 78731.
This First Supplement to Lease Agreement entered into by and between 3410 Far
West, Ltd., hereinafter called "Lessor, and Vignette Corporation, hereinafter
called "Lessee", shall amend and modify the Lease Agreement as follows:
1. Lease Term. Effective July 1, 1999, Lessor and Lessee do hereby acknowledge
----------
and agree that Lessee's lease term shall be extended for eighteen (18) months
to December 31, 2000.
2. Lease Expansions. Effective December 1, 1997, or upon the completion of the
----------------
tenant improvements, whichever is later, and continuing through the remainder
of the lease term (12/31/00), Lessee shall lease from Lessor additional space
known as Suite 240 consisting of 3,083 rentable square feet (2,681 usf), and
Suite 245 consisting of 3,517 rentable square feet (3,058 usf), and Suite 345
consisting of 1,378 rentable square feet (1,198 usf) for a total expansion of
7,978 rentable square feet, as shown on Exhibit A-1, Exhibit A-2, and Exhibit
----------- ----------- -------
A-3, respectively. Lessee shall have access to these three spaces commencing
---
November 15, 1997.
3. Expansion Space Expense Stop. Effective upon the commencement of the lease
----------------------------
term for the expansions set forth in paragraph #2 above and continuing
through the remainder of the lease term (12/31/00), Lessee shall pay to
Lessor additional rents equivalent to Lessee's pro rata share of the building
operating expenses in excess of the actual 1997 operating expense levels.
4. Tenant Finish Out. Lessor shall provide Lessee with a finish out allowance
-----------------
for Suites 240 and 245 (6,600 rsf) of $3.15 per square foot ($20,790.00). In
addition, Lessee shall finish out Suite 345 on a turnkey basis, based on a
space plans which is mutually acceptable to Lessor and Lessee. Lessee shall
have the right to use any unused portion of this allowance on any other space
in the building at any time during the term of the lease. Lessee shall
receive no finish out allowance for its primary space (Suite 300), other than
electing to use a portion (or all) of the $20,790.00 allowance set forth in
this paragraph.
5. Base Rent and Rent Schedule. Effective upon commencement of the lease term
---------------------------
for each of the expansions set forth in paragraph #2 above, Lessee shall pay
to Lessor base rent in the amount of $19.00 per square foot per year for the
entire term of each space. In addition, effective July 1, 1999 and
continuing through the remainder of the lease term (12/31/00), Lessee shall
pay to Lessor base rent for Lessee's primary space in the amount of $19.00
per square foot per year. Base rent for Suite 240 (3,083 rsf), Suite 245
(3,517 rsf) and Suite 345 (1,378 rsf) shall commence either December 1, 1998
or upon completion of the tenant improvements for those spaces, whichever is
later. Lessee shall not unreasonably delay the completion of such
improvements, and rent shall commence not later than thirty (30) days from
the scheduled date unless delay is caused by Lessor.
<TABLE>
<CAPTION>
TIME PERIOD PREMISES PER MONTH PER SF/YR
----------- -------- --------- ---------
<S> <C> <C> <C>
Dec. 1, 1997 to June 30, 1998 #300=12,519 rsf $18,256.88.......................$17.50
#240=3,083 rsf $4,881.42.......................$19.00
#245=3,517 rsf $5,568.58.......................$19.00
#345=1,378 rsf $2,181.83.......................$19.00
-------------------------------
Total Due Per Month: $30,888.71
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
July 1, 1998 to June 30, 1999 #300=12,519 rsf $18,778.50.......................$18.00
#240=3,083 rsf $4,881.42.......................$19.00
#245=3,517 rsf $5,568.58.......................$19.00
#345=1,378 rsf $2,181.83.......................$19.00
-------------------------------
Total Due Per Month: $31,410.33
July 1, 1999 to Dec. 31, 2000 #300=12,519 rsf $19,821.75.......................$19.00
#240=3,083 rsf $4,881.42.......................$19.00
#245=3,517 rsf $5,568.58.......................$19.00
#345=1,378 rsf $2,181.83.......................$19.00
-------------------------------
Total Due Per Month: $32,453.58
</TABLE>
5. Building Signage. Lessee shall have the right to attach a lighted sign to
----------------
the exterior of the building, subject to Lessor's approval of its location
and design as set forth in the attached Exhibit B.
---------
6. Commissions. Lessor shall be responsible for payment of a brokerage
-----------
commission to The Alexander Company, Inc. for its efforts in negotiating this
First Supplement to Lease Agreement. Such commission shall be paid according
to the following:
Renewal: Two percent (2%) of the gross rents scheduled for the original
-------
12,519 rentable square feet during the time period of July 1, 1999 to
December 31, 2000. One percent (1%) shall be paid directly to The Alexander
Company, Inc. and one percent (1%) shall be applied toward the cost of the
exterior building sign set forth in paragraph 5 above, commission remaining,
if any, shall be applied to Lessee's base rent.
Expansions: Four percent (4%) of the gross rents scheduled for the
----------
expansions f the 3,083+1,378+3,517 rentable square feet during the time
period of December 1, 1997 to December 31, 2000. Two percent (2%) shall be
paid directly to The Alexander Company, Inc. and two percent (2%) shall be
applied toward the cost of the exterior building sin set forth in paragraph 5
above, commission remaining, if any, shall be applied to Lessee's base rent.
7. Right of First Refusal. Subject to the rights of any existing tenants'
----------------------
rights of first refusal or other options at the time of the execution of this
First Supplement, Lessee shall have an ongoing right of first refusal on all
space that comes available in the building. Excepting Suite 255, Lessee
shall have five (5) business days to exercise its rights of first refusal
after receiving written notice from Lessor that a space will be available,
and including a floorplan, square footage, and anticipated date of
availability of the space. For Suite 255, Lessor shall give Lessee five (5)
days notice from receipt of an offer to exercise its Right of First Refusal.
Such space shall be leased at all the same terms and conditions as the
primary lease, at a base rate of $19.00 per square foot per year, with an
expense stop of $6.86 per square foot, and the term of which shall be
coterminous with the existing lease term.
For the first eighteen months of this First Supplement (through 05/31/99),
the tenant finish allowance shall be $0.0833 per rentable square foot for
each month remaining on the lease term, except Suite 255. Lessor shall
turnkey finish out Suite 255 to an open area condition standard with lights,
carpet, HVAC and electric during the first 24 months of this lease term
(through 10/31/99), thereafter Lessee's rights to Suite 255 shall terminate.
After the first eighteen months, but before the twenty-fourth month, Lessee
shall have the following options:
1) Extent the entire lease term to have twenty-four (24) months remaining on
the lease term and increase the rate by $0.50 per square foot each year
of the extended period. The tenant finish shall be $2.00 per rentable
square foot.
2) The right to take the new space "as is" at the existing base rate of
$19.00 per square foot and for a lease term through December 31, 2000.
8. Previous First Supplement. Lessor and Lessee do hereby acknowledge and agree
-------------------------
that upon the full execution of this First Supplement to Lease Agreement
dated October 27, 1997 (the "10/27/97 First Supplement"), the
<PAGE>
previous First Supplement dated September 25, 1997 (the "09/25/97 First
Supplement") shall be replaced in its entirety by the 10/27/97 First
Supplement and neither party shall have any further obligation to the other
under the terms and conditions set forth in the 09/25/97 First Supplement.
Except as provided to the contrary herein, all the provisions of the Lease
Agreement shall be applied to the expansion space and all of the remaining
terms, covenants, and provisions of the Lease Agreement shall remain in full
force and effect and unmodified hereby. Each party hereby acknowledges that the
other is not in default under the Lease Agreement in any respect. Each
signatory hereto represents and warrants that he or she is unauthorized to
execute this document and that upon said execution by both parties, this
document will constitute the binding obligation of the party on behalf of whom
such person has signed, without the necessity of joinder of any other person or
entity.
EXECUTED on the dates set forth below our respective signatures.
LESSOR: LESSEE:
3410 Far West, Ltd. Vignette Corporation
By: /s/ Don Tait By: /s/ Neil Webber
------------------------------------- ----------------------------
Don Tait, CPM, RPA, Vice-President, Neil Webber,
Kucera Management, Inc., Chief Technology/Officer
Authorized Managing Agent for
3410 Far West, Ltd.
Date: 11/19/97 Date:
------------------------------------- ----------------------------
<PAGE>
Exhibit 10.9
February 9, 1998
SECOND SUPPLEMENT TO LEASE AGREEMENT
Re: Lease Agreement (the "Lease Agreement") dated June 20, 1996 by and between,
David B. Barrow, Jr., as transferred to and hereinafter referred to as 3410 Far
West, Ltd. as Lessor, and Vignette Corporation, as Lessee, as amended by that
certain First Supplement to Lease Agreement dated November 4, 1997, demising of
20,497 rentable square feet (17,823 usf) of space locally known as Suite 300 in
ONE FAR WEST office building located at 3410 Far West Boulevard, Austin, Travis
County, Texas 78731. The primary lease agreement as amended by the First
Supplement, shall hereinafter be referred to as the "Lease Agreement".
This Second Supplement to Lease Agreement entered into by and between 3410 Far
West, Ltd., hereinafter called "Lessor, and Vignette Corporation, hereinafter
called "Lessee", shall amend and modify the Lease Agreement as follows:
1. Lease Expansions. Effective March 1, 1998, or upon the completion of the
----------------
tenant improvements, whichever is later, Lessee shall lease from Lessor
additional spaces as set forth below:
. Suite 145: consisting of 988 rentable square feet (859 usf), as shown on
---------
Exhibit A-1;
-----------
. Suite 230: consisting of 1,066 rentable square feet (875 usf), as shown
---------
on Exhibit A-2;
-----------
. Suite 255: consisting of 2,012 rentable square feet (1,750 usf), as
shown on Exhibit A-3.
-----------
2. Expansion Space Lease Terms. Effective upon the commencement of the lease
---------------------------
term for the expansions spaces set forth in paragraph #2 above, Lessee shall
lease from Lessor the additional spaces for the period of times set forth
below:
. Suite 145: Twelve (12) months through February 28, 1999.
---------
. Suite 230: Thirty-four (34) months through remainder of lease term
---------
(12/31/00).
. Suite 255: Thirty-four (34) months through remainder of lease term
---------
(12/31/00).
Lessee's total lease square footage from March 1, 1998 through February 28,
1999 shall be 24,503 rentable square feet (21,307 usf). Lessee's total lease
square footage from March 1, 1999 through December 31, 2000 shall be 23,515
rentable square feet (20,448 usf).
3. Expansion Space Expense Stops. Effective upon the commencement of the
-----------------------------
lease term for the expansion spaces set forth in paragraph #2 above and
continuing through the lease terms set forth above, Lessee shall pay to
Lessor additional rents equivalent to Lessee's pro rata share of the
building operating expenses in excess of the actual 1997 operating expense
levels.
4. Tenant Finish Out. Lessor shall provide Lessee with a finish out
-----------------
allowance for the additional spaces as follows:
. Suite 145: Lessor, at Lessor's expense, shall shampoo the carpet and
---------
repaint the suite.
. Suite 230: Lessor shall provide lessee with an allowance of $2,766.50
---------
($2.75/rsf) to remodel the premises as per a mutually
acceptable space plan.
. Suite 255: Lessor shall provide Lessee with an allowance of $5,533.00
---------
($2.75/rsf) to remodel the premises as per a mutually
acceptable space plan. Additionally, Lessor shall make the
HVAC for this space operational.
<PAGE>
5. Base Rent and Rent Schedule. Effective upon the commencement of the lease
---------------------------
term for each of the expansions spaces set forth in paragraph #2 above,
Lessee shall pay to Lessor base rent in the amount of $19.00 per square foot
per year for the term of each additional space, as set forth in the
following rent schedule:
<TABLE>
<CAPTION>
TIME PERIOD PREMISES PER MONTH PER SF/YR
----------- -------- --------- ---------
<S> <C> <C> <C>
March 1, 1998 to June 30, 1998 #300=12,519 rsf $18,256.88...............$17.50
#240=3,083 rsf $4,881.42...............$19.00
#245=3,517 rsf $5,568.58...............$19.00
#345=1,378 rsf $2,181.83...............$19.00
#145=988 rsf $1,564.33...............$19.00
#230=1,006 rsf $1,592.83...............$19.00
#255=2,012 rsf $3,185.67...............$19.00
--------------------------------
Total Due Per Month: $37,231.54
July 1, 1998 to February 28, 1999 #300=12,519 rsf $18,778.50...............$18.00
#240=3,083 rsf $4,881.42...............$19.00
#245=3,517 rsf $5,568.58...............$19.00
#345=1,378 rsf $2,181.83...............$19.00
#145=988 rsf $1,564.33...............$19.00
#230=1,006 rsf $1,592.83...............$19.00
#255=2,012 rsf $3,185.67...............$19.00
--------------------------------
Total Due Per Month: $37,753.16
March 1, 1999 to June 30, 1999 #300=12,519 rsf $18,778.50...............$18.00
#240=3,083 rsf $4,881.42...............$19.00
#245=3,517 rsf $5,568.58...............$19.00
#345=1,378 rsf $2,181.83...............$19.00
#230=1,006 rsf $1,592.83...............$19.00
#255=2,012 rsf $3,185.67...............$19.00
--------------------------------
Total Due Per Month: $36,188.83
July 1, 1999 to Dec. 31, 2000 #300=12,519 rsf $19,821.75...............$19.00
#240=3,083 rsf $4,881.42...............$19.00
#245=3,517 rsf $5,568.58...............$19.00
#345=1,378 rsf $2,181.83...............$19.00
#230=1,006 rsf $1,592.83...............$19.00
#255=2,012 rsf $3,185.67...............$19.00
--------------------------------
Total Due Per Month: $37,232.08
</TABLE>
6. Lease Commission. A commission in an amount of 2% of the total Base Rent due
----------------
under this lease for the expansion spaces shall be paid to The Alexander
Company, upon commencement of the expansions. Lessee shall receive a credit
equal to 2% of the total Base Rent due under this lease for the expansion
spaces to be applied against Lessee's Base Rent.
7. Access for Cabling. Upon execution of the lease by both Lessee and Lessor,
------------------
Lessee shall have access to expansion spaces for purposes of computer and
telephone cabling.
Except as provided to the contrary herein, all the provisions of the Lease
Agreement shall be applied to the expansion space and all of the remaining
terms, covenants and provisions of the Lease Agreement shall remain in full
force and effect and unmodified hereby. Each party hereby acknowledges that
the other is not in default under the Lease Agreement in any respect. Each
signatory hereto represents and warrants that he or she is authorized to
<PAGE>
execute this document and that said execution by both parties, this document
will constitute the binding obligation of the party on behalf of whom such
person has signed, without the necessity of joinder of any other person or
entity.
EXECUTED on the dates set forth below our respective signatures.
LESSOR: LESSEE:
3410 Far West, Ltd. Vignette Corporation
By: /s/ Don Tait By: /s/ Ross Garber
-------------------------------------- ------------------------
Don Tait, CPM, RPA, Vice-President, Ross Garber,
Kucera Management, Inc., President
Authorized Managing Agent for
3410 Far West, Ltd.
Date: 2/23/98 Date: 2/18/98
-------------------------------------- -------------------------
<PAGE>
EXHIBIT A-1
Vignette Corporation Expansion Space
One Far West Plaza, Suite 240
3,083 rentable square feet (2,681 usf)
[DIAGRAM OF EXPANSION SPACE]
<PAGE>
EXHIBIT A-2
Vignette Corporation Expansion Space
One Far West Plaza, Suite 245
3,517 rentable square feet (3,058 usf)
[DIAGRAM OF EXPANSION SPACE]
<PAGE>
EXHIBIT A-3
Vignette Corporation Expansion Space
One Far West Plaza, Suite 345
1,378 rentable square feet (1,198 usf)
[DIAGRAM OF EXPANSION SPACE]
<PAGE>
Page 3 of 4
EXHIBIT B
Exterior Sign Specifications
[DIAGRAM SHOWING VIGNETTE LOGO]
<PAGE>
Page 3 of 4
EXHIBIT B
Exterior Sign Specifications
[DIAGRAM]
<PAGE>
Page 3 of 4
EXHIBIT B
Exterior Sign Specifications
[DIAGRAM]
<PAGE>
Page 4 of 4
EXHIBIT B
Exterior Sign Specifications
[DIAGRAM]
<PAGE>
EXHIBIT 10.10
OFFICE LEASE AGREEMENT
This Lease Agreement (this "Lease") is made this 4th day of August,1998,
between B. O. III, LTD., a Texas limited partnership (hereinafter called
"Landlord"), and Vignette Inc., a Delaware corporation (hereinafter called
"Tenant").
This Lease consists of this paragraph, the Basic Lease Provisions, the
Supplemental Lease Provisions and each exhibit, rider, schedule and addendum
attached to the Basic Lease Provisions and Supplemental Lease Provisions. Each
capitalized term used, but not defined, in the Supplemental Lease Provisions
shall have the meaning assigned to such term in the Basic Lease Provisions.
BASIC LEASE PROVISIONS
1. Building:
a. Name: Barton Oaks Plaza III
Address: 901 S. Mopac Building III, Austin, TX 78748
b. Agreed Rentable Area: 121,423 square feet.
2. Premises:
a. Suite #: 500 ; Floors: a portion of the first floor, and the entire
fourth, and fifth floors
b. Agreed Rentable Area: 66,900 square feet.
3. a. Basic Rent (See Article 2, Supplemental Lease Provisions):
<TABLE>
<CAPTION>
Rate Per Square Basic Basic
Rental Foot of Agreed Annual Monthly
Period Rentable Area Rent Rent
------- ------------- ----- ----
<S> <C> <C> <C>
Months 1 - 36 $16.50 $1,103,850 $91,987.50
Months 37 -60 $17.50 $1,170,750 $97,562.50
$ $ $
$ $ $
</TABLE>
b. Each "Lease Year" shall be a twelve (12) month period commencing with
the Commencement Date or any anniversary date of the Commencement Date and
ending on but not including the next occurring anniversary date of the
Commencement Date; provided, however, the last Lease Year shall mean the
period of time from and including the anniversary date of the Commencement
Date that immediately precedes the Expiration Date to and including the
Expiration Date. Each "Lease Month" shall be a period of time commencing on
the same numeric day as the Commencement Date and ending on (but not
including) the day in the next calendar month that is the same numeric date
as the Commencement Date.
4. a. Tenant's Pro Rata Share Percentage: 55.10 % (the Agreed Rentable Area of
the Premises divided by the Agreed Rentable Area of the Building, expressed
in a percentage).
b. Tenant's Initial Monthly Payment of Additional Rent: $ 8.00 per square
foot of Agreed Rentable Area; $ 44,600.00 per month.
5. Term: 5 (Five) years and zero (0) months (see Article 1, Supplemental
Lease Provisions).
6. Commencement Date: November 1 , 1998 (see Article 1, Supplemental Lease
Provisions).
7. Expiration Date: October 31 , 2003 (see Article 1, Supplemental Lease
Provisions).
8. Security Deposit:$ 4.69 per rentable square foot of the Premises (see
Article 3, Supplemental Lease Provisions).
9. Tenant's Broker: The Alexander Company (such broker is represented by Ford
Alexander ).
10. Permitted Use: General Office Purposes Only (see Article 4, Supplemental
Lease Provisions).
11. All payments shall be sent to Landlord in care of Hill Partners Management
Company, Inc. ("Property Manager") at 2800 Industrial Terrace, Austin, TX
78758 or such other place as Landlord may designate from time to time. All
payments shall be in the form of check until otherwise designated by
Landlord, provided that payment by check shall not be deemed made if the
check is not duly honored with good funds.
12. Parking: See Section 15.17 and Exhibit F, if any, attached to the
Supplemental Lease Provisions.
13. Addresses for notices due under this Lease (see Article 14, Supplemental
Lease Provisions):
Landlord: Tenant:
B. O. III, LTD. PRIOR TO COMMENCEMENT DATE:
c/o Hill Partners Management Company Vignette, Inc.
2800 Industrial Terrace 3410 Far West Boulevard, Suite 300
Austin, TX 78758 Austin, Texas 78731
Attention: Beth Ann Signor Attention: Robert Robinson
Fax: 512/835-1222 Fax: (512) 502-0280
ON AND AFTER COMMENCEMENT DATE:
The Premises.
Fax: TBD
Landlord and Tenant are initialing these Basic Lease Provisions in the
appropriate space provided below as an acknowledgment that they are a part of
this Lease.
1
<PAGE>
TABLE OF CONTENTS
FOR
SUPPLEMENTAL LEASE PROVISIONS
<TABLE>
<CAPTION>
Description Page
<S> <C>
Article 1 Term and Possession.................................. 1
Article 2 Rent................................................. 2
Article 3 Security Deposit..................................... 4
Article 4 Occupancy and Use.................................... 4
Article 5 Utilities and Services............................... 7
Article 6 Maintenance, Repairs, Alterations and Improvements... 9
Article 7 Insurance, Fire and Casualty......................... 10
Article 8 Condemnation......................................... 13
Article 9 Liens................................................ 13
Article 10 Taxes on Tenant's Property........................... 14
Article 11 Subletting and Assigning............................. 14
Article 12 Transfers by Landlord, Subordination and
Tenant's Estoppel Certificate........................ 16
Article 13 Default.............................................. 16
Article 14 Notices.............................................. 19
Article 15 Miscellaneous Provisions............................. 19
</TABLE>
LIST OF EXHIBITS AND RIDERS
TO
SUPPLEMENTAL LEASE PROVISIONS
Exhibit A Floor Plan
Exhibit B Land Legal Description
Exhibit C Intentionally Omitted
Exhibit D Work Letter
Exhibit E Acceptance of Premises Memorandum
Exhibit F Parking Agreement
Rider 1 Renewal Option
Rider 2 Right to Audit
Rider 3 Expansion Option
Rider 4 Tenant's Right of First Refusal
Rider 5 Tenant's Right of Opportunity
Rider H-1 Tenant's Study, Testing and Inspection Rights
i
<PAGE>
SUPPLEMENTAL LEASE PROVISIONS
ARTICLE 1
TERM AND POSSESSION
SECTION 1.1 LEASE OF PREMISES, COMMENCEMENT AND EXPIRATION.
1.101 Lease of Premises. In consideration of the mutual covenants herein,
-----------------
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord,
subject to all the terms and conditions of this Lease, the portion of the
Building (as described in Item 1 of the Basic Lease Provisions) described
as the Premises in Item 2 of the Basic Lease Provisions and that is more
particularly described by the crosshatched area on Exhibit A attached
---------
hereto (hereinafter called the "Premises"). The Building, the land (the
"Land") on which the Building is situated (which Land is more
particularly described on Exhibit B attached hereto), the parking garage,
---------
if any, located on the Land and serving the Building (the "Garage") and
all other improvements located on and appurtenances to the Building, the
Garage and the Land are referred to collectively herein as the
"Property".
1.102 Agreed Rentable Area. The agreed rentable area of the Premises is hereby
--------------------
stipulated to be the "Agreed Rentable Area" of the Premises set forth in
Item 2b of the Basic Lease Provisions. The agreed rentable area of the
Building is hereby stipulated to be the "Agreed Rentable Area" of the
Building set forth in Item 1b of the Basic Lease Provisions.
1.103 Initial Term and Commencement. The initial term of this Lease shall be
-----------------------------
the period of time specified in Item 5 of the Basic Lease Provisions. The
initial term shall commence on the Commencement Date (herein so called)
set forth in Item 6 of the Basic Lease Provisions (as such Commencement
Date may be adjusted pursuant to Section 3 of the Work Letter attached
hereto as Exhibit D) and, unless sooner terminated pursuant to the terms
---------
of this Lease, the initial term of this Lease shall expire, without
notice to Tenant, on the Expiration Date (herein so called) set forth in
Item 7 of the Basic Lease Provisions (as such Expiration Date may be
adjusted pursuant to Section 3 of the Work Letter).
SECTION 1.2 INSPECTION AND DELIVERY OF PREMISES, CONSTRUCTION OF LEASE SPACE
IMPROVEMENTS AND POSSESSION.
1.201 Delivery. Tenant acknowledges that Tenant has inspected the Premises and
--------
the Common Areas (as hereinafter defined) and, except for latent defects
discovered and reported to Landlord by Tenant within 180 days from the
Commencement Date, hereby (i) accepts the Common Areas in "as is"
condition for all purposes and (ii) subject to Landlord's completion of
its obligations under the Work Letter, Tenant hereby accepts the Premises
(including the suitability of the Premises for the Permitted Use) for all
purposes.
1.202 Completion. Landlord will perform or cause to be performed the work
----------
and/or construction of Tenant's Improvements (as defined in the Work
Letter) in accordance with the terms of the Work Letter and will use
reasonable efforts to Substantially Complete (as defined in the Work
Letter) Tenant's Improvements by the Commencement Date. If Tenant's
Improvements are not Substantially Complete by the Commencement Date set
forth in Item 6 of the Basic Lease Provisions for any reason whatsoever,
Tenant's sole remedy shall be an adjustment of the Commencement Date and
the Expiration Date to the extent permitted under Section 3 of the Work
Letter.
1.203 Acceptance of Premises Memorandum. Upon Substantial Completion (as
---------------------------------
defined in the Work Letter) of Tenant's Improvements, Landlord and Tenant
shall execute the Acceptance of Premises Memorandum (herein so called)
attached hereto as Exhibit E. If Tenant occupies the Premises without
---------
executing an Acceptance of Premises Memorandum, Tenant shall be deemed to
have accepted the Premises for all purposes and Substantial Completion
shall be deemed to have occurred on the earlier to occur of (i) actual
occupancy or (ii) the Commencement Date set forth in Item 6 of the Basic
Lease Provisions.
SECTION 1.3 REDELIVERY OF THE PREMISES.
1.301 Obligation to Redeliver. Upon the expiration or earlier termination of
-----------------------
this Lease or upon the exercise by Landlord of its right to re-enter the
Premises without terminating this Lease, Tenant shall immediately deliver
to Landlord the Premises free of offensive odors and in a safe, clean,
neat, sanitary and operational condition, together with all keys and
parking and access cards. Tenant shall, by the Expiration Date or, if
this Lease is earlier terminated, within seven (7) days after the
termination, at the sole expense of Tenant: (i) remove from the Premises
(unless Landlord is asserting its lien rights therein) any equipment,
machinery, trade fixtures and personalty installed or placed in the
Premises by or on behalf of Tenant and (ii) if requested by Landlord, (a)
remove from the Premises all or any part of the improvements (other than
Tenant's Improvements and other improvements approved by Landlord without
the requirement that same be removed upon expiration or earlier
termination of the Lease) made to the Premises by or on behalf of Tenant
and (b) restore the Premises to the condition existing immediately prior
to the installation of such improvements. All removals and work described
above shall be accomplished in a good and workmanlike manner and shall be
conducted so as not to damage the Premises or the Building or the
plumbing, electrical lines or other utilities serving the Building.
Tenant shall, at its expense, promptly repair any damage caused by any
such removal or work. If Tenant fails to deliver the Premises in the
condition aforesaid, then Landlord may restore the Premises to such a
condition at Tenant's expense. All property required to be removed
pursuant to this Section not removed within time period required
hereunder shall thereupon be conclusively presumed to have been abandoned
by Tenant and Landlord may, at its option, take over possession of such
property and either (a) declare the same to be the property of Landlord
by written notice to Tenant at the address provided herein or (b) at the
sole cost and expense of Tenant, remove and store and/or dispose of the
same or any part thereof in any manner that Landlord shall choose without
incurring liability to Tenant or any other person.
1.302 Failure to Deliver. Notwithstanding any provision or inference to the
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contrary herein contained, in the event that Tenant fails to deliver to
Landlord (and surrender possession of) all of the Premises upon the
expiration or earlier termination of this Lease
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<PAGE>
(or the applicable portion of the Premises if this Lease expires or
terminates as to only a portion of the Premises) on the date of
expiration or earlier termination, then Landlord may, without judicial
process and without notice of any kind, immediately enter upon and take
absolute possession of the Premises or applicable portion thereof, expel
or remove Tenant and any other person or entity who may be occupying the
Premises or applicable portion thereof, change the locks to the Premises
or applicable portion thereof (in which event, Tenant shall have no right
to any key for the new locks), limit elevator access to the Premises or
applicable portion thereof, and take any other actions as are necessary
for Landlord to take absolute possession of the Premises or applicable
portion thereof. The foregoing rights are without prejudice and in
addition to, and shall not in any way limit Landlord's rights under,
Section 1.4 below.
SECTION 1.4 HOLDING OVER. In the event Tenant or any party under Tenant
claiming rights to this Lease, retains possession of the Premises after the
expiration or earlier termination of this Lease, such possession shall
constitute and be construed as a tenancy at will only, subject, however, to all
of the terms, provisions, covenants and agreements on the part of Tenant
hereunder; such parties shall be subject to immediate eviction and removal and
Tenant or any such party shall pay Landlord as rent for the period of such
holdover an amount equal to one and one-half (1-1/2) times the Basic Annual Rent
and Additional Rent (as hereinafter defined) in effect immediately preceding
expiration or termination, as applicable, prorated on a daily basis. Tenant
shall also pay actual damages sustained by Landlord by reason of Tenant's
holding over after the Required Vacancy Date (hereinafter defined); provided
that Tenant shall be liable for lost profits and/or penalties incurred by
Landlord in connection with a lease of the Premises to a third party as a
result of Tenant's holding over only if Landlord gives a written notice to
Tenant (i) stating that Landlord has entered into a lease with a proposed tenant
covering the Premises or a portion thereof and, if less than the entire
Premises, identifying the portion of the Premises leased, and (ii) setting forth
a date (the "Required Vacancy Date") on which Landlord requires Tenant to vacate
the Premises, which date shall be no earlier than the later to occur of (i)
thirty (30) days after Tenant's receipt of Landlord's notice, or (ii) the
Expiration Date, and Tenant fails to vacate the Premises (or the portion thereof
subject to a third-party lease) on or before the Required Vacancy Date. The
rent during such holdover period shall be payable to Landlord from time to time
on demand; provided, however, if no demand is made during a particular month,
holdover rent accruing during such month shall be paid in accordance with the
provisions of Article 2. Tenant will vacate the Premises and deliver same to
Landlord immediately upon Tenant's receipt of notice from Landlord to so vacate.
No holding over by Tenant, whether with or without consent of Landlord, shall
operate to extend the term of this Lease; no payments of money by Tenant to
Landlord after the expiration or earlier termination of this Lease shall
reinstate, continue or extend the term of this Lease; and no extension of this
Lease after the expiration or earlier termination thereof shall be valid unless
and until the same shall be reduced to writing and signed by both Landlord and
Tenant. If Landlord elects to cause Tenant to be ejected from the Premises
through judicial process, and without in any way limiting Landlord's rights
under subsection 1.302 above, Tenant agrees that Landlord will not be required
to deliver Tenant more than one (1) days' notice to vacate prior to Landlord's
filing of a forcible detainer suit. In addition, Tenant agrees that Landlord
shall be entitled to the payment of its reasonable legal fees in the event that
Landlord prevails in a forcible detainer action brought by Landlord.
ARTICLE 2
RENT
SECTION 2.1 BASIC RENT. Tenant shall pay as annual rent for the Premises the
applicable Basic Annual Rent shown in Item 3 of the Basic Lease Provisions. The
Basic Annual Rent shall be payable in monthly installments equal to the
applicable Basic Monthly Rent shown in Item 3 of the Basic Lease Provisions in
advance, without demand, offset or deduction, which monthly installments shall
commence on the Commencement Date and shall continue on the first (1st) day of
each calendar month thereafter. If the Commencement Date occurs on a day other
than the first day of a calendar month or the Expiration Date occurs on a day
other than the last day of a calendar month, the Basic Monthly Rent for such
partial month shall be prorated. Notwithstanding the foregoing, Basic Rent for
6,000 square feet of Agreed Rentable Area of the Premises shall be abated for
the first six (6) months of the Lease Term.
SECTION 2.2 ADDITIONAL RENT.
2.201 Definitions. For purposes of this Lease, the following definitions
-----------
shall apply:
(a) "Additional Rent", for a particular calendar year, shall equal the
sum of all (i) Operating Expenses (as hereinafter defined) for the
applicable calendar year multiplied by Tenant's Pro Rata Share
Percentage (as set forth in Item 4.a of the Basic Lease Provisions) plus
(ii) Real Estate Taxes (as hereinafter defined) for the applicable
calendar year multiplied by Tenant's Pro Rata Share Percentage plus
(iii) Additional Pass Through Costs (as hereinafter defined) for the
applicable calendar year multiplied by Tenant's Pro Rata Share
Percentage.
(b) "Operating Expenses" shall mean all of the costs and expenses
Landlord incurs, pays or becomes obligated to pay in connection with
operating, maintaining, insuring and managing the Property for a
particular calendar year or portion thereof as determined by Landlord in
accordance with generally accepted accounting principles, including, but
not limited to, the following: (i) insurance premiums ("Insurance
Premiums"); (ii) water, sewer, electrical and other utility charges
("Utility Expenses"); (iii) service, testing and other charges incurred
in the operation and maintenance of the elevators and the plumbing, fire
sprinkler, security, heating, ventilation and air conditioning system;
(iv) cleaning and other janitorial services inclusive of window
cleaning); (v) tools and supplies costs; (vi) repair costs; (vii) costs
of landscaping, including landscape maintenance and sprinkler
maintenance costs and rental and supply costs in connection therewith;
(viii) security and alarm services; (ix) license, permit and inspection
fees; (x) management fees; (xi) wages and related benefits payable to
employees, including taxes and insurance relating thereto; (xii)
accounting services; (xiii) legal services, unless incurred in
connection with tenant defaults or lease negotiations; (xiv) trash
removal; (xv) garage and parking maintenance, repair, repaving and
operating costs; and (xvi) the charges assessed against the Property
pursuant to any contractual covenants or recorded declaration of
covenants or the covenants, conditions and restrictions of any other
similar instrument affecting the Property. Notwithstanding the
foregoing, Operating Expenses shall not include Real Estate Taxes or
Additional Pass Through Costs.
(c) "Real Estate Taxes" shall mean (i) all real estate taxes and other
taxes or assessments which are levied with respect to the Property or
any portion thereof for each calendar year, (ii) any tax, surcharge or
assessment which shall be levied as a supplement to or in lieu of real
estate taxes, (iii) the costs and expenses of a consultant, if any, or
of contesting the validity or amount of such
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<PAGE>
real estate or other taxes and (iv) any rental, excise, sales,
transaction, privilege or other tax or levy, however denominated,
imposed upon or measured by the rental reserved hereunder or on
Landlord's business of leasing the Premises, excepting only income,
capital stock, estate, inheritance and franchise taxes payable by
Landlord, unless th same shall have been levied as a substitute for or
supplement of real property taxes.
(d) "Additional Pass Through Costs" shall mean the following costs and
expenses incurred by Landlord from and after January 1 of the calendar
year in which this Lease is executed: (i) subject to the limitations of
clause (ii) following, the cost of any improvement made to the Property
by Landlord that is required under any governmental law or regulation
which was not promulgated, or which was promulgated but was not
applicable to the Building, at the time the Building was constructed,
amortized over such period as Landlord shall reasonably determine,
together with an amount equal to interest at the rate three-quarters
percent (.75%) per annum above the prime rate published by the Wall
Street Journal (Southwest Edition) as of the date of the applicable
expenditure (the "Amortization Rate") on the unamortized balance
thereof; (ii) the cost of any improvement made to the Common Areas of
the Property that is required under interpretations or regulations
issued after the Commencement Date under, or amendments made after the
Commencement Date to, the provisions of Tex. Rev. Civ. Stat. Ann. art.
9102 and the provisions of the Americans With Disabilities Act of 1990,
42 U.S.C. (S)(S)12101-12213 (collectively, the "Disability Acts"),
amortized over such period as Landlord shall reasonably determine,
together with an amount equal to interest at the Amortization Rate on
the unamortized balance thereof; (iii) the cost of any labor-saving or
energy-saving device or other equipment installed in the Building
(provided Landlord reasonably anticipates that the installation thereof
will reduce Operating Expenses), amortized over such period as is
reasonably determined by Landlord, together with an amount equal to
interest at the Amortization Rate on the unamortized balance thereof;
and (iv) all other capital costs and expenses which would generally be
regarded as ownership, operating, maintenance and management costs and
expenses which would normally be amortized over a period not to exceed
two (2) years.
Notwithstanding any contrary provision in subsection 2.201 of the
Supplemental Lease Provisions, "Operating Expenses" shall not include
any of the following: costs for which Landlord actually receives
reimbursement by insurance, condemnation awards, warranties or
otherwise, including direct reimbursements by Tenant or other tenants on
the Property (other than through a pass-through of Operating Expenses);
that portion of any payment made to an affiliate of Landlord that is in
excess of the amount which would have been paid in the absence of such
relationship and accounting and legal fees incurred as a part of
Landlord's general corporate or partnership overhead.
2.202 Gross-Up. Operating Expenses shall be grossed up to include all
--------
additional costs and expenses of owning, operating, maintaining and
managing the Building which Landlord determines that it would have
incurred, paid or been obligated to pay during such year if the Building
had been one hundred percent (100%) occupied.
2.203 Payment Obligation. In addition to the Basic Rent specified in this
------------------
Lease, Tenant shall pay to Landlord the Additional Rent, in each
calendar year or partial calendar year during the term of this Lease,
payable in monthly installments as hereinafter provided. Tenant's
initial monthly installment of Additional Rent is set forth in Item 4.b
of the Basic Lease Provisions. On or prior to the Commencement Date and
at least thirty (30) days prior to each calendar year thereafter (or as
soon thereafter as is reasonably possible), Landlord shall give Tenant
written notice of Tenant's estimated Additional Rent for the applicable
calendar year and the amount of the monthly installment due for each
month during such year. Tenant shall pay to Landlord on the Commencement
Date and on the first day of each month thereafter the amount of the
applicable monthly installment, without demand, offset or deduction,
provided, however, if the applicable installment covers a partial month,
then such installment shall be prorated on a daily basis. Within ninety
(90) days after the end of (i) each calendar year and (ii) the
Expiration Date or as soon thereafter as is reasonably possible,
Landlord shall prepare and deliver to Tenant a statement showing
Tenant's actual Additional Rent for the applicable calendar year,
provided that with respect to the calendar year in which the Expiration
Date occurs, (x) that calendar year shall be deemed to have commenced on
January 1 of that year and ended on the Expiration Date (the "Final
Calendar Year") and (y) Landlord shall have the right to estimate the
actual Operating Expenses allocable to the Final Calendar Year but which
are not determinable within such ninety day period. If Tenant's total
monthly payments of Additional Rent for the applicable year are less
than Tenant's actual Additional Rent, then Tenant shall pay to Landlord
the amount of such underpayment. If Tenant's total monthly payments of
Additional Rent for the applicable year are more than Tenant's actual
Additional Rent, then Landlord shall credit against the next Additional
Rent payment or payments due from Tenant the amount of such overpayment,
provided, however, with respect to the Final Calendar Year, Landlord
shall pay to Tenant the amount of such excess payments, less any amounts
then owed to Landlord. Unless Tenant takes written exception to any item
within thirty (30) days after the furnishing of an annual statement,
such statement shall be considered as final and accepted by Tenant. Any
amount due Landlord as shown on any such statement shall be paid by
Tenant within thirty (30) days after it is furnished to Tenant.
2.204 Billing Disputes. If there exists any dispute as to (i) the amount of
----------------
Additional Rent, (ii) whether a particular expense is properly included
in Additional Rent or (iii) Landlord's calculation of Additional Rent
(each an "Additional Rent Dispute"), the events, errors, acts or
omissions giving rise to such Additional Rent Dispute shall not
constitute a breach or default by Landlord under this Lease and even if
a judgment resolving the Additional Rent Dispute is entered against
Landlord, this Lease shall remain in full force and effect and Landlord
shall not be liable for any consequential damages resulting from the
event, error, act or omission giving rise to such Additional Rent
Dispute. Notwithstanding the existence of an Additional Rent Dispute,
Tenant shall pay timely the amount of Additional Rent which is in
dispute and will continue to make all subsequent payments of Additional
Rent as and when required under this Lease, provided that the payment of
such disputed amount and other amounts shall be without prejudice to
Tenant's position. If an Additional Rent is resolved in favor of Tenant,
Landlord shall forthwith pay to Tenant the amount of Tenant's
overpayment of Additional Rent, together with interest from the time of
such overpayment at the annual rate of ten percent (10%).
2.205 Revisions in Estimated Additional Rent. If Real Estate Taxes, Insurance
--------------------------------------
Premiums, Utility Expenses or Additional Pass Through Costs increase
during a calendar year or if the number of square feet of rentable area
in the Premises increases, Landlord may revise the estimated Additional
Rent during such year by giving Tenant written notice to that effect and
thereafter Tenant shall pay to Landlord, in each of the remaining months
of such year, an additional amount equal to the amount of such increase
in the estimated Additional Rent divided by the number of months
remaining in such year.
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<PAGE>
2.206 Real Estate Tax Protest. Section 41.413 of the Texas Property Tax Code
-----------------------
may give Tenant the right to protest before the appropriate appraisal
review board a determination of the appraised value of the Property if
Landlord does not so protest and requires Landlord to deliver to Tenant
a notice of any determination of the appraised value of the Property.
Tenant acknowledges that the Property is a multi-tenant facility, that
any filing of a protest of appraised value by Tenant will give the
appraisal district discretion to increase or decrease the appraised
value, that an increase in the appraised value will affect Landlord and
the other tenants of the Property, and that an increase in the appraised
value may increase the taxes not only for the year in question but for
future years, potentially beyond expiration of the Lease Term.
Accordingly, to the extent permitted by applicable law, Tenant hereby
waives the provisions of (S)41.413 of the Texas Property Tax Code (or
------
any successor thereto). In the alternative, if (S)41.413 of the Texas
Property Tax Code may not be waived, Tenant agrees not to protest any
valuation unless Tenant notifies Landlord in writing of Tenant's intent
so to protest and Landlord fails to protest the valuation within fifteen
(15) days after Landlord receives Tenant's written notice. If Tenant
files a protest without giving the written notice required by the
preceding sentence, such filing shall be an event of default under this
Lease without the necessity of any notice from Landlord, regardless of
the provisions of Section 13.102 of this Lease. Furthermore, if Tenant
exercises the right of protest granted by (S)41.413 of the Texas
Property Tax Code, Tenant shall be solely responsible for, and shall
pay, all costs of such protest. If as a result of any protest filed by
Tenant, the appraised value of the Property is increased by the
---------
appraisal board, Tenant shall be solely responsible for, and shall pay
upon demand by Landlord, all taxes (not only Tenant's Pro Rata Share
Percentage of Real Estate Taxes) assessed against the Property in excess
of the taxes which would have been payable in the absence of the
protest. Tenant shall continue to pay such excess taxes until the
determination of appraised value of the Property is changed by the
appraisal review board, REGARDLESS OF WHETHER THE INCREASED TAXES ARE
INCURRED DURING THE TERM OF THE LEASE OR THEREAFTER. Landlord agrees,
upon request by Tenant, to provide to Tenant a copy of the determination
of appraised value for any year. The payment obligations of Tenant under
this Section 2.206 shall survive the expiration or other termination of
this Lease. Each calendar year during the Term of this Lease, Landlord
agrees to engage a real estate tax consultant for purposes of evaluating
whether or not to protest Real Estate Taxes and in the event such
consultant recommends that Landlord protest Real Estate Taxes for any
particular calendar year, Landlord will follow such recommendation
unless Landlord obtains Tenant's consent to act otherwise.
SECTION 2.3 RENT DEFINED AND NO OFFSETS. Basic Annual Rent, Additional Rent
and all other sums (whether or not expressly designated as rent) required to be
paid to Landlord by Tenant under this Lease (including, without limitation, any
sums payable to Landlord under any addendum, exhibit, rider or schedule attached
hereto) shall constitute rent and are sometimes collectively referred to as
"Rent". Each payment of Rent shall be paid by Tenant when due, without prior
demand therefor and without deduction or setoff.
SECTION 2.4 LATE CHARGES. If any installment of Basic Annual Rent or
Additional Rent or any other payment of Rent under this Lease shall not be paid
within five (5) days after such payment is due, a "Late Charge" of five cents
($.05) per dollar so overdue may be charged by Landlord to defray Landlord's
administrative expense incident to the handling of such overdue payments;
provided that Landlord shall not charge a Late Charge for the first (1st) late
payment, if any, made by Tenant during each calendar year of the Lease Term.
Each Late Charge shall be payable on demand.
ARTICLE 3
SECURITY DEPOSIT
Tenant will pay Landlord on the date this Lease is executed by Tenant the
Security Deposit set forth in Item 8 of the Basic Lease Provisions as security
for the performance of the terms hereof by Tenant. Tenant shall not be entitled
to interest thereon and Landlord may commingle such Security Deposit with any
other funds of Landlord. The Security Deposit shall not be considered an
advance payment of rental or a measure of Landlord's damages in case of default
by Tenant. If Tenant defaults with respect to any provision of this Lease,
Landlord may, but shall not be required to, from time to time, without prejudice
to any other remedy, use, apply or retain all or any part of this Security
Deposit for the payment of any Rent or any other sum in default or for the
payment of any other amount which Landlord may spend or become obligated to
spend by reason of Tenant's default or to compensate Landlord for any other loss
or damage which Landlord may suffer by reason of Tenant's default, including,
without limitation, costs and attorneys' fees incurred by Landlord to recover
possession of the Premises. If Tenant shall fully and faithfully perform every
material provision of this Lease to be performed by it, the Security Deposit
shall be returned to Tenant within thirty (30) days after the Expiration Date.
Tenant agrees that it will not assign or encumber or attempt to assign or
encumber the monies deposited herein as the Security Deposit and that Landlord
and its successors and assigns shall not be bound by any such actual or
attempted assignment or encumbrance. Regardless of any assignment of this Lease
by Tenant, Landlord may return the Security Deposit to the original Tenant, in
the absence of evidence satisfactory to Landlord of an assignment of the right
to receive the Security Deposit or any part of the balance thereof. In the
alternative to a cash Security Deposit, contemporaneously with the execution of
this Lease, Tenant shall cause an American bank or financial institution located
in Austin, Texas reasonably acceptable to Landlord to issue an irrevocable
letter of credit in the amount of the Security Deposit set forth in Item 8 of
the Basic Lease Provisions (the "Letter of Credit"), naming Landlord as
beneficiary to partially secure the performance of Tenant under the Lease. The
Letter of Credit shall be for a term of not less than twelve (12) months. If
all or any portion of the Letter of Credit is drawn against by Landlord, Tenant
shall within thirty (30) days after demand by Landlord, order the issuer of the
Letter of Credit to issue to Landlord at Tenant's expense replacement or
supplementary Letters of Credit such that at all times during the term of this
Lease (other than such thirty (30) day period), Landlord shall have the ability
to draw on one or more Letters of Credit totaling the Security Deposit amount
set forth in Item 8 of the Basic Lease Provisions. Landlord shall be entitled
to draw on the Letter of Credit one or more times for the reasons and uses
provided above applicable to the Security Deposit. Any amount drawn by Landlord
shall not be deemed to fix or determine the amounts to which Landlord is
entitled under this Lease or otherwise, and Landlord shall be entitled to pursue
any remedies provided for in this Lease to the extent Landlord is unable or
elects, in its sole and absolute discretion, not to obtain complete or partial
satisfaction by drawing upon the Letter of Credit. Tenant shall cause the
issuance of a replacement Letter of Credit at least thirty (30) days prior to
the expiration date of the then issued Letter of Credit (such date, the
"Reissuance Date"). If Tenant fails to cause the issuance of a replacement
Letter of Credit prior to the Reissuance Date, then Landlord shall have the
right to draw the full amount of the then issued and outstanding Letter of
Credit; provided that such drawing shall not be an Event of Default hereunder
and Landlord shall hold such funds as security for the performance of Tenant's
obligations under this Lease. Landlord shall refund such funds to Tenant upon
the earlier to occur of (i) Tenant's delivery of a replacement Letter of Credit
and (ii) sixty (60) days after the expiration of this Lease and satisfaction of
Tenant's obligations hereunder. If the issuer of the Letter of Credit shall
admit in writing its inability to pay its debts generally as they become due,
shall file a petition in bankruptcy
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<PAGE>
or a petition to take advantage of any insolvency act, shall consent to the
appointment of a receiver or conservator of itself or the whole or any
substantial part of its property, shall file a petition or answer seeking
reorganization or arrangement under the United States Bankruptcy Code, shall
have a receiver or conservator appointed or shall become subject to operational
supervision by any Federal or State regulatory authority, then Tenant within
thirty (30) days after written demand by Landlord shall obtain a replacement
Letter of Credit from another financial institution satisfactory to Landlord, in
its reasonable judgment. The rights of Landlord under this provision and any
outstanding Letter of Credit under this Lease (including any assignee under a
collateral assignment of Landlord's rights under this Lease) or any Letter of
Credit and the term "Beneficiary" as used in connection with a Letter of Credit
shall refer to Landlord and to each successor and assign of all or any portion
of Landlord's interest under the Lease.
ARTICLE 4
OCCUPANCY AND USE
SECTION 4.1 USE OF PREMISES.
4.101 General. The Premises shall, subject to the remaining provisions of this
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Section, be used solely for the Permitted Use (herein so called)
specified in Item 10 of the Basic Lease Provisions. Without in any way
limiting the foregoing, Tenant will not use, occupy or permit the use or
occupancy of the Premises for any purpose (and the Permitted Use shall
not include any use) which is forbidden by or in violation of any law,
ordinance or governmental or municipal regulation, order, or certificate
of occupancy, or which may be dangerous to life, limb or property; or
permit the maintenance of any public or private nuisance; or do or permit
any other thing which may disturb the quiet enjoyment of any other tenant
of the Property; or keep any substance or carry on or permit any
operation which might emit offensive odors or conditions from the
Premises; or commit or suffer or permit any waste in or upon the
Premises; or sell or permit the sale of food in any form by or to any of
Tenant's agents or employees or other parties in the Premises except
through vending machines in employee lunch or rest areas within the
Premises for use by Tenant's employees only; or use any apparatus which
might make undue noise or set up vibrations in the Building; or permit
anything to be done which would increase the fire and extended coverage
insurance rate on the Building or Building contents and, if there is any
increase in such rate by reason of acts of Tenant, then Tenant agrees to
pay such increase upon demand therefor by Landlord. Payment by Tenant of
any such rate increase shall not be a waiver of Tenant's duty to comply
herewith. Notwithstanding the foregoing, Tenant and its employees shall
be permitted to use microwave ovens and related food service facilities
in kitchen areas on each floor of the Premises. Further, Tenant shall be
entitled to have food delivered to the Premises from outside vendors for
Tenant's employees and its guests. Tenant shall keep the Premises neat
and clean at all times. Tenant shall comply with, and promptly correct
any violation of, each and every governmental law, rule or regulation
relating to the Premises. Tenant shall comply with any direction of any
governmental authority having jurisdiction which imposes any duty upon
Tenant or Landlord with respect to the Premises or with respect to the
occupancy or use thereof.
4.102 Hazardous and Toxic Materials.
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(a) For purposes of this Lease, hazardous or toxic materials shall mean
asbestos containing materials ("ACM") and all other materials,
substances, wastes and chemicals classified as hazardous or toxic
substances, materials, wastes or chemicals under then-current applicable
governmental laws, rules or regulations or that are subject to any right-
to-know laws or requirements.
(b) Tenant shall not knowingly incorporate into, or use or otherwise
place or dispose of any hazardous or toxic materials at or on the
Premises or the Property except for use and storage of cleaning and
office supplies used in the ordinary course of Tenant's business and then
only if (i) such materials are in small quantities, properly labeled and
contained, (ii) such materials are handled and disposed of in accordance
with the highest accepted industry standards for safety, storage, use and
disposal, (iii) notice of and a copy of the current material safety data
sheet is provided to Landlord for each such hazardous or toxic material
and (iv) such materials are used, transported, stored, handled and
disposed of in accordance with all applicable governmental laws, rules
and regulations. Landlord shall have the right to periodically inspect,
take samples for testing and otherwise investigate the Premises for the
presence of hazardous or toxic materials. Landlord shall not knowingly
dispose of any hazardous or toxic materials on the Property and shall
otherwise deal with all hazardous or toxic materials at the Property in a
manner that will not materially and adversely affect Tenant's access, use
or occupancy of the Premises. If Landlord or Tenant ever has knowledge of
the presence of hazardous or toxic materials on the Property that affect
the Premises, the party having knowledge shall notify the other party
thereof in writing promptly after obtaining such knowledge.
(c) Prior to commencement of any tenant finish work to be performed by
Landlord, Tenant shall have the right to make such studies and
investigations and conduct such tests and surveys of the Premises from an
environmental standpoint as permitted under Rider H-1 attached hereto. If
Tenant requests that Landlord commence construction of Tenant's
Improvements prior to exercising such right, Tenant shall be deemed to
have waived the termination right set forth in Rider H-1.
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(d) If Tenant or its employees, agents or contractors shall ever violate
the provisions of paragraph (b) of this subsection 4.102 or otherwise
contaminate the Premises or the Property with hazardous or toxic
materials, then Tenant shall clean-up, remove and dispose of the material
causing the violation, in compliance with all applicable governmental
standards, laws, rules and regulations and then prevalent industry
practice and standards and shall repair any damage to the Premises or
Building within such period of time as may be reasonable under the
circumstances after written notice by Landlord. Tenant shall notify
Landlord of its method, time and procedure for any clean-up or removal and
Landlord shall have the right to require reasonable changes in such
method, time or procedure or to require the same to be done after normal
business hours. Tenant's obligations under this subsection 4.102(d) shall
survive the termination of this Lease. Tenant represents to Landlord
that, except as has been disclosed to Landlord, Tenant has never been
cited for or convicted of any hazardous or toxic materials violations
under applicable laws, rules or regulations.
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SECTION 4.2 COMPLIANCE WITH LAWS.
4.201 Tenant's Compliance Obligation.
------------------------------
(a) Tenant shall comply with all laws, statutes, ordinances, orders,
permits and regulations affecting (i) Tenant's use and occupancy of the
Premises, (ii) any improvements constructed within the Building by or on
behalf of Tenant and (iii) any equipment installed within the Building by
Tenant or installed by a party other than Landlord on behalf of Tenant,
provided, however, Tenant's compliance obligations with respect to the
Disability Acts shall be governed by paragraph (b) following and the
applicable provisions of the Work Letter.
(b) From and after the Commencement Date, Tenant shall be obligated to
see that the Premises comply with all existing requirements of and
regulations issued under the Disability Acts for each of the following:
(i) alterations or improvements to any portion of the Premises performed
after the Commencement Date; (ii) obligations or complaints arising under
or out of Title I of the Americans With Disabilities Act or Tenant's
employer-employee obligations; (iii) obligations or complaints arising
under or out of the conduct or operations of Tenant's business, including
any obligations or requirements for barrier removal to customers or
invitees as a commercial facility or as a public accommodation (as
defined in the Disability Acts); and (iv) any change in the nature of
Tenant's business, or its employees, or financial net worth, or Tenant's
business operations that triggers an obligation under the Disability
Acts.
(c) If any law, statute, ordinance, order, permit or regulation with
which Tenant is required to comply pursuant to this Lease is violated,
Tenant shall take such corrective action as is necessary to cause
compliance.
4.202 Landlord's Compliance Obligation.
--------------------------------
(a) Landlord shall comply with all laws, statutes, ordinances, orders and
regulations (i) relating to the Property (exclusive, however, of those
with which Tenant is obligated to comply by reason of subsection 4.201)
and (ii) non-compliance with which would adversely affect Tenant's use or
occupancy of the Premises or Tenant's rights under this Lease, provided,
however, Landlord's compliance obligations with the Disability Acts shall
be as provided in paragraph (b) of this subsection.
(b) From and after the Commencement Date, Landlord shall be responsible
for compliance with the Disability Acts in the Common Areas; provided
that Landlord shall not be obligated to Tenant to make any alterations to
the Common Areas to effect such compliance.
SECTION 4.3 RULES AND REGULATIONS. Tenant will comply with such rules and
regulations (the "Rules and Regulations") generally applying to tenants in the
Building as may be adopted from time to time by Landlord for the management,
safety, care and cleanliness of, and the preservation of good order and
protection of property in, the Premises and the Building and at the Property.
All such Rules and Regulations are hereby made a part hereof. The Rules and
Regulations in effect on the date hereof are on file with the Property Manager.
All changes and amendments to the Rules and Regulations sent by Landlord to
Tenant in writing and conforming to the foregoing standards shall be carried out
and observed by Tenant; provided that such changes and amendments do not
increase Tenant's obligations hereunder or materially restrict Tenant's rights
hereunder. Landlord hereby reserves all rights necessary to implement and
enforce the Rules and Regulations and each and every provision of this Lease. In
the event of any conflict between the Rules and Regulations and the other
provisions of this Lease, the other terms and provisions of this Lease shall
control.
SECTION 4.4 ACCESS. Without being deemed guilty of an eviction of Tenant and
without abatement of Rent, Landlord and its authorized agents shall have the
right to enter the Premises, upon reasonable notice, to inspect the Premises, to
show the Premises to prospective lenders, purchasers or tenants and to fulfill
Landlord's obligations or exercise its rights (including without limitation
Landlord's Reserved Right [as hereinafter defined]) under this Lease. Tenant
hereby waives any claim for damages for any injury or inconvenience to or
interference with Tenant's business, any loss of occupancy or quiet enjoyment of
the Premises and any other loss occasioned thereby. For each of the aforesaid
purposes, Landlord shall at all times have and retain a key with which to unlock
the doors to and within the Premises, excluding Tenant's vaults and safes.
Landlord shall have the right to use any and all means which Landlord may deem
proper to enter the Premises in an emergency without liability therefor.
Subject to the provisions of this Section 4.4 and Section 6.303 below, Tenant
shall have the right to install a card access security system in the Premises,
provided such security system must be compatible with any security systems of
Landlord, and Tenant shall upon the expiration of the Term of this Lease if
requested by Landlord, remove such security system and repair any damage to the
Premises and the Building caused by such removal. Tenant, at its sole cost and
expense, shall be responsible for the maintenance, repair and replacement of
such security system. Tenant hereby waives any and all claims it may have
against Landlord and hereby agrees to indemnify and hold Landlord harmless from
and against any and all claims in connection with Tenant's security system, EVEN
IF SUCH CLAIMS ARE THE RESULT OF LANDLORD'S NEGLIGENCE.
SECTION 4.5 QUIET POSSESSION. Provided Tenant timely pays Rent and observes
and performs all of the covenants, conditions and provisions on Tenant's part to
be observed and performed hereunder, Tenant shall have the quiet possession of
the Premises for the entire term hereof, subject to all of the provisions of
this Lease and all laws and restrictive covenants to which the Property is
subject.
SECTION 4.6 PERMITS. Landlord agrees to obtain the certificate of occupancy,
if any, required for occupancy of the Premises following construction of
Tenant's Improvements. Tenant shall pay for the cost of any such certificate of
occupancy, provided that Tenant shall be entitled to have such cost funded from
the Finish Allowance, if any, provided for in the Work Letter. If any
governmental license or permit shall be required for the proper and lawful
conduct of Tenant's business in the Premises or any part thereof, Tenant, at its
expense, shall procure and thereafter maintain such license or permit.
Additionally, if Tenant's Improvements or any subsequent alteration or
improvement made to the Premises by Tenant or Tenant's use of the Premises
require any modification or amendment of any certificate of occupancy for the
Building or the issuance of any other permit of any nature whatsoever, Tenant
shall, at its expense, take all actions to procure any such modification or
amendment or additional permit.
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ARTICLE 5
UTILITIES AND SERVICES
SECTION 5.1 SERVICES TO BE PROVIDED.
Landlord agrees to furnish or cause to be furnished to the Premises, the
utilities and services described in subsections 5.101 through 5.106 below,
subject to all other provisions of this Lease.
5.101 Elevator Service. Except for holidays generally recognized by businesses
----------------
and emergencies, Landlord shall provide automatic elevator facilities on
generally accepted business days from 7:00 a.m. to 6:00 p.m. and on
Saturdays from 8:00 a.m. to 1:00 p.m. and have at least one (1) elevator
available for use at all other times.
5.102 Heat and Air Conditioning. On generally accepted business days from 7:00
-------------------------
a.m. to 6:00 p.m. and on Saturdays (other than holidays generally
recognized by businesses) from 8:00 a.m. to 1:00 p.m., Landlord shall
ventilate the Premises and furnish heat or air conditioning, at such
temperatures and in such amounts as is customary in buildings of
comparable size, quality and in the general vicinity of the Building,
with such adjustments as Landlord reasonably deems necessary for the
comfortable occupancy of the Premises, subject to events of force majeure
and any governmental requirements, ordinances, rules, regulations,
guidelines or standards relating to, among other things, energy
conservation. Upon request, Landlord shall make available, at Tenant's
expense, after hours heat or air conditioning. The hourly rate during the
initial Term of this Lease for the use of after hours heat or air
conditioning shall be $20.00 per hour per floor. The hourly rate during
any extended term of this Lease shall be increased to adjust for
inflation.
5.103 Electricity.
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(a) Landlord shall furnish to the Premises electric current not in excess
of that required by the office lighting and receptacles included in
Tenant's Improvements, provided, however, Tenant shall be solely
responsible for the costs of electrical consumption (without duplication)
in excess of 2 1/2 watts per usable square foot in the Premises connected
load in respect of office lighting and in excess of 1 1/2 watts per
usable square foot in the Premises connected load in respect of the power
outlets therein, at any one time (such consumption is herein referred to
as "Excess Consumption" and the costs of Excess Consumption are herein
referred to as "Excess Consumption Costs").
(b) Landlord may, from time to time, engage a reputable consultant to
conduct a survey of electrical usage within the Premises or install one
or more submeters to measure electrical usage within the Premises or a
particular floor of the Premises. If the survey or submeters reflect
Excess Consumption, then (i) Tenant shall be responsible for the costs of
any such surveys and submeters, (ii) Landlord shall have the right to
install permanent submeters to measure the electrical consumption within
the Premises (which permanent submeters shall constitute a part of
Tenant's Submeters, as hereinafter defined), (iii) Tenant shall pay for
the cost of acquiring, maintaining, repairing and reading such submeters,
and (iv) Tenant shall pay the Excess Consumption Costs.
(c) Tenant shall not (i) without the express prior written consent of
Landlord, permit the consumption in the Premises of more than 2 1/2 watts
per usable square foot in the Premises connected load in respect of
office lighting or of more than 1 1/2 watts per usable square foot in the
Premises connected load in respect of the power outlets therein, at any
one time, (ii) use electric current in excess of the capacity of the
feeders or lines to the Building as of the Commencement Date or the
risers or wiring installation of the Building or the Premises as of the
Commencement Date, or (iii) install any electrical plugs, connections or
outlets which supply a voltage greater than 120 volts single phase
without first notifying Landlord and arranging for the installation of a
permanent submeter (which shall be deemed to be part of Tenant's
Submeters), at Tenant's expense, to measure the electrical power consumed
by the equipment and/or machinery hooked or plugged into such plugs,
connections or outlets. All submeters installed by Landlord or Tenant to
measure electrical usage by certain pieces of equipment located within
the Premises together with any submeters installed by Landlord pursuant
to paragraph (b) of this subsection are herein collectively referred to
as "Tenant's Submeters". Landlord will maintain and repair Tenant's
Submeters, at Tenant's cost.
(d) Upon the installation of Tenant's Submeters, Landlord will, at
Tenant's cost, on or about the first day of each month during the Term of
this Lease, read Tenant's Submeters and record such readings for purposes
of determining Metered Electrical Expenses (hereinafter defined). The
cost of electricity consumed within each separately metered portion of
the Premises and by each separately metered piece of equipment within the
Premises ("Metered Electrical Expenses") shall be equal to the sum of (i)
the kilowatts of electricity consumed within the separately metered
portions of the Premises (as measured by the applicable Tenant's
Submeters) during the applicable month (or other applicable period) and
(ii) the kilowatts of electricity consumed by each separately metered
equipment within the Premises (as measured by the applicable Tenant's
Submeters), MULTIPLIED BY (iii) the cost per kilowatt of electricity
-------------
charged to Landlord by the public utility for electricity consumed within
the Building during the applicable month (or other applicable period).
Landlord may, from time to time, invoice Tenant for Metered Electrical
Expenses (as well as any Excess Consumption Costs determined by a
reputable consultant) and Tenant shall, within ten (10) days after
receiving an invoice therefor, pay Landlord the amount of the Metered
Electrical Expenses (and/or, as applicable, any Excess Consumption Costs
determined by a reputable consultant) covered by such invoice. Each such
invoice submitted by Landlord to Tenant shall include (i) the period of
consumption covered by such invoice, (ii) the beginning and ending
readings for each of Tenant's Submeters for such period, (iii) Landlord's
calculations of the Metered Electrical Expenses covered by such invoice,
and (iv) if applicable, the independent electrical consultant's
calculations of Excess Consumption and the Excess Consumption Costs.
5.104 Water. Landlord shall furnish water for drinking, cleaning and lavatory
-----
purposes only.
5.105 Janitorial Services. Landlord shall provide janitorial services to the
-------------------
Premises five (5) times per week (except for holidays) , comparable to
that provided in other office buildings of similar size, quality and in
the general vicinity of the Building, provided the Premises are used
exclusively as offices and further provided Tenant complies with
subsection 6.201 below.
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<PAGE>
5.106 Common Areas. Landlord shall perform routine maintenance in the Common
------------
Areas (hereinafter defined).
5.107 Bulbs and Ballasts. Landlord shall provide Building standard bulbs and
------------------
ballasts as necessary in the Premises. Landlord shall also provide non-
building standard bulbs and ballasts provided Tenant shall pay the cost
thereof, together with an administrative fee equal to ten percent (10%)
of such cost. All amounts due under this subsection for such non-building
standard bulbs shall be paid to Landlord within thirty (30) days after
receipt of an invoice therefor.
SECTION 5.2 ADDITIONAL SERVICES. Landlord may impose a reasonable charge for
any utilities and services, including without limitation, air conditioning,
electrical current and water, provided by Landlord by reason of any use of the
services at any time other than the hours set forth in subsection 5.102 above or
beyond the levels or quantities that Landlord agrees herein to furnish or
because of special electrical, cooling or ventilating needs created by Tenant's
hybrid telephone equipment, computers or other equipment. In no event will
Landlord be required to provide any additional services if Tenant is in breach
of its obligation to pay any Rent hereunder as and when due and payable.
SECTION 5.3 TENANT'S OBLIGATION. Tenant agrees to cooperate fully at all
times with Landlord and to abide by all regulations and requirements which
Landlord reasonably prescribes for the use of the above utilities and services.
SECTION 5.4 SERVICE INTERRUPTION.
5.401 SERVICE INTERRUPTION/WAIVER OF LANDLORD LIABILITY. LANDLORD SHALL NOT BE
-------------------------------------------------
LIABLE FOR AND, EXCEPT AS PROVIDED IN SUBSECTION 5.402 BELOW, TENANT
SHALL NOT BE ENTITLED TO ANY ABATEMENT OR REDUCTION OF RENT BY REASON OF
LANDLORD'S FAILURE TO MAINTAIN TEMPERATURE OR ELECTRICAL CONSTANCY LEVELS
OR TO FURNISH ANY OF THE FOREGOING SERVICES when such failure is caused
by accident, breakage, repairs, strikes, lockouts or other labor
disturbance or labor dispute of any character, governmental regulation,
moratorium or other governmental action, inability to obtain electricity,
water or fuel, or by any cause beyond Landlord's reasonable control
(collectively, "Uncontrollable Events"), NOR SHALL ANY SUCH
UNCONTROLLABLE EVENT OR RESULTS OR EFFECTS THEREOF BE CONSTRUED AS AN
EVICTION (CONSTRUCTIVE OF ACTUAL) OF TENANT OR AS A BREACH OF THE IMPLIED
WARRANTY OF SUITABILITY, OR RELIEVE TENANT FROM THE OBLIGATION TO PERFORM
ANY COVENANT OR AGREEMENT HEREIN AND IN NO EVENT SHALL LANDLORD BE LIABLE
FOR DAMAGE TO PERSONS OR PROPERTY (INCLUDING, WITHOUT LIMITATION,
BUSINESS INTERRUPTION) OR BE IN DEFAULT HEREUNDER, AS A RESULT OF ANY
SUCH UNCONTROLLABLE EVENT OR RESULTS OR EFFECTS THEREOF. Landlord will
provide Tenant with five (5) business days notice of any scheduled
electrical interruption, and such scheduled interruption shall not exceed
forty-eight (48) hours.
5.402 Limited Right to Abatement of Rent. If any portion of the Premises
----------------------------------
becomes unfit for occupancy because Landlord fails to deliver any service
as required under Section 5.101 through 5.104 above (each an "Essential
Service") for any period (other than a reconstruction period conducted
pursuant to Section 7.1 or Article 8 below) exceeding five (5)
consecutive business days after written notice by Tenant to Landlord and
provided such failure is not caused by Tenant, Tenant's Contractors or
any of their respective agents or employees, Tenant shall be entitled to
a fair partial abatement of Basic Annual Rent and Additional Rent for any
such portion of the Premises from the expiration of such five (5)
business day period until such portion is again fit for occupancy.
5.403 Exclusive Remedy. Tenant's sole and exclusive remedy for a failure by
----------------
Landlord to provide any Essential Service to the Premises shall be
Tenant's remedy set forth in subsection 5.402.
SECTION 5.5 MODIFICATIONS. Notwithstanding anything herein to the contrary,
Landlord reserves the right from time to time to make reasonable modifications
to the above standards for utilities and services.
SECTION 5.6 TELECOMMUNICATION EQUIPMENT. In the event that Tenant wishes at
any time to utilize the services of a telephone or telecommunications provider
whose equipment is not then servicing the Building, no such provider shall be
permitted to install its lines or other equipment within the Building without
first securing the prior written approval of the Landlord, which approval shall
include, without limitation, approval of the plans and specifications for the
installation of the lines and/or other equipment within the Building.
Landlord's approval shall not be deemed any kind of warranty or representation
by Landlord, including, without limitation, any warranty or representation as to
the suitability, competence, or financial strength of the provider. Without
limitation of the foregoing standard, unless all of the following conditions are
satisfied to Landlord's satisfaction, it shall be reasonable for Landlord to
refuse to give its approval: (i) Landlord shall incur no expense whatsoever
with respect to any aspect of the provider's provision of its services,
including without limitation, the costs of installation, materials and services;
(ii) prior to commencement of any work in or about the Building by the provider,
the provider shall supply Landlord with such written indemnities, insurance,
financial statements, and such other items as Landlord determines to be
necessary to protect its financial interests and the interests of the Building
relating to the proposed activities of the provider; (iii) the provider agrees
to abide by such rules and regulations, building and other codes, job site rules
and such other requirements as are determined by Landlord to be necessary to
protect the interests of the Building, the tenants in the Building and Landlord,
in the same or similar manner as Landlord has the right to protect itself and
the Building with respect to proposed alterations as described in Section 6.303
of this Lease; (iv) Landlord determines that there is sufficient space in the
Building for the placement of all of the provider's equipment and materials; (v)
the provider agrees to abide by Landlord requirements, if any, that provider use
existing Building conduits and pipes or use Building contractors (or other
contractors approved by Landlord); (vi) Landlord receives from the provider such
compensation as is determined by Landlord to compensate it for space used in the
Building for the storage and maintenance of the provider's equipment, for the
fair market value of a provider's access to the Building, and the costs which
may reasonably be expected to be incurred by Landlord; (vii) the provider agrees
to deliver to Landlord detailed "as built" plans immediately after the
installation of the provider's equipment is complete; and (viii) all of the
foregoing matters are documented in a written license agreement between Landlord
and the provider, the form and content of which are reasonably satisfactory to
Landlord.
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<PAGE>
ARTICLE 6
MAINTENANCE, REPAIRS, ALTERATIONS AND IMPROVEMENTS
SECTION 6.1 LANDLORD'S OBLIGATION TO MAINTAIN AND REPAIR. Landlord shall
(subject to Section 7.1, Section 7.4, Article 8 below and Landlord's rights
under Section 2.2 above and except for ordinary wear and tear) maintain the
exterior walls and roof and load bearing elements of the Building in good repair
and condition. Except for load bearing elements of the Building located within
the Premises, Landlord shall not be required to maintain or repair any portion
of the Premises.
SECTION 6.2 TENANT'S OBLIGATION TO MAINTAIN AND REPAIR.
6.201 Tenant's Obligation.
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(a) Subject to Sections 5.107, 6.1, 7.1 and 7.4 and Article 8 of this
Lease and to ordinary wear and tear, Tenant shall, at Tenant's sole cost
and expense, (i) maintain and keep the interior of the Premises
(including, but not limited to, all fixtures, walls, ceilings, floors,
doors, windows [except replacement of exterior plate glass], appliances
and equipment which are a part of the Premises) in good repair and
condition, (ii) repair or replace any damage or injury done to the
Building or any other part of the Property caused by Tenant, Tenant's
agents, employees, licensees, invitees or visitors or resulting from a
breach of its obligations under this Section 6.2 and (iii) indemnify and
hold Landlord harmless from, and reimburse Landlord for and with respect
to, any and all costs, expenses (including reasonable attorneys' fees),
claims and causes of action arising from or incurred by and/or asserted
in connection with such maintenance, repairs, replacements, damage or
injury. All repairs and replacements performed by or on behalf of Tenant
shall be performed in a good and workmanlike manner and in accordance
with the standards applicable to alterations or improvements performed by
Tenant. Tenant shall continue to pay Rent, without abatement, during any
period that repairs or replacements are performed or required to be
performed by Tenant under this Section 6.2.
(b) Subject to Sections 7.1 and 7.4 and Article 8 of this Lease, Tenant
shall maintain and repair all supplemental HVAC units, data and phone
cabling, and any and all other installations and equipment installed in
the Premises, above the acoustical ceiling tiles of the Premises or
elsewhere in the Building (such equipment and installations collectively
referred to as the "Tenant Service Equipment") installed by or on behalf
of Tenant and which service only the Premises. Tenant shall notify
Landlord prior to performing any repair, maintenance or replacement of
the Tenant Service Equipment and the same shall be performed in
accordance with the standards and conditions applicable to maintenance,
repairs and replacements performed by Tenant pursuant to subpart (a) of
this Section 6.201. Landlord shall have no liability for any repair,
maintenance or replacement cost incurred in connection with the Tenant
Service Equipment. All Tenant Service Equipment shall become property of
the Landlord at the expiration or earlier termination of the Lease;
provided that, if requested by Landlord, Tenant shall remove the Tenant
Service Equipment on or before the Expiration Date or, if this Lease is
terminated earlier, within seven (7) days after such termination. All
removals shall be accomplished in accordance with the standards for
removals under Section 1.301 hereof. Tenant shall indemnify and hold
Landlord harmless from, and reimburse Landlord for and with respect to,
any and all costs, expenses (including reasonable attorneys' fees),
claims and causes of action arising from or incurred by and/or asserted
in connection with the (i) maintenance, repair, replacement of the Tenant
Service Equipment and (ii) any damage or injury arising out of or
resulting from or in connection with the Tenant Service Equipment.
6.202 Rights of Landlord. Landlord shall have the same rights with respect to
------------------
repairs performed by Tenant as Landlord has with respect to improvements
and alterations performed by Tenant under subsection 6.303 below. In the
event Tenant fails, in the reasonable judgment of Landlord, to maintain
the Premises in good order, condition and repair, or otherwise satisfy
its repair and replacement obligations under subsection 6.201 above,
Landlord shall have the right to perform such maintenance, repairs and
replacements at Tenant's expense. Tenant shall pay to Landlord within ten
(10) days after demand any such cost or expense incurred by Landlord,
together with interest thereon at the rate specified in Section 15.10
below from the date of demand until paid.
SECTION 6.3 IMPROVEMENTS AND ALTERATIONS.
6.301 Landlord's Construction Obligation. Landlord's sole construction
----------------------------------
obligation under this Lease is as set forth in the Work Letter.
6.302 Alteration of Building. LANDLORD HEREBY RESERVES THE RIGHT AND AT ALL
----------------------
TIMES SHALL HAVE THE RIGHT TO REPAIR, CHANGE, REDECORATE, ALTER, IMPROVE,
MODIFY, RENOVATE, ENCLOSE OR MAKE ADDITIONS TO ANY PART OF THE PROPERTY
(INCLUDING, WITHOUT LIMITATION, STRUCTURAL ELEMENTS AND LOAD BEARING
ELEMENTS WITHIN THE PREMISES) AND TO ENCLOSE AND/OR CHANGE THE
ARRANGEMENT AND/OR LOCATION OF DRIVEWAYS OR PARKING AREAS OR LANDSCAPING
OR OTHER COMMON AREAS OF THE PROPERTY, ALL WITHOUT BEING HELD GUILTY OF
AN ACTUAL OR CONSTRUCTIVE EVICTION OF TENANT OR BREACH OF THE IMPLIED
WARRANTY OF SUITABILITY AND WITHOUT AN ABATEMENT OF RENT (THE "RESERVED
RIGHT"). WITHOUT IN ANY WAY LIMITING THE GENERALITY OF THE FOREGOING,
LANDLORD'S RESERVED RIGHT SHALL INCLUDE, BUT NOT BE LIMITED TO THE RIGHT
TO DO ANY OF THE FOLLOWING: (i) erect and construct scaffolding, pipe,
conduit and other structures on and within and outside of the Premises
where reasonably required by the nature of the changes, alterations,
improvements, modifications, renovations and/or additions being
performed, (ii) perform within and outside of the Premises all work and
other activities associated with such changes, alterations, improvements,
modifications, renovations and/or additions being performed, (iii)
repair, change, renovate, remodel, alter, improve, modify or make
additions to the arrangement, appearance, location and/or size of
entrances or passageways, doors and doorways, corridors, elevators,
elevator lobbies, stairs, toilets or other Common Areas or Service Areas,
(iv) temporarily close any Common Area and/or temporarily suspend
Building services and facilities in connection with any repairs, changes,
alterations, modifications, renovations or additions to any part of the
Building, (v) repair, change, alter or improve plumbing, pipes and
conduits located in the Building, including without limitation, those
located within the Premises, the Common Areas, the Service Corridors or
the Service Areas (hereinafter defined) of the Building
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<PAGE>
and (vi) repair, change, modify, alter, improve, renovate or make
additions to the Building central heating, ventilation, air conditioning,
electrical, mechanical or plumbing systems. When exercising the Reserved
Right, Landlord will interfere with Tenant's use and occupancy of the
Premises as little as is reasonably practicable. Notwithstanding the
foregoing, Landlord shall not make any material alterations to the
Building or the Common Areas during the initial Term of this Lease unless
such alterations are (i) required by applicable law, (ii) performed in
connection with Landlord's obligations hereunder or in connection with
any repair of the Building or Common Areas, (iii) required to preserve
the health and safety of the tenants of the Building, or (iv) are
necessary for the protection of the Property .
6.303 Alterations, Additions, Improvements and Installations by Tenant. Tenant
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shall not, without the prior written consent of Landlord, make any
changes, modifications, alterations, additions or improvements (other
than Tenant's Improvements under the Work Letter) to, or install any
equipment or machinery (other than office equipment and unattached
personal property) on, the Premises (all such changes, modifications,
alterations, additions, improvements (other than Tenant's Improvements
under the Work Letter) and installations approved by Landlord are herein
collectively referred to as "Installations") if any such Installations
would (i) affect any structural or load bearing portions of the Building,
(ii) result in a material increase of electrical usage above the normal
type and amount of electrical current to be provided by Landlord, (iii)
result in an increase in Tenant's usage of heating or air conditioning,
(iv) impact mechanical, electrical or plumbing systems in the Premises or
the Building, (v) affect areas of the Premises which can be viewed from
Common Areas, (vi) require greater or more difficult cleaning work (e.g.,
kitchens, reproduction rooms and interior glass partitions), (vii)
adversely affect Landlord's ability to deliver Building services to other
tenants of the Building or (viii) violate any provision in Article 4
above or Rider H-1 attached hereto. As to Installations not covered by
---------
the preceding sentence, Tenant will not perform same without the prior
written consent of Landlord, which consent shall not be unreasonably
withheld or delayed. All Installations shall be at Tenant's sole cost and
expense. Without in any way limiting Landlord's consent rights, Landlord
shall not be required to give its consent until (a) Landlord approves the
contractor or person making such Installations and approves such
contractor's insurance coverage to be provided in connection with the
work, (b) Landlord approves final and complete plans and specifications
for the work and (c) the appropriate governmental agency, if any, has
approved the plans and specifications for such work. All work performed
by Tenant or its contractor relating to the Installations shall conform
to applicable governmental laws, rules and regulations, including,
without limitation, the Disability Acts. Upon completion of the
Installations, Tenant shall deliver to Landlord "as built" plans. If
Landlord performs such Installations, Tenant shall pay Landlord, as
additional Rent, the cost thereof plus five percent (5%) as reimbursement
for Landlord's overhead. Each payment shall be made to Landlord within
ten (10) days after receipt of an invoice from Landlord. All
Installations that constitute improvements constructed within the
Premises shall be surrendered with the Premises at the expiration or
earlier termination of this Lease, unless Landlord requests that same be
removed pursuant to Section 1.3 above. Tenant shall indemnify and hold
Landlord harmless from and reimburse Landlord for and with respect to,
any and all costs, expenses (including reasonable attorneys' fees),
demands, claims, causes of action and liens, arising from or in
connection with any Installations performed by or on behalf of Tenant
(other than those performed by Landlord), EVEN IF THE SAME IS CAUSED BY
THE NEGLIGENCE OR OTHER TORTIOUS CONDUCT OF LANDLORD OR LANDLORD IS
STRICTLY LIABLE FOR SUCH COSTS, EXPENSES OR CLAIMS. All Installations
performed by or on behalf of Tenant will be performed diligently and in a
first-class workmanlike manner and in compliance with all applicable
laws, ordinances, regulations and rules of any public authority having
jurisdiction over the Building and/or Tenant's and Landlord's insurance
carriers. Landlord will have the right, but not the obligation, to
inspect periodically the work on the Premises and may require changes in
the method or quality of the work.
6.304 Approvals. Any approval by Landlord (or Landlord's architect and/or
---------
engineers) of any of Tenant's contractors or Tenant's drawings, plans or
specifications which are prepared in connection with any construction of
improvements (including without limitation, Tenant's Improvements) in the
Premises shall not in any way be construed as or constitute a
representation or warranty of Landlord as to the abilities of the
contractor or the adequacy or sufficiency of such drawings, plans or
specifications or the improvements to which they relate, for any use,
purpose or condition.
6.305. Tenant's Generator. Subject to all of the terms and conditions of Section
------------------
6.303 above, Tenant shall be entitled to install a generator which
operates on diesel fuel or natural gas (the "Generator") outside of the
Building at a location mutually acceptable to Landlord and Tenant,
provided that (i) Tenant obtains all necessary approvals from the City of
Austin and all other governmental authorities having jurisdiction over
Tenant, the Property and the Generator, and (ii) the Generator conforms
to all applicable laws, rules and regulations of any governmental
authorities having jurisdiction over the Generator or the Property. For
purposes of this Lease, the Generator shall be considered an Installation
under Section 6.303. Tenant, at its sole cost and expense, shall maintain
the Generator in good and operable condition and shall be responsible for
the maintenance, repair and replacement of the Generator, as necessary.
Further, Tenant shall indemnify and hold Landlord harmless from and
against any and all claims, demands, fines, liabilities, costs, expenses,
damages and causes of action accruing from or related to the Generator,
EVEN IF THE SAME IS CAUSED BY THE NEGLIGENCE OF LANDLORD OR ANYONE ACTING
FOR LANDLORD. In the event Tenant installs the Generator, Tenant shall
reimburse Landlord within thirty (30) days after Tenant's receipt of an
invoice, for the costs of landscaping and/or fencing installed by
Landlord to screen the Generator from public view.
ARTICLE 7
INSURANCE, FIRE AND CASUALTY
SECTION 7.1 TOTAL OR PARTIAL DESTRUCTION OF THE BUILDING OR THE PREMISES. In
the event that the Building should be totally destroyed by fire or other
casualty or in the event the Building (or any portion thereof) should be so
damaged that rebuilding or repairs cannot be completed, in Landlord's reasonable
opinion, within one hundred eighty (180) days after commencement of repairs to
the Building, Landlord may, at its option, terminate this Lease, in which event
Basic Annual Rent and Additional Rent shall be abated during the unexpired
portion of this Lease effective with the date of such damage. Landlord shall
provide Tenant of its determination of the rebuilding and restoration time
within forty-five (45) days after the date of the casualty. Landlord shall
exercise the termination right pursuant to the preceding sentence, if at all, by
delivering written notice of termination to Tenant within ten (10) days after
determining that the repairs cannot be completed within such one hundred eighty
(180) day period. In the event that the Premises should be so damaged by fire
or other casualty that rebuilding or repairs cannot be completed, in Landlord's
reasonable opinion,
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within one hundred eighty (180) days after the commencement of repairs to the
Premises, Tenant may, at its option terminate this Lease, in which event Basic
Annual Rent and Additional Rent shall be abated during the unexpired portion of
this Lease, effective the date of termination. Tenant shall exercise the
termination right pursuant to the preceding sentence, if at all, by delivering
written notice of termination to Landlord within ten (10) days after being
advised by Landlord that the repairs cannot be completed within such one hundred
eighty (180) day period. In the event the Building or the Premises should be
damaged by fire or other casualty and, in Landlord's reasonable opinion, the
rebuilding or repairs can be completed within one hundred eighty (180) days
after the commencement of repairs to the Building or Premises, as applicable, or
if the damage should be more serious but neither Landlord nor Tenant elect to
terminate this Lease pursuant to this Section, in either such event Landlord
shall, within sixty (60) days after the date of such damage, commence (and
thereafter pursue with reasonable diligence) repairing the Building and the
Premises (including Tenant's Improvements), but only to the extent of insurance
proceeds actually received by Landlord for such repairs, to substantially the
same condition which existed immediately prior to the happening of the casualty.
In the event the insurance proceeds are not sufficient to restore the Building
and Premises to substantially the same condition which existed prior to the
casualty and Landlord does not elect to restore the Building and the Premises to
such condition, this Lease shall terminate upon notice by Landlord to Tenant of
Landlord's election not to restore the Building and Premises. In no event shall
Landlord be required to rebuild, repair or replace any part of the furniture,
equipment, fixtures, inventory, supplies or any other personalty or any other
improvements (except Tenant's Improvements to the extent set forth in the
preceding sentence), which may have been placed by Tenant within the Building or
at the Premises. Landlord shall allow Tenant a fair diminution of Basic Annual
Rent and Additional Rent during the time the Premises are unfit for occupancy;
provided, that if such casualty was caused by Tenant, its agents, employees,
licensees or invitees, Basic Annual Rent and Additional Rent shall be abated
only to the extent Landlord is compensated for such Basic Annual Rent and
Additional Rent by loss of rents insurance, if any. Notwithstanding Landlord's
restoration obligation, in the event any mortgagee under a deed of trust,
security agreement or mortgage on the Building should require that the insurance
proceeds be used to retire or reduce the mortgage debt or if the insurance
company issuing Landlord's fire and casualty insurance policy fails or refuses
to pay Landlord the proceeds under such policy, Landlord shall have no
obligation to rebuild and this Lease shall terminate upon notice by Landlord to
Tenant. Any insurance which may be carried by Landlord or Tenant against loss or
damage to the Building or to the Premises shall be for the sole benefit of the
party carrying such insurance and under its sole control.
SECTION 7.2 TENANT'S INSURANCE.
7.201 Types of Coverage. Tenant covenants and agrees that from and after the
-----------------
date of delivery of the Premises from Landlord to Tenant, Tenant will
carry and maintain, at its sole cost and expense, the insurance set forth
in paragraphs (a), (b) and (c) of this subsection.
(a) Commercial General Liability Insurance. Commercial General Liability
--------------------------------------
Insurance covering the Premises and Tenant's use thereof against claims
for personal or bodily injury or death or property damage occurring upon,
in or about the Premises (including contractual indemnity and liability
coverage), such insurance to insure both Tenant and, as additional named
insureds, Landlord and the Property Manager, and to afford protection to
the limit of not less than $1,000,000.00, combined single limit, in
respect to injury or death to any number of persons and all property
damage arising out of any one (1) occurrence, with a deductible
acceptable to Landlord. If the Agreed Rentable Area of the Premises is
more than 30,000 square feet, then, in addition to and not in lieu of the
above stated coverage, Tenant shall carry umbrella or so called excess
coverage in an amount not less than $1,000,000.00 over Tenant's base
coverage amount. All insurance coverage required under this subparagraph
(a) shall extend to any liability of Tenant arising out of the
indemnities provided for in this Lease. Additionally, each policy
evidencing the insurance required under this subparagraph shall expressly
insure both Tenant and, as additional named insureds, Landlord and the
Property Manager, IT BEING THE INTENT THAT SUCH POLICIES AFFORD INSURANCE
COVERAGE TO LANDLORD AND THE PROPERTY MANAGER AGAINST CLAIMS FOR PERSONAL
OR BODILY INJURY OR DEATH OR PROPERTY DAMAGE OCCURRING UPON, IN OR ABOUT
THE PREMISES AS THE RESULT OF THE NEGLIGENCE OF LANDLORD OR THE PROPERTY
MANAGER, whether or not required by the other provisions of this Lease.
(b) Fire and Extended Coverage Insurance. Property insurance on an all-
------------------------------------
risk extended coverage basis (including coverage against fire, wind,
tornado, vandalism, malicious mischief, water damage and sprinkler
leakage) covering all fixtures, equipment and personalty located in the
Premises and endorsed to provide one hundred percent (100%) replacement
cost coverage. Such policy will be written in the names of Tenant,
Landlord and any other parties reasonably designated by Landlord from
time to time, as their respective interests may appear. The property
insurance may, with the consent of the Landlord, provide for a reasonable
deductible.
(c) Workers Compensation and Employer's Liability Insurance. Worker's
-------------------------------------------------------
compensation insurance, if required under the laws of the State of Texas,
and if so required, employer's liability insurance in an amount not less
than $1,000,000.00. The insurance required by this part (c) shall include
provisions waiving all subrogation rights against Landlord.
7.202 Other Requirements of Insurance. All such insurance will be issued and
-------------------------------
underwritten by companies reasonably acceptable to Landlord and will
contain endorsements that (a) such insurance may not lapse with respect
to Landlord or Property Manager or be canceled or amended with respect to
Landlord or Property Manager without the insurance company giving
Landlord and Property Manager at least thirty (30) days prior written
notice of such cancellation or amendment, (b) Tenant will be solely
responsible for payment of premiums, (c) in the event of payment of any
loss covered by such policy, Landlord or Landlord's designees will be
paid first by the insurance company for Landlord's loss and (d) Tenant's
insurance is primary in the event of overlapping coverage which may be
carried by Landlord.
7.203 Proof of Insurance. Tenant shall deliver to Landlord within ten (10)
------------------
days prior to the commencement of construction of Tenant's Improvements,
duplicate originals of all policies of insurance required by this Section
7.2 or duly executed originals of the evidence of such insurance (on
ACORD Form 27 or a similar form) evidencing in-force coverage, stating
that Landlord is an additional insured thereunder and agreeing to give
Landlord at least thirty (30) days written notice prior to termination,
cancellation or modification adversely affecting Landlord. Further,
Tenant shall deliver to Landlord renewals thereof at least thirty (30)
days prior to the expiration of the respective policy terms.
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<PAGE>
SECTION 7.3 LANDLORD'S INSURANCE.
7.301 Types of Coverage. Landlord covenants and agrees that from and after the
-----------------
date of delivery of the Premises from Landlord to Tenant, Landlord will
carry and maintain, at its sole cost and expense, the insurance set forth
in paragraphs (a) and (b) of this subsection.
(a) Commercial General Liability Insurance. Commercial General Liability
--------------------------------------
Insurance covering the Building and all Common Areas, but excluding the
Premises, insuring against claims for personal or bodily injury or death
or property damage occurring upon, in or about the Building or Common
Areas to afford protection to the limit of not less than $2,000,000.00
combined single limit in respect to injury or death to any number of
persons and property damage arising out of any one (1) occurrence. This
insurance coverage shall extend to any liability of Landlord arising out
of the indemnities provided for in this Lease.
(b) Fire and Extended Coverage Insurance. Landlord shall at all times
------------------------------------
during the term hereof maintain in effect a policy or policies of all
risk extended coverage insurance covering the Building (excluding
property required to be insured by Tenant) endorsed to provide full
replacement cost coverage and providing protection against perils
included within the standard Texas form of fire and extended coverage
insurance policy, together with insurance against sprinkler damage,
vandalism, malicious mischief and such other risks as Landlord may from
time to time determine and with any such deductibles as Landlord may from
time to time determine.
7.302 Self Insurance. Any insurance provided for in subsection 7.301 above may
--------------
be effected by a policy or policies of blanket insurance covering
additional items or locations or assureds, provided that the requirements
of this Section 7.3 are otherwise satisfied. Landlord may also self
insure any of the insurance requirements under subsection 7.301 as long
as Landlord has a net worth of at least $25,000,000. Tenant shall have no
rights in any policy or policies maintained by Landlord.
SECTION 7.4 WAIVER OF SUBROGATION. Landlord and Tenant each hereby waives any
rights it may have against the other (including, but not limited to, a direct
action for damages) on account of any loss or damage occasioned to Landlord or
Tenant, as the case may be (EVEN IF (I) SUCH LOSS OR DAMAGE IS CAUSED BY THE
FAULT, NEGLIGENCE OR OTHER TORTIOUS CONDUCT, ACTS OR OMISSIONS OF THE RELEASED
PARTY OR THE RELEASED PARTY'S DIRECTORS, EMPLOYEES, AGENTS OR INVITEES, OR (II)
THE RELEASED PARTY IS STRICTLY LIABLE FOR SUCH LOSS OR DAMAGE), TO THEIR
RESPECTIVE PROPERTY, THE PREMISES, ITS CONTENTS OR TO ANY OTHER PORTION OF THE
BUILDING OR THE PROPERTY ARISING FROM ANY RISK (WITHOUT REGARD TO THE AMOUNT OF
COVERAGE OR THE AMOUNT OF DEDUCTIBLE) COVERED BY THE ALL RISK FULL REPLACEMENT
COST PROPERTY INSURANCE REQUIRED TO BE CARRIED BY TENANT AND LANDLORD,
RESPECTIVELY, UNDER SUBSECTIONS 7.201(B) AND 7.301(B) ABOVE. The foregoing
waiver shall be effective even if either or both parties fail to carry the
insurance required by sections 7.201(b) and 7.301(b) above. The foregoing
waiver shall be effective even if either or both parties fail to carry the
insurance required by sections 7.201(b) and 7.301(b) above. If a party waiving
rights under this Section is carrying an all risk full replacement cost
insurance policy in the promulgated form used in the State of Texas and an
amendment to such promulgated form is passed, such amendment shall be deemed not
a part of such promulgated form until it applies to the policy being carried by
the waiving party. Without in any way limiting the foregoing waivers and to the
extent permitted by applicable law, the parties hereto each, on behalf of their
respective insurance companies insuring the property of either Landlord or
Tenant against any such loss, waive any right of subrogation that Landlord or
Tenant or their respective insurers may have against the other party or their
respective officers, directors, employees, agents or invitees and all rights of
their respective insurance companies based upon an assignment from its insured.
Each party to this Lease agrees immediately to give to each such insurance
company written notification of the terms of the mutual waivers contained in
this Section and to have said insurance policies properly endorsed, if
necessary, to prevent the invalidation of said insurance coverage by reason of
said waivers. The foregoing waiver shall be effective whether or not the
parties maintain the required insurance.
SECTION 7.5 INDEMNITY.
7.501 Tenant's Indemnity. Subject to the limitation and exclusions set forth
------------------
below in this subsection, Tenant will indemnify and hold harmless
Landlord, Property Manager, their respective officers, directors, and
employees and any other parties for whom Landlord and/or Property Manager
are responsible (each a "Landlord Indemnified Party") from, and shall
reimburse each Landlord Indemnified Party for and with respect to, any
and all costs, expenses (including, without limitation, reasonable
attorneys' fees), claims, demands, actions, proceedings, judgments,
hearings, damages, losses and liabilities brought or asserted by or
payable to any third party, on account of personal injury, death,
property damage or any other form of injury or damage (each a "Claim" and
collectively, the "Claims") arising out of or relating to (A) an incident
or event which occurred within or on the Premises, (B) the use or
occupancy of the Premises or (C) any breach of this Lease by Tenant and
which resulted in a Claim, EVEN IF THE CLAIM IS THE RESULT OF OR CAUSED
BY THE NEGLIGENT ACTS OR OMISSIONS OF ANY LANDLORD INDEMNIFIED PARTY OR
THE LANDLORD INDEMNIFIED PARTY IS STRICTLY LIABLE FOR SUCH CLAIM. The
indemnification and reimbursement obligations of Tenant under this
subsection (i) shall be limited to the greater of the amount of
Commercial General Liability Insurance required to be carried by such
party under this Lease or $5,000,000 and (ii) shall not apply to a Claim
------------------
(a) waived by Landlord under Section 7.4 above or any other provision of
this Lease, (b) related to hazardous or toxic materials and caused by an
act or omission that does not constitute a breach by Tenant of the
provisions of subsection 4.102 above or Rider H-1 attached hereto, (c)
---------
arising out of the gross negligence or intentional misconduct of the
Landlord Indemnified Party or (d) resulting from host liquor liability.
If a third party files a lawsuit or brings any other legal action
asserting a Claim against a Landlord Indemnified Party and that is
covered by Tenant's indemnity, then Tenant, upon notice from the Landlord
Indemnified Party, shall resist and defend such Claim through counsel
reasonably satisfactory to the Landlord Indemnified Party. Tenant's
obligations under this subsection shall survive the termination of this
Lease.
7.502 Landlord's Indemnity. Subject to the limitation and exclusions set forth
--------------------
below in this subsection, Landlord will indemnify and hold harmless
Tenant and its officers, directors, and employees and any other parties
for whom Tenant is responsible (each a "Tenant Indemnified Party") from,
and shall reimburse each Tenant Indemnified Party for and with respect
to, any and all Claims
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<PAGE>
(as defined in subsection 7.501 preceding) arising out of or relating to
(a) an incident or event which occurred within or on the Common Areas, (b)
the use or occupancy of the Common Areas, or (c) any breach of this Lease
by Landlord and which resulted in a Claim, EVEN IF THE CLAIM IS THE RESULT
OF OR CAUSED BY THE NEGLIGENT ACTS OR OMISSIONS OF ANY TENANT INDEMNIFIED
PARTY OR THE TENANT INDEMNIFIED PARTY IS STRICTLY LIABLE FOR SUCH CLAIM.
The indemnification and reimbursement obligations of Landlord under this
subsection (i) shall be limited to the greater of the amount of Commercial
General Liability Insurance required to be carried by such party under
this Lease or $5,000,000 and (ii) shall not apply to a Claim (a) waived by
------------------
Tenant under Section 7.4 above or any other provision of this Lease, (b)
related to hazardous or toxic materials and caused by an act or omission
that does not constitute a breach by Landlord of the provisions of
subsection 4.102 above or Rider H-1 attached hereto, (c) arising out of
---------
the gross negligence or intentional misconduct of the Tenant Indemnified
Party or (d) resulting from host liquor liability. If a third party files
a lawsuit or brings any other legal action asserting a Claim against a
Tenant Indemnified Party and that is covered by Landlord's indemnity, then
Landlord, upon notice from the Tenant Indemnified Party, shall resist and
defend such Claim through counsel reasonably satisfactory to the Tenant
Indemnified Party. Landlord's obligations under this subsection shall
survive the termination of this Lease.
ARTICLE 8
CONDEMNATION
SECTION 8.1 CONDEMNATION RESULTING IN CONTINUED USE NOT FEASIBLE. If the
Property or any portion thereof that, in Landlord's reasonable opinion, is
necessary to the continued efficient and/or economically feasible use of the
Property shall be taken or condemned in whole or in part for public purposes, or
sold to a condemning authority in lieu of taking, then the term of this Lease
shall, at the option of Landlord, forthwith cease and terminate.
SECTION 8.2 TOTAL CONDEMNATION OF PREMISES. In the event that all or
substantially all of the Premises is taken or condemned or sold in lieu thereof
or Tenant will be unable to use a substantial portion of the Premises for a
period of one hundred eighty (180) consecutive days by reason of a temporary
taking, either Landlord or Tenant may terminate this Lease by delivering written
notice thereof to the other within ten (10) business days after the taking,
condemnation or sale in lieu thereof.
SECTION 8.3 CONDEMNATION WITHOUT TERMINATION. If upon a taking or
condemnation or sale in lieu of the taking of all or less than all of the
Property which gives either Landlord or Tenant the right to terminate this Lease
pursuant to Section 8.1 or 8.2 above and neither Landlord nor Tenant elect to
exercise such termination right, then this Lease shall continue in full force
and effect, provided that, if the taking, condemnation or sale includes any
portion of the Premises, the Basic Annual Rent and Additional Rent shall be
redetermined on the basis of the remaining square feet of Agreed Rentable Area
of the Premises. Landlord, at Landlord's sole option and expense, shall restore
and reconstruct the Building to substantially its former condition to the extent
that the same may be reasonably feasible, but such work shall not be required to
exceed the scope of the work done by Landlord in originally constructing the
Building, nor shall Landlord in any event be required to spend for such work an
amount in excess of the amount received by Landlord as compensation or damages
(over and above amounts going to the mortgagee of the property taken) for the
part of the Building or the Premises so taken.
SECTION 8.4 CONDEMNATION PROCEEDS. Landlord shall receive the entire award
(which shall include sales proceeds) payable as a result of a condemnation,
taking or sale in lieu thereof. Tenant hereby expressly assigns to Landlord any
and all right, title and interest of Tenant now or hereafter arising in and to
any such award. Tenant shall, however, have the right to recover from such
authority through a separate award which does not reduce Landlord's award, any
compensation as may be awarded to Tenant on account of moving and relocation
expenses and depreciation to and removal of Tenant's physical property.
ARTICLE 9
LIENS
Tenant shall keep the Premises and the Property free from all liens arising out
of any work performed, materials furnished or obligations incurred by or for
Tenant AND TENANT SHALL INDEMNIFY AND HOLD HARMLESS LANDLORD FROM AND AGAINST,
AND REIMBURSE LANDLORD FOR AND WITH RESPECT TO, ANY AND ALL CLAIMS, CAUSES OF
ACTION, DAMAGES, EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES), ARISING FROM
OR IN CONNECTION WITH ANY SUCH LIENS. In the event that Tenant shall not,
within ten (10) days following notification to Tenant of the imposition of any
such lien, cause the same to be released of record by payment or the posting of
a bond in amount, form and substance acceptable to Landlord, Landlord shall
have, in addition to all other remedies provided herein and by law, the right
but not the obligation, to cause the same to be released by such means as it
shall deem proper, including payment of or defense against the claim giving rise
to such lien. All amounts paid or incurred by Landlord in connection therewith
shall be paid by Tenant to Landlord on demand and shall bear interest from the
date of demand until paid at the rate set forth in Section 15.10 below. Nothing
in this Lease shall be deemed or construed in any way as constituting the
consent or request of Landlord, express or implied, by inference or otherwise,
to any contractor, subcontractor, laborer or materialman for the performance of
any labor or the furnishing of any materials for any specific improvement,
alteration or repair of or to the Building or the Premises or any part thereof,
nor as giving Tenant any right, power or authority to contract for or permit the
rendering of any services or the furnishing of any materials that would give
rise to the filing of any mechanic's or other liens against the interest of
Landlord in the Property or the Premises.
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ARTICLE 10
TAXES ON TENANT'S PROPERTY
Tenant shall be liable for and shall pay, prior to their becoming delinquent,
any and all taxes and assessments levied against, and any increases in Real
Estate Taxes as a result of, any personal property or trade or other fixtures
placed by Tenant in or about the Premises and any improvements (other than
Tenant's Improvements) constructed in the Premises by or on behalf of Tenant.
In the event Landlord pays any such additional taxes or increases, Tenant will,
within ten (10) days after demand, reimburse Landlord for the amount thereof.
ARTICLE 11
SUBLETTING AND ASSIGNING
SECTION 11.1 SUBLEASE AND ASSIGNMENT. Tenant shall not assign this Lease, or
allow it to be assigned, in whole or in part, by operation of law or otherwise
or mortgage or pledge the same, or sublet the Premises or any part thereof or
permit the Premises to be occupied by any firm, person, partnership or
corporation or any combination thereof, other than Tenant, without the prior
written consent of Landlord, which shall not be unreasonably withheld so long as
Landlord does not elect to terminate this Lease under Section 11.2 below. In no
event shall any assignment or sublease ever release Tenant from any obligation
or liability hereunder. Without limiting Landlord's consent rights and as a
condition to obtaining Landlord's consent, (i) each assignee must assume all
obligations under this Lease and (ii) each sublessee must confirm that its
sublease is subject and subordinate to this Lease. In addition, each assignee
and sublessee shall agree to cause the Premises to comply at all times with all
requirements of the Disability Acts (as amended), including, but not limited to,
obligations arising out of or associated with such assignee's or subtenant's use
of or activities or business operations conducted within the Premises. No
assignee or sublessee of the Premises or any portion thereof may assign or
sublet the Premises or any portion thereof. Consent by Landlord to one or more
assignments or sublettings shall not operate as a waiver of Landlord's rights as
to any subsequent assignments and/or sublettings. Tenant shall deliver to
Landlord a copy of each assignment or sublease entered into by Tenant promptly
after the execution thereof, whether or not Landlord's consent is required in
connection therewith. Any assignment made by Tenant shall be in recordable form
and shall contain a covenant of assumption by the assignee running to Landlord.
All reasonable legal fees and expenses incurred by Landlord in connection with
any assignment or sublease proposed by Tenant will be the responsibility of
Tenant and will be paid by Tenant within five (5) days of receipt of an invoice
from Landlord. In addition, Tenant will pay to Landlord an administrative
overhead fee of $500.00 in consideration for Landlord's review of any requested
assignment or sublease. Notwithstanding the foregoing, the following shall not
be an "assignment" of this Lease: (i) Tenant's stock becomes publicly traded,
(ii) the sale of all of the stock of Tenant to a third party, provided that
after taking such sale into effect, the third party has a net worth equal to or
greater than the net worth of Tenant on the date hereof, (iii) the sale of
substantially all of the assets of Tenant to a third party provided that after
taking such sale into effect, such third party has a net worth equal to or
greater than Tenant as of the date hereof; (iv) a merger of Tenant into or with
a third party, provided that after taking such merger into effect, the surviving
entity has a net worth equal to or greater than the net worth of Tenant on the
date hereof.
SECTION 11.2 LANDLORD'S RIGHTS.
11.201 Landlord's Termination and Consent Rights.
-----------------------------------------
(a) If Tenant desires to sublease any portion of the Premises or assign
this Lease, Tenant shall submit to Landlord (a) in writing the name of
the proposed subtenant or assignee, the nature of the proposed
subtenant's or assignee's business and, in the event of a sublease, the
portion of the Premises which Tenant desires to sublease (if the
proposed sublease space is less than all of the Premises, such portion
is herein referred to as the "Proposed Sublease Space"), (b) a current
balance sheet and income statement for such proposed subtenant or
assignee, (c) a copy of the proposed form of sublease or assignment, and
(d) such other information as Landlord may reasonably request
(collectively, the "Required Information").
(b) Landlord shall, within fifteen (15) days after Landlord's receipt of
the Required Information deliver to Tenant a written notice (each such
notice, a "Landlord Response") in which Landlord either (i) terminates
this Lease, if Tenant desires to sublease all of the Premises or assign
this Lease, (ii) terminates this Lease only as to the Proposed Sublease
Space, if the Proposed Sublease Space is less than the entire Premises,
(iii) consents to the proposed sublease or assignment, or (iv) withholds
its consent to the proposed sublease or assignment, which consent shall
not be unreasonably withheld so long as Landlord does not elect to
terminate this Lease under subparts (i) or (ii) above and so long as
Landlord has received all Required Information. Landlord shall be deemed
to have reasonably withheld its consent to any sublease or assignment if
the refusal is based on (i) Landlord's determination (in its sole
discretion) that such subtenant or assignee is not of the character or
quality of a tenant to whom Landlord would generally lease space of the
Building, (ii) the fact that such sublease or assignment is not in form
and of substance reasonably satisfactory to Landlord, (iii) such
sublease or assignment conflicts in any manner with this Lease,
including, but not limited to, the Permitted Use under Item 10 of the
Basic Lease Provisions or Section 4.1 of the Supplemental Lease
Provisions, (iv) the proposed subtenant or assignee is a governmental
entity or a medical office, (v) the proposed subtenant's or assignee's
primary business is prohibited by any non-compete clause then affecting
the Building, (vi) the proposed subtenant or assignee is a tenant of the
Building or Landlord is negotiating with the proposed subtenant or
assignee to become a tenant of any building owned by Landlord in the
project known as Barton Oaks Plaza (the "Project"), (vii) the population
density of the proposed subtenant or assignee within the Premises will
exceed the general population density requirement set forth in
subsection 4.101 hereof, (viii) the character of the business to be
conducted within the Premises by the proposed subtenant or assignee is
likely to substantially increase the expenses or costs or providing
Building services, or the burden on parking, existing janitorial
services or elevators in the Building, (ix) the sublease or assignment
would cause Landlord to breach any recorded covenants or contractual
obligations to which the Property or Landlord is subject or (x) such
sublessee or assignee has a net worth less than that of Tenant at the
time Tenant submits the Required Information.
(c) If Landlord does not timely exercise its termination right with
respect to the proposed sublease or assignment within the required
fifteen (15) days period, then Landlord shall be deemed to have waived
its right to terminate this Lease with respect to the applicable
assignment or sublease, but Landlord shall have the right to consent or
withhold its consent to the applicable proposed assignment or sublease,
by delivering written notice thereof to Tenant within such fifteen (15)
day period. If Landlord
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does not exercise its right to consent or withhold its consent in
respect of a proposed assignment or sublease within the required fifteen
(15) day period, then Landlord shall be deemed to have consented to the
proposed assignment or sublease.
11.202 Effect of Termination. If Landlord timely exercises its option to
---------------------
terminate this Lease as to the entire Premises as provided in subsection
11.201, then this Lease shall terminate on a date specified by Landlord
in the Landlord Response (the "Specified Termination Date"), which
Specified Termination Date shall not be sooner than 30 days after the
date of Landlord's Response, nor later than 90 days after the date of
Landlord's Response, and the Basic Rent and Additional Rent shall be
paid and apportioned to the Specified Termination Date. If Landlord
timely exercises its option to terminate this Lease as to only the
Proposed Sublease Space, then (i) this Lease shall end and expire with
respect to the Proposed Sublease Space on the applicable Specified
Termination Date, (ii) from and after the applicable Specified
Termination Date, the Basic Rent shall be reduced by the amount of Basic
Rent that was being paid in respect of the Proposed Sublease Space as of
the applicable Specified Termination Date, (iii) Tenant's Pro Rata Share
Percentage shall be recalculated based on the square feet of rentable
area included in the Premises (exclusive of such Proposed Sublease
Space), (iv) Tenant's estimated payments of Additional Rent shall be
recalculated on the basis of the revised Tenant's Pro Rata Share
Percentage, and (v) if the Proposed Sublease Space adjoins another
portion of the Premises, Tenant shall, at Tenant's sole cost and
expense, construct and finish such demising walls as are necessary to
physically separate the Premises from the Proposed Sublease Space, and
(vi) if the Proposed Sublease Space is part of a floor which is fully
included in the Premises, then Landlord shall have the right, at
Tenant's sole cost and expense, (a) to construct and finish in
accordance with Building standards or to cause Tenant to construct and
finish in accordance with Building standards such demising walls as are
necessary (x) to construct a public corridor so as to convert the floor
to a multi-tenant floor and (y) to convert the restrooms on such floor
(including access thereto) to restrooms which will serve the entire
floor, as opposed to only the Premises, and (b) to make such revisions,
if any, are necessary, to properly light, heat, cool and ventilate the
public corridor and public restrooms. The alterations performed by
Tenant pursuant to this paragraph shall be deemed Installations and
therefore subject to the provisions of subsection 6.303.
SECTION 11.3 LANDLORD'S RIGHTS RELATING TO ASSIGNEE OR SUBTENANT. To the
extent the rentals or income derived from any sublease or assignment exceed the
rentals due hereunder after deduction of the actual out of pocket costs paid by
Tenant in connection with the applicable sublease or assignment, fifty percent
(50%) of such excess rentals (the "Excess Sublease Rentals") shall be the
property of and paid over to Landlord in consideration for Landlord's consent to
the applicable assignment or sublease. In the event Tenant is in default
hereunder, Landlord may at its option collect directly from such assignee or
sublessee all rents becoming due to Tenant under such assignment or sublease
Tenant hereby authorizes and directs any such assignee or sublessee to make such
payments of rent direct to Landlord upon receipt of notice from Landlord and
Tenant agrees that any such payments made by an assignee or sublessee to
Landlord shall, to the extent of the payments so made, be a full and complete
release and discharge of rent owed to Tenant by such assignee or sublessee. No
direct collection by Landlord from any such assignee or sublessee shall be
construed to constitute a novation or a release of Tenant or any guarantor of
Tenant from the further performance of its obligations hereunder. Receipt by
Landlord of rent from any assignee, sublessee or occupant of the Premises or any
part thereof shall not be deemed a waiver of the above covenant in this Lease
against assignment and subletting or a release of Tenant under this Lease. In
the event that, following an assignment or subletting, this Lease or Tenant's
right to possession of the Premises is terminated for any reason, including
without limitation in connection with default by or bankruptcy of Tenant (which,
for the purposes of this Section 11.2, shall include all persons or entities
claiming by or through Tenant), Landlord may, at its sole option, consider this
Lease to be thereafter a direct lease to the assignee or subtenant of Tenant
upon the terms and conditions contained in this Lease, in which event all
rentals payable under such lease after the termination of this Lease or Tenant's
right to possession of the Premises shall be deemed the property of Landlord.
SECTION 11.4 ASSIGNMENT AND BANKRUPTCY.
11.401 Assignments after Bankruptcy. If, pursuant to applicable bankruptcy law
----------------------------
(as hereinafter defined in Section 13.104), Tenant (or its successor in
interest hereunder) is permitted to assign this Lease in disregard of
the restrictions contained in this Article 11 (or if this Lease shall be
assumed by a trustee for such person), the trustee or assignee shall
cure any default under this Lease and shall provide adequate assurance
of future performance by the trustee or assignee, including (i) the
source of payment of Basic Annual Rent and performance of other
obligations under this Lease (for which adequate assurance shall mean
the deposit of cash security with Landlord in an amount equal to the sum
of one (1) year's Basic Annual Rent, Additional Rent and other Rent then
reserved hereunder for the calendar year preceding the year in which
such assignment is intended to become effective, which deposit shall be
held by Landlord, without interest, for the balance of the Term as
security for the full and faithful performance of all of the obligations
under this Lease on the part of Tenant yet to be performed and that any
such assignee of this Lease shall have a net worth exclusive of good
will, computed in accordance with the generally accepted accounting
principles, equal to at least ten (10) times the aggregate of the Basic
Annual Rent reserved hereunder); and (ii) that the use of the Premises
shall be in accordance with the requirements of Article 4 hereof and,
further, shall in no way diminish the reputation of the Building as a
first-class office building or impose any additional burden upon the
Building or increase the services to be provided by Landlord. If all
defaults are not cured and such adequate assurance is not provided
within sixty (60) days after there has been an order for relief under
applicable bankruptcy law, then this Lease shall be deemed rejected,
Tenant or any other person in possession shall immediately vacate the
Premises, and Landlord shall be entitled to retain any Basic Annual
Rent, Additional Rent and any other Rent, together with any security
deposit previously received from the Tenant, and shall have no further
liability to Tenant or any person claiming through Tenant or any
trustee.
11.402 Bankruptcy of Assignee. If Tenant assigns this Lease to any party and
----------------------
such party or its successors or representatives causes termination or
rejection of this Lease pursuant to applicable bankruptcy law, then,
notwithstanding any such termination or rejection, Tenant (i) shall
remain fully liable for the performance of all covenants, agreements,
terms, provisions and conditions contained in this Lease, as though the
assignment never occurred and (ii) shall, without in any way limiting
the foregoing, in writing ratify the terms of this Lease, as same
existed immediately prior to the termination or rejection.
SECTION 11.5 LIMITATION ON RECAPTURE RIGHTS. Notwithstanding the foregoing,
Landlord shall not be entitled to cancel this Lease with respect to any sublease
which has a term of less than seventy-five percent (75%) of the remaining Term
of this Lease at the commencement of such sublease provided that the Agreed
Rentable Area of the Premises covered by such sublease together
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with the Agreed Rentable Area of the Premises covered by all other subleases as
of the commencement of such sublease does not exceed twenty-five percent (25%)
of the total rentable Agreed Rentable Area of the Premises.
ARTICLE 12
TRANSFERS BY LANDLORD, SUBORDINATION AND
TENANT'S ESTOPPEL CERTIFICATE
SECTION 12.1 SALE OF THE PROPERTY. In the event of any transfer of title to
the Building, the transferor shall automatically be relieved and freed of all
obligations of Landlord under this Lease accruing after such transfer so long as
such transferee assumes such obligations of Landlord in writing, provided that
if a Security Deposit has been made by Tenant, Landlord shall not be released
from liability with respect thereto unless Landlord transfers the Security
Deposit to the transferee.
SECTION 12.2 SUBORDINATION, ATTORNMENT AND NOTICE. This Lease is subject and
subordinate to (i) any lease wherein Landlord is the tenant and to the liens of
any and all mortgages and deeds of trust, regardless of whether such lease,
mortgage or deed of trust now exists or may hereafter be created with regard to
all or any part of the Property, (ii) any and all advances (including interest
thereon) to be made under any such lease, mortgage or deed of trust and (iii)
all modifications, consolidations, renewals, replacements and extensions of any
such lease, mortgage or deed of trust; provided that the foregoing subordination
in respect of any mortgage or deed of trust placed on the Property after the
date hereof shall not become effective until and unless the holder of such
mortgage or deed of trust delivers to Tenant a non-disturbance agreement (which
may include Tenant's agreement to attorn as set forth below) permitting Tenant,
if Tenant is not then in default under, or in breach of any provision of, this
Lease, to remain in occupancy of the Premises in the event of a foreclosure of
any such mortgage or deed of trust. Tenant also agrees that any lessor,
mortgagee or trustee may elect (which election shall be revocable) to have this
Lease superior to any lease or lien of its mortgage or deed of trust and, in the
event of such election and upon notification by such lessor, mortgagee or
trustee to Tenant to that effect, this Lease shall be deemed superior to the
said lease, mortgage or deed of trust, whether this Lease is dated prior to or
subsequent to the date of said lease, mortgage or deed of trust. Tenant shall,
in the event of the sale or assignment of Landlord's interest in the Premises
(except in a sale-leaseback financing transaction), or in the event of the
termination of any lease in a sale-leaseback financing transaction wherein
Landlord is the lessee, attorn to and recognize such purchaser, assignee or
mortgagee as Landlord under this Lease. Tenant shall, in the event of any
proceedings brought for the foreclosure of, or in the event of the exercise of
the power of sale under, any mortgage or deed of trust covering the Premises,
attorn to and recognize purchaser at such sale, assignee or mortgagee, as the
case may be, as Landlord under this Lease. The above subordination and
attornment clauses shall be self-operative and no further instruments of
subordination or attornment need be required by any mortgagee, trustee, lessor,
purchaser or assignee. In confirmation thereof, Tenant agrees that, upon the
request of Landlord, or any such lessor, mortgagee, trustee, purchaser or
assignee, Tenant shall execute and deliver whatever instruments may be required
for such purposes and to carry out the intent of this Section 12.2.
SECTION 12.3 TENANT'S ESTOPPEL CERTIFICATE. Tenant shall, upon the request of
Landlord or any mortgagee of Landlord, without additional consideration, deliver
an estoppel certificate, consisting of reasonable statements required by
Landlord, any mortgagee or purchaser of any interest in the Property, which
statements may include but shall not be limited to the following: this Lease is
in full force and effect with rent paid through a specified date; this Lease has
not been modified or amended; Landlord is not in default and Landlord has fully
performed all of Landlord's obligations hereunder; and such other statements as
may reasonably be required by the requesting party. If Tenant is unable to make
any of the statements contained in the estoppel certificate because the same is
untrue, Tenant shall with specificity state the reason why such statement is
untrue. Tenant shall, if requested by Landlord or any such mortgagee, deliver
to Landlord a fully executed instrument in form reasonably satisfactory to
Landlord evidencing the agreement of Tenant to the mortgage or other
hypothecation by Landlord of the interest of Landlord hereunder.
ARTICLE 13
DEFAULT
SECTION 13.1 DEFAULTS BY TENANT. The occurrence of any of the events described
in subsections 13.101 through 13.108 shall constitute a default by Tenant under
this Lease.
13.101 Failure to Pay Rent. With respect to the first two payments of Rent not
-------------------
made by Tenant when due in any twelve (12) month period, the failure by
Tenant to make either such payment to Landlord within three (3) business
days after Tenant receives written notice specifying that the payment
was not made when due. With respect to any other payment of Rent, the
failure by Tenant to make such payment of Rent to Landlord when due, no
notice of any such failure being required.
13.102 Failure to Perform. Except for a failure covered by subsection 13.101
------------------
above or 13.103 below, any failure by Tenant to observe and perform any
provision of this Lease to be observed or performed by Tenant where such
failure continues for thirty (30) days after written notice to Tenant,
provided that if such failure cannot be cured within said thirty (30)
day period, Tenant shall not be in default hereunder so long as Tenant
commences curative action within such thirty (30) day period, diligently
and continuously pursues the curative action and fully and completely
cures the failure within sixty (60) days after such written notice to
Tenant.
13.103 Continual Failure to Perform. The third failure by Tenant in any twelve
----------------------------
(12) month period to perform and observe a particular provision of this
Lease to be observed or performed by Tenant (other than the failure to
pay Rent, which in all instances will be covered by subsection 13.101
above), no notice being required for any such third failure.
13.104 Bankruptcy, Insolvency, Etc. Tenant or any guarantor of Tenant's
---------------------------
obligations hereunder (hereinafter called "Guarantor", whether one (1)
or more), (i) cannot meet its obligations as they become due, (ii)
becomes or is declared insolvent according to any law, (iii) makes a
transfer in fraud of creditors according to any applicable law, (iv)
assigns or conveys all or a substantial portion of its property for the
benefit or creditors or (v) Tenant or Guarantor files a petition for
relief under the Federal Bankruptcy Code
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<PAGE>
or any other present or future federal or state insolvency, bankruptcy
or similar law (collectively, "applicable bankruptcy law"); a receiver
or trustee is appointed for Tenant or Guarantor or its property; the
interest of Tenant or Guarantor under this Lease is levied on under
execution or under other legal process; any involuntary petition is
filed against Tenant or Guarantor under applicable bankruptcy law
(provided that no such levy, execution, legal process or petition filed
against Tenant or Guarantor shall constitute a breach of this Lease if
Tenant or Guarantor shall vigorously contest the same by appropriate
proceedings and shall remove or vacate the same within ninety (90) days
from the date of its creation, service or filing).
13.105 Abandonment. The abandonment of the Premises by Tenant.
-----------
13.106 Vacation. The vacation of ninety percent (90%) or more of the Agreed
--------
Rentable Area of the Premises by Tenant, which shall be conclusively
presumed if Tenant is absent from the Premises for ten (10) consecutive
days or more or if Tenant shall fail to move into or take possession of
the Premises within ten (10) days after the date on which Rent is to
commence under the terms of this Lease.
13.107 Loss of Right to do Business. If Tenant is a corporation or limited
----------------------------
partnership, Tenant fails to maintain its right to do business in the
State of Texas or fails to pay any applicable annual franchise taxes as
and when same become finally due and payable.
13.108 Dissolution or Liquidation. If Tenant is a corporation or partnership,
--------------------------
Tenant dissolves or liquidates or otherwise fails to maintain its
corporate or partnership structure, as applicable.
With respect to the defaults described in subsections 13.103 through 13.108,
Landlord shall not be obligated to give Tenant notices of default and Tenant
shall have no right to cure such defaults.
SECTION 13.2 REMEDIES OF LANDLORD.
13.201 Termination of the Lease. Upon the occurrence of a default by Tenant
------------------------
hereunder, Landlord may, without judicial process, terminate this Lease
by giving written notice thereof to Tenant (whereupon all obligations
and liabilities of Landlord hereunder shall terminate) and, without
further notice and without liability, repossess the Premises. Landlord
shall be entitled to recover all loss and damage Landlord may suffer by
reason of such termination, whether through inability to relet the
Premises on satisfactory terms or otherwise, including without
limitation, the following (without duplication of any element of
damages):
(a) accrued Rent to the date of termination and Late Charges, plus
interest thereon at the rate established under Section 15.10 below from
the date due through the date paid or date of any judgment or award by
any court of competent jurisdiction, the unamortized cost of Tenant's
Improvements, brokers' fees and commissions, attorneys' fees, moving
allowances and any other costs incurred by Landlord in connection with
making or executing this Lease, the cost of recovering the Premises and
the costs of reletting the Premises (including, without limitation,
advertising costs, brokerage fees, leasing commissions, reasonable
attorneys' fees and refurbishing costs and other costs in readying the
Premises for a new tenant);
(b) the present value of the Rent (discounted at a rate of interest
equal to eight percent [8%] per annum [the "Discount Rate"]) that would
have accrued under this Lease for the balance of the Lease term but for
such termination, reduced by the reasonable fair market rental value of
the Premises for such balance of the Lease term (determined from the
present value of the actual base rents, discounted at the Discount Rate,
received and to be received from Landlord's reletting of the Premises
or, if the Premises are not relet, the base rents, discounted at the
Discount Rate, that with reasonable efforts could be collected by
Landlord by reletting the Premises, calculated in accordance with
subsection 13.206);
(c) plus any other costs or amounts necessary to compensate Landlord for
its damages.
13.202 Repossession and Re-Entry. Upon the occurrence of a default by Tenant
-------------------------
hereunder, Landlord may, without judicial process, immediately terminate
Tenant's right of possession of the Premises (whereupon all obligations
and liability of Landlord hereunder shall terminate), but not terminate
this Lease, and, without notice, demand or liability, enter upon the
Premises or any part thereof, take absolute possession of the same,
expel or remove Tenant and any other person or entity who may be
occupying the Premises and change the locks. If Landlord terminates
Tenant's possession of the Premises under this subsection 13.202, (i)
Landlord shall have no obligation whatsoever to tender to Tenant a key
for new locks installed in the Premises, (ii) Tenant shall have no
further right to possession of the Premises and (iii) Landlord will have
the right to relet the Premises or any part thereof on such terms as
Landlord deems advisable, taking into account the factors described in
subsection 13.206. Any rent received by Landlord from reletting the
Premises or a part thereof shall be applied first, to the payment of any
indebtedness other than Rent due hereunder from Tenant to Landlord (in
such order as Landlord shall designate), second, to the payment of any
cost of such reletting, including, without limitation, refurbishing
costs, reasonable attorneys' fees, advertising costs, brokerage fees and
leasing commissions and third, to the payment of Rent due and unpaid
hereunder (in such order as Landlord shall designate), and Tenant shall
satisfy and pay to Landlord any deficiency upon demand therefor from
time to time. Landlord shall not be responsible or liable for any
failure to relet the Premises or any part thereof or for any failure to
collect any rent due upon any such reletting. No such re-entry or taking
of possession of the Premises by Landlord shall be construed as an
election on Landlord's part to terminate this Lease unless a written
notice of such termination is given to Tenant pursuant to subsection
13.201 above. If Landlord relets the Premises, either before or after
the termination of this Lease, all such rentals received from such lease
shall be and remain the exclusive property of Landlord and Tenant shall
not be, at any time, entitled to recover any such rental. Landlord may
at any time after a reletting elect to terminate this Lease.
13.203 Cure of Default. Upon the occurrence of a default hereunder by Tenant,
---------------
Landlord may, without judicial process and without having any liability
therefor, enter upon the Premises and do whatever Tenant is obligated to
do under the terms of this Lease and Tenant agrees to reimburse Landlord
on demand for any expenses which Landlord may incur in effecting
compliance with Tenant's obligations under this Lease, and Tenant
further agrees that Landlord shall not be liable for any damages
resulting to Tenant from such action, WHETHER CAUSED BY THE NEGLIGENCE
OF LANDLORD OR OTHERWISE.
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13.204 Continuing Obligations. No repossession of or re-entering upon the
----------------------
Premises or any part thereof pursuant to subsection 13.202 or 13.203
above or otherwise and no reletting of the Premises or any part thereof
pursuant to subsection 13.202 above shall relieve Tenant or any
Guarantor of its liabilities and obligations hereunder, all of which
shall survive such repossession or re-entering. In the event of any such
repossession of or re-entering upon the Premises or any part thereof by
reason of the occurrence of a default, Tenant will continue to pay to
Landlord Rent required to be paid by Tenant.
13.205 Cumulative Remedies. No right or remedy herein conferred upon or
-------------------
reserved to Landlord is intended to be exclusive of any other right or
remedy set forth herein or otherwise available to Landlord at law or in
equity and each and every right and remedy shall be cumulative and in
addition to any other right or remedy given hereunder or now or
hereafter existing at law or in equity or by statute. In addition to the
other remedies provided in this Lease and without limiting the preceding
sentence, Landlord shall be entitled, to the extent permitted by
applicable law, to injunctive relief in case of the violation, or
attempted or threatened violation, of any of the covenants, agreements,
conditions or provisions of this Lease, or to a decree compelling
performance of any of the covenants, agreements, conditions or
provisions of this Lease, or to any other remedy allowed to Landlord at
law or in equity.
13.206 Mitigation of Damages. For purposes of determining any recovery of rent
---------------------
or damages by Landlord that depends upon what Landlord could collect by
using reasonable efforts to relet the Premises, whether the
determination is required under subsections 13.201 or 13.202 or
otherwise, it is understood and agreed that:
(a) Landlord may reasonably elect to lease other comparable, available
space in the Building, if any, before reletting the Premises.
(b) Landlord may reasonably decline to incur out-of-pocket costs to
relet the Premises, other than customary leasing commissions and legal
fees for the negotiation of a lease with a new tenant.
(c) Landlord may reasonably decline to relet the Premises at rental
rates below then prevailing market rental rates, because of the negative
impact lower rental rates would have on the value of the Building and
because of the uncertainty of actually receiving from Tenant the greater
damages that Landlord would suffer from and after reletting at the lower
rates.
(d) Before reletting the Premises to a prospective tenant, Landlord may
reasonably require the prospective tenant to demonstrate the same
financial wherewithal that Landlord would require as a condition to
leasing other space in the Building to the prospective tenant.
(e) Identifying a prospective tenant to relet the Premises, negotiating
a new lease with such tenant and making the Premises ready for such
tenant will take time, depending upon market conditions when the
Premises first become available for reletting, and during such time
Landlord cannot reasonably be expected to collect any revenue from
reletting.
(f) Listing the Premises with a broker in a manner consistent with parts
(a) through (e) above constitutes reasonable efforts on the part of
Landlord to relet the Premises.
SECTION 13.3 DEFAULTS BY LANDLORD. Landlord shall be in default under this
Lease if Landlord fails to perform any of its obligations hereunder and said
failure continues for a period of thirty (30) days after Tenant delivers written
notice thereof to Landlord (to each of the addresses required by this Section)
and each mortgagee who has a lien against any portion of the Property and whose
name and address has been provided to Tenant, provided that if such failure
cannot reasonably be cured within said thirty (30) day period, Landlord shall
not be in default hereunder if the curative action is commenced within said
thirty (30) day period and is thereafter diligently pursued until cured. In no
event shall (i) Tenant claim a constructive or actual eviction or that the
Premises have become unsuitable hereunder or (ii) a constructive or actual
eviction or breach of the implied warranty of suitability be deemed to have
occurred under this Lease, prior to the expiration of the notice and cure
periods provided under this Section 13.3. Any notice of a failure to perform by
Landlord shall be sent to Landlord at the addresses and to the attention of the
parties set forth in the Basic Lease Provisions. Any notice of a failure to
perform by Landlord not sent to Landlord at all addresses and/or to the
attention of all parties required under this Section and to each mortgagee who
is entitled to notice or not sent in compliance with Article 14 below shall be
of no force or effect.
SECTION 13.4 LANDLORD'S LIABILITY.
13.401 Tenant's Rights in Respect of Landlord Default. Tenant is granted no
----------------------------------------------
contractual right of termination by this Lease, except to the extent and
only to the extent set forth in Sections 7.1 and 8.2 above and Rider H-1
---------
attached hereto. If Tenant shall recover a money judgment against
Landlord, such judgment shall be satisfied only out of the right, title
and interest of Landlord in the Property as the same may then be
encumbered and Landlord shall not be liable for any deficiency. If
Landlord is found to be in default hereunder by reason of its failure to
give a consent that it is required to give hereunder, Tenant's sole
remedy will be an action for specific performance or injunction. The
foregoing sentence shall in no event be construed as mandatorily
requiring Landlord to give consents under this Lease. In no event shall
Landlord be liable to Tenant for consequential or special damages by
reason of a failure to perform (or a default) by Landlord hereunder or
otherwise. In no event shall Tenant have the right to levy execution
against any property of Landlord other than its interest in the Property
as hereinbefore expressly provided.
13.402 Certain Limitations on Landlord's Liability. UNLESS COVERED BY
-------------------------------------------
SUBSECTION 7.502 ABOVE OR CAUSED BY LANDLORD'S GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT AND WITHOUT LIMITING THE PROVISIONS OF SECTION 7.4,
LANDLORD SHALL NOT BE LIABLE TO TENANT FOR ANY CLAIMS, ACTIONS, DEMANDS,
COSTS, EXPENSES, DAMAGE OR LIABILITY OF ANY KIND (i) arising out of the
use, occupancy or enjoyment of the Premises by Tenant or any person
therein or holding under Tenant or by or through the acts or omissions
of any of their respective employees, officers, agents, invitees or
contractors, (ii) caused by or arising out of fire, explosion, falling
sheetrock, gas, electricity, water, rain, snow or dampness, or leaks in
any part of the Premises, (iii) caused by or arising out of damage to
the roof, pipes, appliances or plumbing works or any damage to or
malfunction of heating, ventilation or air conditioning equipment, (iv)
caused by tenants or any persons either in the Premises or elsewhere in
the Building (other
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than Common Areas) or by occupants of property adjacent to the Building
or Common Areas or by the public or by the construction of any private,
public or quasi-public work or (v) caused by any act, neglect or
negligence of Tenant. In no event shall Landlord be liable to Tenant for
any loss of or damage to property of Tenant or of others located in the
Premises, the Building or any other part of the Property by reason of
theft or burglary.
SECTION 13.5 WAIVER OF TEXAS DECEPTIVE TRADE PRACTICES ACT
TENANT HEREBY WAIVES ALL ITS RIGHTS UNDER THE TEXAS DECEPTIVE TRADE
PRACTICES-CONSUMER PROTECTION ACT, SECTION 17.41 ET. SEQ. OF THE TEXAS BUSINESS
AND COMMERCE CODE (THE "DTPA"), A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND
PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF TENANT'S OWN SELECTION,
TENANT VOLUNTARILY CONSENTS TO THIS WAIVER.
SECTION 13.6 LANDLORD'S LIEN. Tenant grants to Landlord an express contract
lien on and security interest in and to all goods, equipment, furnishings,
fixtures, furniture, chattels and personal property of whatever nature owned by
Tenant attached or affixed to or used in and about the Premises on the date of
this Lease or at any time after the date of this Lease or otherwise located in
the Premises (other than intellectual property of Tenant and the media on or in
which such intellectual property is contained) and all renewals or replacements
or substitutions for any of the foregoing, all building materials and equipment
now or hereafter delivered to the Premises and intended to be installed in the
Premises and all security deposits and advance rentals under lease agreements on
the date of this Lease or at any time after the date of this Lease covering or
affecting the Premises and held by or for the benefit of Tenant and all proceeds
of the foregoing (including by way of illustration, but not limitation, proceeds
of any insurance which may accrue to Tenant by reason of damage or destruction
of any such property). On the date this Lease is executed, Tenant shall execute
and deliver to Landlord two multiple originals of a financing statement in form
sufficient to perfect the security interest granted hereunder. A carbon,
photographic or other reproduction of this Lease is sufficient and may be filed
as a financing statement. Landlord shall have all the rights and remedies of a
secured party under the Texas Business and Commerce Code and this lien and
security interest may be foreclosed by process of law. The requirement of
reasonable notice prior to any sale under Article 9 of the Texas Business and
Commerce Code shall be met if such notice is given in the manner prescribed
herein at least ten (10) days before the day of sale. Any sale made pursuant to
the provisions of this Section shall be deemed to have been a public sale
conducted in a commercially reasonable manner if held in the Premises after the
time, place and method of sale and a general description of the types of
property to be sold have been advertised for ten (10) consecutive days prior to
the date of sale in a daily newspaper published in the county in Texas where the
Building is located.
ARTICLE 14
NOTICES
Any notice or communication required or permitted in this Lease shall be given
in writing, sent by (a) personal delivery, with proof of delivery, (b) expedited
delivery service, with proof of delivery, (c) United States mail, postage
prepaid, registered or certified mail, return receipt requested or (d) prepaid
telegram (provided that such telegram is confirmed by expedited delivery service
or by mail in the manner previously described), addressed as provided in Item 13
of the Basic Lease Provisions and Section 13.3 above or to such other address or
to the attention of such other person as shall be designated from time to time
in writing by the applicable party and sent in accordance herewith. Notice also
may be given by telex or fax, provided each such transmission is confirmed (and
such confirmation is supported by documented evidence) as received and further
provided a telex or fax number, as the case may be, is set forth in Item 13 of
the Basic Lease Provisions. Any such notice or communication shall be deemed to
have been given either at the time of personal delivery or, in the case of
delivery service or mail, as of the date of first attempted delivery at the
address and in the manner provided herein, or in the case of telegram or telex
or fax, upon receipt.
ARTICLE 15
MISCELLANEOUS PROVISIONS
SECTION 15.1 BUILDING NAME AND ADDRESS. Tenant shall not, without the written
consent of Landlord, use the name of the Building for any purpose other than as
the address of the business to be conducted by Tenant in the Premises and in no
event shall Tenant acquire any rights in or to such names. Landlord shall have
the right at any time to change the name, number or designation by which the
Building is known.
SECTION 15.2 SIGNAGE. Tenant shall not inscribe, paint, affix or display any
signs, advertisements or notices on or in the Building, except for such tenant
identification information as Landlord permits to be included or shown on the
directory in the main lobby and adjacent to the access door or doors to the
Premises. Unless prohibited by applicable sign ordinances, Landlord shall erect
at Landlord's expense, a multi-tenant monument sign (the "Multi-Tenant Monument
Sign") on the Property. Landlord agrees that Tenant shall have the right to
install a monument sign panel bearing Tenant's name on the top location of the
Multi-Tenant Monument Sign, subject to Landlord's reasonable approval of the
size, design, form and content of such panel. Tenant shall maintain the sign
panel bearing Tenant's name, and shall remove such panel from the Multi-Tenant
Monument Sign upon the expiration or earlier termination of this Lease. Subject
to compliance with the applicable condominium declaration requirements regarding
signage, including without limitation, obtaining the consent of all necessary
parties required under such declaration, Tenant shall have the right, at
Tenant's expense, to install one corporate sign on the exterior of the Building
on uppermost spandrel (the "Building Sign"); provided that (i) the Building Sign
shall not cover any window area, (ii) Tenant obtains all necessary approvals
from the City of Austin and all other governmental authorities (including any
applicable airport) having jurisdiction over Tenant, the Property, or the
Building Sign, (iii) the Building Sign conforms to all applicable laws, rules
and regulations of any governmental authorities having jurisdiction over the
Building Sign or the Property (including the condominium declaration applicable
to the Property), and (iv) Tenant delivers to Landlord certificates of insurance
evidencing that Tenant's contractors, agents, workmen, engineers or other
persons installing the Building Sign have in effect valid workmen's
compensation, public liability and builder's risk insurance in amounts and with
such companies and in such forms as Landlord may consider necessary or
appropriate for its protection. The location, design and size of the Building
Sign is subject to the approval of Landlord in its sole discretion. Tenant shall
pay all costs associated with the Building Sign, including without limitation,
installation expenses, maintenance and repair costs, utilities and insurance.
Tenant shall indemnify and hold Landlord harmless from and against any and all
claims, demands, fines,
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<PAGE>
liabilities, costs, expenses, damages, actions and causes of action accruing
from or related to the Building Sign, EVEN IF CAUSED BY THE NEGLIGENCE OF
LANDLORD OR IF LANDLORD IS STRICTLY LIABLE THEREFOR. Tenant agrees that Landlord
shall have the right to temporarily remove and replace the Building Sign in
connection with and during the course of any repairs, changes, alterations,
modifications, renovations or additions to the Building. Tenant shall maintain
the Building Sign in good condition. If Tenant is in default under the Lease (as
provided in Section 13.1 of the Lease) or if Tenant vacates ninety percent (90%)
or more of the Agreed Rentable Area of the Premises (which shall be presumed if
Tenant is absent from the Premises for ten (10) consecutive days or more or if
Tenant fails to move into or take possession of the Premises within ten (10)
days after the date on which Rent is to commence under the terms of the Lease),
Tenant's rights with respect to the Building Sign under this section shall
terminate and Landlord shall have the option to remove such signage at Tenant's
sole cost and expense. Upon expiration or earlier termination of the Lease,
Tenant shall, at its sole cost and expense, remove the Building Sign and repair
all damage caused by such removal.
SECTION 15.3 NO WAIVER. No waiver by Landlord or by Tenant of any provision of
this Lease shall be deemed to be a waiver by either party of any other provision
of this Lease. No waiver by Landlord of any breach by Tenant shall be deemed a
waiver of any subsequent breach by Tenant of the same or any other provision.
No waiver by Tenant of any breach by Landlord shall be deemed a waiver of any
subsequent breach by Landlord of the same or any other provision. The failure
of Landlord or Tenant to insist at any time upon the strict performance of any
covenant or agreement or to exercise any option, right, power or remedy
contained in this Lease shall not be construed as a waiver or a relinquishment
thereof for the future. Landlord's consent to or approval of any act by Tenant
requiring Landlord's consent or approval shall not be deemed to render
unnecessary the obtaining of Landlord's consent to or approval of any subsequent
act of Tenant. Tenant's consent to or approval of any act by Landlord requiring
Tenant's consent or approval shall not be deemed to render unnecessary the
obtaining of Tenant's consent to or approval of any subsequent act of Landlord.
No act or thing done by Landlord or Landlord's agents during the term of this
Lease shall be deemed an acceptance of a surrender of the Premises, unless done
in writing signed by Landlord. The delivery of the keys to any employee or
agent of Landlord shall not operate as a termination of this Lease or a
surrender of the Premises. The acceptance of any Rent by Landlord following a
breach of this Lease by Tenant shall not constitute a waiver by Landlord of such
breach or any other breach. The payment of Rent by Tenant following a breach of
this Lease by Landlord shall not constitute a waiver by Tenant of any such
breach or any other breach. No waiver by Landlord or Tenant of any provision of
this Lease shall be deemed to have been made unless such waiver is expressly
stated in writing signed by the waiving party. No payment by Tenant or receipt
by Landlord of a lesser amount than the monthly installment of Rent due under
this Lease shall be deemed to be other than on account of the earliest Rent due
hereunder, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment as Rent be deemed an accord and satisfaction
and Landlord may accept such check or payment without prejudice to Landlord's
right to recover the balance of such rent or pursue any other remedy which may
be available to Landlord.
SECTION 15.4 APPLICABLE LAW. This Lease shall be governed by and construed in
accordance with the laws of the State of Texas.
SECTION 15.5 COMMON AREAS. "Common Areas" will mean all areas, spaces,
facilities and equipment (whether or not located within the Building) made
available by Landlord for the common and joint use of Landlord, Tenant and
others designated by Landlord using or occupying space in the Building,
including but not limited to, tunnels, walkways, sidewalks and driveways
necessary for access to the Building, Building lobbies, landscaped areas, public
corridors, public rest rooms, Building stairs, elevators open to the public,
service elevators (provided that such service elevators shall be available only
for tenants of the Building and others designated by Landlord), drinking
fountains and any such other areas and facilities, if any, as are designated by
Landlord from time to time as Common Areas. Common Areas shall not include the
Garage. "Service Corridors" shall mean all loading docks, loading areas and all
corridors that are not open to the public but which are available for use by
Tenant and others designated by Landlord. "Service Areas" will refer to areas,
spaces, facilities and equipment serving the Building (whether or not located
within the Building) but to which Tenant and other occupants of the Building
will not have access, including, but not limited to, mechanical, telephone,
electrical and similar rooms and air and water refrigeration equipment. Tenant
is hereby granted a nonexclusive right to use the Common Areas and Service
Corridors during the term of this Lease for their intended purposes, in common
with others designated by Landlord, subject to the terms and conditions of this
Lease, including, without limitation, the Rules and Regulations. The Building,
Common Areas, Service Corridors and Service Areas will be at all times under the
exclusive control, management and operation of the Landlord. Tenant agrees and
acknowledges that the Premises (whether consisting of less than one floor or
consisting of one or more full floors within the Building) do not include, and
Landlord hereby expressly reserves for its sole and exclusive use, any and all
mechanical, electrical, telephone and similar rooms, janitor closets, elevator,
pipe and other vertical shafts and ducts, flues, stairwells, any area above the
acoustical ceiling and any other areas not specifically shown on Exhibit A as
---------
being part of the Premises.
SECTION 15.6 SUCCESSORS AND ASSIGNS. Subject to Article 11 hereof, all of the
covenants, conditions and provisions of this Lease shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors and assigns.
SECTION 15.7 BROKERS. Tenant warrants that it has had no dealings with any
real estate broker or agent in connection with the negotiation of this Lease,
excepting only the broker named in Item 9 of the Basic Lease Provisions and that
it knows of no other real estate brokers or agents who are or might be entitled
to a commission in connection with this Lease. Tenant agrees to indemnify and
hold harmless Landlord from and against any liability or claim, whether
meritorious or not, arising in respect to brokers and/or agents not so named.
Landlord has agreed to pay the fees of the broker (but only the broker) named in
Item 9 of the Basic Lease Provisions to the extent that Landlord has agreed to
do so pursuant to a written agreement with such broker.
SECTION 15.8 SEVERABILITY. If any provision of this Lease or the application
thereof to any person or circumstances shall be invalid or unenforceable to any
extent, the application of such provisions to other persons or circumstances and
the remainder of this Lease shall not be affected thereby and shall be enforced
to the greatest extent permitted by law.
SECTION 15.9 EXAMINATION OF LEASE. Submission by Landlord of this instrument to
Tenant for examination or signature does not constitute a reservation of or
option for lease. This Lease will be effective as a lease or otherwise only upon
execution by and delivery to both Landlord and Tenant.
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<PAGE>
SECTION 15.10 INTEREST ON TENANT'S OBLIGATIONS. Any amount due from Tenant to
Landlord which is not paid within thirty (30) days after the date due shall bear
interest at the lower of (i) eighteen percent (18%) per annum or (ii) the
highest rate from time to time allowed by applicable law, from the date such
payment is due until paid, but the payment of such interest shall not excuse or
cure the default.
SECTION 15.11 TIME. Time is of the essence in this Lease and in each and all
of the provisions hereof. Whenever a period of days is specified in this Lease,
such period shall refer to calendar days unless otherwise expressly stated in
this Lease.
SECTION 15.12 DEFINED TERMS AND MARGINAL HEADINGS. The words "Landlord" and
"Tenant" as used herein shall include the plural as well as singular. If more
than one person is named as Tenant, the obligations of such persons are joint
and several. The headings and titles to the articles, sections and subsections
of this Lease are not a part of this Lease and shall have no effect upon the
construction or interpretation of any part of this Lease.
SECTION 15.13 AUTHORITY OF TENANT. Tenant and each person signing this Lease
on behalf of Tenant represents to Landlord as follows: Tenant, if a
corporation, is duly incorporated and legally existing under the laws of the
state of its incorporation and is duly qualified to do business in the State of
Texas. Tenant, if a partnership or joint venture, is duly organized under the
Texas Uniform Partnership Act. Tenant, if a limited partnership, is duly
organized under the applicable limited partnership act of the State of Texas or,
if organized under the laws of a state other than Texas, is qualified under said
Texas limited partnership act. Tenant has all requisite power and all
governmental certificates of authority, licenses, permits, qualifications and
other documentation to lease the Premises and to carry on its business as now
conducted and as contemplated to be conducted. Each person signing on behalf of
Tenant is authorized to do so. The foregoing representations in this Section
15.13 shall also apply to any corporation, partnership, joint venture or limited
partnership which is a general partner or joint venturer of Tenant.
SECTION 15.14 FORCE MAJEURE. Whenever a period of time is herein prescribed
for action to be taken by Landlord or Tenant, the party taking the action shall
not be liable or responsible for, and there shall be excluded from the
computation for any such period of time, any delays due to strikes, riots, acts
of God, shortages of labor or materials, war, governmental laws, regulations or
restrictions or any other causes of any kind whatsoever which are beyond the
reasonable control of such party; provided, however, in no event shall the
foregoing apply to the financial obligations of either Landlord or Tenant to the
other under this Lease, including Tenant's obligation to pay Basic Annual Rent,
Additional Rent or any other amount payable to Landlord hereunder.
SECTION 15.15 RECORDING. This Lease shall not be recorded. However, Landlord
shall have the right to record a short form or memorandum hereof, at Landlord's
expense, at any time during the term hereof and, if requested, Tenant agrees
(without charge to Landlord) to join in the execution thereof.
SECTION 15.16 NO REPRESENTATIONS. Landlord and Landlord's agents have made no
warranties, representations or promises (express or implied) with respect to the
Premises, the Building or any other part of the Property (including, without
limitation, the condition, use or suitability of the Premises, the Building or
the Property), except as herein expressly set forth and no rights, easements or
licenses are acquired by Tenant by implication or otherwise except as expressly
set forth in the provisions of this Lease.
SECTION 15.17 PARKING. If the Property includes a Garage, there shall be an
Exhibit F attached hereto, which shall set forth the agreements between Landlord
- ---------
and Tenant relating to parking. If there is no Garage included in the Property,
then the remaining provisions of this Section shall be applicable with respect
to parking. The parking areas shall be designated for automobile parking on a
non-exclusive basis for all Property tenants (including Tenant) and their
respective employees, customers, invitees and visitors. Parking and delivery
areas for all vehicles shall be in accordance with parking regulations
established from time to time by Landlord, with which Tenant agrees to conform.
Tenant shall only permit parking by its employees, customers and agents of
automobiles in appropriate designated parking areas.
SECTION 15.18 ATTORNEYS' FEES. In the event of any legal action or proceeding
brought by either party against the other arising out of this Lease, the
prevailing party shall be entitled to recover reasonable attorneys' fees and
costs incurred in such action (including, without limitation, all costs of
appeal) and such amount shall be included in any judgment rendered in such
proceeding.
SECTION 15.19 NO LIGHT, AIR OR VIEW EASEMENT. Any diminution or shutting off
of light, air or view by any structure which may be erected on the Property or
lands adjacent to the Property shall in no way affect this Lease or impose any
liability on Landlord (even if Landlord is the adjacent land owner).
SECTION 15.20 RELOCATION. Intentionally Omitted.
SECTION 15.21 SURVIVAL OF INDEMNITIES. Each indemnity agreement and hold
harmless agreement contained herein shall survive the expiration or termination
of this Lease.
SECTION 15.22 ENTIRE AGREEMENT. This Lease contains all of the agreements of
the parties hereto with respect to any matter covered or mentioned in this Lease
and no prior agreement, understanding or representation pertaining to any such
matter shall be effective for any purpose. No provision of this Lease may be
amended or added to except by an agreement in writing signed by the parties
hereto or their respective successors in interest.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Lease,
as of the date first written in this Lease.
LANDLORD
B. O. III, LTD., A TEXAS LIMITED PARTNERSHIP
By: Office/Industrial, Inc., General Partner
By:___________________________________________
Name: Richard E. Anderson
---------------------------------------
Title: Vice President
--------------------------------------
TENANT
VIGNETTE, INC.
By:___________________________________________
Name:_________________________________________
Title:________________________________________
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<PAGE>
EXHIBIT A
FLOOR PLAN FOR THE PREMISES
This Exhibit is attached to and a part of that certain Lease Agreement
dated as of August 4, 1998, executed by and between B. O. III, LTD., a Texas
limited partnership, and VIGNETTE, INC., a Delaware corporation.
A-1
<PAGE>
EXHIBIT B
LAND LEGAL DESCRIPTION
This Exhibit is attached to and a part of that certain Lease Agreement
dated as of August 4, 1998, executed by and between B. O. III, LTD., a Texas
limited partnership, and VIGNETTE, INC., a Delaware corporation.
B-1
<PAGE>
EXHIBIT C
INTENTIONALLY OMITTED
C-1
<PAGE>
EXHIBIT D
WORK LETTER
PLANS TO BE AGREED UPON/FINISH ALLOWANCE
This Exhibit is attached to and a part of that certain Lease Agreement
dated as of August 4, 1998, executed by and between B. O. III, LTD., a Texas
limited partnership, and VIGNETTE, INC., a Delaware corporation. Any capitalized
term used but not defined herein shall have the meaning assigned to it in the
provisions designated in the Lease as the Supplemental Lease Provisions.
Landlord and Tenant mutually agree as follows:
1. PLANS.
-----
1.1 Space Plan. On or before August 15, 1998, a space planner engaged by Tenant
----------
and approved by Landlord shall, at Tenant's expense, prepare and deliver to
Landlord a space plan for the Premises showing, regardless of the quantities of
such items, the location of all partitions and doors and the lay-out of the
Premises. Landlord will at all times cooperate with Tenant's space planner (who
shall be subject to the reasonable approval of Landlord) to efficiently and
expeditiously arrive at an acceptable lay-out of the Premises. Landlord will
approve or disapprove in writing the space plan within three (3) business days
after receipt from Tenant and if disapproved, Landlord shall provide Tenant's
space planner with specific reasons for disapproval. If Landlord fails to
approve or disapprove the space plan on or before the end of such three (3)
business day period, Landlord shall be deemed to have approved the last
submitted space plan. The foregoing process shall be repeated until Landlord has
approved (which shall include deemed approval) the space plan (such space plan,
when approved by Landlord and Tenant, is herein referred to as the "Space
Plan").
1.2 Compliance With Disability Acts. Tenant has provided Tenant's space planner
-------------------------------
with all information needed to cause the construction of Tenant's Improvements
to be completed such that Tenant, the Premises and Tenant's Improvements (as
constructed) will be in compliance with the Disability Acts. TENANT SHALL BE
RESPONSIBLE FOR AND SHALL INDEMNIFY AND HOLD HARMLESS LANDLORD FROM AND AGAINST
ANY AND ALL CLAIMS, LIABILITIES AND EXPENSES (INCLUDING, WITHOUT LIMITATION
REASONABLE ATTORNEYS' FEES AND EXPENSES) INCURRED BY OR ASSERTED AGAINST
LANDLORD BY REASON OF OR IN CONNECTION WITH ANY VIOLATION OF THE DISABILITY ACTS
ARISING FROM OR OUT OF (i) Tenant's employer-employee obligations, or (ii)
violations by Tenant and/or Tenant's Improvements or the Premises not being in
compliance with the Disability Acts. The foregoing indemnity shall not include
any claims, liabilities or expenses (including reasonable attorneys' fees and
expenses) arising out of the negligence or gross negligence of Landlord or
Landlord's employees, agents or contractors.
1.3 Construction Plans. On or before fifteen (15) days after approval of the
------------------
Space Plan by Landlord and Tenant, a licensed architect reasonably acceptable to
Landlord (which architect may be the approved space planner if the space planner
is a licensed architect), at Tenant's expense, will prepare construction plans
and specifications (such construction plans and specifications, when approved by
Landlord and Tenant, and all changes and amendments thereto agreed to by
Landlord and Tenant in writing, are herein called the "Construction Plans") for
all of Tenant's improvements requested pursuant to the Space Plan (all
improvements required by the Construction Plans are herein called "Tenant's
Improvements"), including color and design schemes, detail and finish drawings
for partitions, doors, reflected ceiling, telephone outlets, electrical switches
and outlets and Building standard heating, ventilation and air conditioning
equipment and controls. Within five (5) business days after construction plans
and specifications are delivered to Landlord, Landlord shall approve or
disapprove same in writing and if disapproved, Landlord shall provide Tenant's
architect specific reasons for disapproval. The foregoing process shall continue
until the construction plans and specifications are approved by Landlord;
provided that if Landlord fails to respond in any five (5) business day period,
Landlord shall be deemed to have approved the last submitted construction plans.
Landlord hereby agrees that Landlord shall not be entitled to disapprove
construction plans except for the following reasons: (i) the construction plans
do not conform to applicable laws, rules and regulations, (ii) the construction
plans or specifications will not accommodate Building standard heating, cooling,
mechanical, electrical or plumbing improvements, (iii) the construction plans or
specifications do not conform to the Space Plan, (iv) the construction required
by the construction plans could in Landlord's judgment affect the structural
integrity or any structural member of the Building or any part thereof or
requires a floor of the Building to be cut through or in Landlord's judgment
will adversely affect existing Building standard heating, cooling, mechanical,
electrical or plumbing improvements in any part of the Building, (v) the design
and/or color of the improvements which can been seen from the Common Areas do
not conform to the design and/or color scheme generally found in other parts of
the Building, (vi) the work required by the construction plans affects the
exterior of the Premises or the Building, or (vii) the construction plans are
incomplete or contain material errors or omissions (collectively, "Permitted
Objections"). If the construction plans and specifications are not approved in
writing by both Tenant and Landlord on or before September 15, 1998 on account
of Permitted Objections, Landlord may, at its sole option, terminate the Lease
and this Agreement, whereupon shall have no further liability or obligation
thereunder or hereunder. If Landlord does not elect to so terminate, then each
day after September 15, 1998, that the construction plans are not approved by
Tenant shall constitute one (1) day of Tenant Delay. Tenant shall reimburse
Landlord for the cost of Landlord's architectural review of the Space Plan and
the Construction Plans within thirty (30) days of receipt of an invoice
therefor.
1.4 Changes to Approved Plans. If any re-drawing or re-drafting of either the
-------------------------
approved Space Plan or the approved Construction Plans is necessitated by
changes (all of which shall be subject to Landlord's written approval) requested
by Tenant after approval by Landlord and Tenant, the expense of any such re-
drawing, re-drafting or re-reviewing by Landlord's architect required in
connection therewith and the expense of any work and improvements necessitated
by such re-drawing or re-drafting will be charged to Tenant.
1.5 Coordination of Planners and Designers. If Tenant shall arrange for
--------------------------------------
interior design services, whether with Landlord's space planner or any other
planner or designer, it shall be Tenant's responsibility to cause necessary
coordination of its agents' efforts with Landlord's agents to ensure that no
delays are caused to either the planning or construction of the Tenant's
Improvements.
1.6. Building Standard Materials. Tenant shall use Building standard materials
---------------------------
in connection the design and construction of the Tenant's Improvements,
including without limitation, Building standard doors, frames, hardware,
lighting, ceiling tile and occupancy sensors.
D-1
<PAGE>
2. CONSTRUCTION AND COSTS OF TENANT'S IMPROVEMENTS.
-----------------------------------------------
2.1 Selection of Contractor.
-----------------------
(a) Landlord agrees to bid the construction of Tenant's Improvements to at
least three (3) mutually acceptable general contractors (unless a
lesser number is approved by Tenant) within two (2) business days
after Landlord's approval of the Construction Plans. Landlord shall
request that all contractors submit their respective bids within two
(2) weeks after receipt of the bid package. Landlord shall also submit
the Construction Plans for permit within two (2) business days after
Landlord's approval of the Construction Plans.
(b) Landlord and Tenant shall jointly review any bids, and make
adjustments in the bids, if necessary, for inconsistent assumptions in
order to reflect an equitable comparison. Tenant shall select a
contractor within two (2) business days after Landlord's receipt of
all bids. Within three (3) business days after Tenant's selection of
the Contractor, Landlord shall enter into a construction contract with
the Contractor consistent with the terms of the bid to construct the
Tenant's Improvements (the "Construction Contract"). Notwithstanding
anything to the contrary contained herein, if Tenant has not selected
a contractor and Landlord has not executed a Construction Contract
with such Contractor by October 15, 1998, then each day after October
15, 1998 shall constitute a day of Tenant Delay (hereinafter defined).
2.2 Construction Obligation and Finish Allowance.
--------------------------------------------
(a) Landlord agrees to construct Tenant's Improvements, at Tenant's cost
and expense; provided, however, Landlord shall provide Tenant with an
allowance up to $17.75 per square foot of Agreed Rentable Area in the
initial Premises (the "Finish Allowance"), which allowance shall be
disbursed by Landlord, from time to time, for payment of (in the
following priority) (i) the contract sum required to be paid to the
general contractor engaged to construct Tenant's Improvements, which
contract sum shall include without limitation, the costs of any and
all payment and performance bonds required by Landlord in connection
with the construction of Tenant's Improvements and any other costs
incurred by such general contractor to comply with the construction
requirements applicable to the Building (the "Contract Sum"), (ii) the
fees of the preparer of the Space Plan and the Construction Plans,
(iii) payment of the Construction Management Fee (hereinafter
defined), and (iv) such other costs related to the leasehold
improvements (such as equipment, appliances and furnishings) as
Landlord specifically approves in writing, it being understood that
Landlord shall have no obligation whatsoever to fund any portion of
the Finish Allowance for such other costs. Upon completion of Tenant's
Improvements and in consideration of Landlord administering the
construction of Tenant's Improvements, Tenant agrees to pay Landlord a
fee equal to five percent (5%) of the Contract Sum to construct
Tenant's Improvements (the "Construction Management Fee") (the
foregoing costs are collectively referred to as the "Permitted
Costs").
(b) Title to any equipment, appliances, furnishings or personalty
installed in the Premises and purchased with any portion of the Finish
Allowance shall pass to Landlord upon payment of the invoice cost
thereof and Tenant shall not remove any such equipment, appliances,
furnishings or personalty from the Premises without Landlord's
express, prior written consent or unless requested by Landlord in
connection with the expiration or earlier termination of the Lease.
2.3 Excess Costs. If the sum of the Permitted Costs exceeds the Finish
------------
Allowance, then Tenant shall pay all such excess costs ("Excess Costs"). Tenant
agrees to keep the Premises free from any liens arising out of nonpayment of
Excess Costs. In the event that any such lien is filed and Tenant, within ten
(10) days following such filing fails to cause same to be released of record by
payment or posting of a proper bond, Landlord shall have, in addition to all
other remedies provided herein and by law, the right, but not the obligation, to
cause the same to be released by such means as it in its sole discretion deems
proper, including payment of or defense against the claim giving rise to such
lien. All sums paid by Landlord in connection therewith shall constitute Rent
under the Lease and a demand obligation of Tenant to Landlord and such
obligation shall bear interest at the rate provided for in Section 15.10 of the
Supplemental Lease Provisions from the date of payment by Landlord until the
date paid by Tenant.
2.4 Construction Deposit. Tenant shall remit to Landlord an amount (the
--------------------
"Prepayment") equal to the projected Excess Costs, if any, within five (5)
working days after commencement of construction by Landlord. On or prior to the
Commencement Date, Tenant shall deliver to Landlord the actual Excess Costs,
minus the Prepayment previously paid. Failure by Tenant to timely tender to
Landlord the full Prepayment shall permit Landlord to stop all work until the
Prepayment is received. All sums due Landlord under this Section 2.4 shall be
considered Rent under the terms of the Lease and nonpayment shall constitute a
default under the Lease and entitle Landlord to any and all remedies specified
in the Lease.
3. DELAYS. Delays in the completion of construction of Tenant's Improvements
------
or in obtaining a certificate of occupancy, if required by the applicable
governmental authority, caused by Tenant, Tenant's Contractors (hereinafter
defined) or any person, firm or corporation employed by Tenant or Tenant's
Contractors shall constitute "Tenant Delays". Landlord agrees to Substantially
Complete construction of the Tenant's Improvements on or before 75 days after
Landlord executes the Construction Contract; provided however, if a building
permit for the construction of Tenant's Improvements has not been issued within
twenty (20) days after Landlord's execution of the Construction Contract, then
the foregoing 75 day period shall be extended by one day for each day after such
twenty (20) day period that a building permit for the construction of Tenant's
Improvements has not been issued. Further, such 75 day period shall also be
extended by one day for each day of Tenant Delays occurring after Landlord's
execution of the Construction Contract. In the event Landlord fails to
Substantially Complete the construction of the Tenant's Improvements by the
within the time period set forth above (as adjusted for Tenant Delays and
failure to obtain a building permit pursuant to the foregoing), Landlord shall
pay to Tenant, as liquidated damages, the sum of $40,000.00 per month for each
month or portion thereof occurring after such 75 day period (as adjusted for
Tenant Delays and failure to obtain a building permit) until the date of
Substantial Completion of the Tenant's Improvements, provided that such monthly
amount shall be prorated on a daily basis for the first fifteen (15) days after
the 75 day period (as adjusted for Tenant Delays and failure to obtain a
building permit) that Landlord fails to Substantially Complete the Tenant's
Improvements. Landlord and Tenant agree that Tenant's damages resulting from
Landlord's failure to Substantially Complete the Tenant's Improvements within
the period set forth above would be difficult to determine and that the
liquidated damages amount is a reasonable estimate of such damages and is not a
penalty. In the event that Tenant's Improvements are not Substantially Complete
by the Commencement Date referenced in Item 6 of the Basic Lease Provisions,
then the Commencement Date referenced in Item 6 shall be amended to be the
Adjusted Substantial Completion Date
D-2
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(hereinafter defined) and the Expiration Date referenced in Item 7 of the Basic
Lease Provisions shall be adjusted forward by the same number of days as is the
Commencement Date, so that the term of the Lease will be the term set forth in
Item 5 of the Basic Lease Provisions. The Adjusted Substantial Completion Date
shall be the date Tenant's Improvements are Substantially Complete, adjusted
backward, however, by one day for each day of Tenant Delays, if any. The
foregoing adjustments in the Commencement Date and the Expiration Date and
payment of the foregoing described liquidated damages shall be Tenant's sole and
exclusive remedy in the event Tenant's Improvements are not Substantially
Complete by the initial Commencement Date set forth in Item 6 of the Basic Lease
Provisions.
4. SUBSTANTIAL COMPLETION AND PUNCH LIST. The terms "Substantial Completion"
-------------------------------------
and "Substantially Complete," as applicable, shall mean when Tenant's
Improvements are sufficiently completed in accordance with the Construction
Plans so that Tenant can reasonably use the Premises for the Permitted Use (as
described in Item 10 of the Basic Lease Provisions). When Landlord considers
Tenant's Improvements to be Substantially Complete, Landlord will notify Tenant
and within two (2) business days thereafter, Landlord's representative and
Tenant's representative shall conduct a walk-through of the Premises and
identify any necessary touch-up work, repairs and minor completion items as are
necessary for final completion of Tenant's Improvements. Neither Landlord's
representative nor Tenant's representative shall unreasonably withhold his
agreement on punch list items. Landlord will use reasonable efforts to cause the
contractor to complete all punch list items within thirty (30) days after
agreement thereon.
5. TENANT'S CONTRACTORS. If Tenant should desire to enter the Premises or
--------------------
authorize its agent to do so prior to the Commencement Date of the Lease, to
perform approved work not requested of the Landlord, Landlord shall permit such
entry if:
(a) Tenant shall use only such contractors which Landlord shall approve in
its reasonable discretion and Landlord shall have approved the plans
to be utilized by Tenant, which approval will not be unreasonably
withheld; and
(b) Tenant, its contractors, workmen, mechanics, engineers, space planners
or such others as may enter the Premises (collectively, "Tenant's
Contractors"), work in harmony with and do not in any way disturb or
interfere with Landlord's space planners, architects, engineers,
contractors, workmen, mechanics or other agents or independent
contractors in the performance of their work (collectively,
"Landlord's Contractors"), it being understood and agreed that if
entry of Tenant or Tenant's Contractors would cause, has caused or is
causing a material disturbance to Landlord or Landlord's Contractors,
then Landlord may, with notice, refuse admittance to Tenant or
Tenant's Contractors causing such disturbance; and
(c) Tenant (notwithstanding the first sentence of subsection 7.201 of the
Supplemental Lease Provisions), Tenant's Contractors and other agents
shall provide Landlord sufficient evidence that each is covered under
such Worker's Compensation, public liability and property damage
insurance as Landlord may reasonably request for its protection.
Landlord shall not be liable for any injury, loss or damage to any of Tenant's
installations or decorations made prior to the Commencement Date and not
installed by Landlord. Tenant shall indemnify and hold harmless Landlord and
Landlord's Contractors from and against any and all costs, expenses, claims,
liabilities and causes of action arising out of or in connection with work
performed in the Premises by or on behalf of Tenant (but excluding work
performed by Landlord or Landlord's Contractors). Landlord is not responsible
for the function and maintenance of Tenant's Improvements which are different
than Landlord's standard improvements at the Property or improvements,
equipment, cabinets or fixtures not installed by Landlord. Such entry by Tenant
and Tenant's Contractors pursuant to this Section 5 shall be deemed to be under
all of the terms, covenants, provisions and conditions of the Lease except the
covenant to pay Rent.
6. CONSTRUCTION REPRESENTATIVES. Landlord's and Tenant's representatives for
----------------------------
coordination of construction and approval of change orders will be as follows,
provided that either party may change its representative upon written notice to
the other:
LANDLORD'S REPRESENTATIVE:
NAME Sam Houston or Ben Greider
ADDRESS 2800 Industrial Terrace
Austin, Texas 78758
PHONE (512) 835-4455
TENANT'S REPRESENTATIVE:
NAME Kenny Hilberg
ADDRESS 3410 Far West Boulevard, Suite 300
Austin, Texas 78731
PHONE (512) 502-0223
D-3
<PAGE>
7. BUILDING SHELL. Landlord shall perform the following Building shell work at
--------------
Landlord's sole cost and expense:
(a) Building standard VAV system, rigid duct work, perimeter slot
diffusers (excluding internal zone flex duct and supply grills).
(b) Building standard window treatments.
(c) Building standard ceiling grid installed with 2 x 4 ceiling tile
stacked on the floor and 2 x 4 parabolic light fixtures at a ratio of
1 per 90 usable square feet stacked on the floor.
(d) Sprinkler heads installed at 1 per 225 usable square feet.
(e) All Building common areas installed.
D-4
<PAGE>
EXHIBIT E
ACCEPTANCE OF PREMISES MEMORANDUM
This Acceptance of Premises Memorandum is being executed pursuant to that
certain Lease Agreement (the "Lease") dated the 4th day of August, 1998,
between B. O. III, Ltd., a Texas limited partnership ("Landlord"), and VIGNETTE,
INC., a Delaware corporation ("Tenant"), pursuant to which Landlord leased to
Tenant and Tenant leased from Landlord certain space in the office building
located at 901 S. Mopac Expressway, Building III, in Austin, Texas (the
"Building"). Landlord and Tenant hereby agree that:
1. Except for the Punch List Items (as shown on the attached Punch List),
Landlord has fully completed the construction work required under the terms
of the Lease and the Work Letter attached thereto.
2. The Premises are tenantable, Landlord has no further obligation for
construction (except with respect to Punch List Items) and Tenant
acknowledges that the Building, the Premises and Tenant's Improvements are
satisfactory in all respects, except for the Punch List Items and are
suitable for the Permitted Use.
3. The Commencement Date of the Lease is _______________________, _____.If the
date set forth in Item 6 of the Basic Lease Provisions is different than
the date set forth in the preceding sentence, then Item 6 of the Basic
Lease Provisions is hereby amended to be the Commencement Date set forth in
the preceding sentence.
4. The Expiration Date of the Lease is _______________, ____. If the date set
forth in Item 7 of the Basic Lease Provisions is different than the date
set forth in the preceding sentence, then Item 7 of the Basic Lease
Provisions is hereby amended to be the Expiration Date set forth in the
preceding sentence.
5. Tenant acknowledges receipt of the current Rules and Regulations for the
Building.
6. Tenant represents to Landlord that Tenant has obtained a Certificate of
Occupancy covering the Premises.
7. Tenant's telephone number at the Premises is ________________________.
Tenant's facsimile number at the Premises is ___________________________.
8. All capitalized terms not defined herein shall have the meaning assigned to
them in the Lease.
Agreed and Executed this ________ day of ___________________, _______.
LANDLORD
B. O. III, LTD., a Texas limited partnership
By: Office/Industrial, Inc., General Partner
By:_____________________________________
Name:___________________________________
Title:__________________________________
TENANT
VIGNETTE, INC.
By:___________________________________________
Name:_________________________________________
Title:________________________________________
E-1
<PAGE>
EXHIBIT F
GARAGE PARKING AGREEMENT
RESERVED AND NON-RESERVED PARKING SPACES
This Exhibit is attached to and a part of that certain Lease Agreement
dated as of August 4, 1998, executed by and between B. O. III, LTD., a Texas
limited partnership, and VIGNETTE, INC., a Delaware corporation. Any capitalized
term used but not defined herein shall have the meaning assigned to it in the
provisions designated in the Lease as the Supplemental Lease Provisions.
Landlord and Tenant mutually agree as follows:
1. PARKING SPACES. So long as the Lease remains in effect, Tenant or persons
--------------
designated by Tenant shall have the right (but not the obligation) to use
parking spaces at the ratio of one (1) parking spaces per 270 square feet
of Agreed Rentable Area in the Premises, which ratio includes handicap and
visitor parking spaces. In connection with the initial Premises, Tenant's
parking spaces shall be allocated as follows: (i) up to fifteen (15)
reserved parking spaces in the Garage during the term of this Lease and
(ii) up to two hundred thirty-one (231) unreserved and non-exclusive
parking spaces in the Garage and in the surface parking area for the
Building during the term of this Lease. Additionally, so long as Tenant
leases at least 66,000 square feet of Agreed Rentable Area in the Building,
Tenant shall be entitled to two (2) visitor parking spaces reserved for
Tenant's visitors only.
2. PARKING RENTAL. The rent for such parking spaces during the initial term of
--------------
the Lease shall be $00.00.
3. LOST PARKING CARDS. There will be a replacement charge payable by Tenant
------------------
equal to the amount posted from time to time by Landlord for loss of any
magnetic parking card or parking sticker issued by Landlord.
4. VALIDATION. Tenant may validate visitor parking, by such method or methods
----------
as Landlord or the Garage operator may approve, at the validation rate from
time to time generally applicable to visitor parking. Landlord expressly
reserves the right to redesignate parking areas and to modify the parking
structure for other uses or to any extent.
5. PARKING STICKERS AND CARDS. Parking stickers or any other device or form of
--------------------------
identification supplied by Landlord shall remain the property of Landlord
and shall not be transferable.
6. DAMAGE TO OR CONDEMNATION OF GARAGE. If Landlord fails or is unable to
-----------------------------------
provide any parking space to Tenant in the Garage because of damage or
condemnation, such failure or inability shall never be deemed to be a
default by Landlord as to permit Tenant to terminate the Lease, either in
whole or in part, but Tenant's obligation to pay rent for any such parking
space which is not provided by Landlord shall be abated for so long as
Tenant does not have the use of such parking space and such abatement shall
constitute full settlement of all claims that Tenant might otherwise have
against Landlord by reason of such failure or inability to provide Tenant
with such parking space.
7. RULES AND REGULATIONS. A condition of any parking shall be compliance by
---------------------
the parker with Garage rules and regulations, including any sticker or
other identification system established by Landlord. Garage managers or
attendants are not authorized to make or allow any exceptions to these
Rules and Regulations. The following rules and regulations are in effect
until notice is given to Tenant of any change. Landlord reserves the right
to modify and/or adopt such other reasonable and generally applicable rules
and regulations for the Garage as it deems necessary for the operation of
the Garage.
(a) Cars must be parked entirely within the stall lines painted on the
floor.
(b) All directional signs and arrows must be observed.
(c) The speed limit shall be five (5) miles per hour.
(d) Parking is prohibited in areas not striped for parking, aisles, areas
where "no parking" signs are posted, in cross hatched areas and in
such other areas as may be designated by Landlord or Landlord's
agent(s) including, but not limited to, areas designated as "Visitor
Parking" or reserved spaces not rented under this Agreement.
(e) Every parker is required to park and lock his own car. responsibility
for damage to cars or persons or loss of personal possessions is
assumed by the parker.
(f) Spaces which are designated for small, intermediate or full-sized cars
shall be so used. No intermediate or full-size cars shall be parked in
parking spaces limited to compact cars
8. DEFAULT. Failure to promptly pay the rent required hereunder shall
-------
constitute a default under the Lease and Landlord, may, at its option and
in addition to all other remedies provided for in the Lease, terminate
Tenant's rights to use the Garage. Landlord may refuse to permit any person
who violates the rules to park in the Garage and any violation of the rules
shall subject the car to removal at the car owner's expense. No such refusal
or removal shall create any liability on Landlord or be deemed to interfere
with Tenant's right to quiet possession of the Premises.
F-1
<PAGE>
RIDER 1
RENEWAL OPTION
This Rider is attached to and a part of that certain Lease Agreement dated
as of August 4, 1998, executed by and between B. O. III, LTD., a Texas limited
partnership ("Landlord"), and VIGNETTE, INC., a Delaware corporation ("Tenant).
Any capitalized term used but not defined herein shall have the meaning assigned
to it in the provisions designated in the Lease as the Supplemental Lease
Provisions. Landlord and Tenant mutually agree as follows:
1. If, and only if, on the Expiration Date and the date Tenant notifies
Landlord of its intention to renew the term of this Lease (as provided
below), (i) Tenant is not in default under this Lease, (ii) Tenant then
occupies at least ninety percent (90%) of the Agreed Rentable Area of the
original Premises and the Premises then consist of at least all the
original Premises and (iii) this Lease is in full force and effect, then
Tenant, but not any assignee or subtenant of Tenant, shall have and may
exercise an option to renew this Lease for two (2) additional terms of
seven (7) years each (each, a "Renewal Term") upon the same terms and
conditions contained in this Lease with the exceptions that (x) this Lease
shall not be further available for renewal after the second Renewal Term
and (y) the rental for each Renewal Term shall be the "Renewal Rental
Rate", but in no event will the Base Annual Rent be less than the Base
Annual Rent for the last twelve (12) calendar months of the preceding term
of the Lease. The Renewal Rental Rate is hereby defined to mean the then
prevailing rents (including, without limitation, those similar to the Basic
Annual Rent and Additional Rent) payable by renewal tenants having a credit
standing substantially similar to that of Tenant, for properties of
equivalent quality, size, utility and location as the Premises, including
any additions thereto, located within the area described below and leased
for a renewal term approximately equal to the Renewal Term. The Renewal
Rental Rate will take into consideration the tenant inducements offered in
the renewal transactions considered by Landlord in determining the Renewal
Rental Rate. Notwithstanding the foregoing, Tenant shall not be entitled to
exercise the second renewal option unless Tenant exercises the first
renewal option.
2. If Tenant desires to renew this Lease, Tenant must notify Landlord in
writing of its intention to renew on or before the date which is at least
nine (9) months but no more than twelve (12) months prior to the Expiration
Date or the expiration of the first Renewal Term, as the case may be.
Landlord shall, within the next sixty (60) days, notify Tenant in writing
of Landlord's determination of the Renewal Rental Rate and Tenant shall,
within the next twenty (20) days following receipt of Landlord's
determination of the Renewal Rental Rate, notify Landlord in writing of
Tenant's acceptance or rejection of Landlord's determination of the Renewal
Rental Rate. If Tenant timely notifies Landlord of Tenant's acceptance of
Landlord's determination of the Renewal Rental Rate, this Lease shall be
extended as provided herein and Landlord and Tenant shall enter into an
amendment to this Lease to reflect the extension of the term and changes in
Rent in accordance with this Rider. If (i) Tenant timely notifies Landlord
in writing of Tenant's rejection of Landlord's determination of the Renewal
Rental Rate and does not invoke its rights under Paragraph D below, or (ii)
Tenant does not notify Landlord in writing of Tenant's acceptance or
rejection of Landlord's determination of the Renewal Rental Rate within
such twenty (20) day period, this Lease shall end on the Expiration Date
and Landlord shall have no further obligations or liability hereunder. If
Tenant timely notifies Landlord in writing of Tenant's rejection of
Landlord's determination of the Renewal Rental Rate and does invoke its
rights under Paragraph D below (such notice, "Tenant's Notification"), this
Lease shall be extended as provided herein and Landlord and Tenant shall
enter into an amendment to this Lease to reflect the extension of the term
and changes in Rent, with the Renewal Rental Rate determined in accordance
with Paragraph D below.
C. The market area with respect to which the Renewal Rental Rate will be
determined is the southwest Austin, Texas suburban office space market.
D. If Tenant timely invokes its rights under this Paragraph D, the following
shall apply:
(i) Landlord and Tenant shall each appoint a real estate broker
(who shall not be required to be a disinterested broker) with at least five
(5) years experience who is familiar with rental values for properties in
the vicinity of the Building. Each party will make the appointment no later
than ten (10) days after receipt of Tenant's Notification. The agreement of
the two brokers as to the Renewal Rental Rate for the Renewal Term will be
binding upon Landlord and Tenant. If the two (2) brokers cannot agree upon
the Renewal Rental Rate within fifteen (15) days following their
appointment, they shall within ten (10) days thereafter agree upon a real
estate broker (the "Independent Broker") with the qualifications set forth
in subparagraph D(ii) below. Immediately thereafter, each of the brokers
will submit his best estimate of the Renewal Rental Rate for the Renewal
Term (together with a written report supporting such estimate) to the
Independent Broker and such broker will choose between the two estimates.
The estimate of Renewal Rental Rate chosen by the Independent Broker as the
closest to the Renewal Rental Rate will be binding upon Landlord and
Tenant. Notification in writing of this estimate shall be made to Landlord
and Tenant within fifteen (15) days following the selection of the
Independent Broker.
(ii) If either Tenant or Landlord fails to appoint a broker or fails
to notify the other party of such appointment within ten (10) days after
receipt of notice that the prescribed time for appointing the brokers has
passed, then the other party's broker will determine the Renewal Rental Rate
for the Renewal Term which must be reasonable within the context of the
market. The Independent Broker must be a disinterested, reputable, qualified
real estate broker with at least ten (10) years experience in who is
familiar with rental values from properties in the vicinity of the Building.
(iii) If an Independent Broker must be chosen under the procedure set
out above, he will be chosen on the basis objectivity and competence, not on
the basis of his relationship with the brokers or the parties to this Lease,
and the brokers will be so advised. Although the brokers will be instructed
to attempt in good faith to agree upon the broker, if for any reason they
cannot agree within the prescribed time, either Landlord or Tenant may
require the brokers to immediately submit its top choice for the Independent
Broker to the then highest ranking officer of the Dallas Bar Association who
will agree to help and who has no attorney/client or other significant
relationship to either Landlord or Tenant or the brokers. Such officer will
have complete discretion to select the most objective and competent
independent broker from between the choice of each of the brokers, and will
do so within twenty (20) days after such choices are submitted to him.
(iv) Either Landlord or Tenant may notify the broker selected by the
other party to demand the submission of an estimate of the Renewal Rental
Rate or a choice of the Independent Broker as required under the procedure
described above; and if the submission of such an estimate or choice is
required but the other party's broker fails to comply with the demand within
ten
1
<PAGE>
(10) days after receipt of such notice, then the Renewal Rental Rate or
choice of the Independent Broker, as the case may be, selected by the other
broker (i.e., the notifying party's broker) will be binding upon Landlord
and Tenant.
(v) Landlord and Tenant shall each bear the expense, if any, of the
broker appointed by it, and the expense of the Independent Broker and of any
officer of the Dallas Bar Association who participates in the appraisal
process described above will be shared equally by Landlord and Tenant.
(vi) If for any reason the Renewal Rental Rate has not been
determined prior to the commencement of the Renewal Term, then during such
Renewal Term until the Renewal Rental Rate is determined in accordance with
the procedure described above, Tenant shall pay Basic Monthly Rent at the
rate that is 125% of the rate of Basic Monthly Rent which applied prior to
such Renewal Term. Later, when the Renewal Rental Rate for the Renewal Term
is determined, an adjustment will be made between Landlord and Tenant for
any overpayment or underpayment of the Renewal Rental Rate resulting from
the operation of this subparagraph. Any underpayment of the Renewal Rental
Rate for the period prior to such determination will be paid with the
installment of Basic Monthly Rent next due after such determination, and any
overpayment of the Renewal Rental Rate shall be applied as an offset by
Landlord against Tenant's next maturing installments of Basic Monthly Rent.
2
<PAGE>
RIDER 2
RIGHT TO AUDIT
This Rider is attached to and a part of that certain Lease Agreement dated
as of August 4, 1998, executed by and between B. O. III, LTD., a Texas limited
partnership ("Landlord"), and VIGNETTE, INC., a Delaware corporation ("Tenant).
Any capitalized term used but not defined herein shall have the meaning assigned
to it in the provisions designated in the Lease as the Supplemental Lease
Provisions. Landlord and Tenant mutually agree as follows:
If a statement reflecting annual Operating Expenses is delivered to Tenant
pursuant to subsection 2.202 of the Supplemental Lease Provisions and is not
reviewed or prepared by an independent certified public accountant, Tenant shall
have the right to perform an annual audit at Tenant's expense on Landlord's
books and records to the extent necessary to verify Landlord's calculation of
actual Additional Rent for the prior calendar year, provided that such audit
shall be conducted by a certified public accountant whose fees are not
determined on a percentage of recovery or contingency fee basis, and further
provided that the auditor's report reflecting the results of such audit shall be
promptly delivered to Landlord. Any such audit shall be conducted, if at all,
(i) within sixty (60) days after the receipt of the annual statement of actual
Additional Rent from Landlord, (ii) during Landlord's normal business hours,
(iii) at the place where Landlord maintains its records (or such other place as
Landlord shall deliver the appropriate records) and (iv) only after Landlord has
received fifteen (15) days prior written notice. If the audit report reflects
that estimated Additional Rent was overcharged or undercharged in the audited
calendar year and provided Landlord agrees with such audit, Tenant shall within
twenty (20) days after receipt of such report pay to Landlord the amount of any
underpayment or, if applicable, Landlord shall allow Tenant a credit against the
next accruing installment of Additional Rent in the amount of any overpayment,
and if such overpayment exceeds five percent (5%) of Tenant's Additional Rent
payable for the applicable calendar year, Landlord shall reimburse Tenant for
the reasonable cost of the audit.
1
<PAGE>
RIDER H-1
TENANT'S STUDY, TESTING AND INSPECTION RIGHTS
This Rider is attached to and a part of that certain Lease Agreement dated
as of August 4, 1998, executed by and between B. O. III, LTD., a Texas limited
partnership ("Landlord"), and VIGNETTE, INC., a Delaware corporation ("Tenant).
Any capitalized term used but not defined herein shall have the meaning assigned
to it in the provisions designated in the Lease as the Supplemental Lease
Provisions. Landlord and Tenant mutually agree as follows:
Prior to commencement of any tenant finish work to be performed by
Landlord, Tenant shall have the right to make such studies and investigations
and conduct such tests and surveys of the Premises from an environmental
standpoint as Tenant deems necessary or appropriate, subject to the condition
that all such studies and investigations shall be completed prior to the
commencement of any tenant finish work to be performed by Landlord. TENANT SHALL
INDEMNIFY AND HOLD HARMLESS LANDLORD FROM, AND REIMBURSE LANDLORD FOR AND WITH
RESPECT TO, ANY AND ALL LOSS, DAMAGES, AND CLAIMS RESULTING FROM OR RELATING TO
TENANT'S STUDIES, TESTS AND INVESTIGATIONS. If such study, test, investigation
or survey evidences hazardous or toxic materials which affect the Premises,
Tenant shall have the right to terminate this Lease provided such right shall be
exercised, if at all, prior to the commencement of any tenant finish work to be
performed by Landlord and, in any event, within ten (10) days after Tenant
receives the evidence of hazardous or toxic materials. If Tenant does not
exercise such right prior to commencement of any such tenant finish work and
within such five (5) day period, Tenant's right to terminate this Lease shall be
null and void and of no further force or effect.
1
<PAGE>
RIDER 3
EXPANSION OPTION
This Rider is attached to and a part of that certain Lease Agreement dated
as of August 4, 1998, executed by and between B. O. III., LTD., a Texas limited
partnership ("Landlord"), and Vignette, Inc., a Delaware corporation ("Tenant).
Any capitalized term used but not defined herein shall have the meaning assigned
to it in the provisions designated in the Lease as the Supplemental Lease
Provisions. Landlord and Tenant mutually agree as follows:
A. Subject to the remaining provisions of this Rider, Tenant shall have the
option and right (the "Expansion Option") to lease from Landlord all, but
not less than all, of the first (1st) floor of the Building not included in
the initial Premises (the "First Floor Expansion Space"), and all, but not
less than all, of 10,000 square feet of Agreed Rentable Area on the third
(3rd) floor of the Building (the "Third Floor Expansion Space")
(collectively, the "Expansion Space"). The agreed rentable area of the
First Floor Expansion Space is 5,049 square feet. Landlord shall designate
the location of the Third Floor Expansion Space at the time Tenant exercise
the Expansion Option with respect to such space. Tenant shall exercise the
Expansion Option, if at all, by delivering written notice of such exercise
(such notice, the "Notice") on or before 5:00 p.m. December 31, 1998. If
Tenant fails to so exercise the Expansion Option as to either the First
Floor Expansion Space or the Third Floor Expansion Space, the Expansion
Option with respect to such space shall be of no further force or effect.
B. The applicable Expansion Space shall be leased to Tenant upon all terms and
conditions of this Lease with the following exceptions:
(a) All Expansion Space shall be delivered to Tenant in Building shell
condition.
(b) Basic Annual Rent for the applicable Expansion Space will be equal to
the product of the Agreed Rentable Area per square foot rent
applicable to the Premises (at the time such Basic Annual Rent is
calculated) under Item 3 of the Basic Lease Provisions, multiplied by
the agreed rentable area of the Expansion Space.
(c) Basic Monthly Rent for the Expansion Space will be equal to one-
twelfth (1/12th) of the Basic Annual Rent for the Expansion Space.
(d) Basic Annual Rent and Additional Rent for the Expansion Space shall
commence on the earlier to occur of (i) ninety (90) days after
Landlord's receipt of the Notice; provided that such ninety (90) day
period shall be extended by one day for each day of Landlord Delay
(hereinafter defined), and (ii) the date that Tenant commences use of
the Expansion Space. For purposes hereof, Landlord Delay shall mean
each day that Landlord fails to make a submittal or take any other
action required by Landlord within the time period provided for such
action under the work letter executed in connection with the Expansion
Space.
(e) The dates for submission of the initial space plan and construction
plans for the leasehold improvements to be constructed in the
Expansion Space shall be agreed to by Landlord and Tenant within five
(5) days after Tenant elects to lease the Expansion Space.
(f) Tenant shall be entitled to a finish allowance equal to the product of
(i) the per square foot Finish Allowance provided by Landlord with
respect to the initial Premises (as set forth in Exhibit D to the
---------
Lease), multiplied by (ii) the number of square feet of the Expansion
Space, multiplied by (iii) a fraction, the numerator of which is the
number of full calendar months which remain in the initial Lease Term
from and after the date Basic Annual Rent commences with respect to
the Expansion Space and the denominator of which is the number of full
calendar months in the initial Lease Term.
(g) Tenant shall have no right to occupy any portion of the Expansion
Space and in no event shall Tenant occupy the Expansion Space prior to
(i) Substantial Completion of the leasehold improvements to be
constructed in the Expansion Space, (ii) issuance of a certificate of
completion or other document or permit issued by the applicable
governmental authority authorizing Tenant's occupancy of the Expansion
Space and (iii) Landlord's receipt of an Acceptance of Premises
Memorandum executed by Tenant and covering the Expansion Space.
C. Within fifteen (15) days after Landlord's receipt of the Notice, Tenant and
Landlord will enter into a work letter substantially in the form of Exhibit
-------
D attached to the Lease, provided that such form shall be amended to (i)
-
set-forth appropriate dates, (ii) amend the finish allowance to be the
amount of finish allowance calculated in accordance with clause (g) of
Paragraph B of this Rider and (iii) provide for such other matters as are
necessary to reflect the agreements of the parties with respect to the
finish out of the Expansion Space. Pursuant to the work letter, Landlord
shall construct or cause to be constructed improvements in the Expansion
Space in substantial accordance with construction plans agreed to by
Landlord and Tenant.
D. Upon substantial completion of the Expansion Space improvements, Landlord
and Tenant shall execute an Acceptance of Premises Memorandum in
substantially the form of Exhibit E attached to the Lease. If Tenant
---------
occupies any Expansion Space without executing the Acceptance of Premises
Memorandum, Tenant shall be deemed to have accepted such Expansion Space
for all purposes.
E. Within fifteen (15) days after Landlord's receipt of the Notice, Landlord
and Tenant will enter into an amendment to this Lease reflecting (i) the
addition of the Expansion Space to the Premises, (ii) the increase in Basic
Annual Rent and Additional Rent payable under this Lease, (iii) the
increase in Tenant's Pro Rata Share Percentage and (iv) such other
amendments as are necessary.
F. Landlord shall not be liable for the failure to give possession of any of
the Expansion Space by reason of holding over or retention of any third
party tenant, tenants or occupants if such holding over or retention of
possession is contrary to the terms and provisions of the lease of any such
third party tenant, tenants or occupants with Landlord and Landlord has
employed legal counsel to take reasonable steps to endeavor to evict such
third party tenant, tenants or occupants. The Landlord shall also not be
liable for the failure to give possession of any Expansion Space by reason
of force majeure as defined in the Lease. Any rent otherwise due by Tenant
with respect to such Expansion Space shall, however, be abated until
possession is delivered to Tenant and such abatement shall constitute full
settlement of all claims that Tenant might otherwise have against Landlord
by reason of any failure of Landlord to timely give possession of such
Expansion Space to Tenant during such time period as Landlord is pursuing
eviction efforts in the manner described preceding and/or during such time
period as such force majeure is continuing.
<PAGE>
G. Notwithstanding any other provision or inference herein to the contrary,
Tenant's rights and Landlord's obligations under this Rider shall expire
and be of no further force or effect on the earliest of (i) the expiration
or earlier termination of the initial term of this Lease, (ii) a default by
Tenant under this Lease, (iii) an assignment of this Lease by Tenant or
(iv) a sublease of all or any portion of the Premises by Tenant other than
a sublease described in Section 11.5 of the Lease which does not give rise
to Landlord's right to terminate the Lease with respect to such sublease.
2
<PAGE>
RIDER 4
TENANT'S RIGHT OF FIRST REFUSAL
This Rider is attached to and a part of that certain Lease Agreement dated
as of August 4, 1998, executed by and between B. O. III, LTD., a Texas limited
partnership ("Landlord"), and VIGNETTE, INC., a Delaware corporation ("Tenant).
Any capitalized term used but not defined herein shall have the meaning assigned
to it in the provisions designated in the Lease as the Supplemental Lease
Provisions. Landlord and Tenant mutually agree as follows:
A. Prior to leasing any rentable area of the Building (other than the
Premises) (the "Right of First Refusal Space") to a prospective tenant,
Landlord shall deliver to Tenant a written statement ("Statement") pursuant
to which Landlord shall specify the terms and conditions upon which
Landlord has agreed to lease the applicable Right of First Refusal Space to
the prospective tenant, and Tenant shall have the right to lease the
applicable Right of First Refusal Space upon the same terms and conditions;
provided that Tenant shall pay a security deposit in connection with such
Right of First Refusal Space equal to $4.69 per square foot of Agreed
Rentable Area of the applicable Right of First Refusal Space. Tenant shall
have five (5) days after receipt of the Statement within which to notify
Landlord in writing that it desires to lease the applicable Right of First
Refusal Space upon the terms and conditions set forth in the Statement;
provided that Tenant shall pay a security deposit in connection with such
Right of First Refusal Space equal to $4.69 per square foot of Agreed
Rentable Area of the applicable Right of First Refusal Space. Failure by
Tenant to notify Landlord within such five (5) day period shall be deemed
an election by Tenant not to lease the applicable Right of First Refusal
Space and Landlord shall have the right to lease such space to the
prospective tenant upon the terms and conditions set forth in the
Statement. If Landlord enters into such a lease with the prospective tenant
within 120 days after the expiration of such five (5) day period, Tenant
shall have no further rights under this Rider with respect to the Right of
First Refusal Space covered by such lease. In the event Landlord fails to
enter into a lease with the prospective tenant within 120 days after the
expiration of the five (5) day period, Tenant's rights under this Rider
with respect to such Right of First Refusal Space shall be reinstated.
Tenant's rights under this Rider shall continue with respect to any Right
of First Refusal Space not previously offered to Tenant.
B. Notwithstanding any provision or inference in this Rider to the contrary,
the Right of First Refusal shall expire and be of no further force or
effect on the earlier of (i) the expiration or earlier termination of the
initial term of this Lease, (ii) a default by Tenant under this Lease,
(iii) an assignment of this Lease by Tenant, (iv) a sublease of all or any
portion of the Premises by Tenant other than a sublease described in
Section 11.5 of the Lease which does not give rise to Landlord's right to
terminate the Lease with respect to such sublease, or (v) Landlord's lease
of the Right of First Refusal Space within 120 days after the expiration of
the five (5) day Tenant response period.
<PAGE>
RIDER 5
TENANT'S RIGHT OF OPPORTUNITY
(BASIC RENT EQUAL TO FAIR MARKET RENT)
This Rider is attached to and a part of that certain Lease Agreement dated
as of August 4, 1998, executed by and between B. O. III, LTD., a Texas limited
partnership ("Landlord"), and VIGNETTE, INC., a Delaware corporation ("Tenant).
Any capitalized term used but not defined herein shall have the meaning assigned
to it in the provisions designated in the Lease as the Supplemental Lease
Provisions. Landlord and Tenant mutually agree as follows:
A. Prior to leasing to a third party (other than (i) the existing tenant of
such space under the initial lease of such space by Landlord, or (ii) the
holder of any Third Party Expansion Rights with respect to such space) any
of the rentable area in of the Building (other than the Premises) (the
"Opportunity Expansion Space") after the initial lease of such Opportunity
Expansion Space by Landlord, Landlord shall deliver to Tenant a written
statement ("Statement") setting forth (a) the location of the applicable
Available Opportunity Expansion Space and (b) Landlord's determination of
the Fair Market Rent (hereinafter defined) for the applicable Available
Opportunity Expansion Space. The phrase "Available Opportunity Expansion
Space" is hereby defined to mean Opportunity Expansion Space which is not
subject to any expansion options, rights of refusal, rights of opportunity,
rights of offer and other similar expansion rights pursuant to an initial
lease of space in the Building (any and all such expansion rights, "Third
Party Expansion Rights"). Tenant shall have fifteen (15) days after receipt
of the Statement within which to notify Landlord in writing that it elects
to lease the applicable Opportunity Expansion Space and whether Tenant
agrees with Landlord's determination of the Fair Market Rent (each such
written notice is herein referred to as a "Opportunity Notice"). If Tenant
elects to lease the applicable Opportunity Expansion Space within such
fifteen (15) day period, then Tenant's election shall be irrevocable. The
Notice shall also specify whether Tenant accepts or rejects Landlord's
determination of the Fair Market Rent. If Tenant timely notifies Landlord
in writing of Tenant's rejection of Landlord's determination of the Fair
Market Rent, the Fair Market Rent shall be determined in accordance with
Paragraph B below. If Tenant does not specify in the Notice whether Tenant
accepts or rejects Landlord's determination of the Fair Market Rent, Tenant
shall be deemed to have accepted Landlord's determination. Failure by
Tenant to notify Landlord within such fifteen (15) day period shall be
deemed an election by Tenant not to lease the applicable Opportunity
Expansion Space and Tenant's rights under this Rider with respect to such
space shall terminate. However, Tenant's rights hereunder with respect to
all other Opportunity Expansion Space which has not been previously offered
to Tenant shall continue.
B. If Tenant timely invokes its rights under this Paragraph B, the following
shall apply:
(i) Landlord and Tenant shall each appoint a real estate broker (who
shall not be required to be a disinterested broker) with at least five (5)
years experience who is familiar with rental values for properties in the
vicinity of the Building. Each party will make the appointment no later
than three (3) business days after receipt of the Notice. The agreement of
the two brokers as to the Fair Market Rent for the applicable Opportunity
Expansion Space will be binding upon Landlord and Tenant. If the two (2)
brokers cannot agree upon the Fair Market Rent within five (5) business
days following their appointment, they shall within three (3) business)
days thereafter agree upon a real estate broker (the "Independent Broker")
with the qualifications set forth in subparagraph B(ii) below. Immediately
thereafter, each of the brokers will submit his best estimate of the Fair
Market Rent for the applicable Opportunity Expansion Space (together with a
written report supporting such estimate) to the Independent Broker and such
broker will choose between the two estimates. The estimate of Renewal
Rental Rate chosen by the Independent Broker as the closest to the Fair
Market Rent will be binding upon Landlord and Tenant. Notification in
writing of this estimate shall be made to Landlord and Tenant within three
(3) business days following the selection of the Independent Broker.
(ii) If either Tenant or Landlord fails to appoint a broker or fails
to notify the other party of such appointment within two (2) business days
after receipt of notice that the prescribed time for appointing the brokers
has passed, then the other party's broker will determine the Fair Market
Rent for the Opportunity Expansion Space which must be reasonable within
the context of the market. The Independent Broker must be a disinterested,
reputable, qualified real estate broker with at least ten (10) years
experience in who is familiar with rental values from properties in the
vicinity of the Building.
(iii) If an Independent Broker must be chosen under the procedure set
out above, he will be chosen on the basis objectivity and competence, not
on the basis of his relationship with the brokers or the parties to this
Lease, and the brokers will be so advised. Although the brokers will be
instructed to attempt in good faith to agree upon the broker, if for any
reason they cannot agree within the prescribed time, either Landlord or
Tenant may require the brokers to immediately submit its top choice for the
Independent Broker to the then highest ranking officer of the Travis County
Bar Association who will agree to help and who has no attorney/client or
other significant relationship to either Landlord or Tenant or the brokers.
Such officer will have complete discretion to select the most objective and
competent independent broker from between the choice of each of the
brokers, and will do so within twenty (20) days after such choices are
submitted to him.
(iv) Either Landlord or Tenant may notify the broker selected by the
other party to demand the submission of an estimate of the Fair Market Rent
or a choice of the Independent Broker as required under the procedure
described above; and if the submission of such an estimate or choice is
required but the other party's broker fails to comply with the demand within
three (3) business days after receipt of such notice, then the Renewal
Rental Rate or choice of the Independent Broker, as the case may be,
selected by the other broker (i.e., the notifying party's broker) will be
binding upon Landlord and Tenant.
(v) Landlord and Tenant shall each bear the expense, if any, of the
broker appointed by it, and the expense of the Independent Broker and of any
officer of the Travis County Bar Association who participates in the
appraisal process described above will be shared equally by Landlord and
Tenant.
(vi) If for any reason the Fair Market Rent has not been determined
prior to the rent commencement date for the applicable Opportunity
Expansion Space, then until the Fair Market Rent is determined in
accordance with the procedure described above, Tenant shall pay Basic
Monthly Rent at the rate payable under the Lease for the initial Premises.
Later, when the Fair Market Rent for the Opportunity Expansion Space is
determined, an adjustment will be made between Landlord and Tenant for any
overpayment or underpayment of the Fair Market Rent resulting from the
operation of this subparagraph. Any underpayment of the Fair Market Rent
for the period prior to such determination will be paid with the
installment of Basic Monthly Rent next due after such determination, and
any overpayment of the Fair Market Rent shall be applied as an offset by
Landlord against Tenant's next maturing installments of Basic Monthly Rent.
<PAGE>
C. The applicable Opportunity Expansion Space shall be leased to Tenant upon
all terms and conditions of this Lease with the following exceptions:
(a) All Opportunity Expansion Space shall be delivered to Tenant in "as
is" condition.
(b) The term of the Lease for the applicable Opportunity Expansion Space
will be (a) with respect to any Opportunity Expansion Space which
contains 10,000 square feet of Agreed Rentable Area or less, the
greater of (X) the remaining term of the Lease or (Y) three (3) years
from the d Rent Commencement Date (hereinafter defined) for such
space, and (b) with respect to any Opportunity Expansion Space
containing in excess of 10,000 square feet of Agreed Rentable Area,
the greater of (X) the remaining term of the Lease of (Y) four (4)
years from the d Rent Commencement Date for such space.
(c) Basic Annual Rent for the applicable Opportunity Expansion Space will
be equal to the Fair Market Rent, which is hereby defined to mean the
then prevailing rents similar to the Basic Annual Rent payable by
tenants for premises within the Project of equivalent quality, size,
and utility as the applicable Opportunity Expansion Space and leased
for a term approximately equal to the lease term for the applicable
Opportunity Expansion Space, as the case may be. The Fair Market Rent
will take into consideration, and Tenant shall be entitled to, only
the tenant inducements (inclusive of the finish allowance) agreed to
in the transactions considered by Landlord in determining the Fair
Market Rent.
(d) The Basic Monthly Rent for the agreed rentable area of the Opportunity
Expansion Space will be equal to one-twelfth (1/12th) of the Basic
Annual Rent for the applicable Opportunity Expansion Space.
(e) The dates for submission of the initial space plan and construction
plans shall be agreed to by Landlord and Tenant within five (5) days
after Tenant elects to lease the applicable Opportunity Expansion
Space.
(f) The rent commencement date with respect to the applicable Opportunity
Expansion Space shall be determined as follows:
(i) If the applicable Opportunity Expansion Space is less than 5,000
square feet of Agreed Rentable Area, the rent commencement date with
respect to such space shall be the earlier to occur of (x) the later
to occur of (A) substantial completion of the tenant improvements to
be installed in such space, but in no event more than thirty (30) days
after the termination of the existing lease covering the applicable
Opportunity Expansion Space, and (B) ninety (90) days after Landlord's
delivery of the Statement applicable to such Opportunity Expansion
Space, and (y) the date Tenant commences business in the applicable
Opportunity Expansion Space.
(ii) If the applicable Opportunity Expansion Space is 10,000 square
feet of Agreed Rentable Area or less, but greater than 5,000 square
feet of Agreed Rentable Area, the rent commencement date with respect
to such space shall be the earlier to occur of (x) the later to occur
of (A) substantial completion of the tenant improvements to be
installed in such space, but in no event more than sixty (60) days
after the termination of the existing lease covering the applicable
Opportunity Expansion Space, and (B) ninety (90) days after Landlord's
delivery of the Statement applicable to such Opportunity Expansion
Space, and (y) the date Tenant commences business in the applicable
Opportunity Expansion Space.
(iii) If the applicable Opportunity Expansion Space is greater than
10,000 square feet of Agreed Rentable Area, the rent commencement date
with respect to such space shall be the earlier to occur of (x) the
later to occur of (A) substantial completion of the tenant
improvements to be installed in such space, but in no event more than
ninety (90) days after the termination of the existing lease covering
the applicable Opportunity Expansion Space, and (B) ninety (90) days
after Landlord's delivery of the Statement applicable to such
Opportunity Expansion Space, and (y) the date Tenant commences
business in the applicable Opportunity Expansion Space.
(g) Tenant shall have no right to occupy any portion of the Opportunity
Expansion Space prior to the applicable Scheduled Rent Commencement
Date and in no event shall Tenant occupy any Opportunity Expansion
Space prior to (i) Substantial Completion of the leasehold
improvements being constructed in the applicable Opportunity Expansion
Space, (ii) issuance of a certificate of completion or other document
or permit issued by the applicable governmental authority authorizing
Tenant's occupancy of the applicable Opportunity Expansion Space and
(iii) Landlord's receipt of an Acceptance of Premises Memorandum
covering the applicable Opportunity Expansion Space executed by
Tenant.
D. Within fifteen (15) days after Landlord's receipt of a Opportunity Notice,
Tenant and Landlord will enter into a work letter substantially in the form
of Exhibit D attached to the Lease, provided that such form shall be
---------
amended to (i) set forth appropriate dates, (ii) amend the finish allowance
to be the amount of finish allowance considered in calculating the Fair
Market Rent and (iii) provide for such other matters as are necessary to
reflect the agreements of the parties with respect to the finish out of the
applicable Opportunity Expansion Space. Pursuant to the work letter,
Landlord shall construct or cause to be constructed improvements in the
applicable Opportunity Expansion Space in substantial accordance with
construction plans agreed to by Landlord and Tenant.
E. Upon substantial completion of the applicable Opportunity Expansion Space
improvements, Landlord and Tenant shall execute an Acceptance of Premises
Memorandum in substantially the form of Exhibit E attached to the Lease.
---------
If Tenant occupies any Opportunity Expansion Space without executing the
Acceptance of Premises Memorandum, Tenant shall be deemed to have accepted
such Opportunity Expansion Space for all purposes.
F. Within fifteen (15) days after Landlord's receipt of an Opportunity Notice,
Landlord and Tenant will enter into an amendment to this Lease reflecting
(i) the addition of the applicable Opportunity Expansion Space to the
Premises, (ii) the increase in Basic Annual Rent and Additional Rent
payable under this Lease, (iii) the increase in Tenant's Pro Rata Share
Percentage and (iv) such other amendments as are necessary.
G. Notwithstanding any provision or inference in this Rider to the contrary,
Tenant's rights under this Rider shall expire and be of no further force or
effect on the earlier of (i) the expiration or earlier termination of the
initial term of this Lease, (ii) a default by Tenant under this Lease,
(iii) an assignment of this Lease by Tenant, or (iv) a sublease of all or
any portion of the Premises by Tenant other than a sublease described in
Section 11.5 of the Lease which does not give rise to Landlord's right to
terminate the Lease with respect to such sublease.
<PAGE>
Confidential treatment has been requested for portions of this exhibit. The
copy filed herewith omits the information subject to the confidentiality
request. Omissions are designated as *****. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.
EXHIBIT 10.11
"PRISM" DEVELOPMENT AND MARKETING AGREEMENT
-------------------------------------------
This "Prism" Development and Agreement is made this ____ day of July, 1996
(the "Effective Date"), by and between Vignette Corporation, a Delaware
corporation, with offices at 9430 Research Blvd., Building 2, Suite 150, Austin,
Texas 78759 (hereinafter "Vignette"), and C|NET, Inc., a Delaware corporation,
with offices at 150 Chestnut Street, San Francisco, California 94111
("hereinafter "c|net").
WHEREAS, c|net has developed and owns a certain content management software
system that enables the efficient generation of hypertext markup language pages
intended for delivery and viewing via the World Wide Web multimedia information
retrieval system of the Internet; and
WHEREAS, in conjunction with that certain Stock Purchase Agreement entered
into by the parties concurrently herewith, the parties further desire to develop
the software system into a commercial product and to specify the rights and
obligations of each party in and to the software and product(s) to be developed
therefrom;
NOW THEREFORE, in consideration of the mutual covenants and conditions set
forth herein, the receipt and sufficiency of which are acknowledged by each
party, the parties agree as follows:
1. DEFINITIONS
1.1 "c|net's Prism System" or "Prism" shall mean c|net's content
management software system consisting of the particular components identified on
attached Exhibit A and existing as of the Effective Date, but not the
Intellectual Property embodied therein, which system enables the efficient
generation of hypertext markup language pages intended for delivery and viewing
on the World Wide Web of the Internet. Prism shall not include code, application
programming interfaces or algorithms supplied by third parties.
1.2 "Commercial System" shall mean a commercially marketable content
management software system developed by Vignette hereunder that incorporates
Prism or any Derivatives (as defined below) and that performs the principal
functions for which c|net uses Prism as of the Effective Date.
1.3 "Competitive System" shall mean any product that is reasonably
competitive with the Commercial System to be developed hereunder by Vignette.
1.4 "Confidential Information" shall mean printed or electronically
recorded matter, know-how, trade secrets, and other information of a non-public
nature that is known or used by a party. Confidential Information includes
information generated as a result of the activities of the
1
<PAGE>
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
parties hereunder, as well as background information owned by a party prior to
the Effective Date and made available to the other party hereunder, whether
disclosed in writing or orally.
1.5 "Derivatives" shall mean (a) any software, work product, improvement,
modification, alteration, enhancement, new version, update, localization,
upgrade, port, translation, design and documentation, in any medium, format or
form whatsoever, that is derived in any manner, directly or indirectly, from the
Systems (as defined below) or any part or aspect thereof, or that uses or
incorporates the Systems or any part or aspect thereof; (b) all derivative works
of the Systems as defined in the Copyright Law of the United States, Title 17
U.S.C. (S) 101 et seq., and (c) all materials and documentation related to each
of the foregoing. The foregoing notwithstanding, Derivatives shall not include:
(1) derivative works of the Systems programming language that are intended only
for Internal Use; (2) derivative works of the Systems templates; (3) code,
application programming interfaces or algorithms supplied by third parties that
are not derivative works of the Systems as defined in the Copyright Law; or (4)
any algorithm or code created after the Effective Date and designed to be linked
into the hypertext transfer protocol (HTTP) server code in the HTTP server
application programming interface (API).
1.6 "Design Phase" shall mean the period commencing on the Effective Date
and ending with the commencement of the Marketing Phase.
1.7 "Intellectual Property" (also referred to as "IP") means the
worldwide intangible legal rights or interests evidenced by or embodied in (i)
any idea, design, concept, methods, process, technique, apparatus, invention,
discovery, or improvement, including any patents, patent applications, trade
secrets, and know-how; (ii) any work of authorship, including any copyrights,
industrial designs, registration or moral rights recognized by law, (iii) any
trademarks, tradenames, trade dress and associated goodwill, and (iv) any other
proprietary technology or material in which similar rights exist.
1.8 "Internal Use" shall mean, with respect to the software that is the
subject of this Agreement, Use (as defined below) by c|net or any transferee of
all or substantially all of c|net's business (whether through merger, stock sale
or asset sale) for internal development purposes and/or for internal production
purposes at up to ***** Internet sites of companies that are owned at least
fifty (50) percent by c|net or any such transferee.
1.9 "Marketing Phase" shall mean the period commencing with the
marketing, sale, distribution and support of Release 1.0.
1.10 "Release 1.0" shall mean the first commercially available version of
the Commercial System.
1.11 "Stock Purchase Agreement" shall means the agreement between the
parties of even date herewith under which c|net has purchased certain preferred
stock in Vignette.
2
<PAGE>
1.12 "Systems" shall mean Prism and the Commercial System, as modified or
enhanced from time-to-time and including any Derivatives developed by either
party.
1.13 "Use" shall mean the right to use, copy, archive, modify, support and
prepare derivative works.
Other terms may be defined for the purposes of this Agreement in the
context in which they are used or according to the definitions set forth in the
Stock Purchase Agreement, to which this Agreement is an Appendix.
2. EFFECTIVE DATE AND TERM
This Agreement shall become effective on the Effective Date and, subject to
the survival provisions set forth herein, shall continue until the parties shall
agree otherwise or as terminated in accordance with the provisions of Article 8.
3. ASSIGNMENT OF PRISM TO VIGNETTE
3.1 Assignment. For good and valuable consideration, the receipt and
----------
sufficiency of which is hereby acknowledged, c|net hereby assigns, sells and
transfers to Vignette all of its right, title and interest in and to the source
and binary code comprising Prism, all documentation for such source and binary
code existing as of the Effective Date, and any copyrights owned by c|net in the
foregoing deliverables (collectively, the "Transferred Assets").
3.2 Retained Rights. Vignette acknowledges that, except for the
---------------
copyrights specifically identified in Article 3.1, all Intellectual Property in
and to Prism shall remain owned by c|net.
3.3 Transfer Formalities. c|net shall transfer physical possession of
--------------------
the Transferred Assets at the Closing as defined in the Stock Purchase
Agreement, or at such other time and place as the parties may mutually agree.
c|net may retain one or more copies of the source and binary code comprising
Prism, and the documentation for such source and binary code, subject to Article
4.2. At the Closing, c|net shall execute and deliver an appropriate Assignment,
in the form shown attached as Exhibit B, and provide such other assistance as
necessary to enable Vignette to record its ownership of the Transferred Assets.
4. LICENSES
4.1 License Grants to Vignette.
--------------------------
(a) Prism Intellectual Property. c|net hereby grants Vignette an
---------------------------
exclusive (except as to Internal Use), perpetual, royalty-free license to
use Intellectual Property retained by c|net and embodied in Prism or any
Derivatives for use in developing, manufacturing, having manufactured,
using, reproducing, modifying, creating Derivatives, marketing, offering
for sale, selling and otherwise distributing the
3
<PAGE>
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
Commercial System. This license shall be exclusive, except for Internal
Use. This license will terminate only upon c|net's termination of this
Agreement pursuant to Article 8.
(b) Derivatives. c|net hereby grants Vignette an exclusive (except
-----------
as to Internal Use), transferable, perpetual, royalty-free license to
Derivatives of Prism developed by c|net during the ***** period after the
Effective Date (including without limitation all Intellectual Property
rights embodied therein) for use in developing, manufacturing, having
manufactured, using, reproducing, modifying, creating Derivatives,
marketing, offering for sale, selling and otherwise distributing the
Commercial System. The parties shall meet regularly and work in good faith
to agree to the then-current Derivatives contribution, and may by mutual
agreement designate as Derivatives items that fall outside of the
definition set forth in Article 1.5 and designate as not being Derivatives
items that fall within the foregoing definition.
4.2 License Grants to c|net.
-----------------------
(a) Systems. Vignette hereby grants c|net (and its permitted
-------
transferees as defined in Article 1.8) a perpetual, non-exclusive, royalty-
free license to use the Systems in source or binary form for Internal Use.
To facilitate this license, Vignette will promptly deliver to c|net all
source code, binary code and documentation relating to the Systems at the
close of the Design Phase and at such times thereafter as requested. This
license will terminate upon Vignette's termination of this Agreement
pursuant to Article 8.
(b) Other Vignette Products. Vignette hereby grants c|net the right
-----------------------
to license or otherwise acquire any Vignette products or services for
Internal Use on terms and conditions that are at least as favorable to
c|net as the most favorable terms offered by Vignette to any end-user
customer with respect to such products or services (giving effect to any
volume discounts or other promotions or incentives). c|net, or any company
owned at least 50% by c|net, may license or otherwise acquire Vignette
products and services for use other than Internal Use so long as such
acquisitions are within Vignette's then-current standard end user license
agreement(s), with acquisition costs determined by Vignette's then-current
end user price lists.
4.3 No Other Licenses. The parties do not intend to share data, designs,
-----------------
technology, marketing information and other business information and technology
except insofar as it may be useful or required for the purposes contemplated by
this Agreement. Except as expressly stated herein, no licenses or immunities are
granted under this Agreement by implication, estoppel, or otherwise under any
Intellectual Property rights of any party.
4.4 No License Fees or Royalties. No license fees or other royalties
----------------------------
shall be paid by either party to the other party with respect to the licenses
granted above.
4
<PAGE>
5. DEVELOPMENT OF THE COMMERCIAL SYSTEM
5.1 Joint Development of Release 1.0. Vignette and c|net will jointly
--------------------------------
develop Release 1.0. In connection therewith, but subject to the terms and
conditions hereof, Vignette shall control the Release 1.0 development project
including, without limitation, its scope, objectives, staffing and schedules.
5.2 Release 1.0 Project Management. Vignette will have primary
------------------------------
responsibility, including providing all personnel resources necessary (except as
provided below), for the development activities during the Design Phase and will
provide project management and organize a project team to perform its
obligations under this Agreement in a timely manner. Each party will designate
an appropriate employee of such party (collectively the "Project Managers") who
will be the other party's contact on behalf of the appointing party during the
Design Phase. The Project Managers shall have the authority and power to make
decisions on behalf of their respective employers with respect to all aspects of
the Design Phase of this Agreement, and each party shall be entitled to rely
upon such decisions as binding upon the other party. Either party may change its
Project Manager upon prior written notice to the other party.
5.3 Development Plan. Commencing on the Effective Date and continuing
----------------
until the Marketing Phase, the Project Managers shall meet as often as either
party reasonably requests to establish and, as necessary, periodically revise a
plan (the "Development Plan") which will set forth the respective tasks of the
parties during the Design Phase and establish a schedule for the timely
implementation of these tasks. The Development Plan shall also include a
conceptual description of the feature set that will integrate Vignette's
existing content management software (the "Content Server") with Prism and/or
Release 1.0. As of the Effective Date, the parties have agreed that the
integration of the Content Server and Prism shall include at least the feature
set as set forth on attached Schedule C.
5.4 Design Phase.
------------
(a) Vignette's Obligations. Vignette, with the cooperation and
----------------------
assistance of c|net as set forth herein, but at its expense, will use
commercially reasonable efforts during the Design Phase to develop Release
1.0, which will contain all material information required by the
Development Plan. Vignette shall staff the Design Phase with Vignette
personnel located at its Austin, Texas facility and, at its expense, make
such personnel available for Release 1.0 development activities at c|net's
New Jersey and/or San Francisco locations as the Project Managers may
consider reasonably appropriate throughout the development.
(b) c|net's Obligations. During the Design Phase, c|net shall
-------------------
contribute, at its expense, the following technical staff:
(1) a senior Prism engineer, to be located at Vignette's
Austin, Texas facilities, for four (4) weeks during the first (2)
months of the Design Phase, of which the four (4) week period will be
mutually agreed to by the parties;
5
<PAGE>
(2) a Prism template designer, to be located at c|net's
facilities but who shall be available for travel to Vignette's
facilities in Austin, Texas as mutually agreed between the parties in
order to meet the Development Plan;
(3) a senior Prism engineer providing technical consultation
via telephone and e-mail inquiries, on an as-needed basis during
periods in which there are no other c|net personnel located at
Vignette's Austin, Texas facilities; and
(4) a senior Prism engineer, to be located at Vignette's
Austin, Texas facilities, for four (4) weeks during the last month of
the Design Phase, of which the four (4) week period will be mutually
agreed to by the parties.
5.5 Completion of the Design Phase. Upon the successful completion of
------------------------------
the Design Phase as agreed to by the Project Managers, the Commercial Product
shall be deemed in existence and the Marketing Phase shall begin as set forth in
Article 6 below. Upon completion of the Design Phase, c|net shall have no
obligation to provide any further engineering or technical support as required
in Article 5.4(b).
5.6 Development Expenses. Except as provided in the last sentence of
--------------------
Article 5.6, neither party shall charge the other party in any manner for any
expenses or costs in connection with the efforts undertaken during the Design
Phase.
6. THE COMMERCIAL SYSTEM
6.1 Vignette's Obligations. Vignette shall incorporate Prism into its
----------------------
content management product strategy, taking all reasonable steps necessary to
market, sell, support and enhance the Commercial System.
6.2 c|net's Obligations. c|net shall use the Commercial System (at no
-------------------
cost to c|net) for a minimum of twelve (12) months after the Marketing Phase
begins. During this twelve month period, c|net shall not use any Competitive
System unless (a) c|net acquires a company that is using a Competitive System,
in which case c|net may continue using such Competitive System in connection
with the operations of the acquired company; (b) Vignette is acquired by a third
party that is reasonably competitive with c|net; (c) such Competitive System
offers significant functions or features that are not offered by the Commercial
System, in which case c|net can use such Competitive System to the extent
necessary to take advantage of such functions and features; or (d) the
Commercial System does not perform in a manner that is reasonably equivalent (or
superior) to Prism. After such twelve month period, neither party shall have any
further obligation to the other party regarding the future design, development
or direction of Prism, the underlying technology or the Commercial System.
6
<PAGE>
6.3 Joint Promotional Efforts. During the Term, Vignette and c|net shall
-------------------------
use reasonable efforts, jointly and severally, but at each party's expense, to
promote and market the Commercial System, such efforts to include, without
limitation, the following:
(a) press releases, press calls and c|net site profiles;
(b) industry conferences, analyst briefings and other public events;
and
(c) providing industry and customer introductions and references.
Each party shall have the sole control over the type of individual
activities it undertakes with respect to this paragraph, and the parties shall
consult and agree on any joint activities.
6.4 Marketing Expenses. Nothing herein in this Article 6 shall be deemed
------------------
to require either party to incur expenses on behalf of the other party, or to
undertake actions in any manner not consistent with the party's ordinary
business and promotional activities.
6.5 Trademark Rights. To the extent necessary to implement the
----------------
provisions of this Article 6, but subject to reasonable approval rights, each of
the parties grants the other party the right to use the other party's name and
marks in connection with any marketing or promotional materials for the
Commercial System.
6.6 Ownership Rights. Vignette shall own all right, title and interest
----------------
in and to the Commercial System and all Intellectual Property rights embodied
therein subject to c|net's retained Intellectual Property rights in Prism (as
specified in Section 3.2 above) and the license rights granted c|net for
Internal Use. c|net shall make and hereby makes any assignment necessary to
accomplish the foregoing.
7. REPRESENTATIONS, WARRANTIES AND INDEMNITIES
7.1 Authority. Each party represents and warrants to the others that it
---------
has the power and authority to enter into and perform its obligations under this
Agreement and that the signatory on its behalf is authorized to execute this
Agreement and bind its principal to the terms and conditions of this Agreement.
7.2 General Warranties. Each party represents and warrants that (a) the
------------------
execution and performance of this Agreement does not require the consent or
approval of any third party; (b) such party has not entered into any agreements
or commitments inconsistent with the rights and obligations set forth in this
Agreement; and (c) such party will not assert against the other party any
patent, copyright or other proprietary right or IP of any kind, now or hereafter
acquired, that would interfere with the rights granted by and the uses
contemplated by this Agreement.
7.3 Commercial System Warranty. With respect to its use of the
--------------------------
Commercial System, c|net will be entitled to the benefit of any warranties made
in writing by Vignette to other end users of the Commercial System from time to
time, as if such warranties were made directly to c|net.
7
<PAGE>
7.4 Disclaimer. EXCEPT AS PROVIDED ABOVE, THERE ARE NO OTHER WARRANTIES
----------
HEREUNDER AND THE FOREGOING WARRANTIES ARE IN LIEU OF ALL OTHER WARRANTIES,
EXPRESS, IMPLIED OR STATUTORY, INCLUDING, BUT NOT LIMITED TO ANY IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR OF ANY
OTHER WARRANTY OBLIGATION ON THE PART OF EITHER PARTY.
7.5 Cross Indemnity. Vignette and c|net each agree to indemnify, defend
---------------
and hold harmless the other from any and all losses arising out of the services
to be provided under this Agreement, including such losses arising out of (i)
the death or bodily injury of any agent, employee, customer, business invitee or
business visitor of the indemnitor, or (ii) the damage, loss or destruction of
any real or tangible personal property of the indemnitor.
7.6 Intellectual Property Indemnity. With respect to the Commercial
-------------------------------
System, and except as provided below, Vignette agrees to indemnify, defend and
hold harmless c|net from any and all losses arising out of any claims of
infringement of any issued United States letters patent, or a trade secret, or
any copyright, trademark, service mark, trade name or similar proprietary rights
conferred by contract or by common law or by any law of the United States or any
state alleged to have occurred as a result of the manufacture, use, sale,
distribution, licensing, marketing or other exploitation of the Commercial
System; provided, however, that this indemnity shall not apply unless c|net
notifies Vignette promptly of any matters in respect of which the foregoing
indemnity may apply and of which c|net has knowledge and gives Vignette the full
opportunity to control the response thereto and the defense thereof, including,
without limitation, any agreement relating to the settlement thereof. The
foregoing obligation of Vignette shall not extend to infringement arising out of
Prism or any modification of the Commercial System by c|net (where the
infringement is caused by such modification) or the combination, operation or
use of the Commercial System by c|net with other programs or data if such
infringement would have been avoided by the combination, operation or use of the
Commercial System with other than such other programs or data. c|net shall
indemnify, defend and hold harmless Vignette for infringement excluded by the
preceding sentence.
With respect to Prism, and except as provided below, c|net agrees to
indemnify, defend and hold harmless Vignette from any and all losses arising out
of any claims of infringement of any issued United States letters patent, or a
trade secret, or any copyright, trademark, service mark, trade name or similar
proprietary rights conferred by contract or by common law or by any law of the
United States or any state alleged to have occurred as a result of the
manufacture, use, sale, distribution, licensing, marketing or other exploitation
of Prism; provided, however, that this indemnity shall not apply unless Vignette
notifies c|net promptly of any matters in respect of which the foregoing
indemnity may apply and of which c|net has knowledge and gives c|net the full
opportunity to control the response thereto and the defense thereof, including,
without limitation, any agreement relating to the settlement thereof. The
foregoing obligation of c|net shall not extend to infringement arising out of
the Commercial System (exclusive of Prism) or any modification of the Prism by
Vignette (where the infringement is caused by such modification) or the
combination, operation or use of Prism by Vignette with other programs or data
if such infringement would have
8
<PAGE>
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
been avoided by the combination, operation or use of Prism with other than such
other programs or data. Vignette shall indemnify, defend and hold harmless c|net
for infringement excluded by the preceding sentence.
THE FOREGOING OBLIGATIONS CONSTITUTE EACH PARTY'S SOLE LIABILITY AND SOLE
REMEDY FOR INFRINGEMENT OF INTELLECTUAL PROPERTY.
7.8 Survival. Except as otherwise provided, the representations,
--------
warranties and indemnities set forth in this Article shall survive for a period
of ***** from the Effective Date.
8. TERMINATION FOR INSOLVENCY.
In the event that either party hereto is unable to pay its debts generally
as they come due or is declared insolvent or bankrupt, is the subject of any
proceedings relating to its liquidation, insolvency or for the appointment of a
receiver or similar officer for it, makes an assignment for the benefit of all
or substantially all of its creditors, then the other party hereto may, by
giving written notice thereof to such party, terminate this Agreement as of a
date specified in such notice of termination.
9. LIMITATION OF LIABILITY
9.1 Exclusive Remedy. In the event c|net terminates this Agreement under
----------------
Article 8, Vignette's ownership interests in the Transferred Assets shall be
unaffected, however, c|net shall have the right to terminate the licenses set
forth in Article 4.1. In the event Vignette terminates this Agreement under
Article 8, c|net's ownership interests in the Intellectual Property shall be
unaffected, however, Vignette shall have the right to terminate the licenses set
forth in Article 4.2.
9.2 Limitation of Liability. NEITHER PARTY SHALL BE LIABLE FOR ANY
-----------------------
CONSEQUENTIAL, INCIDENTAL OR PUNITIVE DAMAGES, LOST PROFITS OR LOST SAVINGS OF
ANY PARTY. THE REMEDIES SET FORTH ABOVE CONSTITUTE THE ONLY REMEDIES UNDER THIS
AGREEMENT. THEY ARE IN LIEU OF ALL OTHER REMEDIES UNDER STATUTE OR COMMON LAW.
10. ENFORCEMENT RIGHTS
10.1 Right to Bring IP Claims. The right to bring an IP claim shall be
------------------------
determined according to applicable laws and regulations, based on the ownership
of the IP that is involved in the claim.
10.2 Cooperation. Each party agrees to reasonably cooperate with the
-----------
owner of an IP right allegedly infringed at the expense of the prosecuting
party.
9
<PAGE>
11. CONFIDENTIAL INFORMATION
11.1 Obligation of Confidentiality. Subject to Article 11.2, each party
-----------------------------
agrees to use its best efforts to maintain the confidentiality of Confidential
Information so as to prevent the unauthorized use, dissemination and disclosure
of such Confidential Information. To protect Confidential Information against
unauthorized use, dissemination and disclosure, each party agrees to use
protective measures no less stringent than those the party uses within its
business to protect its own similarly situated proprietary information, which
protective measures shall under all circumstances be at least reasonable
measures designed to ensure the continued confidentiality of the Confidential
Information. Each party agrees to use Confidential Information solely for the
purposes expressly set forth in this Agreement. Each party shall only disclose
Confidential Information to their employees and affiliates on a need-to-know
basis.
11.2 Exclusions. Notwithstanding the other provisions of this Agreement,
----------
Confidential Information shall not include information that the receiving party
can show:
(i) is generally known or available, or becomes known or
available, without breach of this Agreement.
(ii) is or has been publicly disclosed in a lawful manner;
(iii) was known to the party to whom it is disclosed prior to such
disclosure;
(iv) is or has been rightfully received from a third party without
breach of an obligation of confidence;
(v) is independently developed by one party without use of
Confidential Information of the other party; or
(vi) is required to be disclosed pursuant to official governmental
process, order or demand.
12. MISCELLANEOUS TERMS AND CONDITIONS
12.1 Dispute Resolution. The dispute resolution procedures set forth in
------------------
the Stock Purchase Agreement shall be used to resolve disputes arising under
this Agreement.
12.2 Survival of Certain Rights and Obligations. Except as otherwise
------------------------------------------
provided, the assignments, confidentiality obligations and licenses, including
applicable limitations and restrictions, set forth in this Agreement shall
survive any termination or expiration of this Agreement.
12.3 Section Headings. The Section headings herein are for convenience
----------------
only and shall not affect in any way the meaning or interpretation of this
Agreement.
10
<PAGE>
12.4 Legal Counsel. Each party acknowledges and represents that, in
-------------
executing this Agreement, it has had the opportunity to seek advice as to its
legal rights from legal counsel. This Agreement shall not be construed against
any party by reason of the drafting or preparation of this Agreement by that
party.
12.5 Modification. This Agreement may be amended or modified only by a
------------
writing executed by the parties.
12.6 No Waiver. The failure by any party at any time or times to require
---------
performance of any provision hereof shall in no manner effect such party's right
at a later time to enforce the same. No waiver by any party of any provision of
this Agreement, whether by conduct or otherwise, in any one or more instances,
shall be deemed a further or continuing waiver of such provision. All waivers
must be in writing.
12.7 Severability. If any of the provisions of this Agreement shall be
------------
held by a court of competent jurisdiction to be contrary to any state or federal
law, the remaining provisions of this Agreement will remain in full force and
effect and shall be construed to accomplish the intent of the parties, and any
invalid provision shall be deemed deleted from this Agreement.
12.8 Governmental Compliance. The parties agree that they will not in any
-----------------------
form export, re-export, resell, ship or divert or cause to be exported, re-
exported, resold, shipped or diverted, directly or indirectly, any product,
technical data or software furnished hereunder or the direct product of such
technical data or software to any country for which the United States Government
or any agency thereof at the time of export and re-export requires any export
license or other governmental approval without first obtaining such license or
approval.
12.9 Choice of Law. This Agreement and the performance of the parties
-------------
hereunder shall be construed in accordance with the governed by the laws of the
State of Texas.
12.10 Further Assurances. Each party shall perform any further acts, sign
------------------
and deliver any further instruments and documents as any other party may
reasonably request to accomplish the purposes of this Agreement.
12.11 Notices. Any notice, communication or statement related to this
-------
Agreement shall be in writing and deemed effective when delivered in person, by
verified facsimile transmission, by electronic mail, or by first class mail,
postage prepaid, to the address or facsimile number of the respective party.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers or representatives.
Vignette Corporation c|net, inc.
_________________________________ ________________________________________
Signature Signature
_________________________________ ________________________________________
Typed or Printed Name Typed or Printed Name
_________________________________ ________________________________________
Date Date
12
<PAGE>
Confidential treatment has been requested for portions of this exhibit. The
copy filed herewith omits the information subject to the confidentiality
request. Omissions are designated as *****. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.
EXHIBIT 10.12
August 15, 1998
Vignette Corporation
3410 Far West Boulevard, Suite 300
Austin, Texas 78731
Attention: Greg Peters
RE: Letter Amendment to "Prism" Development and Marketing Agreement
between Vignette Corporation ("Vignette") and CNET, Inc. ("CNET"),
dated as of July 19, 1996, as amended (the "Agreement")
Dear Greg:
As we have discussed, CNET and National Broadcasting Company, Inc. ("NBC")
have agreed to form a separate joint venture entity to operate the Snap!
Internet portal service (the "Snap Service"), which is currently operated as a
division of CNET. Initially, the joint venture will be owned 81% by CNET and 19%
by NBC Multimedia, Inc., which is a wholly-owned subsidiary of NBC, but NBC
Multimedia, Inc. will have an option to acquire majority ownership of the joint
venture.
Legally, our transaction with NBC will involve the creation of a limited
liability company, Snap! LLC (the "LLC"), and a contribution of Snap assets from
CNET into the LLC. This transaction is expected to close on or around June 30,
1998 (the "Closing"). In order to avoid any ambiguity concerning the application
of the Agreement to the LLC, we are asking you to execute this Letter Amendment
to indicate your agreement to the provisions set forth below. Capitalized terms
used in this Letter Amendment that are not otherwise defined have the meanings
given to such terms in the Agreement.
1. Snap Site. The "Snap Site" means (a) the default version of the Snap
---------
Service, which is currently accessible through "http://www.snap.com" and
includes all URL's that begin with the prefix "http://www.snap.com" (the
"Default Edition"); (b) any co-branded editions of the foregoing that contain
substantially the same content and features as the Default Edition and are
developed for third party distribution partners, for example URL's that begin
with the prefix "http://mci.snap.com"; and (c) any successors to or replacements
of the foregoing (as long as all such sites contain substantially the same
contents and features). The Snap Site may be operated from one or more servers,
including servers operated on behalf of the LLC by third parties, provided the
LLC remains responsible for the content hosted by the servers.
2. Snap Internal Use. Effective upon the Closing, and subject to CNET's
-----------------
execution of the assignment of Patent Rights as specified in Section 6(a) of
this Letter Agreement, any Use of Intellectual Property by the LLC for internal
development purposes or for internal production purposes in connection with the
Snap Site ("Snap Internal Use") will constitute "Internal Use" at a single
Internet site for purposes of the Agreement. Accordingly, effective upon the
Closing:
(a) the LLC will be entitled to Use the Systems in object code form
only pursuant to the perpetual, non-exclusive, royalty-free license granted
to CNET in Section 4.2(a) of the
1
<PAGE>
Agreement, but only for Snap Internal Use, and the LLC will be entitled to
enforce such rights directly against Vignette, as if the LLC were a party
to the Agreement; and
(b) subject to the other terms and conditions of this Letter
Amendment, the LLC shall not be required to pay license fees or other
royalties to Vignette in respect of the rights to Use the Systems granted
hereunder; and
(c) the LLC hereby grants to Vignette the license described in
Section 4.1(b) of the Agreement (as amended) and the related rights
described in Section 4.2(c) of the Agreement, and Vignette will be entitled
to enforce such rights directly against the LLC, as if the LLC were a party
to the Agreement; and
(d) the LLC hereby agrees to be bound by the confidentiality
provisions set forth in Section 11 of the Agreement, and Vignette will be
entitled to enforce such provisions directly against the LLC, as if the LLC
were a party to the Agreement.
3. Limitations on Use. Notwithstanding any contrary provisions of the
------------------
Agreement or this Letter Amendment, the LLC will not have the right to receive
or Use the source code for the Systems (the "Source Code"), but CNET will have
the right to Use the Source Code (to the full extent permitted under the
Agreement) for the benefit of the LLC and to deliver to the LLC object code
versions of any Derivatives of the Systems developed by CNET for the LLC, and
the LLC will have the right to Use the object code versions of such Derivatives
for Snap Internal Use as contemplated by Section 2(a) of this Letter Amendment.
The intention of the parties in providing such rights is to allow the LLC to
engage CNET to modify or improve the Systems if the prioritized needs of the LLC
for Snap Internal Use are inconsistent with standard System features and
Vignette's development schedule. Alternatively, if Vignette and the LLC agree,
the LLC may engage Vignette to perform any necessary modifications or
improvements to the Source Code. The LLC will use commercially reasonable
efforts to plan for a transition to commercially available versions of the
Systems (or other software systems) on or before the Minority Ownership Date (as
defined below) and to limit, to the extent commercially reasonable, any
modifications to the Source Code and any use of customized versions of the
Systems after the Minority Ownership Date.
4. Required Payments after the Minority Ownership Date.
---------------------------------------------------
(a) The date on which CNET first owns less than 50% of the
outstanding equity interests in the LLC is referred to as the "Minority
Ownership Date."
(b) Any Systems that the LLC is using immediately prior to the
Minority Ownership Date and that the LLC desires to continue using after
the Minority Ownership Date are referred to as the "Selected Systems";
provided that (i) the Selected Systems will include only Vignette's
"StoryServer" Systems and any successors thereto and (ii) the Selected
Systems must be sized in a manner that is fair and reasonable to Vignette
and to the LLC in light of the scope of the LLC's operations on the
Minority Ownership Date. Within 30 days after the Minority Ownership Date,
the LLC will notify Vignette of the proposed Selected Systems, to include
the number of copies, the number of servers, the location of the servers,
the URL's hosted, and the number of pages served per day. At Vignette's
request, which must be delivered within 15 days after such notice, CNET,
the LLC and Vignette will cooperate reasonably and in good faith to examine
the configuration of the Selected Systems in light of the operations of the
LLC and to determine whether such sizing is fair and reasonable for the
LLC's scope of operations. Absent a contrary agreement between the LLC and
Vignette, if the sizing and use of the Selected Systems is within
2
<PAGE>
15% of Vignette's standard published guidelines for sizing and use of
installations of similar Systems on similar sites, then the Selected
Systems will be considered fair and reasonable for purposes of this
paragraph.
(c) The LLC's license to Use the Selected Systems, as contemplated by
Section 2(a) of this Letter Amendment, will continue after the Minority
Ownership Date on a royalty-free basis, but the LLC will be required to pay
for any incremental licenses associated with increases in the size of the
Selected Systems after the Minority Ownership Date. In calculating the
incremental license fees, it will be assumed that the LLC has paid cash for
one or more full license(s) to the Selected Systems. Pricing for such
incremental license will be at least as favorable as the most favorable
terms then being offered by Vignette to any similarly situated end user
customer with respect to similar Systems, based on similar volumes and
usage profiles.
(d) Beginning on the Minority Ownership Date, the LLC will be
required to purchase a contract for support, maintenance and update
services (a "Support Contract") for the Selected Systems and, to the extent
applicable, any incremental licenses associated with increased sizing for
the Selected Systems, or else the LLC will not be entitled to receive any
such support, maintenance or update services from Vignette. Pricing and
other terms applicable to any such Support Contract will be at least as
favorable as the most favorable terms then being offered by Vignette to any
similarly situated end user customer with respect to the Selected Systems,
which will be determined by (a) calculating the most favorable price then
being offered by Vignette for the same or similar products as those
comprising the Selected Systems (and such incremental licenses) and (b)
applying the most favorable percentage then being offered by Vignette for
support, maintenance and update services for the Selected Systems. Volume
discounts or other promotions or incentives shall apply to the LLC, and to
the calculation of pricing and percentages described above in this Section
4(d), as they apply to other Vignette customers.
5. Source Code Escrow. At the LLC's request, Vignette will deliver into
------------------
escrow a current copy of the Source Code and related documentation. Vignette
will choose the escrow agent, and the retention and release of the Source Code
and related documentation will be governed by a standard software escrow
agreement reasonably acceptable to both parties and the escrow agent,
substantially in the form attached hereto as Attachment 1 (the "Escrow
Agreement"). Upon release, pursuant to the terms of the Escrow Agreement, the
LLC will have a royalty-free license to use the Source Code and related
documentation for Snap Internal Use only. Following the initial creation of the
escrow for the Source Code and related documentation, Vignette will update the
escrowed Source Code and documentation at least four times each year until
termination of the Escrow Agreement. Vignette will pay the setup and base
maintenance fees charged by the escrow agent, and the LLC will pay the per-
beneficiary fees charged by the escrow agent for escrow of the Source Code and
related documentation as contemplated by this paragraph and the Escrow
Agreement.
6. Patent Assignment and License Back.
----------------------------------
(a) Within 5 business days following execution of this Letter
Amendment by Vignette, CNET will assign to Vignette all of its rights with
respect to the "Patent", U.S. Patent No. 5,740,430, issued 4/14/98, "Method
and apparatus for server-independent caching of dynamically-generated
customized pages" (the "Patent Rights") by fully executing and having
notarized an assignment of patent rights in the form attached hereto as
Attachment 2.
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<PAGE>
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
(b) Subject to CNET's execution of the assignment of patent rights in
the form attached hereto as Attachment 1, Vignette grants to CNET and to
the LLC a non-exclusive, royalty-free license to Use the inventions claimed
in the Patent for CNET's and the LLC's Internal Use only and only in
connection with the Use of the Systems as permitted herein and in the
Agreement, without the right to sublicense any such rights to others. The
licenses granted in this Section 6(b) shall be for the full term of the
Patent.
(c) Vignette shall have no obligation to defend any claim or suit, or
to hold harmless or immune or to indemnify against any loss, cost, expense,
payment or damage, arising from any allegation of infringement or violation
of any patent right or other right or alleged right of a third party by
reason of CNET's and/or the LLC's manufacture, use or sale of any invention
or inventions claimed in the Patent.
7. Advertising on NEWS.COM. CNET will make available to Vignette
-----------------------
***** worth of banner advertising on CNET's NEWS.COM Internet site during the
third calendar quarter of 1998. In valuing and placing such advertising, CNET
will treat Vignette in a manner no less favorable than provided to any
advertiser who pays ***** in cash for similar advertising. Such banner
advertising will be provided subject to CNET's standard advertising terms and
conditions, and Vignette will be responsible for supplying the creative
materials related to such advertising by August 16, 1998.
8. Promotional Assistance.
----------------------
(a) The LLC will provide a product testimonial related to the Systems
and will allow Vignette to use such testimonial in its marketing materials,
subject to the LLC's prior review and approval of the form of such use,
which will not be unreasonably withheld.
(b) NBC Multimedia, Inc. will use commercially reasonable efforts to
arrange a marketing "pitch" meeting between representatives of Vignette and
representatives of US Web.
9. Termination. No termination of the Agreement by Vignette pursuant to
-----------
Section 8 of the Agreement with respect to CNET will affect the LLC's rights,
and no termination of the Agreement by Vignette pursuant to Section 8 of the
Agreement with respect to the LLC will affect CNET's rights. No termination of
the Agreement by CNET pursuant to Section 8 of the Agreement will affect
Vignette's rights as they relate to the LLC.
10. Assignment. The LLC may not transfer, assign or sublicense any of its
----------
rights under the Agreement (as amended hereby) without the prior written consent
of Vignette, which consent will not be unreasonably withheld, except to an
entity that is more than 50% owned and controlled by NBC.
11. No Implication. The parties agree that this Letter Amendment is
--------------
intended to cover a unique situation involving the Snap Site and the projected
changes in ownership and control of the LLC. Execution of this Letter Amendment
by Vignette shall not imply that any other entity except those that are at least
50% owned and controlled by CNET may use the Systems pursuant to the license
granted in Section 4.2 of the Agreement.
This Letter Amendment constitutes an amendment to the Agreement to the
extent necessary to effectuate the foregoing. Except as otherwise expressly
provided in this Letter Amendment, the Agreement will remain in full force and
effect in accordance with its terms. At the LLC's request, CNET, the LLC and
Vignette will negotiate reasonably and in good faith to prepare, execute and
deliver two separate agreements to replace the Agreement, one of which will
govern the respective rights and
4
<PAGE>
obligations of the LLC and Vignette and the other of which will govern the
respective rights and obligations of CNET and Vignette, in each case on the
terms set forth in the Agreement (as amended hereby).
Please sign this Letter Amendment in the space provided below to indicate
your agreement with the foregoing and fax a copy of the signed Letter Amendment
to me at (415) 395-9330.
If you have any questions, please do not hesitate to contact me at (415)
395-7805, extension 4144. We look forward to our continued business
relationship.
Very truly yours,
CNET, INC.
By: ____________________________
Tom Melcher,
General Manager, Snap!
SNAP! LLC
By: ______________________
Name: ______________________
Title: ______________________
Consented and Agreed:
VIGNETTE CORPORATION
By: ________________________
Name: ________________________
Title: ________________________
Date: ________________________
Executed by NBC Multimedia, Inc. solely for purposes of agreeing
to Section 8(b) of this Letter Amendment:
NBC MULTIMEDIA, INC.
By: ________________________
Name: ________________________
Title: ________________________
Date: ________________________
5
<PAGE>
ATTACHMENT 1
PREFERRED ESCROW AGREEMENT
Account Number ______________________
This Agreement is effective __________________, 1998 among Data Securities
International, Inc. ("DSI"), Vignette Corporation ("Depositor") and Snap! LLC
("Preferred Beneficiary"), who collectively may be referred to in this Agreement
as "the parties."
A. Depositor and Preferred Beneficiary have entered or will enter into a
license agreement regarding certain proprietary technology of Depositor
(referred to in this Agreement as "the license agreement").
B. Depositor desires to avoid disclosure of its proprietary technology except
under certain limited circumstances.
C. The availability of the proprietary technology of Depositor is critical to
Preferred Beneficiary in the conduct of its business and, therefore, Preferred
Beneficiary needs access to the proprietary technology under certain limited
circumstances.
D. Depositor and Preferred Beneficiary desire to establish an escrow with DSI
to provide for the retention, administration and controlled access of the
proprietary technology materials of Depositor.
E. The parties desire this Agreement to be supplementary to the license
agreement pursuant to 11 United States Code, Section 365(n).
ARTICLE 1 -- DEPOSITS
1.1 Obligation to Make Deposit. Upon the signing of this Agreement by the
--------------------------
parties, Depositor shall deliver to DSI the proprietary information and other
materials ("deposit materials") required to be deposited by the license
agreement or, if the license agreement does not identify the materials to be
deposited with DSI, then such materials will be identified on an Exhibit A. If
Exhibit A is applicable, it is to be prepared and signed by Depositor and
Preferred Beneficiary. DSI shall have no obligation with respect to the
preparation, signing or delivery of Exhibit A.
1.2 Identification of Tangible Media. Prior to the delivery of the deposit
--------------------------------
materials to DSI, Depositor shall conspicuously label for identification each
document, magnetic tape, disk, or other tangible media upon which the deposit
materials are written or stored. Additionally, Depositor shall complete Exhibit
B to this Agreement by listing each such tangible media by the item label
description, the type of media and the quantity. The Exhibit B must be signed
by Depositor and delivered to DSI with the deposit materials. Unless and until
Depositor makes the initial deposit with DSI, DSI shall have no obligation with
respect to this Agreement, except the obligation to notify the parties regarding
the status of the deposit account as required in Section 2.2 below.
Page 1
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1.3 Deposit Inspection. When DSI receives the deposit materials and the
------------------
Exhibit B, DSI will conduct a deposit inspection by visually matching the
labeling of the tangible media containing the deposit materials to the item
descriptions and quantity listed on the Exhibit B. In addition to the deposit
inspection, Preferred Beneficiary may elect to cause a verification of the
deposit materials in accordance with Section 1.6 below.
1.4 Acceptance of Deposit. At completion of the deposit inspection, if DSI
---------------------
determines that the labeling of the tangible media matches the item descriptions
and quantity on Exhibit B, DSI will date and sign the Exhibit B and mail a copy
thereof to Depositor and Preferred Beneficiary. If DSI determines that the
labeling does not match the item descriptions or quantity on the Exhibit B, DSI
will (a) note the discrepancies in writing on the Exhibit B; (b) date and sign
the Exhibit B with the exceptions noted; and (c) provide a copy of the Exhibit B
to Depositor and Preferred Beneficiary. DSI's acceptance of the deposit occurs
upon the signing of the Exhibit B by DSI. Delivery of the signed Exhibit B to
Preferred Beneficiary is Preferred Beneficiary's notice that the deposit
materials have been received and accepted by DSI.
1.5 Depositor's Representations. Depositor represents as follows:
---------------------------
a. Depositor lawfully possesses all of the deposit materials deposited
with DSI;
b. With respect to all of the deposit materials, Depositor has the right
and authority to grant to DSI and Preferred Beneficiary the rights as
provided in this Agreement;
c. The deposit materials are not subject to any lien or other
encumbrance;
d. The deposit materials consist of the proprietary information and other
materials identified either in the license agreement or Exhibit A, as
the case may be; and
e. The deposit materials are readable and useable in their current form
or, if the deposit materials are encrypted, the decryption tools and
decryption keys have also been deposited.
1.6 Verification. Preferred Beneficiary shall have the right, at Preferred
------------
Beneficiary's expense, to cause a verification of any deposit materials. A
verification determines, in different levels of detail, the accuracy,
completeness, sufficiency and quality of the deposit materials. If a
verification is elected after the deposit materials have been delivered to DSI,
then only DSI, or at DSI's election an independent person or company selected
and supervised by DSI, may perform the verification.
1.7 Deposit Updates. Unless otherwise provided by the license agreement,
---------------
Depositor shall update the deposit materials within 60 days of each release of a
new version of the product which is subject to the license agreement. Such
updates will be added to the existing deposit. All deposit updates shall be
listed on a new Exhibit B and the new Exhibit B shall be signed by Depositor.
Each Exhibit B will be held and maintained separately within the escrow account.
An independent record will be created which will document the activity for each
Exhibit B. The processing of all deposit updates shall be in accordance with
Sections 1.2 through 1.6 above. All references in this Agreement to the deposit
materials shall include the initial deposit materials and any updates.
Page 2
<PAGE>
1.8 Removal of Deposit Materials. The deposit materials may be removed and/or
----------------------------
exchanged only on written instructions signed by Depositor and Preferred
Beneficiary, or as otherwise provided in this Agreement.
ARTICLE 2 -- CONFIDENTIALITY AND RECORD KEEPING
2.1 Confidentiality. DSI shall maintain the deposit materials in a secure,
---------------
environmentally safe, locked facility which is accessible only to authorized
representatives of DSI. DSI shall have the obligation to reasonably protect the
confidentiality of the deposit materials. Except as provided in this Agreement,
DSI shall not disclose, transfer, make available, or use the deposit materials.
DSI shall not disclose the content of this Agreement to any third party. If DSI
receives a subpoena or other order of a court or other judicial tribunal
pertaining to the disclosure or release of the deposit materials, DSI will
immediately notify the parties to this Agreement. It shall be the
responsibility of Depositor and/or Preferred Beneficiary to challenge any such
order; provided, however, that DSI does not waive its rights to present its
position with respect to any such order. DSI will not be required to disobey
any court or other judicial tribunal order. (See Section 7.5 below for notices
of requested orders.)
2.2 Status Reports. DSI will issue to Depositor and Preferred Beneficiary a
--------------
report profiling the account history at least semi-annually. DSI may provide
copies of the account history pertaining to this Agreement upon the request of
any party to this Agreement.
2.3 Audit Rights. During the term of this Agreement, Depositor and Preferred
------------
Beneficiary shall each have the right to inspect the written records of DSI
pertaining to this Agreement. Any inspection shall be held during normal
business hours and following reasonable prior notice.
ARTICLE 3 -- GRANT OF RIGHTS TO DSI
3.1 Title to Media. Depositor hereby transfers to DSI the title to the media
--------------
upon which the proprietary information and materials are written or stored.
However, this transfer does not include the ownership of the proprietary
information and materials contained on the media such as any copyright, trade
secret, patent or other intellectual property rights.
3.2 Right to Make Copies. DSI shall have the right to make copies of the
--------------------
deposit materials as reasonably necessary to perform this Agreement. DSI shall
copy all copyright, nondisclosure, and other proprietary notices and titles
contained on the deposit materials onto any copies made by DSI. With all
deposit materials submitted to DSI, Depositor shall provide any and all
instructions as may be necessary to duplicate the deposit materials including
but not limited to the hardware and/or software needed.
3.3 Right to Transfer Upon Release. Depositor hereby grants to DSI the right to
------------------------------
transfer the deposit materials to Preferred Beneficiary upon any release of the
deposit materials for use by Preferred Beneficiary in accordance with Section
4.5. Except upon such a release or as otherwise provided in this Agreement, DSI
shall not transfer the deposit materials.
Page 3
<PAGE>
ARTICLE 4 -- RELEASE OF DEPOSIT
4.1 Release Conditions. As used in this Agreement, "Release Conditions" shall
------------------
mean the existence of any one or more of the following circumstances:
a. Depositor's failure in a material respect to carry out obligations
imposed on it pursuant to the license agreement, which failure remains
uncorrected for more than thirty (30) days;
b. Depositor files a petition in bankruptcy, makes an assignment for the
benefit of creditors or generally ceases to pay its debts when they
are due;
c. Depositor has filed against it a bankruptcy proceeding that is not
dismissed within 60 days after its commencement;
d. Depositor ceases to conduct material business operations; or
e. Depositor's entry of an order of relief under Chapter 7 of Title 11 of
the United States Code.
4.2 Filing For Release. If Preferred Beneficiary believes in good faith that a
------------------
Release Condition has occurred, Preferred Beneficiary may provide to DSI written
notice of the occurrence of the Release Condition and a request for the release
of the deposit materials. Upon receipt of such notice, DSI shall provide a copy
of the notice to Depositor, by certified mail, return receipt requested, or by
commercial express mail.
4.3 Contrary Instructions. From the date DSI mails the notice requesting
---------------------
release of the deposit materials, Depositor shall have ten business days to
deliver to DSI Contrary Instructions. "Contrary Instructions" shall mean the
written representation by Depositor that a Release Condition has not occurred or
has been cured. Upon receipt of Contrary Instructions, DSI shall send a copy to
Preferred Beneficiary by certified mail, return receipt requested, or by
commercial express mail. Additionally, DSI shall notify both Depositor and
Preferred Beneficiary that there is a dispute to be resolved pursuant to the
Dispute Resolution section (Section 7.3) of this Agreement. Subject to Section
5.2, DSI will continue to store the deposit materials without release pending
(a) joint instructions from Depositor and Preferred Beneficiary; (b) resolution
pursuant to the Dispute Resolution provisions; or (c) order of a court.
4.4 Release of Deposit. If DSI does not receive Contrary Instructions from the
------------------
Depositor, DSI is authorized to release the deposit materials to the Preferred
Beneficiary or, if more than one beneficiary is registered to the deposit, to
release a copy of the deposit materials to the Preferred Beneficiary. However,
DSI is entitled to receive any fees due DSI before making the release. This
Agreement will terminate upon the release of the deposit materials held by DSI.
4.5 Right to Use Following Release. Unless otherwise provided in the license
------------------------------
agreement, upon release of the deposit materials in accordance with this Article
4, Preferred Beneficiary shall have the right to use the deposit materials for
the sole purpose of continuing the benefits afforded to Preferred Beneficiary by
the license agreement. Preferred Beneficiary shall be obligated to maintain the
confidentiality of the released deposit materials.
Page 4
<PAGE>
ARTICLE 5 -- TERM AND TERMINATION
5.1 Term of Agreement. The initial term of this Agreement is for a period of
-----------------
one year. Thereafter, this Agreement shall automatically renew from year-to-
year unless (a) Depositor and Preferred Beneficiary jointly instruct DSI in
writing that the Agreement is terminated; or (b) the Agreement is terminated by
DSI for nonpayment in accordance with Section 5.2. If the deposit materials are
subject to another escrow agreement with DSI, DSI reserves the right, after the
initial one year term, to adjust the anniversary date of this Agreement to match
the then prevailing anniversary date of such other escrow arrangements.
5.2 Termination for Nonpayment. In the event of the nonpayment of fees owed to
--------------------------
DSI, DSI shall provide written notice of delinquency to all parties to this
Agreement. Any party to this Agreement shall have the right to make the payment
to DSI to cure the default. If the past due payment is not received in full by
DSI within one month of the date of such notice, then DSI shall have the right
to terminate this Agreement at any time thereafter by sending written notice of
termination to all parties. DSI shall have no obligation to take any action
under this Agreement so long as any payment due to DSI remains unpaid.
5.3 Disposition of Deposit Materials Upon Termination. Upon termination of
-------------------------------------------------
this Agreement by joint instruction of Depositor and Preferred Beneficiary, DSI
shall destroy, return, or otherwise deliver the deposit materials in accordance
with Depositor's instructions. Upon termination for nonpayment, DSI may, at its
sole discretion, destroy the deposit materials or return them to Depositor. DSI
shall have no obligation to return or destroy the deposit materials if the
deposit materials are subject to another escrow agreement with DSI.
5.4 Survival of Terms Following Termination. Upon termination of this
---------------------------------------
Agreement, the following provisions of this Agreement shall survive:
a. Depositor's Representations (Section 1.5);
b. The obligations of confidentiality with respect to the deposit
materials;
c. The rights granted in the sections entitled Right to Transfer Upon
Release (Section 3.3) and Right to Use Following Release (Section
4.5), if a release of the deposit materials has occurred prior to
termination;
d. The obligation to pay DSI any fees and expenses due;
e. The provisions of Article 7; and
f. Any provisions in this Agreement which specifically state they survive
the termination or expiration of this Agreement.
ARTICLE 6 -- DSI'S FEES
Page 5
<PAGE>
6.1 Fee Schedule. DSI is entitled to be paid its standard fees and expenses
------------
applicable to the services provided. DSI shall notify the party responsible for
payment of DSI's fees at least 90 days prior to any increase in fees. For any
service not listed on DSI's standard fee schedule, DSI will provide a quote
prior to rendering the service, if requested.
6.2 Payment Terms. DSI shall not be required to perform any service unless
-------------
the payment for such service and any outstanding balances owed to DSI are paid
in full. All other fees are due upon receipt of invoice. If invoiced fees are
not paid, DSI may terminate this Agreement in accordance with Section 5.2. Late
fees on past due amounts shall accrue at the rate of one and one-half percent
per month (18% per annum) from the date of the invoice.
ARTICLE 7 -- LIABILITY AND DISPUTES
7.1 Right to Rely on Instructions. DSI may act in reliance upon any
-----------------------------
instruction, instrument, or signature reasonably believed by DSI to be genuine.
DSI may assume that any employee of a party to this Agreement who gives any
written notice, request, or instruction has the authority to do so. DSI shall
not be responsible for failure to act as a result of causes beyond the
reasonable control of DSI.
7.2 Indemnification. DSI shall be responsible to perform its obligations under
---------------
this Agreement and to act in a reasonable and prudent manner with regard to this
escrow arrangement. Provided DSI has acted in the manner stated in the
preceding sentence, Depositor and Preferred Beneficiary each agree to indemnify,
defend and hold harmless DSI from any and all claims, actions, damages,
arbitration fees and expenses, costs, attorney's fees and other liabilities
incurred by DSI relating in any way to this escrow arrangement.
7.3 Dispute Resolution. Any dispute relating to or arising from this Agreement
------------------
shall be resolved by arbitration under the Commercial Rules of the American
Arbitration Association. Unless otherwise agreed by Depositor and Preferred
Beneficiary, arbitration will take place in San Diego, California, U.S.A. Any
court having jurisdiction over the matter may enter judgment on the award of the
arbitrator(s). Service of a petition to confirm the arbitration award may be
made by First Class mail or by commercial express mail, to the attorney for the
party or, if unrepresented, to the party at the last known business address.
7.4 Controlling Law. This Agreement is to be governed and construed in
---------------
accordance with the laws of the State of California, without regard to its
conflict of law provisions.
7.5 Notice of Requested Order. If any party intends to obtain an order from
-------------------------
the arbitrator or any court of competent jurisdiction which may direct DSI to
take, or refrain from taking any action, that party shall:
a. Give DSI at least two business days' prior notice of the hearing;
b. Include in any such order that, as a precondition to DSI's obligation,
DSI be paid in full for any past due fees and be paid for the
reasonable value of the services to be rendered pursuant to such
order; and
Page 6
<PAGE>
c. Ensure that DSI not be required to deliver the original (as opposed to
a copy) of the deposit materials if DSI may need to retain the
original in its possession to fulfill any of its other duties.
Page 7
<PAGE>
ARTICLE 8 -- GENERAL PROVISIONS
8.1 Entire Agreement. This Agreement, which includes the Exhibits described
----------------
herein, embodies the entire understanding among the parties with respect to its
subject matter and supersedes all previous communications, representations or
understandings, either oral or written. No amendment or modification of this
Agreement shall be valid or binding unless signed by all the parties hereto,
except that Exhibit A need not be signed by DSI, Exhibit B need not be signed by
Preferred Beneficiary and Exhibit C need not be signed.
8.2 Notices. All notices, invoices, payments, deposits and other documents and
-------
communications shall be given to the parties at the addresses specified in the
attached Exhibit C. It shall be the responsibility of the parties to notify
each other as provided in this Section in the event of a change of address. The
parties shall have the right to rely on the last known address of the other
parties. Unless otherwise provided in this Agreement, all documents and
communications may be delivered by First Class mail.
8.3 Severability. In the event any provision of this Agreement is found to be
------------
invalid, voidable or unenforceable, the parties agree that unless it materially
affects the entire intent and purpose of this Agreement, such invalidity,
voidability or unenforceability shall affect neither the validity of this
Agreement nor the remaining provisions herein, and the provision in question
shall be deemed to be replaced with a valid and enforceable provision most
closely reflecting the intent and purpose of the original provision.
8.4 Successors. This Agreement shall be binding upon and shall inure to the
----------
benefit of the successors and assigns of the parties. However, DSI shall have
no obligation in performing this Agreement to recognize any successor or assign
of Depositor or Preferred Beneficiary unless DSI receives clear, authoritative
and conclusive written evidence of the change of parties.
Vignette Corporation Snap! LLC
Depositor Preferred Beneficiary
By: _____________________________ By: ______________________________
Name:____________________________ Name:_____________________________
Title:___________________________ Title:____________________________
Date:____________________________ Date:_____________________________
Data Securities International, Inc.
By:_______________________________
Name:_____________________________
Title:____________________________
Date:_____________________________
Page 8
<PAGE>
EXHIBIT A
MATERIALS TO BE DEPOSITED
Account Number ______________________
Depositor represents to Preferred Beneficiary that deposit materials delivered
to DSI shall consist of the following:
Vignette Corporation Snap! LLC
Depositor Preferred Beneficiary
By: ______________________________ By: ______________________________
Name:_____________________________ Name:_____________________________
Title:____________________________ Title:____________________________
Date:_____________________________ Date:_____________________________
Page 9
<PAGE>
EXHIBIT B
DESCRIPTION OF DEPOSIT MATERIALS
Depositor Company Name__________________________________________________________
Account Number__________________________________________________________________
PRODUCT DESCRIPTION:
Product Name________________________ Version____________________________________
Operating System________________________________________________________________
________________________________________________________________________________
Hardware Platform_______________________________________________________________
________________________________________________________________________________
DEPOSIT COPYING INFORMATION:
Hardware required:______________________________________________________________
________________________________________________________________________________
Software required:______________________________________________________________
________________________________________________________________________________
DEPOSIT MATERIAL DESCRIPTION:
Qty Media Type & Size Label Description of Each Separate Item
(excluding documentation)
_____ Disk 3.5" or ____
_____ DAT tape ____mm
_____ CD-ROM
_____ Data cartridge tape ____
_____ TK 70 or ____ tape
_____ Magnetic tape ____
_____ Documentation
_____ Other ______________________
I certify for Depositor that the above DSI has inspected and accepted
described deposit materials have been the above materials (any exceptions
transmitted to DSI: are noted above):
Signature____________________________ Signature_____________________________
Print Name___________________________ Print Name____________________________
Date_________________________________ Date Accepted_________________________
Exhibit B#____________________________
Send materials to: DSI, 9555 Chesapeake Dr. #200, San Diego, CA 92123
Page 10
<PAGE>
EXHIBIT C
DESIGNATED CONTACT
Account Number ______________________
Notices, deposit material returns and
communications to Depositor Invoices to Depositor should be
should be addressed to: addressed to:
Company Name:____________________________ _________________________________
Address:_________________________________ _________________________________
_________________________________ _________________________________
_________________________________ _________________________________
Designated Contact:______________________ Contact:_________________________
Telephone:_______________________________ _________________________________
Facsimile:_______________________________ _________________________________
Notices and communications to Preferred Invoices to Preferred Beneficiary
Beneficiary should be addressed to: should be addressed to:
Company Name:____________________________ _________________________________
Address:_________________________________ _________________________________
_________________________________ _________________________________
_________________________________ _________________________________
Designated Contact:______________________ Contact:_________________________
Telephone:_______________________________ _________________________________
Facsimile:_______________________________ _________________________________
Requests from Depositor or Preferred Beneficiary to change the designated
contact should be given in writing by the designated contact or an authorized
employee of Depositor or Preferred Beneficiary.
Contracts, deposit materials and notices to Invoice inquiries and fee
DSI should be addressed to: remittances to DSI should be
addressed to:
DSI DSI
Contract Administration Accounts Receivable
Suite 200 Suite 1450
9555 Chesapeake Drive 425 California Street
San Diego, CA 92123 San Francisco, CA 94104
Telephone: (619) 694-1900 (415) 398-7900
Facsimile: (619) 694-1919 (415) 398-7914
Date:_________________________________
Page 11
<PAGE>
ATTACHMENT 2
------------
ASSIGNMENT OF PATENTS
WHEREAS, CNET, Inc., a Delaware corporation (hereinafter referred to
as "CNET"), is the sole and rightful owner of all the patents, applications for
patents and inventions set forth in Exhibit A hereof (the "Patents"); and
WHEREAS, Vignette Corporation., a Delaware corporation having it
principal place of business at One Far West Plaza, 3410 Far West Boulevard,
Suite 300, Austin, Texas 78731 ("Vignette"), desires to acquire said patents,
patent applications and inventions;
NOW, THEREFORE, the parties agree as follows:
1. For good and valuable consideration, the receipt of which is hereby
acknowledged, CNET does hereby sell, assign and transfer and set over, unto
Vignette, its successors, legal representatives and assigns, CNET's entire
right, title and interest in and to any and all applications for patents and any
and all patents, as set forth in Exhibit A hereof, and the entire right, title
and interest in and to the inventions set forth in said applications and patents
and any and all patents in the United States of America and all foreign
countries which have been or may be granted, and in and to any and all
divisions, continuations, and continuations-in-part of said applications, or
reissues, reexaminations, or extensions of said patents, and all rights under
the International Convention for the Protection of Industrial Property, said
rights to include any and all rights of recovery based on past infringement of
any and all said inventions and said patents, the same to be held and enjoyed by
Vignette, for its own use and benefit and the use and benefit of its successors,
legal representatives and assigns, to the full end of the term or terms for
which patents may be granted, and all extensions thereof, as fully and entirely
as the same would have been held and enjoyed by CNET, had this assignment not
been made.
2. For the same consideration, CNET hereby covenants and agrees to and with
Vignette, its successors, legal representatives and assigns, that CNET will,
whenever counsel of Vignette, or the counsel of its successor, legal
representatives and assigns, shall advise that any proceeding in connection with
said invention, said patents or said applications for patents, or any proceeding
in connection with patents for said inventions in any country; including
interference proceedings, is lawful and desirable, or that any division,
continuation or continuation-in-part of any application for patents, or any
reissue or extension of any patents, to be obtained thereon, is lawful and
desirable, sign all papers and documents, take all lawful oaths, and do all
reasonable acts necessary or desirable to be done for the filing, prosecution,
assignment, maintenance, enforcement and defense of patents for said inventions,
without charge to Vignette, its successors, legal representatives and assigns,
but at the cost and expense of Vignette, its successors, legal representatives
and assigns.
1/3
<PAGE>
4. CNET hereby authorizes and requests the United States Commissioner of
Patents and other corresponding officials of other jurisdictions, as
appropriate, to record this instrument and to record Vignette as the owner of
the Patents.
IN WITNESS WHEREOF, CNET has caused these present to be duly executed
in a manner appropriate thereto as of this 15th day of August, 1998.
C|NET, Inc
By:_________________________________
Name:_______________________________
Title:______________________________
THE STATE OF (S)
(S)
THE COUNTY OF (S)
The foregoing instrument was acknowledged before me this _____ day of
August, 1998, by ___________________, known by be to be the duly elected or
appointed __________________ of C|NET, Inc.
[SEAL]
__________________________________
Notary Public in and for
the State of ______________________
My Commission Expires:
______________________
2/3
<PAGE>
EXHIBIT A
TO ASSIGNMENT OF PATENTS
BY
CNET, INC.
1. U.S. Patent No. 5,740,430, issued April 14, 1998, "Method and apparatus for
server-independent caching of dynamically-generated customized pages".
3/3
<PAGE>
Confidential treatment has been requested for portions of this exhibit. The
copy filed herewith omits the information subject to the confidentiality
request. Omissions are designated as *****. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.
EXHIBIT 10.13
SOFTWARE LICENSE AGREEMENT
This Software License Agreement ("Agreement") is effective April 6, 1998
(the "Effective Date") by and between Net Perceptions, Inc., ("NPI) a Delaware
corporation having its principal place of business at 11200 West 78/th/ Street,
Eden Prairie, Minnesota 55344, and Vignette Corporation, ("VIGNETTE"), a
Delaware corporation having its principal place of business at One Far West
Plaza, 3410 Far West Plaza Boulevard, Suite 300, Austin, Texas 78731. The
parties agree:
NPI is the developer, manufacturer, distributor and licensor of a certain
software application product, currently known as the GroupLens Recommendation
Engine, that enables businesses to foster 1-to-1 customer relationships by
tailoring web sites to deliver specific and meaningful content based on user
preferences ("GLRE").
VIGNETTE is the developer, manufacturer and distributor of a certain
software product, currently known as Story Server, that delivers collaborative
content management with dynamic content application server ("SS").
In order to enhance its ability to offer advanced personalization
functionality to end-users, VIGNETTE desires to license certain elements of GLRE
to be bundled with, and integrated into, the next major release of SS and,
during the effective term of this Agreement, any and all major or minor releases
thereof) (the "Integrated Product").
VIGNETTE desires NPI to develop a derivative of GLRE ("GLE") according to
the GLE Specifications (as defined in Section 1.1 and Exhibit A), and to license
GLE to VIGNETTE for distribution solely as a component of, or in conjunction
with, the Integrated Product.
NPI desires to develop GLE and to grant VIGNETTE certain limited license
rights under GLE for the sole purpose of VIGNETTE marketing and sublicensing GLE
in conjunction with the Integrated Product.
1. THE GLE AND THE INTEGRATED PRODUCT
1.1 The Specifications. The parties agree that GLE will be developed by
------------------
NPI according to the written specification ("Integrated Product Specification")
appended hereto as Exhibit A. The parties further agree that GLE will be
integrated into SS by Vignette to form the Integrated Product according to the
Integrated Product Specifications.
1.2 Development and Delivery. NPI will use its best efforts to develop GLE
------------------------
in conformance with the GLE Specification and deliver two (2) object code copies
of the completed GLE no later than May 8, 1998 ("Initial Deliverable Date"). In
addition, all GLE feature work will be completed and delivered no later than
April 10, 1998.
1.3 Updates. NPI will use its commercially reasonable efforts to deliver
-------
to VIGNETTE two (2) object code copies of any and all updates, upgrades, new
releases, bug fixes of GLE that enhance GLE functionality to the extent that
existing GLE functionality is modified through the enhancement of GLRE (the
"Subsequent Deliverables") within thirty (30) business days of NPI's commercial
release of any and all major releases of GLRE occurring during the term of this
Agreement. All Subsequent Deliverables will be included within the licenses
granted hereunder; provided, however, that the parties expressly agree that
NPI's obligation to deliver Subsequent Deliverables, and VINGETTE'S rights
thereunder pursuant to this Agreement, are strictly limited to modifications,
upgrades, new releases and bug fixes to the specific functions detailed in the
GLE Specification. For purposes of this Agreement, "GLE" includes any and all
Subsequent Deliverables.
2. APPOINTMENT AND AUTHORITY OF VIGNETTE
2.1 Appointment of VIGNETTE. Subject to the terms and conditions of this
-----------------------
Agreement and to the timely payment in full of all moneys due and payable
hereunder, NPI hereby appoints VIGNETTE to act as a worldwide non-exclusive
reseller of NPI for GLE and grants the licenses under GLE granted herein, and
VIGNETTE hereby accepts such appointment.
2.2 The rights granted VIGNETTE pursuant to this Agreement are subject to
the following conditions:
(a) The sublicensing rights granted to VIGNETTE pursuant to this
Agreement are expressly subject
<PAGE>
to the condition that GLE be sublicensed solely to VIGNETTE
Customers (as defined in Section 5.3) and for use solely as a
component of, or in conjunction with, the Integrated Product.
(b) VIGNETTE will not price GLE as a separate software component.
(c) The user documentation provided by VIGNETTE with the Integrated
Product to Sublicensees will describe the permitted use of each
sublicensed copy of GLE solely to be used on one (1) Site (as
defined in Section 2.2(e)) and will further limit the use of each
such sublicensed copy of GLE to a maximum of ***** Registered
Users (as defined Section 2.2(d)). NPI will provide reasonable
and mutually-agreed assistance to VIGNETTE in developing the
content of the GLE portion of the Integrated Product
documentation.
(d) For purposes of this Agreement, "Registered Users" will mean the
total number of individual users registered on GLE.
(e) For purposes of this Agreement, "Site" will mean a set of web
pages that all have the same hostname component of the Universal
Resource Locator.
(f) The documentation will state that the Integrated Product will not
allow any Sublicensee (as defined in Section 5.4) to have more
than ***** Registered Users and will provide information
regarding the opportunity to license GLRE directly from NPI at
NPI's then prevailing standard license fees (an "Upgrade").
(g) VIGNETTE will not (i) market GLE, except in object code form and
as a part of the Integrated Product, supplied in conjunction
therewith, to VIGNETTE Customers for their own internal purposes,
(ii) modify, reverse engineer or decompile GLE or GLRE, (iii)
remove any of NPI's proprietary copyright notices or legends that
are in compliance with Section 5.2 below, (iv) except as
otherwise provided hereunder, make any copies of GLE, except for
one (1) object code copy of GLE for each copy of the Integrated
Product to be delivered to each Sublicensee pursuant to the
Sublicense Agreement, and (v) except as otherwise expressly
provided herein, sublicense, assign or otherwise transfer its
rights under this Section 2.
3. DEVELOPMENT AND DEMONSTRATION LICENSE
3.1 Development and Demonstration License Grant. NPI hereby grants at no
-------------------------------------------
additional charge to VIGNETTE a nonexclusive, nontransferable right to use
object code copies of GLE solely for the purpose of developing, demonstrating,
testing, and supporting the Integrated Product and not for any other internal
productive purposes (the "Development and Demonstration License").
4. COMPATIBILITY TESTING LICENSE
NPI hereby grants at no additional charge to VIGNETTE a nonexclusive,
nontransferable right to use object code copies of the GLRE solely for the
purpose of compatibility testing, and not for any other internal productive
purposes (the "Compatibility Testing License").
5. MARKETING AND SUBLICENSING
5.1 License to Sublicense. NPI grants to VIGNETTE a worldwide,
---------------------
nonexclusive, nontransferable right during the term of this Agreement to market
to VIGNETTE Customers (as defined in Section 5.3), directly and indirectly
through Permitted Subdistributors (as defined in Section 5.7), and sublicense to
Sublicensees (as defined in Section 5.4) for such Sublicensee's own
2
<PAGE>
internal purposes object code copies of GLE in connection with the marketing and
license of the Integrated Product (the "Sublicense License") pursuant to the
form of Software License Agreement appended as Exhibit C1 or C2, or an agreement
materially similar thereto (the "Sublicense License Agreement"). For purposes of
this Agreement, the Sublicense License Agreement will also include license
agreements executed by Initial GLE Recipients for the licensing of SS, executed
prior to the Effective Date.
5.2 Branding and Copyright Notices. VIGNETTE will market and distribute
------------------------------
GLE during the term of this Agreement under VIGNETTE brand(s). All copies of the
Integrated Product (including any written documentation supplied by NPI) will
provide the following copyright notice with regard to the GLE portion therein:
"Copyright 1998 NET PERCEPTIONS, INC. All rights reserved." or such other legend
as may be reasonably required by NPI from time to time to protect NPI's
intellectual property rights in GLE and the associated trademarks, trade names
and other intellectual property rights. Copyright and other reasonably required
notices for the documentation will be included on the reverse side of the cover
or title page of the documentation booklet. Such legends will also be included
in the "About ______" information display. In addition, all packaging materials
will incorporate a one and one-half inch square (or such other mutually-
agreeable size) NPI logo specified and supplied by NPI. NPI will have the right
to approve actual examples of all such copyright legends and logos, such
approval not to be unreasonably delayed or withheld.
5.3 VIGNETTE Customers. For purposes of this Agreement, "VIGNETTE
------------------
Customer" will mean current licensees of SS and prospective customers of the
Integrated Product.
5.4 Sublicensees. For purposes of this Agreement, "Sublicensee(s)" will
------------
mean any and all VIGNETTE Customers that acquire rights under GLE as a component
of the Integrated Product whether through licensing of the Integrated Product or
through a maintenance upgrade pursuant to an existing license and maintenance
agreement with VIGNETTE for SS.
5.5 Initial GLE Recipients. For purposes of this Agreement, "Initial GLE
----------------------
Recipients" will mean any and all VIGNETTE Customers that have or will receive,
or are entitled to receive (i.e., are current or become current on
maintenance/support fees owed to VIGNETTE in relation to the SS), the
Integrated Product as of the License Date (as defined in Exhibit E).
5.6 Temporary Trial Demonstration Licenses. VIGNETTE is hereby entitled to
--------------------------------------
grant temporary sublicenses ("Trial Sublicenses"), at the charges and terms then
current for VIGNETTE, only in conjunction with trials of the Integrated Product.
Such Trial Sublicenses will be for evaluation purposes only and will be for a
period not to exceed ninety (90) days. VIGNETTE is responsible for ensuring that
prospects receiving a Trial Sublicense sign a trial license agreement
substantially similar to the Software Trial License Agreement appended as
Exhibit D and for taking all reasonable efforts to ensure that all trial
software is purged at the end of the evaluation period. VIGNETTE will include a
prospect summary and trial terms in the Sublicense Report (as defined in Section
6.7).
5.7 Permitted Subdistributors. For purposes of this Agreement, "Permitted
-------------------------
Subdistributors" will mean any and all third party OEMs, VARs and other
authorized distributors of VIGNETTE that have entered into, or will enter into,
a reseller agreement for the Integrated Product during the effective term of
this Agreement; provided, that GLE and the Integrated Product are provided to
such resellers solely for resale "hard-bundled" in software packages.
6. OBLIGATIONS OF VIGNETTE
6.1 Compliance with Terms of Licenses. VIGNETTE will at all times comply
---------------------------------
with the terms of the licenses granted to VIGNETTE under Sections 2, 3, 4 and 5
of this Agreement.
6.2 VIGNETTE Conduct. VIGNETTE will conduct its business in its own name
----------------
and in such a manner that will be reasonably expected to reflect favorably at
all times on GLE and the good name, goodwill and reputation of NPI. VIGNETTE
will not engage in deceptive, misleading or unethical practices that are or
might be detrimental to NPI, GLE or any third party.
6.3 Staff Requirements. VIGNETTE will at all times employ sufficient
------------------
personnel who have been adequately trained to support, demonstrate and develop
GLE and the Integrated Product to permit VIGNETTE to perform its obligations
hereunder.
6.4 Payment. VIGNETTE will pay NPI all license and support fees
-------
(respectively, the
3
<PAGE>
"Sublicense License Fees" and the Sublicense Support Fees") due under this
Agreement in accordance with the terms of Exhibit E. VIGNETTE will directly bill
Sublicensees for licensing of the Integrated Product and sublicensing of GLE.
VIGNETTE will pay all expenses incurred by it in connection with its marketing,
distribution, delivery and service of the Integrated Product and GLE.
6.5 Maintenance of Sublicensees. VIGNETTE will provide all required direct
---------------------------
support of the Integrated Product and GLE directly to Sublicensees [except to
any Sublicensees that Upgrade pursuant to Section 2.2(f).] VIGNETTE will provide
all appropriate first (including installation and how-to questioning) and second
level of support, skilled instruction and maintenance for GLE as may be required
pursuant to the Sublicense Agreement.
6.6 Marketing and Advertising. During the effective term of this
-------------------------
Agreement, VIGNETTE, as part of its activities to promote the distribution of
GLE with the Integrated Product, agrees to confer periodically with NPI on
matters relating to market conditions, sales forecasting, product planning, and
update, promotional and marketing strategies.
6.7 Sublicense Reports. Within thirty (30) days of the last day of each
------------------
month, VIGNETTE will send NPI (a) a report detailing for such month for each
Sublicensee (i) such Sublicensee's name, address and the name and contact
information of the primary business contact, (ii) the platform, (iii) the date
of installation, and (iv) the total Sublicense License Fees and Sublicense
Support Fees due NPI (the "Sublicense Report"), and (b) a copy of the Sublicense
License Agreement signed and dated by VIGNETTE and each such Sublicensee.
6.8 Existing VIGNETTE Customers. VIGNETTE will provide NPI with a complete
---------------------------
list of all Initial GLE Recipients no later than thirty (30) days after the
License Date (as defined in Exhibit E).
6.9 Records Inspection and Audits. VIGNETTE will maintain books and
-----------------------------
records in connection with its obligations under this Agreement, during, and for
a period of two (2) years after, the term of this Agreement. Such records will
include the executed Sublicense License Agreements and the information required
in the quarterly Sublicense Reports. VIGNETTE will permit NPI to inspect all
books, records and other documentation directly relating to VINGETTE'S
performance of this Agreement and to audit up to twice yearly the relevant books
of VIGNETTE to ensure compliance with the terms of this Agreement upon
reasonable prior notice to VIGNETTE. Any such inspection or audit will be
conducted during regular business hours at VINGETTE'S offices and will not
interfere unreasonably with Vignette's business activities. NPI will pay all of
its costs related to performing all inspections and audits; provided, that if
any audit reveals that VIGNETTE has underpaid fees to NPI in excess of seven and
one-half percent (7.5%), then VIGNETTE will pay NPI's reasonable costs of
conducting such audit in addition to paying the underpaid amounts.
6.10 Marketing. VIGNETTE will market and distribute, directly and
---------
indirectly, the Integrated Product to all VIGNETTE Customers and will not
separately market or distribute SS or any other competitive collaborative
content management product during the effective term of this Agreement.
6.11 Notice of Claims, Defects and Changes of Control. VIGNETTE will notify
------------------------------------------------
NPI promptly in writing of (i) any claim or proceeding involving the Integrated
Product or GLE, (ii) any claimed or suspected defects in the Integrated Product
or GLE, and (iii) any material change in the management or control of VIGNETTE.
7. OBLIGATIONS OF NPI
7.1 Integration. NPI agrees, at no additional charge and upon VIGNETTE's
-----------
reasonable request, to provide engineering assistance to VIGNETTE in order to
support the ongoing integration of GLE and SS into the Integrated Product but
only to the extent that such integration efforts are due to modifications of
GLE. NPI will provide additional engineering assistance to VIGNETTE at NPI's
current standard rates for integration efforts that are necessitated by other
changes to the Integrated Product.
7.2 Support. NPI will use all commercially reasonable efforts to assist
-------
VIGNETTE in providing first and second level telephone support to Sublicensees
for the most current version of GLE, as well as any previous version thereof
that was released within twelve (12) months of the date of such request. NPI
will provide reasonable telephone support to two (2) contacts named by VIGNETTE
(or to up to two (2) alternatives named by VIGNETTE at any point in time) (the
"Authorized Contact(s)") for technical and related inquiries arising from
Sublicensees' use of the GLE. Upon receipt of notice of a problem from an
4
<PAGE>
Authorized Contact, and if such problem has been reproduced at a VIGNETTE
support facility and can be reproduced at a NPI support facility or via remote
access to the VIGNETTE site, NPI will use all reasonable efforts to correct or
circumvent such problem as provided in the Sublicense Agreement; provided, that
all corrections to the GLE will be made only to the most current generally
available release, except that for a period of twelve (12) months after the
introduction of a new generally available release, NPI will use all reasonable
efforts to provide telephone support for the immediately prior generally
released version of the GLE. NPI will use all reasonable efforts to follow
VINGETTE'S standard support escalation procedures appended as Exhibit F. NPI
will not interact with any Sublicensees without VINGETTE'S express written
consent; provided, that NPI will provide support services directly to any
VIGNETTE Customer that Upgrade pursuant to Section 2.2(f).
7.3 Escrow. NPI will establish and maintain at VINGETTE'S expense an
------
escrow of the most current source code version of GLE within thirty (30)
business days of NPI's delivery of GLE pursuant to Section 1.2. VIGNETTE will be
entitled to receive a copy of such source code directly from the escrow agent
upon NPI's documented, sustained (for a period of no less than twenty (20)
business days) and undisputed material failure to support VIGNETTE and the
Sublicensees pursuant to Section 7.2. The parties agree that the escrow
agreement will govern in the event of a dispute material failure to support.
VIGNETTE will be entitled to possess and use such source code only to the
minimal extent necessary to provide such support directly to Sublicensees and
only until NPI can demonstrate to VIGNETTE reasonable satisfaction that is again
able and unwilling to supply such support. The additional terms of the escrow
agreement will be negotiated in good faith by the parties within thirty (30)
days of the Effective Date. The parties agree that this provision does not in
any way limit VIGNETTE's rights to terminate this Agreement under Section 13.4
and to pursue any remedies available for such breach, including the recovery of
damages stemming therefrom.
7.4 Sales Collateral. NPI will from time to time provide VIGNETTE with
----------------
base marketing materials in electronic form. NPI hereby grants VIGNETTE a
nonexclusive, nontransferable (except as otherwise expressly provided herein)
license under the copyright rights in all such marketing materials to use,
modify and distribute all such marketing materials. NPI will provide VIGNETTE
with updated versions of such marketing materials for each new release of GLE.
7.5 Most Favored Nations. In the event that during the effective term of
--------------------
this Agreement NPI enters into a similar agreement of similar scope with a
similarly situated third party which contains economic terms which are
materially more favorable that the economic terms agreed to herein, NPI will
within thirty (30) days of such occurrence provide VIGNETTE with a written
summary of the material terms (including the economic terms, licensing terms,
license restrictions, licensee obligations, warranty and indemnification and
other terms) of such third party agreement and VIGNETTE will have thirty (30)
days in which to elect in writing to replace the terms of this Agreement with
such terms; provided, that VIGNETTE must in its election accept each and every
material term so offered; and further provided, that, upon such election, such
terms will be applied retroactively to the effective date of such third party
agreement; and further provided, that any monies paid to NPI by VIGNETTE prior
to the date of such third party agreement will be deemed nonrefundable and
noncreditable.
7.6 Changes of Control. NPI will notify VIGNETTE promptly in writing of
------------------
any material change in the management or control of NPI.
8. OWNERSHIP OF PRODUCTS AND DOCUMENTATION
8.1 Ownership of GLE. NPI owns all right, title and interest in and to
----------------
GLE, including without limitation, all copyrights, trade secrets, patents, and
other intellectual property rights in and to GLE, except for the limited rights
licensed to VIGNETTE pursuant to Sections 2, 3, 4 and 5 of this Agreement. Upon
any termination of this Agreement or of the licenses granted in Section 2, 3, 4
or 5 of this Agreement, all rights of VIGNETTE to use, market or distribute GLE
will also terminate.
8.2 Ownership of the Integrated Product. VIGNETTE owns all right, title
-----------------------------------
and interest in and to the Integrated Product, (expressly excluding the GLE)
including without limitation, all copyrights, trade secrets, patents, trademark
rights and other intellectual property rights in and to the Integrated Product.
5
<PAGE>
8.3 Ownership of Other Materials. All other aspects of GLE and all other
----------------------------
items licensed by NPI hereunder, including without limitation, programs, methods
of processing, specific designs and structure of individual programs and their
interaction and unique programming techniques employed therein as well as screen
formats will remain the sole and exclusive property of NPI and will not be sold,
revealed, disclosed or otherwise communicated, directly or indirectly, by
VIGNETTE to any person, company or institution whatsoever other than for the
purposes set forth herein.
9. WARRANTIES
9.1 Limited Warranty. NPI warrants that GLE, when properly used, will
----------------
operate in all material respects in conformity with the GLE Specification. NPI
does not warrant that GLE will work or perform satisfactorily with the
Integrated Product or that the Integrated Product will work or perform
satisfactorily. NPI's obligations under this warranty are limited to replacing
the initial copy of GLE.
9.2 Customer Warranty. VIGNETTE agrees not to make any representations or
-----------------
warranties with respect to GLE that exceed the limited warranties made by NPI
under this Agreement and the Sublicense Agreements attached hereto absent NPI's
prior written consent.
9.3 Disclaimer of Warranties. OTHER THAN THOSE WARRANTIES EXPRESSLY SET
------------------------
FORTH IN PARAGRAPH 9.1, NPI SPECIFICALLY DISCLAIMS ALL WARRANTIES EXPRESSED OR
IMPLIED, INCLUDING BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO GLE AND THE INTEGRATED
PRODUCT. FOR AVOIDANCE OF DOUBT, NPI EXPRESSLY DISCLAIMS ANY AND ALL ADDITIONAL
WARRANTIES MADE BY VIGNETTE INCLUDING ANY AND ALL SUCH WARRANTIES CONTAINED IN
THE SUBLICENSE AGREEMENTS ATTACHED HERETO.
10. DISCLAIMER OF LIABILITY
IN NO EVENT WILL EITHER PARTY BE LIABLE FOR ANY DAMAGES, INCLUDING WITHOUT
LIMITATION, LOSS OF DATA, LOSS OF PROFITS, COST OF COVER OR OTHER SPECIAL,
INCIDENTAL, CONSEQUENTIAL OR INDIRECT DAMAGES ARISING FROM OR IN RELATION TO
THIS AGREEMENT OR THE USE OF GLE OR THE INTEGRATED PRODUCT, HOWEVER CAUSED AND
REGARDLESS OF THEORY OF LIABILITY. THIS LIMITATION WILL APPLY EVEN IF SUCH
PARTY HAS BEEN ADVISED OR IS AWARE OF THE POSSIBILITY OF SUCH DAMAGES. BOTH
PARTIES HEREBY ACKNOWLEDGE THAT THE MUTUAL COVENANTS AND AGREEMENTS SET FORTH IN
THIS AGREEMENT REFLECT THIS ALLOCATION OF RISK.
11. INDEMNIFICATION
11.1 Indemnification by NPI. Subject to Sections 9 and 10 of this
----------------------
Agreement, NPI will indemnify, defend and hold VIGNETTE harmless from any
claims, demands, liabilities, losses, damages, judgments or settlements,
including all reasonable costs and expenses related thereto including attorneys'
fees, directly or indirectly resulting from any claimed infringement or
violation by NPI of any patent, copyright, trade secret or other right with
respect to GLE provided, that the foregoing notwithstanding, NPI's obligation to
indemnify will not pertain to the extent that the infringement or violation is
attributable to any misuse, unauthorized modification of GLE by VIGNETTE or the
unauthorized combination of GLE with any other software when no such claim would
have been made absent such misuse, authorized modification or combination.
11.2 Indemnification by VIGNETTE. Subject to Sections 9 and 10 of this
---------------------------
Agreement, VIGNETTE will indemnify, defend and hold NPI harmless from any
claims, demands, liabilities, losses, damages, judgments or settlements,
including all reasonable costs and expenses related thereto including attorneys'
fees, directly or indirectly resulting from any claimed infringement or
violation by VIGNETTE of any copyright, patent, trade secret or other
intellectual property right with respect to the Integrated Product, except to
the extent such infringement or violation is attributable solely to GLE and
absent GLE in the Integrated Product, no such infringement claim would have been
made; provided, that the foregoing notwithstanding, VIGNETTE's obligation to
indemnify will not pertain to the extent that the infringement or violation is
attributable to any
6
<PAGE>
misuse, unauthorized modification of SS or by the unauthorized combination of SS
with any other software when no such claim would have been made absent such
misuse, unauthorized modification or combination.
11.3 Cooperation by Indemnified Party. Notwithstanding Sections 11.1 and
--------------------------------
11.2 of this Agreement, the indemnifying party is under no obligation to
indemnify and hold the other party harmless unless (i) the indemnifying party
receives notice of the suit or claim from the indemnified party and is furnished
with a copy of each communication, notice or other action relating to said claim
within ten (10) days after the indemnified party receives such notice and each
such communication, (ii) the indemnifying party will have the right to assume
sole authority to conduct the trial or settlement of such claim or any
negotiations related thereto at the party's own expense, and (iii) the
indemnified party will provide reasonable information and assistance requested
by the indemnifying party in connection with such claim or suit.
12. UPSELLING OF VIGNETTE CUSTOMERS
12.1 The parties expressly agree that NPI is motivated to enter into this
Agreement by the opportunity of up-selling the GLRE to Sublicensees.
12.2 Sales Coordination. Each party will at its expense reasonably assist
------------------
the other party in up-selling the GLRE by (i) sharing leads and information
regarding prospective sales, (ii) participating in joint sales calls, and (iii)
reasonably cooperating in joint marketing efforts and sales incentives programs.
12.3 Promotional Materials. The parties will mutually agree upon the
---------------------
descriptions of GLE and GLRE used in any and all written materials, including
brochures, collateral, manuals and other documentation, used by VIGNETTE in its
promotions of the Integrated Product and/or provided to VIGNETTE Customers and
Sublicensees. NPI will have the right to review and comment on any and all such
written materials; provided, however that VIGNETTE will have the right to
finally approve any content used in such written materials. VIGNETTE fully
inform its sales, marketing and support employees of the Integrated Product
product positioning through company memorandum, sales training and any other
appropriate method.
12.4 Promotional Plan. The parties will reasonably support the other
----------------
party's efforts in to-be-determined promotional activities, including press
releases, analyst briefings, tradeshows and seminars. Each party agrees to
promote the other party as its preferred partner.
13. TERM, TERMINATION AND EFFECT OF TERMINATION
13.1 Term. This Agreement will commence on the Effective Date and will
----
continue in full force and effect until the eighteenth month anniversary thereof
(the "Initial Term") unless terminated earlier under the provisions of this
Section 13. The effective term of this Agreement will automatically be extended
indefinitely for one (1) year terms (each a "Subsequent Term") unless and until
either party provides the other party with notice of its desire to terminate
this Agreement and the licenses granted hereunder at least sixty (60) days prior
to any such automatic renewal.
13.2 Termination for Convenience, Change of Control. In addition to the
----------------------------------------------
foregoing, this Agreement may be terminated (i) by mutual written consent of
both parties, or (ii) by either party within thirty (30) days of any majority
change in ownership or control of the other party if the acquiring company or
surviving entity is, in the reasonable opinion of the non-acquired party, it
direct competitor.
13.3 Termination Upon Insolvency. This Agreement will terminate, effective
---------------------------
upon delivery of written notice by a party, (i) upon the institution of
insolvency, receivership or bankruptcy proceedings or any other proceedings for
the settlement of debts of the other party, (ii) upon the making of an
assignment for the benefit of creditors by the other party, or (iii) upon the
dissolution of the other party.
13.4 Termination Upon Default. Either party may terminate this Agreement in
------------------------
the event that the other party materially defaults in performing any obligation
under this Agreement and such default continues unremedied for a period of
thirty (30) days following written notice of default.
13.5 Survival of Certain Terms. All provisions of this Agreement reasonably
-------------------------
required to survive termination based on the terms of this Agreement will
survive termination of this Agreement. All other rights and obligations of the
parties will cease upon termination of this Agreement.
7
<PAGE>
13.6 Damages. NEITHER NPI NOR VIGNETTE WILL BE LIABLE TO THE OTHER FOR
-------
DAMAGES OF ANY KIND, INCLUDING INCIDENTAL OR CONSEQUENTIAL DAMAGES, RESULTING
FROM THE TERMINATION OF THIS AGREEMENT IN ACCORDANCE WITH THIS SECTION 13. FOR
AVOIDANCE OF DOUBT, THE PARTIES AGREE THAT IF THERE IS A BREACH OF THIS
AGREEMENT BY A PARTY, THE OTHER PARTY SHALL HAVE ALL REMEDIES OF LAW AND/OR
EQUITY THAT MAY BE GRANTED BY A COURT OF COMPETENT JURISDICTION.
13.7 Effect of Termination. Upon termination of this Agreement for any
---------------------
reason, including VIGNETTE's material breach of any of VINGETTE'S obligations
under Section 6 of this Agreement, (a) VIGNETTE will (i) cease including GLE in
any releases of SS occurring more than six (6) months after the effective date
of such termination, (ii) continue during such six (6) month period to support
all Sublicensees as provided under this Agreement, (iii) cease all marketing and
distribution of GLE after such six (6) month period, (iv) cease all display and
advertising related to GLE after such six (6) month period, (v) immediately
cease using any and all materials identifying VIGNETTE with NPI and GLE, (vi)
promptly return all marketing literature, written information and reports
pertaining to GLE, and (b) NPI will thereafter continue to support only
Sublicensees that have Upgrade. VIGNETTE will continue to support all
Sublicensees who have not Upgraded. Each party will return to the other party
all Confidential Information (as defined in Section 14) of the other party
except to the minimal extent such Confidential Information is required to
provide its support obligations.
13.8 Notwithstanding anything to the contrary in this Agreement, VIGNETTE
will, until such time that all Sublicensees (i) have Upgraded to GLRE, and/or
(ii) no longer require maintenance of the Integrated Product (i.e., have
accepted a new release of SS that does not incorporate GLE), VIGNETTE will
retain all rights required for VIGNETTE to support such Sublicenseees including,
but not limited to, the right to retain a reasonable number of copies of GLE
included within the Integrated Product.
13.9 For avoidance of doubt, all of the rights of VIGNETTE Customers and
all of the rights and obligations of the parties arising from the license of the
Integrated Product that exist as of the effective date of the termination of
this Agreement will continue after such termination.
14. CONFIDENTIAL INFORMATION
Except for the specific rights granted by this Agreement, neither
party will use or disclose any Confidential Information of the other party. A
party receiving Confidential Information from the other party will use the
highest commercially reasonable degree of care to protect that Confidential
Information. SS, GLE and GLRE, including methods or concepts utilized therein,
and all customer and other information identified by a disclosing party as
proprietary or confidential ("Confidential Information") will remain the sole
property of such disclosing party and will not be used or disclosed to any third
party without the express written consent of the disclosing party (except solely
for each party's internal business needs, to employees or consultants who are
bound by a written agreement with such party to maintain the confidentiality of
such Confidential Information in a manner consistent with this Agreement). Items
will not be considered to be Confidential Information if (i) available to the
public other than by a breach of an agreement with the disclosing party, (ii)
rightfully received from a third party not in breach of an obligation of
confidentiality, (iii) independently developed by one party by employees without
access to the Confidential Information of the other, (iv) known to the recipient
at the time of disclosure, or (v) produced in compliance with applicable law or
a court order, provided the other party is given reasonable notice of such law
or order and an opportunity to attempt to preclude or limit such production.
15. MISCELLANEOUS
15.1 Notices. Any notice required or permitted hereunder will be in writing
-------
and will be given by registered or certified mail at the address listed above.
Such notice will be deemed to be given upon the earlier of actual receipt or
three (3) days after it has been sent, properly addressed and with postage
prepaid. Either party may change its address for notice by means of notice to
the other party given in accordance with this Section 15.1.
15.2 Assignment. This Agreement may not be transferred or assigned, in
----------
whole or in part, by either party either voluntarily or by operation of law
8
<PAGE>
without the written permission of the other party, and any attempt to do so will
be a material default of this Agreement and will be void; provided, however,
subject to Section 13.2, that either party may assign its interests and
obligations hereunder to a successor in interest to all or substantially all of
its business.
15.3 Governing Law. This Agreement will be interpreted according to the
-------------
laws of the California without regard to or application of choice-of-law rules
or principles.
15.4 Independent Contractors. The relationship of NPI and VIGNETTE
-----------------------
established by this Agreement is that of independent contractors, and nothing
contained in this Agreement will be construed to (i) give either party the power
to direct and control the day-to-day activities of the other, (ii) constitute
the parties as legal partners, joint venturers, co-owners or otherwise as
participants in a joint undertaking, or (iii) allow either party to create or
assume any obligation on behalf of the other party for any purpose whatsoever.
All financial and other obligations associated with the businesses of NPI and
VIGNETTE are their sole respective responsibilities.
15.5 Entire Agreement and Waiver. This Agreement and the Exhibits hereto
---------------------------
will constitute the entire agreement between NPI and VIGNETTE with respect to
its subject matter and all prior agreements, representations, and statement with
respect to such subject matter are superseded. This Agreement may be changed
only by written agreement signed corporate officers of both NPI and VIGNETTE.
No failure of either party to exercise or enforce any of its rights under this
Agreement will act as a waiver of subsequent breaches and the waiver of any
breach will not act as a waiver of subsequent breaches.
Net Perceptions, Inc. Vignette Corporation
By: /s/ Steven J. Snyder By: /s/ Ross B. Garber
--------------------------- ---------------------------
Name: Steven J. Snyder Name: Ross B. Garber
------------------------- -------------------------
Title: President and CEO Title: CEO
------------------------ ------------------------
Date: April 13, 1998 Date: 4/15/98
------------------------- -------------------------
9
<PAGE>
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
EXHIBIT A
GLE SPECIFICATIONS
*****
E-1
<PAGE>
EXHIBIT B
INTEGRATED PRODUCT SPECIFICATIONS
E-2
<PAGE>
EXHIBIT C
FORM OF SUBLICENSE LICENSE AGREEMENT
E-3
<PAGE>
EXHIBIT D
FORM OF SOFTWARE TRIAL LICENSE AGREEMENT
E-4
<PAGE>
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
EXHIBIT E
SUBLICENSE LICENSE FEES AND SUBLICENSE SUPPORT FEES
SUBLICENSE LICENSE FEES
During the effective term of this Agreement VIGNETTE will pay NPI in United
States dollars sublicense license fees (the "Sublicense License Fees")
calculated as:
(a) for each Initial GLE Recipient, ***** dollars ***** due and payable as
of the earlier of (i) the date of the first commercial release of the Integrated
Product, or (ii) June 30, 1998 (the "License Date).
(b) for each license of the Integrated Product entered into after the
License Date, a royalty calculated at a rate of four percent (4%) of
Vignette's gross licensing revenues from the license of the Integrated
Product due and payable within thirty (30) days after the end of the
month of collection by VIGNETTE, such royalty for each such license of
the Integrated Product not to be less than ***** dollars ***** or more
than ***** dollars (*****).
(c) NPI agrees to negotiate from time to time in good faith discounts to
the royalty rate specified in (b) for large volume Sublicenses.
If VIGNETTE deems that it is necessary in order to finalize a Sublicense
Agreement that VIGNETTE provide a limited license fee refund remedy for breach
of the performance remedy provide by NPI pursuant to Section 9.1, VIGNETTE may
offset any actual amounts so refunded from future payments due to NPI.
SUPPORT SUBLICENSE FEES
During the effective term of this Agreement VIGNETTE will pay NPI in United
States dollars fees ("Support Sublicense Fees") calculated as:
(a) ***** percent (*****%) of Vignette's gross receipts for support and
maintenance, updates and/or upgrades for the Integrated Product due and payable
within thirty (30) days after the end of the month of collection by VIGNETTE.
E-5
<PAGE>
EXHIBIT F
STANDARD SUPPORT ESCALATION PROCEDURES
E-6
<PAGE>
EXHIBIT 10.14
Confidential treatment has been requested for portions of this exhibit. The
copy filed herewith omits the information subject to the confidentiality
request. Omissions are designated as *****. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
VIGNETTE DIRECT
------
Introductory Price List
January 1, 1997 - March 31, 1997
________________________________________________________________________________
StoryServer
Q2 Volume Purchase Agreement
Terms of Agreement:
. Tribune Interactive Inc. (TII) agrees to a one-time commitment of *****
for unlimited software licenses chosen from Exhibit A.
. Vignette will allow web sites wholly owned and operated by Tribune Company
to deploy any combination of designated licenses to ***** number of users &
domains for a period of ***** from the agreement date. Also, Vignette will
provide Product Updates and Support as described in Exhibit A.
. TII agrees to pay annual maintenance fees, for updates and upgrades, at
***** of Software List price (as licenses are deployed).
. TII agrees to provide Vignette with an accounting of software deployed on a
quarterly basis. TII will not be required to account for the domain names
where the software is deployed.
. Agreement execution date to take effect before June 30, 1997.
Exhibit A:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
CATEGORY PART NUMBER DESCRIPTION LIST PRICE TOTAL PRICE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Engine SS-ENGINE-C License allows one Web server *****
configured for StoryServer.
Package includes licensing for
five (5) Authors. (Live Server)
SS-ENGINE-R License allows for each *****
additional copy of StoryServer.
Does not include licensing for
additional authors.
(Development Server)
Developer SS-DEVELOPER-10 License gives ten (10) *****
Licenses concurrent users access to
StoryServer's Template
interface.
SS-DEVELOPER-5 License allows access to *****
StoryServer's Template User
Interface for five (5)
concurrent users.
Author SS-AUTHOR-UL License allows access to *****
Licenses StoryServer's Content Entry
Interface for Unlimited
concurrent
</TABLE>
<PAGE>
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<TABLE>
<S> <C> <C>
users.
Product Updates SS-UPDATE-RP The annual maintenance provides
automatic updates, upgrades,
and patches at no additional
charge. (***** of the purchase
price)
Support SS-PS-T1 Telephone Support: Includes
telephone-based technical
support for ***** registered
user for ***** from date
of purchase. Also includes
after-hours emergency
telephone-based technical
support for ***** from
date of purchase. Also
includes Electronic Support.
</TABLE>
- --------------------------------------------------------------------------------
TOTAL
Volume Purchase Commitment *****
Less previous software investments: *****
--------
Total Tribune Interactive commitment *****
VIGNETTE TRIBUNE INTERACTIVE INC.
Signature: /s/ Janice Ryan Signature: /s/ [ILLEGIBLE SIGNATURE]
-------------------------- --------------------------
Title: VP SALES Title: VP
-------------------------- --------------------------
Date: Date: 6/9/97
-------------------------- --------------------------
- --------------------------------------------------------------------------------
www.vignette.com phone: (512) 502-0223 STRICTLY PRIVATE
fax: (512) 502-0280
<PAGE>
EXHIBIT 10.15
Confidential treatment has been requested for portions of this exhibit. The
copy filed herewith omits the information subject to the confidentiality
request. Omissions are designated as *****. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.
PROTEGE SOFTWARE (HOLDINGS) CONFIDENTIAL
PROFESSIONAL SERVICES AGREEMENT
This PROFESSIONAL SERVICES AGREEMENT (the "Agreement") is made this
15/th/ day of November 1997 between PROTEGE SOFTWARE (HOLDINGS) LIMITED of
Richmond House, St. Anne's Place, St. Peter Port, Guernsey, GY1 2NV Channel
Islands (the "Contractor") and Vignette Corporation of One Far West Plaza, 3410
Far West Blvd., Suite 300, Austin, Texas (the "Company") who agree as follows:
1. TERM
The initial term of this Agreement shall begin at the date of signing
by the later of the two parties to sign (the "Effective Date"), and shall end on
the termination of the Agreement by either party in accordance with Paragraph 6.
2. PROFESSIONAL SERVICES
(a) The Contractor agrees to act and perform the Professional
Services in the Territory (as defined in Schedule C) specified in the Work
Assignment Schedule contained in Schedule A, as modified from time to time by
mutual agreement (the "Professional Services").
(b) The Contractor shall perform the Professional Services for
Company, and shall in all cases act in a professional manner and such services
shall conform to the standards, specifications and other reasonable requirements
agreed between the parties.
(c) The Contractor agrees to submit monthly progress reports to the
Company.
(d) The Contractor shall report to Ross Garber or, in his/her
absence, Jack Lynch.
(e) The Contractor shall be entitled to attend executive meetings of
the Company.
3. CONTRACTOR'S REWARD
The Company shall reward the Contractor for its activities as
contained in Schedule B.
4. PROPRIETARY INFORMATION
(a) Each party acknowledges that it may be furnished or may otherwise
receive or have access to confidential or proprietary information which relates
to the other party's business, including (without limitation), past, present or
future business plans, marketing
<PAGE>
plans, products, software, research, development, inventions, processes,
techniques, design or other technical information and data, etc. (the
"Proprietary Information"). Each party further acknowledges that all
intellectual property rights residing in the other party's Proprietary
Information are and will remain the exclusive property of the other party or its
licensors.
(b) Each party agrees to take the same measures it uses to protect
its own information of a similar nature to preserve and protect the
confidentiality of the Proprietary Information and all forms thereof, whether
disclosed to it before this Agreement is signed or afterwards. In addition, it
shall not disclose or disseminate the Proprietary Information to any third party
and shall not use the Proprietary Information for its own benefit (other than in
furtherance of the goals of the other party) or as permitted herein or for the
benefit of any third party (other than in furtherance of the goals of the other
party or as permitted herein).
(c) The foregoing obligations shall not apply to any information
which the recipient can prove (i) is previously publicly known at the time of
receipt from the other party or which subsequently becomes publicly known
through no act or fault of the recipient; (ii) is given to it by a third party
who is not obligated to maintain confidentiality; or (iii) was already known by
it at the time of receipt; or (iv) was independently developed by it without
resort to the Proprietary Information or other resources of the other and not in
the course of performance of the Professional Services, and not for the other
party (unless the parties have otherwise agreed that the specific information
was to be governed by this Agreement).
(d) Within three days after the termination of this Agreement (or any
other time at the other party's request), each party shall return to the other
all copies of Proprietary Information in tangible form in its possession or
control. The Contractor hereby assigns to the Company all its intellectual and
other property rights in its work product performed pursuant to this Agreement,
and waives its moral rights to or in same, and shall require each of its
employees (if any are so permitted by the Company pursuant to Schedule A)
working on this project to sign the Company's standard independent contractor
confidentiality agreement, and assignment of intellectual property rights and
waiver of moral rights.
(e) The provisions of this Section 4 of this Agreement shall survive
the expiry or termination of the Agreement.
5. WARRANTIES AND COVENANTS
A. The Contractor warrants and covenants that:
(i) it is able to perform the Professional Services, as set out
in the agreed business plan or in any agreed-upon business plan;
(ii) that any service it provides and information or materials
it develops for or discloses to the Company shall not in any way be based upon
any confidential or proprietary information derived from any source other than
the Company, unless the Contractor is specifically authorized in writing by such
source to use such proprietary information and the Contractor agrees it shall
not knowingly furnish or use any such information in the performance
2
<PAGE>
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
of this Agreement, without the prior written consent of the Company provided
that the Company agrees the Contractor can use commercially available software
development tools;
(iii) in performance of its obligations hereunder it shall not
infringe any intellectual property right, or trade secret of any third party;
and
(iv) it shall perform all work in a professional manner.
(v) if the Company incurs any liability or expense as a result
of any warranty the Contractor makes in this Agreement not being true, the
Contractor shall indemnify the Company and hold it harmless against all such
liability or expense, including reasonable attorney/solicitor fees, provided
that the Company notifies the Contractor of the claim and co-operates with the
Contractor in defending against the claim. Each party shall notify the other if
it ever becomes aware of any such claim.
B. The Company warrants and covenants that:
(i) it is entitled to appoint the Contractor to perform the
Professional Services in the Territory;
(ii) that any information or materials it discloses to the
Contractor shall not in any way be based upon any confidential or proprietary
information derived from any source other than the contractor or the company
unless the Company is specifically authorised in writing by such source to use
such proprietary information;
(iii) in performance of its obligations and the provision of
information to the Contractor hereunder it will not infringe any intellectual
property right, or trade secret of any third party;
(iv) if the Contractor incurs any liability or expense as a
result of any warranty the Company makes in this Agreement not being true, the
Company shall indemnify the Contractor and hold it harmless against all such
liability or expense, including reasonable attorney/solicitor fees, provided
that the Contractor notifies the Company of the claim and co-operates with the
Company in defending against the claim. Each party shall notify the other if it
ever becomes aware of any such claim; and
(v) it will sell its products and services in the Territory
only through Vignette Europe Ltd. *****
C. The Company undertakes with the Contractor that:
(i) it shall provide prompt and clear instructions to the Contractor
in response to requests for information or instruction from the Contractor in
relation to the Professional Services;
3
<PAGE>
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
(ii) it recognizes that the Contractor and its employees do not
assume any liability in respect of the debt or liabilities of the Company or any
of its subsidiaries;
(iii) it shall procure that Vignette Europe Ltd meets in full
all its debts as they fall due and the Company acknowledges that any failure to
do so will adversely affect the goodwill of the Contractor;
(iv) it shall procure that Vignette Europe Ltd will grant the
Contractor a first floating charge over the book debts of Vignette Europe Ltd as
security for any sums owing to the Contractor;
(v) The Company undertakes that a minimum of ***** will be
retained in the UK bank account of Vignette Europe Ltd and ***** will be
transferred to the UK bank account of Vignette Europe Ltd immediately after
formation of such entity and upon execution of this agreement.
6. TERMINATION AND RENEWAL
(a) The Initial Term of this agreement shall be for a ***** period
from the Effective Date (the "Initial Term").
(b) This Agreement shall automatically continue, following the expiry
of the Initial Term, for subsequent periods of ***** ("Renewal Terms") each
unless terminated in accordance with the terms set out below.
(c) This Agreement may be terminated by either party, as follows:
(i) without cause, after the Initial Term, on at least
***** written notice;
(ii) during the Initial Term, or any Renewal Term, if the other
party has not performed any material covenant when performance was due or has
otherwise breached any material term of this Agreement, the following procedures
shall apply:
(A) the non-defaulting party shall provide written notice
of the event or circumstances representing such breach or non-performance
together with a demand that such breach or non-performance be cured immediately;
(B) if the breach or non-performance has not been cured
(or other arrangements satisfactory to the non-defaulting party have not been
agreed to) within 30 days from the date of the notice delivered under clause (A)
above, immediately upon delivery of a second written notice terminating this
Agreement.
(d) At six months intervals from the Effective Date, the Company may
terminate this Agreement on ***** written notice if *****
4
<PAGE>
7. MISCELLANEOUS
(a) The laws of the State of California shall govern this Agreement
and the parties hereby submit to the exclusive jurisdiction of the California
Courts.
(b) This Agreement, including Schedule A attached hereto, is the
entire agreement between the parties. Any change in the Agreement must be made
in writing and signed by both the Company and the Contractor.
(c) If either party cannot perform any of its respective obligations
due to causes beyond its reasonable control which shall not include the reward
to the Contractor under Schedule A, then the non-performing party shall (i)
notify the other party, (ii) take reasonable steps to resume performance as soon
as possible, and (iii) not be considered in breach during the period performance
is beyond the party's reasonable control.
(d) If any provision of this Agreement shall be deemed by a court to
be too broad, the court is hereby authorized to limit any scope, duration or
area of applicability, or all of them, so such provision is no longer overly
broad and to enforce the same as so limited. Subject to the prior sentence, if
any part of this Agreement is held unenforceable for any reason, such
unenforceability shall void only such part and shall not render unenforceable
any other part of this Agreement.
(e) Waiver by either party of a default by the other does not
constitute a waiver of future or other defaults.
(f) The parties shall not, for 12 months after the Agreement ends,
directly solicit for employment or any other engagement for work, any employee
or any employee of any affiliate of the other party. In this Agreement,
affiliate means a company under the ultimate common control of the other party
of which the party has been notified.
(g) Any notice or other communication required or permitted to be
given by this Agreement (including the signing of this Agreement) shall be in
writing and shall be effectively given if delivered personally, by facsimile
confirmed received, or by registered mail to the party at the relevant party's
address below.
Dated at this 15/th/ day of November 1997.
--------------------
/s/ Ross B. Garber
- ------------------------------------
duly authorised for and on behalf of
Vignette Corporation of One Far West Plaza,
3410 Far West Blvd., Suite 300,
Austin, Texas
Dated at [ILLEGIBLE] this 17th day of November, 1997.
------------------
5
<PAGE>
[SIGNATURE ILLEGIBLE]
- -------------------------------------
duly authorised for and on behalf of
PROTEGE SOFTWARE (HOLDINGS) LIMITED
of Richmond House, St. Anne's Place, St. Peter Port,
Guernsey, GY1 2NV, Channel Islands
6
<PAGE>
SCHEDULE A
WORK ASSIGNMENT SCHEDULE
Territory
For purposes of this Agreement, Territory means Europe (including the
United Kingdom where the activities will be the responsibility of Protege
Software Limited), Africa, subject to then prevailing export regulations in
Canada and the United States.
Europe means those countries set out in Schedule C.
Analysis and Recommendations re:
. Marketing positioning;
. Presentation;
. Technical Support;
. Competitiveness;
. Localization
Implementation and approved Recommendations re:
. Sales,
. Marketing,
. Technical Support,
. Production,
. Finance and Administration.
all for operations, in the Territory, as more particularly set out in the annual
business plans (including budgets) of the Company as said plans and budgets
relate to its operations implemented directly or through:
-- Vignette Europe Ltd; and/or
-- such other corporations or entities, or in furtherance of
distribution, marketing or agency relationships with such third
parties, as the Company and the Contractor agree to establish in
the Territory.
<PAGE>
The business plan and budgets shall be mutually agreed upon by
Contractor and Company.
This implementation will include, but not necessarily be limited to,
the following:
SCOPE OF ACTIVITIES
During the term, Contractor shall perform the following activities in
the Territory:
. Establishment of an organisation for the Territory, to complement
the current resources, technology and economic considerations of
the Company, and the circumstances that prevail in the Territory;
. Liaison with Vignette Europe Ltd, a wholly owned subsidiary of the
Company, so that Company may professionally provide the following:
(a) solicitation of sales orders;
(b) provision of support for Company's distributors and dealers in
the Territory;
(c) co-ordination of product and warranty service between Vignette
Europe Ltd and such other affiliated or third party, arms length corporations or
entities, and licensees and distributors/VARs etc. of the Company's products,
located in the Territory;
(d) provision of product technical support services;
(e) the conducting of periodic training courses and seminars
regarding applications and operations of the products in major marketing centers
located in the Territory for the benefit of distributors and dealers, etc.;
(f) development of business plans for the Territory;
(g) management and coordination of the implementation of the
Company's marketing strategy in the Territory (for the products of Company
handled by Contractor);
(h) localisation of products;
(i) administration of the "Market Development Fund" specified in the
budget approved by the Contractor related to customers in the Territory.
SOLICITATION OF CONTRACTS
(a) Vignette Europe Ltd shall solicit orders for products only at
such current prices as may be periodically established in writing by the Company
and notified to the Contractor.
(b) All orders solicited by Vignette Europe Ltd from customers in the
Territory are subject to acceptance or rejection by an officer or other
authorized person at the
<PAGE>
principal office of the Company, which approval or rejection shall in all cases
be in writing, and no order shall be binding upon Vignette Europe Ltd until so
accepted. The Company and Vignette Europe Ltd reserve the right to refuse any
order originating in the Territory, either for lack of credit of the customer or
for any other reason which, in the judgment of the Company or Vignette Europe
Ltd is reasonable grounds for refusal.
(c) The Contractor agrees to dispatch all inquiries received by it,
applicable to the Company or the products of the Company, from points or sources
outside the Territory promptly to the Company for attention and handling.
(d) Neither Vignette Europe Ltd nor the Company is under any
obligation to the Contractor to continue its business or to manufacture, sell or
supply, or to continue to manufacture, sell or supply any of the products nor
shall any warranty of any nature as to any products run from Vignette Europe
Ltd, the Company, or their affiliates to the Contractor, and neither the Company
nor its affiliates are under any obligations to the Contractor to continue,
discontinue, or change any model or type of any of the products.
(e) All invoices in connection with sales to customers in the
Territory shall be rendered by Vignette Europe Ltd to such customers. It is
expressly understood that full power by and such authority for all collections
rest with Vignette Europe Ltd and the Company, which exercises complete control
over the approval of all customers' credit, orders, and contracts. The
Contractor agrees to protect Vignette Europe Ltd and the Company, as far as is
reasonable by reporting adverse credit information of which it is aware with
respect to customers in the Territory.
<PAGE>
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
SCHEDULE B
CONTRACTOR REWARD SCHEDULE
1. General
A. In this Agreement, the currency is UK pounds sterling.
B. *****
C. *****
2. Reimbursement
The Company will reimburse the Contractor within ***** days after the
end of each fiscal month an amount equal to one hundred per cent (100%) of all
costs approved within the agreed business plan or otherwise agreed to by the
Company, and reasonably incurred by the Contractor in fulfillment of the
Contractor's obligations under this Agreement. The Contractor will keep records
of (and receipts for) all costs in incurs in its performance of the services and
will provide copies of such records to the Company upon reasonable request.
3. Annual Bonus
A. The Contractor shall also be paid an annual cash reward which may
be converted up to ***** of its value at the option of the Contractor (in part
or in whole) into fully paid voting stock of the Company or its successor as
agreed by the Contractor, calculated on the basis set out below provided that
the maximum conversion by the Contractor does not exceed 5% of the voting stock
of the Company then in issue.
B. The reward shall be:
*****
S-B-1
<PAGE>
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
*****
The Contractor shall be entitled to convert up to ***** of this reward
into fully paid voting stock of the Company or its successor at a strike price
of ***** per share.
In the event of termination, other than for the termination criteria
as specified in paragraph 6 (d) of this agreement, during the initial term the
reward shall be deemed to be:
*****
4. If the Company enters into any form of public offering then the
Contractor shall be entitled to require conversion of its accrued reward prior
to the sale taking place.
S-B-2
<PAGE>
SCHEDULE C
EUROPE MEANS
Such of the countries listed below, except to the extent that sales of
the Company's products are prohibited pursuant to the laws of [the United
States] or other jurisdiction applicable to the Company's operations.
Albania Liecthenstein
Andorra Lithuania
Armenia Luxembourg
Austria Macedonia
Azerbaijan Malta & Gozo
Belarus Moldova
Belgium Monaco
Bosnia The Netherlands
Bulgaria Norway
Byclorussia Poland
Croatia Portugal
Cyprus Romania
Czech Republic Russia Federation
Denmark San Marino
Estonia Serbia
Federal Republic of Slovak Republic
Yugoslavia
Finland Slovenia
France Spain
Germany Sweden
Gibraltar Switzerland
Greece Tajikistan
Hungary Turkey
Iceland Turkmenistan
Republic of Ireland Ukraine
Italy United Kingdom
Kazakhstan Uzbekistan
Kyrgyzstan Vatican City State
Latvia
<PAGE>
PROTEGE SOFTWARE HOLDINGS
PROFESSIONAL SERVICES AGREEMENT - AMENDMENT
This AMENDMENT to the PROFESSIONAL SERVICES AGREEMENT (the
"Amendment") is made this 31st day of March 1998, between Protege Software
Holdings Limited of Richmond House, St. Anne's Place, St. Peter Port, Guernsey,
GY1 2NV (the "Contractor") and Vignette Corporation of One Far West Plaza, 3410
Far West Blvd, Suite 300, Austin, Texas (the "Company"), who hereby agree as
follows:
1. The parties entered into a Professional Services Agreement (the
"Agreement") made as at the 17th day of November 1997.
2. In terms of clause 6(a) of the Agreement the initial term shall be for
a ***** period from the Effective date, being the 17th day of November 1997.
3. The parties by this document agree to amend the Agreement so that the
initial terms shall be for ***** months and will expire on the 31st day of
December 1998, to coincide with the year end of the Company.
4. All the other terms and conditions are to remain unchanged, and in
full force.
Dated at Austin, Texas this 31st day of March 1998.
/s/ Jack Lynch
- -------------------------------------
Duly authorised for and on behalf of
Vignette Corporation of One Far West Plaza,
3410 Far West Blvd, Suite 300.
Austin, Texas
Dated at this 11th day of September 1998.
--------------------- ----- ------------
[SIGNATURE ILLEGIBLE]
- -------------------------------------
Duly authorised for and on behalf of
Protege Software (Holdings) Limited of
Richmond House, St. Anne's Place, St. Peter Port,
Guernsey, GY1 2NV
A-1
<PAGE>
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
PROTEGE SOFTWARE CONFIDENTIAL
PROFESSIONAL SERVICES AGREEMENT FOR UNITED KINGDOM
This PROFESSIONAL SERVICE AGREEMENT (the "Agreement") is made this
[15] day of [November] 1997 between PROTEGE SOFTWARE LIMITED of Kinetic Centre,
Theobald Street, Borehamwood, Herts. WD6 4PS (the "Contractor") and Vignette
Corporation of One Far West Plaza, 3410 Far West Blvd, Suite 300, Austin, Texas
(the "Company") who agree as follows:
1. PROFESSIONAL SERVICES IN THE UK
(a) The Contractor and the Company have agreed that the Company shall
act as General Manager for the Company in the United Kingdom including:
(i) setting up a wholly owned subsidiary company of the Company
(subject to local approval) to be called Vignette Europe Ltd.
(ii) setting up such other corporations or entities, or
distribution, marketing or agency relationships with third parties as the
Company and Contractor agree to establish in the United Kingdom.
(b) The Contractor shall perform the Professional Services for
Company, and shall in all cases act in a professional manner and such services
shall conform to the standards, specifications and other reasonable requirements
agreed between the parties.
2. MANAGEMENT FEE
The Contractor shall be paid an annual Management Fee of ***** per
annum excluding the reimbursable expenses detailed below. The Management Fee
shall be payable *****.
3. REIMBURSEMENT OF EXPENSES
The Company will reimburse the Contractor within ***** days after the
end of each fiscal month an amount equal to one hundred per cent (100%) of all
costs approved within the agreed business plan or otherwise agreed to by the
Company, and reasonable incurred by the Contractor in fulfillment of the
Contractor's obligations under this Agreement. The Contractor will keep records
of (and receipts for) all costs it incurs in its performance of the services and
will provide copies of such records to the Company upon reasonably request.
4. TERMINATION
(a) The Initial Term shall be for a ***** period from the
Effective Date (the "Initial Term").
UK-1
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(b) This Agreement shall automatically continue, following the expiry
of the Initial Term, for subsequent periods of ***** ("Renewal Terms") each
unless terminated in accordance with the terms set out below.
(c) This Agreement may be terminated by either party as follows:
(i) without cause, after the Initial Term, on at least *****
written notice, provided that if the Company fails to renew any Renewal Term, it
shall provide at least ***** notice of payment in lieu thereof;
(ii) during the Initial Term, or any Renewal Term, if the other
party has not performed any material covenant when performance was due or has
otherwise breached any material term of this Agreement, the following procedures
shall apply:
(A) the non-defaulting party shall provide written notice
of the event or circumstances representing such breach or non-performance
together with a demand that such breach or non-performance be cured immediately.
(B) If the breach or non-performance has not been cured
(or other arrangements satisfactory to the non-defaulting party have not been
agreed to) within ***** from the date of the notice delivered under clause (A)
above, immediately upon delivery of a second written notice terminating this
Agreement.
(d) At six months intervals from the Effective Date, the Company may
terminate this agreement on ***** written notice if *****
5. MISCELLANEOUS
(a) The laws of the State of California shall govern this Agreement
and the parties hereby submit to the exclusive jurisdiction of the California
Courts.
(b) Any change in this Agreement must be made in writing and signed
by both the Company and the Contractor.
(c) The parties shall not, for 12 months after the Agreement ends,
directly solicit for employment or any other engagement for work, any employee
or any employee of any affiliate of the other party. In this Agreement,
affiliate means a company under the ultimate common control of the other party
of which the party has been notified.
(d) Any notice or other communication required or permitted to be
given by this Agreement (including the signing of this Agreement) shall be in
writing and shall be effectively given if delivered personally, by facsimile
confirmed received, or by registered mail to the party at the relevant party's
address below.
UK-2
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Dated at London this 15 day of November 1997
/s/ Ross B. Garber
- -------------------------------------
duly authorised for and on behalf of
Vignette Corporation of One Far West Plaza,
3410 Far West Blvd, Suite 300,
Austin, Texas
Dated at London this 15th day of November 1997
[SIGNATURE ILLEGIBLE]
- -------------------------------------
duly authorised for and on behalf of
PROTEGE SOFTWARE LIMITED
<PAGE>
EXHIBIT 10.16
SUBORDINATED
LOAN AND SECURITY AGREEMENT
THIS AGREEMENT (the "Agreement"), dated as of December 3, 1998, is entered
into by and between Vignette Corporation, a Delaware corporation, with its chief
executive office, and principal place of business located at 3410 Far West
Blvd., Suite 300, Austin, TX, 78731 (the "Borrower") and Comdisco, Inc., a
Delaware corporation, with its principal place of business located at 6111 North
River Road, Rosemont, Illinois 60018 (the "Lender" or sometimes, "Comdisco").
In consideration of the mutual agreements contained herein, the parties hereto
agree as follows:
RECITALS
WHEREAS, Borrower has requested Lender to make available to Borrower a loan
in the aggregate principal amount of FIVE MILLION DOLLARS ($5,000,000) in 5
installments of ONE MILLION DOLLARS ($1,000,000) each (as the same may from time
to time be amended, modified, supplemented or revised, the "Loan"), which would
be evidenced by Subordinated Promissory Note(s) executed by Borrower
substantially in the form of Exhibit A hereto (as the same may from time to time
be amended, modified, supplemented or restated the "Note(s)").
WHEREAS, Lender is willing to make the Loan on the terms and conditions set
forth in this Agreement, and
WHEREAS, Lender and Borrower agree any Loan hereunder shall be subordinate
to Senior Debt (as defined herein) to the extent set forth in the Subordination
Agreement (as defined herein).
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, Borrower and Lender hereby agree as follows:
SECTION 1. DEFINITIONS
Unless otherwise defined herein, the following capitalized terms shall have
the following meanings (such meanings being equally applicable to both the
singular and plural form of the terms defined);
1.1 "ACCOUNT" means any "account," as such term is defined in Section
9106 of the UCC, now owned or hereafter acquired by Borrower or in which
Borrower now holds or hereafter acquires any interest and, in any event, shall
include, without limitation, all accounts receivable, book debts and other forms
of obligations (other than forms of obligations evidenced by Chattel Paper,
Documents or Instruments) now owned or hereafter received or acquired by or
belonging or owing to Borrower (including, without limitation, under any trade
name, style or division thereof) whether arising out of goods sold or services
rendered by Borrower or from any other transaction, whether or not the same
involves the sale of goods or services by Borrower (including, without
limitation, any such obligation which may be characterized as an account or
contract right under the UCC) and all of Borrower's rights in, to and under all
purchase orders or receipts now owned or hereafter acquired by it for goods or
services, and all of Borrower's rights to any goods represented by any of the
foregoing (including, without limitation, unpaid seller's rights of rescission,
replevin, reclamation and
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stoppage in transit and rights to returned, reclaimed or repossessed goods), and
all monies due or to become due to Borrower under all purchase orders and
contracts for the sale of goods or the performance of services or both by
Borrower (whether or not yet earned by performance on the part of Borrower or in
connection with any other transaction), now in existence or hereafter occurring,
including, without limitation, the right to receive the proceeds of said
purchase orders and contracts, and all collateral security and guarantees of any
kind given by any Person with respect to any of the foregoing.
1.2 "ACCOUNT DEBTOR" means any "account debtor," as such term is defined
in Section 9105(1)(a) of the UCC.
1.3 "ADVANCE" means each installment made by the Lender to Borrower
pursuant to the Loan to be evidenced by the Note(s) secured by the Collateral.
1.4 "ADVANCE DATE" means the funding date of any Advance of the Loan.
1.5. "ADVANCE REQUEST" means the request by Borrower for an Advance under
the Loan, each to be substantially in the form of Exhibit C attached hereto, as
submitted by Borrower to Lender from time to time.
1.6 "CHATTEL PAPER" means any "chattel paper," as such term is defined in
Section 9105(1)(b) of the UCC, now owned or hereafter acquired by Borrower or in
which Borrower now holds or hereafter acquires any interest.
1.7 "CLOSING DATE" means the date hereof.
1.8 "COLLATERAL" shall have the meaning assigned to such term in Section
3 of this Agreement.
1.9 "CONTRACTS" means all contracts, undertakings, franchise agreements
or other agreements (other than rights evidenced by Chattel Paper, Documents or
Instruments) in or under which Borrower may now or hereafter have any right,
title or interest, including, without limitation, with respect to an Account,
any agreement relating to the terms of payment or the terms of performance
thereof.
1.10 "COPYRIGHTS" means all of the following now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest: (i) all copyrights, whether registered or unregistered, held pursuant
to the laws of the United States, any State thereof or of any other country;
(ii) registrations, applications and recordings in the United States Copyright
Office or in any similar office or agency of the United States, any state
thereof or any other country; (iii) any continuations, renewals or extensions
thereof; and (iv) any registrations to be issued in any pending applications.
1.11 "COPYRIGHT LICENSE" means any written agreement granting any right to
use any Copyright or Copyright registration now owned or hereafter acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest.
1.12 "DOCUMENTS" means any "documents," as such term is defined in Section
9105(1)(f) of the UCC, now owned or hereafter acquired by Borrower or in which
Borrower now holds or hereafter acquires any interest.
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1.13 "EQUIPMENT" means any "equipment," as such term is defined in Section
9109(2) of the UCC, now or hereafter owned or acquired by Borrower or in which
Borrower now holds or hereafter acquires any interest and any and all additions,
substitutions and replacements of any of the foregoing, wherever located,
together with all attachments, components, parts, equipment and accessories
installed thereon or affixed thereto.
1.14 "EXCLUDED AGREEMENTS" means (i) any Warrant Agreement(s) executed
hereunder, and any other warrants (including without limitation, the warrant
agreement dated as of December 3, 1998) to acquire, or agreements governing the
rights of the holders of, any equity security of Borrower, (ii) any stock of the
Borrower issued or purchased pursuant to the Warrant Agreement, and (iii) the
Master Lease Agreement dated as of between Borrower, as lessee, and Lender, as
lessor, including, without limitation, any Equipment Schedules and Summary
Equipment Schedules to the Master Lease Agreement executed or delivered by
Borrower pursuant thereto and any other modifications or amendments thereof,
whereby Borrower (as lessee) leases equipment, software, or goods from Lender
(as lessor) to Borrower (as lessee).
1.15 "FACILITY FEE" means one percent 1% of the principal amount of the
installment of the Loan due at the Closing Date plus due diligence and legal
expenses of $8,000.
1.16 "FIXTURES" means any "fixtures," as such term is defined in Section
9313(1)(a) of the UCC, now or hereafter owned or acquired by Borrower or in
which Borrower now holds or hereafter acquires any interest and, now or
hereafter attached or affixed to or constituting a part of, or located in or
upon, real property wherever located, together with all right, title and
interest of Borrower in and to all extensions, improvements, betterments,
renewals, substitutes, and replacements of, and all additions and appurtenances
to any of the foregoing property, and all conversions of the security
constituted thereby, immediately upon any acquisition or release thereof or any
such conversion, as the case may be.
1.17 "GENERAL INTANGIBLES" means any "general intangibles," as such term
is defined in Section 9106 of the UCC, now owned or hereafter acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest and,
in any event, shall include, without limitation, all right, title and interest
which Borrower may now or hereafter have in or under any contract, all customer
lists, Copyrights, Trademarks, Patents, rights to Intellectual Property,
interests in partnerships, joint ventures and other business associations,
Licenses, permits, trade secrets, proprietary or confidential information,
inventions (whether or not patented or patentable), technical information,
procedures, designs, knowledge, know-how, software, data bases, data, skill,
expertise, recipes, experience, processes, models, drawings, materials and
records, goodwill (including, without limitation, the goodwill associated with
any Trademark, Trademark registration or Trademark licensed under any Trademark
License), claims in or under insurance policies, including unearned premiums,
uncertificated securities, cash and other forms of money or currency, deposit
accounts (including as defined in Section 9105(e) of the UCC), rights to sue for
past, present and future infringement of Copyrights, Trademarks and Patents,
rights to receive tax refunds and other payments and rights of indemnification.
1.18 "INSTRUMENTS" means any "instrument," as such term is defined in
Section 9105(1)(i) of the UCC, now owned or hereafter acquired by Borrower or in
which Borrower now holds or hereafter acquires any interest.
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1.19 "INTELLECTUAL PROPERTY" means all Copyrights, Trademarks, Patents,
trade secrets, source codes, customer lists, proprietary or confidential
information, inventions (whether or not patented or patentable), technical
information, procedures, designs, knowledge, know-how, software, data bases,
skill, expertise, experience, processes, models, drawings, materials and
records.
1.20 "INVENTORY " means any "inventory," as such term is defined in
Section 9109(4) of the UCC, wherever located, now or hereafter owned or acquired
by Borrower or in which Borrower now holds or hereafter acquires any interest,
and, in any event, shall include, without limitation, all inventory, goods and
other personal property which are held by or on behalf of Borrower for sale or
lease or are furnished or are to be furnished under a contract of service or
which constitute raw materials, work in process or materials used or consumed or
to be used or consumed in Borrower's business, or the processing, packaging,
promotion, delivery or shipping of the same, and all furnished goods whether or
not such inventory is listed on any schedules, assignments or reports furnished
to Lender from time to time and whether or not the same is in transit or in the
constructive, actual or exclusive occupancy or possession of Borrower or is held
by Borrower or by others for Borrower's account, including, without limitation,
all goods covered by purchase orders and contracts with suppliers and all goods
billed and held by suppliers and all inventory which may be located on premises
of Borrower or of any carriers, forwarding agents, truckers, warehousemen,
vendors, selling agents or other persons.
1.21 "LICENSE" means any Copyright License, Patent License, Trademark
License or other license of rights or interests now held or hereafter acquired
by Borrower or in which Borrower now holds or hereafter acquires any interest
and any renewals or extensions thereof.
1.22 "LIEN" means any mortgage, deed of trust, pledge, hypothecation,
assignment for security, security interest, encumbrance, levy, lien or charge of
any kind, whether voluntarily incurred or arising by operation of law or
otherwise, against any property, any conditional sale or other title retention
agreement, any lease in the nature of a security interest, and the filing of any
financing statement (other than a precautionary financing statement with respect
to a lease that is not in the nature of a security interest) under the UCC or
comparable law of any jurisdiction.
1.23 "LOAN DOCUMENTS" shall mean and include this Agreement, the Note(s),
and any other documents executed in connection with the Secured Obligations or
the transactions contemplated hereby, as the same may from time to time be
amended, modified, supplemented or restated, provided, that the Loan Documents
shall not include any of the Excluded Agreements.
1.24 "MATERIAL ADVERSE EFFECT" means a material adverse effect upon: (i)
the business, operations, properties, assets or conditions (financial or
otherwise) of Borrower; or (ii) the ability of Borrower to perform, or of Lender
to enforce, the Secured Obligations.
1.25 "MATURITY DATE" means the date thirty-six (36) months from the
Advance Date of each installment of the Loan.
1.26 "PATENT LICENSE" means any written agreement granting any right with
respect to any invention on which a Patent is in existence now owned or
hereafter acquired by Borrower or in which Borrower now holds or hereafter
acquires any interest.
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1.27 "PATENTS" means all of the following now owned or hereafter acquired
by Borrower or in which Borrower now holds or hereafter acquires any interest:
(a) letters patent of, or rights corresponding thereto in, the United States or
any other county, all registrations and recordings thereof, and all applications
for letters patent of, or rights corresponding thereto in the United States or
any other country, including, without limitation, registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof or any other country;
(b) all reissues, continuations, continuations-in-part or extensions thereof;
(c) all petty patents, divisionals, and patents of addition; and (d) all patents
to issue in any such applications.
1.28 "PERMITTED LIENS" means any and all of the following: (i) liens in
favor of Lender, (ii) liens related to, or arising in connection with, Senior
Debt.
1.29 "PROCEEDS" means "proceeds," as such term is defined in Section
9306(1) of the UCC and, in any event, shall include, without limitation, (a) any
and all Accounts, Chattel Paper, Instruments, cash or other forms of money or
currency or other proceeds payable to Borrower from time to time in respect of
the Collateral, (b) any and all proceeds of any insurance, indemnity, warranty
or guaranty payable to Borrower from time to time with respect to any of the
Collateral, (c) any and all payments (in any form whatsoever) made or due and
payable to Borrower from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any governmental authority (or any Person acting under color of
governmental authority), (d) any claim of Borrower against third parties (i) for
past, present or future infringement of any Copyright, Patent or Patent License
or (ii) for past, present or future infringement or dilution of any Trademark or
Trademark License or for injury to the goodwill associated with any Trademark,
Trademark registration or Trademark licensed under any Trademark License and (e)
any and all other amounts from time to time paid or payable under or in
connection with any of the Collateral.
1.30 "RECEIVABLES" shall mean and include all of the Borrowers accounts,
instruments, documents, chattel paper and general intangibles whether secured or
unsecured, whether now existing or hereafter created or arising, and whether or
not specifically sold or assigned to Lender hereunder.
1.31 "SECURED OBLIGATIONS" shall mean and include all principal, interest,
fees, costs, or other liabilities or obligations for monetary amounts owed by
Borrower to Lender, whether due or to become due, matured or unmatured,
liquidated or unliquidated, contingent or non-contingent, and all covenants and
duties regarding such amounts, of any kind of nature, present or future, arising
under this Agreement, the Note(s), or any of the other Loan Documents, whether
or not evidenced by any Note(s), Agreement or other instrument, as the same may
from time to time be amended, modified, supplemented or restated, provided, that
the Secured Obligations shall not include any indebtedness or obligations of
Borrower arising under or in connection with the Excluded Agreements.
1.32 "SENIOR CREDITOR" means a bank, insurance company, pension fund, or
other institutional lender to be determined, or a syndication of such
institutional lenders that provides Senior Debt financing to Borrower; provided,
that Senior Creditor shall not include any officer, director, shareholder,
venture capital investor, or insider of Borrower, or any affiliate of the
foregoing persons, except upon the express written consent of Lender.
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1.33 "SENIOR DEBT" means accounts receivable and equipment financing
indebtedness and obligations for borrowed money (including, without limitation,
principal, premium (if any), interest, fees charges, expenses, costs,
professional fees and expenses, and reimbursement obligations) at any time owing
by Borrower to under the Senior Loan Documents, including, but not limited to
such amounts as may accrue or be incurred before or after default or workout or
the commencement of any liquidation, dissolution, bankruptcy, receivership or
reorganization by or against Borrower provided, that Senior Debt shall not
include the following indebtedness or obligations outstanding at any one time:
(a) obligations incurred after default or workout or the commencement of
any liquidation, dissolution, bankruptcy, receivership, or reorganization case
by or against Borrower, and
(b) debt exceeding 10 million during 1999, 15 Million during 2000 and 18
Million during 2001.
1.34 "SENIOR LOAN DOCUMENTS" means the loan agreement between Borrower and
Senior Creditor and any other agreement, security agreement, document,
promissory note, UCC financing statement, or instrument executed by Borrower in
favor of Senior Creditor pursuant to or in connection with the Senior Debt or
the loan agreement, as the same may from time to time be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.35 "SUBORDINATION AGREEMENT" means the Subordination Agreement of even
date herewith, entered into between Borrower and Lender for the benefit of
Senior Creditor.
1.36 "TRADEMARK LICENSE" means any written agreement granting any right to
use any Trademark or Trademark registration now owned or hereafter acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest.
1.37 "TRADEMARKS" means any of the following now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest: (a) any and all trademarks, tradenames, corporate names, business
names, trade styles, service marks, logos, other source or business identifiers,
prints and labels on which any of the foregoing have appeared or appear, designs
and general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and any applications in
connection therewith, including, without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof and (b) any reissues, extensions or
renewals thereof.
1.38 "UCC" shall mean the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of Illinois. Unless otherwise defined
herein, terms that are defined in the UCC and used herein shall have the
meanings given to them in the UCC.
1.39 "WARRANT AGREEMENT(S)" shall mean those agreements entered into in
connection with the Loan, substantially in the form attached hereto as Exhibit I
pursuant to which Borrower granted Lender the right to purchase that number of
shares of Series H Preferred Stock of Borrower as more particularly set forth
therein.
SECTION 2. THE LOAN
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2.1 The outstanding principal amount of the Loan, together with interest
thereon precomputed at the rate of twelve (12%) percent per annum, shall be due
and payable in six (6) equal monthly installments of interest only, payable on
the first day of each month, followed by thirty (30) equal monthly installments
of principal and interest, payable on the first day of each month , to and
including the Maturity Date (each, a "Payment Date"). If any payment under the
Note(s) shall be payable on a day other than a business day, then such payment
shall be due and payable on the next succeeding business day.
2.2 Borrower shall have the option to prepay the Loan, in whole or in
part, after 12 months from the Closing Date by paying the principal amount
thereon together with all accrued and unpaid interest with respect to such
principal amount, as of the date of such prepayment, without premium. In the
event Borrower prepays the Note(s) within 12 months from the Closing Date
hereof, Borrower shall pay the principal amount together with all accrued and
unpaid interest and a prepayment premium equal to 1% of the then outstanding
principal amount.
2.3 (a) Notwithstanding any provision in this Agreement, the Note(s),
or any other Loan Document, it is not the parties' intent to contract for,
charge or receive interest at a rate that is greater than the maximum rate
permissible by law which a court of competent jurisdiction shall deem applicable
hereto (which under the laws of the State of Illinois shall be deemed to be the
laws relating to permissible rates of interest on commercial loans) (the
"Maximum Rate"). If the Borrower actually pays Lender an amount of interest,
chargeable on the total aggregate principal Secured Obligations of Borrower
under this Agreement and the Note(s) (as said rate is calculated over a period
of time from the date of this Agreement through the end of time that any
principal is outstanding on the Note(s)), which amount of interest exceeds
interest calculated at the Maximum Rate on said principal chargeable over said
period of time, then such excess interest actually paid by Borrower shall be
applied first, to the payment of principal outstanding on the Note(s); second,
after all principal is repaid, to the payment of Lender's out of pocket costs,
expenses, and professional fees which are owed by Borrower to Lender under this
Agreement or the Loan Documents; and third, after all principal, costs,
expenses, and professional fees owed by Borrower to Lender are repaid, the
excess (if any) shall be refunded to Borrower, and the effective rate of
interest will be automatically reduced to the Maximum Rate.
(b) In the event any interest is not paid when due hereunder,
delinquent interest shall be added to principal and shall bear interest on
interest, compounded at the rate set forth in Section 2.1.
(c) Upon and during the continuation of an Event of Default
hereunder, all Secured Obligations, including principal, interest,
compounded interest, and professional fees, shall bear interest at a rate
per annum equal to the rate set forth in Section 2.1. plus five percent
(5%) per annum ("Default Rate").
SECTION 3. SECURITY INTEREST
As security for the prompt, complete and indefeasible payment when due
(whether at stated payment dates or otherwise) of all the Secured Obligations
and in order to induce Lender to make the Loan upon the terms and subject to the
conditions of the Note(s), Borrower hereby assigns, conveys, mortgages, pledges,
hypothecates and transfers to Lender for security purposes only, and hereby
grants to Lender a security interest in, all of Borrower's right, title
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and interest in, to and under each of the following (all of which being
hereinafter collectively called the "Collateral"):
(a) All Receivables;
(b) All Equipment;
(c) All Fixtures;
(d) All Inventory;
(e) All other tangible goods and personal property of Borrower whether
now or hereafter owned or existing, leased, consigned by or to, or
acquired by, Borrower and wherever located; and
(f) To the extent not otherwise included, all Proceeds of each of the
foregoing and all accessions to, substitutions and replacements for,
and rents, profits and products of each of the foregoing.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BORROWER
The Borrower represents, warrants and agrees that;
4.1 Borrower owns all right title and interest in and to the Collateral,
free of all liens, security interests, encumbrances and claims whatsoever,
except for Permitted Liens.
4.2 Borrower has the full power and authority to, and does hereby grant
and convey to the Lender, a perfected security interest in the Collateral as
security for the Secured Obligations, free of all liens, security interests,
encumbrances and claims, other than Permitted Liens and shall execute such
Uniform Commercial Code financing statements in connection herewith as the
Lender may reasonably request. Except as set forth herein, no other lien,
security interest, adverse claim or encumbrance has been created by Borrower or
is known by Borrower to exist with respect to any Collateral.
4.3 Borrower is a corporation duly organized, legally existing and in
good standing under the laws of the State of Delaware, and is duly qualified as
a foreign corporation in all jurisdictions in which the nature of its business
or location of its properties require such qualifications and where the failure
to be qualified would have a material adverse effect.
4.4 Borrower's execution, delivery and performance of the Note(s), this
Agreement, all financing statements, all other Loan Documents required to be
delivered or executed in connection herewith, and the Warrant Agreement(s) have
been duly authorized by all necessary corporate action of Borrower, the
individual or individuals executing the Loan Documents and the Warrant
Agreement(s) were duly authorized to do so; and the Loan Documents and the
Warrant Agreement(s) constitute legal, valid and binding obligations of the
Borrower, enforceable in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization or other similar laws
generally affecting the enforcement of the rights of creditors.
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4.5 This Agreement, the other Loan Documents and the Warrant Agreement(s)
do not and will not violate any provisions of Borrower's [Articles/Certificate
of Incorporation], bylaws or any contract, agreement, law, regulation, order,
injunction, judgment, decree or writ to which the Borrower is subject, or result
in the creation or imposition of any lien, security interest or other
encumbrance upon the Collateral, other than those created by this Agreement.
4.6 The execution, delivery and performance of this Agreement, the other
Loan Documents and the Warrant Agreement(s) do not require the consent or
approval of any other person or entity including, without limitation, any
regulatory authority or governmental body of the United States or any state
thereof or any political subdivision of the United States or any state thereof.
4.7 No event which has had or could reasonably be expected to have a
Material Adverse Effect has occurred and is continuing.
4.8 No fact or condition exists that would (or would, with the passage of
time, the giving of notice, or both) constitute a default under the Loan
Agreement between Borrower and Senior Creditor.
4.9 Borrower has filed and will file all tax returns, federal, state and
local, which it is required to file and has duly paid or fully reserved for all
taxes or installments thereof (including any interest or penalties) as and when
due, which have or may become due pursuant to such returns or pursuant to any
assessment received by Borrower for the three (3) years preceding the Closing
Date, if any (including any taxes being contested in good faith and by
appropriate proceedings).
SECTION 5. INSURANCE
5.1 So long as there are any Secured Obligations outstanding, Borrower
shall cause to be carried and maintained comprehensive general liability
insurance against risks customarily insured against in Borrower's line of
business. Such risks shall include, without limitation, the risks of death,
bodily injury and property damage. So long as there are any Secured Obligations
outstanding, Borrower shall also cause to be carried and maintained insurance
upon the Collateral and Borrower's business, covering casualty, hazard and such
other property risks customarily insured against in Borrower's line of business.
Borrower shall deliver to Lender lender's loss payable endorsements (Form BFU
438 or equivalent) naming Lender as loss payee or additional insured, as
appropriate. Borrower shall use commercially reasonable efforts to cause all
policies evidencing such insurance to provide for at least thirty (30) days
prior written notice by the underwriter or insurance company to Lender in the
event of cancellation or expiration. Such policies shall be issued by such
insurers and in such amounts as are reasonably acceptable to Lender.
5.2 Borrower shall and does hereby indemnify and hold Lender, its agents
and shareholders harmless from and against any and all claims, costs, expenses,
damages and liabilities (including, without limitation, such claims, costs,
expenses, damages and liabilities based on liability in tort, including without
limitation, strict liability in tort), including reasonable attorneys' fees,
arising out of the disposition or utilization of the Collateral, other than
claims arising at or caused by Lender's gross negligence or willful misconduct.
SECTION 6. COVENANTS OF BORROWER
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Borrower covenants and agrees as follows at all times while any of the
Secured Obligations remain outstanding:
6.1 Borrower shall furnish to Lender the financial statements listed
hereinafter, each prepared in accordance with generally accepted accounting
principles consistently applied (the "Financial Statements"):
(a) as soon as practicable (and in any event within thirty (30)
days) after the end of each month, unaudited interim financial statements
as of the end of such month (prepared on a consolidated and consolidating
basis, if applicable), including balance sheet and related statements of
income and cash flows accompanied by a report detailing any material
contingencies (including the commencement of any material litigation by or
against Borrower) or any other occurrence that could reasonably be expected
to have a Material Adverse Effect, all certified by Borrower's Chief
Executive Officer or Chief Financial Officer to be true and correct;
(b) as soon as practicable (and in any event within ninety (90)
days) after the end of each fiscal year, unqualified audited financial
statements as of the end of such year (prepared on a consolidated and
consolidating basis, if applicable), including balance sheet and related
statements of income and cash flows, and setting forth in comparative form
the corresponding figures for the preceding fiscal year, certified by a
firm of independent certified public accountants selected by Borrower and
reasonably acceptable to Lender, accompanied by any management report from
such accountants;
(c) promptly after the sending or filing thereof, as the case may
be, copies of any proxy statements, financial statements or reports which
Borrower has made available to its shareholders and copies of any regular,
periodic and special reports or registration statements which Borrower
files with the Securities and Exchange Commission or any governmental
authority which may be substituted therefor, or any national securities
exchange; and
(d) promptly, any additional information, financial or otherwise
(including, but not limited, to tax returns and names of principal
creditors) as Lender reasonably believes necessary to evaluate Borrower's
continuing ability to meet its financial obligations.
6.2 Borrower shall permit any authorized representative of Lender and its
attorneys and accountants on reasonable notice to inspect, examine and make
copies and abstracts of the books of account and records of Borrower at
reasonable times during normal business hours. In addition, such representative
of Lender and its attorneys and accountants shall have the right to meet with
management and officers of the Company to discuss such books of account and
records.
6.3 Borrower will from time to time execute, deliver and file, alone or
with Lender, any financing statements, security agreements or other documents;
procure any instruments or documents as may be requested by Lender; and take all
further action that may be necessary or desirable, or that Lender may request,
to confirm, perfect, preserve and protect the security interests intended to be
granted hereby, and in addition, and for such purposes only, Borrower hereby
authorizes Lender to execute and deliver on behalf of Borrower and to file such
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<PAGE>
financing statements, security agreement and other documents without the
signature of Borrower either in Lender's name or in the name of Borrower as
agent and attorney-in-fact for Borrower. The parties agree that a carbon,
photographic or other reproduction of this Agreement shall be sufficient as a
financing statement and may be filed in any appropriate office in lieu thereof.
6.4 Borrower shall protect and defend Borrower's title as well as the
interest of the Lender against all persons claiming any interest adverse to
Borrower or Lender and shall at all times keep the Collateral free and clear
from any legal process, liens or encumbrances whatsoever (except any placed
thereon by Lender) and shall give Lender immediate written notice thereof.
6.5 Without Lender's prior written consent, Borrower shall not (a) grant
any material extension of the time of payment of any of the Receivables, (b) to
any material extent, compromise, compound or settle the same for less than the
full amount thereof, (c) release, wholly or partly, any Person liable for the
payment thereof, or allow any credit or discount whatsoever thereon other than
trade discounts granted in the ordinary course of business of Borrower.
6.6 Borrower shall maintain and protect its properties, assets and
facilities, including without limitation, its Equipment and Fixtures, in good
order and working repair and condition (taking into consideration ordinary wear
and tear) and from time to time make or cause to be made all necessary and
proper repairs, renewals and replacements thereto and shall competently manage
and care for its property in accordance with prudent industry practices.
6.7 Borrower shall not merge with and into any other entity; or sell or
convey all or substantially all of its assets or stock to any other person or
entity without notifying Lender a minimum of thirty (30) days prior to the
closing date and requesting Lender's consent to the assignment of all of
Borrower's Secured Obligations hereunder to the successor entity in form and
substance satisfactory to Lender. In the event Lender does not consent to such
assignment the parties agree Borrower shall prepay the Loan in accordance with
Section 2.2 hereof.
6.8 Borrower shall not, without the prior written consent of Lender, such
consent not to be unreasonably withheld, declare or pay any cash dividend or
make a distribution on any class of stock, other than pursuant to employee
repurchase plans upon an employee's death or termination of employment or
transfer, sell, lease, lend or in any other manner convey any equitable,
beneficial or legal interest in any material portion of the assets of Borrower
(except inventory sold in the normal course of business).
6.9 Upon the request of Lender, Borrower shall, during business hours,
make the Inventory and Equipment available to Lender for inspection at the place
where it is normally located and shall make Borrower's log and maintenance
records pertaining to the Inventory and Equipment available to Lender for
inspection. Borrower shall take all action necessary to maintain such logs and
maintenance records in a correct and complete fashion.
6.10 Borrower covenants and agrees to pay when due, all taxes, fees or
other charges of any nature whatsoever (together with any related interest or
penalties) now or hereafter imposed or assessed against Borrower, Lender or the
Collateral or upon Borrower's ownership, possession, use, operation or
disposition thereof or upon Borrower's rents, receipts
11
<PAGE>
or earnings arising therefrom. Borrower shall file on or before the due date
therefor all personal property tax returns in respect of the Collateral.
Notwithstanding the foregoing, Borrower may contest, in good faith and by
appropriate proceedings, taxes for which Borrower maintains adequate reserves
therefor.
6.11 Borrower shall not relocate any item of the Collateral (other than
sale of inventory in the ordinary course of business) except: (i) with the prior
written consent of the Lender not to be unreasonably withheld; and (ii) if such
relocation shall be within the continental United States. If permitted to
relocate Collateral pursuant to the foregoing sentence, unless otherwise agreed
in writing by Lender, Borrower shall first (a) cause to be filed and/or
delivered to the Lender all Uniform Commercial Code financing statements,
certificates or other documents or instruments necessary to continue in effect
the perfected security interest of the Lender in the Collateral, and (b) have
given the Lender no less than thirty (30) days prior written notice of such
relocation.
6.12 Borrower shall not redeem any preferred stock as long as any Advance
remains outstanding.
6.13 Borrower shall not sell, transfer, assign, hypothecate or otherwise
encumber its Intellectual Property without Lender's prior written consent.
SECTION 7. CONDITIONS PRECEDENT TO LOAN
The obligation of Lender to fund the Loan on each Advance Date shall be
subject to satisfaction by Borrower or waiver by Lender, in Lender's sole
discretion, of the following conditions:
7.1 (a) The Advance Date for any installment shall occur on or before
May 3, 1999
7.2 DOCUMENT DELIVERY. Borrower, on or prior to the Closing Date, shall
have delivered to Lender the following:
(a) executed originals of the Agreement, [Note(s)], and any
documents reasonably required by Lender to effectuate the liens of Lender,
with respect to all Collateral;
(b) certified copy of resolutions of Borrower's board of directors
evidencing approval of the borrowing and other transactions evidenced by
the Loan Documents and the Warrant Agreement(s);
(c) certified copies of the [Articles/Certificate of Incorporation]
and the Bylaws, as amended through the Closing Date, of Borrower;
(d) certificate of good standing for Borrower from its state of
incorporation and similar certificates from all other jurisdictions in
which it does business and where the failure to be qualified would have a
Material Adverse Effect;
(e) payment of the Facility Fee;
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<PAGE>
(f) such other documents as Lender may reasonably request.
7.3 ADVANCE REQUEST. Borrower shall:
(a) deliver to Lender, at least five (5) business day prior to the
Advance Date, written notice in the form of an Advance Request, or as
otherwise specified by Lender from time to time, specifying the date and
amount of such Advance .
(b) deliver executed original Note(s) and Warrant Agreements as set
forth in Section 2, as applicable.
(c) such other documents as Lender may reasonably request.
7.4 PERFECTION OF SECURITY INTERESTS. Borrower shall have taken or caused
to be taken such actions requested by Lender to grant Lender a first priority
perfected security interest in the Collateral, subject only to Permitted Liens.
Such actions shall include, without limitation, the delivery to Lender of all
appropriate financing statements, executed by Borrower, as to the Collateral
granted by Borrower for all jurisdictions as may be necessary or desirable to
perfect the security interest of Lender in such Collateral
7.5 ABSENCE OF EVENTS OF DEFAULTS. As of the Closing Date or the Advance
Date, no fact or condition exists that would (or would, with the passage of
time, the giving of notice, or both) constitute an Event of Default under this
Agreement or any of the Loan Documents and no fact or condition exists that
would (or would, with the passage of time, the giving of notice, or both)
constitute a default under the Senior Loan Documents between Borrower and Senior
Creditor.
7.6 MATERIAL ADVERSE EFFECT. As of the Closing Date or the Advance Date,
no event which has had or could reasonably be expected to have a Material
Adverse Effect has occurred and is continuing.
SECTION 8. DEFAULT
The occurrence of any one or more of the following events (herein called
"Events of Default") shall constitute a default hereunder and under the Note(s)
and other Loan Documents:
8.1 Borrower defaults in the payment of any principal, interest or other
Secured Obligation involving the payment of money under this Agreement, the
Note(s) or any of the other Loan Documents, and such default continues for more
than five (5) days after the due date thereof; or
8.2 Borrower defaults in the performance of any other covenant or Secured
Obligation of Borrower hereunder or under the Note(s) or any of the other Loan
Documents, and such default continues for more than twenty (20) days after
Lender has given notice of such default to Borrower.
8.3 Any representation or warranty made herein by Borrower shall prove to
have been false or misleading in any material respect; or
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<PAGE>
8.4 Borrower shall make an assignment for the benefit of creditors, or
shall admit in writing its inability to pay its debts as they become due, or
shall file a voluntary petition in bankruptcy, or shall file any petition or
answer seeking for itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation pertinent to such circumstances, or shall seek
or consent to or acquiesce in the appointment of any trustee, receiver, or
liquidator of Borrower or of all or any substantial part (33-1/3% or more) of
the properties of Borrower; or Borrower or its directors or majority
shareholders shall take any action initiating the dissolution or liquidation of
Borrower; or
8.5 Sixty (60) days shall have expired after the commencement of an
action by or against Borrower seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, without such action being dismissed or all
orders or proceedings thereunder affecting the operations or the business of
Borrower being stayed; or a stay of any such order or proceedings shall
thereafter be set aside and the action setting it aside shall not be timely
appealed; or Borrower shall file any answer admitting or not contesting the
material allegations of a petition filed against Borrower in any such
proceedings; or the court in which such proceedings are pending shall enter a
decree or order granting the relief sought in any such proceedings; or
8.6 Sixty (60) days shall have expired after the appointment, without the
consent or acquiescence of Borrower, of any trustee, receiver or liquidator of
Borrower or of all or any substantial part of the properties of Borrower without
such appointment being vacated; or
8.7 The default by Borrower under any Excluded Agreement(s), any other
promissory note or agreement for borrowed money, or any other agreement between
Borrower and Lender; or
8.8 The occurrence of any default under any lease or other agreement or
obligation of Borrower involving an amount in excess of $100,000.00 or having a
Material Adverse Effect; or the entry of any judgment against Borrower involving
an award in excess of $100,000.00 that would have a Material Adverse Effect,
that has not been bonded or stayed on appeal within thirty (30) days; or
8.9 The occurrence of any material default under the Senior Loan
Documents; or
SECTION 9. REMEDIES
Upon the occurrence of any one or more Events of Default, Lender, at its
option, may declare the Note and all of the other Secured Obligations to be
accelerated and immediately due and payable (provided, that upon the occurrence
of an Event of Default of the type described in Sections 8.4 or 8.5, the Note(s)
and all of the other Secured Obligations shall automatically be accelerated and
made due and payable without any further act), whereupon the unpaid principal of
and accrued interest on such Note(s) and all other outstanding Secured
Obligations shall become immediately due and payable, and shall thereafter bear
interest at the Default Rate set forth in, and calculated according to, Section
2.3 (c) of this Agreement. Lender may exercise all rights and remedies with
respect to the Collateral under the Loan Documents or otherwise available to it
under applicable law, including the right to release, hold or otherwise dispose
of all or any part of the Collateral and the right to occupy, utilize, process
and commingle the Collateral.
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<PAGE>
Upon the happening and during the continuance of any Event of Default,
Lender may then, or at any time thereafter and from time to time, apply,
collect, sell in one or more sales, lease or otherwise dispose of, any or all of
the Collateral, in its then condition or following any commercially reasonable
preparation or processing, in such order as Lender may elect, and any such sale
may be made either at public or private sale at its place of business or
elsewhere. Borrower agrees that any such public or private sale may occur upon
five (5) calendar days' prior written notice to Borrower. Lender may require
Borrower to assemble the Collateral and make it available to Lender at a place
designated by Lender which is reasonably convenient to Lender and Borrower. The
proceeds of any sale, disposition or other realization upon all or any part of
the Collateral shall be distributed by Lender in the following order of
priorities:
First, to Lender in an amount sufficient to pay in full Lender's costs and
professionals' and advisors' fees and expenses;
Second, to Lender in an amount equal to the then unpaid amount of the
Secured Obligations in such order and priority as Lender may choose in its
sole discretion; and
Finally, upon payment in full of all of the Secured Obligations, to
Borrower or its representatives or as a court of competent jurisdiction may
direct.
Lender shall be deemed to have acted reasonably in the custody,
preservation and disposition of any of the Collateral if it complies with the
obligations of a secured party under Section 9207 of the UCC.
Lender's rights and remedies hereunder are subject to the terms of the
Subordination Agreement.
SECTION 10. MISCELLANEOUS
10.1 CONTINUATION OF SECURITY INTEREST. This is a continuing Agreement and
the grant of a security interest hereunder shall remain in full force and effect
and all the rights, powers and remedies of Lender hereunder shall continue to
exist until the Secured Obligations are paid in full as the same become due and
payable and until Lender has executed a written termination statement (which
Lender shall execute within a reasonable time after full payment of the Secured
Obligations hereunder), reassigning to Borrower, without recourse, the
Collateral and all rights conveyed hereby and returning possession of the
Collateral to Borrower. The rights, powers and remedies of Lender hereunder
shall be in addition to all rights, powers and remedies given by statute or rule
of law and are cumulative. The exercise of any one or more of the rights, powers
and remedies provided herein shall not be construed as a waiver of or election
of remedies with respect to any other rights, powers and remedies of Lender.
10.2 SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under such law, such provision shall be ineffective only to the extent
and duration of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
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10.3 NOTICE. Except as otherwise provided herein, all notices and service
of process required, contemplated, or permitted hereunder or with respect to the
subject matter hereof shall be in writing, and shall be deemed to have been
validly served, given or delivered upon the earlier of: (i) the first business
day after transmission by facsimile or hand delivery or deposit with an
overnight express service or overnight mail delivery service; or (ii) the third
calendar day after deposit in the United States mails, with proper first class
postage prepaid, and shall be addressed to the party to be notified as follows:
(a) IF TO LENDER:
COMDISCO, INC.
Legal Department
Attention: General Counsel
6111 North River Road
Rosemont, IL 60018
Facsimile: (847) 518-5088
WITH A COPY TO:
COMDISCO, INC./COMDISCO VENTURES
6111 North River Road
Rosemont, IL 60018
Facsimile: (847) 518-5465
(b) IF TO BORROWER:
VIGNETTE CORPORATION
Attention: Chief Financial Officer
3410 Far West Blvd.,Suite 300
Austin, TX 87831
Facsimile: 512-502-0223
Phone: 512-502-0280
or to such other address as each party may designate for itself by like notice.
10.4 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, the Note(s), and the
other Loan Documents, and the Warrant Agreement(s) constitute the entire
agreement and understanding of the parties hereto in respect of the subject
matter hereof and thereof, and supersede and replace in their entirety any prior
proposals, term sheets, letters, negotiations or other documents or agreements,
whether written or oral, with respect to the subject matter hereof or thereof
(including, without limitation, Lender's proposal letter dated November 20,
1998, all of which are merged herein and therein. None of the terms of this
Agreement, the Note(s), any of the other Loan Documents or Warrant Agreement(s)
may be amended except by an instrument executed by each of the parties hereto.
10.5 HEADINGS. The various headings in this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
Agreement or any provisions hereof.
10.6 NO WAIVER. The powers conferred upon Lender by this Agreement are
solely to protect its interest in the Collateral and shall not impose any duty
upon Lender to exercise any
16
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such powers. No omission, or delay, by Lender at any time to enforce any right
or remedy reserved to it, or to require performance of any of the terms,
covenants or provisions hereof by Borrower at any time designated, shall be a
waiver of any such right or remedy to which Lender is entitled, nor shall it in
any way affect the right of Lender to enforce such provisions thereafter.
10.7 SURVIVAL. All agreements, representations and warranties contained
in this Agreement, the Note(s), the other Loan Documents and the Warrant
Agreement(s) or in any document delivered pursuant hereto or thereto shall be
for the benefit of Lender and shall survive the execution and delivery of this
Agreement and the expiration or other termination of this Agreement.
10.8 SUCCESSOR AND ASSIGNS. The provisions of this Agreement, the other
Loan Documents and the Warrant Agreement(s) shall inure to the benefit of and be
binding on Borrower and its permitted assigns (if any). Borrower shall not
assign its obligations under this Agreement, the Note(s), any of the other Loan
Documents or the Warrant Agreement(s), without Lender's express written consent,
and any such attempted assignment shall be void and of no effect. Lender may
assign, transfer, or endorse its rights hereunder and under the other Loan
Documents or Warrant Agreement(s) without prior notice to Borrower, and all of
such rights shall inure to the benefit of Lender's successors and assigns.
10.9 FURTHER INDEMNIFICATION. Borrower agrees to pay, and to save Lender
harmless from, any and all liabilities with respect to, or resulting from any
delay in paying, any and all excise, sales or other similar taxes which may be
payable or determined to be payable with respect to any of the Collateral or in
connection with any of the transactions contemplated by this Agreement.
10.10 GOVERNING LAW. This Agreement, the Note(s), the other Loan Documents
and the Warrant Agreement(s) have been negotiated and delivered to Lender in the
State of Illinois, and shall not become effective until accepted by Lender in
the State of Illinois. Payment to Lender by Borrower of the Secured Obligations
is due in the State of Illinois. This Agreement, the Note(s), the other Loan
Documents and the Warrant Agreement(s) shall be governed by, and construed and
enforced in accordance with, the laws of the State of Illinois, excluding
conflict of laws principles that would cause the application of laws of any
other jurisdiction.
10.11 CONSENT TO JURISDICTION AND VENUE. All judicial proceedings arising
in or under or related to this Agreement, the Note(s), any of the other Loan
Documents or Warrant Agreement(s) may be brought in any state or federal court
of competent jurisdiction located in the State of Illinois. By execution and
delivery of this Agreement, each party hereto generally and unconditionally: (a)
consents to personal jurisdiction in Cook County, State of Illinois; (b) waives
any objection as to jurisdiction or venue in Cook County, State of Illinois; (c)
agrees not to assert any defense based on lack of jurisdiction or venue in the
aforesaid courts; and (d) irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement, the Note(s), the other Loan
Documents or Warrant Agreement(s). Service of process on any party hereto in any
action arising out of or relating to this agreement shall be effective if given
in accordance with the requirements for notice set forth in Section 10.3, above
and shall be deemed effective and received as set forth in Section 10.3, above.
Nothing herein shall affect the right to serve process in any other manner
permitted by law or shall limit the right of either party to bring proceedings
in the courts of any other jurisdiction.
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10.12 MUTUAL WAIVER OF JURY TRIAL. Because disputes arising in connection
with complex financial transactions are most quickly and economically resolved
by an experienced and expert person and the parties wish applicable state and
federal laws to apply (rather than arbitration rules), the parties desire that
their disputes be resolved by a judge applying such applicable laws. EACH OF
BORROWER AND LENDER SPECIFICALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY
OF ANY CAUSE OF ACTION, CLAIM, CROSS-CLAIM, COUNTERCLAIM, THIRD PARTY CLAIM OR
ANY OTHER CLAIM (COLLECTIVELY, "CLAIMS") ASSERTED BY BORROWER AGAINST LENDER OR
ITS ASSIGNEE AND/OR BY LENDER OR ITS ASSIGNEE AGAINST BORROWER. This waiver
extends to all such Claims, including, without limitation, Claims which involve
persons or entities other than Borrower and Lender; Claims which arise out of or
are in any way connected to the relationship between Borrower and Lender; and
any Claims for damages, breach of contract arising out of this Agreement, any
other Loan Document or any of the Excluded Agreements, specific performance, or
any equitable or legal relief of any kind.
10.13 CONFIDENTIALITY. Lender acknowledges that certain items of
Collateral, including, but not limited to trade secrets, source codes, customer
lists and certain other items of Intellectual Property, and any Financial
Statements provided pursuant to Section 6 hereof, constitute proprietary and
confidential information of the Borrower (the "Confidential Information").
Accordingly, Lender agrees that any Confidential Information it may obtain in
the course of acquiring, perfecting or foreclosing on the Collateral or
otherwise provided under this Agreement, provided such Confidential Information
is marked as confidential by Borrower at the time of disclosure, shall be
received in the strictest confidence and will not be disclosed to any other
person or entity in any manner whatsoever, in whole or in part, without the
prior written consent of the Borrower, unless and until Lender has acquired
indefeasible title thereto.
10.14 COUNTERPARTS. This Agreement and any amendments, waivers, consents
or supplements hereto may be executed in any number of counterparts, and by
different parties hereto in separate counterparts, each of which when so
delivered shall be deemed an original, but all of which counterparts shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, the Borrower and the Lender have duly executed and delivered
this Agreement as of the day and year first above written.
BORROWER: VIGNETTE CORPORATION
Signature: /s/ Jack F. Lynch
-----------------------------
Print Name: Jack Lynch
-----------------------------
Title: V.P. Finance & Operations
-----------------------------
ACCEPTED IN ROSEMONT, ILLINOIS:
- ------------------------------
LENDER: COMDISCO, INC.
Signature: /s/ James P. Labe
-----------------------------
Print Name: James P. Labe
-----------------------------
Title: President
-----------------------------
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Exhibit C
ADVANCE REQUEST
Name: Vignette Corporation ("Borrower") Date:___________
Address: 3410 Far West Blvd.
Suite 300
Austin, TX 78731
Borrower hereby requests from Comdisco, Inc. ("Lender") an Advance in the
amount of $__________________ on ______________, 1998 (the "Advance Date") under
that Subordinated Loan and Security Agreement between Borrower and Lender dated
December 3, 1998 (the "Agreement").
Please:
(a) Issue a check payable to Borrower ________
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or
(b) Wire Funds to Borrower's account
---------
Bank:
------------------------------------
Address:
---------------------------------
---------------------------------
ABA Number:
------------------------------
Account Number:
--------------------------
Account Name:
----------------------------
Borrower hereby affirms that all Representations and Warranties of Borrower
set forth in Section 4 and all Conditions Precedent to Loan set forth in Section
7 of the Agreement remain true and correct as of the date hereof.
Executed this ___ day of __________, 1998 by:
BORROWER: VIGNETTE CORPORATION
BY:
-------------------------------
TITLE:
-------------------------------
PRINT:
-------------------------------
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EXHIBIT A
SUBORDINATED PROMISSORY NOTE
$ DATE:
------------ -------------
DUE:
-------------
FOR VALUE RECEIVED, Vignette Corporation a Delaware corporation (the "Borrower")
hereby promises to pay to the order of Comdisco, Inc., a Delaware corporation
(the "Lender") at P.O. Box 91744, Chicago, IL 60693 or such other place of
payment as the holder of this Secured Promissory Note (this "Note") may specify
from time to time in writing, in lawful money of the United States of America,
the principal amount of ____________ and 00/100 Dollars ($____________) together
with interest at twelve percent (12%) per annum from the date of this Note to
maturity of each installment on the principal hereof remaining from time to time
unpaid, such principal and interest to be paid in six (6) monthly installments
of interest only in the amount of _________ each commencing __________ and on
the same day of each month thereafter to and including _______________ followed
by thirty (30) equal months installment of $____________ each, commencing
____________ and on the same day of each month thereafter to and including
___________ , such installments to be applied first to accrued and unpaid
interest and the balance to unpaid principal. Interest shall be computed on the
basis of a year consisting of twelve months of thirty days each.
This Note is the Note referred to in, and is executed and delivered in
connection with, that certain Subordinated Loan and Security Agreement dated
___________ by and between Borrower and Lender (as the same may from time to
time be amended, modified or supplemented in accordance with its terms, the
"Loan Agreement"), and is entitled to the benefit and security of the Loan
Agreement and the other Loan Documents (as defined in the Loan Agreement), to
which reference is made for a statement of all of the terms and conditions
thereof. All terms defined in the Loan Agreement shall have the same
definitions when used herein, unless otherwise defined herein.
THIS NOTE IS EXPRESSLY SUBJECT TO THE TERMS OF THAT CERTAIN SUBORDINATION
AGREEMENT BY AND BETWEEN LENDER AND BORROWER FOR THE BENEFIT OF SENIOR CREDITOR.
IN THE EVENT OF ANY CONTRADICTION OR INCONSISTENCY BETWEEN THIS NOTE AND THE
SUBORDINATION AGREEMENT, THE TERMS OF THE SUBORDINATION AGREEMENT SHALL CONTROL.
The Borrower waives presentment and demand for payment, notice of dishonor,
protest and notice of protest and any other notice as permitted under the UCC or
any applicable law.
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This Note has been negotiated and delivered to Lender and is payable in the
State of Illinois, and shall not become effective until accepted by Lender in
the State of Illinois. This Note shall be governed by and construed and
enforced in accordance with, the laws of the State of Illinois, excluding any
conflicts of law rules or principles that would cause the application of the
laws of any other jurisdiction.
BORROWER: VIGNETTE CORPORATION
ADDRESS:
ADDRESS:
Signature:
----------------------------
Print Name:
----------------------------
Title:
----------------------------
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SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "Agreement") dated as of December
3,1998, is entered into by and between COMDISCO, INC., a Delaware corporation
("Subordinated Creditor"), and Vignette Corporation ("Borrower"), a Delaware
corporation, for the express benefit of Senior Creditor (as defined in Section
1, below).
RECITALS
Concurrently herewith, Subordinated Creditor is agreeing to advance to
Borrower a secured loan of money in the aggregate original principal amount of
Five Million Dollars ($5,000,000) as evidenced by a Subordinated Promissory Note
and a Subordinated Loan and Security Agreement, each dated as of December 3,
1998 (as the same may from time to time be amended, modified, supplemented,
extended, renewed, restated or replaced, the "Subordinated Note" and the
"Subordinated Loan Agreement," respectively), made by Borrower in favor of
Subordinated Creditor. Borrower's obligations to Subordinated Creditor
evidenced by the Subordinated Note are secured by the personal property
collateral granted by Borrower to Subordinated Creditor pursuant to the
Subordinated Loan Agreement.
Borrower has advised Subordinated Creditor that it contemplates entering
into a loan agreement (as the same may from time to time be amended, modified,
supplemented or restated, the "Senior Loan Agreement") with Senior Creditor,
pursuant to which Senior Creditor shall make available to Borrower, on a senior
secured basis, certain extensions of credit as described in the Senior Loan
Agreement.
In contemplation of Borrower obtaining such senior secured financing and
the conditions expected to be imposed by Senior Creditor as conditions precedent
to making available to Borrower the proceeds of such financing, Subordinated
Creditor is entering into this Agreement with Borrower for the express benefit
of Senior Creditor, on the terms and subject to the conditions set forth below.
AGREEMENT
NOW, THEREFORE, in consideration of Borrower's and Subordinated Creditor's
entering into the Subordinated Loan Documents (as defined in Section 1, below),
Subordinated Creditor and Borrower hereby severally agree, each on behalf of
itself and for the benefit of Senior Creditor, as set forth below.
1. DEFINITIONS
As used herein, the following terms shall have the following meanings:
"EXCLUDED AGREEMENTS" means:
(a) the Warrant Agreement of even date herewith between Borrower and
Subordinated Creditor pursuant to which Borrower granted Subordinated
Creditor the right to purchase certain shares of stock (as the same may
from time to time be amended, modified, supplemented or restated, the
"Warrant Agreement"), and any other warrants to acquire, or agreements
governing the rights of the holders of, any equity security of Borrower,
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(b) any stock of the Company issued or purchased pursuant to the
Warrant Agreement,
(c) the Master Lease Agreement dated as of December 3, 1998 between
Borrower, as lessee, and Subordinated Creditor, as lessor, including,
without limitation, any Equipment Schedules and Summary Equipment Schedules
to the Master Lease Agreement executed or delivered by Borrower pursuant
thereto and any other modifications or amendments thereof whereby Borrower
(as lessee) leases equipment, software, or goods from Subordinated Creditor
(as lessor).
"SENIOR CREDITOR" means a bank, insurance company, pension fund, or other
institutional lender to be determined, or a syndicate of such institutional
lenders (including, without limitation, any agent or other representative for
such syndicate), that provides Senior Debt financing to Borrower; provided, that
Senior Creditor shall not include any officer, director, shareholder, venture
capital investor, or insider of Borrower, or any affiliate of the foregoing
persons, except upon the express written consent of Subordinated Creditor.
"SENIOR DEBT" means any and all indebtedness and obligations for borrowed
money (including, without limitation, principal, premium (if any), interest,
fees, charges, expenses, costs, professional fees and expenses, and
reimbursement obligations) at any time owing by Borrower to Senior Creditor
under the Senior Loan Documents including but not limited to such amounts as may
accrue or be incurred before or after default or workout or the commencement of
any liquidation, dissolution, bankruptcy, receivership, or reorganization case
by or against Borrower provided, that Senior Debt shall not include the
following indebtedness or obligations outstanding at any one time:
(a) obligations incurred after default or workout or the commencement of
any liquidation, dissolution, bankruptcy, receivership, or reorganization case
by or against Borrower, and
(b) debt exceeding 10 Million Dollars during 1999, 15 Million Dollars
during 2000 and 18 Million Dollars during 2001.
"SENIOR LOAN DOCUMENTS" means the Senior Loan Agreement and any other
agreement, security agreement, document, promissory note, UCC financing
statement, or instrument executed by Borrower in favor of Senior Creditor
pursuant to or in connection with the Senior Debt or the Senior Loan Agreement,
as the same may from time to time be amended, modified, supplemented, extended,
renewed, restated or replaced.
"SUBORDINATED DEBT" means any and all indebtedness and obligations for
borrowed money (including, without limitation, principal, premium (if any),
interest, fees, charges, expenses, costs, professional fees and expenses, and
reimbursement obligations) at any time owing by Borrower to Subordinated
Creditor under the Subordinated Loan Documents, including but not limited to
such amounts as may accrue or be incurred before or after default or workout or
the commencement of any liquidation, dissolution, bankruptcy, receivership, or
reorganization case by or against Borrower; provided, that notwithstanding
anything to the contrary contained in this Agreement, Subordinated Debt shall
not include any indebtedness or obligations of Borrower arising under or in
connection with any of the Excluded Agreements.
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"SUBORDINATED LOAN DOCUMENTS" means the Subordinated Note(s), the
Subordinated Loan Agreement, and any other agreement, document, promissory note,
UCC financing statement, or instrument executed by Borrower pursuant to or in
connection with the Subordinated Debt, as the same may from time to time be
amended, modified, supplemented, extended, renewed, restated or replaced;
provided, that the Subordinated Loan Documents shall not include any of the
Excluded Agreements. Any changes to the payment schedule or the maturity of the
Subordinated Note requires prior written approval from Senior Creditor which
shall not be unreasonably withheld.
2. SUBORDINATION
(a) On the terms and conditions set forth below, Subordinated Creditor's
right to payment and performance of the Subordinated Debt and all liens and
security interests securing the Subordinated Debt are hereby subordinated to
Senior Creditor's right to full payment and performance of the Senior Debt and
all liens and security interests securing the Senior Debt. Subject to and
except as set forth in Section 3, below, Subordinated Creditor shall not ask,
demand, sue for, take or receive from Borrower, by setoff or in any other
manner, the whole or any part of any monies which may now or hereafter be owing
by Borrower to Subordinated Creditor, or be owing by any other person to
Subordinated Creditor under a guaranty or similar instrument, on account of the
Subordinated Debt, nor any collateral security for any of the foregoing,
including, without limitation, any personal property collateral granted to
Subordinated Creditor pursuant to the Subordinated Loan Agreement, unless and
until all Senior Debt shall have been paid in cash or otherwise provided for in
property or securities in the full amount of the allowed claim of the Senior
Debt and all commitments to extend credit under the Senior Loan Agreement shall
have been terminated (the temporary reduction of outstanding obligations,
liabilities and indebtedness of Borrower to Senior Creditor not being deemed to
constitute full payment or satisfaction thereof). Nothing herein shall be
deemed to subordinate, waive or restrict the payment or performance of the
obligations arising under the Excluded Agreements or subordinate the priority of
any lien or interest in property securing or evidenced by the Excluded
Agreements.
(b) Subordinated Creditor expressly understands that Senior Creditor is
expected not to permit Subordinated Creditor to create, maintain or perfect any
lien on or in any property of Borrower, other than the security interest granted
in favor of Subordinated Creditor in certain of Borrower's personal property
under and as described in the Subordinated Loan Agreement and which liens and
security interests are junior to those securing the Senior Debt. If,
notwithstanding the foregoing, any lien shall be created or shall arise
(including, without limitation, the security interests granted in favor of
Subordinated Creditor pursuant to the Subordinated Loan Agreement), whether by
operation of law or otherwise, and may from time to time exist in favor of
Subordinated Creditor in or on any property of Borrower to secure all or any
portion of the Subordinated Debt, then, regardless of the relative times of
attachment or perfection thereof or the order of filing of financing statements,
mortgages or other documents, any liens granted by Borrower in favor of Senior
Creditor to secure the Senior Debt shall in all respects be first and senior
liens, superior to any liens in favor of Subordinated Creditor securing the
Subordinated Debt, including, without limitation, the security interests granted
in favor of Subordinated Creditor pursuant to the Subordinated Loan Agreement.
In the event Subordinated Creditor has or obtains possession of any such
property or forecloses upon or enforces its lien upon any such property, whether
by judicial action or otherwise, then all such property shall be immediately
delivered in kind to Senior Creditor or, if not deliverable in kind, all cash or
non-cash proceeds and profits of such property shall be held in trust for the
benefit of Senior Creditor and paid over to Senior Creditor, without any
deduction or offset, unless and
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until all of the Senior Debt shall have been paid in cash or otherwise provided
for in property or securities in the full amount of the allowed claim of the
Senior Debt and all commitments to extend credit under the Loan Agreement shall
have been terminated.
(c) The subordination contained in this Agreement is intended to define
the rights and duties of Subordinated Creditor and Senior Creditor; it is not
intended that any third party (including any bankruptcy trustee, receiver, or
debtor-in-possession) shall benefit from it. If the effect of the subordination
contained in this Agreement would be to give any third party a priority status
to which that party would not otherwise be entitled, that provision shall, to
the extent necessary to avoid that priority, be given no effect and the rights
and priorities of Senior Creditor and Subordinated Creditor shall be determined
in accordance with applicable law and this Subordination Agreement.
3. PERMITTED PAYMENTS; PAYMENT BLOCKAGE
(a) Notwithstanding anything to the contrary contained in Section 2,
above, but subject expressly to Section 3.b, below, Borrower shall be permitted
to make, and Subordinated Creditor shall be permitted to accept or receive the
following permitted payments ("Permitted Payments"): (i) scheduled repayments of
principal when due under the Subordinated Note(s) and Subordinated Loan
Agreement, (ii) scheduled payments of accrued interest when due under the
Subordinated Note(s) and Subordinated Loan Agreement, (iii) payments of
reimbursable expenses, costs and professional fees and expenses as and when due
under the Subordinated Note(s) and the other Subordinated Loan Documents, (iv)
cancellation of Subordinated Debt in consideration of the Exercise Price for
stock purchased by Subordinated Creditor under the Warrant Agreement, and (v)
other payments consented to in writing by Senior Creditor.
(b) Notwithstanding anything to the contrary contained in this Section 3
or elsewhere in this Agreement, if Senior Creditor delivers to Subordinated
Creditor written notice (a "Blockage Notice") which states that either:
(i) a specific default by Borrower involving the payment of Senior
Debt (a "Payment Default") has occurred under the Senior Loan Documents and
continues to exist after the giving of any required notice and the
expiration of any applicable grace or cure period, or
(ii) a specific default by Borrower not involving the payment of
Senior Debt (a "Non-Payment Default") has occurred under the Senior Loan
Documents and continues to exist after the giving of any required notice
and the expiration of any applicable grace or cure period, such notice to
include all such defaults in existence at the time,
then from and after the date of delivery of any such Blockage Notice,
Subordinated Creditor shall not accept or receive any payment of any kind of or
on account of the Subordinated Debt (including any Permitted Payment), unless
and until the earlier of (A) the time such Payment Default or Non-Payment
Default shall have been cured by Borrower or waived in writing by Senior
Creditor, or (B) the expiration of the Blockage Period (as defined below) for
such Blockage Notice.
As used herein, "Blockage Period" means a period of time beginning on the
date a Blockage Notice is delivered to Subordinated Creditor and terminating on
the earlier to occur of:
(1) 120 days following such date; provided that if, prior to the
expiration of such 120-day period, Senior Lender has commenced a judicial
proceeding or non-
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judicial actions to collect or enforce the Senior Debt or the acceleration
of the Senior Debt or the collateral for the Senior Debt, or a case or
proceeding by or against Borrower is commenced under the federal Bankruptcy
Code or any other insolvency law, then such period shall be extended during
the continuation of such proceedings and actions until the payment in cash
or other property or securities in the full amount of the allowed claim of
the Senior Debt; or
(2) Senior Creditor's written consent to such termination.
Senior Creditor shall not issue more than two (2) Blockage Notice for Non-
Payment Defaults in any period of 365 consecutive days. After the satisfaction
of the applicable conditions specified in (A) or (B) above, Subordinated
Creditor shall be entitled to receive all Permitted Payments.
4. ENFORCEMENT RIGHTS
Any rights of Subordinated Creditor to accelerate the maturity of the
Subordinated Debt, enforce any claim (including any default remedy) with respect
to the Subordinated Debt or the collateral for the Subordinated Debt, or
otherwise to take any action against Borrower or Borrower's property with
respect to the Subordinated Debt shall be subject to any Blockage Notice given
pursuant to Section 3.b hereof.
5. ASSIGNMENT OF SUBORDINATED DEBT
Subordinated Creditor hereby covenants to Senior Creditor that prior to the
termination of this Agreement in accordance with Section 10, below, the entire
Subordinated Debt created in favor of Subordinated Creditor shall continue to be
owing only to Subordinated Creditor, and any collateral security therefor
(including, without limitation, the collateral security granted to Subordinated
Creditor pursuant to the Subordinated Security Agreement) shall continue to be
held solely for the benefit of Subordinated Creditor, unless assigned pursuant
to an assignment made expressly subject to this Agreement. The Subordinated
Note(s) shall be legended to expressly state that it is subject to this
Subordination Agreement.
6. SENIOR CREDITOR'S PRIORITY
In the event of any distribution, division, or application, partial or
complete, voluntary or involuntary, by operation of law or otherwise, of all or
any part of the property of Borrower or the proceeds thereof to the creditors of
Borrower, or the readjustment of the Senior Debt and the Subordinated Debt of
Borrower, whether by reason of liquidation, bankruptcy, arrangement,
receivership, assignment for the benefit of creditors or any other action or
proceeding involving the readjustment of all or any part of the Senior Debt or
the Subordinated Debt, or the application of the property of Borrower to the
payment or liquidation thereof, or upon the dissolution, liquidation,
reorganization, or other winding up of Borrower's business, or upon the sale of
all or any substantial part of Borrower's property (any of the foregoing being
hereinafter referred to as an "Insolvency Event"), then, and in any such event,
Senior Creditor shall be entitled to receive payment in cash or other property
or securities in the full amount of the allowed claim of the Senior Debt, before
Subordinated Creditor shall be entitled to receive any payment on account of the
Subordinated Debt, and to that end and in furtherance thereof:
(a) All payments and distributions of any kind or character,
whether in cash, property, or securities, in respect of the Subordinated
Debt to which Subordinated Creditor would be entitled if the Subordinated
Debt were not subordinated pursuant to
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this Agreement, shall be paid to Senior Creditor and applied in payment of
the Senior Debt.
(b) Subordinated Creditor shall file a claim or claims, on the form
required in such proceedings, on or before thirty (30) days prior to the
last date such claims or proofs of claim may be filed pursuant to law or
the order of any court exercising jurisdiction over such proceeding.
(c) In the event that, notwithstanding the foregoing, any payment
or distribution of any kind or character, whether in cash, properties or
securities, shall be received by Subordinated Creditor on account of the
Subordinated Debt before all of the Senior Debt has been paid, then such
payment or distribution shall be received by Subordinated Creditor in trust
for and shall be promptly paid over to Senior Creditor for application to
the payments of amounts due on the Senior Debt until the Senior Debt shall
have been paid in cash, property, or securities in the full amount of the
allowed claim of the Senior Debt.
7. GRANT OF AUTHORITY
In the event of the occurrence of an Insolvency Event, and in order to
enable Senior Creditor to enforce its rights hereunder in any of the aforesaid
actions or proceedings, Senior Creditor is hereby irrevocably authorized and
empowered, in Senior Creditor's discretion, as follows:
(a) Senior Creditor is hereby irrevocably authorized and empowered
(in its own name or in the name of Subordinated Creditor or otherwise), but
shall have no obligation, (i) to demand, sue for, collect and receive every
payment or distribution referred to in Section 6, above, and give
acquittance therefor and (ii) (if Subordinated Creditor has failed to file
claims or proofs of claim on or before thirty (30) days prior to the last
date such claims or proofs of claim may be filed pursuant to law or the
order of any court exercising jurisdiction over such proceeding) to file
claims and proofs of claim, and (iii) to take such other action (including,
without limitation, enforcing any lien securing payment of the Subordinated
Debt) as it may deem necessary or advisable for the exercise or enforcement
of any of the rights or interests of Senior Creditor hereunder.
Subordinated Creditor shall duly and promptly take such action as Senior
Creditor may reasonably request to execute and deliver to Senior Creditor
such authorizations, endorsements, assignments, or other instruments as
Senior Creditor may reasonably request in order to enable Senior Creditor
to enforce any and all claims with respect to, and any liens securing
payment of, the Subordinated Debt as such enforcement is contemplated
herein.
(b) To the extent that payments or distributions on account of the
Subordinated Debt are made in property or securities other than cash,
Subordinated Creditor authorizes Senior Creditor to sell or dispose of such
property or securities on such terms as are commercially reasonable in the
situation in question. Following full payment of the Senior Debt, Senior
Creditor shall remit to Subordinated Creditor (with all necessary
endorsements) to the extent of Subordinated Creditor's interest therein,
all payments and distributions of cash, property, or securities paid to and
held by Senior Creditor in excess of the allowed amount of the Senior Debt.
8. PAYMENTS RECEIVED BY SUBORDINATED CREDITOR
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Should any payment, distribution, or security be received by Subordinated
Creditor upon or with respect to the Subordinated Debt (other than Permitted
Payments) prior to termination of this Agreement in accordance with Section 10,
below, Subordinated Creditor shall receive and hold the same in trust for the
benefit of Senior Creditor and shall forthwith deliver the same to Senior
Creditor in precisely the form received (except for the endorsement or
assignment of Subordinated Creditor where necessary), for application to the
Senior Debt, and, until so delivered, the same shall be held in trust by
Subordinated Creditor as the property of Senior Creditor.
9. FURTHER ASSURANCES; COOPERATION
Subject to Section 16.b hereof, Subordinated Creditor agrees to cooperate
with Senior Creditor and to take all actions that Senior Creditor may reasonably
require to enable Senior Creditor to realize the full benefits of this
Agreement.
10. TERMINATION OF AGREEMENT
This Agreement shall be effective upon the date set forth in Section 21
hereof. After the effective date occurs, this Agreement shall remain in effect
and cannot be revoked or amended by Subordinated Creditor, except with the
written consent of Senior Creditor. This Agreement shall terminate upon the
date which is 105 days following the date on which the Senior Debt shall have
been paid in cash or other property or securities in the full amount of the
allowed claim of the Senior Debt and all commitments to extend credit under the
Loan Agreement shall have been terminated.
11. ADDITIONAL AGREEMENTS FOR SENIOR CREDITOR
Senior Creditor may administer and manage its credit and other
relationships with Borrower in its own best interest, without notice to or
consent of Subordinated Creditor. At any time and from time to time, Senior
Creditor may enter into any amendment or agreement with Borrower as Senior
Creditor may deem proper, extending the time of payment of or renewing or
otherwise altering the terms of all or any of the obligations constituting
Senior Debt or affecting the collateral security for, supporting or underlying
any or all of the Senior Debt, and may exchange, sell, release, surrender or
otherwise deal with any such collateral without in any way thereby impairing or
affecting this Agreement, and all such additional agreements and amendments
shall be "Senior Loan Documents" evidencing the Senior Debt; provided, that
neither this Section 11 nor any provision of such agreements shall affect the
limitations contained in the definitions of Senior Creditor or Senior Debt.
12. SUBROGATION
If cash or other property otherwise payable or deliverable to Subordinated
Creditor or on account of the Subordinated Debt shall have been applied pursuant
to this Agreement to the payment of the Senior Debt, and if the Senior Debt
shall have been paid in cash, property or securities in the full amount of the
allowed claim of Senior Debt, then Subordinated Creditor shall be subrogated to
any rights of Senior Creditor to receive further payments or distributions
applicable to the Senior Debt until the Subordinated Debt shall have been fully
paid. No such payments or distributions received by Subordinated Creditor by
reason of such subrogation shall, as between Borrower and its creditors other
than Senior Creditor, on the one hand, and Subordinated Creditor, on the other
hand, be deemed to be a payment by Borrower on account of the Subordinated Debt
owed to Subordinated Creditor.
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13. SUBORDINATED CREDITOR'S WAIVERS AND COVENANTS
(a) Without limiting the generality of any other waiver made by
Subordinated Creditor in this Agreement, Subordinated Creditor hereby expressly
waives (i) reliance by Senior Creditor upon the subordination and other
agreements herein provided, and (ii) any claim that Subordinated Creditor may
now or hereafter have against Senior Creditor arising out of any and all actions
that Senior Creditor, in good faith, takes or omits to take (A) with respect to
the creation, perfection or continuation of liens in or on any collateral
security for the Senior Debt, (B) with respect to the foreclosure upon, sale,
release, or depreciation of, or failure to realize upon, any of the collateral
security for the Senior Debt, (C) with respect to the collection of any claim
for all or any part of the Senior Debt from any account debtor, guarantor or any
other third party and (D) with respect to the valuation, use, protection or
release of any collateral security for the Senior Debt.
(b) Without limiting the generality of any other covenant or agreement
made by Subordinated Creditor in this Agreement, Subordinated Creditor hereby
covenants and agrees that (i) Senior Creditor has not made any warranties or
representations with respect to the due execution, legality, validity,
completeness or enforceability of the Senior Loan Agreement or any of the other
Senior Loan Documents, or the collectibility of the Senior Debt; and (ii)
Subordinated Creditor will not interfere with or in any manner oppose a
disposition of any collateral security for the Senior Debt by Senior Creditor.
14. REINSTATEMENT OF SENIOR DEBT
To the extent that the Senior Creditor receives payments on, or proceeds of
any collateral security for the Senior Debt which are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, receiver or any other party under any bankruptcy law, state or
federal law, common law, or equitable cause, then, to the extent of such payment
or proceeds invalidated, declared to be fraudulent or preferential, set aside or
required to be repaid, the Senior Debt, or part thereof, intended to be
satisfied shall be revived and continue in full force and effect as if such
payments or proceeds had not been received by Senior Creditor.
15. NO WAIVERS
Senior Creditor shall not be prejudiced in its rights under this Agreement
by any act or failure to act of Borrower or Subordinated Creditor or any
noncompliance of Borrower or Subordinated Creditor with any agreement or
obligation, regardless of any knowledge thereof which Senior Creditor may have,
or with which Senior Creditor may be charged; and no action permitted hereunder
taken by Senior Creditor shall in any way affect or impair the rights of Senior
Creditor in the exercise of any other right or remedy or shall operate as a
waiver thereof, and no single or partial exercise by Senior Creditor of any
right or remedy shall preclude any other or further exercise thereof; nor shall
any modification or waiver of any of the provisions of this Agreement be binding
upon Senior Creditor, except as expressly set forth in a writing duly signed and
delivered by Senior Creditor.
16. INFORMATION CONCERNING BORROWER; CREDIT ADMINISTRATION
(a) Subordinated Creditor hereby assumes responsibility for keeping
itself informed of the financial condition of Borrower, any and all endorsers
and any and all guarantors of the Senior Debt and of all other circumstances
bearing upon the risk of nonpayment of the Senior
<PAGE>
Debt or the Subordinated Debt that diligent inquiry would reveal, and
Subordinated Creditor hereby agrees that Senior Creditor shall have no duty to
advise Subordinated Creditor of information known to Senior Creditor regarding
such condition.
(b) Subject to Sections 2.b, 3, 4, 7, and 8 hereof, Subordinated
Creditor may (i) administer and manage its credit and other relationships with
Borrower in its own best interest, and (ii) amend or extend its agreements with
Borrower or enter into additional agreements with Borrower, all without the
consent of or notice to the Senior Creditor; provided that neither this Section
16.b nor any amendments or additional agreements referred to therein shall
impair or affect the subordination of Subordinated Debt or change the definition
of Subordinated Debt, Subordinated Creditor, Senior Debt or Senior Creditor.
17. NOTICES
Except as otherwise provided herein, all notices and service of process
required, contemplated, or permitted hereunder or with respect to the subject
matter hereof shall be in writing, and shall be deemed to have been validly
served, given or delivered upon the earlier of: (i) the first business day
after transmission by facsimile or hand delivery or deposit with an overnight
express service or overnight mail delivery service; or (ii) the third calendar
day after deposit in the United States mails, with proper first class postage
prepaid, and shall be addressed to the party to be notified as follows:
IF TO SUBORDINATED CREDITOR:
COMDISCO, INC.
Legal Department
Attention: General Counsel
6111 North River Road
Rosemont, IL 60018
Facsimile: (847) 518-5088
WITH A COPY TO:
COMDISCO INC./VENTURE GROUP
Attention: James Labe
6111 North River Road
Rosemont, IL 60018
Facsimile: (847) 518-5465
IF TO BORROWER:
VIGNETTE CORPORATION
Attention: Jack F. Lynch
3410 Far West Blvd.
Suite 200
Austin, TX 78731
Facsimile: (512) 502-0280
If to Senior Creditor, at such address as Senior Creditor shall designate
in a writing given to Subordinated Creditor and Borrower, or to such other
address as each party may designate for itself by like notice.
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18. SEVERABILITY
Wherever possible, each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
19. GOVERNING LAW
This Agreement has been approved by Subordinated Creditor in the State of
California, and shall be governed by and interpreted in accordance with the laws
of the State of California without regard to principles of conflict of laws that
would cause the application of laws of any other jurisdiction.
20. ASSIGNMENT
This Agreement shall be binding upon Subordinated Creditor, Borrower and
their respective successors and assigns, and shall inure to the benefit of and
be enforceable by Senior Creditor and its successors and assigns.
21. EFFECTIVENESS OF AGREEMENT
This Agreement shall be effective upon the occurrence of both of the
following events: (a) the execution of this Agreement by Borrower and its
acceptance in Rosemont, Illinois by Subordinated Creditor, and (b) the delivery
by Borrower and Senior Creditor to Subordinated Creditor of written notice (the
"Notice of Senior Loan") in the form attached hereto as Exhibit A, that Borrower
has entered into a Senior Loan Agreement with Senior Creditor for Senior Debt,
which notice shall identify Senior Creditor and state the address to which
notices to Senior Creditor are to be sent. Borrower agrees to furnish
Subordinated Creditor with a copy of the Senior Loan Agreement and such other
Senior Loan Documents as Subordinated Creditor shall reasonably request;
provided, however, that any delay or failure by Borrower to furnish such copies
shall not limit or impair the effectiveness of this Agreement.
22. MUTUAL WAIVER OF JURY TRIAL
Because disputes arising in connection with complex financial transactions
are most quickly and economically resolved by an experienced and expert person
and the parties wish applicable state and federal laws to apply (rather than
arbitration rules), the parties desire that their disputes be resolved by a
judge applying such applicable laws. EACH OF BORROWER, SUBORDINATED CREDITOR,
AND SENIOR CREDITOR SPECIFICALLY WAIVE EACH PARTY'S RIGHT TO TRIAL BY JURY OF
ANY CAUSE OF ACTION, CLAIM, CROSS-CLAIM, COUNTERCLAIM, THIRD PARTY CLAIM OR ANY
OTHER CLAIM (COLLECTIVELY, "CLAIMS") ASSERTED BY BORROWER, SUBORDINATED
CREDITOR, OR SENIOR CREDITOR AGAINST THE OTHER PARTY OR PARTIES TO THIS
AGREEMENT. This Waiver extends to all such claims, including, without
limitation, claims which involve persons or entities other than Borrower,
Subordinated Creditor, and Senior Creditor; claims which arise out of or are in
any way connected to the relationships between or among Borrower, Subordinated
Creditor, and Senior Creditor; and any claims for damages, breach of contract,
specific performance, or any equitable or legal relief of any kind.
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23. COUNTERPARTS
This Agreement and any amendments, waivers, consents or supplements hereto
may be executed in any number of counterparts, and by different parties hereto
in separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all of which counterparts together shall constitute but
one and the same instrument.
IN WITNESS WHEREOF, this Subordination Agreement has been executed as of
the date first above written.
BORROWER VIGNETTE CORPORATION
Signature: /s/ Jack F. Lynch
---------------------------
Print Name: Jack F. Lynch
---------------------------
Title: V.P. Finance & Operations
---------------------------
ACCEPTED IN ROSEMONT, ILLINOIS:
SUBORDINATED CREDITOR COMDISCO, INC.
Signature: /s/ James P. Labe
---------------------------
Print Name: James P. Labe
---------------------------
Title: President
---------------------------
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NOTICE OF SENIOR LOAN
Pursuant to Section 22 of the Subordination Agreement dated as of December
3, 1998, by and between Comdisco, Inc., (as Subordinated Creditor) and Vignette
Corporation (as Borrower), notice is hereby given that Borrower has entered into
a Senior Loan Agreement with Imperial Bank (as Senior Creditor), whose address
is: 2460 Sand Hill Road, Suite 102, Menlo Park, CA 94025 Attn: Ken Le Deit
Facsimile: (650) 233-3020, and that on and after the date of this Notice Senior
Creditor is and shall be entitled to all the rights and benefits of the
Subordination Agreement and shall be bound thereby.
Attached hereto are true and correct copies, as executed, of the Senior
Loan Agreement and the other Senior Loan Documents.
BORROWER: VIGNETTE CORPORATION
Signature: /s/ Jack F. Lynch
---------------------------
Print Name: Jack F. Lynch
---------------------------
Title: V.P. Finance & Operations
---------------------------
SENIOR CREDITOR: IMPERIALBANK
Signature: /s/ Mansoor Ghori
---------------------------
Print Name: Mansoor Ghori
---------------------------
Title: Senior V.P. & Regional Mgr.
---------------------------
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<PAGE>
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OpeggylparkerFinancial Printing GroupTHESE SECURITIES HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED, OR ANY STATE
SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.
WARRANT AGREEMENT
TO PURCHASE SHARES OF THE SERIES H PREFERRED STOCK OF
VIGNETTE CORPORATION
DATED AS OF DECEMBER 3, 1998 (THE "EFFECTIVE DATE")
WHEREAS, Vignette Corporation, a Delaware corporation (the "Company") has
entered into a Subordinated Loan and Security Agreement dated as of December 3,
1998, and related Subordinated Promissory Note(s) (collectively, the "Loans")
with Comdisco, Inc., a Delaware corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Loans, the right to purchase shares of its Series H Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Loans and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
subscribe to and purchase, from the Company, 42,865 fully paid and non-
assessable shares of the Company's Series H Preferred Stock ("Preferred Stock")
at a purchase price of $16.33 per share (the "Exercise Price"). The number and
purchase price of such shares are subject to adjustment as provided in Section 8
hereof.
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant Agreement
and the right to purchase Preferred Stock as granted herein shall commence on
the Effective Date and shall be exercisable for a period of (i) seven (7) years
or (ii) three (3) years from the effective date of the Company's initial public
offering, whichever is shorter.
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are exercisable by
the Warrantholder, in whole or in part, at any time, or from time to time, prior
to the expiration of the term set forth in Section 2 above, by tendering to the
Company at its principal office a notice of exercise in the form attached hereto
as Exhibit I (the "Notice of Exercise"), duly completed and executed. Promptly
upon receipt of the Notice of Exercise and the payment of the purchase price in
accordance with the terms set forth below, and in no event later than twenty-one
(21) days thereafter, the Company shall issue to the Warrantholder a certificate
for the number of shares of Preferred Stock purchased and shall execute the
acknowledgment of exercise in the form attached hereto as Exhibit II (the
"Acknowledgment of Exercise") indicating the number of shares which remain
subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either (i)
by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
X = Y(A-B)
------
A
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<PAGE>
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock requested to be
exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Preferred Stock.
B = the Exercise Price.
For purposes of the above calculation, current fair market value of
Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public
offering of the Company's Common Stock, and if the Company's Registration
Statement relating to such public offering has been declared effective by
the SEC, then the fair market value per share shall be the product of (x)
the initial "Price to Public" specified in the final prospectus with
respect to the offering and (y) the number of shares of Common Stock into
which each share of Preferred Stock is convertible at the time of such
exercise;
(ii) if this Warrant is exercised after, and not in connection
with the Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market
value shall be deemed to be the product of (x) the average of the
closing prices over a twenty-one (21) day period ending three days
before the day the current fair market value of the securities is
being determined and (y) the number of shares of Common Stock into
which each share of Preferred Stock is convertible at the time of
such exercise; or
(b) if actively traded over-the-counter, the fair market
value shall be deemed to be the product of (x) the average of the
closing bid and asked prices quoted on the NASDAQ system (or
similar system) over the twenty-one (21) day period ending three
days before the day the current fair market value of the securities
is being determined and (y) the number of shares of Common Stock
into which each share of Preferred Stock is convertible at the time
of such exercise;
(iii) if at any time the Common Stock is not listed on any
securities exchange or quoted in the NASDAQ System or the over-the-counter
market, the current fair market value of Preferred Stock shall be the
product of (x) the highest price per share which the Company could obtain
from a willing buyer (not a current employee or director) for shares of
Common Stock sold by the Company, from authorized but unissued shares, as
determined in good faith by its Board of Directors and (y) the number of
shares of Common Stock into which each share of Preferred Stock is
convertible at the time of such exercise, unless the Company shall become
subject to a merger, acquisition or other consolidation pursuant to which
the Company is not the surviving party, in which case the fair market value
of Preferred Stock shall be deemed to be the value received by the holders
of the Company's Preferred Stock on a common equivalent basis pursuant to
such merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of this
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock required
to be reserved hereunder require registration with or approval of any
governmental authority under any Federal or State law (other than any
registration under the Securities Act of 1933, as amended ("1933 Act"), as then
in effect, or any similar Federal statute then enforced, or any state securities
law, required by reason of any transfer involved in such conversion), or listing
on any domestic securities exchange, before such shares may be issued upon
conversion, the Company will, at its expense and as expeditiously as possible,
use its best efforts to cause such shares to be duly registered, listed or
approved for listing on such domestic securities exchange, as the case may be.
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<PAGE>
5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation whether or not the Company is the surviving corporation, or the sale
of all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of the Warrant, the number of
shares of preferred stock or other securities of the successor corporation
resulting from such Merger Event, equivalent in value to that which would have
been issuable if Warrantholder had exercised this Warrant immediately prior to
the Merger Event. In any such case, appropriate adjustment (as determined in
good faith by the Company's Board of Directors) shall be made in the application
of the provisions of this Warrant Agreement with respect to the rights and
interest of the Warrantholder after the Merger Event to the end that the
provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Preferred Stock purchasable) shall be applicable
to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time
shall combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the Company's stock,
then the Exercise Price shall be adjusted, from and after the record date of
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Company's
stock outstanding immediately prior to such dividend or distribution, and (ii)
the denominator of which shall be the total number of all shares of the
Company's stock outstanding immediately after such dividend or distribution.
The Warrantholder shall thereafter be entitled to purchase, at the Exercise
Price resulting from such adjustment, the number of shares of Preferred Stock
(calculated to the nearest whole share) obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of shares of
Preferred Stock issuable upon the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(e) Right to Purchase Additional Stock. If the Company has not paid
any Subordinated Promissory Note(s) entered into pursuant to the Loan(s) in its
entirety by the Maturity Date (as defined in the applicable Subordinated
Promissory Note(s)), then for each additional month, or portion thereof,
thereafter that the outstanding
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<PAGE>
principal is not paid, Warrantholder shall have the right to purchase from the
Company, at the Exercise Price (adjusted as set forth herein), an additional
number of shares of Preferred Stock which number shall be determined by (i)
multiplying the outstanding principal amount which due but unpaid by 1% and (ii)
dividing the product thereof by the Exercise Price.
(f) Antidilution Rights. Additional antidilution rights applicable to
the Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit __ (the "Charter"). The
Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the Charter. The Company shall provide
Warrantholder with prior written notice of any issuance of its stock or other
equity security to occur after the Effective Date of this Warrant, which notice
shall include (a) the price at which such stock or security is to be sold, (b)
the number of shares to be issued, and (c) such other information as necessary
for Warrantholder to determine if a dilutive event has occurred.
(g) Notice of Adjustments. If: (i) the Company shall declare any
dividend or distribution upon its stock, whether in cash, property, stock or
other securities; (ii) the Company shall offer for subscription prorata to the
holders of any class of its Preferred or other convertible stock any additional
shares of stock of any class or other rights; (iii) there shall be any Merger
Event; (iv) there shall be an initial public offering; or (v) there shall be any
voluntary dissolution, liquidation or winding up of the Company; then, in
connection with each such event, the Company shall send to the Warrantholder:
(A) at least twenty (20) days' prior written notice of the date on which the
books of the Company shall close or a record shall be taken for such dividend,
distribution, subscription rights (specifying the date on which the holders of
Preferred Stock shall be entitled thereto) or for determining rights to vote in
respect of such Merger Event, dissolution, liquidation or winding up; (B) in the
case of any such Merger Event, dissolution, liquidation or winding up, at least
twenty (20) days' prior written notice of the date when the same shall take
place (and specifying the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such Merger Event, dissolution, liquidation or winding up); and
(C) in the case of a public offering, the Company shall give the Warrantholder
at least twenty (20) days written notice prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(h) Timely Notice. Failure to timely provide such notice required by
subsection (g) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date Warrantholder actually receives a written notice containing all the
information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever; provided, however, that
the Preferred Stock issuable pursuant to this Warrant Agreement may be subject
to restrictions on transfer under state and/or Federal securities laws. The
Company has made available to the Warrantholder true, correct and complete
copies of its Charter and Bylaws, as amended. The issuance of certificates for
shares of Preferred Stock upon exercise of the Warrant Agreement shall be made
without charge to the Warrantholder for any issuance tax in respect thereof, or
other cost incurred by the Company in connection with such exercise and the
related issuance of shares of Preferred Stock. The Company shall not be required
to pay any tax which may be payable in respect of any transfer involved and the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Loans and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which it is a party or by which it is
bound, and the Loans and this Warrant Agreement constitute legal, valid and
binding agreements of the Company, enforceable in accordance with their
respective terms.
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<PAGE>
(c) Consents and Approvals. No consent or approval of, giving of
notice to, registration with, or taking of any other action in respect of any
state, Federal or other governmental authority or agency is required with
respect to the execution, delivery and performance by the Company of its
obligations under this Warrant Agreement, except for the filing of notices
pursuant to Regulation D under the 1933 Act and any filing required by
applicable state securities law, which filings will be effective by the time
required thereby.
(d) Issued Securities. All issued and outstanding shares of Common
Stock, Preferred Stock or any other securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. All
outstanding shares of Common Stock, Preferred Stock and any other securities
were issued in full compliance with all Federal and state securities laws. In
addition:
(i) Immediately prior to the Closing, the authorized capital
stock of the Company shall consist of 17,000,000 shares of Common Stock,
par value $0.01 per share (the "Common Stock"), of which 2,856,745 shares
shall be issued and outstanding, and 9,000,000 shares of Preferred Stock,
$0.01 par value per share, of which 407,500 shares shall have been
designated as Series A Convertible Preferred Stock, 1,853,182 shares shall
have been designated as Series B Convertible Preferred Stock, 1,865,000
shares shall have been designated as Series C Convertible Preferred Stock,
200,000 shares shall have been designated as Series D Convertible Preferred
Stock, 2,358,492 shares shall have been designated as Series E Preferred
Stock, 1,365,808 shares shall have been designated Series F Convertible
Preferred Stock, 191,022 shares shall have been designated Series G
Preferred Stock and 580,000 shall have been designated Series H Preferred
Stock. Immediately prior to the Closing, 400,000 shares of Series A
Convertible Preferred Stock, 1,853,182 shares of Series B Convertible
Preferred Stock, 1,865,000 shares of Series C Convertible Preferred Stock,
65,386 shares of Series D Convertible Preferred Stock, 2,358,492 shares of
Series E. Convertible Preferred Stock, 1,365,808 shares of Series F
Convertible Preferred Stock, 191,022 shares of Series G Convertible
Preferred Stock and no shares of Series H Convertible Preferred Stock were
issued and outstanding. All of the issued and outstanding shares of
Preferred Stock have been duly authorized and validly issued and are fully
paid and nonassessable. All of the issued and outstanding shares of Common
Stock have been duly authorized and validly issued and are fully paid and
nonassessable. Immediately prior to the Closing, there will be 6,061,000
shares of Common Stock reserved for issuance under the Company's 1995 Stock
Option/Stock Issuance Plan, of which 2,942,898 shares have been issued upon
the exercise of options, 2,165,062 shares are subject to outstanding
options and 953,040 shares remain available for issuance. Except as set
forth in Exhibit C hereto, the Certificate of Incorporation, the other
agreements required to be executed by the Company on or prior to the
Closing pursuant to paragraph 5D (the "Ancillary Agreements") or as
provided in this Agreement, (i) no subscription, warrant, option,
convertible security or other right (contingent or otherwise) to purchase
or acquire any shares of capital stock of the Company is authorized or
outstanding, (ii) the Company has no obligation (contingent or otherwise)
to issue any subscription, warrant, option, convertible security or other
such right or to issue or distribute to holders of an share of its capital
stock any evidences of indebtedness or assets of the Company, and (iii) the
Company has no obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any shares of its capital stock or any interest therein
or to pay any dividend to make any other distribution in respect thereof.
All of the issued and outstanding securities or the Company have been
offered, issued and sold by the Company is compliance with applicable
federal and state securities laws.
(ii) In accordance with the Company's Articles of Incorporation,
no shareholder of the Company has preemptive rights to purchase new
issuances of the Company's capital stock.
(e) Insurance. The Company has in full force and effect insurance
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Other Commitments to Register Securities. Except as set forth in
this Warrant Agreement, the Company is not, pursuant to the terms of any other
agreement currently in existence, under any obligation to register under the
1933 Act any of its presently outstanding securities or any of its securities
which may hereafter be issued.
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder's
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the qualification requirements of the applicable state
securities laws.
(h) Compliance with Rule 144. At the written request of the
Warrantholder, who proposes to sell Preferred Stock issuable upon the exercise
of the Warrant in compliance with Rule 144 promulgated by the
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Securities and Exchange Commission, the Company shall furnish to the
Warrantholder, within ten days after receipt of such request, a written
statement confirming the Company's compliance with the filing requirements of
the Securities and Exchange Commission as set forth in such Rule, as such Rule
may be amended from time to time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock or the
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the
Preferred Stock issuable upon exercise of this Warrant is not registered under
the 1933 Act or qualified under applicable state securities laws on the ground
that the issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Preferred Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever
the restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Preferred Stock then outstanding as to
which such restrictions have terminated shall be entitled to receive from the
Company, without expense to such holder, one or more new certificates for the
Warrant or for such shares of Preferred Stock not bearing any restrictive
legend.
(d) Financial Risk. The Warrantholder has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of its investment, and has the ability to bear the economic
risks of its investment.
(e) Risk of No Registration. The Warrantholder understands that if the
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1934 Act (the "1934 Act"), or file reports pursuant to
Section 15(d), of the 1934 Act", or if a registration statement covering the
securities under the 1933 Act is not in effect when it desires to sell (i) the
rights to purchase Preferred Stock pursuant to this Warrant Agreement, or (ii)
the Preferred Stock issuable upon exercise of the right to purchase, it may be
required to hold such securities for an indefinite period. The Warrantholder
also understands that any sale of its rights of the Warrantholder to purchase
Preferred Stock or Preferred Stock which might be made by it in reliance upon
Rule 144 under the 1933 Act may be made only in accordance with the terms and
conditions of that Rule.
(f) Accredited Investor. Warrantholder is an "accredited investor"
within the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
11. TRANSFERS.
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable in whole or in part
by the Warrantholder and any successor transferee, provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed three (3)
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transfers. The transfer shall be recorded on the books of the Company upon
receipt by the Company of a notice of transfer in the form attached hereto as
Exhibit III (the "Transfer Notice"), at its principal offices and the payment to
the Company of all transfer taxes and other governmental charges imposed on such
transfer.
12. MISCELLANEOUS.
(a) Effective Date. The provisions of this Warrant Agreement shall be
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall
be binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court
proceeding between the Company and the Warrantholder relating hereto, the
prevailing party shall be entitled to attorneys' fees and expenses and all costs
of proceedings incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
construed for all purposes under and in accordance with the laws of the State of
Illinois.
(d) Counterparts. This Warrant Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be given
in writing and shall be deemed effectively given upon personal delivery,
facsimile transmission (provided that the original is sent by personal delivery
or mail as hereinafter set forth) or seven (7) days after deposit in the United
States mail, by registered or certified mail, addressed (i) to the Warrantholder
at 6111 North River Road, Rosemont, Illinois 60018, attention: Venture Lease
Administration, cc: Legal Department, attn.: General Counsel, (and/or, if by
facsimile, (847) 518-5465 and (847)518-5088 and (ii) to the Company at 3410 Far
West Blvd., Suite 300, Austin, TX 78731, attention: Chief Financial Officer
(and/or if by facsimile, (512) 502-0223 or at such other address as any such
party may subsequently designate by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-
defaulting party may proceed to protect and enforce its rights either by suit in
equity and/or by action at law, including but not limited to an action for
damages as a result of any such default, and/or an action for specific
performance for any default where Warrantholder will not have an adequate remedy
at law and where damages will not be readily ascertainable. The Company
expressly agrees that it shall not oppose an application by the Warrantholder or
any other person entitled to the benefit of this Agreement requiring specific
performance of any or all provisions hereof or enjoining the Company from
continuing to commit any such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and
conditions of the respective parties contained herein or made pursuant to this
Warrant Agreement shall survive the execution and delivery of this Warrant
Agreement.
(i) Severability. In the event any one or more of the provisions of
this Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended
by a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (d), (f) and (g) of Section 9 above. If the purchase
price for the Loans referenced in the preamble of this Warrant Agreement exceeds
$1,000,000, the Company will also provide Warrantholder with an opinion from the
Company's counsel with respect to those same representations, warranties and
covenants. The Company shall also supply such other documents as the
Warrantholder may from time to time reasonably request.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed by its officers thereunto duly authorized as of the Effective
Date.
COMPANY: VIGNETTE CORPORATION
By: /s/ Jack F. Lynch
-------------------------
Title: V.P. Finance & Operations
-------------------------
WARRANTHOLDER: COMDISCO, INC.
By: /s/ James P. Labe
-------------------------
Title: President
-------------------------
-8-
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
TO:
----------------------
(1) The undersigned Warrantholder hereby elects to purchase _______ shares of
the Series ____ Preferred Stock of _________________, pursuant to the terms
of the Warrant Agreement dated the ______ day of ________________________,
19__ (the "Warrant Agreement") between
_____________________________________ and the Warrantholder, and tenders
herewith payment of the purchase price for such shares in full, together
with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Series ____ Preferred Stock of
________________________________________, the undersigned hereby confirms
and acknowledges the investment representations and warranties made in
Section 10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Series ____ Preferred Stock in the name of the undersigned or in such other
name as is specified below.
- ---------------------------------
(Name)
- ---------------------------------
(Address)
WARRANTHOLDER: COMDISCO, INC.
By:
-------------------------
Title:
-------------------------
Date:
-------------------------
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<PAGE>
EXHIBIT II
ACKNOWLEDGMENT OF EXERCISE
The undersigned ____________________________________, hereby acknowledge
receipt of the "Notice of Exercise" from Comdisco, Inc., to purchase ____ shares
of the Series ____ Preferred Stock of _________________, pursuant to the terms
of the Warrant Agreement, and further acknowledges that ______ shares remain
subject to purchase under the terms of the Warrant Agreement.
COMPANY:
By:
----------------------
Title:
----------------------
Date:
----------------------
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<PAGE>
EXHIBIT III
TRANSFER NOTICE
(TO TRANSFER OR ASSIGN THE FOREGOING WARRANT AGREEMENT EXECUTE THIS FORM AND
SUPPLY REQUIRED INFORMATION. DO NOT USE THIS FORM TO PURCHASE SHARES.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
- ------------------------------------------------------------------
(Please Print)
whose address is
--------------------------------------------------
- ------------------------------------------------------------------
Dated:
----------------------------------------
Holder's Signature:
---------------------------
Holder's Address:
---------------------------
-------------------------------------------
Signature Guaranteed:
-------------------------------------------
NOTE: The signature to this Transfer Notice must correspond with the name as it
appears on the face of the Warrant Agreement, without alteration or
enlargement or any change whatever. Officers of corporations and those
acting in a fiduciary or other representative capacity should file proper
evidence of authority to assign the foregoing Warrant Agreement.
-11-
<PAGE>
EXHIBIT 10.17
M A S T E R L E A S E A G R E E M E N T
MASTER LEASE AGREEMENT (the "Master Lease") dated December 3, 1998 by and
between COMDISCO, INC. ("Lessor") and VIGNETTE CORPORATION ("Lessee").
IN CONSIDERATION of the mutual agreements described below, the parties agree as
follows (all capitalized terms are defined in Section 14.18):
1. PROPERTY LEASED.
Lessor leases to Lessee all of the Equipment described on each Summary Equipment
Schedule. In the event of a conflict, the terms of the applicable Schedule
prevail over this Master Lease.
2. TERM.
On the Commencement Date, Lessee will be deemed to accept the Equipment, will be
bound to its rental obligations for each item of Equipment and the term of a
Summary Equipment Schedule will begin and continue through the Initial Term and
thereafter until terminated by either party upon prior written notice received
during the Notice Period. No termination may be effective prior to the
expiration of the Initial Term.
3. RENT AND PAYMENT.
Rent is due and payable in advance on the first day of each Rent Interval at the
address specified in Lessor's invoice. Interim Rent is due and payable when
invoiced. If any payment is not made when due, Lessee will pay a Late Charge on
the overdue amount. Upon Lessee's execution of each Schedule, Lessee will pay
Lessor the Advance specified on the Schedule. The Advance will be credited
towards the final Rent payment if Lessee is not then in default. No interest
will be paid on the Advance.
4. SELECTION; WARRANTY AND DISCLAIMER OF WARRANTIES.
4.1 SELECTION. Lessee acknowledges that it has selected the Equipment and
disclaims any reliance upon statements made by the Lessor, other than as set
forth in the Schedule.
4.2 WARRANTY AND DISCLAIMER OF WARRANTIES. Lessor warrants to Lessee that, so
long as Lessee is not in default, Lessor will not disturb Lessee's quiet and
peaceful possession, and unrestricted use of the Equipment. To the extent
permitted by the manufacturer, Lessor assigns to Lessee during the term of the
Summary Equipment Schedule any manufacturer's warranties for the Equipment.
LESSOR MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED AS TO ANY MATTER WHATSOEVER,
INCLUDING, WITHOUT LIMITATION, THE MERCHANTABILITY OF THE EQUIPMENT OR ITS
FITNESS FOR A PARTICULAR PURPOSE. Lessor is not responsible for any liability,
claim, loss, damage or expense of any kind (including strict liability in tort)
caused by the Equipment except for any loss or damage caused by the willful
misconduct or negligent acts of Lessor. In no event is Lessor responsible for
special, incidental or consequential damages.
5. TITLE; RELOCATION OR SUBLEASE; AND ASSIGNMENT.
5.1 TITLE. Lessee holds the Equipment subject and subordinate to the rights of
the Owner, Lessor, any Assignee and any Secured Party. Lessee authorizes Lessor,
as Lessee's agent, and at Lessor's expense, to prepare, execute and file in
Lessee's name precautionary Uniform Commercial Code financing statements showing
the interest of the Owner, Lessor, and any Assignee or Secured Party in the
Equipment and to insert serial numbers in Summary Equipment Schedules as
appropriate. Lessee will, at its expense, keep the Equipment free and clear from
any liens or encumbrances of any kind (except any caused by Lessor) and will
indemnify and hold the Owner, Lessor, any Assignee and Secured Party harmless
from and against any loss caused by Lessee's failure to do so, except where such
is caused by Lessor.
5.2 RELOCATION OR SUBLEASE. Upon prior written notice, Lessee may relocate
Equipment to any location within the continental United States provided (i) the
Equipment will not be used by an entity exempt from federal income tax, and (ii)
all additional costs (including any administrative fees, additional taxes and
insurance coverage) are reconciled and promptly paid by Lessee.
Lessee may sublease the Equipment upon the reasonable consent of the Lessor and
the Secured Party. Such consent to sublease will be granted if: (i) Lessee meets
the relocation requirements set out above, (ii) the sublease is expressly
subject and subordinate to the terms of the Schedule, (iii) Lessee assigns its
rights in the sublease to Lessor and the Secured Party as additional collateral
and security, (iv) Lessee's obligation to maintain and insure the Equipment is
not altered, (v) all financing statements required to continue the Secured
Party's prior perfected security interest are filed, and (vi) Lessee executes
sublease documents acceptable to Lessor.
No relocation or sublease will relieve Lessee from any of its obligations under
this Master Lease and the relevant Schedule.
5.3 ASSIGNMENT BY LESSOR. The terms and conditions of each Schedule have been
fixed by Lessor in order to permit Lessor to sell and/or assign or transfer its
interest or grant a security interest in each Schedule and/or the Equipment to a
Secured Party or Assignee. In that event, the term Lessor will mean the Assignee
and any Secured Party. However, any assignment, sale, or other transfer by
Lessor will not relieve Lessor of its obligations to Lessee and will not
materially change Lessee's duties or materially increase the burdens or risks
imposed on Lessee. The Lessee consents to and will acknowledge such assignments
in a written notice given to Lessee. Lessee also agrees that:
(a) The Secured Party will be entitled to exercise all of Lessor's
rights, but will not be obligated to perform any of the obligations of Lessor.
The Secured Party will not disturb Lessee's quiet and peaceful possession and
unrestricted use of the Equipment so long as Lessee is not in default and the
Secured Party continues to receive all Rent payable under the Schedule; and
(b) Lessee will pay all Rent and all other amounts payable to the Secured
Party, despite any defense or claim which it has against Lessor. Lessee reserves
its right to have recourse directly against Lessor for any defense or claim;
(c) Subject to and without impairment of Lessee's leasehold rights in the
Equipment, Lessee holds the Equipment for the Secured Party to the extent of the
Secured Party's rights in that Equipment.
6. NET LEASE; TAXES AND FEES.
6.1 NET LEASE. Each Summary Equipment Schedule constitutes a net lease. Lessee's
obligation to pay Rent and all other amounts due hereunder is absolute and
unconditional and is not subject to any abatement, reduction, set-off, defense,
counterclaim, interruption, deferment or recoupment for any reason whatsoever.
6.2 TAXES AND FEES. Lessee will pay when due or reimburse Lessor for all taxes,
fees or any other charges (together with any related interest or penalties not
arising from the negligence of Lessor) accrued for or arising during the term of
each Summary Equipment Schedule against Lessor, Lessee or the Equipment by any
governmental authority (except only Federal, state, local and franchise taxes on
the capital or the net income of Lessor). Lessor will file all personal property
tax returns for the Equipment and pay all such property taxes due. Lessee will
reimburse Lessor for property taxes within thirty (30) days of receipt of an
invoice.
7. CARE, USE AND MAINTENANCE; INSPECTION BY LESSOR.
7.1 CARE, USE AND MAINTENANCE. Lessee will maintain the Equipment in good
operating order and appearance, protect the Equipment from deterioration, other
than normal wear and tear, and will not use the Equipment for any purpose other
than that for which it was designed. If commercially available and considered
common business practice for each item of Equipment, Lessee will maintain in
force a standard maintenance contract with the manufacturer of the Equipment, or
another party acceptable to Lessor, and will provide Lessor with a complete copy
of that contract. If Lessee has the Equipment maintained by a party other than
the manufacturer or self maintains, Lessee agrees to pay any costs necessary for
the manufacturer to bring the Equipment to then current release, revision and
engineering change levels, and to re-certify the Equipment as eligible for
manufacturer's maintenance at the expiration of the lease term, provided re-
certification is available and is required by Lessor. The lease term will
continue upon the same terms and conditions until recertification has been
obtained.
7.2 INSPECTION BY LESSOR. Upon reasonable advance notice, Lessee, during
reasonable business hours and subject to Lessee's security requirements, will
make the Equipment and its related log and maintenance records available to
Lessor for inspection.
8. REPRESENTATIONS AND WARRANTIES OF LESSEE. Lessee hereby represents, warrants
and covenants that with respect to the Master Lease and each Schedule executed
hereunder:
(a) The Lessee is a corporation duly organized and validly existing in
good standing under the laws of the jurisdiction of its incorporation, is duly
qualified to do business in each jurisdiction (including the jurisdiction where
the Equipment is, or is to be, located) where its ownership or lease of property
or the conduct of its business requires such qualification, except for where
such lack of qualification would not have a material adverse effect on the
Company's business; and has full corporate power and authority to hold property
under the Master Lease and each Schedule and to enter into and perform its
obligations under the Master Lease and each Schedule.
(b) The execution and delivery by the Lessee of the Master Lease and each
Schedule and its performance thereunder have been duly authorized by all
necessary corporate action on the part of the Lessee, and the Master Lease and
each Schedule are not inconsistent with the Lessee's Articles of Incorporation
or Bylaws, do not contravene any law or governmental rule, regulation or order
applicable to it, do not and will not contravene any provision of, or constitute
a default under, any indenture, mortgage, contract or other instrument to which
it is a party or by which it is bound, and the Master Lease and each Schedule
constitute legal, valid and binding
-1-
<PAGE>
agreements of the Lessee, enforceable in accordance with their terms, subject to
the effect of applicable bankruptcy and other similar laws affecting the rights
of creditors generally and rules of law concerning equitable remedies.
(c) There are no actions, suits, proceedings or patent claims pending or,
to the knowledge of the Lessee, threatened against or affecting the Lessee in
any court or before any governmental commission, board or authority which, if
adversely determined, will have a material adverse effect on the ability of the
Lessee to perform its obligations under the Master Lease and each Schedule.
(d) The Equipment is personal property and when subjected to use by the
Lessee will not be or become fixtures under applicable law.
(e) The Lessee has no material liabilities or obligations, absolute or
contingent (individually or in the aggregate), except the liabilities and
obligations of the Lessee as set forth in the Financial Statements and
liabilities and obligations which have occurred in the ordinary course of
business, and which have not been, in any case or in the aggregate, materially
adverse to Lessee's ongoing business.
(f) To the best of the Lessee's knowledge, the Lessee owns, possesses,
has access to, or can become licensed on reasonable terms under all patents,
patent applications, trademarks, trade names, inventions, franchises, licenses,
permits, computer software and copyrights necessary for the operations of its
business as now conducted, with no known infringement of, or conflict with, the
rights of others.
(g) All material contracts, agreements and instruments to which the
Lessee is a party are in full force and effect in all material respects, and are
valid, binding and enforceable by the Lessee in accordance with their respective
terms, subject to the effect of applicable bankruptcy and other similar laws
affecting the rights of creditors generally, and rules of law concerning
equitable remedies.
9. DELIVERY AND RETURN OF EQUIPMENT.
Lessee hereby assumes the full expense of transportation and in-transit
insurance to Lessee's premises and installation thereat of the Equipment. Upon
termination (by expiration or otherwise) of each Summary Equipment Schedule,
Lessee shall, pursuant to Lessor's instructions and at Lessee's full expense
(including, without limitation, expenses of transportation and in-transit
insurance), return the Equipment to Lessor in the same operating order, repair,
condition and appearance as when received, less normal depreciation and wear and
tear. Lessee shall return the Equipment to Lessor at 6111 North River Road,
Rosemont, Illinois 60018 or at such other address within the continental United
States as directed by Lessor, provided, however, that Lessee's expense shall be
limited to the cost of returning the Equipment to Lessor's address as set forth
herein. During the period subsequent to receipt of a notice under Section 2,
Lessor may demonstrate the Equipment's operation in place and Lessee will supply
any of its personnel as may reasonably be required to assist in the
demonstrations.
10. LABELING.
Upon request, Lessee will mark the Equipment indicating Lessor's interest with
labels provided by Lessor. Lessee will keep all Equipment free from any other
marking or labeling which might be interpreted as a claim of ownership.
11. INDEMNITY.
With regard to bodily injury and property damage liability only, Lessee will
indemnify and hold Lessor, any Assignee and any Secured Party harmless from and
against any and all claims, costs, expenses, damages and liabilities, including
reasonable attorneys' fees, arising out of the ownership (for strict liability
in tort only), selection, possession, leasing, operation, control, use,
maintenance, delivery, return or other disposition of the Equipment during the
term of this Master Lease or until Lessee's obligations under the Master Lease
terminate. However, Lessee is not responsible to a party indemnified hereunder
for any claims, costs, expenses, damages and liabilities occasioned by the
negligent acts of such indemnified party. Lessee agrees to carry bodily injury
and property damage liability insurance during the term of the Master Lease in
amounts and against risks customarily insured against by the Lessee on equipment
owned by it. Any amounts received by Lessor under that insurance will be
credited against Lessee's obligations under this Section.
12. RISK OF LOSS.
Effective upon delivery and until the Equipment is returned, Lessee relieves
Lessor of responsibility for all risks of physical damage to or loss or
destruction of the Equipment. Lessee will carry casualty insurance for each item
of Equipment in an amount not less than the Casualty Value. All policies for
such insurance will name the Lessor and any Secured Party as additional insured
and as loss payee, and will provide for at least thirty (30) days prior written
notice to the Lessor of cancellation or expiration, and will insure Lessor's
interests regardless of any breach or violation by Lessee of any representation,
warranty or condition contained in such policies and will be primary without
right of contribution from any insurance effected by Lessor. Upon the execution
of any Schedule, the Lessee will furnish appropriate evidence of such insurance
acceptable to Lessor.
Lessee will promptly repair any damaged item of Equipment unless such Equipment
has suffered a Casualty Loss. Within fifteen (15) days of a Casualty Loss,
Lessee will provide written notice of that loss to Lessor and Lessee will, at
Lessee's option, either (a) replace the item of Equipment with Like Equipment
and marketable title to the Like Equipment will automatically vest in Lessor or
(b) pay the Casualty Value and after that payment and the payment of all other
amounts due and owing with respect to that item of Equipment, Lessee's
obligation to pay further Rent for the item of Equipment will cease.
13. DEFAULT, REMEDIES AND MITIGATION.
13.1 DEFAULT. The occurrence of any one or more of the following Events of
Default constitutes a default under a Summary Equipment Schedule:
(a) Lessee's failure to pay Rent or other amounts payable by Lessee when
due if that failure continues for five (5) business days after written notice;
or
(b) Lessee's failure to perform any other term or condition of the
Schedule or the material inaccuracy of any representation or warranty made by
the Lessee in the Schedule or in any document or certificate furnished to the
Lessor hereunder if that failure or inaccuracy continues for ten (10) business
days after written notice; or
(c) An assignment by Lessee for the benefit of its creditors, the failure
by Lessee to pay its debts when due, the insolvency of Lessee, the filing by
Lessee or the filing against Lessee of any petition under any bankruptcy or
insolvency law or for the appointment of a trustee or other officer with similar
powers, the adjudication of Lessee as insolvent, the liquidation of Lessee, or
the taking of any action for the purpose of the foregoing; or
(d) The occurrence of an Event of Default under any Schedule, Summary
Equipment Schedule or other agreement between Lessee and Lessor or its Assignee
or Secured Party.
13.2 REMEDIES. Upon the occurrence of any of the above Events of Default,
Lessor, at its option, may:
(a) enforce Lessee's performance of the provisions of the applicable
Schedule by appropriate court action in law or in equity;
(b) recover from Lessee any damages and or expenses, including Default
Costs;
(c) with notice and demand, recover all sums due and accelerate and
recover the present value of the remaining payment stream of all Rent due under
the defaulted Schedule (discounted at the same rate of interest at which such
defaulted Schedule was discounted with a Secured Party plus any prepayment fees
charged to Lessor by the Secured Party or, if there is no Secured Party, then
discounted at 6%) together with all Rent and other amounts currently due as
liquidated damages and not as a penalty;
(d) with notice and process of law and in compliance with Lessee's
security requirements, Lessor may enter on Lessee's premises to remove and
repossess the Equipment without being liable to Lessee for damages due to the
repossession, except those resulting from Lessor's, its assignees', agents' or
representatives' negligence; and
(e) pursue any other remedy permitted by law or equity.
The above remedies, in Lessor's discretion and to the extent permitted by law,
are cumulative and may be exercised successively or concurrently.
13.3 MITIGATION. Upon return of the Equipment pursuant to the terms of Section
13.2, Lessor will use its best efforts in accordance with its normal business
procedures (and without obligation to give any priority to such Equipment) to
mitigate Lessor's damages as described below. EXCEPT AS SET FORTH IN THIS
SECTION, LESSEE HEREBY WAIVES ANY RIGHTS NOW OR HEREAFTER CONFERRED BY STATUTE
OR OTHERWISE WHICH MAY REQUIRE LESSOR TO MITIGATE ITS DAMAGES OR MODIFY ANY OF
LESSOR'S RIGHTS OR REMEDIES STATED HEREIN. Lessor may sell, lease or otherwise
dispose of all or any part of the Equipment at a public or private sale for cash
or credit with the privilege of purchasing the Equipment. The proceeds from any
sale, lease or other disposition of the Equipment are defined as either:
(a) if sold or otherwise disposed of, the cash proceeds less the Fair
Market Value of the Equipment at the expiration of the Initial Term less the
Default Costs; or
(b) if leased, the present value (discounted at three percent (3%) over
the U.S. Treasury Notes of comparable maturity to the term of the re-lease) of
the rentals for a term not to exceed the Initial Term, less the Default Costs.
Any proceeds will be applied against liquidated damages and any other sums due
to Lessor from Lessee. However, Lessee is liable to Lessor for, and Lessor may
recover, the amount by which the proceeds are less than the liquidated damages
and other sums due to Lessor from Lessee.
14. ADDITIONAL PROVISIONS.
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<PAGE>
14.1 BOARD ATTENDANCE. Upon invitation of Lessee, one representative of Lessor
will have the right to attend Lessee's corporate Board of Directors meetings and
Lessee will give Lessor reasonable notice in advance of any special Board of
Directors meeting, which notice will provide an agenda of the subject matter to
be discussed at such board meeting. Lessee will provide Lessor with a certified
copy of the minutes of each Board of Directors meeting within thirty (30) days
following the date of such meeting held during the term of this Master Lease.
14.2 FINANCIAL STATEMENTS. As soon as practicable at the end of each month (and
in any event within thirty (30) days), Lessee will provide to Lessor the same
information which Lessee provides to its Board of Directors, but which will
include not less than a monthly income statement, balance sheet and statement of
cash flows prepared in accordance with generally accepted accounting principles,
consistently applied (the "Financial Statements"). As soon as practicable at the
end of each fiscal year, Lessee will provide to Lessor audited Financial
Statements setting forth in comparative form the corresponding figures for the
fiscal year (and in any event within ninety (90) days), and accompanied by an
audit report and opinion of the independent certified public accountants
selected by Lessee. Lessee will promptly furnish to Lessor any additional
information (including, but not limited to, tax returns, income statements,
balance sheets and names of principal creditors) as Lessor reasonably believes
necessary to evaluate Lessee's continuing ability to meet financial obligations.
After the effective date of the initial registration statement covering a public
offering of Lessee's securities, the term "Financial Statements" will be deemed
to refer to only those statements required by the Securities and Exchange
Commission.
14.3 OBLIGATION TO LEASE ADDITIONAL EQUIPMENT. Upon notice to Lessee, Lessor
will not be obligated to lease any Equipment which would have a Commencement
Date after said notice if: (i) Lessee is in default under this Master Lease or
any Schedule; (ii) Lessee is in default under any loan agreement, the result of
which would allow the lender or any secured party to demand immediate payment of
any material indebtedness; (iii) there is a material adverse change in Lessee's
credit standing; or (iv) Lessor determines (in reasonable good faith) that
Lessee will be unable to perform its obligations under this Master Lease or any
Schedule.
14.4 MERGER AND SALE PROVISIONS. Lessee will notify Lessor of any proposed
Merger at least sixty (60) days prior to the closing date. Lessor may, in its
discretion, either (i) consent to the assignment of the Master Lease and all
relevant Schedules to the successor entity, or (ii) terminate the Master Lease
and all relevant Schedules. If Lessor elects to consent to the assignment,
Lessee and its successor will sign the assignment documentation provided by
Lessor. If Lessor elects to terminate the Master Lease and all relevant
Schedules, then Lessee will pay Lessor all amounts then due and owing and a
termination fee equal to the present value (discounted at 6%) of the remaining
Rent for the balance of the Initial Term(s) of all Schedules, and will return
the Equipment in accordance with Section 9. Lessor hereby consents to any Merger
in which the acquiring entity has a Moody's Bond Rating of BA3 or better or a
commercially acceptable equivalent measure of creditworthiness as reasonably
determined by Lessor.
14.5 ENTIRE AGREEMENT. This Master Lease and associated Schedules and Summary
Equipment Schedules supersede all other oral or written agreements or
understandings between the parties concerning the Equipment including, for
example, purchase orders. ANY AMENDMENT OF THIS MASTER LEASE OR A SCHEDULE, MAY
ONLY BE ACCOMPLISHED BY A WRITING SIGNED BY THE PARTY AGAINST WHOM THE AMENDMENT
IS SOUGHT TO BE ENFORCED.
14.6 NO WAIVER. No action taken by Lessor or Lessee will be deemed to constitute
a waiver of compliance with any representation, warranty or covenant contained
in this Master Lease or a Schedule. The waiver by Lessor or Lessee of a breach
of any provision of this Master Lease or a Schedule will not operate or be
construed as a waiver of any subsequent breach.
14.7 BINDING NATURE. Each Schedule is binding upon, and inures to the benefit of
Lessor and its assigns. LESSEE MAY NOT ASSIGN ITS RIGHTS OR OBLIGATIONS.
14.8 SURVIVAL OF OBLIGATIONS. All agreements, obligations including, but not
limited to those arising under Section 6.2, representations and warranties
contained in this Master Lease, any Schedule, Summary Equipment Schedule or in
any document delivered in connection with those agreements are for the benefit
of Lessor and any Assignee or Secured Party and survive the execution, delivery,
expiration or termination of this Master Lease.
14.9 NOTICES. Any notice, request or other communication to either party by the
other will be given in writing and deemed received upon the earlier of (1)
actual receipt or (3) three days after mailing if mailed postage prepaid by
regular or airmail to Lessor (to the attention of "the Comdisco Venture Group")
or Lessee, at the address set out in the Schedule, (3) one day after it is sent
by courier or (4) on the same day as sent via facsimile transmission, provided
that the original is sent by personal delivery or mail by the sending party.
14.10 APPLICABLE LAW. THIS MASTER LEASE HAS BEEN, AND EACH SCHEDULE WILL HAVE
BEEN MADE, EXECUTED AND DELIVERED IN THE STATE OF ILLINOIS AND WILL BE GOVERNED
AND CONSTRUED FOR ALL PURPOSES IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS WITHOUT GIVING EFFECT TO CONFLICT OF LAW PROVISIONS. NO RIGHTS OR
REMEDIES REFERRED TO IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE WILL BE
CONFERRED ON LESSEE UNLESS EXPRESSLY GRANTED IN THIS MASTER LEASE OR A SCHEDULE.
14.11 SEVERABILITY. If any one or more of the provisions of this Master Lease or
any Schedule is for any reason held invalid, illegal or unenforceable, the
remaining provisions of this Master Lease and any such Schedule will be
unimpaired, and the invalid, illegal or unenforceable provision replaced by a
mutually acceptable valid, legal and enforceable provision that is closest to
the original intention of the parties.
14.12 COUNTERPARTS. This Master Lease and any Schedule may be executed in any
number of counterparts, each of which will be deemed an original, but all such
counterparts together constitute one and the same instrument. If Lessor grants a
security interest in all or any part of a Schedule, the Equipment or sums
payable thereunder, only that counterpart Schedule marked "Secured Party's
Original" can transfer Lessor's rights and all other counterparts will be marked
"Duplicate."
14.13 LICENSED PRODUCTS. Lessee will obtain no title to Licensed Products which
will at all times remain the property of the owner of the Licensed Products. A
license from the owner may be required and it is Lessee's responsibility to
obtain any required license before the use of the Licensed Products. Lessee
agrees to treat the Licensed Products as confidential information of the owner,
to observe all copyright restrictions, and not to reproduce or sell the Licensed
Products.
14.14 SECRETARY'S CERTIFICATE. Lessee will, upon execution of this Master Lease,
provide Lessor with a secretary's certificate of incumbency and authority. Upon
the execution of each Schedule with a purchase price in excess of $1,000,000,
Lessee will provide Lessor with an opinion from Lessee's counsel in a form
acceptable to Lessor regarding the representations and warranties in Section 8.
14.15 ELECTRONIC COMMUNICATIONS. Each of the parties may communicate with the
other by electronic means under mutually agreeable terms.
14.16 LANDLORD/MORTGAGEE WAIVER. Lessee agrees to provide Lessor with a
Landlord/Mortgagee Waiver with respect to the Equipment. Such waiver shall be in
a form satisfactory to Lessor.
14.17 EQUIPMENT PROCUREMENT CHARGES/PROGRESS PAYMENTS. Lessee hereby agrees that
Lessor shall not, by virtue of its entering into this Master Lease, be required
to remit any payments to any manufacturer or other third party until Lessee
accepts the Equipment subject to this Master Lease.
14.18 DEFINITIONS.
ADVANCE - means the amount due to Lessor by Lessee upon Lessee's execution of
each Schedule.
ASSIGNEE - means an entity to whom Lessor has sold or assigned its rights as
owner and Lessor of Equipment.
CASUALTY LOSS - means the irreparable loss or destruction of Equipment.
CASUALTY VALUE - means the greater of the aggregate Rent remaining to be paid
for the balance of the lease term or the Fair Market Value of the Equipment
immediately prior to the Casualty Loss. However, if a Casualty Value Table is
attached to the relevant Schedule its terms will control.
COMMENCEMENT DATE - is defined in each Schedule.
DEFAULT COSTS - means reasonable attorney's fees and remarketing costs resulting
from a Lessee default or Lessor's enforcement of its remedies.
DELIVERY DATE - means date of delivery of Inventory Equipment to Lessee's
address.
EQUIPMENT - means the property described on a Summary Equipment Schedule and any
replacement for that property required or permitted by this Master Lease or a
Schedule.
EVENT OF DEFAULT - means the events described in Subsection 13.1.
FAIR MARKET VALUE - means the aggregate amount which would be obtainable in an
arm's-length transaction between an informed and willing buyer/user and an
informed and willing seller under no compulsion to sell.
INITIAL TERM - means the period of time beginning on the first day of the first
full Rent Interval following the Commencement Date for all items of Equipment
and continuing for the number of Rent Intervals indicated on a Schedule.
INTERIM RENT - means the pro-rata portion of Rent due for the period from the
Commencement Date through but not including the first day of the first full Rent
Interval included in the Initial Term.
LATE CHARGE - means the lesser of five percent (5%) of the payment due or the
maximum amount permitted by the law of the state where the Equipment is located.
-3-
<PAGE>
LICENSED PRODUCTS - means any software or other licensed products attached to
the Equipment.
LIKE EQUIPMENT - means replacement Equipment which is lien free and of the same
model, type, configuration and manufacture as Equipment.
MERGER - means any consolidation or merger of the Lessee with or into any other
corporation or entity, any sale or conveyance of all or substantially all of the
assets or stock of the Lessee by or to any other person or entity in which
Lessee is not the surviving entity.
NOTICE PERIOD - means not less than ninety (90) days nor more than twelve (12)
months prior to the expiration of the lease term.
OWNER - means the owner of Equipment.
RENT - means the rent Lessee will pay for each item of Equipment expressed in a
Summary Equipment Schedule either as a specific amount or an amount equal to the
amount which Lessor pays for an item of Equipment multiplied by a lease rate
factor plus all other amounts due to Lessor under this Master Lease or a
Schedule.
RENT INTERVAL - means a full calendar month or quarter as indicated on a
Schedule.
SCHEDULE - means either an Equipment Schedule or a Licensed Products Schedule
which incorporates all of the terms and conditions of this Master Lease.
SECURED PARTY - means an entity to whom Lessor has granted a security interest
for the purpose of securing a loan.
SUMMARY EQUIPMENT SCHEDULE - means a certificate provided by Lessor summarizing
all of the Equipment for which Lessor has received Lessee approved vendor
invoices, purchase documents and/or evidence of delivery during a calendar
quarter which will incorporate all of the terms and conditions of the related
Schedule and this Master Lease and will constitute a separate lease for the
equipment leased thereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Master Lease on or as
of the day and year first above written.
VIGNETTE CORPORATION COMDISCO, INC.
as Lessee as Lessor
By: /s/ Jack F. Lynch By: /s/ James P. Labe
------------------------------- --------------------------------
Title: V.P. Finance & Operations Title: President
---------------------------- -----------------------------
-4-
<PAGE>
ADDENDUM TO THE
MASTER LEASE AGREEMENT DATED AS OF DECEMBER 3, 1998
BETWEEN VIGNETTE CORPORATION, AS LESSEE
AND COMDISCO, INC., AS LESSOR
The undersigned hereby agree that the terms and conditions of the above-
referenced Master Lease are hereby modified and amended as follows:
1) 14.1., "BOARD ATTENDANCE"
Delete this section in its entirety.
VIGNETTE CORPORATION COMDISCO, INC.
AS LESSEE AS LESSOR
By: /s/ Jack F. Lynch By: /s/ James P. Labe
--------------------------- ---------------------------
Title: V.P. Finance & Operations Title: President
--------------------------- ---------------------------
Date: 12/3/98 Date: 12/3/98
--------------------------- ---------------------------
<PAGE>
EQUIPMENT SCHEDULE VL-1
DATED AS OF DECEMBER 3, 1998
TO MASTER LEASE AGREEMENT
DATED AS OF DECEMBER 3, 1998 (THE "MASTER LEASE")
LESSEE: Vignette Corporation LESSOR: COMDISCO, INC.
Admin. Contact/Phone No.: Address for all Notices:
- ------------------------ -----------------------
Contact: Ashley Foster 6111 North River Road
TEL: (512) 502-0223 Rosemont, Illinois 60018
FAX: (512) 502-0280 Attn.: Venture Group
Address for Notices:
- -------------------
3410 Far West Blvd.
Suite 300
Austin, TX 78731
Central Billing Location: Rent Interval: Monthly
- ------------------------ -------------
same as above
Attn.:
Lessee Reference No.: _________________
(24 digits maximum)
Location of Equipment: Initial Term: 36 months
- --------------------- ------------
same as above (Number of Rent Intervals)
Lease Rate Factor: 3.091%
-----------------
Attn.:
EQUIPMENT (as defined below): Advance: $27,046.25
-------
Interim Rent: Interest Only (7.5%)
------------
Equipment specifically approved by Lessor, which shall be delivered to and
accepted by Lessee during the period December 3, 1998 through December 3, 1999
("Equipment Delivery Period"), for which Lessor receives vendor invoices
approved for payment, up to an aggregate purchase price of $875,000 ("Commitment
Amount"); excluding custom use equipment, leasehold improvements, installation
costs and delivery costs, rolling stock, special tooling, "stand-alone"
software, application software bundled into computer hardware, hand held items,
molds and fungible items.
1
<PAGE>
1. EQUIPMENT PURCHASE
This Schedule contemplates Lessor's acquisition of Equipment for lease to
Lessee, either by one of the first three categories listed below or by providing
Lessee with Equipment from the fourth category, in an aggregate value up to the
Commitment Amount referred to on the face of this Schedule. If the Equipment
acquired is of category (i), (ii) , (iii) below, the effectiveness of this
Schedule as it relates to those items of Equipment is contingent upon Lessee's
acknowledgment at the time Lessor acquires the Equipment that Lessee has either
received or approved the relevant purchase documentation between vendor and
Lessor for that Equipment.
(i) NEW ON-ORDER EQUIPMENT. Lessor will purchase new Equipment which is
obtained from a vendor by Lessee for its use subject to Lessor's
prior approval of the Equipment.
(ii) SALE-LEASEBACK EQUIPMENT. Any in-place Equipment installed at
Lessee's site and to which Lessee has clear title and ownership may
be considered by Lessor for inclusion under this Lease (the "Sale-
Leaseback Transaction"). Any request for a Sale-Leaseback
Transaction must be submitted to Lessor in writing (along with
accompanying evidence of Lessee's Equipment ownership satisfactory
to Lessor for all Equipment submitted) no later than January
3,1999*. Lessor will not perform a Sale-Leaseback Transaction for
any request or accompanying Equipment ownership documents which
arrive after the date marked above by an asterisk (*). Further, any
sale-leaseback Equipment will be placed on lease subject to: (1)
Lessor prior approval of the Equipment; and (2) if approved, at
Lessor's actual net appraised Equipment value pursuant to the
schedule below:
ORIGINAL EQUIPMENT INVOICE PERCENT OF ORIGINAL MANUFACTURER'S
DATE NET EQUIPMENT COST PAID BY LESSOR
------------------ ---------------------------------
Between 12/5/98 - 10/03/99 100%
(90 days)
(iii) USED ON-ORDER EQUIPMENT. Lessor will purchase used Equipment which
is obtained from a third party by Lessee for its use subject to
Lessor's prior approval of the Equipment and at Lessor's appraised
value for such used Equipment.
(iv) 800 NUMBER EQUIPMENT. Upon Lessee's use of Comdisco's 1-800 Direct
Service, Lessor will purchase new or used Equipment from a third
party or Lessor will supply new or used Equipment from its inventory
for use by Lessee at rates provided by Lessor.
2. COMMENCEMENT DATE
The Commencement Date for each item of new on-order or used on-order
Equipment will be the install date as confirmed in writing by Lessee as set
forth on the vendor invoice of which a facsimile transmission will constitute an
original document. The Commencement Date for sale-leaseback Equipment shall be
the date Lessor tenders the purchase price. The Commencement Date for 800 Number
Equipment shall be fifteen (15) days from the ship date, such ship date to be
set forth on the vendor invoice or if unavailable on the vendor invoice the ship
date will be determined by Lessor upon other supporting shipping documentation.
Lessor will summarize all approved invoices, purchase documentation and evidence
of delivery, as applicable, received in the same calendar month into a Summary
Equipment Schedule in the form attached to this Schedule as Exhibit 1, and the
Initial Term will begin the first day of the calendar month thereafter. Each
Summary Equipment Schedule will contain the Equipment location, description,
serial number(s) and cost and will incorporate the terms and conditions of the
Master Lease and this Schedule and will constitute a separate lease.
2
<PAGE>
3. OPTION TO EXTEND
So long as no Event of Default has occurred and is continuing hereunder,
and upon written notice no earlier than twelve (12) months and no later than
ninety (90) days prior to the expiration of the Initial Term of a Summary
Equipment Schedule, Lessee will have the right to extend the Initial Term of
such Summary Equipment Schedule for a period of one (1) year. In such event, the
rent to be paid during said extended period shall be mutually agreed upon and if
the parties cannot mutually agree, then the Summary Equipment Schedule shall
continue in full force and effect pursuant to the existing terms and conditions
until terminated in accordance with its terms. The Summary Equipment Schedule
will continue in effect following said extended period until terminated by
either party upon not less than ninety (90) days prior written notice, which
notice shall be effective as of the date of receipt.
4. PURCHASE OPTION
So long as no Event of Default has occurred and is continuing hereunder,
and upon written notice no earlier than twelve (12) months and no later than
ninety (90) days prior to the expiration of the Initial Term or the extended
term of the applicable Summary Equipment Schedule, Lessee will have the option
at the expiration of the Initial Term of the Summary Equipment Schedule to
purchase all, but not less than all, of the Equipment listed therein for a
purchase price not to exceed 15% of Lessor's cost and upon terms and conditions
to be mutually agreed upon by the parties following Lessee's written notice,
plus any taxes applicable at time of purchase. Said purchase price shall be paid
to Lessor at least thirty (30) days before the expiration date of the Initial
Term or extended term. Title to the Equipment shall automatically pass to Lessee
upon payment in full of the purchase price but, in no event, earlier than the
expiration of the fixed Initial Term or extended term, if applicable. If the
parties are unable to agree on the purchase price or the terms and conditions
with respect to said purchase, then the Summary Equipment Schedule with respect
to this Equipment shall remain in full force and effect. Notwithstanding the
exercise by Lessee of this option and payment of the purchase price, until all
obligations under the applicable Summary Equipment Schedule have been fulfilled,
it is agreed and understood that Lessor shall retain a purchase money security
interest in the Equipment listed therein and the Summary Equipment Schedule
shall constitute a Security Agreement under the Uniform Commercial Code of the
state in which the Equipment is located.
5. TECHNOLOGY EXCHANGE OPTION
If Lessee is not in default, and there is no material adverse change in
Lessee's credit, on or after the expiration of the 12th month of any Summary
Equipment Schedule, Lessee shall have the option to replace any of the Equipment
subject to such summary Equipment Schedule with new technology equipment ("New
Technology Equipment") utilizing the following guidelines:
A. Equipment being replaced with New Technology Equipment shall have an
aggregate original cost equal to or greater than $20,000 and be comprised of
full configurations of equipment.
B. This technology Exchange Option shall be limited to a maximum in the
aggregate of fifty percent (50%) of the original equipment cost and shall not
apply to software or any soft costs financed hereunder including but not limited
to tenant improvements and custom equipment.
C. The cost of the New Technology Equipment must be equal to or greater than the
original equipment cost of the replaced equipment, but in no event shall exceed
150% of the original equipment cost.
D. The remaining lease payments applicable to the equipment being replaced by
the New Technology Equipment will be discounted to present value at 6%.
The wholesale market value of the equipment being replaced will be established
by Comdisco based upon then current market conditions. Upon the return of the
replaced equipment, the wholesale price will be deducted from the present value
of the remaining rentals and the differential will be added to the cost of the
New Technology Equipment in calculating the new rental. The lease for the New
Technology Equipment will contain terms and conditions substantially similar to
those for the replaced equipment and will have an Initial Term not less than the
balance of the remaining Initial Term for the replaced equipment.
6. DUE DILIGENCE AND LEGAL EXPENSES
Lessee agrees to pay to Lessor due diligence and legal expenses or $2,500
upon execution hereof.
7. SPECIAL TERMS
3
<PAGE>
The terms and conditions of the Lease as they pertain to this Schedule are
hereby modified and amended as follows:
Master Lease: This Schedule is issued pursuant to the Lease identified on page
1 of this Schedule. All of the terms and conditions of the Lease are
incorporated in and made a part of this Schedule as if they were expressly set
forth in this Schedule. The parties hereby reaffirm all of the terms and
conditions of the Lease (including, without limitation, the representations and
warranties set forth in Section 8) except as modified herein by this Schedule.
This Schedule may not be amended or rescinded except by a writing signed by both
parties.
VIGNETTE CORPORATION COMDISCO, INC.
as Lessee as Lessor
By: /s/ Jack F. Lynch By: /s/ James P. Labe
--------------------------- ---------------------------
Title: V.P. Finance & Operations Title: President
--------------------------- ---------------------------
Date: 12/3/98 Date: 12/3/98
--------------------------- ---------------------------
4
<PAGE>
EXHIBIT 1
SUMMARY EQUIPMENT SCHEDULE
This Summary Equipment Schedule dated XXXX is executed pursuant to
Equipment Schedule No. X to the Master Lease Agreement dated XXXX between
Comdisco, Inc. ("Lessor") and XXXX ("Lessee"). All of the terms, conditions,
representations and warranties of the Master Lease Agreement and Equipment
Schedule No. X are incorporated herein and made a part hereof, and this Summary
Equipment Schedule constitutes a Schedule for the Equipment on the attached
invoices.
1. For Period Beginning: And Ending:
-------------------- ----------
2. Initial Term Starts on: Initial Term:
---------------------- ------------
(Number of Rent Intervals)
3. Total Summary Equipment Cost:
----------------------------
4. Lease Rate Factor:
-----------------
5. Rent:
----
6. Acceptance Doc Type:
-------------------
5
<PAGE>
EQUIPMENT SCHEDULE VL-2
DATED AS OF DECEMBER 3, 1998
TO MASTER LEASE AGREEMENT
DATED AS OF DECEMBER 3, 1996 (THE "MASTER LEASE")
LESSEE: Vignette Corporation LESSOR: COMDISCO, INC.
ADMIN. CONTACT/PHONE NO.: ADDRESS FOR ALL NOTICES:
Contact: Ashley Foster 6111 North River Road
TEL: (512) 502-0223 Rosemont, Illinois 60018
FAX: (512) 502-0280 Attn.: Venture Group
Address for Notices:
3410 Far West Blvd.
Suite 300
Austin, TX 78731
Central Billing Location: Rent Interval: Monthly
same as above
Attn.:
Lessee Reference No.:
----------------
(24 digits maximum)
Location of Equipment: Initial Term: 36 months
(Number of Rent Intervals)
Lease Rate Factor: 3.091%
Attn.:
EQUIPMENT (as defined below): Advance: 11,591.25
Interim Rent: Interest Only(7.5%)
Software and tenant improvements specifically approved by Lessor, which shall be
delivered to and accepted by Lessee during the period December 3, 1998 through
December 3, 1999 ("Equipment Delivery Period") for which Lessor receives vendor
invoices approved for payment, up to an aggregate purchase price of $375,000
("Commitment Amount"); excluding custom use equipment, installation costs and
delivery costs, rolling stock, special tooling, hand held items, molds and
fungible items.
1
<PAGE>
1. EQUIPMENT PURCHASE
This Schedule contemplates Lessor's acquisition of Equipment for lease to
Lessee, either by one of the first three categories listed below or by providing
Lessee with Equipment from the fourth category, in an aggregate value up to the
Commitment Amount referred to on the face of this Schedule. If the Equipment
acquired is of category (i), (ii) , (iii) below, the effectiveness of this
Schedule as it relates to those items of Equipment is contingent upon Lessee's
acknowledgment at the time Lessor acquires the Equipment that Lessee has either
received or approved the relevant purchase documentation between vendor and
Lessor for that Equipment.
(i) NEW ON-ORDER EQUIPMENT. Lessor will purchase new Equipment which is
obtained from a vendor by Lessee for its use subject to Lessor's
prior approval of the Equipment.
(ii) SALE-LEASEBACK EQUIPMENT. Any in-place Equipment installed at
Lessee's site and to which Lessee has clear title and ownership may
be considered by Lessor for inclusion under this Lease (the "Sale-
Leaseback Transaction"). Any request for a Sale-Leaseback Transaction
must be submitted to Lessor in writing (along with accompanying
evidence of Lessee's Equipment ownership satisfactory to Lessor for
all Equipment submitted) no later than January 3, 1999*. Lessor will
not perform a Sale-Leaseback Transaction for any request or
accompanying Equipment ownership documents which arrive after the
date marked above by an asterisk (*). Further, any sale-leaseback
Equipment will be placed on lease subject to: (1) Lessor prior
approval of the Equipment; and (2) if approved, at Lessor's actual
net appraised Equipment value pursuant to the schedule below:
ORIGINAL EQUIPMENT INVOICE PERCENT OF ORIGINAL MANUFACTURER'S
DATE NET EQUIPMENT COST PAID BY LESSOR
-------------------------- ----------------------------------
Between 12/5/98 - 10/03/99 (90 days) 100%
Lessee represents that it has paid all California sales tax due on the cost of
that portion of Equipment to be installed in California and agrees to provide
evidence of such payment to Lessor, if specifically requested. As a result of
the election, Lessor agrees that it will not invoice Lessee for use tax on the
monthly rental rate. Lessee understands that this is an irrevocable election to
measure the tax by the Equipment cost and cannot be changed except prior to
installation of the Equipment.
(iii) USED ON-ORDER EQUIPMENT. Lessor will purchase used Equipment which is
obtained from a third party by Lessee for its use subject to Lessor's
prior approval of the Equipment and at Lessor's appraised value for
such used Equipment.
(iv) 800 NUMBER EQUIPMENT. Upon Lessee's use of Comdisco's 1-800 Direct
Service, Lessor will purchase new or used Equipment from a third
party or Lessor will supply new or used Equipment from its inventory
for use by Lessee at rates provided by Lessor.
2. COMMENCEMENT DATE
The Commencement Date for each item of new on-order or used on-order
Equipment will be the install date as confirmed in writing by Lessee as set
forth on the vendor invoice of which a facsimile transmission will constitute an
original document. The Commencement Date for sale-leaseback Equipment shall be
the date Lessor tenders the purchase price. The Commencement Date for 800 Number
Equipment shall be fifteen (15) days from the ship date, such ship date to be
set forth on the vendor invoice or if unavailable on the vendor invoice the ship
date will be determined by Lessor upon other supporting shipping documentation.
Lessor will summarize all approved invoices, purchase documentation and evidence
of delivery, as applicable, received in the same calendar month into a Summary
Equipment Schedule in the form attached to this Schedule as Exhibit 1, and the
Initial Term will begin the first day of the calendar month thereafter. Each
Summary Equipment Schedule will contain the Equipment location, description,
serial number(s) and cost and will incorporate the terms and conditions of the
Master Lease and this Schedule and will constitute a separate lease.
3. MISCELLANEOUS
In consideration of Lessor financing software and tenant improvements
hereunder, Lessee agrees in addition to its last Monthly Rent Payment to remit
to Lessor an amount equal to 15% of Lessor's aggregate cost of software and
tenant improvements provided hereunder.
4. SPECIAL TERMS
2
<PAGE>
The terms and conditions of the Lease as they pertain to this Schedule are
hereby modified and amended as follows:
(a) Section 9, Delivery and Return of Equipment
Delete second, third and fourth sentences in their entirety.
Master Lease: This Schedule is issued pursuant to the Lease identified on page
1 of this Schedule. All of the terms and conditions of the Lease are
incorporated in and made a part of this Schedule as if they were expressly set
forth in this Schedule. The parties hereby reaffirm all of the terms and
conditions of the Lease (including, without limitation, the representations and
warranties set forth in Section 8) except as modified herein by this Schedule.
This Schedule may not be amended or rescinded except by a writing signed by both
parties.
VIGNETTE CORPORATION COMDISCO, INC.
AS LESSEE AS LESSOR
By: /s/ Jack F. Lynch By: /s/ James P. Labe
--------------------------------- --------------------------------
Title: V.P. Finance & Operations Title: President
------------------------------- ------------------------------
Date: 12/3/98 Date: 12/3/98
-------------------------------- -------------------------------
3
<PAGE>
EXHIBIT 1
SUMMARY EQUIPMENT SCHEDULE
This Summary Equipment Schedule dated XXXX is executed pursuant to Equipment
Schedule No. X to the Master Lease Agreement dated XXXX between Comdisco, Inc.
("Lessor") and XXXX ("Lessee"). All of the terms, conditions, representations
and warranties of the Master Lease Agreement and Equipment Schedule No. X are
incorporated herein and made a part hereof, and this Summary Equipment Schedule
constitutes a Schedule for the Equipment on the attached invoices.
1. For Period Beginning: And Ending:
2. Initial Term Starts on: Initial Term:
(Number of Rent Intervals)
3. Total Summary Equipment Cost:
4. Lease Rate Factor:
5. Rent:
6. Acceptance Doc Type:
4
<PAGE>
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OPEGGY PARKERFinancial Printing GroupTHESE SECURITIES HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED, OR ANY STATE
SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.
WARRANT AGREEMENT
TO PURCHASE SHARES OF THE SERIES H PREFERRED STOCK OF
VIGNETTE CORPORATION
DATED AS OF DECEMBER 3, 1998 (THE "EFFECTIVE DATE")
WHEREAS, Vignette Corporation., a Delaware corporation (the "Company") has
entered into a Master Lease Agreement dated as of December 3, 1998, Equipment
Schedule No. VL-1 and VL-2 dated as of December 3, 1998, and related Summary
Equipment Schedules (collectively, the "Leases") with Comdisco, Inc., a Delaware
corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Leases, the right to purchase shares of its Series H Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
subscribe to and purchase, from the Company, 3,061 fully paid and non-assessable
shares of the Company's Series H Preferred Stock ("Preferred Stock") at a
purchase price of $16.33 per share (the "Exercise Price"). The number and
purchase price of such shares are subject to adjustment as provided in Section 8
hereof.
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant Agreement
and the right to purchase Preferred Stock as granted herein shall commence on
the Effective Date and shall be exercisable for a period of (i) seven (7) years
or (ii) three (3) years from the effective date of the Company's initial public
offering, whichever is shorter.
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are exercisable by
the Warrantholder, in whole or in part, at any time, or from time to time, prior
to the expiration of the term set forth in Section 2 above, by tendering to the
Company at its principal office a notice of exercise in the form attached hereto
as Exhibit I (the "Notice of Exercise"), duly completed and executed. Promptly
upon receipt of the Notice of Exercise and the payment of the purchase price in
accordance with the terms set forth below, and in no event later than twenty-one
(21) days thereafter, the Company shall issue to the Warrantholder a certificate
for the number of shares of Preferred Stock purchased and shall execute the
acknowledgment of exercise in the form attached hereto as Exhibit II (the
"Acknowledgment of Exercise") indicating the number of shares which remain
subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either (i)
by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
-1-
<PAGE>
Y = the number of shares of Preferred Stock requested to be
exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Preferred Stock.
B = the Exercise Price.
For purposes of the above calculation, current fair market value of
Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public offering
of the Company's Common Stock, and if the Company's Registration Statement
relating to such public offering has been declared effective by the SEC,
then the fair market value per share shall be the product of (x) the
initial "Price to Public" specified in the final prospectus with respect to
the offering and (y) the number of shares of Common Stock into which each
share of Preferred Stock is convertible at the time of such exercise;
(ii) if this Warrant is exercised after, and not in connection with
the Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market value
shall be deemed to be the product of (x) the average of the closing
prices over a twenty-one (21) day period ending three days before the
day the current fair market value of the securities is being determined
and (y) the number of shares of Common Stock into which each share of
Preferred Stock is convertible at the time of such exercise; or
(b) if actively traded over-the-counter, the fair market value
shall be deemed to be the product of (x) the average of the closing bid
and asked prices quoted on the NASDAQ system (or similar system) over
the twenty-one (21) day period ending three days before the day the
current fair market value of the securities is being determined and (y)
the number of shares of Common Stock into which each share of Preferred
Stock is convertible at the time of such exercise;
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
current fair market value of Preferred Stock shall be the product of (x)
the highest price per share which the Company could obtain from a willing
buyer (not a current employee or director) for shares of Common Stock sold
by the Company, from authorized but unissued shares, as determined in good
faith by its Board of Directors and (y) the number of shares of Common
Stock into which each share of Preferred Stock is convertible at the time
of such exercise, unless the Company shall become subject to a merger,
acquisition or other consolidation pursuant to which the Company is not the
surviving party, in which case the fair market value of Preferred Stock
shall be deemed to be the value received by the holders of the Company's
Preferred Stock on a common equivalent basis pursuant to such merger or
acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of this
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock required to
be reserved hereunder require registration with or approval of any governmental
authority under any Federal or State law (other than any registration under the
Securities Act of 1933, as amended ("1933 Act"), as then in effect, or any
similar Federal statute then enforced, or any state securities law, required by
reason of any transfer involved in such conversion), or listing on any domestic
securities exchange, before such shares may be issued upon conversion, the
Company will, at its expense and as expeditiously as possible, use its best
efforts to cause such shares to be duly registered, listed or approved for
listing on such domestic securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
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No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation whether or not the Company is the surviving corporation, or the sale
of all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of the Warrant, the number of
shares of preferred stock or other securities of the successor corporation
resulting from such Merger Event, equivalent in value to that which would have
been issuable if Warrantholder had exercised this Warrant immediately prior to
the Merger Event. In any such case, appropriate adjustment (as determined in
good faith by the Company's Board of Directors) shall be made in the application
of the provisions of this Warrant Agreement with respect to the rights and
interest of the Warrantholder after the Merger Event to the end that the
provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Preferred Stock purchasable) shall be applicable
to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time shall
combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the Company's stock,
then the Exercise Price shall be adjusted, from and after the record date of
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Company's
stock outstanding immediately prior to such dividend or distribution, and (ii)
the denominator of which shall be the total number of all shares of the
Company's stock outstanding immediately after such dividend or distribution.
The Warrantholder shall thereafter be entitled to purchase, at the Exercise
Price resulting from such adjustment, the number of shares of Preferred Stock
(calculated to the nearest whole share) obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of shares of
Preferred Stock issuable upon the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(e) Right to Purchase Additional Stock. If, the Warrantholder's total cost
of equipment leased pursuant to the Leases exceeds $1,250,000, Warrantholder
shall have the right to purchase from the Company, at the Exercise Price
(adjusted as set forth herein), an additional number of shares, which number
shall be determined by (i) multiplying the amount by which the Warrantholder's
total equipment cost exceeds $1,250,000 by 4%, and (ii) dividing the product
thereof by the Exercise Price per share referenced above.
(f) Antidilution Rights. Additional antidilution rights applicable to the
Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a
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true and complete copy of which is attached hereto as Exhibit __ (the
"Charter"). The Company shall promptly provide the Warrantholder with any
restatement, amendment, modification or waiver of the Charter. The Company shall
provide Warrantholder with prior written notice of any issuance of its stock or
other equity security to occur after the Effective Date of this Warrant, which
notice shall include (a) the price at which such stock or security is to be
sold, (b) the number of shares to be issued, and (c) such other information as
necessary for Warrantholder to determine if a dilutive event has occurred.
(g) Notice of Adjustments. If: (i) the Company shall declare any dividend
or distribution upon its stock, whether in cash, property, stock or other
securities; (ii) the Company shall offer for subscription prorata to the holders
of any class of its Preferred or other convertible stock any additional shares
of stock of any class or other rights; (iii) there shall be any Merger Event;
(iv) there shall be an initial public offering; or (v) there shall be any
voluntary dissolution, liquidation or winding up of the Company; then, in
connection with each such event, the Company shall send to the Warrantholder:
(A) at least twenty (20) days' prior written notice of the date on which the
books of the Company shall close or a record shall be taken for such dividend,
distribution, subscription rights (specifying the date on which the holders of
Preferred Stock shall be entitled thereto) or for determining rights to vote in
respect of such Merger Event, dissolution, liquidation or winding up; (B) in the
case of any such Merger Event, dissolution, liquidation or winding up, at least
twenty (20) days' prior written notice of the date when the same shall take
place (and specifying the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such Merger Event, dissolution, liquidation or winding up); and
(C) in the case of a public offering, the Company shall give the Warrantholder
at least twenty (20) days written notice prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(h) Timely Notice. Failure to timely provide such notice required by
subsection (g) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date Warrantholder actually receives a written notice containing all the
information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever; provided, however, that
the Preferred Stock issuable pursuant to this Warrant Agreement may be subject
to restrictions on transfer under state and/or Federal securities laws. The
Company has made available to the Warrantholder true, correct and complete
copies of its Charter and Bylaws, as amended. The issuance of certificates for
shares of Preferred Stock upon exercise of the Warrant Agreement shall be made
without charge to the Warrantholder for any issuance tax in respect thereof, or
other cost incurred by the Company in connection with such exercise and the
related issuance of shares of Preferred Stock. The Company shall not be required
to pay any tax which may be payable in respect of any transfer involved and the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Leases and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which it is a party or by which it is
bound, and the Leases and this Warrant Agreement constitute legal, valid and
binding agreements of the Company, enforceable in accordance with their
respective terms.
(c) Consents and Approvals. No consent or approval of, giving of notice
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common Stock,
Preferred Stock or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable.
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<PAGE>
All outstanding shares of Common Stock, Preferred Stock and any other securities
were issued in full compliance with all Federal and state securities laws. In
addition:
(i) Immediately prior to the Closing, the authorized capital stock of
the Company shall consist of 17,000,000 shares of Common Stock, par value
$0.01 per share (the "Common Stock"), of which 2,856,745 shares shall be
issued and outstanding, and 9,000,000 shares of Preferred Stock, $0.01 par
value per share, of which 407,500 shares shall have been designated as
Series A Convertible Preferred Stock, 1,853,182 shares shall have been
designated as Series B Convertible Preferred Stock, 1,865,000 shares shall
have been designated as Series C Convertible Preferred Stock, 200,000
shares shall have been designated as Series D Convertible Preferred Stock,
2,358,492 shares shall have been designated as Series E Preferred Stock,
1,365,808 shares shall have been designated Series F Convertible Preferred
Stock, 191,022 shares shall have been designated Series G Preferred Stock
and 580,000 shall have been designated Series H Preferred Stock.
Immediately prior to the Closing, 400,000 shares of Series A Convertible
Preferred Stock, 1,853,182 shares of Series B Convertible Preferred Stock,
1,865,000 shares of Series C Convertible Preferred Stock, 65,386 shares of
Series D Convertible Preferred Stock, 2,358,492 shares of Series E.
Convertible Preferred Stock, 1,365,808 shares of Series F Convertible
Preferred Stock, 191,022 shares of Series G Convertible Preferred Stock and
no shares of Series H Convertible Preferred Stock were issued and
outstanding. All of the issued and outstanding shares of Preferred Stock
have been duly authorized and validly issued and are fully paid and
nonassessable. All of the issued and outstanding shares of Common Stock
have been duly authorized and validly issued and are fully paid and
nonassessable. Immediately prior to the Closing, there will be 6,061,000
shares of Common Stock reserved for issuance under the Company's 1995 Stock
Option/Stock Issuance Plan, of which 2,942,898 shares have been issued upon
the exercise of options, 2,165,062 shares are subject to outstanding
options and 953,040 shares remain available for issuance. Except as set
forth in Exhibit C hereto, the Certificate of Incorporation, the other
agreements required to be executed by the Company on or prior to the
Closing pursuant to paragraph 5D (the "Ancillary Agreements") or as
provided in this Agreement, (i) no subscription, warrant, option,
convertible security or other right (contingent or otherwise) to purchase
or acquire any shares of capital stock of the Company is authorized or
outstanding, (ii) the Company has no obligation (contingent or otherwise)
to issue any subscription, warrant, option, convertible security or other
such right or to issue or distribute to holders of an share of its capital
stock any evidences of indebtedness or assets of the Company, and (iii) the
Company has no obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any shares of its capital stock or any interest therein
or to pay any dividend to make any other distribution in respect thereof.
All of the issued and outstanding securities or the Company have been
offered, issued and sold by the Company is compliance with applicable
federal and state securities laws.
(ii) In accordance with the Company's Articles of Incorporation, no
shareholder of the Company has preemptive rights to purchase new issuances
of the Company's capital stock.
(e) Insurance. The Company has in full force and effect insurance
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Other Commitments to Register Securities. Except as set forth in this
Warrant Agreement, the Company is not, pursuant to the terms of any other
agreement currently in existence, under any obligation to register under the
1933 Act any of its presently outstanding securities or any of its securities
which may hereafter be issued.
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder's
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the qualification requirements of the applicable state
securities laws.
(h) Compliance with Rule 144. At the written request of the Warrantholder,
who proposes to sell Preferred Stock issuable upon the exercise of the Warrant
in compliance with Rule 144 promulgated by the Securities and Exchange
Commission, the Company shall furnish to the Warrantholder, within ten days
after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
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<PAGE>
(a) Investment Purpose. The right to acquire Preferred Stock or the
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the Preferred
Stock issuable upon exercise of this Warrant is not registered under the 1933
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Preferred Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever
the restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Preferred Stock then outstanding as to
which such restrictions have terminated shall be entitled to receive from the
Company, without expense to such holder, one or more new certificates for the
Warrant or for such shares of Preferred Stock not bearing any restrictive
legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1934 Act (the "1934 Act"), or file reports pursuant to
Section 15(d), of the 1934 Act", or if a registration statement covering the
securities under the 1933 Act is not in effect when it desires to sell (i) the
rights to purchase Preferred Stock pursuant to this Warrant Agreement, or (ii)
the Preferred Stock issuable upon exercise of the right to purchase, it may be
required to hold such securities for an indefinite period. The Warrantholder
also understands that any sale of its rights of the Warrantholder to purchase
Preferred Stock or Preferred Stock which might be made by it in reliance upon
Rule 144 under the 1933 Act may be made only in accordance with the terms and
conditions of that Rule.
(f) Accredited Investor. Warrantholder is an "accredited investor" within
the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
11. TRANSFERS.
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable in whole or in part
by the Warrantholder and any successor transferee, provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed three (3) transfers. The transfer shall be recorded on the
books of the Company upon receipt by the Company of a notice of transfer in the
form attached hereto as Exhibit III (the "Transfer Notice"), at its principal
offices and the payment to the Company of all transfer taxes and other
governmental charges imposed on such transfer.
12. MISCELLANEOUS.
(a) Effective Date. The provisions of this Warrant Agreement shall be
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall
be binding upon any successors or assigns of the Company.
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<PAGE>
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
construed for all purposes under and in accordance with the laws of the State of
Illinois.
(d) Counterparts. This Warrant Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail as
hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed (i) to the Warrantholder at
6111 North River Road, Rosemont, Illinois 60018, Attention: Venture Lease
Administration, cc: Legal Department, Attention.: General Counsel, (and/or, if
by facsimile, (847) 518-5465 and (847)518-5088) and (ii) to the Company at 3410
Far West Blvd., Suite 300, Austin, TX 78731, Attention: Chief Financial Officer
(and/or if by facsimile, (512) 502-0223 or at such other address as any such
party may subsequently designate by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and conditions of
the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended by
a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (d), (f) and (g) of Section 9 above. If the purchase
price for the Leases referenced in the preamble of this Warrant Agreement
exceeds $1,000,000, the Company will also provide Warrantholder with an opinion
from the Company's counsel with respect to those same representations,
warranties and covenants. The Company shall also supply such other documents as
the Warrantholder may from time to time reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed by its officers thereunto duly authorized as of the Effective
Date.
COMPANY: VIGNETTE CORPORATION
BY: /s/ Jack F. Lynch
--------------------------
TITLE: V.P. Finance & Operations
--------------------------
WARRANTHOLDER: COMDISCO, INC.
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BY: /s/ James P. Labe
-----------------------
TITLE: President
-----------------------
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<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
TO:
----------------------------
(1) THE UNDERSIGNED WARRANTHOLDER HEREBY ELECTS TO PURCHASE _______ SHARES OF
THE SERIES ____ PREFERRED STOCK OF _________________, PURSUANT TO THE TERMS
OF THE WARRANT AGREEMENT DATED THE ______ DAY OF ________________________,
19__ (THE "WARRANT AGREEMENT") BETWEEN ______________________________ AND
THE WARRANTHOLDER, AND TENDERS HEREWITH PAYMENT OF THE PURCHASE PRICE FOR
SUCH SHARES IN FULL, TOGETHER WITH ALL APPLICABLE TRANSFER TAXES, IF ANY.
(2) IN EXERCISING ITS RIGHTS TO PURCHASE THE SERIES ____ PREFERRED STOCK OF
________________________________________, THE UNDERSIGNED HEREBY CONFIRMS
AND ACKNOWLEDGES THE INVESTMENT REPRESENTATIONS AND WARRANTIES MADE IN
SECTION 10 OF THE WARRANT AGREEMENT.
(3) PLEASE ISSUE A CERTIFICATE OR CERTIFICATES REPRESENTING SAID SHARES OF
SERIES ____ PREFERRED STOCK IN THE NAME OF THE UNDERSIGNED OR IN SUCH OTHER
NAME AS IS SPECIFIED BELOW.
- ---------------------------------
(NAME)
- ---------------------------------
(ADDRESS)
WARRANTHOLDER: COMDISCO, INC.
BY:
-------------------------
TITLE:
-------------------------
DATE:
-------------------------
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EXHIBIT II
ACKNOWLEDGMENT OF EXERCISE
THE UNDERSIGNED ____________________________________, HEREBY ACKNOWLEDGE
RECEIPT OF THE "NOTICE OF EXERCISE" FROM COMDISCO, INC., TO PURCHASE ____ SHARES
OF THE SERIES ____ PREFERRED STOCK OF _________________, PURSUANT TO THE TERMS
OF THE WARRANT AGREEMENT, AND FURTHER ACKNOWLEDGES THAT ______ SHARES REMAIN
SUBJECT TO PURCHASE UNDER THE TERMS OF THE WARRANT AGREEMENT.
COMPANY:
BY:
-------------------------
TITLE:
-------------------------
DATE:
-------------------------
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EXHIBIT III
TRANSFER NOTICE
(TO TRANSFER OR ASSIGN THE FOREGOING WARRANT AGREEMENT EXECUTE THIS FORM AND
SUPPLY REQUIRED INFORMATION. DO NOT USE THIS FORM TO PURCHASE SHARES.)
FOR VALUE RECEIVED, THE FOREGOING WARRANT AGREEMENT AND ALL RIGHTS
EVIDENCED THEREBY ARE HEREBY TRANSFERRED AND ASSIGNED TO
- -------------------------------------------------------------------
(PLEASE PRINT)
WHOSE ADDRESS IS
---------------------------------------------------
- -------------------------------------------------------------------
DATED:
------------------------------------
HOLDER'S SIGNATURE:
-----------------------
HOLDER'S ADDRESS:
-----------------------
---------------------------------------------
SIGNATURE GUARANTEED:
---------------------------------------------
NOTE: THE SIGNATURE TO THIS TRANSFER NOTICE MUST CORRESPOND WITH THE NAME AS IT
APPEARS ON THE FACE OF THE WARRANT AGREEMENT, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER. OFFICERS OF CORPORATIONS AND THOSE
ACTING IN A FIDUCIARY OR OTHER REPRESENTATIVE CAPACITY SHOULD FILE PROPER
EVIDENCE OF AUTHORITY TO ASSIGN THE FOREGOING WARRANT AGREEMENT.
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EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated March 13, 1998 in the Registration Statement (Form
S-1) and related Prospectus of Vignette Corporation for the registration of
shares of its common stock.
/s/ Ernst & Young LLP
Austin, Texas
December 1, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DECEMBER 31,
1997 AND SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
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