<PAGE>
As filed with the Securities and Exchange Commission on April 11, 2000
Registration No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
DOCENT, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<C> <S> <C>
Delaware 7372 77-0460705
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
---------------
2444 Charleston Road
Mountain View, California 94043
(650) 934-9500
(Address, including zip code and telephone number, including area code,
of registrant's principal executive offices)
---------------
DAVID R. ELLETT
Chairman, President and Chief Executive Officer
Docent, Inc.
2444 Charleston Road
Mountain View, California 94043
(650) 934-9500
(Name, address, including zip code and telephone number, including area code,
of agent for service)
---------------
Copies to:
<TABLE>
<S> <C>
Stephen M. Wurzburg, Esq. Kenneth R. Lamb, Esq.
Pillsbury Madison & Sutro LLP Gibson, Dunn & Crutcher LLP
2550 Hanover Street One Montgomery Street
Palo Alto, CA 94304 Telesis Tower, Suite 2600
(650) 233-4500 San Francisco, CA 94104
(415) 393-8200
</TABLE>
---------------
Approximate date 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, 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 Section 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement of the earlier effective registration statement for the
same offering. [_]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
<CAPTION>
Proposed Amount of
Title of each class of maximum aggregate registration
securities to be registered offering price (1) fee
- ------------------------------------------------------------------
<S> <C> <C>
Common Stock.................... $80,000,000 $21,120
- ------------------------------------------------------------------
- ------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(o) under the Securities Act of 1933.
---------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this preliminary prospectus is not complete and may be +
+changed. These securities may not be sold until the registration statement +
+filed with the Securities and Exchange Commission becomes effective. This +
+preliminary prospectus is not an offer to sell these securities nor does it +
+seek offers to buy these securities in any jurisdiction where the offer or +
+sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion Dated , 2000
[LOGO of Docent Inc.]
- --------------------------------------------------------------------------------
Shares
Common Stock
- --------------------------------------------------------------------------------
This is the initial public offering of Docent, Inc. We are offering
shares of our common stock. We anticipate that the initial public offering
price will be between $ and $ per share. We have applied to list our
common stock on the Nasdaq National Market under the symbol "DCNT."
Investing in our Common Stock involves risks. See "Risk Factors" beginning on
page 7.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary
is a criminal offense.
<TABLE>
<CAPTION>
Underwriting
Discounts and Proceeds to
Price to Public Commissions Docent
<S> <C> <C> <C>
Per Share $ $ $
Total $ $ $
</TABLE>
We have granted the underwriters the right to purchase up to
additional shares to cover over-allotments.
Deutsche Banc Alex. Brown
Dain Rauscher Wessels
Thomas Weisel Partners LLC
The date of this Prospectus is , 2000
<PAGE>
DESCRIPTION OF GRAPHICS FOR INSIDE-FRONT COVER
[TO COME]
<PAGE>
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this
prospectus. This summary may not contain all of the information that you should
consider before investing in our common stock. You should carefully read the
entire prospectus, including "Risk Factors" and the financial statements,
before making an investment decision.
OUR BUSINESS
Docent is a leading provider of products and services that enable the
exchange of knowledge within and among our customer constituencies consisting
of large enterprises, educational content providers and professional
communities. Our Internet-based knowledge exchange platform goes beyond the
simple delivery of learning content online, commonly known as eLearning, to
bring together our constituents into a virtual marketplace with an array of
value-added features. Our solutions provide the following benefits to our
constituents:
. Enterprises can easily and efficiently create, deliver and manage
educational content in a highly personalized manner. Through our
solutions, participants receive the specific knowledge necessary to
bridge skill gaps in order to increase their competency. This can
provide enterprises with a measurable impact on business results;
. Content providers can rapidly and cost-effectively generate additional
revenue by bringing their offerings online and by participating in
virtual knowledge marketplaces; and
. Professional communities or online affiliations of professionals, such
as salespeople and consultants, can offer a broad range of educational
content from multiple content providers, as well as learning management
capabilities, and can offer value-added products and services to their
members.
In today's highly competitive knowledge-based economy, people are often the
most significant asset within an organization. Large amounts of information
frequently need to be disseminated among employees, suppliers, distributors,
customers, partners and service providers, referred to as the extended
enterprise. The ability to rapidly disseminate information to people throughout
the extended enterprise has become mission critical. These extended enterprises
require a flexible and easily accessible knowledge exchange platform that
facilitates the interaction among the different constituents. Our functionally
rich Internet-based platform, which we refer to as an eHub, is based on an
open, flexible and scalable architecture allowing for easy implementation and
customization. Docent Enterprise, our Web-based knowledge exchange software
platform, enables our constituents to develop personalized learning plans,
deliver customized content on demand, assess effectiveness, relate performance
to business goals and manage a wide range of sophisticated eCommerce processes.
We market our products and services through both our direct sales force and
strategic partners. Our sales efforts to date have been targeted at the
technology, financial and business services, and healthcare industries. As of
March 31, 2000, we had over 90 customers and partners using our products and
services. These include Autodesk, Ariba, Arthur Andersen, AXA Insurance, Baxter
Pharmaceutical Products, Hewlett-Packard, Lucent Technologies, Merrill Lynch,
Miller Heiman, Pitney-Bowes, Portera and Schering-Plough.
Our objective is to enhance our position as a leading provider of knowledge
exchange eHub solutions. We plan to expand our sales force and strategic
partnerships to accelerate the
3
<PAGE>
development and growth of operations. In addition, we plan to service new
industries and expand into new applications such as reseller and partner
training solutions. We also plan continued enhancement of the features and
functions of our products and services. In particular, we plan to focus on
enhancing our capabilities in learning object management, personalization,
transaction processing and data analysis.
We have received several awards and recognition for our industry leadership
and product capabilities, including the Crossroads 2000 A-List Award and the
1999 Product of the Year Award from Call Center Solutions Magazine. We were
also recognized in PC Week Magazine (November 16, 1999) with the best score
among seven learning management systems, and in brandon-hall.com's Integrated
Learning Systems report (February 2000) as the "Best Integrated Learning
System" and the "Best Solution for the Sales Organization."
Our principal executive offices are located at 2444 Charleston Road, Mountain
View, California 94043. Our telephone number at that location is (650) 934-
9500. We maintain a World Wide Web site at www.docent.com. The reference to our
website does not constitute incorporation by reference of the information
contained in our website.
- --------------------------------------------------------------------------------
Our trademarks used in this prospectus include Docent, Docent Enterprise,
Docent Desktop, Docent Mobile, Docent Learning Management Server and Docent
Content Delivery Server. All other trademarks appearing in this prospectus are
the property of their respective owners.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by
Docent........................ shares
Common stock to be outstanding
after the offering............ shares
Use of proceeds................ For general corporate purposes, including working
capital, expansion of our sales and marketing efforts
and, potentially, for acquisition opportunities that
we anticipate may arise in the future.
Proposed Nasdaq National Market
Symbol......................... DCNT
</TABLE>
The number of shares outstanding upon completion of this offering is based on
shares outstanding as of December 31, 1999. This number assumes the conversion
into common stock of all of our convertible preferred stock outstanding on
December 31, 1999, including 3,719,477 shares of common stock issuable upon
conversion of 3,719,477 shares of Series E convertible preferred stock which
were issued during April 2000. This number excludes:
. 2,550,495 shares of common stock issuable upon exercise of options
outstanding as of December 31, 1999;
. 10,679,999 shares of common stock issuable in the future under our stock
plans for our employees and consultants; and
. 608,445 shares subject to outstanding warrants to purchase common stock
and convertible preferred stock as of December 31, 1999, and an
additional 2,683,466 shares subject to such warrants granted during
March and April 2000, which will convert into warrants to purchase an
equal number of shares of common stock upon completion of this offering.
5
<PAGE>
Summary Consolidated Financial Data
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Consolidated Statement of Operations Data:
Revenue:
License.......................................... $ 335 $ 297 $ 141
Services and maintenance......................... 60 244 651
------- ------- --------
Total revenue.................................. 395 541 792
Costs and expenses................................. 1,948 7,004 19,457
Loss from operations............................... (1,553) (6,463) (18,665)
Net loss........................................... (1,505) (6,434) (18,713)
Net loss attributable to common stockholders....... (1,505) (6,434) (20,067)
Net loss per share attributable to stockholders:
Basic and diluted................................ $ (0.55) $ (2.24) $ (5.07)
Weighted average shares outstanding.............. 2,717 2,869 3,958
Pro forma net loss per share (unaudited):
Basic and diluted................................ $ (1.09)
Weighted average shares outstanding.............. 17,103
</TABLE>
<TABLE>
<CAPTION>
December 31, 1999
-----------------------------------
Pro Forma As
Actual Pro Forma(1) Adjusted(2)
-------- ----------- ------------
<S> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents................. $ 12,773 $39,574 $
Working capital........................... 9,938 36,739
Total assets.............................. 15,302 42,103
Notes payable and capital lease
obligations, noncurrent portion.......... 1,117 1,117
Convertible preferred stock............... 33,288 --
Total stockholders' equity (deficit)...... (23,330) 36,759
</TABLE>
(1) The pro forma column gives effect to the issuance in April 2000 of
3,719,477 shares of our Series E convertible preferred stock raising net
proceeds of $26.8 million and the conversion of all our outstanding
preferred stock outstanding as of December 31, 1999, and our Series E
convertible preferred stock into common stock upon the closing of this
offering.
(2) The pro forma as adjusted column also reflects the receipt of the net
proceeds from the sale of shares of common stock offered by us
at an assumed initial public offering price of $ per share and
the application of the net proceeds from the offering, after deducting
underwriting discounts and commissions and estimated offering expenses.
------------------------------------------------------------------------
Unless otherwise indicated, all information in this prospectus assumes:
. that the underwriters have not exercised their option to purchase
additional shares;
. conversion of all shares of preferred stock into shares of common stock
upon completion of this offering; and
. the filing of an amended and restated certificate of incorporation upon
completion of this offering to increase our authorized common stock and
decrease our authorized preferred stock.
6
<PAGE>
RISK FACTORS
Any investment in our common stock involves a high degree of risk. You should
consider carefully the risks and uncertainties described below and the other
information in this prospectus before deciding whether to invest in shares of
our common stock. If any of the following risks, or any other risks we are not
aware of or that we currently believe are immaterial, actually occur, our
results of operation and financial condition could suffer significantly. In
this case, the trading price of our common stock could decline and you might
lose all or part of your investment.
Risks Related to Our Business
Our extremely limited operating history and our operation in a new and rapidly
evolving market make our business prospects difficult to evaluate.
Because of our limited operating history, you must consider the risks,
uncertainties and difficulties frequently encountered by companies in their
early stages of development, particularly companies in new and rapidly evolving
markets such as the Web-based knowledge exchange market. For us, these risks
include:
. the failure of our strategy to establish our eHub solutions as a leading
knowledge exchange platform;
. dependency of our revenue on a small number of large sales;
. our inability to become profitable within a time frame expected by us,
public market analysts or investors, or at all;
. intense competition causing reduced gross margins and loss of market
share;
. ineffective management of our rapid growth;
. shortfalls in projected revenue because our ability to accurately
forecast revenue is untested due to our limited sales to date and our
long sales cycle;
. the difficulties associated with attracting new customers in industries
other than technology, financial and business services, and healthcare,
which are the primary industries from which our customers and revenue
have been derived to date;
. failure to continue to develop successful relationships with
enterprises, content providers and professional communities, and with
strategic partners; and
. failure to expand our presence in international markets.
We also have limited experience and unproven ability to predict and react to
trends that may emerge in the knowledge exchange market. Our limited operating
history combined with the uncertainties involved in competing in this new and
rapidly evolving market increase the difficulty of your evaluation of our
business prospects.
We have a history of losses, expect future losses and may never achieve
profitability.
We have experienced losses in each quarter since our inception. We incurred
net losses of $1.5 million in fiscal 1997, $6.4 million in fiscal 1998 and
$18.7 million in fiscal 1999. Our accumulated deficit as of December 31, 1999
was $26.9 million. During fiscal year 2000 and 2001, we expect significantly
greater losses than in fiscal 1999. We plan to significantly increase our
operating expenses to market, sell and support our eHub solutions, build our
internal infrastructure and hire additional personnel. We also plan to make
significant
7
<PAGE>
investments in developing relationships with current and potential eHub
constituents and with strategic partners. If we do not realize the revenue that
we anticipate from these investments, we may never achieve profitability. If we
do not become profitable within a time frame expected by public market analysts
or investors, the market price of our common stock will likely decline
significantly. Even if we do achieve profitability, we may not be able to
sustain or increase profitability on a quarterly or annual basis in the future,
which would also likely cause the market price of our common stock to decline.
Fluctuations in our quarterly revenue and other operating results may cause our
stock price to decline.
In order to promote future growth, we expect to continue to expend
significant sums in all areas of our business, particularly in our sales and
marketing operations. Because the expenses associated with these activities
must be incurred well in advance of our generating revenue from these
activities, we may be unable to reduce spending quickly enough to offset any
unexpected shortfall in revenue growth or any decrease in revenue levels. In
addition, our revenue will need to increase in order to keep up with the
increase in our expenses. As a result, our revenue and other operating results
will likely vary significantly from quarter to quarter.
We primarily use the percentage-of-completion method of contract accounting
with respect to recognition of service fees. If our professional service
organization or our third party service providers are unable to implement our
applications for use by enterprises, content providers and professional
communities within our anticipated time frames, our recognition of revenue for
that customer could be deferred. Our quarterly revenue and other operating
results would suffer unexpected fluctuations in such circumstances, which may
cause our stock price to decline.
We seek to develop a significant number of potential sales prospects, but we
cannot predict when individual customer orders will close. Our base of
customers is small, as is the number of additional customer agreements we enter
into each quarter. Accordingly, our inability to enter into new customer
agreements or the deferral or cancellation of a small number of anticipated
large customer orders in any quarter could result in a significant shortfall in
revenue for that quarter and future quarters.
Other important factors that may cause our quarterly results to fluctuate
materially include:
. our ability to attract and retain sales and marketing personnel who can
enhance our existing sales and marketing force;
. our ability to successfully develop reseller sales channels for our
products and services;
. our ability to increase our third party content provider relationships,
which are limited to a small number today;
. our ability to develop and maintain relationships with third party
hosting service providers;
. any change in the focus of the business of any of our key business
partners, such as Hewlett-Packard, or their failure to comply with the
terms of their agreements with us;
. technical difficulties affecting the operation of our software; and
. introduction of new products and services, changes in pricing or
increased or more effective sales and marketing efforts by our existing
and future competitors.
8
<PAGE>
We believe that quarter-to-quarter comparisons of our revenue and other
operating results are not necessarily meaningful and should not be relied on as
indicators of future performance. Our financial results may as a consequence of
quarterly revenue fluctuations fall short of the expectations of public market
analysts or investors. If this occurs, the price of our common stock would
likely drop.
Our direct sales cycle is lengthy and requires considerable investment with no
assurance of when we will generate revenue from our efforts, if at all.
The period between our initial contact with a potential customer and that
customer's purchase of our products and services is lengthy, typically
extending from four to six months. A customer's decision to purchase our
products and services requires an initial decision to replace or expand
existing knowledge exchange mechanisms, involves a significant allocation of
resources and is influenced by a customer's budgetary cycles. To successfully
sell our products and services, we generally must educate our potential
customers regarding the use and benefits of our products and services, which
can require significant time, capital and other resources. We must expend and
allocate these resources with no assurances that we will generate any revenue
from these activities. In addition, many of our potential customers are large
enterprises that generally take longer than smaller organizations to make
significant business decisions. The delay or failure to complete sales in a
particular quarter could reduce our revenue in that quarter, as well as
subsequent quarters over which revenue for the sale would likely be recognized.
If our sales cycle unexpectedly lengthens in general or for one or more large
orders, it would negatively affect the timing of our revenue and our revenue
growth would be harmed. If we were to experience a delay of several weeks on a
large order, it could impede our ability to meet our forecasts and investor
expectations for a given quarter. Any failure to meet investor expectations for
a given quarter would likely cause the price of our common stock to decline.
We have generated only limited revenue from content providers; however, we must
generate significant revenue from them in the future to be successful and
achieve profitability.
We currently have agreements with some content providers to use our solutions
and to provide our customers with their content. However, this content first
needs to be converted and customized into a form that can be used with our
technology. This conversion process can take several months to complete and few
of our content providers have completed the process. We do not generate
meaningful royalty revenue from our content providers until after the
conversion process is complete and the content has been sold to end users.
Therefore, we may never generate meaningful royalty revenue from these content
providers.
We have generated only limited revenue from resellers; however we must generate
significant revenue from them in the future to be successful and achieve
profitability.
We have generated revenue from only a few of our resellers. In order to be
successful, we must increase and train our reseller sales force and enter into
relationships with more resellers. The resellers will require time to learn
about our products and services so that they may effectively resell them. We
cannot guarantee that we will be able to attract additional resellers who would
generate significant revenue for us. A significant portion of our future
revenue is dependent on our success in attracting new resellers and the
motivation and ability of our existing and future resellers to sell our
products and services.
9
<PAGE>
Our future revenue depends in substantial part upon our being able to bill most
of our professional services on a time-and-materials basis instead of on a
fixed-fee basis as we have done in the past.
Historically, we have generated the majority of our revenues from
professional services, and the bulk of these service revenues have been billed
on a fixed-fee basis. We are attempting to migrate to a model in which we bill
for professional services other than training, such as marketing and
implementation services, on a time-and-materials basis. Should this migration
effort fail, then we risk generating less revenue from our professional
services unless we are able to increase the amount of our fixed fees.
We anticipate that our future revenue will depend primarily on a small number
of large sales. If we fail to complete one or more of these sales, our
operating results will be harmed.
Historically, a significant portion of our revenue has been generated from
and concentrated in a small number of customers. We expect this trend to
continue. Our operating results may be harmed if we are not able to complete
one or more substantial sales to any large customers or we are unable to
collect accounts receivable from any of our large customers in any future
period.
Our revenue may be adversely affected if we fail to change our revenue model
from one based on one-time sales to one based on multi-year, royalty-bearing
license and service agreements.
Historically, we have generated a significant portion of our revenue from
one-time sales to customers which did not generate significant revenue after we
completed the initial sale and implementation of our product. This required us
to identify and sell to new customers, or identify new demand for our products
and services from our existing customers, in order to continue to generate
revenue. Through royalty-bearing license agreements and hosting services, we
are trying to change our business model so that we are able to achieve
consistent or increased revenue from our customers after the initial sale of
our products and services. However, we offer no assurances that we will be able
to effect this change to the degree necessary to make us less dependent on
revenue generated from one-time sales to customers.
Our lack of product diversification means that any decline in price or demand
for our products and services would seriously harm our business.
Our Docent Enterprise software products and services have accounted for
substantially all of our historical revenue and are expected to do so for the
foreseeable future. Consequently, a decline in the price of, or demand for, the
Docent Enterprise products or services, or their failure to achieve broad
market acceptance, would seriously harm our business.
Our eHub strategy is unproven and may not be successful, in which case our
business would be seriously harmed.
We need to establish and enhance our products and services so that they are
attractive to enterprises, content providers and professional communities. The
concept of eHubs is new, and our success depends on a significant number of
each of the potential customer constituencies adopting this concept,
implementing our products and engaging in the knowledge exchange process
through our eHubs. We, together with our customers, may not be able to
effectively operate the knowledge exchange process, both in terms of technical
performance as well as commercial viability. To date, we have only a limited
number of customers. If we are unable to execute this business strategy
effectively, or if our eHubs are not widely adopted as a means for knowledge
exchange, our revenue will be negatively impacted.
10
<PAGE>
If we lose key personnel, or are unable to attract and retain additional
management personnel, we may not be able to successfully grow and manage our
business.
We believe that our future success will depend upon our ability to attract
and retain our key management personnel including David R. Ellett, our
Chairman, President and Chief Executive Officer, David Mandelkern, our
Executive Vice President and Chief Technology Officer, and the other members of
our executive team. These employees are not subject to employment contracts. We
may not be successful in retaining our key employees in the future or in
attracting and assimilating replacement or additional key personnel. Any
failure in retaining and attracting management personnel may impair our ability
to rapidly grow and manage our business.
We expect to more than double our personnel within the next 18 months and any
failure to find sufficient qualified candidates would significantly impair our
ability to continue our rapid growth.
We have increased the number of our employees from approximately 55 full-time
employees on December 31, 1998 to approximately 87 full-time employees on
December 31, 1999. Our business plans call for us to more than double our
personnel by December 31, 2000. Our future success and our ability to expand
our operations will depend in large part on our ability to recruit and retain
additional qualified technical, and sales and marketing personnel. Competition
for these types of employees is intense due to the limited number of qualified
professionals and the high demand for them, particularly in the San Francisco
Bay Area where our headquarters are located. Failure to attract, assimilate and
retain qualified personnel, particularly technical, and sales and marketing
personnel, would have a material adverse effect on our business and potential
growth.
Difficulties we may encounter in managing our growth could adversely affect our
results of operations.
We have experienced and are experiencing a period of rapid and substantial
growth, which has placed a serious strain on our managerial, administrative and
financial personnel and our internal infrastructure. To manage the expected
growth of our operations and personnel, we will be required to improve existing
and implement new operational, financial and management controls, reporting
systems and procedures. We may not be able to install adequate management
information and control systems in an efficient and timely manner and our
current or planned personnel systems, procedures and controls may not be
adequate to support our future operations. If we are unable to manage growth
effectively, we will not be able to capitalize on attractive business
opportunities and may fail to adequately support our existing customer base.
Furthermore, to accommodate our rapid personnel growth, we may require a new
facility in Silicon Valley within the next nine months, which may involve
significant expenses in today's tight real estate market. If we are unable to
locate one facility to accommodate all of our personnel, we may have to
disperse our employees across multiple facilities. The existence of multiple
facilities may diminish our productivity and management effectiveness.
Intense competition in our market segment could impair our ability to grow and
to achieve profitability.
The market for our products and services is intensely competitive, dynamic
and subject to rapid technological change. We expect the intensity of the
competition and the pace of change to increase in the future. The relatively
low barriers to entry in the eLearning market, a segment of the overall market
in which we compete, will encourage competition from a
11
<PAGE>
variety of established and emerging companies. Competitors vary in size and in
the scope and breadth of the products and services offered. We encounter
competition with respect to different aspects of our solution from a variety of
sources, including:
. companies which provide software and services to address specific
components of knowledge exchange platform solutions;
. companies that sell online and traditional learning content over the
Internet;
. existing or potential customers or partners who develop in-house
solutions, including traditional learning programs; and
. enterprise software vendors who could develop their products to include
knowledge content offerings.
Many of our competitors have longer operating histories, substantially
greater financial, technical, marketing or other resources, or greater name
recognition than we do. As a result, our competitors may be able to respond
more quickly than we can to new or emerging technologies and changes in
customer requirements. Increased competition is likely to result in price
reductions, reduced gross margins and loss of market share, any one of which
would seriously harm our business. Our current and potential competitors may
develop and market new technologies that render our existing or future products
and services obsolete, unmarketable or less competitive. Our current and
potential competitors may make strategic acquisitions or establish cooperative
relationships among themselves or with other learning solution providers,
thereby increasing the availability of their services to address the needs of
our current and prospective customers. We may not be able to compete
successfully against our current and future competitors and competitive
pressures that we encounter may seriously harm our business.
We have generated only limited revenue from our international operations, and
our inability to expand internationally would limit our growth prospects.
Although we have generated only limited revenue from international operations
to date, our ability to expand our international presence and operations is a
key component of our growth strategy. Conducting business outside of the United
States subjects us to many of the same risks that other companies face in such
circumstances, such as:
. changes in regulatory requirements and tariffs;
. language barriers;
. difficulties in staffing and managing foreign operations;
. longer payment cycles and greater difficulty in collecting accounts
receivable;
. reduced protection of intellectual property rights;
. potentially harmful tax consequences;
. fluctuating exchange rates;
. price controls and other restrictions on foreign currency;
. difficulties in complying with import and export regulations;
. the burden of complying with a variety of foreign laws; and
. political or economic constraints on international trade or instability.
12
<PAGE>
There are also risks peculiar to our business such as:
. a need to translate our software user interfaces and content that is not
locally developed;
. the need to find new content partners to satisfy different cultural
requirements in regional markets;
. the need for larger markets to support the cost of localization; and
. the need for additional software development to fully support multi-byte
languages such as Chinese and Japanese.
We might not successfully market, sell or distribute our products and services
in foreign markets and cannot be certain that one or more of the factors listed
above will not harm our future international operations and, consequently, our
business and future growth.
Our market is subject to rapid technological change and if we fail to
continually enhance our products and services, our business would be harmed.
We must continue to enhance and improve the performance, functionality and
reliability of our products and services. The software and electronic commerce
industries are characterized by rapid technological change, changes in user
requirements and preferences, frequent new product and services introductions
embodying new technologies, and the emergence of new industry standards and
practices that could render our products and services obsolete. In the past, we
have discovered that some of our customers desire additional performance and
functionality not currently offered by our products. Our success will depend,
in part, on our ability to internally develop and license leading technologies
to enhance our existing products and services, to develop new products and
services that address the increasingly sophisticated and varied needs of our
customers, and to respond to technological advances and emerging industry
standards and practices on a cost-effective and timely basis. If we are unable
to adapt our products and services to changing market conditions, customer
requirements or emerging industry standards, we may not be able to increase our
revenue and expand our business.
We must develop relationships with leading content providers that meet the
needs of our customers or our business will suffer.
To be successful in implementing our eHub strategy, we must enter into
agreements for the provision of content with leading content providers. Even if
we are successful in entering into such agreements, our ability to provide
content to our enterprise and professional community customers depends in large
part on our content providers' willingness and ability to frequently update
course material, develop new content as the underlying subject matter changes
and customize generic content provided for our enterprise and professional
community customers. In order for us to generate significant revenue from the
content provided to us by our content providers, the content providers must
also provide content that has widespread appeal. If the content providers fail
to complete their work in a timely or professional manner, we will be unable to
meet customer expectations and our reputation will be harmed.
We do not have exclusive arrangements with our content providers and some of
these providers may offer their content to our competitors in addition to, or
instead of, offering their content to us.
We do not have exclusive arrangements with any of our content providers. Each
content provider is free to use the content for its own purposes or to sell it
to another company, including competitors of ours. The availability of the same
content from multiple sources may result in increased competition and reduced
margins. We typically enter into agreements with our
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<PAGE>
content providers for three-year terms. At the end of the three-year term, the
content provider may choose not to renew in which case we would no longer be
able to offer its content.
Our business strategy and future success is dependent on our ability to develop
relationships and enter into agreements with professional communities to
promote, use and participate in our eHub solutions.
Our eHub business model is new among our three customer constituencies,
comprised of enterprises, content providers and professional communities.
However, we have the least experience with professional communities and
currently only have a small number of these customers. We cannot assure you
that this model will gain broad acceptance among professional communities in
the industries where we have concentrated our sales and marketing efforts to
date, or in any new industries where we may later focus our efforts. Further,
even if the model does gain acceptance among professional communities, we
cannot be certain that it will generate sufficient revenue to be profitable.
Our expansion into new target industries depends on our ability to recruit new
eHub members in those industries.
Our strategy involves both improving the depth of our content offerings in
our current industries of technology, financial and business services, and
healthcare, and expanding into new industries. Our ability to expand our
content beyond our three current fields of focus may require us to locate and
enter into agreements with additional content providers who would meet the
needs of the constituents in each new field. If we are unable to do so, we may
not be successful in expanding beyond our current fields of focus. Any failure
to expand our content offerings to increase the depth of offerings in our
current three fields of focus or to enter into new fields could constrain our
revenue growth and harm our future prospects. Any expansion beyond our three
current industries would also require us to recruit enterprise and professional
community customers in these new fields. Unless we develop a critical mass of
customers in all three constituencies in any new industry, our eHub solution
may not achieve broad acceptance within that industry and our ability to
generate revenue from that field would be impaired.
Our products sometimes contain errors and by releasing products containing
defects, our business and reputation may be harmed.
Complex software products such as ours often contain unknown and undetected
errors or performance problems. Many defects are frequently found during the
period immediately following introduction and initial delivery of new products
or enhancements to existing products. Although we attempt to discover and
resolve all errors before delivery, we have discovered errors in our products
after release to our customers. These errors or performance problems could
result in lost revenue or delays in customer acceptance and may harm our
business and reputation. Our revenue may also decrease if previously undetected
errors or performance problems in our existing or future products are
discovered in the future or known errors considered minor by us are considered
serious by our customers.
If third parties claim that we infringe on their patents or other intellectual
property rights, it may result in costly litigation or require us to make
royalty payments.
We cannot assure you that third parties will not claim that our current or
future products or services infringe their patent, copyright, trademark or
other intellectual property rights. Currently, third parties have registered
Docent or a variant as a trademark in the United States and in certain other
jurisdictions outside the United States for use with goods or services which
could be construed to overlap those offered by Docent. Although these third
parties have not initiated formal infringement proceedings or any formal
challenges to Docent's use
14
<PAGE>
of the Docent trademark, any claims, with or without merit, could cause costly
litigation that could consume significant management time. As the number of
product and service offerings in our market increases and functionalities
increasingly overlap, companies such as ours may become increasingly subject to
intellectual property infringement claims. Third party intellectual property
infringement claims also might require us to enter into royalty or license
agreements. If required, we may not be able to obtain such royalty or license
agreements, or obtain them on terms favorable, or even acceptable, to us in
which case we would have to pay damages for our prior use of the intellectual
property and cease using the intellectual property involved in the future. This
could adversely affect our business. For example, if the intellectual property
was a trademark, we could be required to cease using a trademark which could
involve a loss of goodwill, as well as the possibility of a damage award and
temporary disruption during a transition to other trademarks.
We may not be able to adequately protect our intellectual property, and our
competitors may be able to offer similar products and services which would harm
our competitive position.
Our success depends upon our intellectual property. We rely primarily on
copyright, trademark and trade secret laws, confidentiality procedures and
contractual provisions to establish and protect our intellectual property.
These mechanisms provide us with only limited protection. We do not hold any
patents and currently have no patent applications pending. Although our
application to register Docent as a trademark in the United States for certain
goods and services has been allowed and will proceed to registration once a
statement of use is filed, we may not be able to register Docent as a trademark
in certain countries, including the United States, for use with various goods
or services due to existing registrations of third parties. As a result, we may
choose not to use Docent as a trademark in one or more of these countries in
connection with certain of our products or services. As part of our
confidentiality procedures, we enter into non-disclosure agreements with our
employees. Despite these precautions, third parties could copy or otherwise
obtain and use our technology without authorization, or develop similar
technology independently. Furthermore, effective protection of intellectual
property rights is unavailable or limited in certain foreign countries. Our
protection of our intellectual property rights may not provide us with any
legal remedy should our competitors independently develop similar technology,
duplicate our products and services, or design around any intellectual property
rights we hold.
We do not have a disaster recovery plan or back-up system, and a disaster or
break-down could severely damage our operations.
We currently do not have a disaster recovery plan in effect and do not have
fully redundant systems for our services at an alternate site. A disaster or
break-down could severely harm our business because our services could be
interrupted for an indeterminate length of time. Our operations depend upon our
ability to maintain and protect our computer systems in our principal
facilities in Mountain View, California, which are located on or near known
earthquake fault zones. Although these systems are designed to be fault
tolerant, they are vulnerable to damage from fire, floods, earthquakes, power
loss, telecommunications failures and other events. Additionally, we do not
carry sufficient business insurance to compensate us for our losses that could
occur. Similarly, disasters or break-downs affecting other eHub participants or
our hosting partners could negatively affect our business to the extent their
systems are involved in supporting other eHub participants.
We rely on third party software incorporated in our products, and errors in
this software or our inability to continue to license this software in the
future would harm our business.
Our products incorporate third party software, and we expect to incorporate
additional software as we broaden our products and services. The operation of
our products would be impaired if errors occur in the third party software that
we incorporate. It may be difficult for
15
<PAGE>
us to correct any errors in third party software because the software is not
within our control. Accordingly, our business would be adversely affected in
the event of any errors in this software. Furthermore, it may be difficult for
us to replace any third party software if a vendor seeks to terminate our
license to the software.
Our business could be adversely affected if we fail to adequately integrate
acquired businesses.
As part of our overall business strategy, we continually evaluate and may
pursue acquisitions of complementary businesses or technologies that would
provide additional product or service offerings, additional industry expertise
or an expanded geographic presence. We may not be able to locate attractive
opportunities or acquire any we locate on favorable terms. Any future
acquisition could result in the use of significant amounts of cash, potentially
dilutive issuances of equity securities, the incurrence of debt or amortization
of expenses related to goodwill and other intangible assets, which would reduce
our earnings. In addition, acquisitions involve numerous risks, including:
. difficulties in the assimilation of the operations, technologies,
products and personnel of the acquired company;
. the diversion of management's attention from other business concerns;
. risks of entering markets in which we have no or limited prior
experience; and
. the potential loss of key employees of the acquired company.
Our stock price may fluctuate substantially.
Prior to this offering, there has been no public market for shares of our
common stock. An active public trading market may not develop following
completion of this offering or, if developed, may not be sustained. The initial
public offering price of the shares of our common stock will be determined by
negotiation between us and representatives of the underwriters. This price will
not necessarily reflect the market price of our common stock following this
offering.
The market price for our common stock following this offering will be
affected by a number of factors, including those described above and the
following:
. the announcement of new products and services by us and our competitors;
. product enhancements by us or our competitors;
. quarterly variations in our results of operations or those of our
competitors;
. changes in revenue and earnings estimates or recommendations by
securities analysts that may follow our stock;
. developments in our industry; and
. general market conditions and other factors, including factors unrelated
to our operating performance or the operating performance of our
competitors.
In addition, stock prices for many companies in the technology and emerging
growth sectors have experienced wide fluctuations that have often been
unrelated to the operating performance of such companies. Such factors and
fluctuations, as well as general economic, political and market conditions, may
materially adversely affect the market price of our common stock.
16
<PAGE>
Certain existing stockholders can exert control over us to the detriment of
minority stockholders.
After this offering, our executive officers, directors and stockholders
holding more than 5% of our outstanding common stock will together control
approximately of our outstanding common stock. As a result, these
stockholders, if they act together, will be able to control our management and
affairs and all matters requiring stockholder approval, including the election
of directors and approval of significant corporate transactions. This
concentration of ownership may have the effect of delaying or preventing a
change in control and might affect the market price of our common stock.
Sales of shares eligible for future sale after this offering could cause our
stock price to decline.
If our stockholders sell substantial amounts of our common stock, including
shares issued upon the exercise of outstanding options and warrants, in the
public market following this offering, the market price of our common stock
could fall. Such sales also might make it more difficult for us to sell equity
or equity-related securities in the future at a time and price that we deem
appropriate. Upon completion of this offering, we will have outstanding
shares of common stock, assuming no exercise of outstanding options or
warrants. Of these shares, all of the shares sold in this offering will be
freely tradable. The remaining shares of common stock outstanding after this
offering will be available for sale in the public market as follows:
<TABLE>
<CAPTION>
Date of Availability for Sale Number of Shares
----------------------------- ----------------
<S> <C>
At the date of this prospectus............................
181 days after the date of this prospectus................
Periodically thereafter...................................
</TABLE>
The anti-takeover provisions in our charter documents could adversely affect
the rights of the holders of our common stock.
Upon the closing of this offering, our Certificate of Incorporation and
Bylaws will contain provisions that could make it harder for a third party to
acquire us without the consent of our board of directors. For example, if a
potential acquiror were to make a hostile bid for us, the acquiror would not be
able to call a special meeting of stockholders to remove our board of directors
or act by written consent without a meeting. In addition, our board of
directors will have staggered terms that makes it difficult to remove them all
at once. The acquiror would also be required to provide advance notice of its
proposal to remove directors at an annual meeting. The acquiror also will not
be able to cumulate votes at a meeting, which will require the acquiror to hold
more shares to gain representation on the board of directors than if cumulative
voting were permitted.
Our board of directors also has the ability to issue preferred stock, which
would significantly dilute the ownership of a hostile acquiror. In addition,
Section 203 of the Delaware General Corporation Law limits business combination
transactions with 15% stockholders that have not been approved by the board of
directors. These provisions and other similar provisions make it more difficult
for a third party to acquire us without negotiation. These provisions apply
even if some stockholders consider the offer to be beneficial.
Our board of directors could choose not to negotiate with an acquiror that it
did not feel was in our strategic interests. If the acquiror was discouraged
from offering to acquire us or prevented from successfully completing a hostile
acquisition by the anti-takeover measures, you could lose the opportunity to
sell your shares at a favorable price.
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<PAGE>
Risks Related to Our Industry
Our revenue may decrease if use of the Web in the markets we target does not
grow as projected.
The use of the Web as a means to connect enterprises, content providers and
professional communities, is integral to our business model. However, the use
of the Web as a means of transacting business is relatively new and has been
accepted by a limited number of customers in the markets we have targeted. The
failure of the Web to continue to develop as a commercial or business medium or
of significant numbers of enterprises, content providers and professional
communities to transact business and collaborate online would harm our revenue
and earnings. The acceptance and use of the Web to transact business and
collaborate is dependent upon a number of factors, such as:
. the relative ease of conducting business on the Web;
. improvements in the efficiencies of conducting commerce on the Web;
. the resolution of concerns about transaction security; and
. taxation of transactions on the Web.
A breach of Internet commerce security measures could reduce demand for our
products and services.
A requirement of the continued growth of Web-based, business-to-business
electronic commerce is the secure transmission of confidential information over
public networks. Failure to prevent security breaches into our products or our
customers' networks, or well publicized security breaches affecting the
Internet in general, could significantly harm our growth and revenue. We cannot
be certain that advances in computer capabilities, new discoveries in the field
of cryptography, or other developments will not result in a compromise or
breach of the algorithms we use to protect content and transactions or our
products or within our customers' networks or proprietary information in our
databases. Anyone who is able to circumvent our security measures could
misappropriate proprietary and confidential information or could cause
interruptions in our operations. We may be required to expend significant
capital and other resources to protect against such security breaches or to
address problems caused by such breaches. Concerns over the security of the
Internet and other online transactions and the privacy of users may also deter
people from using the Internet to conduct transactions that involve
transmitting confidential information.
We may become subject to government regulation and legal uncertainties that
could reduce demand for our products and services or increase the cost of doing
business.
We are not currently subject to direct regulation by any domestic or foreign
governmental agency, other than regulations applicable to businesses generally,
export control laws and laws or regulations directly applicable to Internet
commerce. However, due to the increasing popularity and use of the Internet, it
is possible that a number of laws and regulations may become applicable to us
or may be adopted in the future with respect to the Internet covering issues
such as:
. user privacy;
. taxation;
. content;
. right to access personal data;
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<PAGE>
. copyrights;
. distribution; and
. characteristics and quality of services.
The applicability of existing laws governing issues such as property
ownership, copyrights and other intellectual property issues, encryption,
taxation, libel, export or import matters and personal privacy to the Internet
is uncertain. The vast majority of these laws were adopted prior to the broad
commercial use of the Internet and related technologies. As a result, they do
not contemplate or address the unique issues of the Internet and related
technologies. Changes to these laws intended to address these issues, including
some recently proposed changes, could create uncertainty in the Internet
marketplace. Such uncertainty could reduce demand for our services or increase
the cost of doing business due to increased costs of litigation or increased
service delivery costs.
A failure to expand and improve the infrastructure of the Web could constrain
the functionality of our products and services.
The recent growth in Web traffic has caused frequent periods of decreased
performance and if Internet usage continues to grow rapidly, the Internet
infrastructure may not be able to support this growth and reliability may
decline. If outages or delays on the Internet increase in frequency or
duration, overall Internet usage including usage of our products and services
could grow more slowly or decline. Our ability to increase the speed and scope
of our services to customers is ultimately limited by the speed and reliability
of both the Internet and our customers' internal networks. Consequently, the
emergence and growth of the market for our products and services depend upon
improvements being made to the entire Internet as well as to our individual
customers' networking infrastructures to alleviate overloading and congestion.
If these improvements are not made, the ability of our customers to use our
products and services will be hindered and our business may suffer.
We may be susceptible to a downturn in the economy.
Our products and services require a sizable initial investment in order to
generate their benefits over time. Thus, in an economic downturn, our
enterprise customers may cut back the resources devoted to knowledge exchange
products and services, and in particular new products and services such as
ours, before they cut back on other products and services. Our economy has been
in the largest growth cycle in post-war times. There may therefore be a greater
likelihood of an economic downturn than is normal.
Risks Related to This Offering
Investors will be relying on our management's judgment regarding the use of
proceeds from this offering.
We do not have a definitive quantified plan with respect to the use of the
net proceeds of this offering and have not committed any of these proceeds to
any particular purpose apart from working capital and general corporate
purposes. Accordingly, our management will have broad discretion with respect
to the use of the net proceeds from this offering and investors will be relying
on the judgment of our management regarding the application of these proceeds.
Some of the uses we currently anticipate include expansion of our sales and
marketing operations, increased spending in the areas of research and
development and customer support, broadening our operational and administrative
infrastructure, the leasing of
19
<PAGE>
additional facilities and for working capital and other general corporate
purposes. We may also use a portion of the proceeds for strategic alliances and
acquisitions. These investments may not yield a favorable return.
The liquidity of our common stock is uncertain since it has not been publicly
traded.
There has not been a public market for our common stock. We cannot predict
the extent to which investor interest in our company will lead to the
development of an active, liquid trading market. Active trading markets
generally result in lower price volatility and more efficient execution of buy
and sell orders for investors. The initial public offering price for the shares
will be determined by negotiations between us and the representatives of the
underwriters and may not be indicative of prices that will prevail in the
trading market.
We will need additional financing in the near future, and we cannot be certain
that we can obtain the required financing on favorable terms and conditions.
We require substantial working capital to fund our business. We have had
significant operating losses and negative cash flow from operations since
inception and expect this to continue for the foreseeable future. We currently
anticipate that our available cash resources, combined with the net proceeds
from this offering, will be sufficient to meet our anticipated working capital
and capital expenditure requirements for at least 12 months after the date of
this prospectus. If we operate our business as we currently plan, we would need
to raise additional financing in 2001. However, we may need to raise additional
funds earlier to respond to business contingencies which may include the need
to:
. fund more rapid expansion;
. fund additional marketing expenditures;
. develop new or enhance existing products and services;
. enhance our operating infrastructure;
. hire additional personnel;
. respond to competitive pressures; or
. acquire complementary businesses or necessary technologies.
If additional funds are raised through the issuance of equity or convertible
debt securities, the percentage ownership of our stockholders will be reduced,
stockholders may experience dilution and these newly issued securities may have
rights, preferences or privileges senior to those of existing stockholders,
including those acquiring shares in this offering. We cannot assure you that
additional financing will be available on terms favorable to us, or at all. If
adequate funds are not available or are not available on acceptable terms, our
ability to fund our operations, take advantage of unanticipated opportunities,
develop or enhance our products and services or otherwise respond to
competitive pressures would be significantly limited.
Market prices of Internet and technology companies have been highly volatile
and the market for our stock may be volatile as well.
The stock market has experienced significant price and trading volume
fluctuations and the market prices of technology companies generally and
Internet-related companies particularly, have been extremely volatile. Recent
initial public offerings by technology companies have been accompanied by
exceptional share price and trading volume changes in
20
<PAGE>
the first days and weeks after the securities were released for public trading.
Investors may not be able to resell their shares at or above the initial public
offering price. In the past, following periods of volatility in the market
price of a public company's securities, securities class action litigation has
often been instituted against that company. Such litigation could result in
substantial costs and a diversion of management's attention and resources.
New investors will suffer immediate and substantial dilution in the tangible
net book value of their shares.
We expect the initial public offering price to be substantially higher than
the net tangible book value per share of the common stock. The net tangible
book value of a share of common stock purchased at an assumed initial public
offering price of $ per share will be only $ . Additional
dilution may be incurred if holders of stock options, whether currently
outstanding or subsequently granted, exercise their options or if warrant
holders exercise their warrants to purchase common stock.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA
This prospectus includes forward-looking statements. These forward-looking
statements are not historical facts, and are based on current expectations,
estimates and projections about our industry, our beliefs and our assumptions.
Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks"
and "estimates," and variations of these words and similar expressions, are
intended to identify forward-looking statements. In addition, examples of the
kinds of forward-looking statements in this prospectus include statements
regarding the following: (1) our ability to compete effectively in the
knowledge exchange market, (2) our plans to develop new products and services,
(3) our plans to expand the use of our products and services within the
applications and industries we currently target and within new applications and
industries, (4) our plans to add additional eHub members and strategic
partners, (5) our plans to expand internationally, (6) our expectations of
expanding our technical, and sales and marketing personnel, and technology,
management and facilities infrastructure, (7) our plans to raise additional
financing in 2001, and (8) our business strategies and plans. These statements
are only predictions, are not guarantees of future performance and are subject
to risks, uncertainties and other factors, some of which are beyond our control
and difficult to predict and could cause actual results to differ materially
from those expressed or forecasted in the forward-looking statements. These
risks and uncertainties include those described in "Risk Factors" and elsewhere
in this prospectus. Except as required by law, we undertake no obligation to
update any forward-looking statement, whether as a result of new information,
future events or otherwise.
21
<PAGE>
USE OF PROCEEDS
The net proceeds to us from the sale of the shares being offered by
us at an assumed initial public offering price of $ per share, after
deducting estimated underwriting discounts and commissions and estimated
offering expenses, are estimated to be approximately $ million, or
approximately $ million if the underwriters' over-allotment option is
exercised in full.
We do not have specific uses committed for the net proceeds of this offering.
The size of the offering has been determined primarily based upon our desire to
raise a sufficient amount of capital to afford to us significant business
flexibility in the future.
The principal purposes of this offering are:
. to obtain additional working capital;
. to create a public market for our common stock;
. to facilitate future access by Docent to public equity markets; and
. to enhance our ability to use our stock to make future acquisitions due
to the fact that our shares will be publicly traded.
We expect to use the net proceeds for general corporate purposes, including
working capital, expansion of our sales and marketing efforts, increased
spending on customer support and research and development, expansion of our
operational and administrative infrastructure and the leasing of additional
facilities. In addition, we may use a portion of the net proceeds to acquire or
invest in complementary businesses, technologies, product lines or products.
However, we have no current agreements or commitments with respect to any such
acquisition.
The amounts we actually spend for these purposes may vary significantly and
will depend on a number of factors, including our future revenue and cash
generated by operations and the other factors described in "Risk Factors."
Therefore, we will have broad discretion in the way we use the net proceeds.
DIVIDEND POLICY
The payment of dividends is within the discretion of our board of directors.
Our ability to pay any future dividends will depend on our earnings, operating
and financial condition, projected capital requirements and restrictions under
our credit facilities. In this regard, our credit facility with Silicon Valley
Bank restricts our ability to declare cash dividends without the consent of
Silicon Valley Bank. Notwithstanding the foregoing, we have never declared or
paid any cash dividends on shares of our capital stock and do not intend to do
so at any time in the foreseeable future.
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<PAGE>
CAPITALIZATION
The following table sets forth the following information:
. our actual capitalization as of December 31, 1999;
. our pro forma capitalization as of that date after giving effect to the
issuance in April 2000 of 3,719,477 shares of our Series E convertible
preferred stock raising net proceeds of $26.8 million and the conversion
of all outstanding shares of convertible preferred stock into 22,111,260
shares of common stock upon completion of this offering; and
. our pro forma capitalization as adjusted to reflect the receipt of the
net proceeds from our sale of shares of common stock at an
assumed initial public offering price of $ per share in this
offering, less underwriting discounts and commissions and estimated
offering expenses payable by us.
<TABLE>
<CAPTION>
December 31, 1999
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands)
<S> <C> <C> <C>
Notes payable and capital lease obligations,
noncurrent.................................... $ 1,117 $ 1,117 $
-------- -------- ----
Convertible preferred stock; $0.001 par value
19,483,000 shares authorized; 18,391,783
shares issued and outstanding actual; none
issued and outstanding pro forma and pro forma
as adjusted................................... 33,288 --
-------- -------- ----
Stockholders' equity (deficit):
Common stock; $0.001 par value, 28,800,000
shares authorized, 5,309,749 shares issued and
outstanding actual; 27,421,009 shares issued
and outstanding pro forma and shares
issued and outstanding pro forma as adjusted.. 5 27
Additional paid-in capital..................... 11,218 71,285
Receivables from stockholders.................. (487) (487)
Unearned stock-based compensation.............. (7,200) (7,200)
Accumulated deficit............................ (26,866) (26,866)
-------- -------- ----
Total stockholders' equity (deficit)........... (23,330) 36,759
-------- -------- ----
Total capitalization........................... $ 11,075 $ 37,876 $
======== ======== ====
</TABLE>
This table does not include:
. 2,550,495 shares subject to outstanding options as of December 31, 1999
at a weighted average exercise price per share of $0.66;
. 10,679,999 shares issuable in the future under our stock plans for our
employees and consultants;
. 608,455 shares of common stock subject to outstanding warrants at a
weighted average exercise price per share of $1.95 as of December 31,
1999, 236,534 shares of common stock subject to warrants granted during
March and April 2000 at an exercise price of $10.00 per share and
2,446,932 shares of Series E convertible preferred stock subject to
warrants granted during March 2000, at an exercise price of $7.52 per
share; and
. the amendment to our certificate of incorporation upon completion of
this offering to increase our authorized common stock and to decrease
our authorized preferred stock.
Upon completion of this offering, each outstanding share of convertible
preferred stock will convert into one share of common stock.
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<PAGE>
DILUTION
Our pro forma net tangible book value as of December 31, 1999, was $36.8
million or $1.33 per share of common stock. This represents the amount of our
tangible assets reduced by the amount of our total liabilities and divided by
the total number of shares of our common stock outstanding assuming (i) the
conversion of all our outstanding shares of preferred stock as of December 31,
1999 into 18,391,783 shares of common stock; and (ii) the issuance in April
2000 of 3,719,477 shares of series E convertible preferred stock for net
proceeds of $26.8 million and the conversion of these shares into common stock.
After giving effect to the sale of the shares of our common stock
offered hereby at an assumed initial public offering price of $ per
share and after deducting estimated underwriting discounts and commissions and
estimated offering expenses, our net tangible book value at December 31, 1999
would have been $ million, or $ per share. This represents an
immediate increase in net tangible book value to existing stockholders of
$ per share and an immediate dilution to new investors of $ per
share. 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 December 31,
1999............................................................ $
Increase per share attributable to new investors.................
---
Pro forma net tangible book value per share after this offering....
---
Net tangible book value dilution per share to new investors........ $
===
</TABLE>
The following table summarizes, on a pro forma basis as of December 31, 1999,
the differences between the number of shares of common stock purchased from us,
the total consideration paid and the average price per share paid by the
existing stockholders and by the new public investors (based upon an assumed
initial public offering price of $ per share and before deducting
estimated underwriting discounts and commissions and estimated offering
expenses):
<TABLE>
<CAPTION>
Shares Total
Purchased Consideration
-------------- -------------- Average Price
Number Percent Amount Percent Per Share
------ ------- ------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders...............
New public investors................
---- ---- ---- ---- ----
Total.............................
==== ==== ==== ==== ====
</TABLE>
The above discussion and tables assume no exercise of stock options or
warrants outstanding as of December 31, 1999 and gives effect to the issuance
in April 2000 of 3,719,477 shares of our Series E convertible preferred stock
and the conversion of all shares of our preferred stock outstanding as of that
date into common stock upon completion of this offering. As of December 31,
1999, there were options outstanding to purchase a total of 2,550,495 shares of
common stock at a weighted average exercise price of $0.66 per share under our
1997 Stock Option Plan, and 608,455 shares of common stock subject to
outstanding warrants at a weighted average exercise price per share of $1.95.
An additional 2,683,466 warrants with an average exercise price per share of
$7.74 were granted during March and April 2000. There are also 10,679,999
shares of common stock reserved for issuance in the future under our stock
plans for our employees and consultants. To the extent that any of these
options or warrants are exercised, there will be further dilution to the new
public investors. See "Capitalization," "Management--Compensation Plans" and
Note 9 of Notes to Consolidated Financial Statements.
24
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below should be read
together with the consolidated financial statements and related notes,
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the other information contained in this prospectus. The
statement of operations data set forth below with respect to the years ended
December 31, 1997, 1998 and 1999 and the balance sheet data at December 31,
1998 and 1999 are derived from and are qualified by reference to, the audited
consolidated financial statements included elsewhere in this prospectus. The
selected balance sheet data at December 31, 1997 are derived from the audited
balance sheet not included herein.
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1997 1998 1999
------- ------- --------
(in thousands, except
per share data)
<S> <C> <C> <C>
Consolidated Statement of Operations Data:
Revenue:
License........................................... $ 335 $ 297 $ 141
Services and maintenance.......................... 60 244 651
------- ------- --------
Total revenue................................... 395 541 792
------- ------- --------
Costs and expenses:
Cost of license................................... 35 23 29
Cost of services and maintenance (exclusive of
stock-based compensation of $0 and $78 in 1998
and 1999) ..................................... 18 750 1,201
Research and development (exclusive of stock-based
compensation of $3 and $517 in 1998 and 1999).. 653 2,242 2,482
Sales and marketing (exclusive of stock-based
compensation of $22 and $3,030 in 1998 and
1999).......................................... 718 2,491 8,890
General and administrative (exclusive of stock-
based compensation of $241 and $909 in 1998 and
1999).......................................... 524 1,232 2,321
Stock-based compensation.......................... -- 266 4,534
------- ------- --------
Total costs and expenses........................ 1,948 7,004 19,457
------- ------- --------
Loss from operations............................ (1,553) (6,463) (18,665)
Interest and other income, net..................... 48 29 (48)
------- ------- --------
Net loss........................................ (1,505) (6,434) (18,713)
Accretion of convertible preferred stock........... -- -- (1,354)
------- ------- --------
Net loss attributable to common stockholders.... $(1,505) $(6,434) $(20,067)
======= ======= ========
Net loss per share attributable to common
stockholders:
Basic and diluted................................. $ (0.55) $ (2.24) $ (5.07)
======= ======= ========
Weighted average common shares outstanding........ 2,717 2,869 3,958
Pro forma net loss per share (unaudited):
Basic and diluted................................. $ (1.09)
========
Weighted average common shares outstanding........ 17,103
</TABLE>
<TABLE>
<CAPTION>
December 31,
--------------------------
1997 1998 1999
------- ------- --------
(in thousands)
<S> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents......................... $ 2,113 $ 2,968 $ 12,773
Working capital................................... 1,906 1,862 9,938
Total assets...................................... 2,504 4,183 15,302
Notes payable and capital lease obligations,
noncurrent....................................... -- 162 1,117
Convertible preferred stock....................... 3,867 10,615 33,288
Total stockholders' deficit....................... (1,700) (8,024) (23,330)
</TABLE>
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and the other financial information
together with the consolidated financial statements and related notes included
elsewhere in this prospectus. This discussion contains forward-looking
statements that involve risks and uncertainties. Our actual results could
differ materially from those anticipated in these forward-looking statements as
a result of various factors, including those set forth under "Risk Factors,"
"Business" and elsewhere in this prospectus.
Overview
General
Docent was incorporated in June 1997 to enhance and market the corporate
online learning products initially developed by Stanford Testing Systems.
Stanford Testing Systems had primarily marketed test preparation, assessment
and educational content products to the academic market. In June 1997, the test
preparation, assessment and educational content assets and the Stanford Testing
Systems name were provided to affiliates of Docent, who subsequently sold them
to an unaffiliated third party. From these origins, Docent has developed its
current knowledge exchange eHub platform. During 1997, approximately $88,000,
or 22%, of Docent's revenue was derived from Stanford Testing Systems sales
prior to June 1997 in the academic market.
Sources of Revenue and Revenue Recognition
We generate revenue from the sale of our products and services to our
knowledge exchange eHub constituents, which are enterprises, content providers
and professional communities, and from our reseller partners. To date, we have
primarily generated revenue from direct sales to our domestic enterprise
customers.
Enterprise customers have the option of purchasing licenses for the Docent
Enterprise software or alternatively using our Application Service Provider
offerings. Our license agreements are time-based or perpetual. Our time-based
licenses require license holders to pay a monthly fee, which is based on the
number of participants and includes maintenance and support. Our perpetual
licensees pay an initial fee based on the number of participants and may enter
into annual maintenance contracts that include the right to receive periodic
upgrades, error corrections, and telephone and Web-based support. Our
Application Service Provider offerings allow enterprise customers to host their
knowledge exchange solutions on our servers. We charge an initial set-up fee
plus an ongoing monthly fee, which includes access to telephone and Web-based
support. Customers with perpetual or time-based licenses can also outsource the
hosting of their system on our servers for a monthly fee.
In conjunction with the licensing of our Docent Enterprise software, we offer
professional services in areas such as implementation and training. To date
these services have primarily been delivered on a fixed-fee basis. Other than
training, we expect to provide these services on a time-and-materials basis. In
the future, we expect to act as a reseller of third party content to our
enterprise customers and to receive commission revenue on such sales. To date,
most of our enterprise customer revenue has been based on perpetual software
licenses and professional services.
We typically sign multi-year royalty agreements with our content providers to
deliver their content over the Web. Under these agreements, we receive a
minimum annual payment and a percentage of the revenue they receive in excess
of the minimum payment for content which
26
<PAGE>
they or third parties, such as resellers or professional communities described
below, provide to customers. For that minimum payment, we provide our software
and application hosting. In the first year of the agreement, as part of the
minimum payment, we also provide professional services such as marketing,
implementation and training. During subsequent years, these services are
available for an additional fee. To date, almost all of our revenue from
content providers has consisted of the minimum annual payments.
We expect to generate revenue from professional communities in two ways:
directly from the professional community and indirectly from content providers.
We typically sign multi-year royalty agreements with our professional community
customers under which we receive a minimum annual payment. For that minimum
payment, we provide our software and application hosting. In the first year of
the agreement as part of the minimum payment, we also provide professional
services in areas such as marketing, implementation and training. During
subsequent years, these professional services are available for an additional
fee. Because the professional communities usually provide their members with
access to content from our content providers, our content providers would
receive revenue which is included in the calculation of the royalties we are
entitled to receive from our content providers as described above. In late
1999, we entered into our first agreements with these professional communities
and almost all of our revenue to date from them has consisted of minimum annual
payments.
We generate revenue from our reseller partners who purchase our products and
maintenance services along with content from our content providers and resell
them to their customers. To date, resellers have typically sold both perpetual
licenses to our software and annual maintenance agreements. They usually
provide additional professional services themselves, but may also resell some
of our professional services. Generally, they receive a discount from our list
prices. When they resell content from our content providers, our content
providers would receive revenue that is included in the calculation of the
royalties we are entitled to receive from our content providers as described
above. We have only recently entered into agreements with reseller partners and
have received little revenue to date from them.
In accordance with the American Institute of Certified Public Accounts
("AICPA") Statement of Position 97-2, as amended we recognize revenue from
licensing of our software if all of the following conditions are met:
. There is persuasive evidence of an arrangement;
. We have delivered the product to the customer;
. Collection of the fees is probable; and
. The amount of the fee to be paid by the customer is fixed or
determinable.
For arrangements involving customer acceptance, revenue recognition is
deferred until the earlier of the end of the acceptance period or until written
notice of acceptance is received from the customer.
For arrangements involving significant modification and customization of our
software product, we recognize revenue using the percentage-of-completion
method. However, where there are customer acceptance clauses which we do not
have an established history of meeting or which are not considered to be
routine, we recognize revenue when the arrangement has been completed and
accepted by the customer.
For arrangements which include multiple elements, such as product license,
maintenance and support, hosting and professional services, we allocate revenue
to all undelivered elements, usually maintenance and support, hosting and
professional services, based on objective evidence of the fair value of those
elements. Fair value is specific to us and
27
<PAGE>
represents the price for which we sell each element separately. Any amount
remaining is allocated to the delivered elements, generally only the product
license, and recognized as revenue when the conditions discussed above are met.
We recognize revenue from fees for ongoing maintenance and support ratably
over the period of the maintenance and support agreement, which is generally
one year. We recognize revenue allocated to, or fees generated from, the
separate selling of professional services as the related services are
performed. Fees associated with hosting services, including any initial set-up
fee, are recognized ratably over the period of the hosting agreement, which is
generally one year.
For arrangements with our content providers, the minimum fee is allocated
among the separate elements, including professional services and hosting, based
on the fair value of each of these elements. Any minimum royalty amount is
recognized as revenue ratably over the period in which it is earned, which is
generally one year. Any royalty over and above the minimum is recognized upon
receipt of a revenue report from the content provider.
Customer billings which have not been recognized as revenue in accordance
with the above policies are shown on the balance sheet as deferred revenue.
Costs and expenses
Our cost of license revenue includes the cost of manuals and product
documentation, production media and shipping costs. Our cost of service and
maintenance revenue includes salaries and related expenses of our professional
services organization and charges related to hosting activities and other third
party services.
Research and development, sales and marketing, and general and administrative
expense categories include direct costs such as salaries, employee benefits,
travel and entertainment, and allocated communication, information technology,
rent and depreciation. Sales and marketing expenses also include sales
commissions and expenditures related to public relations, advertising, trade
shows and marketing campaigns. General and administrative expenses also include
costs such as legal and financial services fees.
Stock-based compensation consists of two components. The first component is
amortization of unearned stock-based compensation recorded in connection with
stock option grants to our employees. This amount represents the difference
between the deemed fair value of our common stock for accounting purposes on
the date these stock options were granted and the exercise price of those
options. This amount is included as a component of stockholders' equity and is
being amortized on an accelerated basis by charges to operations over the
vesting period of the options, consistent with the method described in
Financial Accounting Standards Board Interpretation No. 28. The second
component is the fair value of common stock and other equity instruments issued
to non-employees in exchange for services. We use the Black-Scholes pricing
model to estimate the fair value of other equity instruments granted to non-
employees.
History of Losses
We have incurred significant costs to develop our technology and products and
for our engineering, sales, marketing, professional services and administration
departments. As a result, we have incurred significant losses since inception
and as of December 31, 1999, had an accumulated deficit of $26.9 million. We
believe our success is contingent on increasing our customer and partner base,
continually enhancing our Docent Enterprise product and expanding the number of
our eHub members. We intend to continue to invest heavily in sales, marketing,
research and development, and administrative personnel and infrastructure. We
therefore expect to continue to incur substantial operating losses for the
foreseeable future.
28
<PAGE>
Results of Operations
Revenue
Total revenue increased $251,000, or 46%, from 1998 to 1999, and $146,000, or
37%, from 1997 to 1998. The increase in revenue from 1998 to 1999 was primarily
attributable to an increase in revenue per customer reflecting the evolution of
our business strategy toward focusing on larger enterprise opportunities. The
increase in deferred revenue on our balance sheet from $501,000 as of December
31, 1998, to $1.1 million as of December 31, 1999, also reflects this shift in
focus. The increase in revenue from 1997 to 1998 was primarily attributable to
an increase in the number of customers and partly attributable to an increase
in revenue per customer.
Total license revenue decreased $156,000, or 53%, from 1998 to 1999, and
$38,000, or 11%, from 1997 to 1998. This decline in license revenue was
attributable to an increase in revenue from multiple element enterprise
agreements as compared to one-time perpetual license sales. In accordance with
our revenue recognition policy, a larger portion of revenue is initially
allocated to the service elements of these multiple element agreements, and as
a result our license revenue from the agreements is less.
Our service and maintenance revenue increased $407,000, or 167%, from 1998 to
1999, and $184,000, or 307%, from 1997 to 1998. The increase in revenue in both
years was primarily attributable to the increase in the number of larger
enterprise agreements described above, which typically include large service
components. Under our revenue recognition policy, a larger portion of revenue
is initially allocated to the service elements of these agreements. To a lesser
extent, the increase was due to the cumulative effect of renewals of annual
maintenance agreements.
In 1999, sales to Impiric, a division of Young & Rubicam, accounted for 27%
of our revenue. In 1998, sales to Veritas Software accounted for 26%, sales to
Sun Microsystems accounted for 13% and sales to Lucent Technologies accounted
for 12% of our revenue. In 1997, sales to Sun Microsystems accounted for 13% of
our revenue.
Costs and Expenses
Cost of revenue. Cost of license revenue remained relatively constant in
1999, 1998 and 1997 and consisted primarily of the fixed costs of delivering
the software. Cost of service and maintenance revenue increased $451,000, or
60%, from 1998 to 1999, and increased $732,000 to $750,000 in 1998, from
$18,000 in 1997, due to increases in personnel in our professional services
organization.
Research and development. Research and development expenses increased
$240,000, or 11%, from 1998 to 1999, and $1.6 million, or 243%, from 1997 to
1998. The increases were primarily attributable to increases in the number of
research and development personnel. To date, all software development costs
have been expensed in the period incurred. We believe that continued investment
in research and development is critical to attaining our strategic objectives
and, as a result, we expect research and development expenses to increase
significantly in future periods.
Sales and marketing. Sales and marketing expenses increased $6.4 million, or
257%, from 1998 to 1999, and $1.8 million, or 247%, from 1997 to 1998. The
increase from 1998 to 1999 was primarily attributable to an increase in the
number of employees in our sales, marketing and professional services
organizations, as well as the costs associated with the establishment of sales
offices in additional domestic and international locations. Expenses relating
to sales and marketing personnel increased $4.4 million from $1.4 million in
1998 to
29
<PAGE>
$5.8 million in 1999. Expenses relating to marketing activities, including
trade shows, promotional materials and public relations, increased $640,000
from $528,000 in 1998 to $1.2 million in 1999. In 1999 and 1998, our
professional services organization split its efforts between the performance of
service and maintenance work for customers and the development of new
customers. As a result, expenses of $1.4 million and $150,000 associated with
the professional services organization were charged to sales and marketing
expense for 1999 and 1998, respectively. The $1.8 million increase in sales and
marketing expenses from 1997 to 1998 was primarily attributable to an increase
in the number of employees in our sales and marketing organizations. We believe
our sales and marketing expenses will continue to increase in absolute dollar
amounts in future periods as we expect to continue to expand our sales and
marketing efforts.
General and administrative. General and administrative expenses increased
$1.1 million, or 88%, from 1998 to 1999, and $708,000, or 135%, from 1997 to
1998. The increase from 1999 to 1998 was primarily attributable to an increase
in administrative employees and in the amount of recruitment and outside
professional services fees. Expenses relating to general and administrative
personnel increased $460,000 from $926,000 in 1998 to $1.4 million in 1999.
Recruitment fees increased $332,000 from $15,000 in 1998 to $347,000 in 1999.
Fees for outside professional services, such as attorneys and accountants,
increased $192,000 from $156,000 in 1998 to $348,000 in 1999. The $708,000
increase in general and administrative expenses from 1997 to 1998 was primarily
attributable to an increase in administrative employees and outside
professional services fees. We believe general and administrative expenses will
continue to increase in absolute dollars, as we expect to add personnel to
support our expanding operations, incur additional costs related to the growth
of our business and assume the responsibilities of a public company.
Stock-based compensation. In connection with the granting of stock options to
our employees, we recorded deferred stock-based compensation totaling
approximately $8.8 million as of December 31, 1999. Stock-based compensation
amortization expense relating to these options was $1.6 million for the year
ended December 31, 1999 and $36,000 for the year ended December 31, 1998. As of
December 31, 1999, we had an aggregate of $7.2 million of deferred compensation
to be amortized. The amortization of the remaining deferred stock-based
compensation will result in additional charges to operations as follows: $4.2
million in 2001; $1.9 million in 2002; $850,000 in 2003; and $234,000 in 2004.
The amortization of stock-based compensation is classified as a separate
component of operating expenses in our consolidated statement of operations.
We have issued our common stock and granted options and warrants to non-
employees in exchange for services. We have recorded total expense of $2.9
million in 1999 and $26,000 in 1998 in relation to common stock and other
equity instruments issued to non-employees in exchange for services.
During the quarter ended March 31, 2000, we issued warrants to purchase up to
2,446,932 shares of Series E convertible preferred stock and 200,000 shares of
common stock in conjunction with strategic partnership agreements. In
connection with the issuance of these warrants we expect to record a sales and
marketing expense equal to the fair value of the warrants determined using the
Black-Scholes option pricing model.
In April 2000 we issued a warrant to purchase 36,534 shares of common stock
in connection with the issuance of the Series E convertible preferred stock and
expect to record the fair value of the warrant as issuance cost.
Interest income and other expense, net
Interest income and other expense, net consists of interest income, interest
expense and other non-operating expenses. The $77,000 decrease in interest and
other expense, net from
30
<PAGE>
1998 to 1999 is attributable to interest expense related to equipment loans,
the proceeds of which were primarily used to purchase computer equipment and
office furniture, partially offset by interest income from average invested
cash proceeds from financing activities. The $19,000 decrease in interest and
other expense, net from 1997 to 1998 is attributable to increased interest
expense related to equipment loans.
Provision for Income Taxes
We incurred operating losses for all periods from inception through December
31, 1999 and therefore have not recorded a provision for income taxes. We have
recorded a valuation allowance for the full amount of our net deferred tax
assets.
As of December 31, 1999, we had net operating loss carry-forwards for federal
tax purposes of approximately $16.1 million and for state tax purposes of
approximately $15.7 million. These federal and state tax loss carry-forwards
are available to reduce future taxable income and expire at various dates
beginning 2012. Under the provisions of the Internal Revenue Code, certain
substantial changes in our ownership may limit the amount of net operating loss
carry-forwards that could be utilized annually in the future to offset taxable
income.
Liquidity and Capital Resources
Since inception, we have funded our operations primarily through the sale of
equity securities, through which we have raised net proceeds of $31.4 million
through December 31, 1999. As of December 31, 1999, we had outstanding
equipment leases and notes payable of $2.4 million. As of December 31, 1999, we
had approximately $12.8 million of cash and cash equivalents. In April 2000, we
raised an additional $26.8 million of net proceeds through the sale of our
Series E convertible preferred stock.
Cash used in operating activities was $13.0 million in 1999, $5.5 million in
1998 and $1.3 million in 1997. The cash used during these periods was primarily
attributable to net losses of $18.7 million during 1999, $6.4 million during
1998, and $1.5 million in 1997. During 1999 and 1998, these net losses required
lower cash use due to non-cash compensation charges related to various equity
instruments granted to employees and non-employees. Total expenses in relation
to these grants were $4.5 million in 1999 and $266,000 in 1998.
In addition, changes in operating assets and liabilities generated cash of
$774,000 in 1999, $427,000 in 1998 and $194,000 in 1997. The increases during
the three-year period primarily were the result of increases in accounts
payable and deferred revenue offset by increases in accounts receivable and
prepaid expenses as we expanded our business.
Investment in property and equipment, excluding equipment acquired under
capital leases, was $611,000 in 1999, $486,000 in 1998 and $242,000 in 1997.
Cash provided by financing activities was $23.5 million in 1999, $6.9 million
in 1998 and $3.6 million in 1997, resulting primarily from net proceeds from
the sale of convertible preferred stock and, to a lesser extent, from bank
borrowings. These amounts were partially offset by payments on capital lease
obligations and notes payable of $745,000 in 1999 and $59,000 in 1998.
As of December 31, 1999, we did not have any material commitments for capital
expenditures. Our principal commitments consisted of obligations of $4.1
million under operating leases and $72,000 under capital leases.
31
<PAGE>
We currently anticipate that our available cash resources, combined with the
net proceeds from our offering, will be sufficient to meet our presently
anticipated working capital, capital expenditure and business expansion
requirements for at least 12 months after the date of this prospectus. If we
operate our business as intended, we will need to raise additional financing in
2001; however, we may need to raise additional funds prior to this date to
support a more rapid expansion, develop new or enhanced applications and
services, respond to competitive pressures, acquire complementary businesses or
technologies, or take advantage of unanticipated opportunities.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." SFAS 133 established a new model for accounting for
derivatives and hedging activities and supercedes and amends a number of
existing accounting standards. SFAS 133 requires that all derivatives be
recognized in the balance sheet at their fair market value and any
corresponding derivative gains or losses be either reported in the statement of
operations or as a deferred item depending on the type of hedge relationship
that exists with respect to such derivatives. In July 1999, the Financial
Accounting Standards Board issued SFAS No.137, "Accounting for Derivative
Financial Instruments and Hedging Activities--Deferral of the Effective Date of
FASB Statement No. 133." SFAS 137 deferred the effective date until fiscal
quarters beginning after June 15, 2000. We will adopt SFAS 133 in the quarter
ended September 30, 2000. We do not currently hold any derivative financial
instruments or engage in any hedging activities and as a result do not expect
that the adoption of SFAS 133 will have a significant effect on our financial
position or results of operations.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements,"
which provides guidance on the recognition, presentation and disclosure of
revenue in financial statements filed with the SEC. SAB 101 outlines the basic
criteria that must be met to recognize revenue and provides guidance for
disclosure related to revenue recognition policies. We have complied with the
guidance in SAB 101 for all periods presented.
Market and Currency Risk
All of our revenue and capital spending is denominated in U.S. dollars. As of
December 31, 1999, we were exposed to interest rate risk on the balance
outstanding on our equipment loan and subordinated debt facility. The table
below presents principal amounts by expected maturity and the weighed average
interest rates of debt obligations which are sensitive to changes in interest
rates.
<TABLE>
<CAPTION>
Expected Maturity Date
-----------------------------
2000 2001 2002 Total
----- ------ ----- ------
(in thousands)
<S> <C> <C> <C> <C> <C>
Equipment loan.................................... $ 137 $ 12 $ -- $ 149
Weighted average interest rate.................... 8.5% 8.5% 8.5% 8.5%
Subordinated debt facility........................ $ 957 $1,080 $ 363 $2,400
Weighted average interest rate.................... 12.2% 12.2% 12.2% 12.2%
</TABLE>
We believe that the fair value of our current borrowings approximates their
carrying value due to the fact that the interest rates charged approximate a
market rate.
32
<PAGE>
BUSINESS
Overview
Docent is a leading provider of products and services that enable the
exchange of knowledge within and among our customer constituencies consisting
of large enterprises, educational content providers and professional
communities. Our Internet-based knowledge exchange platform goes beyond the
simple delivery of learning content online, commonly known as eLearning, to
bring together our constituents into a virtual marketplace with an array of
value-added features. Our solutions provide the following benefits to our
constituents:
. Enterprises can easily and efficiently create, deliver and manage
educational content in a highly personalized manner. Through our
solutions, participants receive the specific knowledge necessary to
bridge skill gaps in order to increase their competency. This can
provide enterprises with a measurable impact on business results;
. Content providers can rapidly and cost-effectively generate additional
revenue by bringing their offerings online and by participating in
virtual knowledge marketplaces; and
. Professional communities or online affiliates of professionals, such as
salespeople and consultants, can offer a broad range of educational
content from multiple content providers, as well as learning management
capabilities, and offer value-added products and services to their
members.
We have received several awards and recognition for our industry leadership
and product capabilities, including the Crossroads 2000 A-List Award and the
1999 Product of the Year Award from Call Center Solutions Magazine. We were
also recognized in PC Week Magazine (November 16, 1999) with the best score
among seven learning management systems, and in brandon-hall.com's Integrated
Learning Systems report (February 2000) as the "Best Integrated Learning
System" and the "Best Solution for the Sales Organization." As of March 31,
2000, we had over 90 customers and partners using our products and services.
These include Autodesk, Ariba, Arthur Andersen, AXA Insurance, Baxter
Pharmaceutical Products, Hewlett-Packard, Lucent Technologies, Merrill Lynch,
Miller Heiman, Pitney-Bowes, Portera and Schering-Plough.
Industry Background
Growth of the Internet as a Business Communication, Collaboration and
Exchange Platform
The Internet is rapidly being adopted as a communication and collaboration
platform among businesses and is fundamentally changing the way companies
operate. This new medium offers businesses the opportunity to streamline
complex business processes, reduce transaction costs, increase process
efficiencies and better serve their customers. Forrester Research concludes
that 93% of firms expect to transact business on the Internet by 2002. In
addition, Forrester Research estimates that business-to-business electronic
commerce, or eCommerce, will grow from $406 billion in 2000 to $2.7 trillion in
2004.
The rapid growth in business-to-business eCommerce to date has given rise to
Web-based marketplaces which automate communication and collaboration among
buyers and suppliers and facilitate transactions among businesses. Electronic
marketplaces allow companies to access a broader selection of customers and
suppliers, achieve greater economies of scale and streamline the buy/sell
process, reducing many of the administrative costs associated with transacting
business. These basic electronic marketplaces, however, do not typically
provide the integration and value-added services and features required by
industries characterized by a high level of transaction and process complexity.
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<PAGE>
New Web-based platforms are emerging which extend the benefits of electronic
marketplaces by integrating decentralized business processes such as
collaboration, training, procurement, benchmarking, reporting and sophisticated
payment processing within companies and across businesses. These new business
platforms are called electronic hubs, or eHubs. eHubs provide a foundation for
seamlessly integrating the functionality of business process automation and
electronic marketplace solutions. For the first time, these platforms provide
effective automation solutions for industries characterized by product and
service customization, complex business processes, highly interactive design,
production and fulfillment workflows, and significant dependence on information
exchange.
Knowledge Exchange
In today's highly competitive knowledge-based economy, people are often the
most significant asset within an organization. Large amounts of information
frequently need to be disseminated among employees, suppliers, distributors,
customers, partners and service providers, referred to as the extended
enterprise. The ability to rapidly disseminate information to people throughout
the extended enterprise has become mission critical. These extended enterprises
require a flexible and easily accessible knowledge exchange platform that
facilitates the interactions among the different constituents. The pervasive
and interactive characteristics of the Internet are well suited to enabling
this dissemination of knowledge and make eHubs an ideal knowledge exchange
solution. While traditional learning and training methods are one facet of
knowledge exchange within an organization, eHubs offer new capabilities which
overcome the limitations of conventional approaches.
Traditional Learning and Training
Learning activities have historically consisted of classroom-based and
instructor-led training programs. The delivery of learning and training through
traditional instructor-led methods is characterized by a number of limitations
that prevent these methods from facilitating a comprehensive knowledge exchange
process.
Limitations affecting organizations include:
. Limited scalability. The facility and personnel requirements of
traditional instructor-led methods limit scalability as organizations
become larger and more geographically dispersed.
. High cost. The cost of bringing participants to learning centers or
classrooms is often prohibitive, both in terms of the direct travel
expenses and the indirect opportunity costs associated with removing
individuals from the workplace.
. Inefficient delivery infrastructure. Traditional learning and training
methods are limited by the difficulties associated with disseminating
new content to a large and distributed group of participants. Previous
attempts at technology-delivered learning, such as satellite television,
are limited by the cost and complexity of the delivery infrastructure.
. Limited measurement capabilities. Traditional learning and training
methods lack an easy and automated means to track participants'
performance results, hampering the ability of organizations to measure
the impact and effectiveness of learning on an individual's performance.
Furthermore, organizations have traditionally been unable to link
training activities to relevant business metrics such as increases in
revenue or the reduction of operating costs.
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Limitations affecting individual participants include:
. Lack of personalization. Instructor-led programs typically result in a
"one-size-fits-all" experience that lacks personalization. This may
result in a learning experience that is over- or under-inclusive for the
individual participant and is not customized for that participant's
learning style.
. Event-oriented learning. Traditional learning has focused on broad
topics delivered at scheduled times and specific locations. Therefore,
participants are precluded from continuous access to specific learning
objects or information on demand.
eLearning
The Internet provides a platform to address the limitations of traditional
learning. Initial implementations of Web-based learning and training, commonly
known as eLearning, use the Web primarily as a delivery platform. eLearning
delivers learning events conveniently and directly to an employee, customer or
supplier at the time and location of their choice, at a low incremental
infrastructure cost and through standard Web browsers. Furthermore, because the
Internet reaches broad and varied market segments, eLearning allows for
economies of scale in what was previously a fragmented and inefficient
environment. The development of eLearning has led to the emergence of three
defined categories of constituencies:
Enterprise-class organizations. Many enterprise-class organizations have
realized that eLearning has significant and measurable advantages over
traditional forms of knowledge delivery and training. These extended
enterprises require a flexible and easily accessible knowledge exchange
platform which facilitates the interaction among the different
constituents. International Data Corporation, or IDC, projects that the
United States corporate eLearning market will grow from approximately $1.1
billion in 1999 to $11.4 billion in 2003, representing a 79% compound
annual growth rate.
Content providers. Companies that sell educational content often are
looking for scalable solutions that enhance their revenue growth
opportunities and leverage their subject matter expertise. These companies
frequently lack the technical and financial resources necessary to develop
an effective online presence. However, many content providers recognize
that Web-based learning represents a permanent transformation in their
industry to which they must respond or risk the loss of market share to new
entrants. According to IDC, the total United States corporate market for
eLearning content will grow from approximately $735 million in 1999 to $6.2
billion in 2003, representing a 70% compound annual growth rate.
Professional communities. Individual and small groups of professionals,
such as salespeople, consultants and medical doctors, often have limited
access to the learning resources available to large enterprises. As a
result, these individual or small groups of professionals have joined
online professional communities to facilitate access to these resources.
However, these online communities lack an easy and cost-effective means to
access and retrieve the most relevant learning materials from various
resources and integrate them into a comprehensive learning plan.
Next Generation Knowledge Exchange Solutions
eLearning uses the Web primarily as a delivery platform to increase the
convenience and lower the cost of training. However, eLearning solutions
typically lack a number of features which would provide a more complete and
effective knowledge exchange experience. These features include content
personalization, smaller knowledge objects as opposed to monolithic courses,
performance measurement and tracking, and comprehensive eCommerce support.
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The next generation solutions are evolving from a simple delivery platform into
Web-based knowledge exchange eHubs. These eHubs bring together enterprises,
content providers and professional communities into one virtual marketplace and
offer a greater array of features. Each of these constituents benefits from
aggregation, integration, scale and expanded eCommerce opportunities.
Additionally, individual participants benefit from an ongoing and personalized
learning experience. Organizations benefit from greater efficiencies, more
productive employees and higher returns on investments.
The Docent Solution
We are a leading provider of eHubs for knowledge exchange. Using our
technology platform and services, our constituents can easily build and
customize their own knowledge exchange eHub under their own brand. Our
solutions are comprehensive, scalable and easily adaptable to changing
circumstances, allowing constituents to develop knowledge exchanges that are
customized for their existing and evolving requirements. New eHub participants
can be quickly and easily added. Content providers who are seeking large
concentrations of potential customers for their content are likely to be drawn
to the eHub as the number of enterprise and professional community participants
increases. As the number of content providers increases, enterprise and
professional community participants benefit from a broader selection of
content. Online professional communities benefit from increased traffic on
their sites, repeat visits and greater usage times, commonly referred to as
Website "stickiness." Professional communities also have the opportunity to
derive revenue from the additional product and service offerings available as a
result of the greater availability of content.
Docent Enterprise, our software technology platform, enables constituents to:
. develop, recommend and manage personalized learning plans based on skill
gaps or competency levels;
. customize and deliver content on demand;
. measure and aggregate individual results, assess program effectiveness,
and refine profiles and learning plans;
. quantify learning outcomes as they relate to business goals;
. integrate the eHub with other enterprise applications; and
. implement and manage a wide range of eCommerce processes.
Benefits to Enterprise-Class Organizations
Greater efficiencies. Our solutions allow large enterprises to increase
operational efficiencies and reduce transaction costs by using the Web to
enhance the information flow in the knowledge exchange process. For example,
new product training can be accomplished online rather than by sending a
marketing team on a product roadshow. The speed and efficiency with which
content is delivered on the Web significantly reduces the time and cost
required to design new learning programs and reduces costs such as travel
expenditures.
More effective knowledge transfer to employees. Our solutions allow content
to be personalized to individual participants' needs and presented as an
integrated learning plan. Individual participants only access the content they
need, when they need it. Each participant's activities are assessed and results
are automatically tracked and measured in our participant database. This data
can be used to further refine the participant's learning profile, be correlated
with other enterprise data to make further recommendations, demonstrate
efficiencies of learning programs as they relate to business results, and
provide guidance for management decisions.
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One-stop knowledge exchange solution. We provide enterprise customers with
broader access to content from third party educational content providers. Our
enterprise customers benefit from a single platform that easily makes a wide
range of content available to a globally dispersed audience of employees,
partners and customers.
Faster time-to-results. Our solutions can be implemented quickly and easily.
In addition, our software technology platform enables organizations to rapidly
convert and customize existing training material into reusable content objects
for delivery over the Web.
Benefits to Content Providers
New revenue opportunities. Our solutions enable content providers to realize
new revenue streams from the sale of Web-delivered content that is available
continuously and reaches geographically dispersed audiences. Furthermore, our
solutions allow for aggregation and cross-selling of other providers' content.
Since content providers' own brands are promoted across the knowledge exchange
eHubs, they can drive additional Web-based traffic to their traditional
training offerings, and generate repeat business with more personalized
offerings and learning plans. By participating in our knowledge exchange eHubs,
content providers gain access to and leverage additional distribution channels
such as our direct sales force, resale partners and professional communities
with whom we have relationships.
Focus on core competencies. Our solutions enable content providers to quickly
and easily convert their existing content for deployment on the Web under their
own brand. When content providers use our content development and hosting
services, they can focus on providing quality content, rather than developing
new skills in technology implementation and Web development.
Improved business effectiveness. Our solutions allow content providers to
capture previously unavailable data on participant performance results. Content
providers can analyze and leverage this data to focus their sales efforts,
improve and personalize content, identify new business opportunities and
provide richer client services.
Benefits to Professional Communities
New revenue opportunities. Our solutions provide additional revenue
opportunities to professional communities through the sale of knowledge and
learning content. They can also drive additional Web-based traffic to
traditional professional community products and services.
Greater member participation. Our solutions allow professional communities to
provide their members with access to high quality and relevant content that was
previously difficult or costly to obtain. As a result, professional communities
can increase their Website "stickiness."
Improved learning experience. For the individual community members, we make
content from multiple vendors available through a single source for both online
and traditional instructor-led learning. Community members can thus maintain a
record of their learning activities in one location and integrate multiple
courses from multiple vendors into a single comprehensive learning plan based
on their individual needs.
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Strategy
Our objective is to enhance our position as a leading provider of enterprise
knowledge exchange eHub solutions by building the most extensive network of
enterprises, content providers and professional communities. The key elements
of our strategy include:
Increase direct sales force and strategic partnerships. Historically, our
revenue has been generated through our direct sales efforts. We plan to
increase our number of direct sales professionals, both domestically and
internationally. In addition, we intend to increase the number of
relationships with strategic partners, resellers and systems integrators.
We intend to work with these parties to accelerate the growth of our global
operations, provide additional customer implementation capabilities, expand
our customer base and increase the number of content providers available
through our eHubs. These relationships allow us to focus on our core areas
of expertise while leveraging the strengths of complementary organizations.
Penetrate new and existing functional and vertical markets. To date, we
have focused our efforts on sales, service and support organizations within
segments of the technology, financial and business services, and healthcare
industries. We are expanding the use of our products and services to
include additional applications for the extended enterprise, such as
reseller and partner training solutions. In addition, we believe there are
significant opportunities to further penetrate our existing vertical
markets and service new industries. Ultimately, we plan to create an
extended network of interconnected eHubs among these various constituencies
both within vertical markets and across various application areas.
Expand our international presence. Our marketing efforts primarily have
been focused in North America and selected countries in Europe. We believe
that there are significant opportunities for our solutions in Europe and
Asia. We plan to further increase our international presence in order to
take advantage of these opportunities and others as appropriate.
Continue to enhance our products and services capabilities. We plan to
continue to enhance the features and functions of our products and
services. In particular, we plan to focus on enhancing our capabilities in
learning objects management, personalization, transaction processing and
data analysis. For instance, we plan to expand our ability to capture and
aggregate data from multiple eHub constituents. This data can be used by
all eHub constituents to further improve their business offerings and
create additional revenue opportunities. In addition, we continually
evaluate acquisition opportunities and may acquire complementary businesses
to build a more comprehensive suite of products and services.
Support industry standards and open architecture. Our solutions are based
on standard Web technologies and an open architecture. Our solutions can be
accessed through standard Internet browsers and do not require any client
software installation by the customer. We believe that our continued
support of industry standards and our open architecture will remain an
attractive feature of our solutions.
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eHub Members
From inception to March 31, 2000, we have entered into agreements with more
than 90 eHub members in the technology, financial and business services and
healthcare industries. Set forth below is a representative list of our
enterprise customers:
<TABLE>
<S> <C> <C>
Financial and Business
Technology Services Healthcare
- ---------- ---------------------- ----------
Autodesk Arthur Andersen Baxter Pharmaceutical Products
Informatica AXA Group Beckman Coulter
Kana Communications GreenPoint Mortgage PSS/World Medical
LSI Logic Impiric, a division of Young Schering-Plough
& Rubicam
Lucent Technologies Merrill Lynch
Micromuse TIAA-CREF
Pitney-Bowes
Veritas Software
</TABLE>
Our content providers include Blessing-White, C/3/i, HotelTraining.com,
HyCurve, IBT Financial, Impax, Knowledge Impact, LearningAction, Learning
Insights, Learning Voyage, Miller Heiman, SMGnet, The Richardson Company and
Tech Resource Group (TRG).
Our professional community members include Ariba, the National Association of
Manufacturers and Portera.
Products and Services
While our products and services address the specific needs of each of the
three key constituencies within our eHubs, there is a large degree of
commonality and overlap between their needs. This has allowed us to use the
same underlying technology for all three groups. Docent products enable the
following key knowledge exchange processes:
Personalized learning plans. We enable our customers to personalize
learning plans based on competency models, job title or classification, or
pre-assessment of participants. Learning plans can reflect historical
success models or other competency models and can direct participants to a
wide variety of learning activities.
Content customization and delivery. We enable our customers to create
new, personalized Web-based courses easily and effectively. Our technology
is based on a standards-based open architecture designed for the Internet
and can be accessed through standard Web browsers. It does not require
proprietary scripting languages, client-side software, applets or plug-ins
and can incorporate any Internet-based multimedia technologies such as Real
Audio and Shockwave.
Performance and program assessment. We provide online assessment for all
learning activities to ensure the successful exchange of knowledge before a
participant proceeds to his or her next objective. All profile information,
activities and results are automatically captured in an individual's
learning plan. In addition, individual results can be aggregated to measure
program effectiveness and the results can be used to further refine future
programs.
Results measurement. Our products permit comprehensive reports on
participant progress based on data stored in our databases. These reports
can be integrated with data from other enterprise applications, showing the
value of our personalized learning programs and our customers' return on
investment.
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Facilitation of eCommerce processes. Our customers can collect user
profile information, enroll participants in learning events and collect
payment for courses online. Our solutions provide for enhanced commerce
transactions, including aggregation of purchases from multiple vendors,
cross-selling content between multiple vendors, resale of products through
multiple-tiered distribution channels and extracting value from data
contained in a repository of participant profiles. Our registration
interface can also be used to manage the registration process for all forms
of content, enabling our customers to register participants for both self-
paced and live interactive online and offline events.
Docent Enterprise
Docent Enterprise, our eHub software platform, consists of four tightly-
integrated components: Docent Learning Management Server, Docent Content
Delivery Server, Docent Desktop and Docent Mobile.
. Docent Learning Management Server is the primary system that interfaces
with users for learning management and registration and has been
designed to allow a customer to easily change workflow, add new
capabilities and customize the "look and feel" of their knowledge
exchange eHub;
. Docent Content Delivery Server consists of a rules-based engine that
assembles and presents content files to participants on demand based on
their interaction with the knowledge exchange platform;
. Docent Desktop assists content creators in authoring or converting
courseware for deployment to the Docent Content Delivery Server. Docent
Desktop allows a content creator to build a graphical outline of its
courseware and populate it by importing existing files or creating new
content by launching the third party editor of their choice, such as
Microsoft Word or FrontPage; and
. Docent Mobile provides the capability for users to download content from
a Docent Content Delivery Server and then continue to use the content
after they have disconnected from their network and resynchronize data
and results after they reconnect to their servers.
Application Service Provider Offerings
Our Application Service Provider offerings are designed to provide customers
with a means to implement our solutions quickly and flexibly while reducing the
risks and costs associated with the implementation process. The Application
Service Provider offerings include a hosted technology infrastructure, Docent
application support and continuous management of the hosted services.
Professional Services
Our professional services organization offers our constituents marketing,
implementation, training, and support and maintenance services. We provide
marketing services to assist our constituents in creating highly targeted
marketing plans to launch their knowledge exchange solutions. Our
implementation services assist our constituents with integration, content
customization and system administration. We provide customized training through
interactive classes and online learning activities to meet the needs of our
customers and partners. Support services are available by e-mail, fax, or
telephone, both during normal business hours and on an extended coverage basis.
Finally, maintenance services are provided on an annual contract basis, which
includes all software updates, bug fixes, additional documentation or patches
released during the contract period.
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Strategic Relationships
We have entered into strategic relationships to market and implement our
knowledge exchange eHub solutions. Establishing new strategic relationships and
alliances is a fundamental element of our strategy to expand our products and
services and enter new markets. The following is a list of some of our existing
strategic partner relationships:
Hewlett-Packard. We have granted Hewlett-Packard ("HP") a non-exclusive
license to our products. The license allows HP to resell our products,
either as part of HP's portfolio of personalized education solutions, or as
part of its own hosted eLearning solutions. In addition, HP has agreed to
co-brand its HP solutions with a "Powered by Docent" logo. As part of the
alliance, HP has granted us the right to resell its hosting and solution
services to our customers in combination with the sale of our products. The
agreement does not require HP to market a minimum quantity of our products.
Our agreement with HP is for three years, terminating, in the absence of a
breach by either party, on December 31, 2002.
Resale and service partnerships. We also have resale and service
partnerships with Aptech Worldwide, Arinso International, Belle
Productions, Caliber, Cegos, Evisor, General Physics, Internal/External
Communications, Niam TMS, Rapid Learning Deployment, Stoas, and U&I
Learning.
Marketing alliances. We have established a number of marketing alliances
that help provide multiple benefits, including joint sales calls, trade
show promotions, marketing activities and promotions and joint press
releases. We are currently a member of the following partner programs:
Siebel Systems Alliance Program Premier Software Partner, Microsoft Online
Learning Partner, Sun Microsystems Developer Connection Solutions Provider
and SAP Complementary Software Partner.
Technology alliances. We have also established a number of relationships
and alliances that provide our customers with access to technologies that
are either included as part of our products and services or are used in
conjunction with our platform. Some of these relationships include
technology and marketing alliances with vendors such as Centra, InterWise,
Oracle, Microsoft, and Placeware. We intend to increase the number of these
types of complementary partnerships in the future.
Technology, Research and Development
Our solutions are designed on a standards-based, open and scalable
architecture, are Web-based and are accessible by users through standard Web
browsers. As a result, our infrastructure supports large numbers of individual
users and member organizations within a single knowledge exchange. The
architecture has been designed to allow for content and results from multiple
organizations to be aggregated easily and delivered to anyone using a variety
of Internet appliances. Our Web-based architecture does not require additional
software to be installed and maintained on each user's computer or other
Internet devices. This allows knowledge exchanges to reach a diverse set of
internal and external participants with minimal deployment and maintenance
costs. Furthermore, the user profiles, assessment results, detailed course
statistics and other types of user activity data are tracked in a central
database in order to analyze usage and participant behavior patterns.
Our solutions are designed to support leading relational database management
systems, including Oracle and Microsoft SQL Server. We support multiple
operating systems and hardware configurations to meet the different needs of
our customers. Our software incorporates third party software in addition to
code which we have created ourselves. Server
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applications are based on standard Web server technology and are implemented in
C++ with native connectivity to both the Web server and the database. The
multi-tier architecture connects browser-based applications to application
servers and databases through an enterprise local area network, wide area
network, Intranet or a secure Internet connection. Our technology performs
messaging between clients and the application engine in real time over TCP/IP
and makes database connections through native database interfaces. Key features
of our technology include:
Single unified data model. Our solutions are built around a single,
unified data model. The complete learning experience of a user, from
initial skill gap analysis and learning plan development, through
registration and content delivery, to post-assessment, certification and
measurement of results, is tracked in relational databases that share
information in an integrated, comprehensive and data-centric learning
environment.
Scalable platform. Our solutions are designed as a series of separable
application servers, allowing individual hardware platforms to be sized to
the specific needs of a customer. We are able to add multiple application
servers in one or more geographic locations to provide the capacity to
handle large numbers of participants, organizations, courses and types of
content or to improve the overall response time of the system.
Ease of implementation. Our solutions have been designed to be easily
tailored to an organization's business environment. This has been
accomplished through the use of our "application file" architecture which
includes HTML tags, SQL database queries and standard scripting language
statements in ordinary text files. A standard system can be quickly and
easily deployed using automated installation scripts.
Standards-based open architecture. Our application servers run in both
the Windows NT and UNIX environments, using standard Web servers from
Microsoft, Netscape, Apache and others, and relational databases from
Microsoft or Oracle. We provide direct connections to industry standard
databases and Web servers. Our platform can be accessed from any HTML 2.0+
compliant Internet browser without requiring any plug-ins, applets or
client-side software, including from platforms such as Macintosh OS and
Linux. Our solution infrastructure is based on standard Internet
architectures and protocols. We support standards activities in the
learning management arena, and our system is one of the few certified as
compliant with the Aviation Industry CBT Committee (AICC) AGR-010 Internet-
based course management interface standard.
Disconnected and wireless operations. Our solutions provide a number of
capabilities to allow for disconnected operations. These include hybrid
Web/CD-ROM deliverables that enable organizations to make more effective
use of limited network bandwidth. Docent Mobile component allows users to
download content for use while disconnected from the Internet or an
intranet and to synchronize results upon reconnection. Our technology
platform also allows us to deliver knowledge exchange solutions through
non-traditional devices such as WebTV, Palm or other personal data
assistant devices and browser-equipped cellular telephones.
Sales and Marketing
We market and sell our solutions and related services primarily through our
direct sales force in the United States. Outside of the United States we rely
heavily on our international partners. To date, we have focused our sales
efforts on enterprise-class organizations in the technology, financial and
business services, and healthcare industries and on content providers. Our
sales efforts are directed at executive level decision makers within sales,
customer support and customer education organizations. We have seven sales
offices in the United States and one sales office in The Netherlands. We also
have sales personnel in Belgium, France and the United Kingdom. As of March 31,
2000, we had 73 employees in our sales and marketing departments.
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We focus our marketing efforts on educating potential eHub members,
generating new sales and partnership opportunities, and creating awareness for
our knowledge exchange solutions. To reach our eHub constituents, we conduct a
variety of marketing programs including trade shows, seminars, Web marketing
programs, advertising, press relations and industry analyst programs. To help
our eHub constituents and resellers successfully create, market and maintain
their knowledge exchange, we have an extensive set of marketing programs which
include the "Powered by Docent" branding, lead exchange, co-marketing and
technical and sales training programs. We also host regularly scheduled
networking programs to facilitate communication among content providers,
resellers and professional communities.
Competition
The market for knowledge exchange and eLearning is intensely competitive,
subject to rapid technological change and significantly affected by new product
introductions and activities of other industry participants. The knowledge
exchange and eLearning market is highly fragmented with many competitors, and
no single company accounts for a dominant market share. Increased competition
is likely to result in price reductions, reduced gross margins and loss of
market share, any one of which could harm our business. Although we believe
that we offer one of the most comprehensive knowledge exchange platforms, we
encounter, or could encounter, competition with respect to different aspects of
our solution from a variety of companies, including:
. companies which provide software and services to address specific
components of knowledge exchange platform solutions;
. companies that sell online and traditional learning content over the
Internet;
. existing or potential customers or partners who develop in-house
solutions, including traditional learning programs; and
. enterprise software vendors who could develop their products to include
knowledge content offerings.
The boundaries between the different areas in which these groups of
competitors compete are permeable. Competitors who are categorized in one area
may have or may develop products or services which compete with us in other
areas. Companies that compete with certain aspects of our solutions include:
Click2Learn, DigitalThink, IBM (Lotus LearningSpace), Pathlore, Saba Software
and WBT Systems, among others. We expect additional competition from other
established and emerging companies as the market for knowledge exchange
solutions evolves. Some of our current or potential competitors have longer
operating histories and significantly greater financial, technical, marketing
and other resources than we do. Therefore, they may be able to respond more
quickly to new or changing opportunities, technologies and customer
requirements. Also, many current and potential competitors have wider brand
recognition and more extensive customer bases that could be leveraged, thereby
gaining market share to our detriment.
We believe that the principal factors that would bear upon our performance in
comparison to our competitors include the following: the breadth and depth of
learning and training solutions, product quality and performance, product
features and functions, eHub services and support, core technology and the
ability to rapidly implement solutions. Although we believe that our solutions
are currently competitive with respect to these factors, our market is new and
evolving rapidly. We may not be able to sustain our competitive position
against current and potential competitors, especially those with significantly
greater financial, marketing, service, support, technical and other resources.
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Intellectual Property Rights
Our success and ability to effectively compete is dependent on our ability to
develop and maintain the proprietary aspects of our technology and operate
without infringing on the intellectual property rights of others. We rely on a
combination of trademark, trade secret and copyright law and contractual
restrictions to protect the proprietary aspects of our technology. These legal
protections afford only limited protection for our technology. We seek to
protect the source code for our software, documentation and other written
materials under trade secret and copyright laws. We license our software
pursuant to signed license or "shrink wrap" agreements, which impose certain
restrictions on the licensee's ability to use the software. Finally, we seek to
avoid disclosure of our intellectual property by requiring employees and
consultants with access to proprietary information to execute confidentiality
agreements with us and by restricting access to our source code. Due to rapid
technological change, we believe factors such as the technological and creative
skills of our personnel and new product developments and enhancements to
existing products are more important to establishing and maintaining a
technology leadership position than the various legal protections of our
technology.
Despite our efforts to protect our intellectual property rights, unauthorized
parties may attempt to copy aspects of our products or to obtain and use
information that we regard as proprietary. Policing unauthorized use of our
products is difficult and, while we are unable to determine the extent to which
software piracy exists, if at all, it can be expected to be a persistent
problem. The laws of many countries do not protect our proprietary rights to as
great an extent as do the laws of the United States. Litigation may be
necessary in the future to enforce our intellectual property rights, to protect
our trade secrets, to determine the validity and scope of the intellectual
property rights of others or to defend against claims of infringement or
invalidity. Any such litigation could result in substantial costs and diversion
of resources. Our means of protecting our intellectual property rights may not
be adequate to protect us from the infringement or misappropriation of such
rights by other.
Currently, third parties have registered Docent or a variant as a trademark
in the United States and in certain other jurisdictions outside the United
States for use with goods or services which could be construed to overlap those
offered by Docent. Although these third parties have not initiated formal
infringement proceedings or any other formal challenges to Docent's use of the
Docent trademark, any claims, with or without merit, could cause costly
litigation that could consume significant management time. Although our
application to register Docent as a trademark in the United States for certain
goods and services has been allowed and will proceed to registration once a
statement of use is filed, we may not be able to register Docent as a trademark
in certain countries, including the United States, for use with various goods
or services due to existing registrations of third parties. As a result, we may
choose not to use Docent as a trademark in one or more of these countries in
connection with certain of our products or services.
We obtain the content for many of the courses delivered with our solutions
from outside content providers and also receive the right to resell this
content to other customers. It is possible that the use of this content may
subject us to the intellectual property claims of third parties. Although we
seek indemnification from our content providers to protect us from these types
of claims, we may not be fully protected from extensive damage claims or claims
for injunctive relief. In addition, our content providers may assert that some
of the courses we develop under contract with other customers may improperly
use their proprietary content. Our involvement in any litigation to resolve
intellectual property ownership matters would require us to incur substantial
costs and divert management's attention and resources. If we became liable to
third parties for infringing their intellectual property rights, we could be
required to pay substantial damages. In order to continue marketing our
products, we may be
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required to develop noninfringing intellectual property, obtain a license or
cease selling the products that contain the infringing intellectual property,
each of which may cause us to incur significant costs and expenses.
Furthermore, we may be unable to develop noninfringing intellectual property or
to obtain a license on commercially reasonable terms, if at all. In such event,
if the intellectual property was a trademark, we could be required to cease
using a trademark which could involve a loss of goodwill, as well as the
possibility of a damage award and a temporary disruption during a transition to
other trademarks.
Employees
As of March 31, 2000, we had 132 full-time employees. Of these employees, 73
were engaged in sales and marketing, 19 in research and development, 23 in
professional services and 17 in finance and administration. In addition, we
expect to hire a significant number of new employees in the near future. Our
future success depends on our ability to attract and retain highly qualified
technical, sales and senior management personnel.
None of our employees is represented by a labor union or collective
bargaining agreement. We have not experienced any work stoppages and consider
our relations with our employees to be good.
Facilities
We currently lease approximately 25,000 square feet of office space for our
headquarters in two buildings located in Mountain View, California. We expect
to outgrow our present office space by June 2000, and have the right to occupy
an additional 13,800 square feet of office space commencing no later than June
1, 2000. If we continue to increase the number of our personnel as projected,
we will outgrow the Mountain View premises, including the additional premises
we intend to occupy in June, 2000, by the end of this calendar year. In
addition to the Mountain View premises, in the United States we also lease
sales offices in Burlington, Massachusetts; Atlanta, Georgia; Houston, Texas;
Plano, Texas; Princeton, New Jersey; Irvine, California; and Lisle, Illinois.
We also lease sales offices in The Netherlands.
Legal Proceedings
From time to time, we may become involved in litigation relating to claims
arising from our ordinary course of business. We believe that there are no
claims or actions pending or threatened against us, the ultimate disposition of
which would have a material adverse effect on us.
45
<PAGE>
MANAGEMENT
Executive Officers, Directors And Other Key Employees
The names, ages and positions of our current executive officers, directors
and other key employees are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
David R. Ellett.......... 45 Chief Executive Officer, President and
Chairman of the Board
Donald E. Lundgren....... 55 Vice President and Chief Financial Officer
David Mandelkern......... 40 Executive Vice President, Chief Technology
Officer, Secretary and Director
Kathleen A. Gogan........ 41 Vice President, Marketing
R. Matthew Oates......... 33 Vice President, Business Development
Mary A. Egan Lorigan..... 39 Vice President, Sales
Maarten W. G. de Groodt.. 36 Vice President, Europe
Richard L. Dellinger..... 50 Vice President, Engineering
E. Keith Finch........... 52 Vice President, Professional Services
Eric N. Campbell......... 37 Vice President, Human Resources
Kevin G. Hall............ 41 Director
Jos C. Henkens........... 47 Director
Pardner Wynn............. 42 Director
</TABLE>
David R. Ellett, Chief Executive Officer and President, joined Docent in July
1998. He has been a member of the Board of Directors since March 1998 and
Chairman of the Board since January 2000. From April 1997 to July 1998, Mr.
Ellett served as Chief Operating Officer of Business Objects, Inc. From January
1994 to April 1997, Mr. Ellett served as Corporate Vice President of Worldwide
Education at Oracle Corporation. In addition, Mr. Ellett spent 13 years at
Electronic Data Systems, most recently as President of the Performance Service
Group from 1991 to 1994. Mr. Ellett holds a B.A. degree from Southern Methodist
University.
Donald E. Lundgren, Vice President and Chief Financial Officer, joined Docent
in November 1999. From November 1998 to May 1999, Mr. Lundgren served as Chief
Financial Officer of Blue Pumpkin Software, Inc., a provider of workforce
management software. In addition, Mr. Lundgren founded and served as Chief
Executive Officer of Kairos Software, Inc., a developer of Web-based,
knowledge-enabled selling systems, from July 1995 to June 1998. Prior
experience includes Chief Financial Officer positions at NetLabs, from June
1994 to June 1995, NetManage, from June 1993 to August 1993, and Frame
Technology, Inc, from March 1990 to April 1993. Mr. Lundgren holds an M.B.A.
degree from Indiana University and a B.S. degree in Electrical Engineering from
Rose Hulman Institute of Technology.
David Mandelkern, Executive Vice President and Chief Technology Officer, co-
founded Docent in June 1997. He served as President and Chief Executive Officer
from January 1998 to July 1998 and has been a director since June 1997. He has
also served as Chief Technology Officer from August 1998 to present. Before co-
founding Docent, Mr. Mandelkern founded and served from July 1993 to June 1997
as President of AlmondSeed Software, a provider of UNIX utility software. From
February 1991 to June 1993, Mr. Mandelkern served as President and Chief
Executive Officer of Talarian Corporation, a supplier of real-time networking
middleware. From October 1996 to June 1997, Mr. Mandelkern was a consultant to
Stanford Testing Systems, Inc., the predecessor to Docent. Mr. Mandelkern is a
member of the board of directors and compensation committee of Advanced Visual
Systems, Inc. Mr. Mandelkern holds a B.S. degree with distinction in Electrical
Engineering from Stanford University and an M.S. degree in Electrical
Engineering from Stanford University.
46
<PAGE>
Kathleen A. Gogan, Vice President, Marketing, joined Docent in October 1998.
From July 1997 to September 1998, Ms. Gogan served as Vice President of
Marketing at Decisive Technology, a provider of online survey software. From
May 1990 to July 1997, Ms. Gogan was employed by Informix Corporation and
served in a variety of management roles including Vice President of Global
Partners, and Vice President of Channel and Partner Marketing. Ms. Gogan holds
a B.S. degree in Mechanical Engineering from the University of Notre Dame and a
Masters of Management degree from Northwestern University.
R. Matthew Oates, Vice President of Business Development, joined Docent in
February 1999. Before joining Docent, Mr. Oates managed the Silicon Valley
division of The ParaMarketing Group, LLC, an international consulting firm,
from January 1998 to January 1999. Prior to ParaMarketing Group, Mr. Oates held
management positions with Arthur Andersen LLP from December 1994 to December
1997 and with Synetics Corporation from August 1992 to December 1994. Mr. Oates
holds a B.A. degree in Political Science from the University of Florida.
Mary A. Egan Lorigan, Vice President of Sales, joined Docent in October 1999.
From April 1999 to October 1999 Ms. Lorigan served as Vice President of Sales
at NetSage, Inc., a provider of intelligent agent software. From November 1993
to July 1998 Ms. Lorigan served in several sales management capacities
including Vice President North America Sales, Vice President North American
Verticals and Channels and Vice President Western Region at The Vantive
Corporation, a developer of customer relationship management and sales force
automation software. From May 1983 to November 1993, Ms. Lorigan served in
sales and various sales management roles at Informix Software, Inc. Ms. Lorigan
holds a B.A. degree from the University of California, San Diego.
Maarten W. G. de Groodt, Vice President, Europe, joined Docent in September
1999. Previously, Mr. de Groodt served as Director of Education for The
Netherlands for Oracle Corporation from June 1997 to September 1999. Prior to
Oracle, Mr. de Groodt was Manager of Professional Development at CAP Gemini
from July 1985 to May 1997. Mr. de Groodt holds a degree in business management
from IBO of Holland.
Richard L. Dellinger, Vice President, Engineering, joined Docent in November
1997. From October 1994 to October 1997, Mr. Dellinger served as Vice
President, Engineering at Presidio Systems, Inc., a provider of medical
software. From January 1991 to October 1994, Mr. Dellinger served as Vice
President, Engineering, at ParcPlace Systems, Inc. Mr. Dellinger holds a B.S.
degree in Engineering from the University of Houston and an M.S. degree in
Computer Science from Rice University.
E. Keith Finch, Vice President, Professional Services, joined Docent in
October 1998. Before joining Docent, Mr. Finch served as Vice President,
Worldwide Consulting at Business Objects, Inc., from November 1997 to October
1998. From October 1995 to October 1997, Mr. Finch served as CIO of Oracle
Education, a service business within Oracle Corporation. Previously, Mr. Finch
spent 13 years at Electronic Data Systems Corporation, where he held a variety
of management positions in sales, systems engineering and professional
consulting. Mr. Finch holds a B.A. degree from Oklahoma Baptist University and
an M.A. degree from Southwestern Baptist Theological Seminary.
Eric N. Campbell, Vice President, Human Resources, joined Docent in July
1999. Previous experience includes Manager of Human Resources for Inprise
Corporation, formerly Borland International, from November 1992 to June 1999.
From January 1991 to October 1992, Mr. Campbell served as manager of Human
Resources for Bama Foods Ltd., a food products manufacturer. Mr. Campbell holds
a B.S. degree from Oklahoma State University.
47
<PAGE>
Kevin G. Hall has served as a member of the Board of Directors of Docent
since June 1997, as a member of Docent's compensation committee since January
1999, and as a member of Docent's audit committee since January 2000. Since
1993, Mr. Hall has been a General Partner of Norwest Venture Partners. Prior to
joining Norwest, Mr. Hall was a Principal at Brentwood Associates. Mr. Hall
currently serves on the board of directors of Continuous Software, Inc., as
well as a variety of privately held companies. Mr. Hall received a B.S. degree
in Engineering and an M.S. degree in Engineering from Purdue University and an
M.B.A. degree from Stanford University.
Jos C. Henkens has served as a member of the Board of Directors of Docent
since June 1997, as a member of Docent's compensation committee since January
1999, and as a member of Docent's audit committee since January 2000. Mr.
Henkens is a General Partner of Advanced Technology Ventures, with which he has
been associated since January 1983. Mr. Henkens currently serves on the board
of directors of Actel Corporation, Credence Systems Corporation, Seagull
Business Software, BV, Garage.com, Inc., Accord Networks, Ltd., Annuncio
Software, Inc. as well as a variety of other privately held companies. Mr.
Henkens holds an MS and BS in Physics from the University of Leyden, The
Netherlands, an MS in Business Administration from the University of Delft, The
Netherlands, and an MS in Engineering-Economic Systems and an MBA from Stanford
University.
Pardner Wynn co-founded Docent in June 1997 and is currently a member of its
Board of Directors and has been a member of Docent's audit committee since
January 2000. Mr. Wynn has held various positions with Docent, including
Chairman of the Board from June 1997 to January 2000, President and Chief
Executive Officer from June 1997 to December 1997 and Chief Technology Officer
from May 1998 to August 1998. Prior to founding Docent, in January 1991
Mr. Wynn founded Stanford Testing Systems, a provider of test preparation and
skill assessment software and predecessor to Docent. Previously, Mr. Wynn had
served as Product Line Manager at Xilinx, Inc., a manufacturer of field
programmable logic arrays. Mr. Wynn holds a B.S. degree in Electrical
Engineering from Stanford University and an M.S. degree in Electrical
Engineering from Stanford University.
Board of Directors
Our board of directors is currently comprised of five directors. The board of
directors designated a Compensation Committee in January 1999 and an Audit
Committee in January 2000. Prior thereto, there were no such committees of the
board of directors and decisions regarding the compensation of executive
officers were made by the board of directors as a whole. The Compensation
Committee, which consists of Messrs. Hall and Henkens, makes recommendations to
the Board concerning the compensation of our officers and directors and the
administration of our 1997 Stock Option Plan, 2000 Omnibus Equity Incentive
Plan and 2000 Employee Stock Purchase Plan. The Audit Committee, which consists
of Messrs. Hall, Henkens and Wynn, reviews our financial controls, evaluates
the scope of the annual audit, reviews audit results, consults with management
and our independent auditors prior to the presentation of financial statements
to stockholders and, as appropriate, initiates inquiries into aspects of our
internal accounting controls and financial affairs.
Upon the closing of this offering, the directors will be divided into three
classes, with each class to be elected every third year. Unless a director
resigns or is removed, the terms of Messrs. Wynn and Henkens will end at the
2001 annual shareholders' meeting; the terms of Messrs. Mandelkern and Hall
will end at the 2002 annual shareholders' meeting; and the term of Mr. Ellett
will end at the 2003 annual shareholders meeting.
48
<PAGE>
Director Compensation
Directors have not historically received any cash compensation from Docent
for their services as members of the board of directors, although members are
reimbursed for expenses in connection with attendance at board of directors and
committee meetings. Upon the closing of this offering, our non-employee
directors will receive $1,000 for every meeting of the board of directors they
attend and $500 for every meeting of a committee of the board of directors they
attend. Our directors are eligible to participate in our 2000 Omnibus Equity
Incentive Plan and our directors who are employees of Docent are eligible to
participate in our 2000 Employee Stock Purchase Plan.
Upon the closing of this offering, Messrs. Hall, Wynn and Henkens will each
be granted a ten-year option under the 2000 Omnibus Equity Incentive Plan to
purchase 40,000 common shares with an exercise price equal to the market
closing price that day. These options will vest as to 10,000 shares at the 2001
annual shareholders' meeting and as to an additional 833 1/3 shares every month
thereafter. In the future, any non-management director will automatically
receive an analogous 40,000 share option grant upon first becoming a Docent
director. Each Docent non-management director who has served at least six
months at the time of a subsequent annual shareholders meeting shall
automatically receive a 10,000 share option grant which will vest at the rate
833 1/3 shares per month beginning three years after its date of grant.
Compensation Committee Interlocks and Insider Participation
Prior to the formation of the Compensation Committee, the board of directors
performed the functions typically assigned to a compensation committee. No
member of the Compensation Committee and none of our executive officers has a
relationship that would constitute an interlocking relationship with executive
officers and directors of another entity.
Norwest Venture Partners and its affiliated funds collectively have purchased
an aggregate of 7,536,424 shares of our Series A through D convertible
preferred stock for an aggregate of $11,226,776.40. One of our directors, Kevin
Hall, is a managing member of Norwest Venture Partners.
Advanced Technology Ventures and its affiliated funds have collectively
purchased an aggregate of 5,089,815 shares of our Series A through D
convertible preferred stock for an aggregate of $5,976,783.66. One of our
directors, Jos C. Henkens, is a general partner of Advanced Technology
Ventures.
Pardner Wynn, a director of Docent, has purchased an aggregate of 389,536
shares of our Series A through D convertible preferred stock for an aggregate
of $274,299. Mr. Wynn has also purchased an aggregate of 1,353,225 shares of
our common stock for an aggregate of $135,322.50.
Upon the closing of this offering, each outstanding share of Series A, B, B-
1, C, D and E convertible preferred stock will convert into one share of common
stock.
Prior to the completion of this offering we will have entered into
indemnification agreements with our officers and directors, including Messrs.
Ellett, Mandelkern, Hall, Henkens and Wynn. These indemnification agreements
will contain provisions that may require us, among other things, to indemnify
our officers and directors against certain liabilities that may arise by reason
of their status or service as officers or directors.
49
<PAGE>
Required Number of Independent Directors
Under the rules of the Nasdaq National Market, we must have three independent
directors. For purposes of this rule, an independent director is a director
that is not an employee of ours and does not have other specified relationships
with us as specified in the Nasdaq's rules. We believe that all of our
directors, other than Messrs. Ellett, Mandelkern, and Wynn are independent
directors for this purpose. Prior to the completion of this offering, we intend
to recruit an additional independent director who we believe could contribute
significantly to the board of directors.
Executive Officers
Our executive officers are appointed by our board of directors and serve at
the pleasure of our board of directors until their successors are elected or
appointed.
Compensation
The following table sets forth in summary form information concerning the
compensation paid by us during the fiscal year ended December 31, 1999, to our
Chief Executive Officer and each of our other most highly compensated executive
officers. These individuals are referred to as the named executive officers in
this prospectus.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation Awards
----------------- ------------
Common Stock
Fiscal Underlying
Name and Principal Position Year Salary Bonus Options
- --------------------------- ------ -------- -------- ------------
<S> <C> <C> <C> <C>
David R. Ellett ......................... 1999 $224,989 $318,474 --
Chief Executive Officer
David Mandelkern ........................ 1999 $168,119 $ 63,313 --
Executive Vice President
E. Keith Finch........................... 1999 $161,296 $ 61,500 --
Vice President, Professional Services
Kathleen A. Gogan ....................... 1999 $163,255 $ 31,522 --
Vice President, Marketing
Richard L. Dellinger .................... 1999 $168,663 $ 46,875 62,500
Vice President, Engineering
</TABLE>
David R. Ellett and David Mandelkern each have severance agreements with us
which provide that, if their employment with us is terminated without cause,
they will be entitled to receive six months salary and benefits.
50
<PAGE>
Option Grants In Last Fiscal Year
The following table sets forth, as to the named executive officers,
information concerning stock options granted during the fiscal year ended
December 31, 1999 for the only named officer who received an option grant in
1999.
The information regarding stock options granted to the named executive
officer as a percentage of total options granted to employees in the fiscal
year, as disclosed in the table is based upon options to purchase an aggregate
of 2,199,525 shares of common stock that were granted to all employees and
directors as a group, including the named executive officer, in the fiscal year
ended December 31, 1999.
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------
% of Potential Realizable
Total Value at Assumed
Number of Options Annual Rates of
Common Granted Stock Price
Shares to Appreciation for
Underlying Employees Exercise Option Term
Options in Fiscal Price Expiration ---------------------
Name Granted 1999 (per share) Date 5% 10%
- ---- ---------- --------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Richard L. Dellinger.... 62,500 2.84% $0.30 02/02/09
</TABLE>
The potential realizable value at assumed 5% and 10% annual rates of stock
appreciation are based upon an assumed initial public offering price of $
per share over the ten-year term, compounded annually and subtracting from that
result the total option exercise price. These rates of appreciation are
mandated by the rules of the Securities and Exchange Commission and do not
represent our estimate or projection of our future stock prices. Actual gains,
if any, on stock option exercises will be dependent on the future performance
of our common stock.
The option indicated in the table above has a ten-year term and vests at the
rate of 1/48 of the shares at the end of each month from the vesting
commencement date, subject to continued service as an employee or consultant.
The named executive officers have each signed agreements which provide that,
if an officer is terminated within six months after any change in control of
Docent and such termination is not for cause or for good reason, the vesting of
all the officer's unvested shares shall be accelerated one year forward.
Aggregated Option Exercises In Last Fiscal Year And Fiscal Year-End Option
Values
The following table sets forth information concerning option exercises during
1999 and unexercised options outstanding on December 31, 1999 with respect to
each of the named executive officers.
The value realized represents the difference between the deemed value of the
common stock on the date of exercise used by us for accounting purposes and the
exercise price of the option.
The value of unexercised in-the-money options was calculated by determining
the difference between $ (the assumed initial public offering price)
and the exercise price of the option.
51
<PAGE>
Mr. Ellett paid $7,000 in cash and received a $103,000 loan secured by
1,030,000 of the 1,100,000 shares on September 30, 1998 to assist him in
exercising his option. The loan bears 5.54% interest and is due in five years
or earlier if his employment terminates or he sells the shares.
<TABLE>
<CAPTION>
Value Of
Unexercised
In-The-Money
Number of Options
Unexercised Options at Fiscal Year-
Shares at Fiscal Year-End End
Acquired Value -------------------- ---------------
Name on Exercise Realized Vested Unvested Vested Unvested
- ---- ----------- -------- --------- ---------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
David R. Ellett...... 1,100,000 $ -- -- $ -- $ --
David Mandelkern..... -- -- -- -- -- --
E. Keith Finch....... -- -- 51,041 123,959
Kathleen A. Gogan.... -- -- 73,689 178,961
Richard L.
Dellinger........... -- -- 13,020 149,480
</TABLE>
Company Repurchase Rights
Certain of the named executive officers exercised their options prior to such
options vesting, and another purchased his shares subject to vesting, in each
case with the unvested shares subject to repurchase at cost by us if the
officer's employment terminates for any reason. As of March 31, 2000, the
number of shares subject to such repurchase, the monthly rate of decline in
such number of repurchasable shares, and the repurchase price per share to us
are shown in the table below:
<TABLE>
<CAPTION>
Repurchase
Shares Monthly Price Per
Name Repurchasable Decline Share
- ---- ------------- ------- ----------
<S> <C> <C> <C>
David R. Ellett............................ 595,834 22,917 $0.10
David Mandelkern........................... 101,545 20,313 0.10
E. Keith Finch............................. -- N/A N/A
Kathleen A. Gogan.......................... 163,171 5,264 0.20
Richard L. Dellinger....................... 104,167 5,208 0.10
Richard L. Dellinger....................... 13,073 1,302 0.30
</TABLE>
Compensation Plans
1997 Stock Option Plan
The 1997 Stock Option Plan is administered by our compensation committee. The
1997 Stock Option Plan provides a means by which our employees, directors and
consultants may be given an opportunity to purchase shares of our common stock.
The 1997 Stock Option Plan provides for the grant of incentive stock options as
defined in Section 422 of the Internal Revenue Code and the grant of
nonstatutory stock options.
A total of 2,500,000 shares of common stock were originally reserved for
issuance under the 1997 Stock Option Plan. Subject to stockholder approval, the
Board of Directors has approved increases in the number of shares reserved for
issuance under the plan in multiple increments ultimately resulting in a total
of 7,300,000 shares.
The 1997 Stock Option Plan contains the following program features:
. Qualified employees are eligible for the grant of incentive stock
options to purchase shares of common stock;
. The compensation committee determines the exercise price of options, but
in no event is the option price for incentive stock options less than
100% of the fair market value of the stock on the date of grant; and
. The exercise price may, at the discretion of the compensation committee,
be paid in, among other things, cash, cash equivalents, full-recourse
promissory notes, past services or future services.
52
<PAGE>
As of March 31, 2000, of the 7,300,000 options available under the 1997 Stock
Option Plan 3,946,161 options were outstanding, 2,286,416 options had been
exercised, and 1,067,423 options remained available for future grant.
The board of directors is able to amend or modify the 1997 Stock Option Plan
at any time, subject to any required stockholder approval. The 1997 Stock
Option Plan will terminate on July 24, 2007. Upon closing this offering, we do
not intend to grant further options under this plan.
2000 Omnibus Equity Incentive Plan
The 2000 Omnibus Equity Incentive Plan was adopted by our board of directors
on March 23, 2000 and will be submitted for approval by our stockholders prior
to the completion of this offering. The 2000 Omnibus Equity Incentive Plan will
be administered by our compensation committee. The 2000 Omnibus Equity
Incentive Plan provides for the direct award or sale of shares of common stock
and for the grant of options to purchase shares of common stock. The 2000
Omnibus Equity Incentive Plan provides for the grant of incentive stock options
as defined in Section 422 of the Internal Revenue Code and the grant of
nonstatutory stock options, restricted shares, stock units and stock
appreciation rights to employees, non-employee directors, advisors and
consultants.
6,000,000 shares of common stock have been reserved for issuance under the
2000 Omnibus Equity Incentive Plan. Each year, the number of shares reserved
for issuance under the plan increases by 3% of the Company's outstanding shares
as of close of business on December 31 of the plan year, or such lower number
of shares determined by the board of directors. In no event may one participant
in the 2000 Omnibus Equity Incentive Plan receive option grants or direct stock
issuances for more than 1,000,000 shares in the aggregate per fiscal year.
The 2000 Omnibus Equity Incentive Plan will have the following program
features:
. Qualified employees will be eligible for the grant of incentive stock
options to purchase shares of common stock;
. Qualified non-employee directors will be eligible to receive automatic
option grants, to be made at periodic intervals, to purchase shares of
common stock at an exercise price equal to 100% of the fair market value
of those shares on the date of grant;
. The compensation committee will determine the exercise price of options
or the purchase price of stock purchase rights, but in no event will the
option price for incentive stock options be less than 100% of the fair
market value of the stock on the date of grant;
. The exercise price or purchase price may, at the discretion of the
compensation committee, be paid in, among other things, cash, cash
equivalents, full-recourse promissory notes, past services, future
services, surrender of outstanding stock held for one year, or the
Company withholding shares upon request of the optionees which would
otherwise have been issued upon exercise taken at their fair market
value.
53
<PAGE>
The 2000 Omnibus Equity Incentive Plan will include change in control
provisions that may result in the accelerated vesting of outstanding option
grants and stock issuances. The committee may grant options or stock purchase
rights in which all or some of the shares shall become vested in the event of a
change in control of Docent. Change in control is defined under the 2000
Omnibus Equity Incentive Plan as:
. a change in the composition of the board of directors, as a result of
which fewer than one-half of the incumbent directors are directors who
either:
-- had been directors of Docent twenty-four months prior to the change;
or
-- were elected, or nominated for election, to the board with the
affirmative votes of at least a majority of the directors who had
been directors 24 months prior to the change and who were still in
office at the time of the election or nomination; or
. an acquisition or aggregation of securities by a person, as defined in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended, as a result of which the person becomes the beneficial owner of
twenty percent or more of the voting power of Docent's outstanding
securities.
The board of directors will be able to amend or modify the 2000 Omnibus
Equity Incentive Plan at any time, subject to any required stockholder
approval. The 2000 Omnibus Equity Incentive Plan will terminate no later than
March 23, 2010.
2000 Employee Stock Purchase Plan
The board of directors adopted our 2000 Employee Stock Purchase Plan on March
23, 2000, to be effective upon completion of this offering. We will be
submitting it for approval by our stockholders prior to the completion of this
offering. A total of 1,500,000 shares of common stock have been reserved for
issuance under our employee stock purchase plan. The number of shares reserved
for issuance under the 2000 Employee Stock Purchase Plan will be increased on
the first day of each of our fiscal years beginning in 2001 through 2009 by the
lesser of:
. that number of shares such that the total shares reserved comprise 4% of
our outstanding common stock at the close of business on the last day of
the immediately preceding fiscal year; or
. the number of shares determined by the board of directors.
Our 2000 Employee Stock Purchase Plan, which is intended to qualify under
Section 423 of the Internal Revenue Code, is administered by the board of
directors or by a committee appointed by the board. Employees (including
officers and employee directors of Docent but excluding 5% or greater
stockholders) are eligible to participate if they are employees as of the close
of this offering or if they have been employees for three consecutive months
provided that they are customarily employed for more than 20 hours per week and
for more than five months in any calendar year. Our 2000 Employee Stock
Purchase Plan permits eligible employees to purchase common stock through
payroll deductions, which may not exceed 15% of an employee's compensation.
The 2000 Employee Stock Purchase Plan will be implemented by a series of
offering periods of six months' duration, with new offering periods, other than
the first offering period, commencing on January 1 and July 1 of each year. The
board of directors will establish accumulation periods for our 2000 Employee
Stock Purchase Plan, none of which will exceed six months. During each
accumulation period, payroll deductions will accumulate, without interest. On
the purchase dates set by the board of directors for each accumulation period,
accumulated payroll deductions will be used to purchase common stock. The
initial offering period is expected to commence on the date of this offering
and end on December 31, 2000. The initial purchase period is expected to begin
on the date of this offering and end on December 31, 2000.
54
<PAGE>
The purchase price will be equal to 85% of the fair market value per share of
common stock on either the last trading day of the accumulation period or on
the last trading day before the start of the applicable offering period,
whichever is less. In the case of the offering period beginning on the close of
this offering, the purchase price will be equal to 85% of initial offering
price in this offering or the fair market value per share of common stock on
the last trading day of the accumulation period. Employees may withdraw their
accumulated payroll deductions at any time before the last day of an
accumulation period. Participation in our 2000 Employee Stock Purchase Plan
ends automatically on termination of employment with Docent. Immediately prior
to the effective time of a corporate reorganization, the participation period
then in progress shall terminate and stock will be purchased with the
accumulated payroll deductions, unless the 2000 Employee Stock Purchase Plan is
assumed by the surviving corporation or its parent corporation pursuant to the
plan of merger or consolidation. Our 2000 Employee Stock Purchase Plan will
terminate on March 23, 2010, unless sooner terminated by the board of
directors.
401(k) Plan
We have established a tax-qualified employee savings and retirement plan for
which our employees are generally eligible. Pursuant to the 401(k) Plan,
employees may elect to reduce their current compensation and have the amount of
such reduction contributed to the 401(k) Plan. To date, Docent has made no
matching contributions. The 401(k) Plan is intended to qualify under Section
401 of the Internal Revenue Code of 1986, as amended, so that contributions to
the 401(k) Plan and income earned on plan contributions are not taxable to
employees until withdrawn from the 401(k) Plan, and so that contributions by
Docent, if any, will be deductible by us when made.
Limitation On Liability And Indemnification Matters
Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that directors
of a corporation will not be personally liable for monetary damages for breach
of their fiduciary duties as directors, except for any liability arising with
respect to (1) any breach of their duty of loyalty to the corporation or its
stockholders, (2) acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law or (3) any transaction
from which the director derived an improper personal benefit.
Our certificate of incorporation and bylaws upon the closing of this offering
will further provide that we are required to indemnify our directors and
executive officers and may indemnify our other officers and employees and
agents to the fullest extent permitted by Delaware law. We believe that
indemnification under our certificate of incorporation covers negligence and
gross negligence on the part of indemnified parties.
Prior to the closing of this offering, we will have entered into agreements
to indemnify our directors and officers, in addition to indemnification
provided for in our certificate of incorporation. These agreements, among other
things, require us to indemnify these directors and officers for certain
expenses (including attorneys' fees), judgments, fines and settlement amounts
incurred by any such person in any action or proceeding, including any action
by or in the right of Docent, arising out of that person's services as a
director or officer of Docent, any subsidiary of Docent or any other company or
enterprise to which the person provides services at the request of Docent.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of Docent where indemnification would be
required or permitted. We are not aware of any pending or threatened litigation
or proceeding that might result in a claim for such indemnification. We believe
that these provisions and agreements are necessary to attract and retain
qualified directors and officers.
55
<PAGE>
CERTAIN TRANSACTIONS
Transactions with Promoters
Stanford Testing Systems, Inc., wholly-owned by Pardner and Cynthia Wynn,
then husband and wife, engaged in test preparation, test assessment and
education content in the academic field since its incorporation in 1994.
Stanford Testing Systems, Inc. began to market corporate online learning
products in earnest in 1997 and in June 1997, incorporated two wholly-owned
subsidiaries, Docent, Inc. and TestPrep, Inc., in order to separate its two
businesses. The academic market assets of Stanford Testing Systems, Inc. and
its tradename, were transferred to TestPrep, Inc. in exchange for 1,000 shares
which were subsequently distributed to the Wynns who later disposed of them.
Stanford Testing Systems, Inc., and its remaining corporate online learning
business, was merged into Docent on June 27, 1997, with the Wynns ending up
owning 3,725,000 Docent shares. On the same day, investors purchased Series A
Preferred shares, as described below, and shortly thereafter David Mandelkern
purchased 975,000 common shares in exchange for a $97,500 promissory note
secured by his shares and bearing 6% interest and due in 20 years or earlier if
his employment terminates or he sells the shares.
As part of these transactions, the Wynns and Mr. Mandelkern agreed to subject
a portion of their shares to repurchase at $0.10, with the repurchase option to
lapse over 30 months for the Wynns and 40 months for Mr. Mandelkern should the
employment of Mr. Wynn or Mr. Mandelkern cease. On September 30, 1998, Mr. Wynn
resigned and we bought back 509,275 shares from each of the Wynns, leaving them
each with 1,353,225 common shares. We bought back these shares at $0.20 rather
than $0.10 in light of the amicable departure and lack of severance pay. Until
this offering, the Wynns, Mr. Mandelkern, and our major preferred shareholders
had an agreement on how to vote their shares in an election of directors and
another agreement providing for rights of co-sale and first refusal on any sale
of their shares.
Transactions With Management And Others
Since our inception, there has not been, nor is there currently proposed, any
transaction or series of transactions to which we were or are a party in which
the amount involved exceeded or will exceed $60,000 and in which any director,
executive officer, holder of more than 5% of any class of our capital stock or
any member of the immediate family of any of the foregoing persons had or will
have a direct or indirect material interest, other than the transactions
described below.
We did not sell any shares of common stock to any of our executive officers
or directors in the fiscal year ended December 31, 1999. As of March 31, 2000,
Mr. Mandelkern was indebted to us in the amount of $97,500 plus interest
accrued since July 9, 1997, at the rate of 6% per year, in connection with a
loan made to enable him to purchase 975,000 shares of common stock. As of March
31, 2000, Mr. Ellett was indebted to us in the amount of $103,000 plus interest
accrued since September 30, 1998 at the rate of 5.54% per year, in connection
with a loan made to enable him to purchase 1,030,000 of the 1,100,000 shares of
common stock he acquired by exercising options.
Between June 1997 and April 2000, we sold an aggregate of 22,111,260 shares
of convertible preferred stock in the following rounds of financing:
. We sold 5,799,998 shares of Series A convertible preferred stock in June
1997 at a price of $0.675 per share;
. We sold 2,000,000 shares of Series B convertible preferred stock in June
1998 at a price of $1.00 per share;
56
<PAGE>
. We sold 833,333 shares of Series B-1 convertible preferred stock in
September 1998 at a price of $1.20 per share;
. We sold 2,036,717 shares of Series C convertible preferred stock in
November 1998, and 541,315 shares of Series C convertible preferred
stock in March 1999 at a price of $1.86 per share;
. We sold 5,856,645 shares of Series D convertible preferred stock in
August 1999, 174,825 shares of Series D convertible preferred stock in
September 1999, 699,300 shares of Series D convertible preferred stock
in November 1999 and 449,650 shares of Series D convertible preferred
stock in December 1999 at a price of $2.86 per share; and
. We sold 3,719,477 shares of Series E convertible preferred stock in
April 2000 at a price of $7.52 per share.
The following table summarizes purchases, valued in excess of $60,000, of
shares of preferred stock by our directors, executive officers and our 5%
stockholders:
<TABLE>
<CAPTION>
Number of
Number of Number of Shares of Number of Number of Number of
Shares of Shares of Series B- Shares of Shares of Shares of
Purchaser Series A Series B 1 Series C Series D Series E
- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Kevin G. Hall(1)........ 2,592,592 984,275 410,417 2,150,539 1,398,601 531,915
Jos C. Henkens(2)....... 2,592,592 984,275 410,417 403,230 699,301 39,894
Pardner Wynn............ 370,370 10,000 4,166 5,000 -- --
Gilde IT Fund........... -- -- -- -- 1,748,251 132,979
INVESCO Private Capital,
Inc.(3)................ -- -- -- -- 1,748,252 --
</TABLE>
- --------
(1) These shares are held by Norwest Venture Partners VI. Mr. Hall disclaims
beneficial ownership of these shares except to the extent of his pecuniary
interest in entities affiliated with Norwest Venture Partners.
(2) These shares are held by Advanced Technology Ventures IV. Mr. Henkens
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest in entities affiliated with Advanced Technology
Ventures.
(3) Represents 1,061,888 shares of Series D convertible preferred stock held by
Citiventure 96 Partnership, L.P., 243,706 shares of Series D preferred
stock held by Chancellor Private Capital Partners III, L.P., 41,259 shares
of Series D convertible preferred stock held by Chancellor Private Capital
Offshore Partners I, C.V., and 401,399 shares of Series D convertible
preferred stock held by Chancellor Private capital Offshore Partners II,
L.P., INVESCO Private Capital, Inc. is the investment manger for, and has
the sole voting and investment power over the share held by, Citiventure 96
Partnership, L.P., Chancellor Private Capital Partner III, L.P., Chancellor
Private Capital Offshore Partners I, C.V., and Chancellor Private Capital
Offshore Partners II, L.P.
In connection with the above transactions, we entered into agreements with
the investors providing for registration rights with respect to these shares.
The most recent such agreement is an Amended and Restated Investor Rights
Agreement dated April 2000, which restates and incorporates the registration
rights of all investors. For more information regarding this agreement, see
"Description of Capital Stock -- Registration Rights."
For more information regarding transactions with some of our officers and
directors and their affiliates, see "Compensation Committee Interlocks and
Insider Participation."
57
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding beneficial ownership of
our common stock as of April , 2000, by:
. each person or entity known to us to own beneficially more than 5% of
the outstanding shares of our common stock;
. each of the named executive officers;
. each of our directors; and
. all executive officers and directors as a group.
Beneficial ownership is determined in accordance with the rules and
regulations of the Securities and Exchange Commission. In computing the number
of shares beneficially owned by a person and the percentage ownership of that
person, shares of common stock subject to options held by that person that are
currently exercisable or exercisable within 60 days of March 31, 2000 are
deemed outstanding. These shares, however, are not deemed outstanding for the
purposes of computing the percentage ownership of any other person. Except as
indicated, and subject to applicable community property laws, the stockholders
named in the table have sole voting and investment power with respect to the
shares beneficially owned by them.
Unless otherwise indicated, the address for the following stockholders is c/o
Docent, Inc., 2444 Charleston Road, Mountain View, California 94043.
The following table assumes conversion into common shares of 22,111,260
shares of preferred shares at the closing of this offering and assumes no
exercise of the underwriters' over-allotment option. Applicable percentage
ownership is based on shares of common stock outstanding or deemed
outstanding as of April , 2000 and shares outstanding immediately after
completion of this offering.
<TABLE>
<CAPTION>
Percentage of
Number of Common Stock
Shares -----------------
Beneficially Before After
Name Owned Offering Offering
- ---- ------------ -------- --------
<S> <C> <C> <C>
5% Stockholders:
Norwest Equity Partners VI, LP(1).............. 8,168,339 % %
Advanced Technology Ventures IV(2)............. 5,148,359
Gilde IT Fund(3)............................... 2,131,230
INVESCO Private Capital, Inc.(4)............... 1,748,252
Pardner Wynn(5)................................ 1,710,085
Cynthia Wynn(6)................................ 1,318,825
Directors and Executive Officers:
David R. Ellett(7)............................. 1,500,000
David Mandelkern(8)............................ 1,125,000
Richard L. Dellinger(9)........................ 457,500
Kathleen A. Gogan(10).......................... 312,650
E. Keith Finch(11)............................. 235,000
Kevin G. Hall(1)............................... --
Jos C. Henkens(2).............................. --
Pardner Wynn................................... 1,710,085
All directors and executive officers as a
group(13 persons)............................. 5,340,235 % %
</TABLE>
58
<PAGE>
- --------
(1) Principal address is 2455 Lytton, Suite 250, Palo Alto, California 94301.
Itasca VC Partners VI, LLP is the general partner of Norwest Equity
Partners VI, LP and has the sole voting and investment power over the
shares held by Norwest Equity Partners VI, LP. Kevin Hall, a partner of
Itasca VC Partners VI, LLP and one of our directors, disclaims beneficial
ownership of the shares held by Norwest Equity Partners VI, LP except to
the extent of his pecuniary interest therein.
(2) Principal address is 485 Ramona Street, Suite 230, Palo Alto, California
94301. Jos Henkens, a general partner of Advanced Technology Ventures IV
and one of our directors, disclaims beneficial ownership of the shares
held by Advanced Technology Ventures IV except to the extent of his
pecuniary interest therein.
(3) Principal address is P.O. Box 85067, 3508 AB Utrecht, The Netherlands.
Represents 1,881,231 shares of common stock and 250,000 shares of common
stock issued or issuable upon the exercise of a warrant.
(4) Principal address of entities affiliated with INVESCO Private Capital,
Inc. is 1166 Sixth Avenue, New York, New York 10036. Represents 1,061,888
shares of common stock held by Citiventure 96 Partnership, L.P., 243,706
shares of common stock held by Chancellor Private Capital Partners III,
L.P., 41,259 shares of common stock held by Chancellor Private Capital
Offshore Partners I, C.V., and 401,399 shares of series D common stock
held by Chancellor Private Capital Offshore Partners II, L.P. INVESCO
Private Capital, Inc. is the investment manager for, and has the sole
voting and investment power over the shares held by, Citiventure 96
Partnership, L.P., Chancellor Private Capital Partners III, L.P.,
Chancellor Private Capital Offshore Partners I, C.V., and Chancellor
Private Capital Offshore Partners II, L.P.
(5) Includes 5,000 shares held as trustee for each of Hannah G. Wynn, Jemima
K. Wynn and Nathaniel C. Wynn.
(6) Includes 5,200 shares held as trustee for each of Hannah G. Wynn, Jemima
K. Wynn and Nathaniel C. Wynn.
(7) Includes 595,834 shares subject to repurchase by us upon employment
termination at $0.10 per share and 400,000 shares issuable upon exercise
of options within sixty (60) days of March 31, 2000, a portion of which
would be subject to repurchase by us upon employment termination.
(8) Includes 101,545 shares subject to repurchase by us upon employment
termination at $0.10 per share and 150,000 shares issuable upon exercise
of options within sixty (60) days of March 31, 2000, a portion of which
would be subject to repurchase by us upon employment termination.
(9) Includes 104,167 shares subject to repurchase by us upon employment
termination at $0.10 per share and 13,073 shares subject to repurchase at
$0.30 per share and 177,500 shares issuable upon exercise of options
within sixty (60) days of March 31, 2000, a portion of which would be
subject to repurchase by us upon employment termination.
(10) Includes 163,171 shares subject to repurchase by us upon employment
termination at $0.20 per share and 60,000 shares issuable upon exercise of
options within sixty (60) days of March 31, 2000, a portion of which would
be subject to repurchase by us upon employment termination.
(11) Includes 235,000 shares issuable upon exercise of options within sixty
(60) days of March 31, 2000, a portion of which would be subject to
repurchase by us upon employment termination.
59
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Authorized And Outstanding Capital Stock
Our authorized capital stock as of April 11, 2000 consisted of 38,800,000
shares of common stock and 27,283,816 shares of convertible preferred stock. As
of April 11, 2000, there were outstanding 6,052,037 shares of common stock and
22,111,260 shares of convertible preferred stock. Such shares were held of
record by a total of 116 stockholders.
Upon the closing of this offering:
. our certificate of incorporation will be amended and restated to provide
for total authorized capital consisting of 250,000,000 shares of common
stock and 5,000,000 shares of convertible preferred stock; and
. all shares of preferred stock will convert into common stock and a total
of shares of common stock and no shares of preferred stock
will be outstanding, based on the number of shares outstanding as of
March 31, 2000 and assuming no exercise of the underwriters' over-
allotment option, after giving effect to the sale of common stock we are
offering.
Common Stock
The holders of our common stock are entitled to receive dividends as may be
declared by our board of directors and paid out of legally available funds.
Holders of shares of common stock are entitled to one vote per share upon all
matters upon which stockholders have the right to vote. Cumulative voting of
shares is not permitted. In the event of a voluntary or involuntary
liquidation, dissolution or winding up of Docent, the holders of our common
stock are entitled to receive and share ratably in all assets remaining
available for distribution to stockholders after payment of any preferential
amounts to which the holders of preferred stock may be entitled. Our common
stock has no preemptive rights and is not redeemable, assessable or entitled to
the benefits of any sinking fund. Shares of our common stock held by all other
persons are not convertible. All outstanding shares of our common stock are and
the common stock to be issued in this offering will be, validly issued, fully
paid and nonassessable.
Preferred Stock
As of the closing date of this offering, each outstanding share of preferred
stock will automatically convert into one share of common stock. Pursuant to an
amended and restated certificate of incorporation to be filed upon the closing
date, a total of 5,000,000 shares of preferred stock will be authorized for
future issuance, none of which has been designated in any series. Our board of
directors is authorized, without further stockholder action, to authorize and
issue any of the 5,000,000 undesignated shares of preferred stock in one or
more series and to fix the voting rights, liquidation preferences, dividend
rights, repurchase rights, conversion rights, preemption rights, redemption
rights and terms, including sinking fund provisions and certain other rights
and preferences of such shares of our preferred stock. The issuance of any
class or series of preferred stock could adversely affect the rights of the
holders of common stock by restricting dividends on, diluting the power of,
impairing the liquidation rights of common stock, or delaying, deferring or
preventing a change in control of Docent. We have no present plans to issue any
preferred stock.
Warrants
In March 1999, we issued warrants to purchase an aggregate of 119,962 shares
of common stock at an exercise price of $0.30 per share. These warrants expire
in November 2001.
60
<PAGE>
In March 1998, we issued a warrant to purchase 10,000 shares of series B
convertible preferred stock at an exercise price of $1.25 per share. This
warrant expires in March 2003.
In April 1999, we issued warrants to purchase an aggregate of 228,493 shares
of series C convertible preferred stock at an exercise price of $1.86 per
share. These warrants expire in April 2006.
In March 1999, we issued a warrant to purchase up to 175,000 shares of
convertible preferred stock at an exercise price of the greater of $1.86 per
share or the highest purchase price per share paid by a purchaser of our
convertible preferred stock in a financing at any time after March 23, 1999. In
December 1999, 100,000 shares of Series D convertible preferred stock were
issued at $2.86 per share upon exercise of the warrant. The remaining
75,000 shares were not issued and the warrant expired at December 31, 1999.
In December 1999, we issued a warrant to purchase an aggregate of 250,000
shares of Series D convertible preferred stock at an exercise price of $2.86
per share. This warrant expires in December 2002.
In March and April 2000, we issued warrants to purchase an aggregate of
236,534 shares of common stock at an exercise price of $10.00. These warrants
expire at various times over the next five years.
In March 2000, we issued warrants to purchase an aggregate of 2,446,932
shares of Series E convertible preferred stock at an exercise price of $7.52
per share. These warrants expire at various times over the next three years.
Upon completion of this offering, all of our warrants to purchase shares of
preferred stock will convert into the right to purchase the equivalent number
of shares of common stock at the same exercise price per share.
Registration Rights
Upon completion of this offering, the holders of 22,111,260 shares of common
stock issuable upon conversion of the Series A, B, B-1, C, D and E preferred
stock and upon the exercise of certain of the warrants have the right to cause
us to register these shares under the Securities Act as follows:
. Demand Registration Rights. At the earlier of December 31, 2001 or six
months after this offering, the holders of 50% of the common stock
issued upon conversion of Series A, B, B-1, C, D and E convertible
preferred stock may request that we register their shares with respect
to all or part of their registrable securities having aggregate gross
proceeds exceeding $7,500,000.
. Piggyback Registration Rights. The holders of common stock issuable upon
conversion of the Series A, B, B-1, C, D and E convertible preferred
stock may request to have their shares registered anytime we file a
registration statement to register any of our securities for our own
account or for the account of others subject to a pro rata cutback to a
minimum of 10% of any offering.
. S-3 Registration Rights. The holders of common stock issued upon
conversion of the Series A, B, B-1, C, D and E convertible preferred
stock have the right to request registrations on Form S-3 if we are
eligible to use Form S-3 and have not already effected such an S-3
registration within the past twelve (12) months and if the aggregate
proceeds are at least $1,000,000.
61
<PAGE>
Registration of shares of common stock pursuant to the exercise of demand
registration rights, piggyback registration rights or S-3 registration rights
under the Securities Act would result in these shares becoming freely tradable
without restriction under the Securities Act immediately upon the effective-
ness of such registration. See "Shares Eligible for Future Sale" and "Certain
Transactions."
Docent will pay all registration expenses, other underwriting discounts and
commissions in connection with any registration. The registration rights
terminate upon completion of this offering for those holders whose registrable
securities may immediately be sold under Rule 144 during any 90-day period.
Antitakeover Effects Of Provisions Of Our Certificate Of Incorporation and
Bylaws And Of Delaware Law
Certain provisions of our certificate of incorporation, bylaws and Delaware
law, described below, may have the effect of delaying, deferring or
discouraging another person from acquiring control of our company.
Certificate of Incorporation and Bylaws
Certain provisions of our certificate of incorporation and Bylaws are
designed to enhance the likelihood of continuity and stability of our board of
directors and in the policies formulated thereby. Accordingly, such provisions
may have the effect of preventing, discouraging or delaying any potential
acquisition proposals, whether by tender offer, proxy offer, or otherwise, or
changes in the control of our company and of preventing changes in our
management.
These provisions, summarized below, are expected to discourage certain types
of coercive takeover practices and inadequate takeover bids. These provisions
are also designed to encourage persons seeking to acquire control of us to
first negotiate with our board. We believe that the benefits of increased
protection of our potential ability to negotiate with the proponent of an
unfriendly or unsolicited proposal to acquire or restructure outweighs the
disadvantages of discouraging such proposals because negotiation of such
proposals could result in an improvement of their terms.
Classified Board
Our board of directors is divided into three classes. The directors in each
class will serve for a three-year term, with our stockholders electing one
class each year. This system of electing and removing directors may tend to
discourage a third party from making a tender offer or otherwise attempting to
obtain control of us, because it generally makes it more difficult for
stockholders to replace a majority of the directors.
Restrictions on Persons Able to Call Stockholder Meetings
Under our bylaws, only the board of directors, the chairman of the board and
the president may call special meetings of stockholders.
Advance Notification of Stockholder Nominations and Proposals Required
Our bylaws establish advance notice procedures for stockholder proposals and
the nomination of candidates for election as directors, other than nominations
made by or at the direction of the board of directors or a committee of the
board.
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<PAGE>
Effect of Delaware Anti-Takeover Statute
We are subject to Section 203 of the Delaware General Corporation Law which,
subject to certain exceptions, prohibits a Delaware corporation from engaging
in any business combination with any interested stockholder for a period of
three years following the date that the stockholder became an interested
stockholder, unless:
. the transaction is approved by the board of directors prior to the date
the interested stockholder attained such status;
. upon the closing 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; or
. on or subsequent to such date the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders by at least two-thirds of the outstanding voting stock that
is not owned by the interested stockholder.
Generally, a "business combination" includes a merger, asset or stock sale,
or other transaction resulting in a financial benefit to the interested
stockholder. Generally, an "interested stockholder" is a person who, together
with affiliates and associates, owns or within three years prior to the
determination of interested stockholder status, did own, 15% or more of a
corporation's voting stock. The existence of this provision may have an anti-
takeover effect with respect to transactions not approved in advance by the
board of directors, including discouraging attempts that might result in a
premium over the market price for the shares of common stock held by
stockholders.
Stockholder Action by Written Consent Eliminated
Our certificate of incorporation and bylaws do not provide for cumulative
voting in the election of directors unless required by Section 2115 as
described below.
Undesignated Preferred Stock
The authorization of undesignated preferred stock makes it possible for the
board of directors to issue preferred stock with voting or other rights or
preferences that could impede the success of any attempt to change our control.
These and other provisions may have the effect of deterring hostile takeovers
or delaying changes in our control or management.
Amendment of Charter Provisions Require Supermajority Vote
The amendment of any of the above provisions would require approval by
holders of at least 66 2/3% of the outstanding common stock.
Section 2115
We are currently subject to Section 2115 of the California General
Corporation Law. Section 2115 provides that, regardless of a company's legal
domicile, some provisions of California corporate law will apply to that
company if more than 50% of its outstanding voting securities are held of
record by persons having addresses in California and the majority of our
operations occur in California. For example, while we are subject to Section
2115, stockholders may cumulate votes in electing directors. This means that
each stockholder may vote the number of votes equal to the number of candidates
multiplied by the number of votes to which the stockholder's shares are
normally entitled in favor of one candidate. This potentially allows minority
stockholders to elect some members of the board of directors.
63
<PAGE>
When we are no longer subject to Section 2115, cumulative voting will not be
allowed and a holder of 50% or more of our voting stock will be able to control
the election of all directors. In addition to this difference, Section 2115 has
the following additional effects:
. enables removal of directors with or without cause with majority
stockholder approval;
. places limitations on the distribution of dividends;
. extends additional rights to dissenting stockholders in any
reorganization, including a merger, sale of assets or exchange of
shares; and
. provides for information rights and required filings in the event we
effect a sale of assets or complete a merger.
We anticipate that our common stock will be qualified for trading as a
national market security on the Nasdaq National Market and that we will have at
least stockholders of record by the record date for our 2001 annual
meeting of stockholders. If these two conditions occur, then we will no longer
be subject to Section 2115 as of the record date for our 2001 annual meeting of
stockholders.
Transfer Agent And Registrar
The transfer agent and registrar for our common stock is . Its telephone
number is .
Listing
We have applied to list our common stock on the Nasdaq National Market under
the trading symbol "DCNT."
64
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have shares of common
stock outstanding. Of these shares, the shares sold in this
offering will be freely tradable without restriction under the Securities Act,
unless purchased by our "affiliates," as that term is defined in Rule 144 under
the Securities Act. Substantially all shares of our stock outstanding prior to
this offering are subject to 180-day lock-up agreements and may not be sold in
the public market prior to the expiration of the lock-up agreements. Deutsche
Banc Alex. Brown may release the shares subject to the lock-up agreements in
whole or in part at any time without prior public notice. However, Deutsche
Banc Alex. Brown has no current plans to effect such a release. Upon the
expiration of the lock-up agreements, approximately additional
shares will be available for sale in the public market, subject in some cases
to compliance with the volume and other limitations of Rule 144.
<TABLE>
<CAPTION>
Days After Date of This Shares Eligible
Prospectus for Sale Comment
----------------------- --------------- -------
<C> <C> <S>
Upon effectiveness............. Freely tradable shares sold in
this offering
All holders of securities are
bound by lock-up agreements
One hundred eighty (180) days.. Lock-up released; shares
saleable under Rule 144,
144(k) or 701
Various dates thereafter....... Restricted securities held for
one year of less as of 180
days following effectiveness
</TABLE>
Rule 144
Assuming other conditions are met, under Rule 144 a person (or persons whose
shares are aggregated) who has beneficially owned shares for at least one year
(including the holding period of any prior owner except an affiliate) 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
. 1% of the then outstanding shares of our common stock (approximately
shares immediately after this offering) or
. the average weekly trading volume during the four calendar weeks
preceding such sale, subject to the filing of a Form 144 with respect to
the sale.
A person (or persons whose shares are aggregated) who is not deemed to have
been our affiliate at any time during the 90 days immediately preceding the
sale who has beneficially owned his or her shares for at least two years
(including the holding period of any prior owner except an affiliate) is
entitled to sell these shares pursuant to Rule 144(k) without regard to the
volume limitations or other conditions described above. Affiliates must always
sell pursuant to Rule 144, even after the applicable holding periods have been
satisfied.
We cannot estimate the number of shares that will be sold under Rule 144, as
this will depend on the market price for our common stock, the personal
circumstances of the sellers and other factors. Prior to this offering, there
has been no public market for our common stock and there can be no assurance
that a significant public market for our common stock will develop or be
sustained after this offering. Any future sale of substantial amounts of our
common stock in the open market may adversely affect the market price of our
common stock.
65
<PAGE>
Lock-Up Agreements
We and our directors, executive officers, substantially all of our
stockholders and holders of options and warrants to purchase our capital stock
have agreed pursuant to the underwriting agreement and other agreements not to
sell any of our common stock without the prior consent of Deutsche Banc Alex.
Brown until 180 days from the date of this prospectus, except that we may,
without such consent, grant options and sell shares pursuant to our 2000
Omnibus Equity Incentive Plan and our 2000 Employee Stock Purchase Plan.
Stock Options
We intend to file a registration statement on Form S-8 under the Securities
Act to register shares of our common stock that are subject to outstanding
options or reserved for issuance under our 2000 Omnibus Equity Incentive Plan
and our 2000 Employee Stock Purchase Plan within 180 days after the date of
this prospectus, thus permitting the resale of these shares by nonaffiliates in
the public market without restriction under the Securities Act.
Rule 701
Any of our employees or consultants 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. Rule 701 permits nonaffiliates to sell their Rule 701
shares without having to comply with the current 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 March 1, 2000, the holders of approximately
shares of our common stock will be eligible to sell their shares in reliance
upon Rule 701 upon the expiration of the 180-day lockup period.
Registration Rights
After this offering, the holders of shares of our common stock and
warrants to purchase preferred stock convertible into shares of our common
stock will be entitled to certain rights with respect to registration of such
shares under the Securities Act. Registration of these shares under the
Securities Act would result in these shares becoming freely tradable without
restriction under the Securities Act (except for shares purchased by our
affiliates). See "Description of Capital Stock--Registration Rights."
66
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, through their representatives Deutsche Bank
Securities Inc., Dain Rauscher Incorporated and Thomas Weisel Partners LLC,
have severally agreed to purchase from Docent the following respective number
of shares of common stock at a public offering price less the underwriting
discounts and commissions set forth on the cover page of this prospectus:
<TABLE>
<CAPTION>
Number
of
Underwriter Shares
----------- ------
<S> <C>
Deutsche Bank Securities Inc. ........................................
Dain Rauscher Incorporated............................................
Thomas Weisel Partners LLC............................................
-----
Total.................................................................
=====
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares of common stock offered hereby are subject
to certain conditions precedent and that the underwriters will purchase all
shares of the common stock offered hereby, other than those covered by the
over-allotment option described below, if any of these shares are purchased.
The underwriters propose to offer the shares of common stock to the public at
the public offering price set forth on the cover of this prospectus and to
dealers at a price that represents a concession not in excess of $ per
share under the public offering price. The underwriters may allow and these
dealers may re-allow, a concession of not more than $ per share to other
dealers. After the initial public offering, representatives of the underwriters
may change the offering price and other selling terms.
We have granted to the underwriters an option, exercisable not later than 30
days after the date of this prospectus, to purchase up to additional
shares of common stock at the public offering price less the underwriting
discounts and commissions set forth on the cover page of this prospectus. The
underwriters may exercise this option only to cover over-allotments made in
connection with the sale of the common stock offered hereby. To the extent that
the underwriters exercise this option, each of the underwriters will become
obligated, subject to conditions, to purchase approximately the same percentage
of additional shares of common stock as the number of shares of common stock to
be purchased by it in the above table bears to the total number of shares of
common stock offered hereby. We will be obligated, pursuant to the option, to
sell these additional shares of common stock to the underwriters to the extent
the option is exercised. If any additional shares of common stock are
purchased, the underwriters will offer the additional shares on the same terms
as those on which the shares are being offered.
The underwriting fee is equal to the public offering price per share of
common stock less the amount paid by the underwriters to us per share of common
stock. The underwriting fee is
67
<PAGE>
currently expected to be approximately % of the initial public offering
price. We have agreed to pay the underwriters the following fees, assuming
either no exercise or full exercise by the underwriters of the underwriters'
over-allotment option:
<TABLE>
<CAPTION>
Total Fees
-------------------
Without With
Exercise Exercise
Fee of Over- of Over-
per Allotment Allotment
Share Option Option
----- --------- ---------
<S> <C> <C> <C>
Fees paid by Docent................................ $ $ $
</TABLE>
In addition, we estimate that our share of the total expenses of this
offering, excluding underwriting discounts and commissions, will be
approximately $ .
We have agreed to indemnify the underwriters against some specified types of
liabilities, including liabilities under the Securities Act and to contribute
to payments the underwriters may be required to make in respect of any of these
liabilities.
Each of our officers and directors and substantially all of our stockholders
and holders of options and warrants to purchase our stock, have agreed not to
offer, sell, contract to sell or otherwise dispose of, or enter into any
transaction that is designed to, or could be expected to, result in the
disposition of any shares of our common stock or other securities convertible
into or exchangeable or exercisable for shares of our common stock or
derivatives of our common stock owned by these persons prior to this offering
or common stock issuable upon exercise of options or warrants held by these
persons for a period of 180 days after the effective date of the registration
statement of which this prospectus is a part without the prior written consent
of Deutsche Bank Securities Inc. This consent may be given at any time without
public notice. We have entered into a similar agreement with the
representatives of the underwriters, except that we may grant options and sell
shares pursuant to our 2000 Omnibus Equity Incentive Plan and our 2000 Employee
Stock Purchase Plan without such consent. There are no agreements between the
representatives and any of our stockholders or affiliates releasing them from
these lock-up agreements prior to the expiration of the 180-day period.
The representatives of the underwriters have advised us that the underwriters
do not intend to confirm sales to any account over which they exercise
discretionary authority.
In order to facilitate the offering of our common stock, the underwriters may
engage in transactions that stabilize, maintain or otherwise affect the market
price of our common stock. Specifically, the underwriters may over-allot shares
of our common stock in connection with this offering, thus creating a short
position in our common stock for their own account. A short position results
when an underwriter sells more shares of common stock than that underwriter is
committed to purchase. Additionally, to cover these over-allotments or to
stabilize the market price of our common stock, the underwriters may bid for
and purchase, shares of our common stock in the open market. Finally, the
representatives, on behalf of the underwriters, may also reclaim selling
concessions allowed to an underwriter or dealer if the underwriting syndicate
repurchases shares distributed by that underwriter or dealer. Any of these
activities may maintain the market price of our common stock at a level above
that which might otherwise prevail in the open market. These transactions may
be effected on the Nasdaq National Market or otherwise. The underwriters are
not required to engage in these activities and, if commenced, may end any of
these activities at any time.
We have applied for quotation of our common stock or the NASDAQ National
Market under the symbol "DCNT."
Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since
December 1998, Thomas
68
<PAGE>
Weisel Partners has been named as a lead or co-manager on 153 filed public
offerings of equity securities, of which 109 have been completed, and has acted
as a syndicate member in an additional 80 public offerings of equity
securities. Thomas Weisel Partners does not have any material relationship with
us or any of our officers, directors or other controlling persons, except with
respect to its contractual relationship with us pursuant to the underwriting
agreement entered into in connection with this offering and the share ownership
of individuals associated with Thomas Weisel Partners stated below.
In April 2000, we sold 3,719,477 shares of our Series E preferred stock in a
private placement at a price of $7.52 per share. Each of the shares of Series E
preferred stock is convertible at the option of the holder into one shares of
our common stock. In this private placement, individuals and funds associated
with Deutsche Bank Securities Inc. purchased 159,579 shares of Series E
preferred stock, individuals and funds associated with Dain Rauscher
Incorporated purchased 33,245 shares of Series E preferred stock, and
individuals associated with Thomas Weisel Partners LLC purchased 5,320 shares
of Series E preferred stock, all on the same terms as the other investors in
the private placement. The aggregate number of shares of Series E preferred
stock purchased by individuals and funds associated with Deutsche Bank
Securities Inc., Dain Rauscher Incorporated and Thomas Weisel Partners LLC was
198,144 shares. Upon conversion of these shares into common stock, based on an
assumed initial public offering price of $ , the value of these shares is
$ . The difference between the amount that individuals and funds associated
with Deutsche Bank Securities Inc., Dain Rauscher Incorporated, and Thomas
Weisel Partners LLC originally paid for the Series E preferred stock and the
value of the Series E preferred stock based on the assumed initial public
offering price of $ equals $ .
Pricing Of This Offering
Prior to this offering, there has been no public market for our common stock.
Consequently, the initial public offering price for our common stock has been
determined by negotiation among us and the representatives of the underwriters.
Among the primary factors considered in determining the public offering price
were:
. prevailing market conditions;
. estimates of our business potential;
. the present stage of our development;
. the market capitalization and stage of development of other companies
that we and the representatives of the underwriters believe to be
comparable to our business; and
. our results of operations in recent periods.
The estimated initial public offering price range set forth on the cover of
this preliminary prospectus is subject to change as a result of market
conditions and other factors.
69
<PAGE>
LEGAL MATTERS
Select legal matters with respect to the validity of the common stock offered
by this prospectus are being passed upon for us by Pillsbury Madison & Sutro
LLP, Palo Alto, California. At the close of this offering, Pillsbury Venture
Fund III, an investment partnership composed of some current partners of
Pillsbury Madison & Sutro LLP, and two current partners of Pillsbury Madison &
Sutro LLP will beneficially own a total of 39,815 shares of our common stock.
Gibson Dunn and Crutcher LLP, San Francisco, California will act as counsel to
the underwriters in connection with this offering. At the close of this
offering, GDC Partners 2000 Fund, LLC, an investment partnership composed of
some current and former partners of Gibson Dunn & Crutcher LLP, will
beneficially own a total of shares of our common stock.
EXPERTS
The consolidated financial statements of Docent as of December 31, 1998 and
1999 and for each of the three years in the period ended December 31, 1999
included in this prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the common
stock. This prospectus does not contain all of the information set forth in the
registration statement and the exhibits and schedule filed as part of the
registration statement. For further information with respect to us and our
common stock, we refer you to the registration statement and the exhibits and
schedule filed as a part of the registration statement. Statements contained in
this prospectus concerning the contents of any contract or any other document
are not necessarily complete. If a contract or document has been filed as an
exhibit to the registration statement, we refer you to the copy of the contract
or document that has been filed. Each statement in this prospectus relating to
a contract or document filed as an exhibit is qualified in all respects by the
filed exhibit. The registration statement, including exhibits and schedule, may
be inspected without charge at the principal office of the Securities and
Exchange Commission, Public Reference Section, 450 Fifth Street N.W.,
Washington, D.C. 20549 and copies of all or any part of it may be obtained from
that office after payment of fees prescribed by the Securities and Exchange
Commission. The Securities and Exchange Commission maintains a Website that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Securities and Exchange
Commission at http://www.sec.gov.
Upon completion of this offering, Docent will become subject to the
information and periodic reporting requirements of the Securities Exchange Act
and, in accordance therewith, will file periodic reports, proxy statements and
other information with the SEC. These periodic reports, proxy statements and
other information will be available for inspection and copying at the SEC's
public reference rooms and the Website of the SEC referred to above.
We intend to provide our stockholders with annual reports containing
financial statements audited by an independent public accounting firm and to
make available to our stockholders quarterly reports containing unaudited
financial data for the first three quarters of each year.
70
<PAGE>
DOCENT, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants......................................... F-2
Consolidated Balance Sheets............................................... F-3
Consolidated Statements of Operations..................................... F-4
Consolidated Statements of Convertible Preferred Stock and Stockholders'
Deficit.................................................................. F-5
Consolidated Statements of Cash Flows..................................... F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Docent, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of convertible preferred stock and
stockholders' deficit and of cash flows present fairly, in all material
respects, the financial position of Docent, Inc. at December 31, 1998 and 1999,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. 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 of these statements in accordance with auditing standards
generally accepted in the United States, which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
San Jose, California
March 28, 2000
F-2
<PAGE>
DOCENT, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma
Stockholders'
December 31, Equity at
----------------- December 31,
1998 1999 1999
------- -------- -------------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................... $ 2,968 $ 12,773
Accounts receivable......................... 307 809
Deferred contract costs..................... -- 424
Prepaid expenses and other current assets... 17 159
------- --------
Total current assets...................... 3,292 14,165
Property and equipment, net................... 558 964
Deferred contract costs....................... 250 --
Other assets.................................. 83 173
------- --------
Total assets.............................. $ 4,183 $ 15,302
======= ========
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT)
--------------------------------------------
Current liabilities:
Accounts payable............................ $ 275 $ 988
Accrued liabilities......................... 513 875
Deferred revenue............................ 501 1,108
Capital lease obligations, current portion.. 4 25
Notes payable, current portion.............. 137 1,231
------- --------
Total current liabilities................. 1,430 4,227
Capital lease obligations..................... 13 47
Notes payable................................. 149 1,070
------- --------
Total liabilities......................... 1,592 5,344
------- --------
Commitments (Note 4)
Convertible preferred stock, $0.001 par value;
19,483 shares authorized; 10,670, 18,391 and
no (unaudited) shares issued and outstanding
(Liquidation value at December 31, 1999 of
$32,245)..................................... 10,615 33,288 $ --
Stockholders' equity (deficit):
Common stock, $0.001 par value; 28,800
shares authorized; 5,160, 5,310 and 23,701
(unaudited) shares issued and outstanding.. 5 5 24
Additional paid-in capital.................. 655 11,218 44,487
Receivables from stockholders............... (201) (487) (487)
Unearned stock-based compensation........... (330) (7,200) (7,200)
Accumulated deficit......................... (8,153) (26,866) (26,866)
------- -------- --------
Total stockholders' equity (deficit)...... (8,024) (23,330) $ 9,958
------- -------- ========
Total liabilities, convertible preferred
stock and stockholders' equity
(deficit)................................ $ 4,183 $ 15,302
======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
DOCENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Revenue:
License.......................................... $ 335 $ 297 $ 141
Services and maintenance......................... 60 244 651
------- ------- --------
395 541 792
------- ------- --------
Costs and expenses:
Cost of license.................................. 35 23 29
Cost of services and maintenance (exclusive of
stock-based compensation of $0 and $78 in 1998
and 1999)....................................... 18 750 1,201
Research and development (exclusive of stock-
based compensation of $3 and $517 in 1998 and
1999)........................................... 653 2,242 2,482
Sales and marketing (exclusive of stock-based
compensation of $22 and $3,030 in 1998 and
1999)........................................... 718 2,491 8,890
General and administrative (exclusive of stock-
based compensation of $241 and $909 in 1998 and
1999)........................................... 524 1,232 2,321
Stock-based compensation......................... -- 266 4,534
------- ------- --------
Total costs and expenses....................... 1,948 7,004 19,457
------- ------- --------
Loss from operations........................... (1,553) (6,463) (18,665)
Interest expense................................... (7) (20) (310)
Other expense...................................... -- (2) (17)
Interest income.................................... 55 51 279
------- ------- --------
Net loss....................................... (1,505) (6,434) (18,713)
Accretion of convertible preferred stock........... -- -- (1,354)
------- ------- --------
Net loss attributable to common stockholders... $(1,505) $(6,434) $(20,067)
======= ======= ========
Net loss per share attributable to common
stockholders--basic and diluted................... $ (0.55) $ (2.24) $ (5.07)
======= ======= ========
Weighted average common shares outstanding......... 2,717 2,869 3,958
======= ======= ========
Pro forma net loss per share--basic and diluted
(unaudited)....................................... $ (1.09)
========
Pro forma weighted average common shares
outstanding (unaudited)........................... 17,103
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
DOCENT, INC.
CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS'
DEFICIT
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Convertible
Preferred
Stock Common Stock Additional Receivables Unearned
-------------- -------------- Paid-In from Stock-based Accumulated
Shares Amount Shares Amount Capital Stockholders Compensation Deficit Total
------ ------- ------ ------ ---------- ------------ ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31,
1996.................... -- $ -- 3,725 $ 4 $ 15 $ -- $ -- $ (214) $ (195)
Issuance of Series A
convertible preferred
stock for cash at $0.675
per share, net of
issuance costs of $48... 5,430 3,617 -- -- -- -- -- -- --
Issuance of Series A
convertible preferred
stock upon cancellation
of bridge loans......... 370 250 -- -- -- -- -- -- --
Issuance of common stock
for note receivable..... -- -- 975 1 97 (98) -- -- --
Net loss................ -- -- -- -- -- -- -- (1,505) (1,505)
------ ------- ------ --- ------- ----- ------- -------- --------
Balances, December 31,
1997.................... 5,800 3,867 4,700 5 112 (98) -- (1,719) (1,700)
Issuance of Series B
convertible preferred
stock for cash at $1 per
share, net of issuance
costs of $21............ 2,000 1,979 -- -- -- -- -- -- --
Issuance of Series B-1
convertible preferred
stock for cash at $1.20
per share, net of
issuance costs of $8.... 833 992 -- -- -- -- -- -- --
Issuance of Series C
convertible preferred
stock for cash at $1.86
per share, net of
issuance costs of $11... 2,037 3,777 -- -- -- -- -- -- --
Issuance of convertible
preferred stock warrants
in exchange for
services................ -- -- -- -- 14 -- -- -- 14
Unearned stock-based
compensation............ -- -- -- -- 366 -- (366) -- --
Issuance of options in
exchange for services... -- -- -- -- 12 -- -- -- 12
Amortization of unearned
stock-based
compensation............ -- -- -- -- -- -- 36 -- 36
Issuance of common stock
for cash on option
exercise................ -- -- 448 -- 49 -- -- -- 49
Issuance of common stock
on option exercise in
exchange for note
receivable.............. -- -- 1,030 1 102 (103) -- -- --
Repurchase of common
stock................... -- -- (1,018) (1) -- -- -- -- (1)
Net loss................ -- -- -- -- -- -- -- (6,434) (6,434)
------ ------- ------ --- ------- ----- ------- -------- --------
Balances, December 31,
1998.................... 10,670 10,615 5,160 5 655 (201) (330) (8,153) (8,024)
Issuance of Series C
convertible preferred
stock for cash at $1.86
per share, net of
issuance costs of $16... 541 834 -- -- -- -- -- -- --
Issuance of common stock
warrants in connection
with Series C
convertible preferred
stock financing......... -- -- -- -- 157 -- -- -- 157
Issuance of Series C
convertible preferred
stock warrants in
connection with
subordinated loan and
capital leases.......... -- -- -- -- 339 -- -- -- 339
Issuance of Series D
convertible preferred
stock for cash at $2.86
per share, net of
issuance costs of $51... 7,080 20,199 -- -- -- -- -- -- --
Issuance of convertible
preferred stock warrants
in exchange for
services................ -- -- -- -- 1,892 -- -- -- 1,892
Issuance of Series D
convertible preferred
stock upon exercise of
warrant................. 100 286 -- -- -- (286) -- -- (286)
Unearned stock-based
compensation............ -- -- -- -- 8,466 -- (8,466) -- --
Amortization of unearned
stock-based
compensation............ -- -- -- -- -- -- 1,596 -- 1,596
Issuance of options in
exchange for services... -- -- -- -- 310 -- -- -- 310
Issuance of common stock
in exchange for
services................ -- -- 126 -- 736 -- -- -- 736
Issuance of common stock
for cash on exercise of
options................. -- -- 93 -- 25 -- -- -- 25
Repurchase of common
stock................... -- -- (69) -- (8) -- -- -- (8)
Accretion of Series D
convertible preferred
stock................... -- 1,354 -- -- (1,354) -- -- -- (1,354)
Net loss................ -- -- -- -- -- -- -- (18,713) (18,713)
------ ------- ------ --- ------- ----- ------- -------- --------
Balances, December 31,
1999.................... 18,391 $33,288 5,310 $ 5 $11,218 $(487) $(7,200) $(26,866) $(23,330)
------ ------- ------ --- ------- ----- ------- -------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
DOCENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss........................................... $(1,505) $(6,434) $(18,713)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization.................... 42 157 268
Loss on write-off of property and equipment...... -- 48 --
Compensation expense related to repurchase of
common stock from founders...................... -- 204 --
Amortization of deferred interest expense........ -- -- 91
Amortization of unearned stock-based
compensation.................................... -- 36 1,596
Issuance of options in exchange for services..... -- 12 310
Issuance of convertible preferred stock warrants
in exchange for services........................ -- 14 1,892
Issuance of common stock in exchange for
services........................................ -- -- 736
Changes in operating assets and liabilities:
Accounts receivable............................. (43) (233) (502)
Prepaid expenses and other assets............... (52) (292) (406)
Accounts payable................................ 149 110 713
Accrued liabilities............................. 96 385 362
Deferred revenue................................ 44 457 607
------- ------- --------
Net cash used in operating activities......... (1,269) (5,536) (13,046)
------- ------- --------
Cash flows from investing activities:
Purchases of property and equipment................ (242) (486) (611)
Disposal of property and equipment................. 10 -- --
------- ------- --------
Net cash used in investing activities......... (232) (486) (611)
------- ------- --------
Cash flows from financing activities:
Loan from stockholder.............................. 81 -- --
Payment to stockholder on note payable............. (84) -- --
Proceeds from issuance of convertible preferred
stock, net........................................ 3,617 6,748 21,033
Proceeds from issuance of common stock, net........ -- 49 25
Proceeds from issuance of convertible preferred
stock warrants.................................... -- -- 157
Repurchase of common stock......................... -- (204) (8)
Proceeds from notes payable........................ -- 343 3,000
Repayment of notes payable......................... -- (57) (737)
Principal payments under capital lease
obligations....................................... -- (2) (8)
------- ------- --------
Net cash provided by financing activities..... 3,614 6,877 23,462
------- ------- --------
Net increase in cash and cash equivalents.......... 2,113 855 9,805
Cash and cash equivalents, beginning of period..... -- 2,113 2,968
------- ------- --------
Cash and cash equivalents, end of period........... $ 2,113 $ 2,968 $ 12,773
======= ======= ========
Supplemental disclosures of cash flow information:
Interest paid...................................... $ 7 $ 20 $ 220
======= ======= ========
Income taxes paid.................................. $ -- $ 2 $ --
======= ======= ========
Supplemental disclosure of noncash investing and
financing activities:
Receivable from stockholders in connection with
issuance of common stock and convertible preferred
stock............................................. $ 98 $ 103 $ 286
======= ======= ========
Equipment acquired under capital leases............ $ -- $ 19 $ 63
======= ======= ========
Issuance of convertible preferred stock upon
cancellation of bridge loan....................... $ 250 $ -- $ --
======= ======= ========
Deferred interest expense related to warrants
issued in connection with subordinated loan and
capital leases.................................... $ -- $ -- $ 339
======= ======= ========
Unearned stock-based compensation.................. $ -- $ 366 $ 8,466
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
DOCENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Basis of Presentation
The Company is a provider of products and services that enable the exchange
of knowledge within and among large enterprises, educational content providers
and professional communities. The Company's Internet-based platform provides
for the delivery of learning content online, commonly known as eLearning, as
well as brings together the Company's customers into a virtual marketplace with
an array of value-added features, commonly known as an "eHub."
2. Summary of Significant Accounting Policies
Principles of consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary. All significant intercompany balances and
transactions have been eliminated.
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 reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Cash and cash equivalents
The Company considers all highly liquid investments purchased with original
or remaining maturities of three months or less to be cash equivalents. Cash
and cash equivalents are stated at cost which approximates market value.
Fair value of financial instruments
Carrying amounts of certain of the Company's financial instruments including
accounts receivable, accounts payable and accrued liabilities approximate fair
value due to their short maturities. The carrying amounts of notes payable
approximate fair value based on the terms of similar borrowing arrangements
available to the Company.
Risks and uncertainties
The Company is subject to all of the risks inherent in a company which
operates in the intensely competitive Internet industry, providing a service
which is relatively new and constantly evolving. These risks include, but are
not limited to, dependence upon customer acceptance of the Internet,
development of relationships with content providers, reliance on third-party
software incorporated in the Company's products and market acceptance of the
Company's products and services. The Company's operating results may be
materially affected by the foregoing factors.
Concentration of credit risk
Financial instruments which potentially subject the Company to concentration
of credit risk consist principally of cash, cash equivalents and accounts
receivable. The Company's cash and
F-7
<PAGE>
DOCENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
cash equivalents are deposited with two financial institutions which, at times,
may exceed federally insured limits.
Accounts receivable include amounts due from customers in a wide variety of
industries. The Company performs ongoing customer credit evaluations of its
customers, does not require collateral and maintains allowances for potential
credit losses when deemed necessary. To date, such losses have been within
management's expectations. At December 31, 1998, the Company had accounts
receivable from three customers representing, 16%, 35% and 37% of total
accounts receivable, respectively. At December 31, 1999, the Company had
accounts receivable from two customers representing 20% and 39% of total
accounts receivable, respectively.
Revenue recognition
The Company derives its revenue from the licensing of its software, either
through perpetual or time-based licenses, maintenance and support, hosting and
the provision of professional services, including implementation, consulting
and training.
For arrangements involving the external licensing of its software, the
Company adopted the provisions of the American Institute of Certified Public
Accountants Statement of Position ("SOP") 97-2, "Software Revenue Recognition",
as amended by SOP 98-4 "Deferral of the Effective Date of Certain Provisions of
SOP 97-2" effective January 1, 1998. The Company records revenue from licensing
of software products to end-users when evidence of an arrangement exists, the
fee is fixed and determinable, collection is probable and delivery of the
product has occurred. For agreements which include multiple obligations, such
as product license, maintenance and support, web-hosting and professional
services, the Company allocates revenue to all undelivered elements, usually
maintenance and support and professional services, based on objective evidence
of its fair value which is specific to the Company. Any amount remaining is
allocated to the delivered elements and recognized as revenue when the
conditions set forth above are met.
For arrangements involving customer acceptance, revenue recognition is
deferred until the earlier of the end of the acceptance period or until written
notice of acceptance is received from the customer.
For arrangements involving significant modification and customization of the
Company's software product, the Company recognizes revenue using the
percentage-of-completion method or, where there are customer acceptance clauses
which the Company does not have an established history of meeting or which are
not considered to be routine, when the arrangement has been completed and
accepted by the customer. The Company also defers the costs relating to these
arrangements until the revenue is recognized.
The Company recognizes revenue from maintenance fees for ongoing customer
support and product updates ratably over the period of the maintenance and
support arrangement. Payments for maintenance fees are generally made in
advance and are non-refundable. For revenue allocated to or generated from the
separate selling of professional services, the Company recognizes revenue as
the related services are performed.
Fees associated with web-hosting services, including the initial set-up fee,
are recognized as revenue over the hosting period agreement, generally one
year.
F-8
<PAGE>
DOCENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
During the year ended December 31, 1997 the Company recognized revenue from
product revenue when evidence of an arrangement existed, the fee was fixed and
determinable, collection was probable and delivery had occurred in accordance
with Statement of Position 91-1. Revenue from maintenance fees was recognized
ratably over the period of the maintenance agreement. Fees from professional
services were recognized as revenue as the services were performed.
In addition, the Company has entered into multi-year royalty agreements with
content providers. Under these agreements, the Company receives a minimum
annual royalty amount and a percentage of revenue the content provider receives
in excess of the minimum royalty amount for content provided to customers. In
return the Company provides their software and application hosting. In the
first year of the agreement the Company also provides professional services
such as marketing, implementation and training. In subsequent years,
professional services are available for an additional fee.
For agreements with content providers, the minimum fee is allocated among the
separate elements, including professional services and web-hosting, based on
the fair value of each of these elements. Any minimum royalty amount is
recognized as revenue ratably over the period which the minimum is earned. Any
royalty over and above the minimum is recognized upon notification from the
content provider.
Property and equipment
Property and equipment are stated at cost. Depreciation and amortization is
generally calculated using the straight-line method over the estimated useful
lives of the related assets ranging from 3 to 5 years. Leasehold improvements
and assets acquired under capital leases are amortized on a straight-line basis
over the term of the lease, or the useful life of the assets, whichever is
shorter. Maintenance and repairs are charged to expense as incurred, and
improvements and betterments are capitalized. When assets are retired or
otherwise disposed of, the cost and accumulated depreciation and amortization
are removed from the accounts and any resulting gain or loss is reflected in
operations in the period realized.
Long-lived assets
The Company evaluates the recoverability of its long-lived assets in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of," which requires recognition of impairment of long-lived
assets in the event the net book value of such assets exceeds the future
undiscounted cash flows attributable to such assets. In that event, a loss is
recognized based on the amount by which the carrying value exceeds the fair
value of the long-lived asset. Fair value is determined primarily using the
anticipated cash flows discounted at a rate commensurate with the risk
involved. Losses on long-lived assets to be disposed of are determined in a
similar manner, except that fair values are reduced for the cost of disposal.
No losses from impairment have been recognized in the financial statements.
Research and development
Costs incurred in the research and development of new software products are
expensed as incurred until technological feasibility is established.
Development costs are capitalized beginning when a products technological
feasibility has been established and ending when the product is available for
general release to customers. Technological feasibility is reached when the
product reaches the beta stage. To date, products and enhancements have
generally reached technological feasibility and have been released for sale at
substantially the same time.
F-9
<PAGE>
DOCENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Advertising
Cost related to advertising and promotion of products is charged to sales and
marketing expense as incurred. Advertising expense for the year ended December
31, 1999, was $84,000. No advertising expenses were incurred during the years
ended December 31, 1997 and 1998.
Income taxes
Deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax basis of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to affect taxable income. Valuation allowances are established when necessary
to reduce deferred tax assets to amounts expected to be realized.
Stock-based compensation
The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board Opinion ("APB") No.
25, Accounting for Stock Issued to Employees, and Financial Accounting
Standards Board Interpretation ("FIN") No. 28, Accounting for Stock
Appreciation Rights and Other Variable Stock Option or Award Plans, and
complies with the disclosure provisions of SFAS No. 123, Accounting for Stock-
Based Compensation. Under APB No. 25, compensation expense is based on the
difference, if any, on the date of grant, between the estimated fair value of
the Company's common stock and the exercise price. SFAS 123 defines a "fair
value" based method of accounting for an employee stock option or similar
equity investment. The pro forma disclosures of the difference between the
compensation expense included in net loss and the related cost measured by the
fair value method are presented in Note 9. The Company accounts for equity
instruments issued to nonemployees in accordance with the provisions of SFAS
No. 123 and Emerging Issues Task Force ("EITF") 96-18, Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services.
Comprehensive income (loss)
The Company adopted the provisions of SFAS No. 130, Reporting Comprehensive
Income. This statement requires companies to classify items of other
comprehensive income by their nature in the financial statements and display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of the balance
sheet. There has been no difference between the Company's net loss and its
total comprehensive loss through December 31, 1999.
Foreign currency remeasurement and transactions
The functional currency of the Company's foreign subsidiary is the U.S.
dollar and as a result monetary assets and liabilities denominated in foreign
currency, are remeasured at the balance sheet date exchange rate. Nonmonetary
assets are remeasured using historical rates and revenue and expenses are
remeasured at the average exchange rate prevailing during the year. The
resulting remeasurement gains and losses, are recorded in operations.
Foreign currency transaction gains and losses are included in results of
operations.
F-10
<PAGE>
DOCENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Net loss per share
Basic and diluted net loss per share is computed by dividing the net loss for
the period by the weighted average number of shares of common stock outstanding
during the period. The calculation of diluted net loss per share excludes
potential common shares if the effect is antidilutive. Potential common shares
are comprised of common stock subject to repurchase rights, incremental shares
of common and preferred stock issuable upon the exercise of stock options or
warrants and shares issuable upon conversion of convertible preferred stock.
The following table sets forth the computation of basic and diluted net loss
per share for the periods indicated (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Net loss attributable to common stockholders... $(1,505) $(6,434) $(20,067)
======= ======= ========
Basic and diluted shares:
Weighted average common shares outstanding... 4,213 4,868 5,189
Weighted average unvested common shares
subject to repurchase....................... (1,496) (1,999) (1,231)
------- ------- --------
Weighted average shares used to compute basic
and diluted net loss per share.............. 2,717 2,869 3,958
======= ======= ========
Net loss per share attributable to common
stockholders--basic and diluted............... $ (0.55) $ (2.24) $ (5.07)
======= ======= ========
</TABLE>
The following table sets forth potential shares of common stock that are not
included in the diluted net loss per share attributable to common stockholders
above because to do so would be antidilutive for the periods indicated (in
thousands):
<TABLE>
<CAPTION>
December 31,
-------------------
1997 1998 1999
----- ------ ------
<S> <C> <C> <C>
Convertible preferred stock upon conversion to
common stock............................................ 5,800 10,670 18,391
Warrants to purchase convertible preferred stock......... -- 10 663
Warrants to purchase common stock........................ -- -- 120
Unvested common shares subject to repurchase............. 2,300 1,786 1,039
Options to purchase common stock......................... 764 1,340 2,551
----- ------ ------
8,864 13,806 22,764
===== ====== ======
</TABLE>
Pro forma net loss per share (unaudited)
Pro forma net loss per share for the year ended December 31, 1999 is computed
using the weighted average number of common shares outstanding, including the
pro forma effects of the automatic conversion of the Company's convertible
preferred stock into shares of common stock effective upon the closing of the
Company's initial public offering, as if such conversion occurred on January 1,
1999 or at the date of original issuance, if later. The resulting pro forma
adjustment includes an increase in the weighted average shares used to compute
pro forma basic net loss per share of 13,145,000 shares for the year ended
December 31, 1999. The calculation of pro forma diluted net loss per share
excludes potential shares of common stock as their effect would be
antidilutive.
F-11
<PAGE>
DOCENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Pro forma stockholders' equity (unaudited)
The pro forma stockholders' equity as of December 31, 1999 reflects the
conversion of all outstanding shares of convertible preferred stock into an
aggregate of 18,391,000 shares of common stock.
Segment reporting
Financial Accounting Standards Board Statement No. 131, "Disclosure about
Segments of an Enterprise and Related Information" ("SFAS 131") requires that
companies report separately in the financial statements certain financial and
descriptive information about operating segments profit or loss, certain
specific revenue and expense items and segment assets. Additionally, companies
are required to report information about the revenue derived from their
products and service groups, about geographic areas in which the Company earns
revenue and holds assets, and about major customers. The Company has one
reporting segment.
All revenue are derived from customers located in and all long lived assets
are held in the United States. One customer accounted for 27% of the Company's
revenue for the year ended December 31, 1999. Three customers accounted for
12%, 13% and 26% of the Company's revenue for the year ended December 31, 1998.
One customer accounted for 13% of the Company's revenue for the year ended
December 31, 1997.
Recently issued accounting pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133
establishes a new model for accounting for derivatives and hedging activities
and supercedes and amends a number of existing accounting standards. SFAS No.
133 requires that all derivatives be recognized in the balance sheet at their
fair market value and the corresponding derivative gains or losses be either
reported in the statement of operations or as a deferred item depending on the
type of hedge relationship that exists with respect of such derivatives. In
July 1999, the Financial Accounting Standards Board issued SFAS No. 137,
Accounting for Derivative Instruments and Hedging Activities--Deferral of the
Effective Date of FASB Statement No. 133. SFAS No. 137 deferred the effective
date until the quarter ending June 30, 2000. The Company will adopt SFAS No.
133 in its quarter ending June 30, 2000. To date, the Company has not engaged
in derivative or hedging activities.
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements," which provides guidance on the recognition, presentation, and
disclosure of revenue in financial statements filed with the SEC. SAB 101
outlines the basic criteria that must be met to recognize revenue and provides
guidance for disclosures related to revenue recognition policies. The Company
has complied with the guidance in SAB 101 for all periods presented.
F-12
<PAGE>
DOCENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. Balance Sheet Components
<TABLE>
<CAPTION>
December 31,
-------------
1998 1999
----- ------
(in
thousands)
<S> <C> <C>
Property and equipment, net:
Computer equipment and software............................... $ 606 $1,063
Furniture and fixtures........................................ 62 277
Leasehold improvements........................................ 48 50
----- ------
716 1,390
Less: Accumulated depreciation and amortization............... (158) (426)
----- ------
$ 558 $ 964
===== ======
Accrued liabilities:
Accrued payroll and related liabilities....................... $ 357 $ 629
Other accrued liabilities..................................... 156 246
----- ------
$ 513 $ 875
===== ======
</TABLE>
Depreciation expense was $42,000, $157,000 and $268,000 for the years ended
December 31, 1997, 1998 and 1999, respectively.
4. Commitments
The Company leases its current office facilities in California, Massachusetts
and Texas under noncancelable operating lease agreements with various
expiration dates through 2004.
At December 31, 1999, the future minimum lease payments under all
noncancelable operating lease agreements are as follows (in thousands):
<TABLE>
<S> <C>
Year Ending December 31,
2000.................................................................. $ 938
2001.................................................................. 898
2002.................................................................. 912
2003.................................................................. 715
2004.................................................................. 623
------
Total minimum lease payments........................................ $4,086
======
</TABLE>
Rent expense under operating leases for the years ended December 31, 1997,
1998 and 1999 was $87,000, $325,000 and $485,000, respectively.
F-13
<PAGE>
DOCENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Capital Leases
At December 31, 1999, the future minimum lease payments under noncancelable
capital leases are as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal year ending December 31,
-------------------------------
<S> <C>
2000................................................................... $ 25
2001................................................................... 25
2002................................................................... 25
2003................................................................... 5
----
Total minimum lease payments........................................... 80
Less amount representing interest...................................... (8)
----
Present value of capital lease obligations............................. 72
Less current portion................................................... (25)
----
Long-term portion of capital lease obligations......................... $ 47
====
</TABLE>
During the years ended December 31, 1998 and 1999, the Company acquired
equipment under capital leases with a cost of $19,000 and $63,000,
respectively. The accumulated depreciation on these assets was $3,000 and
$12,000 at December 31, 1998 and 1999, respectively.
6. Borrowings
Notes payable consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
--------------
1998 1999
----- -------
<S> <C> <C>
Subordinated loan............................................ $ -- $ 2,400
Equipment loan............................................... 286 149
Unamortized discount......................................... -- (248)
----- -------
286 2,301
Less current portion......................................... (137) (1,231)
----- -------
Noncurrent portion........................................... $ 149 $ 1,070
===== =======
</TABLE>
Equipment loan
The Company had $149,000 outstanding under an equipment loan and security
agreement with a bank at December 31, 1999. The loan agreement provides for
borrowings of up to $750,000, all of which is collateralized by substantially
all of the Company's assets. Under the terms of the loan agreement, certain
transactions, including the payment of dividends and redemption of stock, are
prohibited without the bank's consent. The loan bears interest at the prime
rate (8.5% on December 31, 1999). The Company is required to make monthly
payments of principal and interest on this loan through February 2001.
F-14
<PAGE>
DOCENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Subordinated loan
In April 1999, the Company entered into a subordinated debt agreement (the
"Subordinated Loan") with a financing company (the "Lender") for an amount of
$3,000,000. Amounts due under the subordinated loan bear interest at 12.16%.
Principal and interest installments are payable monthly through May 2002 and
the notes are collateralized by substantially all of the Company's assets.
The Subordinated Loan is subject to an agreement under which borrowings under
this facility are subordinated to any borrowings currently outstanding under
the equipment loan and any future borrowings from the bank. In the event of
specific default by the Company on the equipment loan the bank may issue a
blockage notice preventing the Lender from accepting any further repayment on
the subordinated loan until such default is cured.
Future payments under these loans are as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal year ending December 31,
-------------------------------
<S> <C>
2000................................................................. $ 1,336
2001................................................................. 1,211
2002................................................................. 400
-------
2,947
Less amount representing interest.................................... (398)
Unamortized discount................................................. (248)
-------
2,301
Less current portion................................................. (1,231)
-------
Noncurrent portion................................................... $ 1,070
=======
</TABLE>
7. Receivables from Stockholders
Receivables from stockholders include two full recourse promissory notes for
$97,500 and $103,000, as well as a receivable from a stockholder of $286,000.
The notes bear interest at rates of 5.54% and 6.00% and are due and payable in
full no later than September 31, 2003, and June 27, 2017, respectively. The
receivable was repaid in January 2000.
F-15
<PAGE>
DOCENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Convertible Preferred Stock
The following table summarizes convertible preferred stock at December 31,
1999 (in thousands):
<TABLE>
<CAPTION>
Shares
---------------------- Liquidation
Series Authorized Outstanding Amount
------ ---------- ----------- -----------
<S> <C> <C> <C>
A........................................ 5,800 5,800 $ 3,915
B........................................ 2,010 2,000 2,000
B-1...................................... 833 833 1,000
C........................................ 3,340 2,578 4,795
D........................................ 7,500 7,180 20,535
------ ------ -------
19,483 18,391 $32,245
====== ====== =======
</TABLE>
The rights, privileges and restrictions of holders of Series A, B, B-1, C and
D convertible preferred stock ("Series A," "Series B," "Series B-1," "Series C"
and "Series D," respectively) are summarized as follows:
Voting
Each share of preferred stock has voting rights equal to an equivalent number
of shares of common stock into which it is convertible and votes together as
one class with the common stock.
As long as any shares of preferred stock remain outstanding, the Company must
obtain approval from a majority of the holders of Series A, B, B-1, C and D
convertible preferred stock; voting together as a class, in order to modify the
rights, preferences or privileges of the preferred stock, alter or repeal any
provision of the Amended and Restated Certificate of Incorporation, increase
the authorized number of shares of preferred stock or common stock, repurchase
any shares of preferred stock or common stock other than shares subject to the
right of repurchase by the Company pursuant to restrictive stock purchase
agreements, create a new class or series of stock or effect an Asset Transfer
or Acquisition.
For as long as any shares of Series D remain outstanding, the Company must
obtain approval from a majority of the holders of Series D to modify the
rights, preferences or privileges of Series D, create a new class or series of
stock, authorize a dividend or redeem any shares for any class of convertible
preferred stock other than Series D, or issue more than 2,600,000 shares of
stock to the Company's employees, officers, directors and consultants on or
before March 31, 2001.
Dividends
Holders of Series A, B, B-1, C and D convertible preferred stock are entitled
to receive noncumulative dividends at the per annum rate of $0.068, $0.10,
$0.12, $0.186 and $0.286 per share, respectively, when and if declared by the
Board of Directors. The holders of convertible preferred stock will also be
entitled to participate in dividends on common stock, when and if declared by
the Board of Directors, based on the number of shares of common stock held on
an as-if converted basis. No dividends will be paid to common stockholders
until the holders of convertible preferred stock are paid. No dividends on the
convertible preferred stock or common stock have been declared by the Company's
Board of Directors from inception through December 31, 1999.
F-16
<PAGE>
DOCENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Liquidation
In the event of any liquidation, dissolution or winding up of the Company,
including a merger, acquisition or sale of assets where the beneficial owners
of the Company's common stock and convertible preferred stock own less than 50%
of the resulting voting power of the surviving entity, the holders of Series D
are entitled to receive an amount of $2.86 per share plus any declared but
unpaid dividends prior to and in preference to any distribution to the holders
of Series A, B, B-1 and C convertible preferred or any common stock.
After payment of the full liquidation preference of Series D preferred
stockholders, the holders of Series A, B, B-1 and C shall be entitled to
receive the amount of $0.675, $1.00, $1.20 and $1.86 per share, respectively,
plus any declared but unpaid dividends.
After payment of the full liquidation preferences of the preferred
stockholders, the legally available assets shall be distributed ratably to
holders of the common stock and Series D (on an as-if converted basis) until
such time as the holders of Series D have received a total of $5.72 per share.
After such payment to holders of Series D, all remaining assets, if any, shall
be distributed ratably to the holders of common stock.
Conversion
Each share of preferred stock is convertible into common stock at the option
of the holder at any time. The conversion rate is the quotient obtained by
dividing the Original Issue Price of Series A, B, B-1, C and D by the Series A,
B, B-1, C and D Conversion Price, which initially is the Original Issue Price
as adjusted. Conversion is automatic upon either the consent of the holders of
a majority of the outstanding shares of preferred stock or the effective date
of a public offering of common stock for which the aggregate proceeds are not
less than $15,000,000 and the offering price is not less than $6.00 per share
of common stock.
Redemption
The Series D convertible preferred stock is redeemable after receipt of a
written election at least 60 days prior to the fifth anniversary of the
original issue date. Upon receipt of the written election, the Company is
required to redeem in three equal annual installments the Series D preferred
stock on the fifth, sixth and seventh anniversary of the original issue date.
The redemption price is the greater of (i) $2.86 per share (appropriately
adjusted under certain circumstances), plus all declared but unpaid dividends,
and (ii) the fair market value on the date of redemption. Accordingly, the
Company has recorded preferred stock accretion of $1,354,000 for the year ended
December 31, 1999 based on $9.00 per share being the estimated fair market
value of shares of such stock at December 31, 1999.
Warrants for convertible preferred stock
The Company issued warrants to purchase 10,000 shares of Series B convertible
preferred stock at $1.25 per share in March 1998, which expires in March 2003,
in exchange for services. The Company valued the warrants using the Black-
Scholes option pricing model applying an expected life of five years, a
weighted average risk free rate of 5.11%, a dividend yield of 0% and volatility
of 75%. The fair value of approximately $14,000 was expensed during the year
ended December 31, 1998.
F-17
<PAGE>
DOCENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In connection with a loan and capital leases, the Company issued warrants to
purchase 228,493 shares of Series C at $1.86 per share. These warrants expire
on the later of 7 years from the date of the grant, or three years from the
effective date of the Company's initial public offering. The Company valued the
warrants using the Black-Scholes option pricing model applying an expected life
of 7 years, a weighted average risk free rate of 5.08%, a dividend yield of 0%
and volatility of 75%. The fair value of approximately $339,000 is being
amortized over the term of the loan and capital leases. Amortization for the
year ended December 31, 1999, was approximately $91,000.
In March 1999, the Company issued a warrant to purchase up to 175,000 shares
of Series D at $2.86 per share to a consultant. In December 1999, 100,000
shares of Series D were issued upon the exercise of the warrant. The remaining
75,000 shares of Series D were not issued and the warrant expired at December
31, 1999. The warrant was valued using the Black-Scholes option pricing model
applying an expected life of nine months, a weighted average risk free rate of
4.5%, a dividend yield of 0% and volatility of 75%. The fair value of
approximately $134,000 was recognized as sales and marketing expense for the
year ended December 31, 1999.
In December 1999, the Company issued a warrant to purchase 250,000 shares of
Series D at a price of $2.86 per share to a new investor as an inducement to
assist the Company in the development of its European operations. The warrant
expires in seven years and was valued using the Black-Scholes option pricing
model applying an expected life of seven years, a weighted average risk free
rate of 6.19%, a dividend yield of 0% and volatility of 75%. The fair value of
approximately $1,758,000 was recognized as sales and marketing expense for the
year ended December 31, 1999.
9. Stockholders' Equity
Warrants for common stock
In March 1999, the Company issued warrants to purchase 119,962 shares of
common stock at $0.30 per share to investors in conjunction with the issuance
of Series C. The warrants had a term of 32 months. The proceeds received from
the investors have been allocated between Series C and the warrants based on
the relative fair values of each element. Accordingly, $157,000 of the proceeds
was allocated to the warrants. The fair value was calculated using the Black-
Scholes option pricing model applying an expected life of 32 months, a risk
free rate of 5.14%, a dividend yield of zero percent and volatility of 75%.
Restricted common stock
A total of 4,700,000 shares of common stock were issued to the Company's
founders, of which 2,829,293 were issued subject to restricted stock purchase
agreements which provide the Company with the right to repurchase these shares
at the original issuance price. In September 1998, 1,018,550 shares were
repurchased from two of the founders at the then fair market value of $0.20 per
share. As a result the Company recognized stock-based compensation expense of
approximately $204,000 during 1998. The repurchase right over the remaining
shares lapses ratably over 40 months and is due to expire in October 2000. As
of December 31, 1997, 1998 and 1999, a total of 2,299,991, 426,549 and 182,793
shares, respectively, were subject to repurchase by the Company under these
agreements.
F-18
<PAGE>
DOCENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Stock Option Plan
On July 25, 1997, the Company adopted the 1997 Stock Option Plan (the
"Plan"). The Plan provides for the granting of stock options to employees and
consultants of the Company. Options granted under the Plan may be either
incentive stock options or non-statutory stock options. Incentive stock options
("ISO") may be granted only to Company employees (including officers and
directors who are also employees). Non-statutory stock options ("NSO") may be
granted to Company employees and consultants. The Company has reserved
6,500,000 shares of common stock for issuance under the Plan.
Options under the Plan may be granted for periods of up to ten years and at
prices no less than 85% of the estimated fair value of the shares on the date
of grant as determined by the Board of Directors, provided, however, that (i)
the exercise price of an ISO and NSO granted to a 10% shareholder shall not
less than 110% of the estimated fair value of the shares on the date of grant.
Options are exercisable immediately subject to repurchase options held by the
Company which lapse with the options vesting schedule. Options may have maximum
term of up to 10 years as determined by the Board of Directors. To date,
options granted generally vest over four years.
A summary of the activity under the Plan since its inception is set forth
below:
<TABLE>
<CAPTION>
Options Outstanding
--------------------------------
Weighted
Shares Average
Available Number of Exercise
for Grant Shares Price
---------- ---------- --------
<S> <C> <C> <C>
Options reserved at Plan inception.......... 2,500,000 --
Options granted............................. (962,500) 962,500 $0.10
Options canceled............................ 198,230 (198,230) $0.10
---------- ----------
Balance, December 31, 1997.................. 1,735,730 764,270 $0.10
Additional options reserved................. 1,000,000 --
Options granted............................. (2,375,950) 2,375,950 $0.14
Options exercised........................... -- (1,476,363) $0.19
Options canceled............................ 323,522 (323,522) $0.12
---------- ----------
Balance, December 31, 1998.................. 683,302 1,340,335 $0.15
Additional options reserved................. 3,000,000 --
Options granted............................. (2,199,525) 2,199,525 $0.78
Options exercised........................... -- (93,143) $0.27
Options canceled............................ 827,366 (827,366) $0.22
Options repurchased......................... 68,856 (68,856) $0.12
---------- ----------
Balance, December 31, 1999.................. 2,379,999 2,550,495 $0.66
========== ==========
</TABLE>
Common stock option holders have the right to exercise unvested options,
subject to a repurchase right held by the Company, at the original exercise
price, in the event of voluntary or involuntary termination of employment of
the stockholder. As of December 31, 1998 and 1999, 1,359,189 and 856,212 shares
of common stock, respectively, were subject to repurchase.
F-19
<PAGE>
DOCENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes information about stock options outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding and Exercisable
-----------------------------------
Weighted Weighted
Average Average
Number of Remaining Exercise
Options Contractual Price
Outstanding Life (in per
Exercise Price (in thousands) years) Share
-------------- -------------- ----------- --------
<S> <C> <C> <C>
$0.10.................................... 94 7.9 $0.10
$0.15.................................... 7 8.5 $0.15
$0.20.................................... 461 8.9 $0.20
$0.30.................................... 378 9.2 $0.30
$0.50.................................... 101 9.4 $0.50
$0.75.................................... 191 9.6 $0.75
$1.00.................................... 1,318 9.8 $1.00
-----
$0.10-$1.00.............................. 2,550 9.4 $0.66
=====
</TABLE>
At December 31, 1997, 1998 and 1999, 9,000, 57,000 and 169,000, respectively,
of the options outstanding were vested.
Fair value disclosures
Had compensation cost for the Company's stock-based compensation plan been
determined based on the fair value at the grant dates for the awards under a
method prescribed by SFAS No. 123, the Company's net loss attributable to
common stockholders would have been increased to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Net loss attributable to common stockholders
(in thousands):
As reported.................................. $(1,505) $(6,434) $(20,067)
Pro forma.................................... $(1,505) $(6,439) $(20,161)
Net loss per share attributable to common
stockholders--basic and diluted:
As reported.................................. $ (0.55) $ (2.24) $ (5.07)
Pro forma.................................... $ (0.55) $ (2.24) $ (5.09)
</TABLE>
The Company calculated the value of each option grant on the date of grant
using the Black-Scholes option pricing model with the following assumptions for
the year ended December 31, 1997, 1998 and 1999: dividend yield expected is 0%
and volatility of 0%; expected lives of four years and risk free interest rate
of 4.91%-6.19% for 1999. These pro forma amounts may not be representative of
the effects on reported net loss for future years as options vest over several
years and additional awards are generally made each year. The weighted average
fair value of options granted was $0.03, $0.23 and $4.54 for the years ended
December 31, 1997, 1998 and 1999, respectively.
F-20
<PAGE>
DOCENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Stock-based compensation
In connection with certain stock option grants to employees during the years
ended December 31, 1998 and 1999, the Company recognized approximately $366,000
and $8,466,000 of unearned stock-based compensation for the excess of the
deemed value of the shares of common stock subject to such options over the
exercise price of these options at the date of grant. Such amounts are included
as a reduction of stockholders' equity and are being amortized over the vesting
period of generally four years. The Company recorded stock-based compensation
expense of $36,000 and $1,596,000 for the years ended December 31, 1998 and
1999, respectively. Amortization of stock-based compensation is expected to be
$4,247,000 in 2000, $1,869,000 in 2001, $850,000 in 2002 and $234,000 in 2003.
Stock-based compensation expense related to equity investments granted to
consultants is recognized as earned. At each reporting date, the Company re-
values any unvested equity investments using the Black-Scholes option pricing
model. As a result, the stock-based compensation expense will fluctuate as the
fair market value of the Company's common stock fluctuates. In connection with
the grant of fully vested stock options to consultants, the Company recorded
stock-based compensation expense of $12,000 and $310,000 for the years ended
December 31, 1998 and 1999, respectively.
During the year ended December 31, 1999 the Company granted 126,000 shares of
common stock with a fair value of $736,000 in exchange for services from a
consultant.
As discussed in Note 8 the Company recorded stock-based compensation expense
of $14,000 and $1,892,000 in respect of warrants issued to consultants in
exchange for services during the years ended December 31, 1998 and 1999.
10. Income Taxes
At December 31, 1998 and 1999, temporary differences which gave rise to
significant deferred tax assets and liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
----------------
1998 1999
------- -------
<S> <C> <C>
Net operating losses.......................................... $ 1,747 $ 6,385
Capitalized research and development.......................... 1,043 1,927
Other......................................................... 460 768
------- -------
3,250 9.080
Less valuation allowance...................................... (3,250) (9,080)
------- -------
Net deferred tax assets....................................... $ -- $ --
======= =======
</TABLE>
In accordance with generally accepted accounting principles, a valuation
allowance must be established for a deferred tax asset if it is more likely
than not that a tax benefit will not be realized from the asset in the future.
The Company has established a valuation allowance to the extent of its deferred
tax assets as no immediate benefit is expected to be received due to the
Company's recurring losses. The valuation allowance increased by $603,000,
$2,647,000 and $5,830,000 for the years ended December 31, 1997, 1998 and 1999,
respectively.
At December 31, 1999, the Company had federal and state net operating loss
carryforwards of approximately $16,094,000 and $15,656,000, respectively,
available to offset
F-21
<PAGE>
DOCENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
future regular and alternative minimum taxable income. The Company's federal
and state net operating loss carryforwards will expire beginning in 2012 and
2023, respectively, if not utilized.
At December 31, 1999, the Company also has research and development credit
carryforwards of approximately $443,000 for federal and California tax purposes
available to reduce future income tax liability. Such carryforwards expire in
varying amounts beginning 2002.
The Tax Reform Act of 1986 limits the use of net operating loss and tax
credit carryforwards in certain situations where changes occur in the stock
ownership of a company. If the Company should have an ownership change, as
defined by the tax law, utilization of the carryforwards could be restricted.
11. Employee Benefit Plan
The Company adopted a 401(k) Profit Sharing Plan and Trust (the "401(k)
Plan") effective October 16, 1997, which is intended to qualify under Section
401(k) of the Internal Revenue Code. The 401(k) Plan allows eligible employees
to contribute up to 25% of their pre-tax salary, subject to a maximum limit of
$10,500 for the year ended December 31, 1999, subject to certain limitations.
The 401(k) Plan provides for employer contributions at the discretion of the
Board of Directors. No amounts have been contributed by the Company to the
401(k) Plan through December 31, 1999.
12. Subsequent Events (Unaudited)
1997 Stock Option Plan
In March 2000, the Company's Board of Directors approved an increase in the
number of shares of common stock authorized for issuance under the Plan by
800,000 shares to an aggregate of 7,300,000 shares.
2000 Omnibus Equity Incentive Plan
The 2000 Omnibus Equity Incentive Plan was adopted by the Company's board of
directors on March 23, 2000. The 2000 Omnibus Equity Incentive Plan provides
for the direct award or sale of shares of common stock and for the grant of
options to purchase shares of common stock to employees, non-employee
directors, advisors and consultants. The Company has reserved 6,000,000 shares
of common stock for issuance under this Plan. Each year, the number of shares
reserved for issuance under this plan increases by 3%.
2000 Employee Stock Purchase Plan
The Company's board of directors adopted the 2000 Employee Stock Purchase
Plan on March 23, 2000, to be effective upon completion of the Company's
initial public offering. The common stock purchase price will be 85% of fair
market value. A total of 1,500,000 shares of common stock have been reserved
for issuance under this plan. The number of shares reserved increases on an
annual basis.
F-22
<PAGE>
DOCENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Series E convertible preferred stock
In April 2000, the Company sold 3,719,477 shares of Series E convertible
preferred stock at $7.52 per share for net proceeds of approximately $26.8
million. In connection with this issuance the Company issued a warrant to
purchase 36,534 shares of common stock and expects to record value of this
warrant as issuance cost.
The rights and preference of Series E convertible preferred stock are
substantially the same as those of Series A, Series B, Series B-1, Series C and
Series D convertible preferred stock except for the following: (1) the Company
must obtain approval from a majority of the holders of Series E to modify the
rights, preference or privileges of Series E, create a new class or series of
stock; (2) the holders of Series E have liquidation preference to Series A,
Series B, Series B-1, Series C and Series D convertible preferred stock; (3)
the Company must obtain approval from the holders of Series D and Series E to
declare or pay any dividends, repay stockholders loans and issue more than
2,600,000 shares of stock to the Company's employees, officers, directors and
consultants on or before the earlier of the initial public offering of the
Company or March 31, 2001. The redemption rights of Series E are substantially
the same as those of Series D.
Issuance of warrants
On March 31, 2000 the Company issued warrants to purchase up to 2,446,932
shares of Series E convertible preferred stock and 200,000 shares of common
stock. The warrants were issued to each party as an inducement to sign
strategic alliances with the Company and have exercise prices ranging from
$7.52 to $10.00 and terms ranging from six months to three years. In connection
with the issuance of these warrants, the Company expects to record a sales and
marketing expense equal to the fair value of the warrants determined using the
Black-Scholes option pricing model in the quarter ended March 31, 2000.
Issuance of stock options
In the quarter ended March 31, 2000 the Company granted 2,121,020 options to
purchase shares of common stock to existing and new employees at a weighted
average exercise price of $2.09 per share.
In the quarter ended March 31, 2000 the Company granted 78,920 options to
purchase shares of common stock to consultants at an exercise price of $1.90
per share.
Issuance of common stock
In the quarter ended March 31, 2000 the Company granted 52,301 shares of common
stock to consultants in exchange for services.
F-23
<PAGE>
DESCRIPTION OF GRAPHICS FOR BACK GATEFOLD
[TO COME]
<PAGE>
You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide information different from that contained in
this prospectus. We are offering to sell, 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 our commons stock.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 7
Special Note Regarding Forward-Looking Statements and Industry Data...... 21
Use of Proceeds.......................................................... 22
Dividend Policy.......................................................... 22
Capitalization........................................................... 23
Dilution................................................................. 24
Selected Consolidated Financial Data..................................... 25
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 26
Business................................................................. 33
Management............................................................... 46
Certain Transactions..................................................... 56
Principal Stockholders................................................... 58
Description of Capital Stock............................................. 60
Shares Eligible for Future Sale.......................................... 65
Underwriting............................................................. 67
Legal Matters............................................................ 70
Experts.................................................................. 70
Where You Can Find Additional Information................................ 70
Index to Consolidated Financial Statements............................... F-1
</TABLE>
Until , 2000 (25 days after the date of this prospectus), all dealers
that buy, sell or trade in this securities, whether or not participating in
this offering, may be required to deliver a prospectus. Dealers are also
obligated to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
- -------------------------------------------------------------------------------
[LOGO OF DOCENT INC.]
Shares
Common Stock
Deutsche Banc Alex. Brown
Dain Rauscher Wessels
Thomas Weisel Partners LLC
<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 Registrant in connection
with the sale of Common Stock being registered. All amounts are estimates
except the registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
Amount
to be
Paid
-------
<S> <C>
SEC Registration Fee................................................ $21,120
NASD Filing Fee..................................................... $ 8,500
Nasdaq National Market Listing Fee.................................. *
Printing and Engraving.............................................. *
Legal Fees and Expenses............................................. *
Accounting Fees and Expenses........................................ *
Blue Sky Fees and Expenses.......................................... *
Transfer Agent Fees................................................. *
Director & Officer Liability Insurance (1933 Act Premiums).......... *
Miscellaneous....................................................... *
-------
Total............................................................. $ *
=======
</TABLE>
- --------
* To be filed by amendment.
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law provides for the
indemnification of officers, directors and other corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act of 1933, as amended (the "Act"). Article VI.B. of the
Registrant's Amended and Restated Certificate of Incorporation (Exhibit 3.2
hereto) and Article XI of the Registrant's Amended and Restated Bylaws (Exhibit
3.4 hereto) provide for indemnification of the Registrant's directors,
officers, employees and other agents to the extent and under the circumstances
permitted by the Delaware General Corporation Law. The Registrant has also
entered into agreements with its directors and officers that will require the
Registrant, among other things, to indemnify them against certain liabilities
that may arise by reason of their status or service as directors or officers to
the fullest extent not prohibited by law.
The Underwriting Agreement (Exhibit 1.1) provides for indemnification by
ourselves, our underwriters and our directors and officers of the underwriters,
for certain liabilities, including liabilities arising under the Act and
affords certain rights of contribution with respect thereto.
Item 15. Recent Sales of Unregistered Securities
Since June 1997, we have issued and sold the following unregistered
securities:
1. On June 27, 1997, we issued 3,725,000 shares to Pardner and Cynthia Wynn,
the shareholders of Stanford Testing Systems, Inc. upon its merger into the
Company, of which 1,018,550 shares were subsequently repurchased.
2. Between June 1997 and March 2000, we issued and sold an aggregate of
3,345,587 shares of common stock at prices ranging from $0.10 to $1.00 per
share, net of any repurchases
II-1
<PAGE>
except as described in 1 above. The recipients of the shares were all
employees, directors and consultants.
3. In June 1997, we sold 5,799,998 shares of Series A convertible preferred
stock to seven investors for an aggregate purchase price of $3,914,998.65.
4. In June 1998, we sold 2,000,000 shares of Series B convertible preferred
stock to four investors for an aggregate purchase price of $2,000,000.
5. In September 1998, we sold 833,333 shares of Series B-1 convertible
preferred stock to four investors for an aggregate purchase price of
$999,999.60.
6. From November 1998 to March 1999, we sold 2,578,032 shares of Series C
convertible preferred stock to four investors for an aggregate purchase price
of $4,795,139.52.
7. From August 1999 to December 1999, we sold 7,180,420 shares of Series D
convertible preferred stock to twelve investors for an aggregate purchase price
of $20,536,001.20.
8. In April 2000, we sold 3,719,477 shares of Series E convertible preferred
stock to twenty-five investors for an aggregate purchase price of
$27,970,467.04.
9. In March 1999, we issued warrants to purchase an aggregate of 119,962
shares of common stock at an exercise price of $0.30 per share. These warrants
expire in November 2001.
10. In March 1998, we issued a warrant to purchase 10,000 shares of Series B
convertible preferred stock at an exercise price of $1.25 per share. This
warrant expires in March 2003.
11. In April 1999, we issued warrants to purchase an aggregate of 228,493
shares of Series C convertible preferred stock at an exercise price of $1.86
per share. These warrants expire in April 2006.
12. In March 1999, we issued a warrant to purchase up to 175,000 shares of
convertible preferred stock at an exercise price of the greater of $1.86 per
share or the highest purchase price per share paid by a purchaser of our
convertible preferred stock in a financing at any time after March 23, 1999. In
December 1999, 100,000 shares of Series D convertible preferred stock were
issued at $2.86 per share upon exercise of the warrant. The remaining 75,000
shares were not issued and the warrant expired at December 31, 1999.
13. In December 1999, we issued a warrant to purchase up to 250,000 shares of
Series D convertible preferred stock at an exercise price of $2.86 per share.
This warrant expires in December 2002.
14. In March and April 2000, we issued warrants to purchase 236,534 shares of
common stock at an exercise price of $10.00 per share. These warrants expire at
various times over the next five years.
15. In March 2000, we issued warrants to purchase an aggregate of 2,446,932
shares of Series E convertible preferred stock at an exercise price of $7.52
per share. These warrants expire at various times over the next three years.
The sales of the above securities were deemed to be exempt from registration
under the Securities Act in reliance on Section 4(2) of the Securities Act, or
Regulation D promulgated thereunder, or Rule 701 promulgated under Section 3(b)
of the Securities Act, as transactions by an issuer not involving a public
offering or transactions pursuant to compensatory benefit plans and contracts
relating to compensation as provided under Rule 701. The recipients of
securities in each of these transactions represented their intention to acquire
the securities for investment only and not with view to or for sale in
connection with any distribution thereof and appropriate legends were affixed
to the share certificates and instruments issued in such transactions. All
recipients had adequate access, through their relationship with the Registrant,
to information about the Registrant.
II-2
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
See exhibits listed on the Exhibit Index following the signature page of the
Form S-1, which is incorporated herein by reference.
(b) Financial Statement Schedules
Schedules have been omitted because they are not applicable or not required
or because the information is included elsewhere in the Financial Statements or
the notes thereto.
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, 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 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, 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 whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, as amended, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the 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 of
1933, as amended, 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.
(3) The Registrant will provide to the underwriters at the closing(s)
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.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement on Form S-1 to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Mountain View, State
of California, on the 11th day of April, 2000.
DOCENT, INC.
/s/ David R. Ellett
By: _________________________________
David R. Ellett,
Chairman, President and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David R. Ellett, and Donald Lundgren, and each
of them, his or her true and lawful attorneys-in-fact and agents, each with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments, including post-effective amendments, to this Registration
Statement, and any registration statement relating to the offering covered by
this Registration Statement and filed pursuant to Rule 462(b) under the
Securities Act of 1933 and to file the same, with exhibits thereto and other
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, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that each of said attorneys-
in-fact and agents 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, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ David R. Ellett Chairman, President, Chief April 11, 2000
____________________________________ Executive Officer and Director
David R. Ellett (Principal Executive Officer)
/s/ Donald E. Lundgren Vice President and Chief April 11, 2000
____________________________________ Financial Officer (Principal
Donald E. Lundgren Financial and Accounting
Officer)
/s/ David Mandelkern Executive Vice President, Chief April 11, 2000
____________________________________ Technology Officer, Secretary
David Mandelkern and Director
/s/ Kevin G. Hall Director April 11, 2000
____________________________________
Kevin G. Hall
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Jos C. Henkens Director April 11, 2000
____________________________________
Jos C. Henkens
/s/ Pardner Wynn Director April 11, 2000
____________________________________
Pardner Wynn
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Exhibit Description
------- ----------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation.
3.2 Amended and Restated Certificate of Incorporation, to be effective
upon completion of this offering.
3.3 Bylaws.
3.4 Amended and Restated Bylaws, to be effective upon completion of this
offering.
4.1* Form of Stock Certificate.
4.2 Amended and Restated Investors' Rights Agreement, dated April 7, 2000.
5.1* Opinion of Pillsbury Madison & Sutro LLP.
10.1 Registrant's 1997 Stock Option Plan.
10.2 Registrant's 2000 Omnibus Equity Incentive Plan.
10.3 Registrant's 2000 Employee Stock Purchase Plan.
10.4* Form of Directors and Officers' Indemnification Agreement, to be
entered into subsequent to the completion of this offering.
10.5 Employment Letter from the Registrant to David Ellett dated February
25, 1998.
10.6 Employment Letter from the Registrant to Richard Dellinger dated
November 4, 1997.
10.7 Employment Letter from the Registrant to Keith Finch dated August 18,
1998.
10.8 Employment Letter from the Registrant to Kathleen Gogan dated
September 22, 1998.
10.9 Officer's Change in Control Agreement dated October 14, 1999 by and
between the Registrant and David Mandelkern.
10.10 Officer's Change in Control Agreement dated October 14, 1999 by and
between the Registrant and Richard Dellinger.
10.11*+ Integrator Reseller Agreement dated January 7, 2000 by and between the
Registrant and Hewlett-Packard Company.
10.12*+ Master License and Professional Services Agreement dated September 11,
1998 between the Registrant and Merrill Lynch Pierce Fenner & Smith
Inc.
10.13*+ Master License and Services Agreement dated September 1999 between the
Registrant and Richardson Company.
10.14*+ Professional Services Agreement dated March 25, 1999 between the
Registrant and Impiric (formerly Wunderman Cato Johnson).
10.15*+ Master License Agreement dated March 25, 1999 between the Registrant
and Impiric (formerly Wunderman Cato Johnson).
10.16*+ Master License and Services Agreement dated September 1999 by and
between the Registrant and Ariba, Inc.
10.17 Lease Agreement dated September 22, 1999 by and between the Registrant
and Limar Realty Corp. #17.
10.18 Lease Agreement dated February 1, 2000 by and between the Registrant
and Connecticut General Life Insurance Company.
10.19 Quickstart Loan and Security Agreement dated August 1, 1997 by and
between the Registrant and Silicon Valley Bank as amended on October
31, 1997.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Exhibit Description
------- ----------------------------------------------------------------------
<C> <S>
10.20 Subordinated Loan and Security Agreement dated April 23, 1999 by and
between the Registrant and Comdisco, Inc.
10.21 Promissory Note from David Ellett to the Registrant.
10.22 Promissory Note from David Mandelkern to the Registrant.
10.23 Stock Pledge Agreements dated July 9, 1997 by and between the
Registrant and David Mandelkern and dated September 30, 1998 by and
between the Registrant and David Ellett.
10.24 Warrant to Purchase Shares of Series C Preferred Stock dated April 23,
1999.
10.25 Warrant to Purchase Shares of Series D Preferred Stock dated December
1999.
10.26* Warrant to Purchase Shares of Series E Preferred Stock dated March 31,
2000.
10.27 Severance Agreement dated June 27, 1997 by and among Pardner Wynn,
David Mandelkern, Norwest Equity Partners, V and Advanced Technology
Ventures IV.
23.1* Consent of Pillsbury Madison & Sutro LLP (included in Exhibit 5.1).
23.2 Consent of Independent Accountants.
24.1 Power of Attorney. Reference is made to Page II-4.
27.1 Financial Data Schedule.
</TABLE>
- --------
*To be filed by amendment.
+ Confidential Treatment Requested.
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
DOCENT, INC.
(a Delaware corporation)
David Ellett and David Mandelkern hereby certify that:
ONE: The original name of the corporation was Docent, Inc. and the date of
filing the original Certificate of Incorporation of the corporation with the
Secretary of State of the State of Delaware was June 3, 1997.
TWO: They are the duly elected and acting President and Secretary,
respectively, of Docent, Inc., a Delaware corporation.
THREE: The Certificate of Incorporation of the corporation is hereby
amended and restated in its entirety to read as follows:
"ARTICLE I.
The name of the corporation is Docent, Inc. (the "Corporation").
ARTICLE II.
The address of the registered office of the Corporation in the State of
Delaware is 15 East North Street, City of Dover, County of Kent, and the name of
the registered agent of the Corporation in the State of Delaware at such address
is Amerisearch Corporate Services Inc.
ARTICLE III.
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.
ARTICLE IV.
A. This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the Corporation is authorized to issue is sixty-six
million, eighty-three thousand, eight hundred sixteen (66,083,816) shares,
thirty-eight million eight hundred thousand (38,800,000) shares of which shall
be Common Stock, with a par value of one-tenth of one cent ($0.001) per share,
and twenty-seven million, two hundred eighty-three thousand eight hundred
sixteen (27,283,816) shares of which shall be Preferred Stock, with a par value
of one-tenth of one cent ($0.001) per share.
1.
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B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, within the limitations and
restrictions stated in this Amended and Restated Certificate of Incorporation,
to fix or alter the dividend rights, dividend rate, conversion rights, voting
rights, rights and terms of redemption (including sinking fund provisions), the
redemption price or prices, the liquidation preferences of any wholly unissued
series of Preferred Stock, and the number of shares constituting any such series
and the designation thereof, or any of them; and to increase or decrease the
number of shares of any series subsequent to the issue of shares of that series,
but not below the number of shares of such series then outstanding. In case the
number of shares of any series shall be so decreased, the shares constituting
such decrease shall resume the status which they had prior to the adoption of
the resolution originally fixing the number of shares of such series.
C. Five million seven hundred ninety-nine thousand nine hundred ninety-
eight (5,799,998) of the authorized shares of Preferred Stock are hereby
designated "Series A Convertible Preferred Stock" ("Series A Preferred"). Two
million ten thousand (2,010,000) of the authorized shares of Preferred Stock are
hereby designated "Series B Convertible Preferred Stock" ("Series B Preferred").
Eight hundred thirty-three thousand three hundred thirty-three (833,333) of the
authorized shares of Preferred Stock are hereby designated "Series B-1
Convertible Preferred Stock" ("Series B-1 Preferred"). Three million three
hundred forty thousand four hundred eighty-five (3,340,485) of the authorized
shares are hereby designated "Series C Convertible Preferred Stock" ("Series C
Preferred"). Seven million five hundred thousand (7,500,000) of the authorized
shares are hereby designated "Series D Convertible Preferred Stock" ("Series D
Preferred"). Seven million eight hundred thousand (7,800,000) of the authorized
shares are hereby designated "Series E Convertible Preferred Stock" ("Series E
Preferred"). The rights, preferences, privileges, restrictions and other matters
relating to the Preferred Stock are as follows:
1. Dividend Rights.
a. Holders of Series A Preferred, Series B Preferred, Series B-1
Preferred, Series C Preferred, Series D Preferred and Series E Preferred, in
preference to the holders of any other stock of the Corporation, whether
currently outstanding or hereafter issued, (collectively, the "Junior Stock"),
shall be entitled to receive, but only out of funds that are legally available
therefor, cash dividends at the rate of ten percent (10%) of the "Original Issue
Price" per annum on each outstanding share of Series A Preferred, Series B
Preferred, Series B-1 Preferred, Series C Preferred, Series D Preferred and
Series E Preferred (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares), respectively. The
Original Issue Price of the Series A Preferred shall be Sixty-Seven and One-Half
Cents ($0.675) per share. The Original Issue Price of the Series B Preferred
shall be One Dollar ($1.00) per share. The Original Issue Price of the Series B-
1 Preferred shall be One Dollar and Twenty Cents ($1.20) per share. The Original
Issue Price of Series C Preferred shall be One Dollar and Eighty-Six Cents
($1.86) per share. The Original Issue Price of Series D Preferred shall be Two
Dollars and Eighty-Six Cents ($2.86) per share. The Original Issue Price of
Series E Preferred shall be Seven Dollars and Fifty-Two Cents ($7.52) per share.
Such dividends shall be payable only when, as and if declared by the Board of
Directors and shall be non-cumulative.
2.
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b. So long as any shares of Series A Preferred, Series B
Preferred, Series B-1 Preferred, Series C Preferred, Series D Preferred or
Series E Preferred shall be outstanding, no dividend, whether in cash or
property, shall be paid or declared, nor shall any other distribution be made,
on any Junior Stock, nor shall any shares of any Junior Stock of the Corporation
be purchased, redeemed, or otherwise acquired for value by the Corporation
(except for repurchases by the Corporation of Common Stock held by employees,
directors or consultants or other persons performing bona fide services for the
Corporation or any subsidiary of the Corporation pursuant to restrictive stock
agreements which permit the Corporation to repurchase such shares upon
termination of services to the Corporation or in exercise of the Corporation's
right of first refusal upon a proposed transfer) until all dividends (set forth
in Section 1(a) above) on the Series A Preferred, Series B Preferred, Series B-1
Preferred, Series C Preferred, Series D Preferred and Series E Preferred shall
have been paid or declared and set apart. In the event dividends are paid on any
share of Common Stock, an additional dividend shall be paid with respect to all
outstanding shares of Series A Preferred, Series B Preferred, Series B-1
Preferred, Series C Preferred, Series D Preferred and Series E Preferred in an
amount equal per share (on an as-if-converted to Common Stock basis) to the
amount paid or set aside for each share of Common Stock. The provisions of this
Section 1(b) shall not, however, apply to (i) a dividend payable in Common
Stock, (ii) the acquisition of shares of any Junior Stock in exchange for shares
of any other Junior Stock which acquisition has been approved by the holders of
a majority of the then outstanding Series A Preferred, Series B Preferred,
Series B-1 Preferred, Series C Preferred, Series D Preferred and Series E
Preferred or (iii) any repurchase of any outstanding securities of the
Corporation that is unanimously approved by the Corporation's Board of
Directors.
2. Voting Rights.
a. General Rights. Except as otherwise provided herein or as
required by law, Preferred Stock shall be voted equally with the shares of the
Common Stock of the Corporation and not as a separate class, at any annual or
special meeting of stockholders of the Corporation, and may act by written
consent in the same manner as the Common Stock, in either case upon the
following basis: each holder of shares of Preferred Stock shall be entitled to
such number of votes as shall be equal to the whole number of shares of Common
Stock into which such holder's aggregate number of shares of Preferred Stock are
convertible (pursuant to Section 4 hereof) immediately after the close of
business on the record date fixed for such meeting or the effective date of such
written consent. Fractional votes shall not, however, be permitted, and any
fractional voting rights available on an as-converted basis (after aggregating
all shares into which shares of Preferred Stock held by each holder could be
converted) shall be rounded to the nearest whole number (with one-half being
rounded upward).
b. Separate Vote of Preferred Stock. For so long as any shares
of Series A Preferred, Series B Preferred, Series B-1 Preferred, Series C
Preferred, Series D Preferred or Series E Preferred (subject to adjustment for
any stock split, reverse stock split or other similar event affecting the Series
A Preferred, Series B Preferred, Series B-1 Preferred, Series C Preferred,
Series D Preferred or Series E Preferred), remain outstanding, in addition to
any other vote or consent required herein or by law, the vote or written consent
of the holders of at least fifty percent (50%) of the outstanding Series A
Preferred, Series B Preferred, Series B-1
3.
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Preferred, Series C Preferred, Series D Preferred and Series E Preferred voting
together as a single class, shall be necessary for effecting or validating the
following actions:
(i) Any alteration, modification or change in the rights,
preferences or privileges of the Series A Preferred, Series B Preferred, Series
B-1 Preferred, Series C Preferred, Series D Preferred or Series E Preferred that
adversely affects the Series A Preferred, Series B Preferred, Series B-1
Preferred, Series C Preferred, Series D Preferred or Series E Preferred;
(ii) Any amendment, alteration or repeal of any provision of
the Amended and Restated Certificate of Incorporation or the Bylaws of the
Corporation (including any filing of a Certificate of Determination) whether by
merger, consolidation or otherwise;
(iii) Any increase (other than by redemption or conversion) in
the authorized number of shares of Common Stock, Preferred Stock, Series A
Preferred, Series B Preferred, Series B-1 Preferred, Series C Preferred, Series
D Preferred or Series E Preferred;
(iv) Any authorization, designation or issuance, whether by
reclassification or otherwise, of any new class or series of stock or any other
securities convertible into equity securities of the Corporation ranking senior
to or on parity with the Series A Preferred, Series B Preferred, Series B-1
Preferred, Series C Preferred, Series D Preferred or Series E Preferred with
respect to liquidation preference, voting or dividends or any increase in the
authorized or designated number of any such new class or series;
(v) Any Asset Transfer or Acquisition (each as defined in
Section 3(e)) or any agreement by the Corporation or its stockholders regarding
an Asset Transfer or Acquisition; or
(vi) Any redemption, purchase or other acquisition (or payment
into or setting aside for a sinking fund) of any shares of Series A Preferred,
Series B Preferred, Series B-1 Preferred, Series C Preferred, Series D
Preferred, Series E Preferred or Common Stock; provided however, that this
restriction shall not apply to (i) the repurchase of shares of Common Stock from
employees, directors, consultants or other persons performing bona fide services
for the Corporation or any subsidiary of the Corporation pursuant to restrictive
stock purchase agreements which permit the Corporation to repurchase such shares
upon termination of services to the Corporation, (ii) repurchases in exercise of
the Corporation's right of first refusal upon a proposed transfer or (iii) any
redemptions pursuant to Section 5 hereof.
c. Separate Vote of the Series D Preferred. For so long as any
shares of Series D Preferred (subject to adjustment for any stock split, reverse
stock split or other similar event affecting the Series D Preferred), remain
outstanding, in addition to any other vote or consent required herein or by law,
the vote or written consent of the holders of at least fifty percent (50%) of
the outstanding Series D Preferred voting together as a single class, shall be
necessary for effecting or validating the following actions:
(i) Any alteration, modification or change in the rights,
preferences or privileges of the Series D Preferred that adversely affects the
Series D Preferred;
4.
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(ii) Any authorization, designation or issuance, whether by
reclassification or otherwise, of any new class or series of stock or any other
securities convertible into equity securities of the Corporation ranking senior
to or on parity with the Series D Preferred with respect to liquidation
preference, voting or dividends or any increase in the authorized or designated
number of any such new class or series;
d. Separate Vote of the Series E Preferred. For so long as any
shares of Series E Preferred (subject to adjustment for any stock split, reverse
stock split or other similar event affecting the Series E Preferred), remain
outstanding, in addition to any other vote or consent required herein or by law,
the vote or written consent of the holders of at least fifty percent (50%) of
the outstanding Series E Preferred voting together as a single class, shall be
necessary for effecting or validating the following actions:
(i) Any alteration, modification or change in the rights,
preferences or privileges of the Series E Preferred that adversely affects the
Series E Preferred;
(ii) Any authorization, designation or issuance, whether by
reclassification or otherwise, of any new class or series of stock or any other
securities convertible into equity securities of the Corporation ranking senior
to or on parity with the Series E Preferred with respect to liquidation
preference, voting or dividends or any increase in the authorized or designated
number of any such new class or series;
e. Separate Vote of the Combined Series D Preferred and Series E
Preferred. For so long as shares of both Series D Preferred and Series E
Preferred (subject to adjustment for any stock split, reverse stock split or
other similar event affecting the Series D Preferred and Series E Preferred)
remain outstanding, in addition to any other vote or consent required herein or
by law, the vote or written consent of the holders of at least fifty percent
(50%) of the outstanding Series D Preferred and Series E Preferred voting
together as a single class shall be necessary for effecting or validating the
following actions:
(i) Any declaration or payment of any dividend on or redemption
of any shares of Series A Preferred, Series B Preferred, Series B-1 Preferred,
Series C Preferred or Junior Stock, or repayment of any stockholder loans,
except in the case of terminated employees or in the case of employees if
unanimously approved by the Board of Directors; or
(ii) Any issuance of an aggregate of more than two million six
hundred thousand (2,600,000) shares of stock to the Company's employees,
officers, directors and consultants on or before the earlier of (a) the initial
public offering of the Company which results in the automatic conversion of
Preferred Stock pursuant to 4(m) below or (b) March 31, 2001.
If only Shares of Series D Preferred or Shares of Series E
Preferred (subject to adjustment for any stock split, reverse stock split or
other similar event affecting the Series D Preferred or Series E Preferred)
remain outstanding, the vote or consent of the holders of at least fifty percent
(50%) of the outstanding Series D Preferred or Series E Preferred,
5.
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whichever remains outstanding, voting as a class shall satisfy the requirements
of this Section 2(e).
f. Election of Board of Directors. For so long as at least an
aggregate of 1,000,000 shares of Series A Preferred, Series B Preferred, Series
B-1 Preferred, Series C Preferred, Series D Preferred and Series E Preferred
remain outstanding (subject to adjustment for any stock split, reverse stock
split or similar event affecting the Series A Preferred, Series B Preferred,
Series B-1 Preferred, Series C Preferred, Series D Preferred or Series E
Preferred), the authorized size of the Corporation's Board of Directors shall be
five (5) and (i) the holders of Series A Preferred, Series B Preferred, Series
B-1 Preferred, Series C Preferred, Series D Preferred and Series E Preferred
voting together as a single class, shall be entitled to elect two (2) members of
the Corporation's Board of Directors at each meeting or pursuant to each consent
of the Corporation's stockholders for the election of directors, and to remove
from office such director and to fill any vacancy caused by the resignation,
death or removal of such director; (ii) the holders of Common Stock, voting as a
separate class, shall be entitled to elect two (2) members of the Board of
Directors at each meeting or pursuant to each consent of the Corporation's
stockholders for the election of directors, and to remove from office such
directors and to fill any vacancy caused by the resignation, death or removal of
such directors; and (iii) the holders of Common Stock and Series A Preferred,
Series B Preferred, Series B-1 Preferred, Series C Preferred, Series D Preferred
and Series E Preferred voting together as a single class, shall be entitled to
elect the one (1) remaining member of the Board of Directors. If less than an
aggregate of 1,000,000 shares of Series A Preferred, Series B Preferred, Series
B-1 Preferred, Series C Preferred, Series D Preferred and Series E Preferred
remain outstanding, then the holders of Common Stock, Series A Preferred, Series
B Preferred, Series B-1 Preferred, Series C Preferred, Series D Preferred and
Series E Preferred, voting together as a single class, shall be entitled to
elect the authorized number of members of the Corporation's Board of Directors
at each meeting or pursuant to each consent of the Corporation's stockholders
for the election of directors, and to remove from office such director and to
fill any vacancy caused by the resignation, death or removal of such director.
3. Liquidation Rights.
a. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, before any distribution or
payment shall be made to the holders of the Series A Preferred, the Series B
Preferred, the Series B-1 Preferred, the Series C Preferred, the Series D
Preferred or any Junior Stock, the holders of the Series E Preferred shall be
entitled to be paid out of the assets of the Corporation an amount per share of
Series E Preferred Stock equal to its Original Issue Price plus all declared and
unpaid dividends on such shares of Preferred Stock (as adjusted for any stock
dividends, combinations, splits, recapitalizations and the like with respect to
such shares) for each share of Preferred Stock held by them.
b. After payment of the full liquidation preference of the Series E
Preferred and before any distribution or payment shall be made to the holders of
the Series A Preferred, the Series B Preferred, the Series B-1 Preferred, the
Series C Preferred or any Junior Stock, the holders of the Series D Preferred
shall be entitled to be paid out of the assets of the Corporation an amount per
share of Series D Preferred Stock equal to its Original Issue Price
6.
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plus all declared and unpaid dividends on such shares of Preferred Stock (as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to such shares) for each share of Preferred Stock held by
them.
c. After payment of the full liquidation preference of the Series E
Preferred and the full liquidation preference of the Series D Preferred, the
holders of Series A Preferred, Series B Preferred and Series C Preferred shall
be entitled to be paid out of the assets of the Corporation an amount per share
of Series A Preferred, Series B Preferred and Series C Preferred equal to each
series' respective Original Issue Price plus all declared and unpaid dividends
on such shares of Preferred Stock (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares) for each share of Preferred Stock held by them.
d. After payment of the full liquidation preference of the Preferred
Stock as set forth in Sections 3(a), 3(b) and 3(c) above, the assets of the
Corporation legally available for distribution, if any, shall be distributed
ratably and pari passu to the holders of the Common Stock and the holders of the
Series E Preferred and the Series D Preferred on an as-if-converted to Common
Stock basis until such time as the holders of Series E Preferred and the holders
Series D Preferred have received pursuant to Sections 3(a) and 3(b) above and
this Section 3(d) an aggregate amount per share of Series E Preferred and Series
D Preferred equal to two (2) times each series' Original Issue Price (as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to the Series D Preferred and the Series E Preferred).
After such payment to the holders of Series E Preferred and Series D Preferred,
all remaining assets, if any, shall be distributed ratably to the holders of
Common Stock.
e. The following events shall be considered a liquidation under this
Section 3:
(i) any consolidation or merger of the Corporation with or into
any other corporation or other entity or person, or any other corporate
reorganization, in which the stockholders of the Corporation immediately prior
to such consolidation, merger or reorganization, own less than 50% of the
surviving Corporation's voting power immediately after such consolidation,
merger or reorganization, or any transaction or series of related transactions
in which in excess of fifty percent (50%) of the Corporation's voting power is
transferred (an "Acquisition"); or
(ii) a sale, lease or other disposition, in a single transaction
or a series of related transactions, of all or substantially all of the assets
of the Corporation (an "Asset Transfer").
f. If upon occurrence of any liquidation, dissolution or winding up
of the Corporation, the assets thus distributed among the holders of the
Preferred Stock shall be insufficient to permit the payment to the holders of
the full aforesaid preferential amounts, the entire assets of the Corporation
legally available for distribution shall be distributed first to the holders of
the Series E Preferred, then to the holders of Series D Preferred and then
ratably
7.
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among the holders of the Series A Preferred, Series B Preferred and Series C
Preferred Stock in proportion to the number of shares of Preferred Stock then
held by such holders.
g. In the event of any Asset Transfer or Acquisition, if the
consideration received by the Corporation is other than cash, its value will be
deemed to be its fair market value. Any securities shall be valued as follows:
(i) If traded on a securities exchange or through the Nasdaq
National Market or Small-Cap Market, the value shall be deemed to be the average
of the closing prices of the securities on such exchange over the thirty-day
(30-day) period ending three (3) days prior to the closing;
(ii) If there is no active public market, the value shall be the
fair market value thereof, as mutually determined by the Corporation and the
holders of at least a majority of the voting power of the then-outstanding
shares of Preferred Stock.
h. The Corporation shall give each holder of record of Preferred
Stock written notice of such impending Asset Transfer or Acquisition not later
than twenty (20) days prior to the stockholders' meeting called to approve such
transaction, or twenty (20) days prior to the closing of such transaction,
whichever is earlier, and shall also notify such holders in writing of the final
approval of such transaction. The first of such notices shall describe the
material terms and conditions of the impending transaction and the provisions of
this Section 3, and the Corporation shall thereafter give such holders prompt
notice of any material changes. Such transaction shall in no event take place
sooner than twenty (20) days after the Corporation has given the first notice
provided for herein or sooner than ten (10) days after the Corporation has given
notice of any material changes provided for herein; provided however, that such
period may be shortened upon the written consent of the holders of the Preferred
Stock that are entitled to such notice rights or similar notice rights and that
represent at least a majority of the voting power of all the then-outstanding
shares of such Preferred Stock.
i. In the event the requirements of this Section 3 are not complied
with, this Corporation shall forthwith either;
(i) cause such closing to be postponed until such time as the
requirements of this Section 3 have been complied with; or
(ii) cancel such transaction, in which event the rights,
preferences and privileges of the holders of the Preferred Stock shall revert to
and be the same as such rights, preferences and privileges existing immediately
prior to the date of the first notice referred to in Section 3(f) hereof.
4. Conversion Rights.
The holders of the Preferred Stock shall have the following rights with
respect to the conversion of the Preferred Stock into shares of Common Stock
(the "Conversion Rights"):
a. Optional Conversion. Subject to and in compliance with the
provisions of this Section 4, any shares of Preferred Stock may, at the option
of the holder, be
8.
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converted at any time, and from time to time, into fully-paid and nonassessable
shares of Common Stock. The number of shares of Common Stock to which a holder
of Preferred Stock shall be entitled upon conversion shall be the product
obtained by multiplying the "Series A Preferred Conversion Rate," "Series B
Preferred Conversion Rate," "Series B-1 Preferred Conversion Rate," "Series C
Preferred Conversion Rate," "Series D Preferred Conversion Rate," or "Series E
Preferred Conversion Rate," as the case may be, then in effect (determined as
provided in Section 4(b)) by the respective number of shares of Series A
Preferred, Series B Preferred, Series B-1 Preferred, Series C Preferred, Series
D Preferred or Series E Preferred being converted.
b. Preferred Stock Conversion Rate. The conversion rate in
effect at any time for conversion of the Series A Preferred ("Series A Preferred
Conversion Rate") shall be the quotient obtained by dividing the Original Issue
Price of the Series A Preferred by the "Series A Preferred Conversion Price,"
calculated as provided in Section 4(c). The conversion rate in effect at any
time for conversion of the Series B Preferred ("Series B Preferred Conversion
Rate") shall be the quotient obtained by dividing the Original Issue Price of
the Series B Preferred by the "Series B Preferred Conversion Price," calculated
as provided in Section 4(c). The conversion rate in effect at any time for
conversion of the Series B-1 Preferred ("Series B-1 Preferred Conversion Rate")
shall be the quotient obtained by dividing the Original Issue Price of the
Series B-1 Preferred by the "Series B-1 Preferred Conversion Price," calculated
as provided in Section 4(c). The conversion rate in effect at any time for
conversion of Series C Preferred ("Series C Preferred Conversion Rate") shall be
the quotient obtained by dividing the Original Issue Price of the Series C
Preferred by the "Series C Preferred Conversion Price," calculated as provided
in Section 4(c). The conversion rate in effect at any time for conversion of the
Series D Preferred ("Series D Preferred Conversion Rate") shall be the quotient
obtained by dividing the Original Issue Price of the Series D Preferred by the
"Series D Preferred Conversion Price," calculated as provided in Section 4(c).
The conversion rate in effect at any time for conversion of the Series E
Preferred ("Series E Preferred Conversion Rate") shall be the quotient obtained
by dividing the Original Issue Price of the Series E Preferred by the "Series E
Preferred Conversion Price," calculated as provided in Section 4(c).
c. Conversion Price. The conversion price for the Series A
Preferred shall initially be the Original Issue Price of the Series A Preferred
("Series A Preferred Conversion Price"). The conversion price for the Series B
Preferred shall initially be the Original Issue Price of the Series B Preferred
("Series B Preferred Conversion Price"). The conversion price for the Series B-1
Preferred shall initially be the Original Issue Price of the Series B-1
Preferred ("Series B-1 Preferred Conversion Price"). The conversion price for
the Series C Preferred shall initially be the Original Issue Price of the Series
C Preferred ("Series C Preferred Conversion Price"). The conversion price for
Series D Preferred shall initially be the Original Issue Price of Series D
Preferred ("Series D Preferred Conversion Price"). The conversion price for
Series E Preferred shall initially be the Original Issue Price of Series E
Preferred ("Series E Preferred Conversion Price"). Such initial Series A
Preferred Conversion Price, Series B Preferred Conversion Price, Series B-1
Preferred Conversion Price, Series C Preferred Conversion Price, Series D
Preferred Conversion Price and Series E Preferred Conversion Price shall be
adjusted from time to time in accordance with this Section 4. All references to
the Series A Preferred Conversion Price, Series B Preferred Conversion Price,
Series B-1 Preferred Conversion Price, Series C Preferred Conversion Price,
Series D Preferred
9.
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Conversion Price and Series E Preferred Conversion Price herein shall mean the
Series A Preferred Conversion Price, Series B Preferred Conversion Price, Series
B-1 Preferred Conversion Price, Series C Preferred Conversion Price, Series D
Preferred Conversion Price and Series E Preferred Conversion Price as so
adjusted.
d. Mechanics of Conversion for Optional Conversion. Each holder
of Preferred Stock who desires to convert the same into shares of Common Stock
pursuant to this Section 4 shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or any transfer agent
for the Preferred Stock, and shall give written notice to the Corporation at
such office that such holder elects to convert the same. Such notice shall state
the number of shares of Preferred Stock being converted. Thereupon, the
Corporation shall promptly issue and deliver at such office to such holder a
certificate or certificates for the number of shares of Common Stock to which
such holder is entitled and shall promptly pay in cash or, to the extent
sufficient funds are not then legally available therefor, in Common Stock (at
the Common Stock's fair market value determined by the Board of Directors as of
the date of such conversion), any declared and unpaid dividends on the shares of
Preferred Stock being converted. Such conversion shall be deemed to have been
made at the close of business on the date of such surrender of the certificates
representing the shares of Preferred Stock to be converted, and the person
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder of such shares of Common
Stock on such date.
e. Adjustment for Stock Splits and Combinations. If the
Corporation shall at any time or from time to time after the date that the first
share of Series A Preferred was issued (the "Original Issue Date") effect a
subdivision of the outstanding Common Stock without a corresponding subdivision
of the Preferred Stock, the Series A Preferred Conversion Price, Series B
Preferred Conversion Price, Series B-1 Preferred Conversion Price, Series C
Preferred Conversion Price, Series D Preferred Conversion Price and the Series E
Preferred Conversion Price in effect immediately before that subdivision shall
be proportionately decreased. Conversely, if the Corporation shall at any time
or from time to time after the Original Issue Date combine the outstanding
shares of Common Stock into a smaller number of shares without a corresponding
combination of the Preferred Stock, the Series A Preferred Conversion Price,
Series B Preferred Conversion Price, Series B-1 Preferred Conversion Price,
Series C Preferred Conversion Price, Series D Preferred Conversion Price and
Series E Preferred Conversion Price in effect immediately before the combination
shall be proportionately increased. Any adjustment under this Section 4(e) shall
become effective at the close of business on the date the subdivision or
combination becomes effective.
f. Adjustment for Common Stock Dividends and Distributions. If
the Corporation at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in additional
shares of Common Stock, in each such event the Series A Preferred Conversion
Price, Series B Preferred Conversion Price, Series B-1 Preferred Conversion
Price, Series C Preferred Conversion Price, Series D Preferred Conversion Price
or Series E Preferred Conversion Price that is then in effect shall be decreased
as of the time of such issuance or, in the event such record date is fixed, as
of the close of business on such record date, by multiplying the respective
Series A Preferred Conversion Price, Series B Preferred
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Conversion Price, Series B-1 Preferred Conversion Price, Series C Preferred
Conversion Price, Series D Preferred Conversion Price or Series E Preferred
Conversion Price then in effect by a fraction (i) the numerator of which is the
total number of shares of Common Stock issued and outstanding immediately prior
to the time of such issuance or the close of business on such record date, and
(ii) the denominator of which is the total number of shares of Common Stock
issued and outstanding immediately prior to the time of such issuance or the
close of business on such record date plus the number of shares of Common Stock
issuable in payment of such dividend or distribution; provided however, that if
such record date is fixed and such dividend is not fully paid or if such
distribution is not fully made on the date fixed therefor, the Series A
Preferred Conversion Price, Series B Preferred Conversion Price, Series B-1
Preferred Conversion Price, Series C Preferred Conversion Price, Series D
Preferred Conversion Price and Series E Preferred Conversion Price shall be
recomputed accordingly as of the close of business on such record date and
thereafter the Series A Preferred Conversion Price, Series B Preferred
Conversion Price, Series B-1 Preferred Conversion Price, Series C Preferred
Conversion Price, Series D Preferred Conversion Price and Series E Preferred
Conversion Price shall be adjusted pursuant to this Section 4(f) to reflect the
actual payment of such dividend or distribution.
g. Adjustments for Other Dividends and Distributions. If the
Corporation at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in securities of
the Corporation other than shares of Common Stock, in each such event provision
shall be made so that the holders of the Preferred Stock shall receive upon
conversion thereof, in addition to the number of shares of Common Stock
receivable thereupon, the amount of other securities of the Corporation which
they would have received had their Preferred Stock been converted into Common
Stock on the date of such event and had they thereafter, during the period from
the date of such event to and including the conversion date, retained such
securities receivable by them as aforesaid during such period, subject to all
other adjustments called for during such period under this Section 4 with
respect to the rights of the holders of the Preferred Stock or with respect to
such other securities by their terms.
h. Adjustment for Reclassification, Exchange and Substitution.
If at any time or from time to time after the Original Issue Date, the Common
Stock issuable upon the conversion of the Preferred Stock is changed into the
same or a different number of shares of any class or classes of stock, whether
by recapitalization, reclassification or otherwise (other than an Acquisition or
Asset Transfer as defined in Section 3(c) or a subdivision or combination of
shares or stock dividend or a reorganization, merger, consolidation or sale of
assets provided for elsewhere in this Section 4), in any such event each holder
of Preferred Stock shall have the right thereafter to convert such stock into
the kind and amount of stock and other securities and property receivable upon
such recapitalization, reclassification or other change by holders of the
maximum number of shares of Common Stock into which such shares of Preferred
Stock could have been converted immediately prior to such recapitalization,
reclassification or change, all subject to further adjustment as provided herein
or with respect to such other securities or property by the terms thereof.
i. Reorganizations, Mergers, Consolidations or Sales of Assets.
If at any time or from time to time after the Original Issue Date, there is a
capital reorganization of the Common Stock (other than an Acquisition or Asset
Transfer as defined in Section 3(c) or a
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recapitalization, subdivision, combination, reclassification, exchange or
substitution of shares provided for elsewhere in this Section 4), as a part of
such capital reorganization, provision shall be made so that the holders of the
Preferred Stock shall thereafter be entitled to receive upon conversion of the
Preferred Stock the number of shares of stock or other securities or property of
the Corporation to which a holder of the number of shares of Common Stock
deliverable upon conversion would have been entitled on such capital
reorganization, subject to adjustment in respect of such stock or securities by
the terms thereof. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 4 with respect to the rights of
the holders of Preferred Stock after the capital reorganization to the end that
the provisions of this Section 4 (including adjustment of the Series A Preferred
Conversion Price, Series B Preferred Conversion Price, Series B-1 Preferred
Conversion Price, Series C Preferred Conversion Price, Series D Preferred
Conversion Price and Series E Preferred Conversion Price then in effect and the
number of shares issuable upon conversion of the Preferred Stock) shall be
applicable after that event and be as nearly equivalent as practicable.
j. Sale of Shares Below Conversion Price.
(i) Subject to the limitations below, in the event the
Company shall issue or is deemed to have issued any Additional Shares of Common
Stock (as defined in subsection j(v) below) for consideration per share less
than the Series E Preferred Conversion Price in effect immediately prior to such
issuance but equal to or greater than the average of the Series D Preferred
Conversion Price and the Series E Preferred Conversion Price, the Series E
Preferred Conversion Price shall be adjusted to equal the consideration per
share for the offering of Additional Shares of Common Stock (without any other
adjustment pursuant to j(ii) below). Subject to the limitations below, in the
event the Company shall issue or is deemed to have issued any Additional Shares
of Common Stock without consideration or for consideration per share less than
the average of the Series D Preferred Conversion Price and the Series E
Preferred Conversion Price, the Series E Preferred Conversion Price shall (i)
first, be adjusted to equal the average of the Series D Preferred Conversion
Price and the Series E Preferred Conversion Price, (ii) then, be adjusted
further in accordance with the provisions of subsection j(ii) below (the
adjustments described in this sentence and the preceding sentence shall be
referred to hereinafter as the "Series E Anti-Dilution Adjustments").
Notwithstanding the above, the Series E Anti-Dilution Adjustments shall
terminate six (6) months following the first sale and issuance of the Series E
Preferred Stock, (such date referred to herein as the "Termination Date").
Following the Termination Date, any issuance or deemed issuance of Additional
Shares of Common Stock without consideration or for consideration per share less
than the Series E Preferred Price then in effect shall not result in an
adjustment to the Series E Preferred Conversion Price under this subsection
j(i).
(ii) Subject to adjustments made to the Series E Preferred
in subsection j(i) above, if at any time or from time to time after the Original
Issue Date, the Corporation issues or sells, or is deemed by the express
provisions of this subsection j to have issued or sold, Additional Shares of
Common Stock (as defined in subsection j(v) below), other than as a dividend or
other distribution on any class of stock as provided in Section 4(f) above, and
other than a subdivision or combination of shares of Common Stock as provided in
Section 4(e) above, for an Effective Price (as defined in subsection j(v) below)
less than the then effective Series A Preferred Conversion Price, Series B
Preferred Conversion Price, Series B-1
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Preferred Conversion Price, Series C Preferred Conversion Price, Series D
Preferred Conversion Price or Series E Preferred Conversion Price as the case
may be, then and in each such case the then existing Series A Preferred
Conversion Price, Series B Preferred Conversion Price, Series B-1 Preferred
Conversion Price, Series C Preferred Conversion Price, Series D Preferred
Conversion Price or Series E Conversion Price, shall be reduced, as of the
opening of business on the date of such issue or sale, to a price determined by
multiplying the Series A Preferred Conversion Price, Series B Preferred
Conversion Price, Series B-1 Preferred Conversion Price, Series C Preferred
Conversion Price, Series D Preferred Conversion Price or Series E Preferred
Conversion Price, respectively, by a fraction (i) the numerator of which shall
be (A) the number of shares of Common Stock deemed outstanding (as defined
below) immediately prior to such issue or sale, plus (B) the number of shares of
Common Stock which the aggregate consideration received (as defined in
subsection j(ii)) by the Corporation for the total number of Additional Shares
of Common Stock so issued would purchase at such Series A Preferred Conversion
Price, Series B Preferred Conversion Price, Series B-1 Preferred Conversion
Price, Series C Preferred Conversion Price, Series D Preferred Conversion Price
or Series E Conversion Price, respectively, and (ii) the denominator of which
shall be the number of shares of Common Stock deemed outstanding (as defined
below) immediately prior to such issue or sale plus the total number of
Additional Shares of Common Stock so issued. For the purposes of the preceding
sentence, the number of shares of Common Stock deemed to be outstanding as of a
given date shall be the sum of (A) the number of shares of Common Stock actually
outstanding, (B) the number of shares of Common Stock into which the then
outstanding shares of Preferred, could be converted if fully converted on the
day immediately preceding the given date, and (C) the number of shares of Common
Stock that could be obtained through the exercise or conversion of all other
rights, options and convertible securities on the day immediately preceding the
given date.
(iii) For the purpose of making any adjustment required
under this Section 4(j), the consideration received by the Corporation for any
issue or sale of securities shall (A) to the extent it consists of cash, be
computed at the net amount of cash received by the Corporation after deduction
of any underwriting or similar commissions, compensation or concessions paid or
allowed by the Corporation in connection with such issue or sale but without
deduction of any expenses payable by the Corporation, (B) to the extent it
consists of property other than cash, be computed at the fair value of that
property as determined in good faith by the Board of Directors, and (C) if
Additional Shares of Common Stock, Convertible Securities (as defined in
subsection j(iv) below) or rights or options to purchase either Additional
Shares of Common Stock or Convertible Securities are issued or sold together
with other stock or securities or other assets of the Corporation for a
consideration which covers both, be computed as the portion of the consideration
so received that may be reasonably determined in good faith by the Board of
Directors to be allocable to such Additional Shares of Common Stock, Convertible
Securities or rights or options.
(iv) For the purpose of the adjustment required under this
Section 4(j), if the Corporation issues or sells any rights or options for the
purchase of, or stock or other securities convertible into, Additional Shares of
Common Stock (such convertible stock or securities being herein referred to as
"Convertible Securities") and if the Effective Price of such Additional Shares
of Common Stock is less than the Series A Preferred Conversion Price, Series B
Preferred Conversion Price, Series B-1 Preferred Conversion Price, Series C
Preferred
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Conversion Price, Series D Preferred Conversion Price or Series E Preferred
Conversion Price, as the case may be, in each case the Corporation shall be
deemed to have issued at the time of the issuance of such rights or options or
Convertible Securities the maximum number of Additional Shares of Common Stock
issuable upon exercise or conversion thereof and to have received as
consideration for the issuance of such shares an amount equal to the total
amount of the consideration, if any, received by the Corporation for the
issuance of such rights or options or Convertible Securities, plus, in the case
of such rights or options, the minimum amounts of consideration, if any, payable
to the Corporation upon the exercise of such rights or options, plus, in the
case of Convertible Securities, the minimum amounts of consideration, if any,
payable to the Corporation (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities) upon the conversion
thereof; provided that if in the case of Convertible Securities the minimum
amounts of such consideration cannot be ascertained, but are a function of
antidilution or similar protective clauses, the Corporation shall be deemed to
have received the minimum amounts of consideration without reference to such
clauses; provided further that if the minimum amount of consideration payable to
the Corporation upon the exercise or conversion of rights, options or
Convertible Securities is reduced over time or on the occurrence or non-
occurrence of specified events other than by reason of antidilution adjustments,
the Effective Price shall be recalculated using the figure to which such minimum
amount of consideration is reduced; provided further that if the minimum amount
of consideration payable to the Corporation upon the exercise or conversion of
such rights, options or Convertible Securities is subsequently increased, the
Effective Price shall be again recalculated using the increased minimum amount
of consideration payable to the Corporation upon the exercise or conversion of
such rights, options or Convertible Securities. No further adjustment of the
Series A Preferred Conversion Price, Series B Preferred Conversion Price, Series
B-1 Preferred Conversion Price, Series C Preferred Conversion Price, Series D
Preferred Conversion Price or Series E Preferred Conversion Price, as adjusted
upon the issuance of such rights, options or Convertible Securities, shall be
made as a result of the actual issuance of Additional Shares of Common Stock on
the exercise of any such rights or options or the conversion of any such
Convertible Securities. If any such rights or options or the conversion
privilege represented by any such Convertible Securities shall expire without
having been exercised, the Series A Preferred Conversion Price, Series B
Preferred Conversion Price, Series B-1 Preferred Conversion Price, Series C
Preferred Conversion Price, Series D Preferred Conversion Price or Series E
Preferred Conversion Prices, as the case may be, as adjusted upon the issuance
of such rights, options or Convertible Securities shall be readjusted to the
respective Series A Preferred Conversion Price, Series B Preferred Conversion
Price, Series B-1 Preferred Conversion Price, Series C Preferred Conversion
Price, Series D Preferred Conversion Price or Series E Preferred Conversion
Price, which would have been in effect had an adjustment been made on the basis
that the only Additional Shares of Common Stock so issued were the Additional
Shares of Common Stock, if any, actually issued or sold on the exercise of such
rights or options or rights of conversion of such Convertible Securities, and
such Additional Shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Corporation upon such exercise, plus the
consideration, if any, actually received by the Corporation for the granting of
all such rights or options, whether or not exercised, plus the consideration
received for issuing or selling the Convertible Securities actually converted,
plus the consideration, if any, actually received by the Corporation (other than
by cancellation of liabilities or obligations evidenced by such Convertible
Securities) on the conversion of such
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Convertible Securities, provided that such readjustment shall not apply to prior
conversions of Series A Preferred.
(v) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued by the Corporation or deemed to be issued pursuant
to this Section 4(j) after the date of this amended and restated Certificate,
whether or not subsequently reacquired or retired by the Corporation other than
(A) any shares of Common Stock issued upon conversion of the Series A Preferred,
Series B Preferred, Series B-1 Preferred, Series C Preferred, Series D Preferred
or Series E Preferred; (B) any shares of Common Stock and/or options, warrants
or other Common Stock purchase rights and the Common Stock issued pursuant to
such options, warrants or other rights (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like) to employees, officers or
directors of, or consultants or advisors to the Corporation or any subsidiary
pursuant to the 1997 Stock Option Plan, or other arrangements that are approved
by the Board; (C) any stock issued pursuant to the exercise of options,
warrants, convertible securities or other rights outstanding as of the date of
this amended and restated Certificate; (D) any stock issued in connection with
any stock dividends, combinations, splits, recapitalizations and the like; (E)
any options, warrants, or rights for the purchase or shares of the Corporation's
stock issued pursuant to any leasing arrangement, loan, or debt financing from a
bank or similar financial institution; (F) any securities issued by the
Corporation pursuant to a registration statement filed under the Securities Act;
and (G) if unanimously approved by the Company's Board of Directors, any
options, warrants or rights for the purchase or shares of the Corporation's
stock issued in connection with strategic transactions involving the Corporation
and other entities, including (i) joint venture, manufacturing or distribution
arrangements or (ii) technology transfer or development arrangements, provided
that such securities are issued principally in conjunction with specific
commercial relationships and not in conjunction with a general corporate
financing. The "Effective Price" of Additional Shares of Common Stock shall mean
the quotient determined by dividing the total number of Additional Shares of
Common Stock issued or sold, or deemed to have been issued or sold by the
Corporation under this Section 4(j), into the aggregate consideration received,
or deemed to have been received by the Corporation for such issue under this
Section 4(j), for such Additional Shares of Common Stock.
k. Certificate of Adjustment. In each case of an adjustment or
readjustment of the Series A Preferred Conversion Price, Series B Preferred
Conversion Price, Series B-1 Preferred Conversion Price, Series C Preferred
Conversion Price, Series D Preferred Conversion Price or Series E Preferred
Conversion Price for the number of shares of Common Stock or other securities
issuable upon conversion of the Preferred Stock, the Corporation, at its
expense, shall compute such adjustment or readjustment in accordance with the
provisions hereof and prepare a certificate showing such adjustment or
readjustment, and shall mail such certificate, by first class mail, postage
prepaid, to each registered holder of Preferred Stock at the holder's address as
shown in the Corporation's books. The certificate shall set forth such
adjustment or readjustment, showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (i) the
consideration received or deemed to be received by the Corporation for any
Additional Shares of Common Stock issued or sold or deemed to have been issued
or sold, (ii) the Series A Preferred Conversion Price, Series B Preferred
Conversion Price, Series B-1 Preferred Conversion Price, Series C Preferred
Conversion Price, Series D Preferred Conversion Price or the Series E Preferred
Conversion
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Price as the case may be, at the time in effect, (iii) the number of Additional
Shares of Common Stock and (iv) the type and amount, if any, of other property
which at the time would be received upon conversion of the Preferred Stock.
l. Notices of Record Date. Upon (i) any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, or (ii) any capital reorganization of the
Corporation, any reclassification or recapitalization of the capital stock of
the Corporation, any merger or consolidation of the Corporation with or into any
other corporation other than an Asset Transfer or an Acquisition as defined in
Section 3(c), or any voluntary or involuntary dissolution, liquidation or
winding up of the Corporation, the Corporation shall mail to each holder of
Preferred Stock at least twenty (20) days prior to the record date specified
therein a notice specifying (A) the date on which any such record is to be taken
for the purpose of such dividend or distribution and a description of such
dividend or distribution, (B) the date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding up is expected to become effective, and (C) the date, if any, that is to
be fixed as to when the holders of record of Common Stock (or other securities)
shall be entitled to exchange their shares of Common Stock (or other securities)
for securities or other property deliverable upon such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding up.
m. Automatic Conversion.
(i) Each share of Preferred Stock shall automatically be
converted into shares of Common Stock, based on the then-effective Series A
Preferred Conversion Price, in the case of holders of Series A Preferred, or the
then-effective Series B Preferred Conversion Price, in the case of holders of
Series B Preferred, or the then-effective Series B-1 Preferred Conversion Price,
in the case of holders of Series B-1 Preferred, or the then-effective Series C
Preferred Conversion Price, in the case of holders of Series C Preferred, or the
then-effective Series D Preferred Conversion Price, in the case of holders of
Series D Preferred, or the then-effective Series E Preferred Conversion Price,
in the case of holders of Series E Preferred: (A) at any time upon the
affirmative election of the holders of at least fifty percent (50%) of the
outstanding shares of Preferred Stock; provided however, that any such
conversion of Series E Preferred shall be approved by at least fifty percent
(50%) of the outstanding shares of Series E Preferred, or (B) immediately upon
the closing of a firmly underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Common Stock for the account of the Corporation in which
the gross cash proceeds to the Corporation (before underwriting discounts,
commissions and fees) are at least $35,000,000, at a per share offering price of
not less than eight dollars and fifty cents ($8.50) per share. Upon such
automatic conversion, any declared and unpaid dividends shall be paid in
accordance with the provisions of Section 4(d).
(ii) Upon the occurrence of the event specified in paragraph
(A) above, the outstanding shares of Preferred Stock shall be converted
automatically without any further action by the holders of such shares and
whether or not the certificates representing such shares are surrendered to the
Corporation or its transfer agent; provided however, that the Corporation shall
not be obligated to issue certificates evidencing the shares of Common Stock
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issuable upon such conversion unless the certificates evidencing such shares of
Preferred Stock are either delivered to the Corporation or its transfer agent as
provided below, or the holder notifies the Corporation or its transfer agent
that such certificates have been lost, stolen or destroyed and executes an
agreement satisfactory to the Corporation to indemnify the Corporation from any
loss incurred by it in connection with such certificates. Upon the occurrence of
such automatic conversion of the Preferred Stock, the holders of Preferred Stock
shall surrender the certificates representing such shares at the office of the
Corporation or any transfer agent for the Preferred Stock. Thereupon, there
shall be issued and delivered to such holder promptly at such office and in its
name as shown on such surrendered certificate or certificates, a certificate or
certificates for the number of shares of Common Stock into which the shares of
Preferred Stock surrendered were convertible on the date on which such automatic
conversion occurred, and any declared and unpaid dividends shall be paid in
accordance with the provisions of Section 4(d).
n. Fractional Shares. No fractional shares of Common Stock shall
be issued upon conversion of Preferred Stock. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Preferred Stock by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of any fractional share, the Corporation shall, in lieu
of issuing any fractional share, pay cash equal to the product of such fraction
multiplied by the Common Stock's fair market value (as determined by the Board
of Directors) on the date of conversion.
o. Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Preferred Stock, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of the Preferred Stock. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Preferred Stock, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose,
including, without limitation, engaging in best efforts to obtain the requisite
stockholder approval of any necessary amendment to this certificate.
p. Notices. Any notice required by the provisions of this
Section 5 shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed telex
or facsimile if sent during normal business hours of the recipient; if not, then
on the next business day, (iii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (iv)
one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt. All notices
shall be addressed to each holder of record at the address of such holder
appearing on the books of the Corporation.
q. Payment of Taxes. The Corporation will pay all taxes (other
than taxes based upon income) and other governmental charges that may be imposed
with respect to the issue or delivery of shares of Common Stock upon conversion
of shares of Preferred Stock,
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excluding any tax or other charge imposed in connection with any transfer
involved in the issue and delivery of shares of Common Stock in a name other
than that in which the shares of Preferred Stock so converted were registered.
r. No Dilution or Impairment. Without the consent of the holders
of the then outstanding Preferred Stock, as required under Section 2(b), the
Corporation shall not amend its Amended and Restated Certificate of
Incorporation or participate in any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or take any
other voluntary action, for the purpose of avoiding or seeking to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but shall at all times in good faith assist in
carrying out all such action as may be reasonably necessary or appropriate in
order to protect the conversion rights of the holders of the Preferred Stock
against dilution or other impairment.
5. Redemption. The Company shall be obligated to redeem the Series D
Preferred and Series E Preferred as follows:
a. Series D. Preferred Redemption. The holders of at least a
majority of the then outstanding shares of Series D Preferred, voting together
as a separate class, may require the Company, to the extent it may lawfully do
so, to redeem up to one-third (1/3) of the then-outstanding shares of Series D
Preferred (the "Maximum Allowable Series D Redemption Shares") on the fifth
(5/th/) anniversary of the Original Issue Date, and to redeem up to the Maximum
Allowable Series D Redemption Shares on the sixth (6/th/) and seventh (7/th/)
anniversaries, respectively, of the Original Issue Date (each, a "Series D
Redemption Date"); provided that the Company shall receive at least sixty (60)
days prior to such fifth (5/th/) anniversary written notice of such consent of
the Series D Preferred.
b. Series E Preferred Redemption. The holders of at least a
majority of the then outstanding shares of Series E Preferred, voting together
as a separate class, may require the Company, to the extent it may lawfully do
so, to redeem up to one-third (1/3) of the then-outstanding shares of Series E
Preferred (the "Maximum Allowable Series E Redemption Shares") on the fifth
(5th) anniversary of the "Series D Issue Date", and to redeem up to the Maximum
Allowable Series E Redemption Shares on the sixth (6/th/) and seventh (7/th/)
anniversaries, respectively, of the Series D Issue Date (each, a "Series E
Redemption Date"); provided that the Company shall receive at least sixty (60)
days prior to such fifth (5/th/) anniversary written notice of such consent of
the Series E Preferred.
c. The Company shall effect such redemptions on the applicable
Series D Redemption Dates or Series E Redemption Dates (the "Redemption Dates")
by paying in cash in exchange for the shares of Preferred Stock to be redeemed a
sum equal to the greater of (i) Original Issue Price per share of the Preferred
Stock to be redeemed (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares) plus declared and
unpaid dividends with respect to such shares, and (ii) fair market value on the
date of such redemption. The total amount to be paid for the Preferred Stock to
be redeemed is hereinafter referred to as its "Redemption Price." The number of
shares of Series D Preferred or Series E Preferred that the Company shall be
required to redeem on any one Redemption Date shall be equal to the amount
determined by dividing (i) the aggregate number of shares of that
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series of Preferred Stock outstanding immediately prior to the applicable
Redemption Date by (ii) the number of remaining Redemption Dates (including the
Redemption Date to which such calculation applies). Shares subject to redemption
pursuant to this Section 5(c) shall be redeemed from each holder of the
appropriate series of Preferred Stock on a pro rata basis
d. At least thirty (30) days but no more than sixty (60) days
prior to a first applicable Redemption Date, the Company shall send a notice (a
"Redemption Notice") to all holders of the Preferred Stock to be redeemed
setting forth (A) the Redemption Price for the shares to be redeemed; and (B)
the place at which such holders may obtain payment of such Redemption Price upon
surrender of their share certificates. If the Company does not have sufficient
funds legally available to redeem all shares to be redeemed at the applicable
Redemption Date (including, if applicable, those to be redeemed at the option of
the Company), then it shall redeem such shares pro rata (based on the portion of
the aggregate Redemption Price payable to them) to the extent possible and shall
redeem the remaining shares to be redeemed as soon as sufficient funds are
legally available.
e. On or prior to such applicable Redemption Date, the Company
shall deposit the Redemption Price of all shares to be redeemed with a bank or
trust company having aggregate capital and surplus in excess of $100,000,000, as
a trust fund, with irrevocable instructions and authority to the bank or trust
company to pay, on and after such applicable Redemption Date, the Redemption
Price of the shares to their respective holders upon the surrender of their
share certificates. Any moneys deposited by the Company pursuant to this Section
5(b) for the redemption of shares thereafter converted into shares of Common
Stock pursuant to Section 4 hereof no later than the fifth (5th) day preceding
the applicable Redemption Date shall be returned to the Company forthwith upon
such conversion. The balance of any funds deposited by the Company pursuant to
this Section 5(b) remaining unclaimed at the expiration of one (1) year
following such applicable Redemption Date shall be returned to the Company
promptly upon its written request.
f. On or after such applicable Redemption Date, each holder of
shares of the Preferred Stock to be redeemed shall surrender such holder's
certificates representing such shares to the Company in the manner and at the
place designated in the Redemption Notice, and thereupon the Redemption Price of
such shares shall be payable to the order of the person whose name appears on
such certificate or certificates as the owner thereof and each surrendered
certificate shall be canceled. In the event less than all the shares represented
by such certificates are redeemed, a new certificate shall be issued
representing the unredeemed shares. From and after such applicable Redemption
Date, unless there shall have been a default in payment of the Redemption Price
or the Company is unable to pay the Redemption Price due to not having
sufficient legally available funds, all rights of the holders of such shares as
holders of Preferred Stock (except the right to receive the Redemption Price
without interest upon surrender of their certificates), shall cease and
terminate with respect to such shares; provided that in the event that such
shares of Preferred Stock are not redeemed due to a default in payment by the
Company or because the Company does not have sufficient legally available funds,
such shares of Preferred Stock shall remain outstanding and shall be entitled to
all of the rights and preferences provided herein.
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g. In the event of a redemption of any shares of Series D
Preferred or Series E Preferred, the Conversion Rights (as defined in Section 4)
for such Preferred Stock shall terminate as to the shares designated for
redemption at the close of business on the fifth (5th) day preceding the
applicable Redemption Date, unless default is made in payment of the Redemption
Price.
6. No Reissuance of Preferred Stock. No share or shares of Preferred
Stock acquired by the Corporation by reason of redemption, purchase, conversion
or otherwise shall be reissued; and in addition, the Amended and Restated
Certificate of Incorporation shall be appropriately amended to effect the
corresponding reduction in the Corporation's authorized stock.
7. No Preemptive Rights. Stockholders shall have no preemptive
rights, except as granted by the Corporation pursuant to written agreements.
ARTICLE V.
For the management of the business and for the conduct of the affairs of
the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A. The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors.
B. Subject to the rights of the holders of any series of Preferred Stock
to elect additional directors under specified circumstances, following the date
on which the Corporation is no longer subject to Section 2115 of the California
Corporations Code (the "Qualifying Record Date"), the directors shall be divided
into three classes with the terms of the classes to expire over three
consecutive years, respectively. The classes shall be designated according to
the year in which the term of directors in such class shall expire (e.g., the
"1999 Class"). Directors shall be assigned to each class in accordance with a
resolution or resolutions adopted by the Board of Directors. At the first annual
meeting of stockholders following the Qualifying Record Date, the term of office
of the applicable class of directors shall expire and directors assigned to such
class, appropriately redesignated, shall be elected for a full term of three
years. At the second annual meeting of stockholders following the Qualifying
Record Date, the term of office of the applicable class of directors shall
expire and directors assigned to such class, appropriately redesignated, shall
be elected for a full term of three years. At the third annual meeting of
stockholders following the Qualifying Record Date, the term of office of the
remaining class of directors shall expire and directors assigned to such class,
appropriately redesignated, shall be elected for a full term of three years. At
each succeeding annual meeting of stockholders, directors shall be elected for a
full term of three years to succeed the directors of the class whose terms
expire at such annual meeting.
20.
<PAGE>
Notwithstanding the foregoing provisions of this Article, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
C. Any director may be removed, with or without cause, at any time, by the
holders of a majority of the shares then entitled to vote at an election of
directors (as set forth in Article IV Section D(2)(c) herein).
D. Subject to the rights of the holders of any series of Preferred Stock,
any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other causes and any newly created directorships
resulting from any increase in the number of directors, shall, unless the Board
of Directors determines by resolution that any such vacancies or newly created
directorships shall be filled by the stockholders, except as otherwise provided
by law, be filled only by the affirmative vote of a majority of the directors
then in office, even though less than a quorum of the Board of Directors, and
not by the stockholders. Any director elected in accordance with the preceding
sentence shall hold office for the remainder of the full term of the director
with respect to which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.
E. Subject to paragraph (h) of Section 43 of the Bylaws, the Bylaws may be
altered or amended or new Bylaws adopted by the affirmative vote of at least
sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the
then-outstanding shares of stock entitled to vote (the "Voting Stock"). The
Board of Directors shall also have the power to adopt, amend, or repeal Bylaws.
F. The directors of the Corporation need not be elected by written ballot
unless the Bylaws so provide.
G. No action shall be taken by the stockholders of the Corporation except
at an annual or special meeting of stockholders called in accordance with the
Bylaws or by written consent of stockholders in accordance with the Bylaws prior
to the closing of the Corporation's initial public offering and following the
closing of such initial public offering no action shall be taken by the
stockholders by written consent.
H. Special meetings of the stockholders of the Corporation may be called,
for any purpose or purposes, by (i) the Chairman of the Board of Directors, (ii)
the President, (iii) the Board of Directors pursuant to a resolution adopted by
a majority 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 of Directors for adoption) or (iv) the
holders of the shares entitled to cast not less than twenty-five percent (25%)
of the votes at the meeting, and shall be held at such place, on such date, and
at such time as the Board of Directors shall fix.
I. Advance notice of stockholder nominations for the election of directors
and of business to be brought by stockholders before any meeting of the
stockholders of the Corporation shall be given in the manner provided in the
Bylaws of the Corporation.
21.
<PAGE>
ARTICLE VI.
A. A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for any 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 an improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.
B. Any repeal or modification of this Article VI shall be prospective and
shall not affect the rights under this Article VI in effect at the time of the
alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
ARTICLE VII.
A. The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided in paragraph B. of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of stock required by law, this Certificate of
Incorporation or any preferred stock designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of stock, voting together as a
single class, shall be required to alter, amend or repeal Articles V, VI or VII.
ARTICLE VIII.
The Corporation is to have perpetual existence."
FOUR: This Amended and Restated Certificate of Incorporation has been duly
approved by the Board of Directors of the corporation in accordance with and
pursuant to the provisions of Sections 141 and 242 of the General Corporation
Law of the State of Delaware.
FIVE: This Amended and Restated Certificate of Incorporation has been duly
adopted by the stockholders of the corporation in accordance with and pursuant
to the provisions of Sections 228, 242, and 245 of the General Corporation Law
of the State of Delaware.
22.
<PAGE>
In Witness Whereof, Docent, Inc. has caused this Amended and Restated
Certificate of Incorporation to be signed by its President and Secretary in
Mountain View, California this _____ day of April, 2000.
Docent, Inc.
By: _____________________________
David Ellett
President
Attest:
By: _______________________________
David Mandelkern
Secretary
23.
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
DOCENT, INC.
David Ellett and David Mandelkern hereby certify that:
ONE: They are the duly elected and acting President and Secretary,
respectively, of Docent, Inc., a Delaware corporation.
TWO: The original name of this corporation is Docent, Inc. and the date
on which the Certificate of Incorporation was originally filed with the
Secretary of State of the State of Delaware is June 3, 1997.
THREE: The Certificate of Incorporation of this corporation is hereby
amended and restated to read as follows:
I.
The name of the corporation is DOCENT, INC. (the "Corporation" or the
"Company").
II.
The address of the registered office of the Corporation in the State of
Delaware is:
Amerisearch Corporate Services, Inc.
15 East North Street
City of Dover
County of Kent
The name of the Corporation's registered agent at said address is
Amerisearch Corporate Services, Inc.
III.
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.
IV.
A. This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the corporation is authorized to issue is two hundred and
fifty five million (255,000,000) shares. Two hundred and fifty million
(250,000,000) shares shall be Common Stock, each having a par
1.
<PAGE>
value of one-tenth of one cent ($0.001). Five million (5,000,000) shares shall
be Preferred Stock, each having a par value of one-tenth of one cent ($0.001).
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the Delaware General Corporation Law
("DGCL"), to fix or alter from time to time the designation, powers, preferences
and rights of the shares of each such series and the qualifications, limitations
or restrictions of any wholly unissued series of Preferred Stock, and to
establish from time to time the number of shares constituting any such series or
any of them; and to increase or decrease the number of shares of any series
subsequent to the issuance of shares of that series, but not below the number of
shares of such series then outstanding. In case the number of shares of any
series shall be decreased in accordance with the foregoing sentence, the shares
constituting such decrease shall resume the status that they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
V.
For the management of the business and for the conduct of the affairs of
the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A. Management
1. 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
exclusively by one or more resolutions adopted by the Board of Directors.
2. Board of Directors
a. Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, following the
closing of the initial public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "1993 Act"),
covering the offer and sale of Common Stock to the public (the "Initial Public
Offering"), the directors shall be divided into three classes designated as
Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the closing
of the Initial Public Offering, the term of office of the Class I directors
shall expire and Class I directors shall be elected for a full term of three
years. At the second annual meeting of stockholders following the Initial Public
Offering, the term of office of the Class II directors shall expire and Class II
directors shall be elected for a full term of three years. At the third annual
meeting of stockholders following the Initial Public Offering, the term of
office of the Class III directors shall expire and Class III directors shall be
elected for a full term of three years. At each succeeding annual meeting of
stockholders, directors shall be elected for a full term of three years to
succeed the directors of the class whose terms expire at
2.
<PAGE>
such annual meeting. During such time or times that the corporation is subject
to Section 2115(b) of the California General Corporation Law ("CGCL"), this
Section A.2.a of this Article V shall not be effective and Section A.2.b of this
Article shall apply.
b. In the event that the corporation is subject to Section
2115(b) of the CGCL, Section A.2.a of this Article V shall not apply and all
directors shall be shall be elected at each annual meeting of stockholders to
hold office until the next annual meeting.
c. No person entitled to vote at an election for directors may
cumulate votes to which such person is entitled, unless, at the time of such
election, the corporation (i) is subject to Section 2115(b) of the CGCL and (ii)
is not a "listed" corporation or ceases to be a "listed" corporation under
Section 301.5 of the CGCL. During this time, every stockholder entitled to vote
at an election for directors may cumulate such stockholder's votes and give one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which such stockholder's shares are
otherwise entitled, or distribute the stockholder's votes on the same principle
among as many candidates as such stockholder thinks fit. No stockholder,
however, shall be entitled to so cumulate such stockholder's votes unless (i)
the names of such candidate or candidates have been placed in nomination prior
to the voting and (ii) the stockholder has given notice at the meeting, prior to
the voting, of such stockholder's intention to cumulate such stockholder's
votes. If any stockholder has given proper notice to cumulate votes, all
stockholders may cumulate their votes for any candidates who have been properly
placed in nomination. Under cumulative voting, the candidates receiving the
highest number of votes, up to the number of directors to be elected, are
elected.
Notwithstanding the foregoing provisions of this section, each director shall
serve until his successor is duly elected and qualified or until his death,
resignation or removal. No decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent director.
3. Removal of Directors
a. During such time or times that the corporation is subject to
Section 2115(b) of the CGCL, the Board of Directors or any individual director
may be removed from office at any time without cause by the affirmative vote of
the holders of at least a majority of the outstanding shares entitled to vote on
such removal; provided, however, that unless the entire Board is removed, no
individual director may be removed when the votes cast against such director's
removal, or not consenting in writing to such removal, would be sufficient to
elect that director if voted cumulatively at an election which the same total
number of votes were cast (or, if such action is taken by written consent, all
shares entitled to vote were voted) and the entire number of directors
authorized at the time of such director's most recent election were then being
elected.
b. At any time or times that the corporation is not subject to
Section 2115(b) of the CGCL and subject to any limitations imposed by law,
Section A. 3. a. above shall no longer apply and removal shall be as provided in
Section 141(k) of the DGCL.
3.
<PAGE>
4. Vacancies
a. Subject to the rights of the holders of any series of Preferred
Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.
b. If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
DGCL.
c. At any time or times that the corporation is subject to Section
2115(b) of the CGCL, if, after the filling of any vacancy by the directors then
in office who have been elected by stockholders shall constitute less than a
majority of the directors then in office, then
(i) Any holder or holders of an aggregate of five percent (5%) or
more of the total number of shares at the time outstanding having the right to
vote for those directors may call a special meeting of stockholders; or
(ii) The Superior Court of the proper county shall, upon
application of such stockholder or stockholders, summarily order a special
meeting of stockholders, to be held to elect the entire board, all in accordance
with Section 305(c) of the CGCL. The term of office of any director shall
terminate upon that election of a successor.
B.
1. Bylaw Amendments
Subject to paragraph (h) of Section 43 of the Bylaws, the Bylaws may
be altered or amended or new Bylaws adopted by the affirmative vote of at least
sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the
then-outstanding shares of the voting stock of the corporation entitled to vote.
The Board of Directors shall also have the power to adopt, amend, or repeal
Bylaws.
4.
<PAGE>
2. The directors of the corporation need not be elected by written
ballot unless the Bylaws so provide.
3. No action shall be taken by the stockholders of the corporation
except (i) at an annual or special meeting of stockholders called in accordance
with the Bylaws or (ii) by written consent of stockholders in accordance with
the Bylaws prior to the closing of the Initial Public Offering and following the
closing of the Initial Public Offering no action shall be taken by the
stockholders by written consent.
4. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the corporation shall be given in the manner provided in the
Bylaws of the corporation.
VI.
A. The liability of the directors for monetary damages shall be
eliminated to the fullest extent under applicable law.
B. This corporation is authorized to provide indemnification of agents
(as defined in Section 317 of the CGCL) for breach of duty to the corporation
and its shareholders through bylaw provisions or through agreements with the
agents, or through shareholder resolutions, or otherwise, in excess of the
indemnification otherwise permitted by Section 317 of the CGCL, subject, at any
time or times the corporation is subject to Section 2115(b) to the limits on
such excess indemnification set forth in Section 204 of the CGCL.
C. Any repeal or modification of this Article VI shall be prospective and
shall not affect the rights under this Article VI in effect at the time of the
alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
A. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided in paragraph B. of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, following the closing of
the Initial Public Offering the affirmative vote of the holders of at least
sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the
then-outstanding shares of the voting stock, voting together as a single class,
shall be required to alter, amend or repeal Articles V, VI, or VII of this
Amended and Restated Certificate of Incorporation.
* * * *
5.
<PAGE>
FOUR: This Amended and Restated Certificate of Incorporation has been duly
approved by the Board of Directors of this Corporation.
FIVE: This Amended and Restated Certificate of Incorporation has been duly
adopted in accordance with the provisions of Sections 228, 242 and 245 of the
General Corporation Law of the State of Delaware by the Board of Directors and
the stockholders of the Corporation. The total number of outstanding shares
entitled to vote or act by written consent was 5,359,773 shares of Common Stock,
5,799,998 shares of Series A Convertible Preferred Stock, 2,000,000 shares of
Series B Convertible Preferred Stock, 833,333 shares of Series B-1 Convertible
Preferred Stock, 2,578,032 shares of Series C Convertible Preferred Stock and
7,180,420 shares of Series D Convertible Preferred Stock. A majority of the
outstanding shares of Common Stock and a majority of the outstanding shares of
Preferred Stock approved this Restated Certificate of Incorporation by written
consent in accordance with Section 228 of the General Corporation Law of the
State of Delaware and written notice of such was given by the Corporation in
accordance with said Section 228.
6.
<PAGE>
In Witness Whereof, Docent, Inc. has caused this Amended and Restated
Certificate of Incorporation to be signed by the President and the Secretary in
Mountain View, California this _____ day of ________, 2000.
Docent, Inc.
By: ______________________________
David Ellett
President
Attest:
By: ________________________
David Mandelkern
Secretary
<PAGE>
EXHIBIT 3.3
BYLAWS
OF
DOCENT, INC.
(a Delaware corporation)
<PAGE>
BYLAWS
OF
DOCENT, INC.
(a Delaware corporation)
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the corporation in
the State of Delaware shall be in the City of Dover, County of Kent.
Section 2. Other Offices. The corporation shall also have and maintain an
office or principal place of business at such place as may be fixed by the Board
of Directors, and 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
CORPORATE SEAL
Section 3. Corporate Seal. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate Seal-
Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
Section 4. Place Of Meetings. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
Section 5. Annual Meeting.
(a) The annual meeting of the stockholders of the corporation, for
the purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual 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
1
<PAGE>
before an annual meeting by a stockholder, the stockholder must have given
timely notice thereof in writing to the Secretary of the corporation. To be
timely, a stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the corporation not later than the close of
business on the sixtieth (60th) day nor earlier than the close of business on
the ninetieth (90th) day prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting has been changed by
more than thirty (30) days from the date contemplated at the time of the
previous year's proxy statement, notice by the stockholder to be timely must be
so received not earlier than the close of business on the ninetieth (90th) day
prior to such annual meeting and not later than the close of business on the
later of the sixtieth (60th) day prior to such annual meeting or, in the event
public announcement of the date of such annual meeting is first made by the
corporation fewer than seventy (70) days prior to the date of such annual
meeting, the close of business on the tenth (10th) day following the day on
which public announcement of the date of such meeting is first made by the
corporation. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and address, as they appear on the corporation's books, of the stockholder
proposing such business, (iii) the class and number of shares of the corporation
which are beneficially owned by the stockholder, (iv) any material interest of
the stockholder in such business and (v) any other information that is required
to be provided by the stockholder pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), in his capacity as
a proponent to a stockholder proposal. Notwithstanding the foregoing, in order
to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the procedures set
forth in this paragraph (b). The chairman of the annual meeting shall, if the
facts warrant, determine and declare at the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this paragraph (b), and, if he should so determine, he shall so declare at the
meeting that any such business not properly brought before the meeting shall not
be transacted.
(c) Only persons who are nominated in accordance with the
procedures set forth in this paragraph (c) shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of the
corporation may be made at a meeting of stockholders by or at the direction of
the Board of Directors or by any stockholder of the corporation entitled to vote
in the election of directors at the meeting who complies with the notice
procedures set forth in this paragraph (c). Such nominations, other than those
made by or at the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the corporation in accordance with
the provisions of paragraph (b) of this Section 5. Such stockholder's notice
shall set forth (i) as to each person, if any, whom the stockholder proposes to
nominate for election or re-election as a director: (A) the name, age, business
address and residence address of such person, (B) the principal occupation or
employment of such person, (C) the class and number of shares of the corporation
which are beneficially owned by such person, (D) a description of all
arrangements or understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to
2
<PAGE>
which the nominations are to be made by the stockholder, and (E) any other
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 1934 Act (including without
limitation such person's written consent to being named in the proxy statement,
if any, as a nominee and to serving as a director if elected); and (ii) as to
such stockholder giving notice, the information required to be provided pursuant
to paragraph (b) of this Section 5. At the request of the Board of Directors,
any person nominated by a stockholder for election as a director shall furnish
to the Secretary of the corporation that information required to be set forth in
the stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director of the corporation unless nominated
in accordance with the procedures set forth in this paragraph (c). The chairman
of the meeting shall, if the facts warrant, determine and declare at the meeting
that a nomination was not made in accordance with the procedures prescribed by
these Bylaws, and if he should so determine, he shall so declare at the meeting,
and the defective nomination shall be disregarded.
(d) For purposes of this Section 5, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or 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.
Section 6. Special Meetings.
(a) Special meetings of the stockholders of the corporation may
be called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, (iii) the Board of Directors
pursuant to a resolution adopted by a majority 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 of
Directors for adoption) or (iv) by the holders of shares entitled to cast not
less than twenty-five percent (25%) of the votes at the meeting, and shall be
held at such place, on such date, and at such time as the Board of Directors,
shall fix.
(b) If a special meeting is called by any person or persons other
than the Board of Directors, the request shall be in writing, specifying the
general nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the Chairman of the Board of Directors, the Chief Executive
Officer, or the Secretary of the corporation. No business may be transacted at
such special meeting otherwise than specified in such notice. The Board of
Directors shall determine the time and place of such special meeting, which
shall be held not less than thirty-five (35) nor more than one hundred twenty
(120) days after the date of the receipt of the request. Upon determination of
the time and place of the meeting, the officer receiving the request shall cause
notice to be given to the stockholders entitled to vote, in accordance with the
provisions of Section 7 of these Bylaws. If the notice is not given within sixty
(60) days after the receipt of the request, the person or persons requesting the
meeting may set the time and place of the meeting and give the notice. Nothing
contained in this paragraph (b) shall be construed as limiting, fixing, or
affecting the time when a meeting of stockholders called by action of the Board
of Directors may be held.
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Section 7. Notice Of Meetings. Except as otherwise provided by law or
the Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
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. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.
Section 8. Quorum. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. In the absence of a quorum,
any meeting of stockholders may be adjourned, from time to time, either by the
chairman of the meeting or by vote of the holders of a majority of the shares
represented thereat, but no other business shall be transacted at such meeting.
The stockholders present at a duly called or convened meeting, at which a quorum
is present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by law, the Certificate of Incorporation or these Bylaws, all
action taken by the holders of a majority of the vote cast, excluding
abstentions, at any meeting at which a quorum is present shall be valid and
binding upon the corporation; provided, however, that directors shall be elected
by a plurality of the votes of the shares present in person or represented by
proxy at the meeting and entitled to vote on the election of directors. Where a
separate vote by a class or classes or series is required, except where
otherwise provided by the statute or by the Certificate of Incorporation or
these Bylaws, a majority of the outstanding shares of such class or classes or
series, present in person or represented by proxy, shall constitute a quorum
entitled to take action with respect to that vote on that matter and, except
where otherwise provided by the statute or by the Certificate of Incorporation
or these Bylaws, the affirmative vote of the majority (plurality, in the case of
the election of directors) of the votes cast, including abstentions, by the
holders of shares of such class or classes or series shall be the act of such
class or classes or series.
Section 9. Adjournment And Notice Of Adjourned Meetings. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes, excluding abstentions. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting, the corporation may transact any business which might
have been transacted at the original meeting. 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.
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Section 10. Voting Rights. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote or execute consents shall have the right to do so either
in person or by an agent or agents authorized by a proxy granted in accordance
with Delaware law. An agent so appointed need not be a stockholder. No proxy
shall be voted after three (3) years from its date of creation unless the proxy
provides for a longer period.
Section 11. Joint Owners of Stock. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the General Corporation Law of Delaware, Section 217(b).
If the instrument filed with the Secretary shows that any such tenancy is held
in unequal interests, a majority or even-split for the purpose of subsection (c)
shall be a majority or even-split in interest.
Section 12. List Of Stockholders. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, 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
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time thereof
and may be inspected by any stockholder who is present.
Section 13. Action Without Meeting.
(a) Unless otherwise provided in the Certificate of
Incorporation, any action required by statute to be taken at any annual or
special meeting of the stockholders, or any action which may be taken at any
annual or special meeting of the 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 such action at a meeting at which all shares entitled to vote thereon
were present and voted.
(b) Every written consent shall bear the date of signature of
each stockholder who signs the consent, and no written consent shall be
effective to take the corporate action referred to therein unless, within sixty
(60) days of the earliest dated consent delivered to the corporation in the
manner herein required, written consents signed by a sufficient number of
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stockholders to take action are delivered to the corporation by delivery to its
registered office in the State of Delaware, its principal place of business or
an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested.
(c) 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. If the action which is consented
to is such as would have required the filing of a certificate under any section
of the General Corporation Law of the State of Delaware if such action had been
voted on by stockholders at a meeting thereof, then the certificate filed under
such section shall state, in lieu of any statement required by such section
concerning any vote of stockholders, that written notice and written consent
have been given as provided in Section 228 of the General Corporation Law of
Delaware.
Section 14. Organization.
(a) At every meeting of stockholders, the Chairman of the Board of
Directors, if the President is absent, a chairman of the meeting chosen by a
majority in interest of the stockholders entitled to vote, present in person or
by proxy, shall act as chairman. The Secretary, or, in his absence, an Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
(b) The Board of Directors of the corporation shall be entitled to
make such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
Section 15. Number and Term of Office. The authorized number of directors
of the corporation shall be fixed by the Board of Directors from time to time
unless otherwise provided in the Certificate of Incorporation. Directors need
not be stockholders unless so required by the Certificate of Incorporation. If
for any cause, the directors shall not have been elected at an
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annual meeting, they may be elected as soon thereafter as convenient at a
special meeting of the stockholders called for that purpose in the manner
provided in these Bylaws.
Section 16. Powers. The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.
Section 17. Classes of Directors. Subject to the rights of the holders of
any series of Preferred Stock to elect additional directors under specified
circumstances, directors shall be elected at each annual meeting of stockholders
for a term of one year. Each director shall serve until his successor is duly
elected and qualified or until his death, resignation or removal. No decrease in
the number of directors constituting the Board of Directors shall shorten the
term of any incumbent director.
Notwithstanding the foregoing provisions of this Article, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
Section 18. Vacancies. Unless otherwise provided in the Certificate of
Incorporation, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by stockholders, be filled only
by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the director for which the vacancy was created or occurred and
until such director's successor shall have been elected and qualified. A
vacancy in the Board of Directors shall be deemed to exist under this Bylaw in
the case of the death, removal or resignation of any director.
Section 19. Resignation. Any director may resign at any time by
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When one
or more directors shall resign from the Board of Directors, effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office for the unexpired
portion of the term of the Director whose place shall be vacated and until his
successor shall have been duly elected and qualified.
Section 20. Removal. Any director may be removed, with or without cause,
at any time, by the holders of a majority of the shares then entitled to vote at
an election of directors (as set forth in Article IV Section D(2)(c) of the
Certificate of Incorporation).
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Section 21. Meetings.
(a) Annual Meetings. The annual meeting of the Board of
Directors shall be held immediately before or after the annual meeting of
stockholders and at the place where such meeting is held. No notice of an annual
meeting of the Board of Directors shall be necessary and such meeting shall be
held for the purpose of electing officers and transacting such other business as
may lawfully come before it.
(b) Regular Meetings. Except as hereinafter otherwise provided,
regular meetings of the Board of Directors shall be held in the office of the
corporation required to be maintained pursuant to Section 2 hereof. Unless
otherwise restricted by the Certificate of Incorporation, regular meetings of
the Board of Directors may also be held at any place within or without the State
of Delaware which has been designated by resolution of the Board of Directors or
the written consent of all directors.
(c) Special Meetings. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place within or without the State of Delaware whenever
called by the Chairman of the Board, the President or any two of the directors
(d) Telephone Meetings. Any member of the Board of Directors, or
of any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
(e) Notice Of Meetings. Notice of the time and place of all
special meetings of the Board of Directors shall be orally or in writing, by
telephone, facsimile, telegraph or telex, during normal business hours, at least
twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the 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.
(f) Waiver Of Notice. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be present and if, either before
or after the meeting, each of the directors not present shall sign a written
waiver of notice. All such waivers shall be filed with the corporate records or
made a part of the minutes of the meeting.
Section 22. Quorum And Voting.
(a) Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 43 hereof, for which a quorum shall be one-third of the exact number of
directors fixed from time to time in accordance
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with the Certificate of Incorporation, a quorum of the Board of Directors shall
consist of a majority of the exact number of directors fixed from time to time
by the Board of Directors in accordance with the Certificate of Incorporation;
provided, however, at any meeting whether a quorum be present or otherwise, a
majority of the directors present may adjourn from time to time until the time
fixed for the next regular meeting of the Board of Directors, without notice
other than by announcement at the meeting.
(b) At each meeting of the Board of Directors at which a quorum
is present, all questions and business shall be determined by the affirmative
vote of a majority of the directors present, unless a different vote be required
by law, the Certificate of Incorporation or these Bylaws.
Section 23. Action Without 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 of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 24. Fees And Compensation. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
Section 25. Committees.
(a) Executive Committee. The Board of Directors may by
resolution passed by a majority of the whole Board of Directors appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and 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, including without limitation the power or
authority to declare a dividend, to authorize the issuance of stock and to adopt
a certificate of ownership and merger, 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 (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the Board of Directors fix the designations and any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
corporation or fix the number of shares of any series of stock or authorize the
increase or decrease of the shares of any series), 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
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stockholders a dissolution of the corporation or a revocation of a dissolution,
or amending the bylaws of the corporation.
(b) Other Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, from time to time appoint
such other committees as may be permitted by law. Such other committees
appointed by the Board of Directors shall consist of one (1) or more members of
the Board of Directors and shall have such powers and perform such duties as may
be prescribed by the resolution or resolutions creating such committees, but in
no event shall such committee have the powers denied to the Executive Committee
in these Bylaws.
(c) Term. Each member of a committee of the Board of Directors shall
serve a term on the committee coexistent with such member's term on the Board of
Directors. The Board of Directors, subject to the provisions of subsections (a)
or (b) of this Bylaw may at any time increase or decrease the number of members
of a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. 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, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
(d) Meetings. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 25 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when notice
thereof has been given to each member of such committee, no further notice of
such regular meetings need be given thereafter. Special meetings of any such
committee may be held at any place which has been determined from time to time
by such committee, and may be called by any director who is a member of such
committee, upon written notice to the members of such committee of the time and
place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special 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. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.
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Section 26. Organization. At every meeting of the directors, the Chairman
of the Board of Directors, or, if a Chairman has not been appointed or is
absent, the President, or if the President is absent, the most senior Vice
President, or, in the absence of any such officer, a chairman of the meeting
chosen by a majority of the directors present, shall preside over the meeting.
The Secretary, or in his absence, an Assistant Secretary directed to do so by
the President, shall act as secretary of the meeting.
ARTICLE V
OFFICERS
Section 27. Officers Designated. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer, the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the
officers of the corporation shall be fixed by or in the manner designated by the
Board of Directors.
Section 28. Tenure and Duties of Officers.
(a) General. All officers shall hold office at the pleasure of the
Board of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. Any officer elected or appointed by the Board
of Directors may be removed at any time by the Board of Directors. If the office
of any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors.
(b) Duties Of Chairman Of The Board Of Directors. The Chairman of
the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28.
(c) Duties of President. The President shall preside at all
meetings of the stockholders and at all meetings of the Board of Directors,
unless the Chairman of the Board of Directors has been appointed and is present.
Unless some other officer has been elected Chief Executive Officer of the
corporation, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. The President shall perform other duties commonly incident to his
office and shall also perform such other duties and have such other powers as
the Board of Directors shall designate from time to time.
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(d) Duties of Vice Presidents. The Vice Presidents may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(e) Duties of Secretary. The Secretary shall attend all meetings of
the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
(f) Duties of Chief Financial Officer. The Chief Financial Officer
shall keep or cause to be kept the books of account of the corporation in a
thorough and proper manner and shall render statements of the financial affairs
of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and perform the duties
of the Chief Financial Officer in the absence or disability of the Chief
Financial Officer, and each Treasurer and Assistant Treasurer and each
Controller and Assistant Controller shall perform other duties commonly incident
to his office and shall also perform such other duties and have such other
powers as the Board of Directors or the President shall designate from time to
time.
Section 29. Delegation of Authority. The Board of Directors may from time to
time delegate the powers or duties of any officer to any other officer or agent,
notwithstanding any provision hereof.
Section 30. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
Section 31. Removal. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or
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superior officers upon whom such power of removal may have been conferred by the
Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND
VOTING OF SECURITIES OWNED BY THE CORPORATION
Section 32. Execution of Corporate Instruments. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the corporation, and other corporate instruments or
documents requiring the corporate seal, and certificates of shares of stock
owned by the corporation, shall be executed, signed or endorsed by the Chairman
of the Board of Directors, or the President or any Vice President, and by the
Secretary or Treasurer or any Assistant Secretary or Assistant Treasurer. All
other instruments and documents requiring the corporate signature, but not
requiring the corporate seal, may be executed as aforesaid or in such other
manner as may be directed by the Board of Directors.
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
Section 33. Voting of Securities Owned by the Corporation. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
ARTICLE VII
SHARES OF STOCK
Section 34. Form and Execution of Certificates. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. 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 of the Board of Directors, or the
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President or any Vice President and by the Treasurer or Assistant Treasurer or
the Secretary or Assistant Secretary, certifying the number of shares owned by
him in the corporation. Any or all of the signatures on the certificate may be
facsimiles. 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 with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall state
upon the face or back thereof, in full or in summary, all of the powers,
designations, preferences, and rights, and the limitations or restrictions of
the shares authorized to be issued or shall, except as otherwise required by
law, set forth on the face or back 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. Within a reasonable time after
the issuance or transfer of uncertificated stock, the corporation shall send to
the registered owner thereof a written notice containing the information
required to be set forth or stated on certificates pursuant to this section or
otherwise required by law or with respect to this section 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. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical.
Section 35. Lost Certificates. A new certificate or certificates shall 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. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, 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 or to
give the corporation a surety bond in such form and amount 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 36. Transfers.
(a) Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares.
(b) The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Delaware.
Section 37. Fixing Record Dates.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon
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which the resolution fixing the record date is adopted by the Board of
Directors, and which 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 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.
(b) Prior to the Initial Public Offering, in order that the
corporation may determine the stockholders entitled to consent to corporate
action in writing without a meeting, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which date
shall not be more than 10 days after the date upon which the resolution fixing
the record date is adopted by the Board of Directors. Any stockholder of record
seeking to have the stockholders authorize or take corporate action by written
consent shall, by written notice to the Secretary, request the Board of
Directors to fix a record date. The Board of Directors shall promptly, but in
all events within 10 days after the date on which such a request is received,
adopt a resolution fixing the record date. If no record date has been fixed by
the Board of Directors within 10 days of the date on which such a request is
received, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting, when no prior action by the Board
of Directors is required by applicable law, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be taken is
delivered to the corporation by delivery to its registered office in the State
of Delaware, its principal place of business or an officer or agent of the
corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
(c) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders 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
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
Section 38. 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 shall not be
bound to recognize any equitable or other
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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 VIII
OTHER SECURITIES OF THE CORPORATION
Section 39. Execution of Other Securities. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 34), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed thereon
or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; provided, however, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature, or where permissible facsimile signature, of a trustee under an
indenture pursuant to which such bond, debenture or other corporate security
shall be issued, the signatures of the persons signing and attesting the
corporate seal on such bond, debenture or other corporate security may be the
imprinted facsimile of the signatures of such persons. Interest coupons
appertaining to any such bond, debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an
Assistant Treasurer of the corporation or such other person as may be authorized
by the Board of Directors, or bear imprinted thereon the facsimile signature of
such person. In case any officer who shall have signed or attested any bond,
debenture or other corporate security, or whose facsimile signature shall appear
thereon or on any such interest coupon, shall have ceased to be such officer
before the bond, debenture or other corporate security so signed or attested
shall have been delivered, such bond, debenture or other corporate security
nevertheless may be adopted by the corporation and issued and delivered as
though the person who signed the same or whose facsimile signature shall have
been used thereon had not ceased to be such officer of the corporation.
ARTICLE IX
DIVIDENDS
Section 40. Declaration of 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 pursuant to law at any regular
or special meeting. 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 41. Dividend Reserve. 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 purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
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ARTICLE X
FISCAL YEAR
Section 42. Fiscal Year. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
Section 43. Indemnification Of Directors, Officers, Employees And Other
Agents.
(a) Directors and Officers. The corporation shall indemnify its
directors and officers to the fullest extent not prohibited by the Delaware
General Corporation Law; provided, however, that the corporation may modify the
extent of such indemnification by individual contracts with its directors and
officers; and, provided, further, that the corporation shall not be required to
indemnify any director or officer in connection with any proceeding (or part
thereof) initiated by such person unless (i) such indemnification is expressly
required to be made by law, (ii) the proceeding was authorized by the Board of
Directors of the corporation, (iii) such indemnification is provided by the
corporation, in its sole discretion, pursuant to the powers vested in the
corporation under the Delaware General Corporation Law or (iv) such
indemnification is required to be made under subsection (d).
(b) Employees and Other Agents. The corporation shall have power to
indemnify its employees and other agents as set forth in the Delaware General
Corporation Law.
(c) Expenses. The corporation shall advance to any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or officer, of
the corporation, or is or was serving at the request of the corporation as a
director or executive officer of another corporation, partnership, joint
venture, trust or other enterprise, prior to the final disposition of the
proceeding, promptly following request therefor, all expenses incurred by any
director or officer in connection with such proceeding upon receipt of an
undertaking by or on behalf of such person to repay said amounts if it should be
determined ultimately that such person is not entitled to be indemnified under
this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Bylaw, no advance shall be made by the corporation to an
officer of the corporation (except by reason of the fact that such officer is or
was a director of the corporation in which event this paragraph shall not apply)
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative, if a determination is reasonably and promptly made (i) by the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to the proceeding, or (ii) if such quorum is not obtainable,
or, even if obtainable, a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, that the facts known to the
decision-making party at the time such determination is made demonstrate clearly
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and convincingly that such person acted in bad faith or in a manner that such
person did not believe to be in or not opposed to the best interests of the
corporation.
(d) Enforcement. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and officers
under this Bylaw shall be deemed to be contractual rights and be effective to
the same extent and as if provided for in a contract between the corporation and
the director or officer. Any right to indemnification or advances granted by
this Bylaw to a director or officer shall be enforceable by or on behalf of the
person holding such right in any court of competent jurisdiction if (i) the
claim for indemnification or advances is denied, in whole or in part, or (ii) no
disposition of such claim is made within ninety (90) days of request therefor.
The claimant in such enforcement action, if successful in whole or in part,
shall be entitled to be paid also the expense of prosecuting his claim. In
connection with any claim for indemnification, the corporation shall be entitled
to raise as a defense to any such action that the claimant has not met the
standards of conduct that make it permissible under the Delaware General
Corporation Law for the corporation to indemnify the claimant for the amount
claimed. In connection with any claim by an officer of the corporation (except
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such executive officer is or was a
director of the corporation) for advances, the corporation shall be entitled to
raise a defense as to any such action clear and convincing evidence that such
person acted in bad faith or in a manner that such person did not believe to be
in or not opposed to the best interests of the corporation, or with respect to
any criminal action or proceeding that such person acted without reasonable
cause to believe that his conduct was lawful. Neither the failure of the
corporation (including its Board of Directors, independent legal counsel or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in the Delaware
General Corporation Law, nor an actual determination by the corporation
(including its Board of Directors, independent legal counsel or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that claimant has not
met the applicable standard of conduct.
(e) Non-Exclusivity Of Rights. The rights conferred on any person by
this Bylaw shall not be exclusive of any other right which such person may have
or hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law.
(f) Survival Of Rights. The rights conferred on any person by this
Bylaw shall continue as to a person who has ceased to be a director, officer,
employee or other agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
(g) Insurance. To the fullest extent permitted by the Delaware
General Corporation Law, the corporation, upon approval by the Board of
Directors, may purchase
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insurance on behalf of any person required or permitted to be indemnified
pursuant to this Bylaw.
(h) Amendments. Any repeal or modification of this Bylaw shall only
be prospective and shall not affect the rights under this Bylaw in effect at the
time of the alleged occurrence of any action or omission to act that is the
cause of any proceeding against any agent of the corporation.
(i) Saving Clause. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law.
(j) Certain Definitions. For the purposes of this Bylaw, the
following definitions shall apply:
(k) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(1) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding.
(2) The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who 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, shall stand in the same position under the provisions
of this Bylaw with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
(3) References to a "director," "executive officer," "officer,"
"employee," or "agent" of the corporation shall include, without limitation,
situations where such person is serving at the request of the corporation as,
respectively, a director, executive officer, officer, employee, trustee or agent
of another corporation, partnership, joint venture, trust or other enterprise.
(4) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect to
an employee
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benefit plan, its participants, or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of the corporation" as
referred to in this Bylaw.
ARTICLE XII
NOTICES
Section 44. Notices.
(a) Notice To Stockholders. Whenever, under any provisions of
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail, postage
prepaid, and addressed to his last known post office address as shown by the
stock record of the corporation or its transfer agent.
(b) Notice to Directors. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by facsimile,
telex or telegram, except that such notice other than one which is delivered
personally shall be sent to such address as such director shall have filed in
writing with the Secretary, or, in the absence of such filing, to the last known
post office address of such director.
(c) Affidavit of Mailing. An affidavit of mailing, executed by a
duly authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(d) Time Notices Deemed Given. All notices given by mail, as above
provided, shall be deemed to have been given as at the time of mailing, and all
notices given by facsimile, telex or telegram shall be deemed to have been given
as of the sending time recorded at time of transmission.
(e) Methods of Notice. It shall not be necessary that the same
method of giving notice be employed in respect of all directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
(1) Failure to Receive Notice. The period or limitation of
time within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
(2) Notice to Person With Whom Communication is Unlawful.
Whenever notice is required to be given, under any provision of law or of the
Certificate of Incorporation or Bylaws of the corporation, to any person with
whom communication is
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unlawful, the giving of such notice to such person shall not be required and
there shall be no duty to apply to any governmental authority or agency for a
license or permit to give such notice to such person. Any action or meeting
which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given. In the event that the action taken by the corporation is
such as to require the filing of a certificate under any provision of the
Delaware General Corporation Law, the certificate shall state, if such is the
fact and if notice is required, that notice was given to all persons entitled to
receive notice except such persons with whom communication is unlawful.
(3) Notice to Person With Undeliverable Address. Whenever
notice is required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph.
ARTICLE XIII
AMENDMENTS
Section 45. Amendments. Subject to paragraph (h) of Section 43 of the
Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the Voting Stock. The
Board of Directors shall also have the power to adopt, amend, or repeal Bylaws.
ARTICLE XIV
RIGHT OF FIRST REFUSAL
Section 46. Right of First Refusal. No stockholder shall sell, assign,
pledge, or in any manner transfer any of the shares of stock of the corporation
or any right or interest therein, whether voluntarily or by operation of law, or
by gift or otherwise, except by a transfer which meets the requirements
hereinafter set forth in this bylaw:
(a) If the stockholder desires to sell or otherwise transfer any
of his shares of stock, then the stockholder shall first give written notice
thereof to the corporation. The notice shall name the proposed transferee and
state the number of shares to be transferred, the proposed consideration, and
all other terms and conditions of the proposed transfer.
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(b) For thirty (30) days following receipt of such notice, the
corporation shall have the option to purchase all (but not less than all) of the
shares specified in the notice at the price and upon the terms set forth in such
notice; provided, however, that, with the consent of the stockholder, the
corporation shall have the option to purchase a lesser portion of the shares
specified in said notice at the price and upon the terms set forth therein. In
the event of a gift, property settlement or other transfer in which the proposed
transferee is not paying the full price for the shares, and that is not
otherwise exempted from the provisions of this Section 46, the price shall be
deemed to be the fair market value of the stock at such time as determined in
good faith by the Board of Directors. In the event the corporation elects to
purchase all of the shares or, with consent of the stockholder, a lesser portion
of the shares, it shall give written notice to the transferring stockholder of
its election and settlement for said shares shall be made as provided below in
paragraph (d).
(c) The corporation may assign its rights hereunder.
(d) In the event the corporation and/or its assignee(s) elect to
acquire any of the shares of the transferring stockholder as specified in said
transferring stockholder's notice, the Secretary of the corporation shall so
notify the transferring stockholder and settlement thereof shall be made in cash
within thirty (30) days after the Secretary of the corporation receives said
transferring stockholder's notice; provided that if the terms of payment set
forth in said transferring stockholder's notice were other than cash against
delivery, the corporation and/or its assignee(s) shall pay for said shares on
the same terms and conditions set forth in said transferring stockholder's
notice.
(e) In the event the corporation and/or its assignees(s) do not
elect to acquire all of the shares specified in the transferring stockholder's
notice, said transferring stockholder may, within the sixty-day period following
the expiration of the option rights granted to the corporation and/or its
assignees(s) herein, transfer the shares specified in said transferring
stockholder's notice which were not acquired by the corporation and/or its
assignees(s) as specified in said transferring stockholder's notice. All shares
so sold by said transferring stockholder shall continue to be subject to the
provisions of this bylaw in the same manner as before said transfer.
(f) Anything to the contrary contained herein notwithstanding, the
following transactions shall be exempt from the provisions of this bylaw:
(1) A stockholder's transfer of any or all shares held either
during such stockholder's lifetime or on death by will or intestacy to such
stockholder's immediate family or to any custodian or trustee for the account of
such stockholder or such stockholder's immediate family. "Immediate family" as
used herein shall mean spouse, lineal descendant, father, mother, brother, or
sister of the stockholder making such transfer.
(2) A stockholder's bona fide pledge or mortgage of any
shares with a commercial lending institution, provided that any subsequent
transfer of said shares by said institution shall be conducted in the manner set
forth in this bylaw.
(3) A stockholder's transfer of any or all of such
stockholder's shares to the corporation or to any other stockholder of the
corporation.
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(4) A stockholder's transfer of any or all of such
stockholder's shares to a person who, at the time of such transfer, is an
officer or director of the corporation.
(5) A corporate stockholder's transfer of any or all of its
shares pursuant to and in accordance with the terms of any merger,
consolidation, reclassification of shares or capital reorganization of the
corporate stockholder, or pursuant to a sale of all or substantially all of the
stock or assets of a corporate stockholder.
(6) A corporate stockholder's transfer of any or all of its
shares to any or all of its stockholders.
(7) A transfer by a stockholder which is a limited or general
partnership to any or all of its partners or former partners.
In any such case, the transferee, assignee, or other recipient shall receive
and hold such stock subject to the provisions of this bylaw, and there shall be
no further transfer of such stock except in accord with this bylaw.
(g) The provisions of this bylaw may be waived with respect to any
transfer either by the corporation, upon duly authorized action of its Board of
Directors, or by the stockholders, upon the express written consent of the
owners of a majority of the voting power of the corporation (excluding the votes
represented by those shares to be transferred by the transferring stockholder).
This bylaw may be amended or repealed either by a duly authorized action of the
Board of Directors or by the stockholders, upon the express written consent of
the owners of a majority of the voting power of the corporation.
(h) Any sale or transfer, or purported sale or transfer, of
securities of the corporation shall be null and void unless the terms,
conditions, and provisions of this bylaw are strictly observed and followed.
(i) The foregoing right of first refusal shall terminate on either
of the following dates, whichever shall first occur:
(1) On June 1, 2007; or
(2) Upon the date securities of the corporation are first
offered to the public pursuant to a registration statement filed with, and
declared effective by, the United States Securities and Exchange Commission
under the Securities Act of 1933, as amended.
(j) The certificates representing shares of stock of the
corporation shall bear on their face the following legend so long as the
foregoing right of first refusal remains in effect:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE
CORPORATION AND/OR ITS ASSIGNEE(S), AS PROVIDED IN THE
BYLAWS OF THE CORPORATION."
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ARTICLE XV
LOANS TO OFFICERS
Section 47. Loans to Officers. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee 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. Nothing in these Bylaws shall be deemed
to deny, limit or restrict the powers of guaranty or warranty of the corporation
at common law or under any statute.
ARTICLE XVI
MISCELLANEOUS
Section 48. Annual Report.
(a) Subject to the provisions of paragraph (b) of this Bylaw,
the Board of Directors shall cause an annual report to be sent to each
stockholder of the corporation not later than one hundred twenty (120) days
after the close of the corporation's fiscal year. Such report shall include a
balance sheet as of the end of such fiscal year and an income statement and
statement of changes in financial position for such fiscal year, accompanied by
any report thereon of independent accounts or, if there is no such report, the
certificate of an authorized officer of the corporation that such statements
were prepared without audit from the books and records of the corporation. When
there are more than 100 stockholders of record of the corporation's shares, as
determined by Section 605 of the California Corporations Code, additional
information as required by Section 1501(b) of the California Corporations Code
shall also be contained in such report, provided that if the corporation has a
class of securities registered under Section 12 of the 1934 Act, that Act shall
take precedence. Such report shall be sent to stockholders at least fifteen (15)
days prior to the next annual meeting of stockholders after the end of the
fiscal year to which it relates.
(b) If and so long as there are fewer than 100 holders of record
of the corporation's shares, the requirement of sending of an annual report to
the stockholders of the corporation is hereby expressly waived.
24
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I OFFICES.............................................................................. 1
Section 1. Registered Office.................................................................... 1
Section 2. Other Offices........................................................................ 1
ARTICLE II CORPORATE SEAL....................................................................... 1
Section 3. Corporate Seal....................................................................... 1
ARTICLE III STOCKHOLDERS' MEETINGS............................................................... 1
Section 4. Place Of Meetings.................................................................... 1
Section 5. Annual Meeting....................................................................... 1
Section 6. Special Meetings..................................................................... 3
Section 7. Notice Of Meetings................................................................... 4
Section 8. Quorum............................................................................... 4
Section 9. Adjournment and Notice of Adjourned Meetings......................................... 4
Section 10. Voting Rights........................................................................ 5
Section 11. Joint Owners of Stock................................................................ 5
Section 12. List Of Stockholders................................................................. 5
Section 13. Action Without Meeting............................................................... 5
Section 14. Organization......................................................................... 6
ARTICLE IV DIRECTORS............................................................................ 7
Section 15. Number and Term of Office............................................................ 7
Section 16. Powers............................................................................... 7
Section 17. Classes of Directors................................................................. 7
Section 18. Vacancies............................................................................ 7
Section 19. Resignation.......................................................................... 7
Section 20. Removal.............................................................................. 8
Section 21. Meetings............................................................................. 8
Section 22. Quorum And Voting.................................................................... 9
Section 23. Action Without Meeting............................................................... 9
Section 24. Fees And Compensation................................................................ 9
Section 25. Committees........................................................................... 9
Section 26. Organization......................................................................... 11
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE V OFFICERS............................................................................. 11
Section 27. Officers Designated.................................................................. 11
Section 28. Tenure and Duties of Officers........................................................ 11
Section 29. Delegation of Authority.............................................................. 12
Section 30. Resignations......................................................................... 13
Section 31. Removal.............................................................................. 13
ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE CORPORATION. 13
Section 32. Execution of Corporate Instruments................................................... 13
Section 33. Voting of Securities Owned by the Corporation........................................ 13
ARTICLE VII SHARES OF STOCK...................................................................... 14
Section 34. Form and Execution of Certificates................................................... 14
Section 35. Lost Certificates.................................................................... 14
Section 36. Transfers............................................................................ 15
Section 37. Fixing Record Dates.................................................................. 15
Section 38. Registered Stockholders.............................................................. 16
ARTICLE VIII OTHER SECURITIES OF THE CORPORATION.................................................. 16
Section 39. Execution of Other Securities........................................................ 16
ARTICLE IX DIVIDENDS............................................................................ 17
Section 40. Declaration of Dividends............................................................. 17
Section 41. Dividend Reserve..................................................................... 17
ARTICLE X FISCAL YEAR.......................................................................... 17
Section 42. Fiscal Year.......................................................................... 17
ARTICLE XI INDEMNIFICATION...................................................................... 17
Section 43. Indemnification Of Directors, Officers, Employees And Other Agents................... 17
ARTICLE XII NOTICES.............................................................................. 20
Section 44. Notices.............................................................................. 20
ARTICLE XIII AMENDMENTS........................................................................... 22
Section 45. Amendments........................................................................... 22
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
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<S> <C>
ARTICLE XIV RIGHT OF FIRST REFUSAL............................................................... 22
Section 46. Right of First Refusal............................................................... 22
ARTICLE XV LOANS TO OFFICERS.................................................................... 24
Section 47. Loans to Officers.................................................................... 24
ARTICLE XVI MISCELLANEOUS........................................................................ 24
Section 48. Annual Report........................................................................ 24
</TABLE>
iii
<PAGE>
Exhibit 3.4
BYLAWS
OF
DOCENT, INC.
(A DELAWARE CORPORATION)
<PAGE>
BYLAWS
OF
DOCENT, INC.
(A DELAWARE CORPORATION)
Article I
Offices
Section 1. Registered Office. The registered office of the corporation in
the State of Delaware shall be in the City of Dover, County of Kent.
Section 2. Other Offices. The corporation shall also have and maintain an
office or principal place of business at such place as may be fixed by the Board
of Directors, and 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
Corporate Seal
Section 3. Corporate Seal. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate Seal-
Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
Article III
Stockholders' Meetings
Section 4. Place Of Meetings. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
Section 5. Annual Meetings.
(a) The annual meeting of the stockholders of the corporation, for
the purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To be
properly brought
1.
<PAGE>
before an annual 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 an
annual meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not later than the close of
business on the sixtieth (60th) day nor earlier than the close of business on
the ninetieth (90th) day prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting has been changed by
more than thirty (30) days from the date contemplated at the time of the
previous year's proxy statement, notice by the stockholder to be timely must be
so received not earlier than the close of business on the ninetieth (90th) day
prior to such annual meeting and not later than the close of business on the
later of the sixtieth (60th) day prior to such annual meeting or, in the event
public announcement of the date of such annual meeting is first made by the
corporation fewer than seventy (70) days prior to the date of such annual
meeting, the close of business on the tenth (10th) day following the day on
which public announcement of the date of such meeting is first made by the
corporation. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and address, as they appear on the corporation's books, of the stockholder
proposing such business, (iii) the class and number of shares of the corporation
which are beneficially owned by the stockholder, (iv) any material interest of
the stockholder in such business and (v) any other information that is required
to be provided by the stockholder pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), in his capacity as
a proponent to a stockholder proposal. Notwithstanding the foregoing, in order
to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the procedures set
forth in this paragraph (b). The chairman of the annual meeting shall, if the
facts warrant, determine and declare at the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this paragraph (b), and, if he should so determine, he shall so declare at the
meeting that any such business not properly brought before the meeting shall not
be transacted.
(c) Only persons who are nominated in accordance with the procedures
set forth in this paragraph (c) shall be eligible for election as directors.
Nominations of persons for election to the Board of Directors of the corporation
may be made at a meeting of stockholders by or at the direction of the Board of
Directors or by any stockholder of the corporation entitled to vote in the
election of directors at the meeting who complies with the notice procedures set
forth in this paragraph (c). Such nominations, other than those made by or at
the direction of the Board of Directors, shall be made pursuant to timely notice
in writing to the Secretary of the
2.
<PAGE>
corporation in accordance with the provisions of paragraph (b) of this Section
5. Such stockholder's notice shall set forth (i) as to each person, if any, whom
the stockholder proposes to nominate for election or re-election as a director:
(A) the name, age, business address and residence address of such person, (B)
the principal occupation or employment of such person, (C) the class and number
of shares of the corporation which are beneficially owned by such person, (D) a
description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nominations are to be made by the stockholder, and (E) any
other 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 1934 Act (including without
limitation such person's written consent to being named in the proxy statement,
if any, as a nominee and to serving as a director if elected); and (ii) as to
such stockholder giving notice, the information required to be provided pursuant
to paragraph (b) of this Section 5. At the request of the Board of Directors,
any person nominated by a stockholder for election as a director shall furnish
to the Secretary of the corporation that information required to be set forth in
the stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director of the corporation unless nominated
in accordance with the procedures set forth in this paragraph (c). The chairman
of the meeting shall, if the facts warrant, determine and declare at the meeting
that a nomination was not made in accordance with the procedures prescribed by
these Bylaws, and if he should so determine, he shall so declare at the meeting,
and the defective nomination shall be disregarded.
(d) For purposes of this Section 5, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or 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 1934 Act.
Section 6. Special Meetings.
(a) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, (iii) holders of fifty percent of
the Company's voting stock, or (iv) the Board of Directors pursuant to a
resolution adopted by a majority 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 of Directors for
adoption), and shall be held at such place, on such date, and at such time as
the Board of Directors, shall fix.
(b) If a special meeting is called by any person or persons other
than the Board of Directors, the request shall be in writing, specifying the
general nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the Chairman of the Board of Directors, the Chief Executive
Officer, or the Secretary of the corporation. No business may be transacted at
such special meeting otherwise than specified in such notice. The Board of
Directors shall determine the time and place of such special meeting, which
shall be held not less than thirty-five (35) nor more than one hundred twenty
(120) days after the date of the receipt of the request. Upon
3.
<PAGE>
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within sixty (60) days after the receipt of the request, the person or
persons requesting the meeting may set the time and place of the meeting and
give the notice. Nothing contained in this paragraph (b) shall be construed as
limiting, fixing, or affecting the time when a meeting of stockholders called by
action of the Board of Directors may be held.
Section 7. Notice Of Meetings. Except as otherwise provided by law or the
Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
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. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.
Section 8. Quorum. At all meetings of stockholders, except where otherwise
provided by statute or by the Certificate of Incorporation, or by these Bylaws,
the presence, in person or by proxy duly authorized, of the holders of a
majority of the outstanding shares of stock entitled to vote shall constitute a
quorum for the transaction of business. In the absence of a quorum, any meeting
of stockholders may be adjourned, from time to time, either by the chairman of
the meeting or by vote of the holders of a majority of the shares represented
thereat, but no other business shall be transacted at such meeting. The
stockholders present at a duly called or convened meeting, at which a quorum is
present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by law, the Certificate of Incorporation or these Bylaws, all
action taken by the holders of a majority of the vote cast, excluding
abstentions, at any meeting at which a quorum is present shall be valid and
binding upon the corporation; provided, however, that directors shall be elected
by a plurality of the votes of the shares present in person or represented by
proxy at the meeting and entitled to vote on the election of directors. Where a
separate vote by a class or classes or series is required, except where
otherwise provided by the statute or by the Certificate of Incorporation or
these Bylaws, a majority of the outstanding shares of such class or classes or
series, present in person or represented by proxy, shall constitute a quorum
entitled to take action with respect to that vote on that matter and, except
where otherwise provided by the statute or by the Certificate of Incorporation
or these Bylaws, the affirmative vote of the majority (plurality, in the case of
the election of directors) of the votes cast, including abstentions, by the
holders of shares of such class or classes or series shall be the act of such
class or classes or series.
4.
<PAGE>
Section 9. Adjournment And Notice Of Adjourned Meetings. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes, excluding abstentions. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting, the corporation may transact any business which might
have been transacted at the original meeting. 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 10. Voting Rights. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote shall have the right to do so either in person or by an
agent or agents authorized by a proxy granted in accordance with Delaware law.
An agent so appointed need not be a stockholder. No proxy shall be voted after
three (3) years from its date of creation unless the proxy provides for a longer
period.
Section 11. Joint Owners Of Stock. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the General Corporation Law of Delaware, Section 217(b).
If the instrument filed with the Secretary shows that any such tenancy is held
in unequal interests, a majority or even-split for the purpose of subsection (c)
shall be a majority or even-split in interest.
Section 12. List Of Stockholders. The Secretary shall prepare and make, at
least ten (10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at said meeting, arranged in alphabetical order,
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 specified, at the place where
the meeting is to be held. The list shall be produced and kept at the time and
place of meeting during the whole time thereof and may be inspected by any
stockholder who is present.
5.
<PAGE>
Section 13. Action Without Meeting.
(a) Unless otherwise provided in the Certificate of Incorporation,
any action required by statute to be taken at any annual or special meeting of
the stockholders, or any action which may be taken at any annual or special
meeting of the 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 such
action at a meeting at which all shares entitled to vote thereon were present
and voted.
(b) Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days of
the earliest dated consent delivered to the corporation in the manner herein
required, written consents signed by a sufficient number of stockholders to take
action are delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
(c) 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. If the action which is
consented to is such as would have required the filing of a certificate under
any section of the General Corporation Law of the State of Delaware if such
action had been voted on by stockholders at a meeting thereof, then the
certificate filed under such section shall state, in lieu of any statement
required by such section concerning any vote of stockholders, that written
consent has been given in accordance with Section 228 of the General Corporation
Law of Delaware.
(d) Notwithstanding the foregoing, no such action by written consent
may be taken following the closing of the initial public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "1933 Act"), covering the offer and sale of Common Stock of the corporation
(the "Initial Public Offering").
Section 14. Organization.
(a) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
(b) The Board of Directors of the corporation shall be entitled to
make such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if
6.
<PAGE>
any, the chairman of the meeting shall have the right and authority to prescribe
such rules, regulations and procedures and to do all such acts as, in the
judgment of such chairman, are necessary, appropriate or convenient for the
proper conduct of the meeting, including, without limitation, establishing an
agenda or order of business for the meeting, rules and procedures for
maintaining order at the meeting and the safety of those present, limitations on
participation in such meeting to stockholders of record of the corporation and
their duly authorized and constituted proxies and such other persons as the
chairman shall permit, restrictions on entry to the meeting after the time fixed
for the commencement thereof, limitations on the time allotted to questions or
comments by participants and regulation of the opening and closing of the polls
for balloting on matters which are to be voted on by ballot. Unless and to the
extent determined by the Board of Directors or the chairman of the meeting,
meetings of stockholders shall not be required to be held in accordance with
rules of parliamentary procedure.
Article IV
Directors
Section 15. Number And Term Of Office. The authorized number of directors
of the corporation shall be fixed in accordance with the Certificate of
Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws.
Section 16. Powers. The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.
Section 17. Classes Of Directors. Unless otherwise provided in the
Certificate of Incorporation and subject to the rights of the holders of any
series of Preferred Stock to elect additional directors under specified
circumstances, following the closing of the Initial Public Offering, the
directors shall be divided into three classes designated as Class I, Class II,
and Class III, respectively. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the Board of Directors.
At the first annual meeting of stockholders following the closing of the Initial
Public Offering, the term of office of the Class I directors shall expire and
Class I directors shall be elected for a full term of three years. At the second
annual meeting of stockholders following the Closing of the Initial Public
Offering, the term of office of the Class II directors shall expire and Class II
directors shall be elected for a full term of three years. At the third annual
meeting of stockholders following the closing of the Initial Public Offering,
the term of office of the Class III directors shall expire and Class III
directors shall be elected for a full term of three years. At each succeeding
annual meeting of stockholders, directors shall be elected for a full term of
three years to succeed the directors of the class whose terms expire at such
annual meeting.
7.
<PAGE>
Notwithstanding the foregoing provisions of this Article, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
Section 18. Vacancies. Unless otherwise provided in the Certificate of
Incorporation, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by stockholders, be filled only
by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the director for which the vacancy was created or occurred and
until such director's successor shall have been elected and qualified. A vacancy
in the Board of Directors shall be deemed to exist under this Bylaw in the case
of the death, removal or resignation of any director.
Section 19. Resignation. Any director may resign at any time by delivering
his written resignation to the Secretary, such resignation to specify whether it
will be effective at a particular time, upon receipt by the Secretary or at the
pleasure of the Board of Directors. If no such specification is made, it shall
be deemed effective at the pleasure of the Board of Directors. When one or more
directors shall resign from the Board of Directors, effective at a future date,
a majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon
to take effect when such resignation or resignations shall become effective, and
each Director so chosen shall hold office for the unexpired portion of the term
of the Director whose place shall be vacated and until his successor shall have
been duly elected and qualified.
Section 20. Removal. Subject to the rights of the holders of any series of
Preferred Stock, the Board of Directors or any individual director may be
removed from office at any time (i) with cause by the affirmative vote of the
holders of a majority of the voting power of all the then-outstanding shares of
voting stock of the corporation entitled to vote at an election of directors
(the "Voting Stock") or (ii) without cause by the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all the then-outstanding shares of the Voting Stock.
8.
<PAGE>
Section 21. Meetings.
(a) Annual Meetings. The annual meeting of the Board of Directors
shall be held immediately before or after the annual meeting of stockholders and
at the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.
(b) Regular Meetings. Except as hereinafter otherwise provided,
regular meetings of the Board of Directors shall be held in the office of the
corporation required to be maintained pursuant to Section 2 hereof. Unless
otherwise restricted by the Certificate of Incorporation, regular meetings of
the Board of Directors may also be held at any place within or without the State
of Delaware which has been designated by resolution of the Board of Directors or
the written consent of all directors.
(c) Special Meetings. Unless otherwise restricted by the Certificate
of Incorporation, special meetings of the Board of Directors may be held at any
time and place within or without the State of Delaware whenever called by the
Chairman of the Board, the President or any two of the directors.
(d) Telephone Meetings. Any member of the Board of Directors, or of
any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
(e) Notice Of Meetings. Notice of the time and place of all special
meetings of the Board of Directors shall be orally or in writing, by telephone,
including a voice messaging system or other system or technology designed to
record and communicate messages, facsimile, telegraph or telex, or by electronic
mail or other electronic means, during normal business hours, at least twenty-
four (24) hours before the date and time of the meeting, or sent in writing to
each director by first class mail, charges prepaid, at least three (3) days
before the date of the meeting. Notice of any meeting may be waived in writing
at any time before or after the meeting and will be waived by any director by
attendance thereat, except when the director attends the 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.
(f) Waiver Of Notice. The transaction of all business at any meeting
of the Board of Directors, or any committee thereof, however called or noticed,
or wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum be present and if, either before or after
the meeting, each of the directors not present shall sign a written waiver of
notice. All such waivers shall be filed with the corporate records or made a
part of the minutes of the meeting.
9.
<PAGE>
Section 22. Quorum And Voting.
(a) Unless the Certificate of Incorporation requires a greater number
and except with respect to indemnification questions arising under Section 43
hereof, for which a quorum shall be one-third of the exact number of directors
fixed from time to time in accordance with the Certificate of Incorporation, a
quorum of the Board of Directors shall consist of a majority of the exact number
of directors fixed from time to time by the Board of Directors in accordance
with the Certificate of Incorporation; provided, however, at any meeting whether
a quorum be present or otherwise, a majority of the directors present may
adjourn from time to time until the time fixed for the next regular meeting of
the Board of Directors, without notice other than by announcement at the
meeting.
(b) At each meeting of the Board of Directors at which a quorum is
present, all questions and business shall be determined by the affirmative vote
of a majority of the directors present, unless a different vote be required by
law, the Certificate of Incorporation or these Bylaws.
Section 23. Action Without 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 of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 24. Fees And Compensation. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
Section 25. Committees.
(a) Executive Committee. The Board of Directors may appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and 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 (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by
Delaware the General Corporation Law to be submitted to stockholders for
approval, or (ii) adopting, amending or repealing any bylaw of the corporation.
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(b) Other Committees. The Board of Directors may, from time to time,
appoint such other committees as may be permitted by law. Such other committees
appointed by the Board of Directors shall consist of one (1) or more members of
the Board of Directors and shall have such powers and perform such duties as may
be prescribed by the resolution or resolutions creating such committees, but in
no event shall any such committee have the powers denied to the Executive
Committee in these Bylaws.
(c) Term. Each member of a committee of the Board of Directors shall
serve a term on the committee coexistent with such member's term on the Board of
Directors. The Board of Directors, subject to the provisions of subsections (a)
or (b) of this Bylaw may at any time increase or decrease the number of members
of a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. 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, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
(d) Meetings. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 25 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when notice
thereof has been given to each member of such committee, no further notice of
such regular meetings need be given thereafter. Special meetings of any such
committee may be held at any place which has been determined from time to time
by such committee, and may be called by any director who is a member of such
committee, upon written notice to the members of such committee of the time and
place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special 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. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.
Section 26. Organization. At every meeting of the directors, the Chairman
of the Board of Directors, or, if a Chairman has not been appointed or is
absent, the President, or if the President is absent, the most senior Vice
President, or, in the absence of any such officer, a
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chairman of the meeting chosen by a majority of the directors present, shall
preside over the meeting. The Secretary, or in his absence, an Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
Article V
Officers
Section 27. Officers Designated. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer and the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the corporation shall be fixed by or in the manner designated by the Board of
Directors.
Section 28. Tenure And Duties Of Officers.
(a) General. All officers shall hold office at the pleasure of the
Board of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. Any officer elected or appointed by the Board
of Directors may be removed at any time by the Board of Directors. If the office
of any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors.
(b) Duties Of Chairman Of The Board Of Directors. The Chairman of the
Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28.
(c) Duties Of President. The President shall preside at all meetings
of the stockholders and at all meetings of the Board of Directors, unless the
Chairman of the Board of Directors has been appointed and is present. Unless
some other officer has been elected Chief Executive Officer of the corporation,
the President shall be the chief executive officer of the corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and officers of the corporation. The
President shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers as the Board of
Directors shall designate from time to time.
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(d) Duties Of Vice Presidents. The Vice Presidents may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(e) Duties Of Secretary. The Secretary shall attend all meetings of
the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
(f) Duties Of Chief Financial Officer. The Chief Financial Officer
shall keep or cause to be kept the books of account of the corporation in a
thorough and proper manner and shall render statements of the financial affairs
of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and perform the duties
of the Chief Financial Officer in the absence or disability of the Chief
Financial Officer, and each Treasurer and Assistant Treasurer and each
Controller and Assistant Controller shall perform other duties commonly incident
to his office and shall also perform such other duties and have such other
powers as the Board of Directors or the President shall designate from time to
time.
Section 29. Delegation Of Authority. The Board of Directors may from time
to time delegate the powers or duties of any officer to any other officer or
agent, notwithstanding any provision hereof.
Section 30. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
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Section 31. Removal. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
Article VI
Execution Of Corporate Instruments And Voting Of Securities Owned By The
Corporation
Section 32. Execution Of Corporate Instruments. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the corporation, and other corporate instruments or
documents requiring the corporate seal, and certificates of shares of stock
owned by the corporation, shall be executed, signed or endorsed by the Chairman
of the Board of Directors, or the President or any Vice President, and by the
Secretary or Treasurer or any Assistant Secretary or Assistant Treasurer. All
other instruments and documents requiring the corporate signature, but not
requiring the corporate seal, may be executed as aforesaid or in such other
manner as may be directed by the Board of Directors.
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
Section 33. Voting Of Securities Owned By The Corporation. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
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Article VII
Shares Of Stock
Section 34. Form And Execution Of Certificates. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. 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 of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Any or all of the signatures on the certificate may be
facsimiles. 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 with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall state
upon the face or back thereof, in full or in summary, all of the powers,
designations, preferences, and rights, and the limitations or restrictions of
the shares authorized to be issued or shall, except as otherwise required by
law, set forth on the face or back 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. Within a reasonable time after
the issuance or transfer of uncertificated stock, the corporation shall send to
the registered owner thereof a written notice containing the information
required to be set forth or stated on certificates pursuant to this section or
otherwise required by law or with respect to this section 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. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical.
Section 35. Lost Certificates. A new certificate or certificates shall 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. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, 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 or to
give the corporation a surety bond in such form and amount 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 36. Transfers.
(a) Transfers of record of shares of stock of the corporation shall
be made only upon its books by the holders thereof, in person or by attorney
duly authorized, and upon the surrender of a properly endorsed certificate or
certificates for a like number of shares.
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(b) The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Delaware.
Section 37. Fixing Record Dates.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which 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 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 38. 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 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 VIII
Other Securities Of The Corporation
Section 39. Execution Of Other Securities. All bonds, debentures and other
corporate securities of the corporation, other than stock certificates (covered
in Section 34), may be signed by the Chairman of the Board of Directors, the
President or any Vice President, or such other person as may be authorized by
the Board of Directors, and the corporate seal impressed thereon or a facsimile
of such seal imprinted thereon and attested by the signature of the Secretary or
an Assistant Secretary, or the Chief Financial Officer or Treasurer or an
Assistant Treasurer; provided, however, that where any such bond, debenture or
other corporate security shall be authenticated by the manual signature, or
where permissible facsimile signature, of a trustee under an indenture pursuant
to which such bond, debenture or other corporate security shall be issued, the
signatures of the persons signing and attesting the corporate seal on such bond,
debenture or other corporate security may be the imprinted facsimile of the
signatures of such persons. Interest coupons appertaining to any such bond,
debenture or other corporate security, authenticated by a trustee as aforesaid,
shall be signed by the Treasurer or an Assistant Treasurer of the corporation or
such other person as may be authorized by the Board of Directors, or bear
imprinted thereon the facsimile signature of such person. In case any officer
who shall
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have signed or attested any bond, debenture or other corporate security, or
whose facsimile signature shall appear thereon or on any such interest coupon,
shall have ceased to be such officer before the bond, debenture or other
corporate security so signed or attested shall have been delivered, such bond,
debenture or other corporate security nevertheless may be adopted by the
corporation and issued and delivered as though the person who signed the same or
whose facsimile signature shall have been used thereon had not ceased to be such
officer of the corporation.
Article IX
Dividends
Section 40. Declaration Of 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 pursuant to law at any regular
or special meeting. 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 41. Dividend Reserve. 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 purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
Article X
Fiscal Year
Section 42. Fiscal Year. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
Article XI
Indemnification
Section 43. Indemnification Of Directors, Executive Officers, Other
Officers, Employees And Other Agents.
(a) Directors And Executive Officers. The corporation shall indemnify
its directors and executive officers (for the purposes of this Article XI,
"executive officers" shall have the meaning defined in Rule 3b-7 promulgated
under the 1934 Act) to the fullest extent not prohibited by the Delaware General
Corporation Law; provided, however, that the corporation may modify the extent
of such indemnification by individual contracts with its directors and
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executive officers; and, provided, further, that the corporation shall not be
required to indemnify any director or executive officer in connection with any
proceeding (or part thereof) initiated by such person unless (i) such
indemnification is expressly required to be made by law, (ii) the proceeding was
authorized by the Board of Directors of the corporation, (iii) such
indemnification is provided by the corporation, in its sole discretion, pursuant
to the powers vested in the corporation under the Delaware General Corporation
Law or (iv) such indemnification is required to be made under subsection (d).
(b) Other Officers, Employees and Other Agents. The corporation shall
have power to indemnify its other officers, employees and other agents as set
forth in the Delaware General Corporation Law.
(c) Expenses. The corporation shall advance to any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or executive
officer, of the corporation, or is or was serving at the request of the
corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred by any director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Bylaw, no advance shall be made by the corporation to an
executive officer of the corporation (except by reason of the fact that such
executive officer is or was a director of the corporation in which event this
paragraph shall not apply) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, if a determination is reasonably and
promptly made (i) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to the proceeding, or (ii) if such
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, that
the facts known to the decision-making party at the time such determination is
made demonstrate clearly and convincingly that such person acted in bad faith or
in a manner that such person did not believe to be in or not opposed to the best
interests of the corporation.
(d) Enforcement. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and executive
officers under this Bylaw shall be deemed to be contractual rights and be
effective to the same extent and as if provided for in a contract between the
corporation and the director or executive officer. Any right to indemnification
or advances granted by this Bylaw to a director or executive officer shall be
enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. In connection with any claim for indemnification, the
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corporation shall be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct that make it permissible under the
Delaware General Corporation Law for the corporation to indemnify the claimant
for the amount claimed. In connection with any claim by an executive officer of
the corporation (except in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
executive officer is or was a director of the corporation) for advances, the
corporation shall be entitled to raise a defense as to any such action clear and
convincing evidence that such person acted in bad faith or in a manner that such
person did not believe to be in or not opposed to the best interests of the
corporation, or with respect to any criminal action or proceeding that such
person acted without reasonable cause to believe that his conduct was lawful.
Neither the failure of the corporation (including its Board of Directors,
independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the corporation (including its Board of Directors, independent
legal counsel or its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that claimant has not met the applicable standard of conduct.
(e) Non-Exclusivity Of Rights. The rights conferred on any person by
this Bylaw shall not be exclusive of any other right which such person may have
or hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law.
(f) Survival Of Rights. The rights conferred on any person by this
Bylaw shall continue as to a person who has ceased to be a director, officer,
employee or other agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
(g) Insurance. To the fullest extent permitted by the Delaware
General Corporation Law, the corporation, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or permitted
to be indemnified pursuant to this Bylaw.
(h) Amendments. Any repeal or modification of this Bylaw shall only
be prospective and shall not affect the rights under this Bylaw in effect at the
time of the alleged occurrence of any action or omission to act that is the
cause of any proceeding against any agent of the corporation.
(i) Saving Clause. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law.
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(j) Certain Definitions. For the purposes of this Bylaw, the
following definitions shall apply:
(1) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(2) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding.
(3) The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who 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, shall stand in the same position under the provisions
of this Bylaw with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
(4) References to a "director," "executive officer," "officer,"
"employee," or "agent" of the corporation shall include, without limitation,
situations where such person is serving at the request of the corporation as,
respectively, a director, executive officer, officer, employee, trustee or agent
of another corporation, partnership, joint venture, trust or other enterprise.
(5) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect to
an employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Bylaw.
Article XII
Notices
Section 44. Notices.
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(a) Notice To Stockholders. Whenever, under any provisions of these
Bylaws, notice is required to be given to any stockholder, it shall be given in
writing, timely and duly deposited in the United States mail, postage prepaid,
and addressed to his last known post office address as shown by the stock record
of the corporation or its transfer agent.
(b) Notice To Directors. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by facsimile,
telex or telegram, except that such notice other than one which is delivered
personally shall be sent to such address as such director shall have filed in
writing with the Secretary, or, in the absence of such filing, to the last known
post office address of such director.
(c) Affidavit Of Mailing. An affidavit of mailing, executed by a duly
authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(d) Time Notices Deemed Given. All notices given by mail, as above
provided, shall be deemed to have been given as at the time of mailing, and all
notices given by facsimile, telex or telegram shall be deemed to have been given
as of the sending time recorded at time of transmission.
(e) Methods Of Notice. It shall not be necessary that the same method
of giving notice be employed in respect of all directors, but one permissible
method may be employed in respect of any one or more, and any other permissible
method or methods may be employed in respect of any other or others.
(f) Failure To Receive Notice. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
(g) Notice To Person With Whom Communication Is Unlawful. Whenever
notice is required to be given, under any provision of law or of the Certificate
of Incorporation or Bylaws of the corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
required and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action or
meeting which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given. In the event that the action taken by the corporation is
such as to require the filing of a certificate under any provision of the
Delaware General Corporation Law, the certificate shall state, if such is the
fact and if notice is required, that notice was given to all persons entitled to
receive notice except such persons with whom communication is unlawful.
21.
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(h) Notice To Person With Undeliverable Address. Whenever notice is
required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph.
Article XIII
Amendments
Section 45. Amendments. Subject to paragraph (h) of Section 43 of the
Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the Voting Stock. The
Board of Directors shall also have the power to adopt, amend, or repeal Bylaws.
Article XIII
Right Of First Refusal
Section 46. Right Of First Refusal. No holder of common stock shall sell,
assign, pledge, or in any manner transfer any of the shares of common stock of
the corporation or any right or interest therein, whether voluntarily or by
operation of law, or by gift or otherwise, except by a transfer which meets the
requirements hereinafter set forth in this bylaw:
(a) If the holder of common stock desires to sell or otherwise
transfer any of his shares of stock, then the holder of common stock shall first
give written notice thereof to the corporation. The notice shall name the
proposed transferee and state the number of shares to be transferred, the
proposed consideration, and all other terms and conditions of the proposed
transfer.
(b) For thirty (30) days following receipt of such notice, the
corporation shall have the option to purchase all (but not less than all) of the
shares specified in the notice at the price and upon the terms set forth in such
notice; provided, however, that, with the consent of the holder of common stock,
the corporation shall have the option to purchase a lesser portion of the
22.
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shares specified in said notice at the price and upon the terms set forth
therein. In the event of a gift, property settlement or other transfer in which
the proposed transferee is not paying the full price for the shares, and that is
not otherwise exempted from the provisions of this Section 46, the price shall
be deemed to be the fair market value of the stock at such time as determined in
good faith by the Board of Directors. In the event the corporation elects to
purchase all of the shares or, with consent of the holder of common stock, a
lesser portion of the shares, it shall give written notice to the transferring
holder of common stock of its election and settlement for said shares shall be
made as provided below in paragraph (d).
(c) The corporation may assign its rights hereunder.
(d) In the event the corporation and/or its assignee(s) elect to
acquire any of the shares of the transferring holder of common stock as
specified in said transferring holder of common stock's notice, the Secretary of
the corporation shall so notify the transferring holder of common stock and
settlement thereof shall be made in cash within thirty (30) days after the
Secretary of the corporation receives said transferring holder of common stock's
notice; provided that if the terms of payment set forth in said transferring
holder of common stock's notice were other than cash against delivery, the
corporation and/or its assignee(s) shall pay for said shares on the same terms
and conditions set forth in said transferring holder of common stock's notice.
(e) In the event the corporation and/or its assignees(s) do not elect
to acquire all of the shares specified in the transferring holder of common
stock's notice, said transferring holder of common stock may, within the sixty-
day period following the expiration of the option rights granted to the
corporation and/or its assignees(s) herein, transfer the shares specified in
said transferring holder of common stock's notice which were not acquired by the
corporation and/or its assignees(s) as specified in said transferring holder of
common stock's notice. All shares so sold by said transferring holder of common
stock shall continue to be subject to the provisions of this bylaw in the same
manner as before said transfer.
(f) Anything to the contrary contained herein notwithstanding, the
following transactions shall be exempt from the provisions of this bylaw:
(1) A holder of common stock's transfer of any or all shares
held either during such holder of common stock's lifetime or on death by will or
intestacy to such holder of common stock's immediate family or to any custodian
or trustee for the account of such holder of common stock or such holder of
common stock's immediate family or to any limited partnership of which the
holder of common stock, members of such holder of common stock's immediate
family or any trust for the account of such holder of common stock or such
holder of common stock's immediate family will be the general of limited
partner(s) of such partnership. "Immediate family" as used herein shall mean
spouse, lineal descendant, father, mother, brother, or sister of the holder of
common stock making such transfer.
(2) A holder of common stock's bona fide pledge or mortgage of
any shares with a commercial lending institution, provided that any subsequent
transfer of said shares by said institution shall be conducted in the manner set
forth in this bylaw.
23.
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(3) A holder of common stock's transfer of any or all of such
holder of common stock's shares to the corporation or to any other holder of
common stock of the corporation.
(4) A holder of common stock's transfer of any or all of such
holder of common stock's shares to a person who, at the time of such transfer,
is an officer or director of the corporation.
(5) A corporate holder of common stock's transfer of any or all
of its shares pursuant to and in accordance with the terms of any merger,
consolidation, reclassification of shares or capital reorganization of the
corporate holder of common stock, or pursuant to a sale of all or substantially
all of the stock or assets of a corporate holder of common stock.
(6) A corporate holder of common stock's transfer of any or all
of its shares to any or all of its stockholders.
(7) A transfer by a holder of common stock which is a limited or
general partnership to any or all of its partners or former partners.
In any such case, the transferee, assignee, or other recipient shall receive and
hold such stock subject to the provisions of this bylaw, and there shall be no
further transfer of such stock except in accord with this bylaw.
(g) The provisions of this bylaw may be waived with respect to any
transfer either by the corporation, upon duly authorized action of its Board of
Directors, or by the holder of common stocks, upon the express written consent
of the owners of a majority of the voting power of the corporation (excluding
the votes represented by those shares to be transferred by the transferring
holder of common stock). This bylaw may be amended or repealed either by a duly
authorized action of the Board of Directors or by the holder of common stocks,
upon the express written consent of the owners of a majority of the voting power
of the corporation.
(h) Any sale or transfer, or purported sale or transfer, of
securities of the corporation shall be null and void unless the terms,
conditions, and provisions of this bylaw are strictly observed and followed.
(i) The foregoing right of first refusal shall terminate on either of
the following dates, whichever shall first occur:
(1) On March 13, 2010; or
(2) Upon the date securities of the corporation are first
offered to the public pursuant to a registration statement filed with, and
declared effective by, the United States Securities and Exchange Commission
under the Securities Act of 1933, as amended.
24.
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(j) The certificates representing shares of common stock of the
corporation shall bear on their face the following legend so long as the
foregoing right of first refusal remains in effect:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION
AND/OR ITS ASSIGNEE(S), AS PROVIDED IN THE BYLAWS OF THE
CORPORATION."
Article XIV
Loans To Officers
Section 47. Loans To Officers. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee 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. Nothing in these Bylaws shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
25.
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Table Of Contents
<TABLE>
<CAPTION>
Page
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Article I Offices.......................................................... 1
Section 1. Registered Office....................................... 1
Section 2. Other Offices........................................... 1
Article II Corporate Seal.................................................. 1
Section 3. Corporate Seal.......................................... 1
Article III Stockholders' Meetings......................................... 1
Section 4. Place Of Meetings....................................... 1
Section 5. Annual Meetings......................................... 1
Section 6. Special Meetings........................................ 3
Section 7. Notice Of Meetings...................................... 4
Section 8. Quorum.................................................. 4
Section 9. Adjournment And Notice Of Adjourned Meetings............ 4
Section 10. Voting Rights.......................................... 5
Section 11. Joint Owners Of Stock.................................. 5
Section 12. List Of Stockholders................................... 5
Section 13. Action Without Meeting................................. 6
Section 14. Organization........................................... 6
Article IV Directors....................................................... 7
Section 15. Number And Term Of Office.............................. 7
Section 16. Powers................................................. 7
Section 17. Classes Of Directors................................... 7
Section 18. Vacancies.............................................. 8
Section 19. Resignation............................................ 8
Section 20. Removal................................................ 8
Section 21. Meetings............................................... 8
(a) Annual Meetings..................................... 8
(b) Regular Meetings.................................... 8
(c) Special Meetings.................................... 9
(d) Telephone Meetings.................................. 9
</TABLE>
i.
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Table Of Contents
(Continued)
<TABLE>
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(e) Notice Of Meetings.................................................................... 9
(f) Waiver Of Notice...................................................................... 9
Section 22. Quorum And Voting........................................................................ 9
Section 23. Action Without Meeting................................................................... 10
Section 24. Fees And Compensation.................................................................... 10
Section 25. Committees............................................................................... 10
(a) Executive Committee................................................................... 10
(b) Other Committees...................................................................... 10
(c) Term.................................................................................. 10
(d) Meetings.............................................................................. 11
Section 26. Organization............................................................................. 11
Article V Officers........................................................................................... 11
Section 27. Officers Designated...................................................................... 11
Section 28. Tenure And Duties Of Officers............................................................ 12
(a) General............................................................................... 12
(b) Duties Of Chairman Of The Board Of Directors.......................................... 12
(c) Duties Of President................................................................... 12
(d) Duties Of Vice Presidents............................................................. 12
(e) Duties Of Secretary................................................................... 12
(f) Duties Of Chief Financial Officer..................................................... 13
Section 29. Delegation Of Authority.................................................................. 13
Section 30. Resignations............................................................................. 13
Section 31. Removal.................................................................................. 13
Article VI Execution Of Corporate Instruments And Voting Of Securities Owned By The Corporation.............. 13
Section 32. Execution Of Corporate Instruments....................................................... 13
Section 33. Voting Of Securities Owned By The Corporation............................................ 14
Article VII Shares Of Stock.................................................................................. 14
Section 34. Form And Execution Of Certificates....................................................... 14
</TABLE>
ii.
<PAGE>
Table Of Contents
(Continued)
<TABLE>
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Section 35. Lost Certificates.................................................................... 15
Section 36. Transfers............................................................................ 15
Section 37. Fixing Record Dates.................................................................. 15
Section 38. Registered Stockholders.............................................................. 16
Article VIII Other Securities Of The Corporation......................................................... 16
Section 39. Execution Of Other Securities........................................................ 16
Article IX Dividends..................................................................................... 16
Section 40. Declaration Of Dividends............................................................. 16
Section 41. Dividend Reserve..................................................................... 16
Article X Fiscal Year.................................................................................... 17
Section 42. Fiscal Year.......................................................................... 17
Article XI Indemnification............................................................................... 17
Section 43. Indemnification Of Directors, Executive Officers, Other Officers, Employees
And Other Agents................................................................................. .17
(a) Directors And Executive Officers.................................................. 17
(b) Other Officers, Employees and Other Agents........................................ 17
(c) Expenses.......................................................................... 17
(d) Enforcement....................................................................... 18
(e) Non-Exclusivity Of Rights......................................................... 18
(f) Survival Of Rights................................................................ 19
(g) Insurance......................................................................... 19
(h) Amendments........................................................................ 19
(i) Saving Clause..................................................................... 19
(j) Certain Definitions............................................................... 19
Article XII Notices...................................................................................... 20
Section 44. Notices.............................................................................. 20
(a) Notice To Stockholders............................................................ 20
(b) Notice To Directors............................................................... 20
(c) Affidavit Of Mailing.............................................................. 20
</TABLE>
iii.
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Table Of Contents
(continued)
<TABLE>
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(d) Time Notices Deemed Given................................. 20
(e) Methods Of Notice......................................... 21
(f) Failure To Receive Notice................................. 21
(g) Notice To Person With Whom Communication Is Unlawful...... 21
(h) Notice To Person With Undeliverable Address............... 21
Article XIII Amendments................................................. 22
Section 45. Amendments.............................................. 22
Article XIV Right Of First Refusal...................................... 22
Section 46. Right Of First Refusal.................................. 22
Article XV Loans To Officers............................................ 24
Section 47. Loans To Officers....................................... 24
</TABLE>
iv.
<PAGE>
Exhibit 4.2
DOCENT, INC.
AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
April 7, 2000
<PAGE>
AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
This Amended and Restated Investor Rights Agreement (the "Agreement") is
made effective as of the 7th day of April 2000, by and among Docent, Inc., a
Delaware corporation (the "Company"), and the investors set forth on Schedule I
attached hereto (each, an "Investor"; collectively, "Investors").
Now, Therefore, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement, the parties
mutually agree as follows:
SECTION 1. General.
1.1 Definitions. As used in this Agreement the following terms shall have
the following respective meanings:
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute and the rules and regulations thereunder, all as
the same shall be in effect from time to time.
"Form S-3" means such form under the Securities Act as in effect on
the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
"Holder" means any person owning of record Registrable Securities that
have not been sold to the public or any assignee of record of such Registrable
Securities in accordance with Section 2.10 hereof.
"Initial Offering" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
"Register," "registered" and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
"Registrable Securities" means (i) Common Stock of the Company issued
or issuable upon conversion of the Shares; and (ii) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, such above-described
securities. Notwithstanding the foregoing, Registrable Securities shall not
include any securities after they have been sold by a person to the public
either pursuant to a registration statement or Rule 144 of the Securities Act or
after they have been sold in a private transaction in which the transferor's
rights under Section 2 of this Agreement are not assigned.
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"Registrable Securities then outstanding" shall be the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (i) are then issued and
outstanding or (ii) are issuable pursuant to then exercisable or convertible
securities.
"Registration Expenses" shall mean all expenses incurred by the
Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements not
to exceed Fifteen Thousand Dollars ($15,000) of a single special counsel for the
Holders, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
"SEC" means the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute and the rules and regulations thereunder, all as the
same shall be in effect from time to time.
"Series A Stock" shall mean the Company's Series A Convertible
Preferred Stock issued pursuant to that certain Series A Convertible Preferred
Stock Purchase Agreement, dated as of June 27, 1997.
"Series B Stock" shall mean the Company's Series B Convertible
Preferred Stock issued pursuant to that certain Series B Convertible Preferred
Stock Purchase Agreement, dated as of June 5, 1998.
"Series B-1 Stock" shall mean the Company's Series B-1 Convertible
Preferred Stock issued pursuant to that certain Series B-1 Convertible Preferred
Stock Purchase Agreement, dated as of September 25, 1998.
"Series C Stock" shall mean the Company's Series C Convertible
Preferred Stock issued pursuant to (a) that certain Series C Convertible
Preferred Stock Purchase Agreement, dated as of November 13, 1998; (b) that
certain Series C Convertible Preferred Stock Purchase Agreement, dated as of
March 23, 1999; and (c) two warrants for the purchase of up to an aggregate of
two hundred twenty-eight thousand five hundred (228,500) shares of the Company's
Series C Convertible Preferred Stock held by Comdisco, Inc. (the "Comdisco
Warrants").
"Series D Stock" shall means all the Company's Series D Convertible
Preferred Stock issued pursuant to those certain Series D Convertible Stock
Purchase Agreements, dated as of August 19, 1999, August 27, 1999, November 22,
1999 and December 22, 1999, respectively.
"Series E Stock" shall mean all the Company's Series E Convertible
Preferred Stock issued pursuant to that certain Series E Convertible Stock
Purchase Agreement, dated as of April __, 2000.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities.
2
<PAGE>
"Shares" shall mean the Series A Stock, Series B Stock, Series B-1
Stock, Series C Stock, Series D Stock and Series E Stock held by the Investors
and their permitted assigns.
SECTION 2. Registration; Restrictions on Transfer.
2.1 Restrictions on Transfer.
(a) Each Holder agrees not to make any disposition of all or any
portion of the Shares or Registrable Securities unless and until:
(i) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be bound by
the terms of this Agreement, (B) such Holder shall have notified the Company of
the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (C) if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(iii) Notwithstanding the provisions of paragraphs (i) and (ii)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by a Holder which is (A) a partnership to its partners or former
partners in accordance with partnership interests, (B) a corporation to its
stockholders in accordance with their interest in the corporation, (C) a limited
liability company to its members or former members in accordance with their
interest in the limited liability company, or (D) to the Holder's family member
or trust for the benefit of an individual Holder; provided that in each case the
transferee will be subject to the terms of this Agreement to the same extent as
if he were an original Holder hereunder.
(b) Each certificate representing Shares or Registrable Securities
shall (unless otherwise permitted by the provisions of the Agreement) be stamped
or otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws or as
provided elsewhere in this Agreement):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY
HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
(c) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if the holder shall have
obtained an opinion of
3
<PAGE>
counsel (which counsel may be counsel to the Company) reasonably acceptable to
the Company to the effect that the securities proposed to be disposed of may
lawfully be so disposed of without registration, qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
2.2 Demand Registration.
(a) Subject to the conditions of this Section 2.2, if the Company
shall receive a written request from the Holders of at least fifty percent (50%)
of the Registrable Securities then outstanding (the "Initiating Holders") that
the Company file a registration statement under the Securities Act covering the
registration of Registrable Securities having an aggregate offering price to the
public in excess of $7,500,000 (a "Qualified Public Offering"), then the Company
shall, within thirty (30) days of the receipt thereof, give written notice of
such request to all Holders, and subject to the limitations of this Section 2.2,
use its best efforts to effect, as soon as practicable, the registration under
the Securities Act of all Registrable Securities that the Holders request to be
registered.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to this Section 2.2
or any request pursuant to Section 2.4 and the Company shall include such
information in the written notice referred to in Section 2.2(a) or Section
2.4(a), as applicable. In such event, the right of any Holder to include its
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting by a
majority in interest of the Initiating Holders (which underwriter or
underwriters shall be reasonably acceptable to the Company). Notwithstanding any
other provision of this Section 2.2 or Section 2.4, if the underwriter advises
the Company that marketing factors require a limitation of the number of
securities to be underwritten (including Registrable Securities) then the
Company shall so advise all Holders of Registrable Securities which would
otherwise be underwritten pursuant hereto, and the number of shares that may be
included in the underwriting shall be allocated to the Holders of such
Registrable Securities on a pro rata basis based on the number of Registrable
Securities held by all such Holders (including the Initiating Holders). Any
Registrable Securities excluded or withdrawn from such underwriting shall be
withdrawn from the registration.
(c) The Company shall not be required to effect a registration
pursuant to this Section 2.2:
(i) prior to the earlier of December 31, 2001 or one hundred
eighty (180) days following the effective date of the registration statement
pertaining to the Initial Offering; or
4
<PAGE>
(ii) after the Company has effected three (3) registrations
pursuant to this Section 2.2, and such registrations have been declared or
ordered effective; or
(iii) during the period starting with the date of filing of, and
ending on the date one hundred eighty (180) days following the effective date of
the registration statement pertaining to the Initial Offering; provided that the
Company makes reasonable good faith efforts to cause such registration statement
to become effective;
(iv) if within thirty (30) days of receipt of a written request
from Initiating Holders pursuant to Section 2.2(a), the Company gives notice to
the Holders of the Company's intention to make its Initial Offering within
ninety (90) days; or
(v) if the Company shall furnish to Holders requesting a
registration statement pursuant to this Section 2.2, a certificate signed by the
Chairman of the Board stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its stockholders for such registration statement to be effected at such time, in
which event the Company shall have the right to defer such filing for a period
of not more than ninety (90) days after receipt of the request of the Initiating
Holders; provided that such right to delay a request shall be exercised by the
Company not more than once in any twelve (12) month period.
2.3 Piggyback Registrations. The Company shall notify all Holders of
Registrable Securities in writing at least thirty (30) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to employee benefit
plans or with respect to corporate reorganizations or other transactions under
Rule 145 of the Securities Act) and will afford each such Holder an opportunity
to include in such registration statement all or part of such Registrable
Securities held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by it
shall, within twenty (20) days after the above-described notice from the
Company, so notify the Company in writing. Such notice shall state the intended
method of disposition of the Registrable Securities by such Holder. If a Holder
decides not to include all of its Registrable Securities in any registration
statement thereafter filed by the Company, such Holder shall nevertheless
continue to have the right to include any Registrable Securities in any
subsequent registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
(a) Underwriting. If the registration statement under which the
Company gives notice under this Section 2.3 is for an underwritten offering, the
Company shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder to be included in a registration pursuant to this
Section 2.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of the Agreement, if the Company and the underwriter determine in good
faith that marketing factors require a limitation of the number of
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shares to be underwritten, the number of shares that may be included in the
underwriting shall be allocated, first, to the Company; second, to Holders, not
including members of the Company's management, on a pro rata basis based on the
total number of Registrable Securities held by these Holders; third, to all
remaining Holders on a pro rata basis based on the total number of Registrable
Securities held by the remaining Holders; and fourth to any stockholder of the
Company (other than a Holder) on a pro rata basis. No such reduction shall (i)
reduce the securities being offered by the Company for its own account to be
included in the registration and underwriting, or (ii) reduce the amount of
securities of the selling Holders included in the registration below ten percent
(10%) of the total amount of securities included in such registration, unless
such offering is the Initial Offering and such registration does not include
shares of any other selling stockholders, in which event any or all of the
Registrable Securities of the Holders may be excluded in accordance with the
immediately preceding sentence. In no event will shares of any other selling
stockholder be included in such registration which would reduce the number of
shares which may be included by Holders without the written consent of Holders
of at least sixty-six and two-thirds percent (66 2/3%) of the Registrable
Securities proposed to be sold in the offering.
(b) Right to Terminate Registration. The Company shall have the right
to terminate or withdraw any registration initiated by it under this Section 2.3
prior to the effectiveness of such registration whether or not any Holder has
elected to include securities in such registration. The Registration Expenses of
such withdrawn registration shall be borne by the Company in accordance with
Section 2.5 hereof.
2.4 Form S-3 Registration. In case the Company shall receive from any
Holder or Holders of Registrable Securities a written request or requests that
the Company effect a registration on Form S-3 (or any successor to Form S-3) or
any similar short-form registration statement and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders of Registrable
Securities; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.4 if:
(i) Form S-3 (or any successor or similar form) is not available
for such offering by the Holders, or
(ii) the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than $1,000,000, or
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(iii) the Company shall furnish to the Holders a certificate
signed by the Chairman of the Board of Directors of the Company stating that in
the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its stockholders for such Form S-3
Registration to be effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 registration statement for a
period of not more than ninety (90) days after receipt of the request of the
Holder or Holders under this Section 2.4: provided, that such right to delay a
request shall be exercised by the Company not more than once in any twelve (12)
month period, or
(iv) the Company has, within the twelve (12) month period
preceding the date of such request, already effected one (1) registration on
Form S-3 for the Holders pursuant to this Section 2.4, or
(v) in any particular jurisdiction in which the Company would
be required to qualify to do business or to execute a general consent to service
of process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a Form S-3
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All such Registration Expenses incurred in
connection with three registrations requested pursuant to this Section 2.4 shall
be paid by the Company.
2.5 Expenses of Registration. Except as specifically provided herein, all
Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2 or any registration under
Section 2.3 or the first three registrations under Section 2.4 herein shall be
borne by the Company. All Selling Expenses incurred in connection with any
registrations hereunder, shall be borne by the holders of the securities so
registered pro rata on the basis of the number of shares so registered. The
Company shall not, however, be required to pay for expenses of any registration
proceeding begun pursuant to Section 2.2 or 2.4, the request of which has been
subsequently withdrawn by the Initiating Holders unless (i) the withdrawal is
based upon material adverse information concerning the Company of which the
Initiating Holders were not aware at the time of such request or (ii) the
Holders of a majority of Registrable Securities agree to forfeit their right to
one requested registration pursuant to Section 2.2 or Section 2.4, as
applicable, in which event such right shall be forfeited by all Holders. If the
Holders are required to pay the Registration Expenses, such expenses shall be
borne by the holders of securities (including Registrable Securities) requesting
such registration in proportion to the number of shares for which registration
was requested. If the Company is required to pay the Registration Expenses of a
withdrawn offering pursuant to clause (a) above, then the Holders shall not
forfeit their rights pursuant to Section 2.2 or Section 2.4 to a demand
registration.
2.6 Obligations of the Company. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all reasonable efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities
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registered thereunder, keep such registration statement effective for up to one
hundred twenty (120) days or, if earlier, until the Holder or Holders have
completed the distribution related thereto; provided, however, that (i) such
120-day period shall be extended for a period of time equal to the period the
Holder refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other securities) of the Company;
and (ii) in the case of any registration of Registrable Securities on Form S-3
which are intended to be offered on a continuous or delayed basis, such 120-day
period shall be extended, if necessary, to keep the registration statement
effective until all such Registrable Securities are sold, provided that Rule
415, or any successor rule under the Securities Act, permits an offering on a
continuous or delayed basis, and provided further that applicable rules under
the Securities Act governing the obligation to file a post-effective amendment
permit, in lieu of filing a post-effective amendment which (x) includes any
prospectus required by Section 10(a)(3) of the Securities Act or (y) reflects
facts or events representing a material or fundamental change in the information
set forth in the registration statement, the incorporation by reference of
information required to be included in (x) and (y) above to be contained in
periodic reports filed pursuant to Section 13 or 15(d) of the Exchange Act in
the registration statement.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use all reasonable efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of a majority of the Holders
participating in the registration, on the date that such Registrable Securities
are delivered to the underwriters for sale, if such securities are being sold
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through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities and (ii) a letter
dated as of such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and if permitted by
applicable accounting standards, to the Holders requesting registration of
Registrable Securities.
(h) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed.
(i) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
(j) Otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC.
2.7 Termination of Registration Rights. All registration rights granted
under this Section 2 shall terminate and be of no further force and effect four
(4) years after the date of the Company's Initial Offering. In addition, a
Holder's registration rights shall expire sooner if (i) the Company has
completed its Initial Offering and is subject to the provisions of the Exchange
Act; and (ii) all Registrable Securities held by and issuable to such Holder
(and its affiliates, partners and former partners) may be sold under Rule 144
during any ninety (90) day period.
2.8 Delay of Registration; Furnishing Information.
(a) No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(b) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the selling
Holders shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as shall be required to effect the registration of their
Registrable Securities.
(c) The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.2 or Section 2.4 if, due to the
operation of subsection 2.2(b), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in Section 2.2 or Section 2.4,
whichever is applicable.
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2.9 Indemnification. In the event any Registrable Securities are included
in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) To the extent permitted by law, the Company will indemnify,
defend, protect and hold harmless each Holder, the partners, officers,
directors, members and legal counsel of each Holder, any underwriter (as defined
in the Securities Act) for such Holder and each person, if any, who controls
such Holder or underwriter within the meaning of the Securities Act or the
Exchange Act, against any losses, claims, damages or liabilities (joint or
several) to which they may become subject under the Securities Act, the Exchange
Act or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation") by the Company: (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the offering
covered by such registration statement; and the Company will reimburse each such
Holder, partner, officer, director, member, legal counsel, underwriter or
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided however, that the indemnity agreement contained in
this Section 2.9(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company, which consent shall not be unreasonably withheld,
nor shall the Company be liable in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out of or is based upon
a Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Holder, partner, officer, director, member, legal counsel, underwriter or
controlling person of such Holder or underwriter.
(b) To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration qualifications or compliance is being effected, indemnify, defend,
protect and hold harmless the Company, each of its directors, its officers, and
legal counsel and each person, if any, who controls the Company within the
meaning of the Securities Act, any underwriter and any other Holder selling
securities under such registration statement or any of such other Holder's
partners, directors or officers or any person who controls such Holder, against
any losses, claims, damages or liabilities (joint or several) to which the
Company or any such director, officer, controlling person, underwriter or other
such Holder, or partner, director, officer or controlling person of such other
Holder may become subject under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder under an instrument duly executed by such Holder and stated to be
specifically for use in connection with such registration; and each such Holder
will reimburse any legal or other expenses reasonably incurred by the Company or
any such director, officer, legal counsel, controlling person, underwriter or
other Holder, or partner, officer, director, legal counsel or
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controlling person of such other Holder in connection with investigating or
defending any such loss, claim, damage, liability or action if it is judicially
determined that there was such a Violation; provided, however, that the
indemnity agreement contained in this Section 2.9(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 2.9 exceed the net proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
2.9 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 2.9, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 2.9 only to the extent that such party is
harmed by such failure to deliver notice, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 2.9.
(d) If the indemnification provided for in this Section 2.9 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault and/or relative benefit of the indemnifying party on the one hand
and of the indemnified party on the other in connection with the Violation(s)
that resulted in such loss, claim, damage or liability, as well as any other
relevant equitable considerations. The relative fault and/or relative benefit of
the indemnifying party and of the indemnified party shall be determined by a
court of law by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the indemnified
party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission; provided, that in
no event shall any contribution by a Holder hereunder exceed the net proceeds
from the offering received by such Holder.
(e) The obligations of the Company and Holders under this Section 2.9
shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this agreement. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof
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the giving by the claimant or plaintiff to such Indemnified Party of a release
from all liability in respect to such claim or litigation.
2.10 Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section 2 may be assigned by a
Holder to a transferee or assignee of Registrable Securities which (i) is a
general partner, limited partner or retired partner of a Holder that is a
partnership, (ii) is a Holder's family member or trust for the benefit of an
individual Holder, or (iii) acquires at least five percent (5%) of the
Registrable Securities then outstanding (as adjusted for stock splits and
combinations); provided however, (A) the transferor shall, within ten (10) days
after such transfer, furnish to the Company written notice of the name and
address of such transferee or assignee and the securities with respect to which
such registration rights are being assigned and (B) such transferee shall agree
to be subject to all restrictions set forth in this Agreement.
2.11 Amendment of Registration Rights. Any provision of this Section 2 may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of at least sixty-six and two-
thirds percent (66-2/3%) of the Registrable Securities then outstanding. Any
amendment or waiver effected in accordance with this Section 2.11 shall be
binding upon each Holder and the Company. By acceptance of any benefits under
this Article II, Holders of Registrable Securities hereby agree to be bound by
the provisions hereunder.
2.12 Limitation on Subsequent Registration Rights. After the date of this
Agreement, the Company shall not, without the prior written consent of the
Holders of at least sixty-six and two-thirds percent (66-2/3%) of the
Registrable Securities then outstanding, enter into any agreement with any
holder or prospective holder of any securities of the Company that would grant
such holder registration rights senior to or on parity with those granted to the
Holders hereunder.
2.13 "Market Stand-Off" Agreement. Each Holder hereby agrees that such
Holder shall not sell or otherwise transfer or dispose of any Common Stock (or
other securities) of the Company held by such Holder (other than those included
in the registration) for a period specified by the representative of the
underwriters of Common Stock (or other securities) of the Company not to exceed
either: (i) one hundred eighty (180) days following the effective date of the
registration statement of the Company filed under the Securities Act pertaining
to the Initial Offering, provided that all officers and directors of the Company
and holders of at least one percent (1%) of the Company's voting securities
enter into similar agreements; or (ii) ninety (90) days following the effective
date of a subsequent registration statement of the Company filed under the
Securities Act in which such Holder participates, provided that all officers and
directors of the Company and holders of at least one percent (1%) of the
Company's voting securities enter into similar agreements.
Each Holder agrees to execute and deliver such other agreements as may be
reasonably requested by the Company or the underwriter that are consistent with
the foregoing or which are necessary to give further effect thereto. The
obligations described in this Section 2.13 shall not apply to a registration
relating solely to employee benefit plans on Form S-1 or Form S-8 or similar
forms that may be promulgated in the future, or a registration relating solely
to SEC Rule 145 transaction on Form S-4 or similar forms that may be promulgated
in the future. The
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Company may impose stop-transfer instructions with respect to the shares of
Common Stock (or other securities) subject to the foregoing restriction until
the end of the period specified in such agreements.
2.14 Rule 144 Reporting. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act;
(c) So long as a Holder owns any Registrable Securities, furnish to
such Holder forthwith upon request: a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 of the Securities
Act, and of the Exchange Act (at any time after it has become subject to such
reporting requirements); a copy of the most recent annual or quarterly report of
the Company; and such other reports and documents as a Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing it to
sell any such securities without registration.
SECTION 3. Covenants of the Company.
3.1 Basic Financial Information and Reporting.
(a) The Company will maintain true books and records of account in
which full and correct entries will be made of all its business transactions
pursuant to a system of accounting established and administered in accordance
with generally accepted accounting principles consistently applied, and will set
aside on its books all such proper accruals and reserves as shall be required
under generally accepted accounting principles consistently applied.
(b) As soon as practicable after the end of each fiscal year of the
Company, and in any event within one hundred twenty (120) days thereafter, the
Company will furnish each Investor that holds a minimum of 25,000 Shares with a
consolidated balance sheet of the Company, as at the end of such fiscal year,
and a consolidated statement of income and a consolidated statement of cash
flows of the Company, for such year, all prepared in accordance with generally
accepted accounting principles consistently applied and setting forth in each
case in comparative form the figures for the previous fiscal year, all in
reasonable detail. Such financial statements shall be accompanied by a report
and opinion thereon by independent public accountants of national standing
selected by the Company's Board of Directors.
(c) The Company will furnish each holder of a minimum of 100,000
Shares (a "Major Investor") (i) within thirty (30) days after Board approval,
the annual operating plan for the next fiscal year; and (ii) as soon as
practicable after the end of each month, and in any event within forty-five (45)
days thereafter, a consolidated balance sheet of the Company as of the end of
each such month, and a consolidated statement of income and a consolidated
statement of cash
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flows of the Company for such month and for the current fiscal year to date,
prepared in accordance with generally accepted accounting principles
consistently applied and each of which shall indicate the variance from the
operating plan, with the exception that no notes need be attached to such
statements and year-end audit adjustments may not have been made.
3.2 Inspection Rights. Each Major Investor shall have the right to visit
and inspect any of the properties of the Company or any of its subsidiaries, and
to discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with its officers, and to review such information as is reasonably
requested all at such reasonable times and as often as may be reasonably
requested; provided, however, that the Company shall not be obligated under this
Section 3.2 with respect to a competitor of the Company or with respect to
information which the Board of Directors determines in good faith is
confidential and should not, therefore, be disclosed.
3.3 Confidentiality of Records. Each Investor agrees to use, and to use
its best efforts to insure that its authorized representatives use, the same
degree of care as such Investor uses to protect its own confidential information
to keep confidential any information furnished to it which the Company
identifies as being confidential or proprietary (so long as such information is
not in the public domain), except that such Investor may disclose such
proprietary or confidential information to any partner, subsidiary or parent of
such Investor for the purpose of evaluating its investment in the Company as
long as such partner, subsidiary or parent is advised of the confidentiality
provisions of this Section 3.3.
3.4 Reservation of Common Stock. The Company will at all times reserve and
keep available, solely for issuance and delivery upon the conversion of the
Preferred Stock, all Common Stock issuable from time to time upon such
conversion.
3.5 Proprietary Information and Inventions Agreement. The Company shall
require all employees and consultants to execute and deliver a Proprietary
Information and Inventions Agreement in substantially the form attached to the
Purchase Agreement.
3.6 Directors' Expenses. The Company shall not pay any compensation to any
member of the Company's Board of Directors in connection with the performance of
their duties as a Director, provided however, the Company shall pay reasonable
expenses incurred by Directors in performance of their duties.
3.7 Real Property Holding Corporation. The Company covenants that it will
operate in a manner such that it will not become a "United States real property
holding corporation" as that term is defined in Section 897(c)(2) of the
Internal Revenue Code of 1986, as amended, and the regulations thereunder
("FIRPTA"). The Company agrees to make determinations as to its status as a
USRPHC, and will file statements concerning those determinations with the
Internal Revenue Service, in the manner and at the times required under Reg. (S)
1.897-2(h), or any supplementary or successor provision thereto. Within 30 days
of a request from an Investor or any of its partners, the Company will inform
the requesting party, in the manner set forth in Reg. (S) 1.897- 2(h)(1)(iv) or
any supplementary or successor provision thereto, whether that party's interest
in the Company constitutes a United States real property interest (within the
meaning of Internal Revenue Code Section 897(c)(1) and the regulations
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thereunder) and whether the Company has provided to the Internal Revenue Service
all required notices as to its USRPHC status.
3.8 Termination of Covenants. All covenants of the Company contained in
Section 3 of this Agreement shall expire and terminate as to each Investor on
the effective date of the registration statement pertaining to the Initial
Offering.
SECTION 4. Right of First Refusal.
4.1 Subsequent Offerings. Each Investor shall have a right of first
refusal to purchase up to its pro rata share of all Equity Securities, as
defined below, that the Company may, from time to time, propose to sell and
issue after the date of this Agreement, other than the Equity Securities
excluded by Section 4.5 hereof. Each Investor's pro rata share is equal to the
ratio of (i) the number of shares of the Company's Common Stock (including all
shares of Common Stock issued or issuable upon conversion of the Shares) which
such Investor is deemed to be a holder immediately prior to the issuance of such
Equity Securities to (ii) the total number of shares of the Company's
outstanding Common Stock (including all shares of Common Stock issued or
issuable upon conversion of the Shares or upon the exercise of any outstanding
warrants or options) immediately prior to the issuance of the Equity Securities.
The term "Equity Securities" shall mean (i) any Common Stock, Preferred Stock or
other security of the Company, (ii) any security convertible, with or without
consideration, into any Common Stock, Preferred Stock or other security
(including any option, warrant or right to purchase such a convertible
security), (iii) any security carrying any option, warrant or right to subscribe
to or purchase any Common Stock, Preferred Stock or other security or (iv) any
such option, warrant or right. The Right of First Refusal provided by this
Section 4.1 shall be applicable to only the initial sale or grant by the Company
of Equity Securities, but not upon the exercise or conversion thereof.
4.2 Exercise and Waiver of Rights. If the Company proposes to issue any
Equity Securities, it shall give each Investor written notice of its intention,
describing the Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same. Each Investor shall have fifteen
(15) days from the giving of such notice to agree to purchase up to its pro rata
share of the Equity Securities for the price and upon the terms and conditions
specified in the notice by giving written notice to the Company and stating
therein the quantity of Equity Securities to be purchased. Notwithstanding the
foregoing, the Company shall not be required to offer or sell such Equity
Securities (i) if the holders of a majority of the Registrable Securities waive
such rights or (ii) to any Investor who would cause the Company to be in
violation of applicable federal securities laws by virtue of such offer or sale.
4.3 Termination of Rights of First Refusal. The rights of first refusal
established by this Section 4 shall not apply to, and shall terminate upon the
effective date of the registration statement pertaining to the Company's Initial
Offering.
4.4 Transfer of Rights of First Refusal. The rights of first refusal of
each Investor under this Section 4 may be transferred to the same parties,
subject to the same restrictions as any transfer of registration rights pursuant
to Section 2.10.
4.5 Excluded Securities. The rights of first refusal established by this
Section 4 shall have no application to any of the following Equity Securities:
15
<PAGE>
(a) shares of Common Stock (and/or options, warrants or other Common
Stock issued or to be issued to employees, officers or directors of, or
consultants or advisors to the Company or any subsidiary, pursuant to stock
purchase or stock option plans or other arrangements that are approved by the
Board of Directors;
(b) any Equity Securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business
combination;
(c) shares of Common Stock issued in connection with any stock split,
stock dividend or recapitalization by the Company;
(d) shares of Common Stock issued upon conversion of the Shares;
(e) any Equity Securities issued in connection with any leasing
arrangement, loan or debt financing from a bank or similar financial institution
approved by the Board of Directors of the Company;
(f) any Equity Securities that are issued by the Company pursuant to
a registration statement filed under the Securities Act; and
(g) any Equity Securities with an aggregate valuation of less than
$250,000, as determined by the Company's Board of Directors, which Equity
Securities are issued in connection with strategic transactions involving the
Company and other entities, including (i) joint ventures, manufacturing,
marketing or distribution arrangements or (ii) technology transfer or
development arrangements.
SECTION 5. Miscellaneous.
5.1 Governing Law. This Agreement shall be governed by and construed under
the laws of the State of California as applied to agreements among California
residents entered into and to be performed entirely within California. The
parties hereto hereby (a) expressly consent to the personal jurisdiction and
venue of the state and federal courts located in Santa Clara County, California
for any action brought by either party to interpret or enforce any provision of
this Agreement and (b) agree not to assert (by way of motion, as a defense or
otherwise), in any such action any claim that such legal proceeding has been
brought in an inconvenient forum.
5.2 Survival. The representations, warranties, covenants, and agreements
made herein shall survive any investigation made by any Holder and the closing
of the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
5.3 Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties hereto
and shall inure to the benefit of and be
16
<PAGE>
enforceable by each person who shall be a holder of Registrable Securities from
time to time; provided, however, that prior to the receipt by the Company of
adequate written notice of the transfer of any Registrable Securities specifying
the full name and address of the transferee, the Company may deem and treat the
person listed as the holder of such shares in its records as the absolute owner
and holder of such shares for all purposes, including the payment of dividends
or any redemption price.
5.4 Entire Agreement. This Agreement and the Purchase Agreement and the
other documents delivered pursuant thereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and no party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically set
forth herein and therein.
5.5 Severability. In case any provision of the Agreement shall be invalid,
illegal, or unenforceable, the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
5.6 Amendment and Waiver.
(a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the holders
of at least sixty-six and two-thirds percent (66 2/3%) of the Registrable
Securities.
(b) Except as otherwise expressly provided, the obligations of the
Company and the rights of the Holders under this Agreement may be waived only
with the written consent of the holders of at least sixty-six and two-thirds
percent (66 2/3%) of the Registrable Securities.
(c) Notwithstanding the foregoing, this Agreement may be amended with
only the written consent of the Company to include additional purchasers of
Shares as "Investors," "Holders" and parties hereto.
5.7 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
5.8 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the party
at the address as set forth on Schedule I attached
17
<PAGE>
hereto or at such other address as such party may designate by ten (10) days
advance written notice to the other parties hereto.
5.9 Attorneys' Fees. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
5.10 Titles and Subtitles. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
5.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
5.12 Consent and Waiver. Each Investor hereby:
(a) consents, on behalf of all such "Investors," under Sections
5.6(a), 5.6(b) and 5.6(c) of this Agreement, to the registration rights granted
to Holders hereunder; and
(b) waives, on behalf of all such "Investors," such "Investors"
rights of first refusal, and related rights to notice, under Section 4.1 and
Section 4.2 of this Agreement as they apply to the issuance of Series A Stock,
Series B Stock, Series B-1 Stock, Series C Stock, Series D Stock, Series E Stock
and the Comdisco Warrants.
18
<PAGE>
In Witness Whereof, the parties hereto have executed this Amended and
Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.
COMPANY
Docent, Inc.
By:________________________________________
David R. Ellett
President and Chief Executive Officer
S-1
<PAGE>
In Witness Whereof, the parties hereto have executed this Amended and
Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.
INVESTORS: American Express Financial Advisors
By: _______________________________ By: _______________________________
Print Name:________________________ Print Name:________________________
Title: ____________________________ Title: ____________________________
Norwest Venture Partners, VI Bernard V. and Theresa S.
a Minnesota Limited Partnership, Vonderschmitt Joint Declaration of
Trust dtd 1/4/96
By: Itasca VC Partners VI, L.L.P,
General Partner
By: _______________________________ By: _______________________________
Print Name:________________________ Print Name:________________________
Title: ____________________________ Title: ____________________________
Advanced Technology Ventures IV
By: _______________________________
Print Name:________________________
_________________________________
Title: ____________________________ Alvin Eugene Banman
Gilde IT Fund
_________________________________
By: _______________________________ Michiko Ikuta
Print Name:________________________
Title: ____________________________
S-2
<PAGE>
Comdisco GC&H Investments
By: _______________________________ By: _______________________________
Print Name:________________________ Print Name:________________________
Title: ____________________________ Title: ____________________________
___________________________________ ___________________________________
Pardner Wynn Frank Poirier
Credit Suisse First Boston BancBoston Ventures Inc.
Venture Fund I, L.P.
By: QBB Management I, L.L.C. By: _______________________________
General Partner Print Name:________________________
By: ______________________________ Title: ____________________________
George Boutros
Member
Citiventure 96 Partnership, L.P. Chancellor Private Capital
Partners III, L.P.
By: INVESCO Private Capital, Inc., By: CPCP Associates, L.P., its
As Investment Adviser and Attorney- General Partner
in-Fact
By: INVESCO Private Capital, Inc.,
By: _______________________________ Its General Partner
Print Name:________________________
By: _______________________________
Title: ____________________________
Print Name:________________________
Title: ____________________________
S-3
<PAGE>
Chancellor Private Capital Offshore Chancellor Private Capital Offshore
Partners II, L.P. Partners I, C.V.
By: CPCP Associates, L.P., its By: Chancellor KME IV, L.P., its
Investment General Partner Investment General Partner
By: INVESCO Private Capital, Inc., By: INVESCO Private Capital, Inc.,
Its General Partner Its General Partner
By: _______________________________ By: _______________________________
Print Name:________________________ Print Name:________________________
Title: ____________________________ Title: ____________________________
Andersen Consulting Apollo Group, Inc.
By: _______________________________ By: _______________________________
Print Name:________________________ Print Name:________________________
Title: ____________________________ Title: ____________________________
Wurzburg, Steven Berkely, Richard
By: _______________________________ By: _______________________________
Print Name:________________________ Print Name:________________________
Title: ____________________________ Title: ____________________________
DHM Arcadia Partners, L.P. Van Wagoner Capital Management
By: _______________________________ By: _______________________________
Print Name:________________________ Print Name:________________________
Title: ____________________________ Title: ____________________________
S-4
<PAGE>
Bolton, George Brown Coffey, Kathryn E. Individual
By: _______________________________ By: _______________________________
Print Name:________________________ Print Name:________________________
Title: ____________________________ Title: ____________________________
Dain Rauscher Wessels Hampton Partners X
By: _______________________________ By: _______________________________
Print Name:________________________ Print Name:________________________
Title: ____________________________ Title: ____________________________
GDC Partners 2000 Fund, LLC J.W. Seligman
By: _______________________________ By: _______________________________
Print Name:________________________ Print Name:________________________
Title: ____________________________ Title: ____________________________
Herrington, Barbara Thomas Weisel Partners
By: _______________________________ By: _______________________________
Print Name:________________________ Print Name:________________________
Title: ____________________________ Title: ____________________________
S-5
<PAGE>
Jorge del Calvo and Geraldine Ongkeko Liu, Jeffrey
as husband and wife
By:_________________________________ By:____________________________
Print Name:_________________________ Print Name:____________________
Title:______________________________ Title:_________________________
Moore, James A. Pillsbury Venture Fund III
By:_________________________________ By:____________________________
Print Name:_________________________ Print Name:____________________
Title:______________________________ Title:_________________________
Sylvan Learning Educational Ventures US Development Capital Portfolio
Fund Company
By:_________________________________ By:____________________________
Print Name:_________________________ Print Name:____________________
Title:______________________________ Title:_________________________
S-6
<PAGE>
Schedule I
Schedule of Investors
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Number of Number of Number of Number of Number of Number of
Name of Person or Entity Shares Shares Shares of Shares Shares of Shares of
of Series A of Series B Series B-1 of Series C Series D Series E
Preferred Preferred Preferred Preferred Preferred Preferred
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Norwest Venture Partners, VI 2,592,592 984,275 410,417 2,150,539 1,223,776
A Minnesota Limited
Partnership,
BY: Itasca VC Partners VI,
L.L.P., General Partner
Address: 245 Lytton Avenue,
Suite 250
Palo Alto, CA 94301
- ----------------------------------------------------------------------------------------------------------------------------------
Advanced Technology 2,592,592 984,275 410,417 403,230 524,476 39,894
Ventures IV
Address: 485 Ramona, Street
#200
Palo Alto, CA 94301
- ----------------------------------------------------------------------------------------------------------------------------------
Pardner Wynn 370,370 10,000 4,166 5,000 3,000
Address: 1011 E.
Sharpsburg, Apt. 518
Spokane, WA 99208
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SCH-1
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Number of Number of Number of Number of Number of Number of
Name of Person or Entity Shares Shares Shares of Shares Shares of Shares of
of Series A of Series B Series B-1 of Series C Series D Series E
Preferred Preferred Preferred Preferred Preferred Preferred
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bernard V. and Theresa S. 74,074 -------- -------- ------- --------
Vonderschmitt joint
Declaration of Trust dtd
1/4/96
Address: 510 West Mendel
Lane
Jasper, IN 47546
- ----------------------------------------------------------------------------------------------------------------------------------
Alvin Eugene Banman 37,037 -------- ------- ------- --------
Address: 272 Delphi Circle
Los Altos, CA 94022
- ----------------------------------------------------------------------------------------------------------------------------------
Michiko Ikuta 37,037
Lillian Hill
Despository Trust
55 Water Street, 2/nd/
Sublevel
New York, NY 10000
- ----------------------------------------------------------------------------------------------------------------------------------
GC&H Investments 74,074 21,450 8,333 19,263 --------
Address: One Maritime
Plaza, 20/th/ Floor
San Francisco, CA 94111
- ----------------------------------------------------------------------------------------------------------------------------------
Frank Poirier 22,222 -------- -------- ------- --------
Address: 8316 Desert Quail
Drive
Las Vegas, NV 89128
- ----------------------------------------------------------------------------------------------------------------------------------
Gilde IT Fund -------- -------- -------- -------- 1,048,951
Address: P.O. Box 85067
3508 AB Utrecht
Netherlands
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SCH-2
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Number of Number of Number of Number of Number of Number of
Name of Person or Entity Shares Shares Shares of Shares Shares of Shares of
of Series A of Series B Series B-1 of Series C Series D Series E
Preferred Preferred Preferred Preferred Preferred Preferred
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Chancellor Private Capital -------- -------- -------- ------- 243,706
Partners III, L.P.
Address: 1166 6/th/ Avenue,
Floor 25
New York, NY 10036
- ----------------------------------------------------------------------------------------------------------------------------------
Citiventure 96 Partnership, -------- -------- -------- ------- 1,061,888
L.P.
Address: 1166 6/th/ Avenue,
Floor 25
New York, NY 10036
- ----------------------------------------------------------------------------------------------------------------------------------
Chancellor Private Capital -------- -------- -------- ------- 401,399
Offshore Partners II, L.P.
Address: 1166 6/th/ Avenue,
Floor 25
New York, NY 10036
- ----------------------------------------------------------------------------------------------------------------------------------
Chancellor Private Capital -------- -------- -------- ------- 41,259
Offshore Partners I, C.V.
Address: 1166 6/th/ Avenue,
Floor 25
New York, NY 10036
- ----------------------------------------------------------------------------------------------------------------------------------
Comdisco, Inc. -------- -------- -------- ------- 87,413
Address: 100 Hamilton
Avenue, Suite 104A
Palo Alto, CA 94301
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SCH-3
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Number of Number of Number of Number of Number of Number of
Name of Person or Entity Shares Shares Shares of Shares Shares of Shares of
of Series A of Series B Series B-1 of Series C Series D Series E
Preferred Preferred Preferred Preferred Preferred Preferred
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Credit Suisse First Boston -------- -------- -------- ------- 699,301
Address: 2400 Hanover Street
Palo Alto, CA 94304
- ----------------------------------------------------------------------------------------------------------------------------------
BancBoston Ventures Inc. -------- -------- -------- ------- 524,476
Address: 100 Federal Street
Boston, MA 02110
- ----------------------------------------------------------------------------------------------------------------------------------
DHM Arcadia Partners, L.P. -------- -------- -------- ------- 174,825
Address: 1 Court Street
Boston, MA 02108
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SCH-4
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Section 1. General....................................................... 1
1.1 Definitions................................................... 1
Section 2. Registration; Restrictions on Transfer........................ 3
2.1 Restrictions on Transfer...................................... 3
2.2 Demand Registration........................................... 4
2.3 Piggyback Registrations....................................... 5
2.4 Form S-3 Registration......................................... 6
2.5 Expenses of Registration...................................... 7
2.6 Obligations of the Company.................................... 7
2.7 Termination of Registration Rights............................ 9
2.8 Delay of Registration; Furnishing Information................. 9
2.9 Indemnification............................................... 10
2.10 Assignment of Registration Rights............................. 12
2.11 Amendment of Registration Rights.............................. 12
2.12 Limitation on Subsequent Registration Rights.................. 12
2.13 "Market Stand-Off" Agreement.................................. 12
2.14 Rule 144 Reporting............................................ 13
Section 3. Covenants of the Company...................................... 13
3.1 Basic Financial Information and Reporting..................... 13
3.2 Inspection Rights............................................. 14
3.3 Confidentiality of Records.................................... 14
3.4 Reservation of Common Stock................................... 14
3.5 Proprietary Information and Inventions Agreement.............. 14
3.6 Directors' Expenses........................................... 14
3.7 Real Property Holding Corporation............................. 14
3.8 Termination of Covenants...................................... 15
Section 4. Right of First Refusal........................................ 15
4.1 Subsequent Offerings.......................................... 15
4.2 Exercise and Waiver of Rights................................. 15
4.3 Termination of Rights of First Refusal........................ 15
4.4 Transfer of Rights of First Refusal........................... 16
4.5 Excluded Securities........................................... 16
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 5. Miscellaneous................................................ 16
5.1 Governing Law................................................ 17
5.2 Survival..................................................... 17
5.3 Successors and Assigns....................................... 17
5.4 Entire Agreement............................................. 17
5.5 Severability................................................. 17
5.6 Amendment and Waiver......................................... 17
5.7 Delays or Omissions.......................................... 17
5.8 Notices...................................................... 18
5.9 Attorneys' Fees.............................................. 18
5.10 Titles and Subtitles......................................... 18
5.11 Counterparts................................................. 18
5.12 Consent and Waiver........................................... 18
5.13 Entire Agreement............................................. 18
</TABLE>
Schedule I - Investors
ii
<PAGE>
EXHIBIT 10.1
DOCENT, INC.
1997 STOCK OPTION PLAN
ADOPTED JULY 25, 1997
APPROVED BY STOCKHOLDERS AUGUST 14, 1997
1. Purposes.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to Docent, Inc. and its Affiliates
(the "Company") may be given an opportunity to purchase stock of the Company.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(c) The Company intends that the Options issued under the Plan shall, in
the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either Incentive Stock Options or Nonstatutory Stock Options. All Options shall
be separately designated Incentive Stock Options or Nonstatutory Stock Options
at the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
2. Definitions.
(a) "Affiliate" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a Committee appointed by the Board in accordance with
subsection 3(c) of the Plan.
(e) "Company" means Docent Software, Inc., a Delaware corporation.
(f) "Consultant" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided
<PAGE>
that the term "Consultant" shall not include Directors who are paid only a
director's fee by the Company or who are not compensated by the Company for
their services as Directors.
(g) "Continuous Status as an Employee, Director or Consultant" means that
the service of an individual to the Company, whether as an Employee, Director or
Consultant, is not interrupted or terminated. The Board or the chief executive
officer of the Company may determine, in that party's sole discretion, whether
Continuous Status as an Employee, Director or Consultant shall be considered
interrupted in the case of: (i) any leave of absence approved by the Board or
the chief executive officer of the Company, including sick leave, military
leave, or any other personal leave; or (ii) transfers between the Company,
Affiliates or their successors.
(h) "Covered Employee" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to stockholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
(i) "Director" means a member of the Board.
(j) "Employee" means any person, including Officers and Directors, employed
by the Company or any Affiliate of the Company. Neither service as a Director
nor payment of a director's fee by the Company shall be sufficient to constitute
"employment" by the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(l) "Fair Market Value" means the value of the common stock as determined
in good faith by the Board and in a manner consistent with Section 260.140.50 of
Title 10 of the California Code of Regulations.
(m) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(n) "Listing Date" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange, or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.
(o) "Non-Employee Director" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a
2
<PAGE>
business relationship as to which disclosure would be required under Item 404(b)
of Regulation S-K; or (ii) is otherwise considered a "non-employee director" for
purposes of Rule 16b-3.
(p) "Nonstatutory Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(q) "Officer" means (i) prior to the Listing Date, any person designated by
the Company as an officer and (ii) from and after the Listing Date, a person who
is an officer of the Company within the meaning of Section 16 of the Exchange
Act and the rules and regulations promulgated thereunder.
(r) "Option" means a stock option granted pursuant to the Plan.
(s) "Option Agreement" means a written agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(t) "Optionee" means a person to whom an Option is granted pursuant to the
Plan or, if applicable, such other person who holds an outstanding Option.
(u) "Outside Director" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(v) "Plan" means this 1997 Stock Option Plan.
(w) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3 as in effect with respect to the Company at the time discretion is
being exercised regarding the Plan.
(x) "Securities Act" means the Securities Act of 1933, as amended.
3. Administration.
(a) The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible under
the Plan shall be granted Options; when and how each Option shall be granted;
whether an Option
3
<PAGE>
will be an Incentive Stock Option or a Nonstatutory Stock Option; the provisions
of each Option granted (which need not be identical), including the time or
times such Option may be exercised in whole or in part; and the number of shares
for which an Option shall be granted to each such person.
(2) To construe and interpret the Plan and Options granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Option Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.
(3) To amend the Plan or an Option as provided in Section 11.
(c) The Board may delegate administration of the Plan to a committee
of the Board composed of two (2) or more members (the "Committee"), all of the
members of which Committee may be, in the discretion of the Board, Non-Employee
Directors and/or Outside Directors. If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board, including the power to
delegate to a subcommittee of two (2) or more Outside Directors any of the
administrative powers the Committee is authorized to exercise (and references in
this Plan to the Board shall thereafter be to the Committee or such a
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan. Additionally, prior to the Listing Date, and
notwithstanding anything to the contrary contained herein, the Board may
delegate administration of the Plan to any person or persons and the term
"Committee" shall apply to any person or persons to whom such authority has been
delegated. Notwithstanding anything in this Section 3 to the contrary, the Board
or the Committee may delegate to a committee of one or more members of the Board
the authority to grant Options to eligible persons who (1) are not then subject
to Section 16 of the Exchange Act and/or (2) are either (i) not then Covered
Employees and are not expected to be Covered Employees at the time of
recognition of income resulting from such Option, or (ii) not persons with
respect to whom the Company wishes to comply with Section 162(m) of the Code.
4. Shares Subject To The Plan.
(a) Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to Options shall not
exceed in the aggregate Two Million Five Hundred Thousand (2,500,000) shares of
the Company's common stock. If any Option shall for any reason expire or
otherwise terminate, in whole or in part, without having been exercised in full,
the stock not purchased under such Option shall revert to and again become
available for issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. Eligibility.
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(a) Incentive Stock Options may be granted only to Employees. Nonstatutory
Stock Options may be granted only to Employees, Directors or Consultants.
(b) No person shall be eligible for the grant of an Option if, at the time
of grant, such person owns (or is deemed to own pursuant to Section 424(d) of
the Code) stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or of any of its Affiliates
unless the exercise price of such Option is at least one hundred ten percent
(110%) of the Fair Market Value of such stock at the date of grant and the
Option is not exercisable after the expiration of five (5) years from the date
of grant.
(c) Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, no person shall be eligible to be granted Options covering
more than One Million (1,000,000) shares of the Company's common stock in any
calendar year. This subsection 5(c) shall not apply prior to the Listing Date
and, following the Listing Date, shall not apply until (i) the earliest of: (A)
the first material modification of the Plan (including any increase to the
number of shares reserved for issuance under the Plan in accordance with Section
4); (B) the issuance of all of the shares of common stock reserved for issuance
under the Plan; (C) the expiration of the Plan; or (D) the first meeting of
stockholders at which directors are to be elected that occurs after the close of
the third calendar year following the calendar year in which occurred the first
registration of an equity security under Section 12 of the Exchange Act; or (ii)
such other date required by Section 162(m) of the Code and the rules and
regulations promulgated thereunder.
6. Option Provisions.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) Term. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) Price. The exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted; the exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, an Option (whether an
Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an
exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Code.
(c) Consideration. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of
5
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the grant of the Option, (A) by delivery to the Company of other common stock of
the Company, (B) according to a deferred payment or other arrangement (which may
include, without limiting the generality of the foregoing, the use of other
common stock of the Company) with the person to whom the Option is granted or to
whom the Option is transferred pursuant to subsection 6(d), or (C) in any other
form of legal consideration that may be acceptable to the Board. In the case of
any deferred payment arrangement, interest shall be compounded at least annually
and shall be charged at the minimum rate of interest necessary to avoid the
treatment as interest, under any applicable provisions of the Code, of any
amounts other than amounts stated to be interest under the deferred payment
arrangement. In addition, to the extent required by law, the par value of the
stock will be paid in cash at the time the Option is exercised.
(d) Transferability. Prior to the Listing Date, an Option (whether an
Incentive Stock Option or a Nonstatutory Stock Option) shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the Option is granted only
by such person. From and after the Listing Date, a Nonstatutory Stock Option
may be transferable to the extent provided in the Option Agreement; provided,
however, that if the Option Agreement does not specifically provide for
transferability, then such Nonstatutory Stock Option shall not be transferable
except by will or by the laws of descent and distribution. Notwithstanding the
foregoing, the person to whom the Option is granted may, by delivering written
notice to the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionee, shall thereafter be
entitled to exercise the Option.
(e) Vesting. The total number of shares of stock subject to an Option may,
but need not, be allotted in periodic installments (which may, but need not, be
equal). The Option Agreement may provide that from time to time during each of
such installment periods, the Option may become exercisable ("vest") with
respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The vesting provisions of
individual Options may vary, provided, however that prior to the Listing Date,
each Option will provide for vesting of at least twenty percent (20%) per year
of the total number of shares subject to the Option. Notwithstanding the
foregoing, an Option granted to an Officer, Director or Consultant may become
fully exercisable, subject to reasonable conditions such as continued
employment, at any time or during any period established by the Company or of
any of its Affiliates. The provisions of this subsection 6(e) are subject to
any Option provisions governing the minimum number of shares as to which an
Option may be exercised.
(f) Securities Law Compliance. The Company may require any Optionee, or
any person to whom an Option is transferred under subsection 6(d), as a
condition of exercising any such Option, (1) to give written assurances
satisfactory to the Company as to the Optionee's knowledge and experience in
financial and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and experienced in
6
<PAGE>
financial and business matters, and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of
exercising the Option; and (2) to give written assurances satisfactory to the
Company stating that such person is acquiring the stock subject to the Option
for such person's own account and not with any present intention of selling or
otherwise distributing the stock. The foregoing requirements, and any
assurances given pursuant to such requirements, shall be inoperative if (i) the
issuance of the shares upon the exercise of the Option has been registered under
a then currently effective registration statement under the Securities Act, or
(ii) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may require the Optionee to
provide such other representations, written assurances or information which the
Company shall determine is necessary, desirable or appropriate to comply with
applicable securities and other laws as a condition of granting an Option to
such Optionee or permitting the Optionee to exercise such Option. The Company
may, upon advice of counsel to the Company, place legends on stock certificates
issued under the Plan as such counsel deems necessary or appropriate in order to
comply with applicable securities laws, including, but not limited to, legends
restricting the transfer of the stock.
(g) Termination of Employment or Relationship as a Director or Consultant.
In the event an Optionee's Continuous Status as an Employee, Director or
Consultant terminates (other than upon the Optionee's death or disability), the
Optionee may exercise his or her Option (to the extent that the Optionee was
entitled to exercise it as of the date of termination) but only within such
period of time ending on the earlier of (i) the date sixty (60) days following
the termination of the Optionee's Continuous Status as an Employee, Director or
Consultant, or such longer or shorter period, which shall not be less than
thirty (30) days, specified in the Option Agreement, or (ii) the expiration of
the term of the Option as set forth in the Option Agreement; provided, however,
if the Optionee is terminated for cause, then the Option shall terminate on the
date Optionee's Continuous Status as an Employee, Director or Consultant ceases.
If, at the date of termination, the Optionee is not entitled to exercise his or
her entire Option, the shares covered by the unexercisable portion of the Option
shall revert to and again become available for issuance under the Plan. If,
after termination, the Optionee does not exercise his or her Option within the
time specified in the Option Agreement, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.
An Optionee's Option Agreement may also provide that if the exercise of the
Option following the termination of the Optionee's Continuous Status as an
Employee, Director, or Consultant (other than upon the Optionee's death or
disability) would result in liability under Section 16(b) of the Exchange Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in the Option Agreement, or (ii) the tenth (10th) day
after the last date on which such exercise would result in such liability under
Section 16(b) of the Exchange Act. Finally, an Optionee's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionee's Continuous Status as an Employee, Director or Consultant (other than
upon the Optionee's death or disability) would be prohibited at any time solely
because the issuance of shares would violate the registration requirements under
the Securities Act, then the Option shall terminate on the earlier of (i) the
expiration of the term of the Option set forth in the first paragraph of this
subsection 6(g), or (ii) the expiration of
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a period of sixty (60) days after the termination of the Optionee's Continuous
Status as an Employee, Director or Consultant during which the exercise of the
Option would not be in violation of such registration requirements.
(h) Disability of Optionee. In the event an Optionee's Continuous Status
as an Employee, Director or Consultant terminates as a result of the Optionee's
disability, the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it as of the date of termination), but only
within such period of time ending on the earlier of (i) the date six (6) months
following such termination (or such longer period specified in the Option
Agreement), or (ii) the expiration of the term of the Option as set forth in the
Option Agreement. If, at the date of termination, the Optionee is not entitled
to exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to and again become available for issuance
under the Plan. If, after termination, the Optionee does not exercise his or
her Option within the time specified herein, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.
(i) Death of Optionee. In the event of the death of an Optionee during, or
within a period specified in the Option Agreement after the termination of, the
Optionee's Continuous Status as an Employee, Director or Consultant, the Option
may be exercised (to the extent the Optionee was entitled to exercise the Option
as of the date of death) by the Optionee's estate, by a person who acquired the
right to exercise the Option by bequest or inheritance or by a person designated
to exercise the option upon the Optionee's death pursuant to subsection 6(d),
but only within the period ending on the earlier of (i) the date twelve (12)
months following the date of death (or such longer or shorter period, which in
no event shall be less than six (6) months, specified in the Option Agreement),
or (ii) the expiration of the term of such Option as set forth in the Option
Agreement. If, at the time of death, the Optionee was not entitled to exercise
his or her entire Option, the shares covered by the unexercisable portion of the
Option shall revert to and again become available for issuance under the Plan.
If, after death, the Option is not exercised within the time specified herein,
the Option shall terminate, and the shares covered by such Option shall revert
to and again become available for issuance under the Plan.
(j) Early Exercise. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased shall be subject to a repurchase right in favor of the Company, with
the repurchase price to be equal to the original purchase price of the stock, or
to any other restriction the Board determines to be appropriate. Prior to the
Listing Date, however, any unvested shares so purchased shall be subject to a
repurchase right in favor of the Company, with the repurchase price to be equal
to the original purchase price of the stock, or to any other restriction the
Board determines to be appropriate; provided, however, that (i) the right to
repurchase at the original purchase price shall lapse at a minimum rate of
twenty percent (20%) per year over five (5) years from the date the Option was
granted, and (ii) such right shall be exercisable only within (A) the ninety
(90)-day period following the termination of employment or the relationship as a
Director or Consultant, or (B) such longer period as may be agreed to by the
Company and the Optionee (for example, for purposes of satisfying the
requirements of
8
<PAGE>
Section 1202(c)(3) of the Code (regarding "qualified small business stock")),
and (iii) such right shall be exercisable only for cash or cancellation of
purchase money indebtedness for the shares. Notwithstanding the foregoing,
shares received on exercise of an Option by an Officer, Director or Consultant
may be subject to additional or greater restrictions.
(k) Right of Repurchase. The Option may, but need not, include a provision
whereby the Company may elect, prior to the Listing Date, to repurchase all or
any part of the vested shares exercised pursuant to the Option; provided,
however, that (i) such repurchase right shall be exercisable only within (A) the
ninety (90)-day period following the termination of employment or the
relationship as a Director or Consultant (or in the case of a post-termination
exercise of the Option, the ninety (90)-day period following such post-
termination exercise), or (B) such longer period as may be agreed to by the
Company and the Optionee (for example, for purposes of satisfying the
requirements of Section 1202(c)(3) of the Code (regarding "qualified small
business stock")), (ii) such repurchase right shall be exercisable for less than
all of the vested shares only with the Optionee's consent, and (iii) such right
shall be exercisable only for cash or cancellation of purchase money
indebtedness for the shares at a repurchase price equal to the stock's Fair
Market Value at the time of such termination. Notwithstanding the foregoing,
shares received on exercise of an Option by an Officer, Director or Consultant
may be subject to additional or greater restrictions specified in the Option
Agreement.
(l) Right of First Refusal. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to exercise
a right of first refusal following receipt of notice from the Optionee of the
intent to transfer all or any part of the shares exercised pursuant to the
Option. Such right of first refusal must be exercised by the Company no more
than thirty (30) days following receipt of notice of the Optionee's intent to
transfer shares and must be exercised as to all the shares the Optionee intends
to transfer unless the Optionee consents to exercise for less than all the
shares offered. The purchase of the shares following exercise must be completed
within sixty (60) days of the Company's receipt of notice of the Optionee's
intent to transfer shares or such longer period of time as has been offered by
the person to whom the Optionee intends to transfer the shares.
(m) Withholding. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such Option by any of the following means
or by a combination of such means: (1) tendering a cash payment; (2)
authorizing the Company to withhold shares from the shares of the common stock
otherwise issuable to the Optionee as a result of the exercise of the Option; or
(3) delivering to the Company owned and unencumbered shares of the common stock
of the Company.
7. Covenants Of The Company.
(a) During the terms of the Options, the Company shall keep available at
all times the number of shares of stock required to satisfy such Options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of
9
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stock upon exercise of the Options; provided, however, that this undertaking
shall not require the Company to register under the Securities Act either the
Plan, any Option or any stock issued or issuable pursuant to any such Option.
If, after reasonable efforts, the Company is unable to obtain from any such
regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell stock
upon exercise of such Options unless and until such authority is obtained.
8. Use Of Proceeds From Stock.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
9. Miscellaneous.
(a) The Board shall have the power to accelerate the time at which an
Option may first be exercised or the time during which an Option or any part
thereof will vest pursuant to subsection 6(e), notwithstanding the provisions in
the Option stating the time at which it may first be exercised or the time
during which it will vest.
(b) Neither an Optionee nor any person to whom an Option is transferred
under subsection 6(d) shall be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to such Option unless and
until such person has satisfied all requirements for exercise of the Option
pursuant to its terms.
(c) Throughout the term of any Option, the Company shall deliver to the
holder of such Option, not later than one hundred twenty (120) days after the
close of each of the Company's fiscal years during the Option term, a balance
sheet and an income statement. This section shall not apply (i) after the
Listing Date, or (ii) when issuance is limited to key employees whose duties in
connection with the Company assure them access to equivalent information.
(d) Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Employee, Director, Consultant or
Optionee any right to continue in the employ of the Company or any Affiliate (or
to continue acting as a Director or Consultant or shall affect the right of the
Company or any Affiliate to terminate the employment of any Employee, with or
without cause, to remove any Director as provided in the Company's Bylaws and
the provisions of the Delaware General Corporation Law, or to terminate the
relationship of any Consultant subject to the terms of that Consultant's
agreement with the Company or Affiliate to which such Consultant is providing
services.
(e) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such
10
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limit (according to the order in which they were granted) shall be treated as
Nonstatutory Stock Options.
(f) (1) The Board or the Committee shall have the authority to effect, at
any time and from time to time (i) the repricing of any outstanding Options
under the Plan and/or (ii) with the consent of the affected holders of Options,
the cancellation of any outstanding Options and the grant in substitution
therefor of new Options under the Plan covering the same or different numbers of
shares of common stock, but having an exercise price per share not less than
eighty-five percent (85%) of the Fair Market Value (one hundred percent (100%)
of the Fair Market Value in the case of an Incentive Stock Option or, in the
case of a ten percent (10%) stockholder (as defined in subsection 5(b)), not
less than one hundred and ten percent (110%) of the Fair Market Value) per share
of common stock on the new grant date.
(2) Shares subject to an Option canceled under this subsection 9(f)
shall continue to be counted, for the applicable period in which it was granted,
against the maximum award of Options permitted to be granted pursuant to
subsection 5(c) of the Plan. The repricing of an Option under this subsection
9(f), resulting in a reduction of the exercise price, shall be deemed to be a
cancellation of the original Option and the grant of a substitute Option; in the
event of such repricing, both the original and the substituted Options shall be
counted for the applicable period against the maximum awards of Options
permitted to be granted pursuant to subsection 5(c) of the Plan. The provisions
of this subsection 9(f)(2) shall be applicable only to the extent required by
Section 162(m) of the Code.
10. Adjustments Upon Changes In Stock.
(a) If any change is made in the stock subject to the Plan, or subject to
any Option (through merger, consolidation, reorganization, recapitalization,
stock dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the type(s) and maximum
number of securities subject to the Plan pursuant to subsection 4(a) and the
maximum number of securities subject to award to any person during any calendar
year pursuant to subsection 5(c), and the outstanding Options will be
appropriately adjusted in the type(s) and number of securities and price per
share of stock subject to such outstanding Options. Such adjustments shall be
made by the Board or Committee, the determination of which shall be final,
binding and conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company.")
(b) In the event of: (1) a merger or consolidation in which the Company is
not the surviving corporation or (2) a reverse merger in which the Company is
the surviving corporation but the shares of the Company's common stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, then: (i) any surviving or acquiring corporation shall assume the
Options outstanding under the Plan or shall substitute similar options
(including an option to acquire the same consideration paid to stockholders in
the transaction described in this Subsection 10(b)) for
11
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those outstanding under the Plan, or (ii) in the event any surviving or
acquiring corporation refuses to assume such Options or to substitute similar
options for those outstanding under the Plan, (A) with respect to Options held
by persons then performing services as Employees, Directors or Consultants, the
vesting of such Options and the time during which such Options may be exercised
shall be accelerated prior to such event and the Options terminated if not
exercised after such acceleration and at or prior to such event, and (B) with
respect to any other Options outstanding under the Plan, such Options shall be
terminated if not exercised prior to such event. In the event of a (x)
dissolution or liquidation or (y) a sale of all or substantially all of the
assets of the Company, the outstanding Options shall terminate if not exercised
prior to such event; unless, in the event of a sale of all or substantially all
of the assets of the Company, the acquiring person or entity agrees to assume
the Options outstanding under the Plan.
11. Amendment Of The Plan and Options.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 10 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company to the extent stockholder approval is necessary for the Plan to
satisfy the requirements of Section 422 of the Code, Rule 16b-3 under the
Exchange Act or any Nasdaq or securities exchange listing requirements.
(b) The Board may in its sole discretion submit any other amendment to the
Plan for stockholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations promulgated thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.
(d) Rights and obligations under any Option granted before amendment of the
Plan shall not be impaired by any amendment of the Plan unless (i) the Company
requests the consent of the person to whom the Option was granted and (ii) such
person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms of
any one or more Options; provided, however, that the rights and obligations
under any Option shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Option was granted and
(ii) such person consents in writing.
12. Termination Or Suspension Of The Plan.
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on July 24, 2007, which shall be within ten
(10) years from the date the Plan is adopted by the Board or approved by the
stockholders of the Company,
12
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whichever is earlier. No Options may be granted under the Plan while the Plan is
suspended or after it is terminated.
(b) Rights and obligations under any Option granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except
with the written consent of the person to whom the Option was granted.
13. Effective Date Of Plan.
The Plan shall become effective as determined by the Board, but no Options
granted under the Plan shall be exercised unless and until the Plan has been
approved by the stockholders of the Company, which approval shall be within
twelve (12) months before or after the date the Plan is adopted by the Board.
13
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Exhibit 10.2
DOCENT, INC.
2000 Omnibus Equity Incentive Plan
(Adopted by the Board on March 23, 2000)
<PAGE>
TABLE OF CONTENTS
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<CAPTION>
Page
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<S> <C>
SECTION 1. ESTABLISHMENT AND PURPOSE................................ 1
SECTION 2. DEFINITIONS.............................................. 1
(a) "Affiliate"................................................ 1
(b) "Award".................................................... 1
(c) "Board of Directors"....................................... 1
(d) "Change in Control"........................................ 1
(e) "Code"..................................................... 2
(f) "Committee"................................................ 2
(g) "Company".................................................. 2
(h) "Consultant"............................................... 2
(i) "Employee"................................................. 2
(j) "Exchange Act"............................................. 2
(k) "Exercise Price"........................................... 2
(l) "Fair Market Value"........................................ 2
(m) "ISO"...................................................... 3
(n) "Nonstatutory Option"...................................... 3
(o) "Offeree".................................................. 3
(p) "Option"................................................... 3
(q) "Optionee"................................................. 3
(r) "Outside Director"......................................... 3
(s) "Parent"................................................... 3
(t) "Participant".............................................. 3
(u) "Plan"..................................................... 3
(v) "Purchase Price"........................................... 3
(w) "Restricted Share"......................................... 3
(x) "Restricted Share Agreement ".............................. 3
(y) "SAR"...................................................... 3
(z) "SAR Agreement"............................................ 3
(aa) "Service".................................................. 3
(bb) "Share".................................................... 4
(cc) "Stock".................................................... 4
(dd) "Stock Option Agreement"................................... 4
(ee) "Stock Purchase Agreement"................................. 4
(ff) "Stock Unit"............................................... 4
(gg) "Stock Unit Agreement"..................................... 4
(hh) "Subsidiary"............................................... 4
(ii) "Total and Permanent Disability"........................... 4
SECTION 3. ADMINISTRATION........................................... 4
(a) Committee Procedures....................................... 4
(b) Committee Responsibilities................................. 4
</TABLE>
-i-
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<TABLE>
<S> <C>
SECTION 4. ELIGIBILITY................................................. 6
(a) General Rule.................................................. 6
(b) Outside Directors............................................. 6
(c) Limitation On Grants.......................................... 7
(d) Ten-Percent Stockholders...................................... 7
(e) Attribution Rules............................................. 7
(f) Outstanding Stock............................................. 7
SECTION 5. STOCK SUBJECT TO PLAN....................................... 7
(a) Basic Limitation.............................................. 7
(b) Annual Increase in Shares..................................... 7
(c) Additional Shares............................................. 7
(d) Dividend Equivalents.......................................... 8
SECTION 6. RESTRICTED SHARES........................................... 8
(a) Restricted Stock Agreement.................................... 8
(b) Payment for Awards............................................ 8
(c) Vesting....................................................... 8
(d) Voting and Dividend Rights.................................... 8
SECTION 7. OTHER TERMS AND CONDITIONS OF AWARDS OR SALES............... 9
(a) Duration of Offers and Nontransferability of Rights........... 9
(b) Purchase Price................................................ 9
(c) Withholding Taxes............................................. 9
(d) Restrictions on Transfer of Shares............................ 9
SECTION 8. TERMS AND CONDITIONS OF OPTIONS............................. 9
(a) Stock Option Agreement........................................ 9
(b) Number of Shares.............................................. 9
(c) Exercise Price................................................ 9
(d) Withholding Taxes............................................. 10
(e) Exercisability and Term....................................... 10
(f) Nontransferability............................................ 10
(g) Exercise of Options Upon Termination of Service............... 10
(h) Effect of Change in Control................................... 10
(i) Leaves of Absence............................................. 11
(j) No Rights as a Stockholder.................................... 11
(k) Modification, Extension and Renewal of Options................ 11
(l) Restrictions on Transfer of Shares............................ 11
(m) Buyout Provisions............................................. 11
SECTION 9. PAYMENT FOR SHARES.......................................... 11
(a) General Rule.................................................. 11
(b) Surrender of Stock............................................ 12
(c) Services Rendered............................................. 12
(d) Cashless Exercise............................................. 12
(e) Exercise/Pledge............................................... 12
</TABLE>
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<TABLE>
<S> <C>
(f) Promissory Note.................................................. 12
(g) Other Forms of Payment........................................... 12
SECTION 10. STOCK APPRECIATION RIGHTS..................................... 12
(a) SAR Agreement.................................................... 12
(b) Number of Shares................................................. 12
(c) Exercise Price................................................... 13
(d) Exercisability and Term.......................................... 13
(e) Effect of Change in Control...................................... 13
(f) Exercise of SARs................................................. 13
(g) Modification or Assumption of SARs............................... 13
SECTION 11. STOCK UNITS................................................... 14
(a) Stock Unit Agreement............................................. 14
(b) Payment for Awards............................................... 14
(c) Vesting Conditions............................................... 14
(d) Voting and Dividend Rights....................................... 14
(e) Form and Time of Settlement of Stock Units....................... 14
(f) Death of Recipient............................................... 15
(g) Creditors' Rights................................................ 15
SECTION 12. PROTECTION AGAINST DILUTION................................... 15
(a) Adjustments...................................................... 15
(b) Dissolution or Liquidation....................................... 15
(c) Reorganizations.................................................. 16
SECTION 13. DEFERRAL OF AWARDS............................................ 16
SECTION 14. AWARDS UNDER OTHER PLANS...................................... 17
SECTION 15. PAYMENT OF DIRECTOR'S FEES IN SECURITIES...................... 17
(a) Effective Date................................................... 17
(b) Elections to Receive NSOs, Restricted Shares or Stock Units...... 17
(c) Number and Terms of NSOs, Restricted Shares or Stock Units....... 17
SECTION 16. ADJUSTMENT OF SHARES.......................................... 17
(a) General.......................................................... 17
(b) Reorganizations.................................................. 17
(c) Reservation of Rights............................................ 18
SECTION 17. LEGAL AND REGULATORY REQUIREMENTS............................. 18
SECTION 18. WITHHOLDING TAXES............................................. 18
(a) General.......................................................... 18
(b) Share Withholding................................................ 18
SECTION 19. LIMITATION ON PARACHUTE PAYMENTS.............................. 18
(a) Scope of Limitation.............................................. 18
</TABLE>
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<TABLE>
<S> <C>
(b) Supersedes Other Provisions..................................... 19
SECTION 20. NO EMPLOYMENT RIGHTS......................................... 19
SECTION 21. DURATION AND AMENDMENTS...................................... 19
(a) Term of the Plan................................................ 19
(b) Right to Amend or Terminate the Plan............................ 19
(c) Effect of Amendment or Termination.............................. 19
SECTION 22. EXECUTION.................................................... 19
</TABLE>
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<PAGE>
DOCENT, INC.
-----------
2000 Omnibus Equity Incentive Plan
----------------------------------
(Adopted by the Board on March 23, 2000)
SECTION 1. ESTABLISHMENT AND PURPOSE.
- ---------------------------------------
The Plan was adopted by the Board of Directors effective March 23, 2000.
The purpose of the Plan is to promote the long-term success of the Company 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.
SECTION 2. DEFINITIONS.
- -------------------------
(a) "Affiliate" shall mean any entity other than a Subsidiary, if the
---------
Company and/or one of more Subsidiaries own not less than fifty percent (50%) of
such entity.
(b) "Award" shall mean any award of an Option, a SAR, a Restricted Share
-----
or a Stock Unit under the Plan.
(c) "Board of Directors" shall mean the Board of Directors of the Company,
------------------
as constituted from time to time.
(d) "Change in Control" shall mean the occurrence of either of the
-----------------
following events:
(i) A change in the composition of the Board of Directors, as a
result of which fewer than one-half of the incumbent directors are
directors who either:
(A) Had been directors of the Company twenty-four (24) months
prior to such change; or
(B) Were elected, or nominated for election, to the Board of
Directors with the affirmative votes of at least a majority of the
directors who had been directors of the Company twenty-four (24)
months prior to such change and who were still in office at the time
of the election or nomination; or
(ii) Any "person" (as such term is used in sections 13(d) and 14(d) of
the Exchange Act) who, by the acquisition or aggregation of securities, is
or becomes the beneficial owner, directly or indirectly, of securities of
the Company representing twenty percent (20%) or more of the combined
voting power of the Company's then outstanding securities ordinarily (and
apart from rights accruing under special circumstances) having
<PAGE>
the right to vote at elections of directors (the "Base Capital Stock");
except that any change in the relative beneficial ownership of the
Company's securities by any person resulting solely from a reduction in the
aggregate number of outstanding shares of Base Capital Stock, and any
decrease thereafter in such person's ownership of securities, shall be
disregarded until such person increases in any manner, directly or
indirectly, such person's beneficial ownership of any securities of the
Company. For purposes of this Subsection (ii), the term "person" shall not
include an employee benefit plan maintained by the Company.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(f) "Committee" shall mean the committee designated by the Board of
---------
Directors, which is authorized to administer the Plan under Section 3 hereof.
The Committee shall have membership composition which enables the Options or
other rights granted under the Plan to qualify for exemption under Rule 16b-3
with respect to persons who are subject to Section 16 of the Exchange Act.
(g) "Company" shall mean Docent, Inc., a Delaware corporation.
-------
(h) "Consultant" shall mean a consultant or advisor who provides bona fide
----------
services to the Company, 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 the second sentence of
Section 4(a) and Section 4(b).
(i) "Employee" shall mean (i) any individual who is a common-law employee
--------
of the Company or of a Subsidiary, (ii) a member of the Board of Directors,
including (without limitation) an Outside Director, or an affiliate of member of
the Board of Directors and (iii) a member of the board of directors of a
Subsidiary; or (iv) an independent contractor or advisor who performs services
for the Company or a Subsidiary. Service as a member of the Board of Directors,
a member of the board of directors of a Subsidiary or as an independent
contractor or advisor shall be considered employment for all purposes of the
Plan except the second sentence of Section 4(a) and Section 4(b).
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
(k) "Exercise Price" shall mean, in the case of an Option, the amount for
--------------
which one Common Share may be purchased upon exercise of such Option, as
specified in the applicable Stock Option Agreement. "Exercise Price," in the
case of a SAR, shall mean 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.
(l) "Fair Market Value" shall mean (i) the closing price of a Share on the
-----------------
principal exchange which the Shares are trading, on the date on which the Fair
Market Value is determined (if Fair Market Value is determined on a date which
the principal exchange is closed, Fair Market Value shall be determined on the
last immediately preceding trading day), or (ii) if the Shares are not traded on
an exchange but are quoted on the Nasdaq National Market or a successor
quotation system, the closing price on the date on which the Fair Market Value
is determined, or (iii) if the Shares are not traded on an exchange or quoted on
the Nasdaq National
-2-
<PAGE>
Market or a successor quotation system, the fair market value of a Share, as
determined by the Committee in good faith. Such determination shall be
conclusive and binding on all persons.
(m) "ISO" shall mean an employee incentive stock option described in Code
---
section 422.
(n) "Nonstatutory Option" shall mean an employee stock option that is not
-------------------
an ISO.
(o) "Offeree" shall mean an individual to whom the Committee has offered
-------
the right to acquire Shares under the Plan (other than upon exercise of an
Option).
(p) "Option" shall mean an ISO or Nonstatutory Option granted under the
------
Plan and entitling the holder to purchase Shares.
(q) "Optionee" shall mean an individual or estate who holds an Option or
--------
SAR.
(r) "Outside Director" shall mean a member of the Board of Directors who
---------------
is not a common-law employee of the Company or of a Subsidiary. Service as an
Outside Director shall be considered employment for all purposes of the Plan,
except as provided in the second sentence of Section 4(a).
(s) "Parent" shall mean any corporation (other than the Company) in an
------
unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns 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. A corporation that attains the status of a
Parent on a date after the adoption of the Plan shall be a parent commencing as
of such date.
(t) "Participant" shall mean an individual or estate who holds an Award.
-----------
(u) "Plan" shall mean this 2000 Omnibus Equity Incentive Plan of Docent,
----
Inc., as amended from time to time.
(v) "Purchase Price" shall mean the consideration for which one Share may
--------------
be acquired under the Plan (other than upon exercise of an Option), as specified
by the Committee.
(w) "Restricted Share" shall mean a Common Share awarded under the Plan.
----------------
(x) "Restricted Share Agreement" shall mean the agreement between the
--------------------------
Company and the recipient of a Restricted Share which contains the terms,
conditions and restrictions pertaining to such Restricted Shares.
(y) "SAR" shall mean a stock appreciation right granted under the Plan.
---
(z) "SAR Agreement" shall mean the agreement between the Company and an
-------------
Optionee which contains the terms, conditions and restrictions pertaining to his
or her SAR.
(aa) "Service" shall mean service as an Employee.
-------
-3-
<PAGE>
(bb) "Share" shall mean one share of Stock, as adjusted in accordance with
-----
Section 9 (if applicable).
(cc) "Stock" shall mean the Common Stock of the Company.
-----
(dd) "Stock Option Agreement" shall mean the agreement between the Company
----------------------
and an Optionee which contains the terms, conditions and restrictions pertaining
to his Option.
(ee) "Stock Purchase Agreement" shall mean the agreement between the
------------------------
Company and an Offeree who acquires Shares under the Plan which contains the
terms, conditions and restrictions pertaining to the acquisition of such Shares.
(ff) "Stock Unit" shall mean a bookkeeping entry representing the
----------
equivalent of one Common Share, as awarded under the Plan.
(gg) "Stock Unit Agreement" shall mean the agreement between the Company
--------------------
and the recipient of a Stock Unit which contains the terms, conditions and
restrictions pertaining to such Stock Unit.
(hh) "Subsidiary" shall mean any corporation, if the Company and/or one or
----------
more other Subsidiaries own not less than fifty percent (50%) of the total
combined voting power of all classes of outstanding stock of such corporation. 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.
(ii) "Total and Permanent Disability" shall mean that the Optionee is
------------------------------
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted, or can be expected to last, for a continuous period
of not less than twelve (12) months.
SECTION 3. ADMINISTRATION.
- ----------------------------
(a) Committee Procedures. The Plan shall be administered by the
--------------------
Committee. The Committee shall consist exclusively of two or more directors of
the Company, who shall be appointed by the Board of Directors. The Board of
Directors shall designate one of the members of the Committee as chairman. The
Committee may hold meetings at such times and places as it shall determine. The
acts of a majority of the Committee members present at meetings at which a
quorum exists, or acts reduced to or approved in writing by all Committee
members, shall be valid acts of the Committee.
(b) Committee Responsibilities. Subject to the provisions of the Plan, the
--------------------------
Committee shall have full authority and discretion to take the following
actions:
(i) To interpret the Plan and to apply its provisions;
(ii) To adopt, amend or rescind rules, procedures and forms relating
to the Plan;
-4-
<PAGE>
(iii) To authorize any person to execute, on behalf of the Company,
any instrument required to carry out the purposes of the Plan;
(iv) To determine when Shares are to be awarded or offered for sale
and when Options are to be granted under the Plan;
(v) To select the Offerees and Optionees;
(vi) To determine the number of Shares to be offered to each Offeree
or to be made subject to each Option;
(vii) To prescribe the terms and conditions of each award or sale of
Shares, including (without limitation) the Purchase Price, the vesting of
the award (including accelerating the vesting of awards) and to specify the
provisions of the Stock Purchase Agreement relating to such award or sale;
(viii) To prescribe the terms and conditions of each Option, including
(without limitation) the Exercise Price, the vesting or duration of the
Option (including accelerating the vesting of the Option), to determine
whether such Option is to be classified as an ISO or as a Nonstatutory
Option, and to specify the provisions of the Stock Option Agreement
relating to such Option;
(ix) To amend any outstanding Stock Purchase Agreement or Stock
Option Agreement, subject to applicable legal restrictions and to the
consent of the Offeree or Optionee who entered into such agreement;
(x) To prescribe the consideration for the grant of each Option or
other right under the Plan and to determine the sufficiency of such
consideration;
(xi) To determine the disposition of each Option or other right
under the Plan in the event of an Optionee's or Offeree's divorce or
dissolution of marriage;
(xii) To determine whether Options or other rights under the Plan
will be granted in replacement of other grants under an incentive or other
compensation plan of an acquired business;
(xiii) To correct any defect, supply any omission, or reconcile any
inconsistency in the Plan, any Stock Option Agreement or any Stock Purchase
Agreement; and
(xiv) To take any other actions deemed necessary or advisable for the
administration of the Plan.
Subject to the requirements of applicable law, the Committee may designate
persons other than members of the Committee to carry out its responsibilities
and may prescribe such conditions and limitations as it may deem appropriate,
except that the Committee may not delegate its authority with regard to the
selection for participation of or the granting of Options or other rights under
the Plan to persons subject to Section 16 of the Exchange Act. All decisions,
interpretations and other actions of the Committee shall be final and binding on
all Offerees, all
-5-
<PAGE>
Optionees, and all persons deriving their rights from an Offeree or Optionee. No
member of the Committee shall be liable for any action that he has taken or has
failed to take in good faith with respect to the Plan, any Option, or any right
to acquire Shares under the Plan.
SECTION 4. ELIGIBILITY.
- -------------------------
(a) General Rule. Only Employees shall be eligible for the grant of
------------
Restricted Shares, Stock Units, NSOs or SARs. In addition, only individuals who
are employed as common-law employees by the Company, a Parent or a Subsidiary
shall be eligible for the grant of ISOs. In addition, an Employee who owns more
than ten percent (10%) of the total combined voting power of all classes of
outstanding stock of the Company or any of its Parents or Subsidiaries shall not
be eligible for the grant of an ISO unless the requirements set forth in section
422(c)(6) of the Code are satisfied.
(b) Outside Directors. Any other provision of the Plan notwithstanding,
-----------------
the participation of Outside Directors in the Plan shall be subject to the
following restrictions:
(i) Outside Directors shall only be eligible for the grant of
Restricted Shares, Stock Units, Nonstatutory Options and SARs.
(ii) Each Outside Director shall automatically be granted an initial
Nonstatutory Option to purchase 40,000 Shares (subject to adjustment under
Section 16) as a result of their appointment or election as an Outside
Director on the earlier to occur of (i) the effectiveness of the Company's
initial public offering of the Stock or (ii) the date of such election or
appointment. In addition, upon the conclusion of each regular annual
meeting of the Company's stockholders occurring after 2000 and following
the meeting at which they were appointed, each Outside Director who will
continue serving as a member of the Board thereafter shall receive a
supplemental Nonstatutory Option to purchase 10,000 Shares (subject to
adjustment under Section 16). All such Nonstatutory Options shall vest and
become exercisable as follows:
(A) The initial option shall vest 25% on the one-year
anniversary of the Vesting Start Date and 2-12% per month for the
following 36 months.
(B) The Vesting Start Date for the initial option will be (i)
May 23, 2000, if the person was a director on such date; (ii) the date
of appointment or election as a director otherwise.
(C) All subsequent options shall vest in 12 equal monthly
installments 8-1/3% starting one month after the date that the last
installment of the last option held by such director granting under
this Section 4(b)(ii) vests.
(iii) The Exercise Price of all Nonstatutory Options granted to an
Outside Director under this Section 4(b) shall be equal to one hundred
percent (100%) of the Fair Market Value of a Share on the date of grant,
payable in one of the forms described in Section 9(a), (b) and (d).
-6-
<PAGE>
(iv) All Nonstatutory Options granted to an Outside Director under
this Section 4(b) shall terminate on the earliest of (A) the tenth (10th)
anniversary of the date of grant of such Options or (B) the date twelve
(12) months after the termination of such Outside Director's service for
any reason.
(c) Limitation On Grants. No Employee shall be granted Options to purchase
--------------------
more than one million (1,000,000) Shares in any fiscal year of the Company.
(d) Ten-Percent Stockholders. An Employee who owns more than ten percent
------------------------
(10%) of the total combined voting power of all classes of outstanding stock of
the Company or any of its Subsidiaries shall not be eligible for the grant of an
ISO unless such grant satisfies the requirements of Code section 422(c)(6).
(e) Attribution Rules. For purposes of Subsection (d) above, in
-----------------
determining stock ownership, an Employee shall be deemed to own the stock owned,
directly or indirectly, by or for his brothers, sisters, spouse, ancestors and
lineal descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its shareholders, partners or beneficiaries.
(f) Outstanding Stock. For purposes of Subsection (d) above, "outstanding
-----------------
stock" shall include all stock actually issued and outstanding immediately after
the grant. "Outstanding stock" shall not include shares authorized for issuance
under outstanding options held by the Employee or by any other person.
SECTION 5. STOCK SUBJECT TO PLAN.
- -----------------------------------
(a) Basic Limitation. Shares offered under the Plan shall be authorized
----------------
but unissued Shares or treasury Shares. The maximum aggregate number of Options,
SARs, Stock Units and Restricted Shares awarded under the Plan shall not exceed
(a) six million (6,000,000) Shares, plus the additional Common Shares described
in Sections (b) and (c). The limitation of this Section 5(a) shall be subject to
adjustment pursuant to Section 12.
(b) Annual Increase in Shares. As of January 1 of each year, commencing
-------------------------
with the year 2001, 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 (i) 5% of the outstanding shares on
such date or (ii) a lesser amount determined by the Board. The aggregate number
of Shares which may be issued under the Plan shall at all times be subject to
adjustment pursuant to Section 16. The number of Shares which are subject to
Options or other rights outstanding at any time under the Plan shall not exceed
the number of Shares which then remain available for issuance under the Plan.
The Company, during the term of the Plan, shall at all times reserve and keep
available sufficient Shares to satisfy the requirements of the Plan.
(c) Additional Shares. If Restricted Shares or Common Shares issued upon
-----------------
the exercise of Options are forfeited, then such Common Shares 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 Common Shares shall again become available for Awards under the
Plan. If Stock Units are settled, then only the number of Common Shares (if any)
actually issued in settlement of such Stock Units shall reduce the
-7-
<PAGE>
number available under Section 5(a) and the balance shall again become available
for Awards under the Plan. If SARs are exercised, then only the number of Common
Shares (if any) actually issued in settlement of such SARs shall reduce the
number available in Section 5(a) and the balance shall again become available
for Awards under the Plan. The foregoing notwithstanding, the aggregate number
of Common Shares that may be issued under the Plan upon the exercise of ISOs
shall not be increased when Restricted Shares or other Common Shares are
forfeited.
(d) 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.
SECTION 6. RESTRICTED SHARES
- -------------------------------
(a) Restricted Stock Agreement. Each grant of Restricted Shares under the
--------------------------
Plan shall be evidenced by a Restricted Stock Agreement between the recipient
and the Company. 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.
(b) 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, if permitted by law, 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 Company (or a Parent or
Subsidiary), as the Committee may determine.
(c) Vesting. 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. The Committee may
include among such conditions the requirement that the performance of the
Company or a business unit of the Company for a specified period of one or more
years equal or exceed a target determined in advance by the Committee. Such
performance shall be determined by the Company's independent auditors. Such
target shall be based on one or more of the criteria set forth in Appendix A.
The Committee shall determine such target not later than the 90th day of such
period. In no event shall the number of Restricted Shares which are subject to
performance based vesting conditions exceed 1,000,000, subject to adjustment in
accordance with Section 16. A Restricted Stock Agreement may provide for
accelerated vesting in the event of the Participant's death, disability or
retirement or other events. The Committee may determine, at the time of granting
Restricted Shares of thereafter, that all or part of such Restricted Shares
shall become vested in the event that a Change in Control occurs with respect to
the Company.
(d) Voting and Dividend Rights. The holders of Restricted Shares awarded
--------------------------
under the Plan shall have the same voting, dividend and other rights as the
Company'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
-8-
<PAGE>
shall be subject to the same conditions and restrictions as the Award with
respect to which the dividends were paid.
SECTION 7. OTHER TERMS AND CONDITIONS OF AWARDS OR SALES.
- -----------------------------------------------------------
(a) Duration of Offers and Nontransferability of Rights. Any right to
---------------------------------------------------
acquire Shares under the Plan (other than an Option) shall automatically expire
if not exercised by the Offeree within thirty (30) days after the grant of such
right was communicated to him by the Committee. Such right shall not be
transferable and shall be exercisable only by the Offeree to whom such right was
granted.
(b) Purchase Price. The Purchase Price shall be determined by the
--------------
Committee at its sole discretion. The Purchase Price shall be payable in one of
the forms described in Sections 9(a), (b) or (c).
(c) Withholding Taxes. As a condition to the purchase of Shares, the
-----------------
Offeree shall make such arrangements as the Committee may require for the
satisfaction of any federal, state or local withholding tax obligations that may
arise in connection with such purchase.
(d) Restrictions on Transfer of Shares. Any Shares awarded or sold under
----------------------------------
the Plan shall be subject to such special forfeiture conditions, rights of
repurchase, rights of first refusal and other transfer restrictions as the
Committee may determine. Such restrictions shall be set forth in the applicable
Stock Purchase Agreement and shall apply in addition to any general restrictions
that may apply to all holders of Shares.
SECTION 8. TERMS AND CONDITIONS OF OPTIONS.
- ---------------------------------------------
(a) Stock Option Agreement. Each grant of an Option under the Plan shall
----------------------
be evidenced by a Stock Option Agreement between the Optionee and the Company.
Such Option shall be subject to all applicable terms and conditions of the Plan
and may be subject to any other terms and conditions which are not inconsistent
with the Plan and which the Committee deems appropriate for inclusion in a Stock
Option Agreement. 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 a form described in Section 9.
(b) Number of Shares. Each Stock Option Agreement shall specify the number
----------------
of Shares that are subject to the Option and shall provide for the adjustment of
such number in accordance with Section 16. Options granted to an Optionee in a
single fiscal year of the Company shall not cover more than 1,000,000 Shares.
(c) Exercise Price. Each Stock Option Agreement shall specify the Exercise
--------------
Price. The Exercise Price of an ISO shall not be less than 100 percent (100%) of
the Fair Market Value of a Share on the date of grant, except as otherwise
provided in Section 4(d). Subject to the foregoing in this Section 8(c), the
Exercise Price under any Option shall be determined by the
-9-
<PAGE>
Committee at its sole discretion. The Exercise Price shall be payable in one of
the forms described in Section 9.
(d) Withholding Taxes. As a condition to the exercise of an Option, the
-----------------
Optionee shall make such arrangements as the Committee may require for the
satisfaction of any federal, state or local withholding tax obligations that may
arise in connection with such exercise. The Optionee shall also make such
arrangements as the Committee may require for the satisfaction of any federal,
state or local withholding tax obligations that may arise in connection with the
disposition of Shares acquired by exercising an Option.
(e) Exercisability and Term. Each Stock Option Agreement shall specify
-----------------------
the date 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 ten (10) years from the date of
grant (five (5) years for Employees described in Section 4(d)). 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. Subject to the foregoing in this Section 8(e), the Committee
at its sole discretion shall determine when all or any installment of an Option
is to become exercisable and when an Option is to expire.
(f) Nontransferability. During an Optionee's lifetime, his Option(s)
------------------
shall be exercisable only by him and shall not be transferable. In the event of
an Optionee's death, his Option(s) shall not be transferable other than by will
or by the laws of descent and distribution.
(g) Exercise of Options Upon Termination of Service. Each Stock Option
-----------------------------------------------
Agreement shall set forth the extent to which the Optionee shall have the right
to exercise the Option following termination of the Optionee's Service with the
Company and its Subsidiaries, and the right to exercise the Option of any
executors or administrators of the Optionee's estate or any person who has
acquired such Option(s) directly from the Optionee by bequest or inheritance.
Such provisions shall be determined in the sole discretion of the Committee,
need not be uniform among all Options issued pursuant to the Plan, and may
reflect distinctions based on the reasons for termination of Service.
(h) Effect of Change in Control. The Committee may determine, at the time
---------------------------
of granting an Option or thereafter, that such Option shall become exercisable
as to all or part of the Shares subject to such Option in the event that a
Change in Control occurs with respect to the Company, subject to the following
limitations:
(i) In the case of an ISO, the acceleration of exercisability shall
not occur without the Optionee's written consent.
(ii) If the Company and the other party to the transaction
constituting a Change in Control agree that such transaction is to be
treated as a "pooling of interests" for financial reporting purposes, and
if such transaction in fact is so treated, then the acceleration of
exercisability shall not occur to the extent that the Company's
-10-
<PAGE>
independent accountants and such other party's independent accountants
separately determine in good faith that such acceleration would preclude
the use of "pooling of interests" accounting.
(i) Leaves of Absence. An Employee's Service shall cease when such
-----------------
Employee ceases to be actively employed by, or a consultant or adviser to, the
Company (or any subsidiary) as determined in the sole discretion of the Board of
Directors. For purposes of Options, Service does not terminate when an Employee
goes on a bona fide leave of absence, that was approved by the Company in
writing, if the terms of the leave provide for continued service crediting, or
when continued service crediting is required by applicable law. However, for
purposes of determining whether an Option is entitled to ISO status, an
Employee's Service will be treated as terminating ninety (90) days after such
Employee went on leave, unless such Employee's right to return to active work is
guaranteed by law or by a contract. Service terminates in any event when the
approved leave ends, unless such Employee immediately returns to active work.
The Company determines which leaves count toward Service, and when Service
terminates for all purposes under the Plan.
(j) No Rights as a Stockholder. An Optionee, or a transferee of an
--------------------------
Optionee, shall have no rights as a stockholder with respect to any Shares
covered by his Option until the date of the issuance of a stock certificate for
such Shares. No adjustments shall be made, except as provided in Section 9.
(k) Modification, Extension and Renewal of Options. Within the limitations
----------------------------------------------
of the Plan, the Committee may modify, extend or renew outstanding options or
may accept the cancellation of outstanding options (to the extent not previously
exercised), whether or not granted hereunder, 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, impair his rights or increase
his obligations under such Option.
(l) Restrictions on Transfer of Shares. Any Shares issued upon exercise of
----------------------------------
an Option shall be subject to such special forfeiture conditions, rights of
repurchase, rights of first refusal and other transfer restrictions as the
Committee may determine. Such restrictions shall be set forth in the applicable
Stock Option Agreement and shall apply in addition to any general restrictions
that may apply to all holders of Shares.
(m) 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.
SECTION 9. PAYMENT FOR SHARES.
- -------------------------------
(a) General Rule. The entire Exercise Price of Shares issued under the
------------
Plan shall be payable in lawful money of the United States of America at the
time when such Shares are purchased, except as provided in Subsections (b)
through (g) below.
-11-
<PAGE>
(b) Surrender of Stock. To the extent that a Stock Option Agreement so
------------------
provides, payment may be made all or in part by surrendering, or attesting to
the ownership of, Shares which have already been owned by the Optionee or his
representative for more than twelve (12) months. Such Shares shall be valued at
their Fair Market Value on the date when the new Shares are purchased under the
Plan. The Optionee shall not surrender, or attest to the ownership of, Shares in
payment of the Exercise Price if such action would cause the Company to
recognize compensation expense (or additional compensation expense) with respect
to the Option for financial reporting purposes.
(c) Services Rendered. At the discretion of the Committee, Shares may be
-----------------
awarded under the Plan in consideration of services rendered to the Company or a
Subsidiary prior to the award. If Shares are awarded without the payment of a
Purchase Price in cash, the Committee shall make a determination (at the time of
the award) of the value of the services rendered by the Offeree and the
sufficiency of the consideration to meet the requirements of Section 6(c).
(d) Cashless Exercise. To the extent that a Stock Option Agreement so
-----------------
provides, payment may be made all or in part by delivery (on a form prescribed
by the Committee) of an irrevocable direction to a securities broker to sell
Shares and to deliver all or part of the sale proceeds to the Company in payment
of the aggregate Exercise Price.
(e) Exercise/Pledge. To the extent that a Stock Option Agreement so
---------------
provides, payment may be made all or in part by delivery (on a form prescribed
by the Committee) of an irrevocable direction to a securities broker or lender
to pledge Shares, as security for a loan, and to deliver all or part of the loan
proceeds to the Company in payment of the aggregate Exercise Price.
(f) Promissory Note. To the extent that a Stock Option Agreement so
---------------
provides, payment may be made all or in part by delivering (on a form prescribed
by the Company) a full-recourse promissory note. However, the par value of the
Common Shares being purchased under the Plan, if newly issued, shall be paid in
cash or cash equivalents.
(g) Other Forms of Payment. To the extent that a Stock Option Agreement so
----------------------
provides, payment may be made in any other form that is consistent with
applicable laws, regulations and rules.
SECTION 10. STOCK APPRECIATION RIGHTS.
- ---------------------------------------
(a) SAR Agreement. Each grant of a SAR under the Plan shall be evidenced
-------------
by a SAR Agreement between the Optionee and the Company. 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.
(b) Number of Shares. Each SAR Agreement shall specify the number of
----------------
Common Shares to which the SAR pertains and shall provide for the adjustment of
such number in accordance with Section 12. SARs granted to any Optionee in a
single calendar year shall in no event pertain to more than 10,000 Common
Shares, except that SARs granted to a new
-12-
<PAGE>
Employee in the fiscal year of the Company in which his or her service as an
Employee first commences shall not pertain to more than 100,000 Common Shares.
The limitations set forth in the preceding sentence shall be subject to
adjustment in accordance with Section 12.
(c) 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.
(d) 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. A 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. A 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.
(e) Effect of Change in Control. The Committee may determine, at the time
---------------------------
of granting a SAR or thereafter, that such SAR shall become fully exercisable as
to all Common Shares subject to such SAR in the event that a Change in Control
occurs with respect to the Company, subject to the following sentence. If the
Company and the other party to the transaction constituting a Change in Control
agree that such transaction is to be treated as a "pooling of interests" for
financial reporting purposes, and if such transaction in fact is so treated,
then the acceleration of exercisability shall not occur to the extent that the
Company's independent accountants and such other party's independent accountants
separately determine in good faith that such acceleration would preclude the use
of "pooling of interests" accounting.
(f) 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 Company (a) Common Shares, (b) cash or (c) a combination of Common Shares
and cash, as the Committee shall determine. The amount of cash and/or the Fair
Market Value of Common Shares 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 Common Shares subject to the SARs exceeds the Exercise Price.
If, on the date when a 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.
(g) 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 Company 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 a SAR shall, without the consent of the
Optionee, may alter or impair his or her rights or obligations under such SAR.
-13-
<PAGE>
SECTION 11. STOCK UNITS.
- -------------------------
(a) Stock Unit Agreement. Each grant of Stock Units under the Plan shall
--------------------
be evidenced by a Stock Unit Agreement between the recipient and the Company.
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.
(b) 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.
(c) 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. The Committee may
determine, at the time of granting Stock Units or thereafter, that all or part
of such Stock Units shall become vested in the event that a Change in Control
occurs with respect to the Company, except as provided in the next following
sentence. If the Company and the other party to the transaction constituting a
Change in Control agree that such transaction is to be treated as a "pooling of
interests" for financial reporting purposes, and if such transaction in fact is
so treated, then the acceleration of vesting shall not occur to the extent that
the Company's independent accountants and such other party's independent
accountants separately determine in good faith that such acceleration would
preclude the use of "pooling of interests" accounting.
(d) 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 Common Share 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 Common Shares, 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.
(e) Form and Time of Settlement of Stock Units. Settlement of vested Stock
------------------------------------------
Units may be made in the form of (a) cash, (b) Common Shares 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 Common Shares 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 Section 12.
-14-
<PAGE>
(f) Death of Recipient. Any Stock Units Award that becomes payable after
------------------
the recipient's death shall be distributed to the recipient's beneficiary or
beneficiaries. Each recipient of a Stock Units Award under the Plan shall
designate one or more beneficiaries for this purpose by filing the prescribed
form with the Company. A beneficiary designation may be changed by filing the
prescribed form with the Company at any time before the Award recipient's death.
If no beneficiary was designated or if no designated beneficiary survives the
Award recipient, then any Stock Units Award that becomes payable after the
recipient's death shall be distributed to the recipient's estate.
(g) Creditors' Rights. A holder of Stock Units shall have no rights other
-----------------
than those of a general creditor of the Company. Stock Units represent an
unfunded and unsecured obligation of the Company, subject to the terms and
conditions of the applicable Stock Unit Agreement.
SECTION 12. PROTECTION AGAINST DILUTION.
- -----------------------------------------
(a) Adjustments. In the event of a subdivision of the outstanding Common
-----------
Shares, a declaration of a dividend payable in Common Shares, a declaration of a
dividend payable in a form other than Common Shares in an amount that has a
material effect on the price of Common Shares, a combination or consolidation of
the outstanding Common Shares (by reclassification or otherwise) into a lesser
number of Common Shares, 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:
(i) The number of Options, SARs, Restricted Shares and Stock Units
available for future Awards under Section 5;
(ii) The limitations set forth in Sections 8(b) and 10(b);
(iii) The number of NSOs to be granted to Outside Directors under
Section 4(b);
(iv) The number of Common Shares covered by each outstanding Option
and SAR;
(v) The Exercise Price under each outstanding Option and SAR; or
(vi) The number of Stock Units included in any prior Award which has
not yet been settled.
Except as provided in this Section 12, a Participant shall have no rights by
reason of any issue by the Company 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.
(b) 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 Company.
-15-
<PAGE>
(c) Reorganizations. In the event that the Company 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:
(i) The continuation of the outstanding Awards by the Company, if
the Company is a surviving corporation;
(ii) The assumption of the outstanding Awards by the surviving
corporation or its parent or subsidiary;
(iii) The substitution by the surviving corporation or its parent or
subsidiary of its own awards for the outstanding Awards;
(iv) Full exercisability or vesting and accelerated expiration of the
outstanding Awards; or
(v) Settlement of the full value of the outstanding Awards in cash
or cash equivalents followed by cancellation of such Awards.
SECTION 13. 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 a 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 Company's books;
(b) Have Common Shares 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 Common Shares 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 Company's
books. Such amounts shall be determined by reference to the Fair Market Value of
such Common Shares as of the date when they otherwise would have been delivered
to such Participant.
A deferred compensation account established under this Section 13 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 Company. Such an account
shall represent an unfunded and unsecured obligation of the Company and shall be
subject to the terms and conditions of the applicable agreement between such
Participant and the Company. 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 Section 13.
-16-
<PAGE>
SECTION 14. AWARDS UNDER OTHER PLANS.
- --------------------------------------
The Company may grant awards under other plans or programs. Such awards
may be settled in the form of Common Shares issued under this Plan. Such Common
Shares shall be treated for all purposes under the Plan like Common Shares
issued in settlement of Stock Units and shall, when issued, reduce the number of
Common Shares available under Section 5.
SECTION 15. PAYMENT OF DIRECTOR'S FEES IN SECURITIES.
- ------------------------------------------------------
(a) Effective Date. No provision of this Section 15 shall be effective
--------------
unless and until the Board has determined to implement such provision.
(b) 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 Company 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 Section 15 shall be filed with the Company on the prescribed form.
(c) 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.
SECTION 16. ADJUSTMENT OF SHARES.
- ----------------------------------
(a) General. In the event of a subdivision of the outstanding Stock, a
-------
declaration of a dividend payable in Shares, a declaration of a dividend payable
in a form other than Shares in an amount that has a material effect on the value
of Shares, a combination or consolidation of the outstanding Stock (by
reclassification or otherwise) into a lesser number of Shares, a
recapitalization or a similar occurrence, the Committee shall make appropriate
adjustments in one or more of (i) the number of Shares available for future
grants under Section 5, (ii) the number of Shares available for grants under
Section 4(c), (iii) the number of Shares covered by each outstanding Option,
(iv) the Exercise Price under each outstanding Option, (v) the number of shares
covered by each outstanding award or (vi) the Purchase Price of each outstanding
award.
(b) Reorganizations. In the event that the Company is a party to a merger
---------------
or other reorganization, outstanding Options shall be subject to the agreement
of merger or reorganization. Such agreement may provide for the assumption of
outstanding Options by the surviving corporation or its parent or for their
continuation by the Company (if the Company is a surviving corporation);
provided, however, that if assumption or continuation of the outstanding Options
is not provided by such agreement then the Committee shall have the option of
offering the payment of a cash settlement equal to the difference between the
amount to be paid for one Share under such agreement and the Exercise Price, in
all cases without the Optionees' consent.
-17-
<PAGE>
(c) Reservation of Rights. Except as provided in this Section 16, an
---------------------
Optionee or Offeree shall have no rights by reason of any subdivision or
consolidation of shares of stock of any class, the payment of any dividend or
any other increase or decrease in the number of shares of stock of any class.
Any issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
Exercise Price of Shares subject to an Option. The grant of an Option pursuant
to the Plan shall not affect in any way the right or power of the Company to
make adjustments, reclassifications, reorganizations or changes of its capital
or business structure, to merge or consolidate or to dissolve, liquidate, sell
or transfer all or any part of its business or assets.
SECTION 17. LEGAL AND REGULATORY REQUIREMENTS.
- -----------------------------------------------
Shares shall not be issued under the Plan unless the issuance and delivery
of such Shares complies with (or is 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 on which the Company's
securities may then be listed, and the Company has obtained the approval or
favorable ruling from any governmental agency which the Company determines is
necessary or advisable.
SECTION 18. WITHHOLDING TAXES.
- -------------------------------
(a) 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 Company for the satisfaction of any withholding tax
obligations that arise in connection with the Plan. The Company shall not be
required to issue any Common Shares or make any cash payment under the Plan
until such obligations are satisfied.
(b) 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
Company withhold all or a portion of any Common Shares that otherwise would be
issued to him or her or by surrendering all or a portion of any Common Shares
that he or she previously acquired. Such Common Shares shall be valued at their
Fair Market Value on the date when taxes otherwise would be withheld in cash.
SECTION 19. LIMITATION ON PARACHUTE PAYMENTS.
- ----------------------------------------------
(a) Scope of Limitation. This Section 19 shall apply to an Award only if:
-------------------
(i) 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 Section 19 than it was before the
application of this Section 19; or
-18-
<PAGE>
(ii) 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 Section 19 (regardless of the after-tax value of such Award
to the Participant).
(b) Supersedes Other Provisions. If this Section 19 applies to an Award,
---------------------------
it shall supersede any contrary provision of the Plan or of any Award granted
under the Plan.
SECTION 20. NO EMPLOYMENT RIGHTS.
- ----------------------------------
No provision of the Plan, nor any right or Option granted under the Plan,
shall be construed to give any person any right to become, to be treated as, or
to remain an Employee. The Company and its Subsidiaries reserve the right to
terminate any person's Service at any time and for any reason, with or without
notice.
SECTION 21. DURATION AND AMENDMENTS.
- -------------------------------------
(a) Term of the Plan. The Plan, as set forth herein, shall terminate
----------------
automatically on March 23, 2010 and may be terminated on any earlier date
pursuant to Subsection (b) below.
(b) Right to Amend or Terminate the Plan. The Board of Directors may
------------------------------------
amend the Plan at any time and from time to time. Rights and obligations under
any Option granted before amendment of the Plan shall not be materially impaired
by such amendment, except with consent of the person to whom the Option was
granted. An amendment of the Plan shall be subject to the approval of the
Company's stockholders only to the extent required by applicable laws,
regulations or rules.
(c) Effect of Amendment or Termination. No Shares shall be issued or sold
----------------------------------
under the Plan after the termination thereof, except upon exercise of an Option
granted prior to such termination. The termination of the Plan, or any amendment
thereof, shall not affect any Share previously issued or any Option previously
granted under the Plan.
SECTION 22. EXECUTION.
- -----------------------
To record the adoption of the Plan by the Board of Directors effective as
of March 23, 2000, the Company has caused its authorized officer to execute the
same.
DOCENT, INC.
By_______________________________
David Ellett
Chief Executive Officer
-19-
<PAGE>
Exhibit 10.3
DOCENT, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
(Adopted by the Board on March 23, 2000)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1 Purpose Of The Plan............................................................... 1
SECTION 2 Definitions....................................................................... 1
(a) "Accumulation Period.............................................................. 1
(b) "Board"........................................................................... 1
(c) "Code"............................................................................ 1
(d) "Committee"....................................................................... 1
(e) "Company"......................................................................... 1
(f) "Compensation".................................................................... 1
(g) "Corporate Reorganization"........................................................ 1
(h) "Eligible Employee"............................................................... 2
(i) "Exchange Act".................................................................... 2
(j) "Fair Market Value"............................................................... 2
(k) "IPO"............................................................................. 2
(l) "Offering Period"................................................................. 2
(m) "Participant"..................................................................... 2
(n) "Participating Company"........................................................... 2
(o) "Plan"............................................................................ 3
(p) "Plan Account".................................................................... 3
(q) "Purchase Price".................................................................. 3
(r) "Stock"........................................................................... 3
(s) "Subsidiary"...................................................................... 3
SECTION 3 Administration Of The Plan........................................................ 3
(a) Committee Composition............................................................. 3
(b) Committee Responsibilities........................................................ 3
SECTION 4 Enrollment And Participation...................................................... 3
(a) Offering Periods.................................................................. 3
(b) Accumulation Periods.............................................................. 3
(c) Enrollment........................................................................ 3
(d) Duration of Participation......................................................... 4
(e) Applicable Offering Period........................................................ 4
SECTION 5 Employee Contributions............................................................ 4
(a) Frequency of Payroll Deductions................................................... 4
(b) Amount of Payroll Deductions...................................................... 4
(c) Changing Withholding Rate......................................................... 4
(d) Discontinuing Payroll Deductions.................................................. 5
(e) Limit on Number of Elections...................................................... 5
SECTION 6 Withdrawal From The Plan.......................................................... 5
(a) Withdrawal........................................................................ 5
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
(b) Re-enrollment After Withdrawal.................................................... 5
SECTION 7 Change In Employment Status....................................................... 5
(a) Termination of Employment......................................................... 5
(b) Leave of Absence.................................................................. 5
(c) Death............................................................................. 6
SECTION 8 Plan Accounts And Purchase Of Shares.............................................. 6
(a) Plan Accounts..................................................................... 6
(b) Purchase Price.................................................................... 6
(c) Number of Shares Purchased........................................................ 6
(d) Available Shares Insufficient..................................................... 6
(e) Issuance of Stock................................................................. 7
(f) Unused Cash Balances.............................................................. 7
(g) Stockholder Approval.............................................................. 7
SECTION 9 Limitations On Stock Ownership.................................................... 7
(a) Five Percent Limit................................................................ 7
(b) Dollar Limit...................................................................... 7
SECTION 10 Rights Not Transferable........................................................... 8
SECTION 11 No Rights As An Employee.......................................................... 8
SECTION 12 No Rights As A Stockholder........................................................ 8
SECTION 13 Securities Law Requirements....................................................... 8
SECTION 14 Stock Offered Under The Plan...................................................... 9
(a) Authorized Shares................................................................. 9
(b) Antidilution Adjustments.......................................................... 9
(c) Reorganizations................................................................... 9
SECTION 15 Amendment Or Discontinuance....................................................... 9
SECTION 16 Execution......................................................................... 10
</TABLE>
-iii-
<PAGE>
DOCENT, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
SECTION 1
---------
Purpose Of The Plan
-------------------
The Plan was adopted by the Board on March 23, 2000, 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
Company by purchasing Stock from the Company 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
---------
Definitions
-----------
(a) "Accumulation Period" means a six (6) month period during which
-------------------
contributions may be made toward the purchase of Stock under the Plan, as
determined pursuant to Section 4(b).
(b) "Board" means the Board of Directors of the Company, 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 3.
---------
(e) "Company" means Docent, Inc., a Delaware Corporation.
-------
(f) "Compensation" means (i) the total compensation paid in cash to a
------------
Participant by a Participating Company, 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.
(g) "Corporate Reorganization" means:
------------------------
(i) The consummation of a merger or consolidation of the Company
with or into another entity, or any other corporate reorganization; or
(ii) The sale, transfer or other disposition of all or
substantially all of the Company's assets or the complete liquidation
or dissolution of the Company.
1
<PAGE>
(h) "Eligible Employee" means any employee of a Participating Company who
-----------------
meets both of the following requirements:
(i) His or her customary employment is for more than five (5)
months per calendar year and for more than 20 hours per week; and
(ii) He or she is an employee of a Participating Company at the
time of the IPO or else has been an employee of a Participating
Company for not less than three (3) consecutive months.
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.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
(j) "Fair Market Value" means the market price of Stock, determined by the
-----------------
Committee as follows:
(i) If 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 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 Company by Nasdaq or a stock exchange. Such determination shall
be conclusive and binding on all persons.
(k) "IPO" means the initial offering of Stock to the public pursuant to a
---
registration statement filed by the Company with the Securities and Exchange
Commission.
(l) "Offering Period" means a six (6) month period with respect to which
---------------
the right to purchase Stock may be granted under the Plan, as determined
pursuant to Section 4(a).
(m) "Participant" means an Eligible Employee who elects to participate in
-----------
the Plan, as provided in Section 4(c).
(n) "Participating Company" means (i) the Company and (ii) each present or
---------------------
future Subsidiary designated by the Committee as a Participating Company.
2
<PAGE>
(o) "Plan" means this Docent, Inc. 2000 Employee Stock Purchase Plan, as
----
it may be amended from time to time.
(p) "Plan Account" means the account established for each Participant
------------
pursuant to Section 8(a).
(q) "Purchase Price" means the price at which Participants may purchase
--------------
Stock under the Plan, as determined pursuant to Section 8(b).
(r) "Stock" means the Common Stock of the Company.
-----
(s) "Subsidiary" means any corporation (other than the Company) in an
----------
unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns 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.
SECTION 3
---------
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 Company, 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 4
---------
Enrollment And Participation
----------------------------
(a) Offering Periods. While the Plan is in effect, two Offering Periods
----------------
shall commence in each calendar year. The Offering Periods shall consist of the
six (6) month periods commencing on each January 1 and July 1, except that the
first Offering Period shall commence on the date of the IPO and end on
December 31, 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-(6) month periods commencing on January 1 and July 1, except
that the first Accumulation Period shall commence on the date of the IPO and end
on December 31, 2000.
(c) Enrollment. Any individual who, on the day preceding 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 Company at the prescribed location not later than fifteen (15)
days prior to the commencement of such Offering Period.
3
<PAGE>
(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 Offering Period in which his or her employee contributions were
discontinued under Section 5(d) or 9(b). A Participant who discontinued employee
contributions under Section 5(d) or 9(b) or withdrew from the Plan under Section
6(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 9(b)
shall automatically resume participation at the beginning of the earliest
Offering 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 8(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 in a subsequent Offering Period under Paragraph (ii) below.
(ii) In the event that the Fair Market Value of Stock on the
last trading day before the commencement of the Offering Period in
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) 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 5
---------
Employee Contributions
----------------------
(a) Frequency of Payroll Deductions. A Participant may purchase shares of
-------------------------------
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 the purchase of Stock. Such portion shall be a whole
percentage of the Eligible Employee's Compensation, but not less than one
percent (1%) nor more than fifteen percent (15%).
(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 Company at the prescribed location at any time. The new withholding rate
shall be effective as soon as
4
<PAGE>
reasonably practicable after such form has been received by the Company. The new
withholding rate shall be a whole percentage of the Eligible Employee's
Compensation, but not less than __________ (___%) nor more than __________
(___%).
(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 Company at the prescribed location at any time. Payroll
withholding shall cease as soon as reasonably practicable after such form has
been received by the Company. (In addition, employee contributions may be
discontinued automatically pursuant to Section 9(b).) A Participant who has
discontinued employee contributions may resume such contributions by filing a
new enrollment form with the Company at the prescribed location. Payroll
withholding shall resume as soon as reasonably practicable after such form has
been received by the Company.
(e) Limit on Number of Elections. No Participant shall make more than (i)
----------------------------
one (1) election under Subsection (c) above and (ii) one (1) election under
Subsection (d) above during any Offering Period.
SECTION 6
---------
Withdrawal From The Plan
------------------------
(a) Withdrawal. A Participant may elect to withdraw from the Plan by
----------
filing the prescribed form with the Company 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 4(c). Re-enrollment may be effective only at the commencement of
an Offering Period.
SECTION 7
---------
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 6(a). (A transfer from one Participating
Company 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 absence, if the leave was approved by the Company
in writing. Employment, however, shall be deemed to terminate ninety (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.
5
<PAGE>
(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 Company at the
prescribed location before the Participant's death.
SECTION 8
---------
Plan Accounts And Purchase Of Shares
------------------------------------
(a) Plan Accounts. The Company 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 Company'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 Stock purchased
--------------
at the close of an Accumulation Period shall be the lower of:
(i) Eighty-five percent (85%) of the Fair Market Value of such
share on the last trading day in such Accumulation Period; or
(ii) Eighty-five percent (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 4(e)) or, in
the case of the first Offering Period under the Plan, eighty-five
percent (85%) of the price at which one share of 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 Stock calculated in accordance with this Subsection (c), unless the
Participant has previously elected to withdraw from the Plan in accordance with
Section 6(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 Company with the funds in the Participant's Plan Account. The foregoing
notwithstanding, no Participant shall purchase more than 5,000 shares of Stock
with respect to any Accumulation Period nor more than the amounts of Stock set
forth in Sections 9(b) and 14(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 14(a), then the number of shares 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.
6
<PAGE>
(e) Issuance of Stock. Certificates representing the shares of 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.
(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 9(b) or Section 14(a) shall be refunded to the
Participant in cash, without interest.
(g) Stockholder Approval. Any other provision of the Plan notwithstanding,
--------------------
no shares of Stock shall be purchased under the Plan unless and until the
Company's stockholders have approved the adoption of the Plan.
SECTION 9
---------
Limitations On Stock Ownership
------------------------------
(a) Five Percent Limit. Any other provision of the Plan notwithstanding,
------------------
no Participant shall be granted a right to purchase Stock under the Plan if such
Participant, immediately after his or her election to purchase such Stock, would
own stock possessing more than five percent (5%) of the total combined voting
power or value of all classes of stock of the Company or any parent or
Subsidiary of the Company. 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 5,000 shares of Stock under this Plan with respect to each
Accumulation Period.
(b) Dollar Limit. Any other provision of the Plan notwithstanding, no
------------
Participant shall purchase Stock with a Fair Market Value in excess of the
following limit:
Any other provision of the Plan notwithstanding, no Participant shall
purchase Stock with a Fair Market Value in excess of $25,000 per calendar year
(under this Plan and all other employee stock purchase plans of the Company or
any parent or Subsidiary of the Company).
7
<PAGE>
For purposes of this Subsection (b), the Fair Market Value of Stock shall
be determined in each case as of the beginning of the Offering Period in which
such 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 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 10
----------
Rights Not Transferable
-----------------------
The rights of any Participant under the Plan, or any Participant's interest
in any 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 6(a).
SECTION 11
----------
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
Company for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Participating Companies 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 12
----------
No Rights As A Stockholder
--------------------------
A Participant shall have no rights as a stockholder with respect to any
shares of 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 Offering
Period.
SECTION 13
----------
Securities Law Requirements
---------------------------
Shares of 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 Company's securities may then be traded.
8
<PAGE>
SECTION 14
----------
Stock Offered Under The Plan
----------------------------
(a) Authorized Shares. The maximum aggregate number of shares of Stock
-----------------
available for purchase under the Plan is one million five hundred thousand
(1,500,000), plus an annual increase to be added on the first day of the
Company's fiscal year beginning in 2001 equal to the lesser of that number of
shares such that the number of shares reserved for issuance under the Plan
(excluding all shares previously issued or to be issued under Section 8(e) under
the Plan) is four percent (4%) of the Company's outstanding common stock and
common stock issuable upon conversion of any outstanding preferred stock as of
the closing of the prior fiscal year or (ii) a lesser amount determined by the
Board. The aggregate number of Shares available for purchase under the Plan
shall at all times be subject to adjustment pursuant to Section 14.
(b) Antidilution Adjustments. The aggregate number of shares of Stock
------------------------
offered under the Plan, the 5,000 share limitation described in Section 8(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 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 Company, the distribution of the shares of a Subsidiary to the Company'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 then in progress shall terminate and shares shall be purchased
pursuant to Section 8, unless the Plan is assumed by the surviving corporation
or its parent corporation pursuant to the plan of merger or consolidation. The
Plan shall in no event be construed to restrict in any way the Company's right
to undertake a dissolution, liquidation, merger, consolidation or other
reorganization.
SECTION 15
----------
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 14, any increase in
the aggregate number of shares of Stock to be issued under the Plan shall be
subject to approval by a vote of the stockholders of the Company. In addition,
any other amendment of the Plan shall be subject to approval by a vote of the
stockholders of the Company to the extent required by an applicable law or
regulation.
9
<PAGE>
SECTION 16
----------
Execution
---------
To record the adoption of the Plan by the Board on March 23, 2000, the
Company has caused its authorized officer to execute the same.
DOCENT, INC.
By____________________________________
Title_________________________________
10
<PAGE>
EXHIBIT 10.5
February 25, 1998
Mr. Dave Ellett
5431 Country Club Parkway
San Jose, CA 95138
Dear Dave:
On behalf of the Board of Directors of Docent, Inc., I am pleased to extend to
you a revised offer to become the President & Chief Executive Officer of our
company. Under your leadership, Docent has the opportunity to become the company
that shapes the future of on-line education and training. The Board of Directors
and the entire management team all look forward to working with you to ensure
that Docent becomes a highly-respected, successful and profitable company. Our
offer consists of the following benefits, terms and conditions:
POSITION: President and Chief Executive Officer. Responsible for leading and
managing Docent, Inc. in all regards. You will work at our Palo Alto, CA office.
You will also be elected as a member of the Docent Board of Directors.
REPORTING TO: The Board of Directors of Docent, Inc.
SALARY: Your base salary will be $18,750.00 a month, ($225,000 a year rate) less
payroll deductions and all required withholdings. You will be paid semi-monthly.
ANNUAL BONUS: You will participate in the Docent, Inc. Executive Management
Bonus Plan as you will define it in the future in collaboration with the Board
of Directors. The Company will guarantee that you will be paid a minimum bonus
of $18,750.00 per quarter for the next eight quarters ($150,000 guaranteed
minimum bonus over the next two years), provided that you are employed by the
Company on the last day of each quarter. Quarterly bonuses will be paid within
30 days after the end of each calendar quarter.
In addition, we anticipate that the Executive Management Bonus Plan would give
you substantial upside earnings potential should we exceed the business plan
objectives which we will mutually agree to.
<PAGE>
SIGNING BONUS: In addition to the performance bonus described above, you will be
paid an additional signing bonus of $500,000 paid on the following quarterly
schedule, provided that you are employed by the Company on the first day of each
quarter. The result of these quarterly payments will be to give you extra income
of $250,000 in your first year of employment with Docent, $150,000 in your
second year, and $100,000 in the first six months of your third year of
employment with Docent.
June 1, 1998 $62,500.00
September 1, 1998 $62,500.00
December 1, 1998 $62,500.00
March 1, 1999 $62,500.00
June 1, 1999 $37,500.00
September 1, 1999 $37,500.00
December 1, 1999 $37,500.00
March 1, 2000 $37,500.00
June 1, 2000 $50,000.00
September 1, 2000 $50,000.00
BENEFITS: You will be eligible for the following standard Docent benefits:
medical, dental, vision, long-term-disability and term life insurance; 401(k)
plan; vacation, sick leave and holidays. Details about these benefit plans are
available for your review. Docent, Inc. may modify compensation and benefits
from time to time as it deems necessary.
EQUITY COMPENSATION: You will be granted incentive stock options for the
purchase of up to 970,000 (nine hundred and seventy thousand) shares of the
Company's Common Stock, with vesting and an exercise price determined by the
Board of Directors pursuant to the Company's 1997 Stock Option Plan. The
incentive stock option will be granted at a Fair Market Value of $0.10 per
share, with vesting over four years as follows: 1/4 vests after 12 months of
service, 1/48 vests each month thereafter.
This option grant currently represents 7.5% of the equity in Docent Software on
a fully-diluted basis. The number of shares granted to you will be adjusted
upward in the event of any interim financing or adjustment to the number of
shares outstanding, so as to ensure you retain a 7.5% equity stake on a fully-
diluted basis up until your start date. In any future financing, you will incur
a dilution consistent with other shareholders.
In the event of a change of ownership of more than 50% or a merger in which
Docent is not the surviving entity, which results in no equivalent position of
responsibility for
<PAGE>
you with the surviving company, one (1) year of unvested options held by you at
that time will immediately become fully vested.
TERMINATION BENEFITS: If involuntary termination should result, except for
cause, during the first twelve (12) months of your employment with Docent, the
company will continue your base salary and benefits for up to one (1) year or
until you begin employment elsewhere. If you are involuntarily terminated
without cause after the first twelve (12) months of employment, the company will
continue to pay your base salary and benefits for up to six (6) months or until
you begin employment elsewhere.
START DATE: You will start full-time at Docent no later than July 1, 1998.
OTHER: As a Docent, Inc. employee you will be expected to abide by Company rules
and regulations, and sign and comply with a Proprietary Information and
Inventions Agreement which prohibits unauthorized use or disclosure of Docent,
Inc. proprietary information.
Normal working hours are from 8:00 am to 5:00 pm, Monday through Friday. As an
exempt salaried employee, you will be expected to work additional hours as
required by the nature of your work.
This letter confirms your representations to us that: (i) you are not a party to
any employment agreement or other contract or arrangement that prohibits your
full-time employment with Docent, Inc. (ii) you will not disclose any trade
secrets or confidential information of any third party to Docent, and (iii) you
do not know of any conflict that would restrict your employment with Docent,
Inc..
You may terminate your employment with Docent, Inc. at any time and for any
reason whatsoever simply by notifying Docent, Inc. Likewise, Docent, Inc. may
terminate your employment at any time and for any reason whatsoever, with or
without cause or advance notice. Also, the Docent, Inc. Board of Directors
retains its discretion to make all other decisions concerning your employment
(e.g. demotions, transfers, job responsibilities, compensation or any other
managerial decisions) with or without good cause. This is an "at-will"
employment relationship and cannot be changed except in writing and as agreed to
by the Board of Directors.
The employment terms in this letter constitute the complete, final and exclusive
embodiment of the entire agreement between you and the Company with respect to
the terms and conditions of your employment, and these terms supersede any other
agreements or promises made to you by anyone, whether oral or written. As
required by law, this offer is subject to satisfactory proof of your right to
work in the United States of America.
<PAGE>
The terms of this offer are considered confidential information to Docent, and I
trust that you will treat it as confidential between you and the Docent Board of
Directors.
Dave, we are very excited about your joining the Docent team and look forward to
a long and rewarding relationship. We are convinced that your passion for the
education/training industry, as well as your talents and experience and energy,
make this a great match for both you and Docent. We look forward to your
positive acceptance of this offer and determination of your exact start date
with the company.
This offer will remain open to you until Friday, March 13, 1998 unless we notify
you otherwise in writing. If you wish to accept employment at Docent, Inc. under
the terms as described above, please sign and date below and return a copy to me
no later than March 13, 1998.
I look forward to your favorable reply and to a productive and enjoyable work
relationship with you.
Sincerely,
/s/ Dave Mandelkern
Dave Mandelkern
Executive Vice President
Accepted:
/s/ Dave Ellett
Dave Ellett
Date: February 27, 1998
cc: Kevin Hall, Norwest Venture Capital
Jos Henkens, Advanced Technology Ventures
Pardner Wynn
Michael Parsells
<PAGE>
EXHIBIT 10.6
[LETTERHEAD OF DOCENT APPEARS HERE]
November 4, 1997
Richard L. Dellinger
1656 Christina Drive
Los Altos, CA 94024
Dear Richard:
Docent Software, Inc. ("Company") is pleased to offer you the position of Vice
President, Engineering, on the following terms:
POSITION: Vice President, Engineering. Responsible for managing Docent
Software's software development organization, including quality assurance and
technical documentation. You will be responsible for product management and
release engineering. You will work at our Palo Alto, CA office. Of course,
Docent Software, Inc. may change your position, duties, and work location from
time to time as it deems necessary.
REPORTING TO: Pardner Wynn, Chief Technical Officer, until such time as we hire
a new President and Chief Executive Officer. You will then report to the
President and CEO.
SALARY: Your base salary will be $11,666,67 a month, ($140,000 a year rate) less
payroll deductions and all required withholdings. You will be paid semimonthly.
BONUS: You will participate in the Docent Software, Inc. Executive Management
Bonus Plan as it will be defined in the future. The Company will guarantee that
you will be paid a minimum bonus of $5000.00 per quarter for the next four
quarters ($20,000 guaranteed minimum bonus for the period from October 1, 1997
until September 30, 1998), provided that you are employed by the Company on the
last day of each quarter. Quarterly bonuses will be paid within 30 days after
the end of each calendar quarter.
BENEFITS: You will be eligible for the following standard Docent Software
benefits: medical, dental, vision, long-term-disability and term life insurance;
401(k) plan; vacation, sick leave and holidays. Details about these benefit
plans are available for your review. Docent Software, Inc. may modify
compensation and benefits from time to time as it deems necessary.
<PAGE>
EQUITY Compensation: Subject to prior approval by the Company's Board of
Directors, you will be granted incentive stock options for the purchase of up to
250,000 (two hundred and fifty thousand) shares of the Company's Common Stock,
with vesting and an exercise price determined by the Board of Directors pursuant
to the Company's 1997 Stock Option Plan. If you prefer, we can arrange for you
to purchase these shares immediately, subject to a repurchase agreement that
would accomplish the same objectives as our standard vesting plan.
The last Incentive stock option granted by the Board of Directors (on September
2, 1997) was at a Fair Market Value of $0.10 per share, with vesting of four
years as follows: 1/4 vests after 12 months of service, 1/48 vests each month
thereafter.
In addition, the Board of Directors will be requested to grant you an additional
option for the purchase of up to 62,500 (sixty-two thousand five hundred) shares
of the Company's Common Stock, with vesting and exercise price to be based on
attainment of performance goals to be determined by mutual agreement of
yourself, the Board, and our now CEO.
START DATE: You will start on Monday, November 10, 1997 or another mutually
agreed-to date.
OTHER: As a Docent Software, Inc. employee you will be expected to abide by
Company rules and regulations, and sign and comply with a Proprietary
Information and Inventions Agreement which prohibits unauthorized use or
disclosure of Docent Software, Inc. proprietary Information.
Normal working hours are from 8:00 am to 5:00 pm, Monday through Friday. As an
exempt salaried employee, you will be expected to work additional hours as
required by the nature of your work assignments.
You may terminate your employment with Docent Software, Inc. at any time and for
any reason whatsoever simply by notifying Docent Software, Inc. Likewise, Docent
Software, Inc. may terminate your employment at any time and for any reason
whatsoever, with or without cause or advance notice. Also, Docent Software, Inc.
retains its discretion to make all other decisions concerning your employment
(e.g. demotions, transfers, job responsibilities, compensation or any other
managerial decisions) with or without good cause. This at-will employment
relationship cannot be changed except in a writing signed by a Company officer.
<PAGE>
The employment terms in this letter constitute the complete, final and exclusive
embodiment of the entire agreement between you and the Company with respect to
the terms and conditions of your employment, and these terms supersede any other
agreements or promises made to you by anyone, whether oral or written (including
our previous offer letter dated October 23, 1997). As required by law, this
offer is subject to satisfactory proof of your right to work in the United
States of America.
Richard. we look forward to having you join us at Docent. If you wish to accept
employment at Docent Software, Inc. under the terms described above, please sign
and date below and return a copy to me by November 6, 1997.
We look forward to your favorable reply and to a productive and enjoyable work
relationship.
Sincerely,
/s/ Dave Mandelkern
Dave Mandelkern
Executive Vice President
Accepted:
/s/ Richard L. Dellinger
Richard L. Dellinger
Date:
Nov 5 1997
<PAGE>
EXHIBIT 10.7
[LETTERHEAD OF DOCENT]
August 18, 1998
Mr. Keith Finch
9512 Daly Drive
Plano, TX 75025
Dear Keith:
Docent, Inc. ("Docent") is pleased to extend to you an offer of employment for
the position of Vice President, Professional Services on the terms described
below. This offer is valid for five business days.
You will be responsible for all consulting, implementation, education and
customer support activities of Docent and will report to David R. Ellett,
President and Chief Executive Officer.
You will start as soon as possible, but in no event later than Monday, September
21, 1998.
Your monthly base salary will be $13,333.34 ($160,000 per year) less payroll
deductions and all required withholdings. You will be paid semi-monthly. You
will receive a $35,000.00 signing bonus, of which $15,000 is payable in your
first paycheck and $20,000 is payable in the first paycheck following the six-
month anniversary of your hire date, both provided that you are an employee of
Docent on those respective pay dates. You will participate in the Docent, Inc.
Executive Management Bonus Plan with a target annual bonus of $50,000 for 1998,
prorated for your actual period of employment and payable based upon achievement
of MBOs.
In addition to the above compensation, you will be eligible to participate in
Docent's standard benefit plans, which currently include medical, dental,
vision, long-term disability and term life insurance; 401(k) plan; flexible
spending plan; sick leave and holidays. Details about these benefit plans are
available for your review. You will also accrue vacation at the rate of three
weeks per year up to a maximum accrual of six weeks. Docent may modify benefits
from time to time as it deems necessary.
Subject to approval by the Board of Directors, you will be granted an incentive
stock option for the purchase of up to 175,000 shares of Docent common stock
with an exercise price equal to the fair market value of Docent common stock on
the date of grant as
<PAGE>
[LOGO]
Mr. Keith Finch
August 18, 1998
Page 2
determined by the Board of Directors. This option will be granted pursuant to
the Docent 1997 Stock Option Plan and will be subject to vesting over four years
as follows: 1/4 vests after 12 months of service, 1/48 vests each month of
service thereafter.
As a condition of your employment, you agree to sign Docent's Proprietary
Information and Inventions Agreement which prohibits unauthorized use or
disclosure of Docent proprietary information. This letter, together with your
Proprietary Information and Inventions Agreement, forms the complete and
exclusive statement of your employment agreement with Docent. The employment
terms in this letter supersede any other agreements or promises made to you by
anyone, whether oral or written. Further, by signing below and indicating your
acceptance of this offer, you represent that you may legally work in the United
State of America and agree to provide the necessary supporting documentation. As
a Docent employee, you will be expected to abide by Docent rules and regulations
as outlined in the Docent Employee Handbook.
This letter confirms your representations to us that: (i) you are not a party to
any employment agreement or other contract or arrangement that prohibits your
full-time employment with Docent, (ii) you will not disclose any trade secrets
or confidential information of any third party to Docent, and (iii) you do not
know of any conflict that would restrict your employment with Docent.
Your employment with Docent is entered into voluntarily. As a result, you may
terminate your employment with Docent at any time and for any reason simply by
notifying Docent. Likewise, Docent may terminate your employment at any time
and for any reason, with or without cause or advanced notice. This at-will
employment relationship cannot be changed except in a writing signed by an
officer of Docent.
Normal working hours are 8:00 a.m. to 5:00 p.m., Monday through Friday. As an
exempt salaried employee, you will be expected to work additional hours as
required by the nature of your work assignments.
Keith, we look forward to having you join us at Docent. If you wish to accept
employment at Docent under the terms described above, please sign and date and
confirm your start date and return a copy to me by August 25, 1998.
<PAGE>
[LOGO]
Mr. Keith Finch
August 18, 1998
Page 3
We look forward to your favorable reply and to a productive and enjoyable work
relationship.
Sincerely,
/s/ David R. Ellett
David R. Ellett
President and Chief Executive Officer
Accepted: /s/ Keith Finch Date: 8/19/98
------------------------ --------------
Keith Finch
Start Date: 9/21/98
------------------------
<PAGE>
EXHIBIT 10.8
[LETTERHEAD OF DOCENT]
September 22, 1998
Ms Kathleen Gogan
702 Paradise Way
Redwood City, CA 94062
Dear Kathleen:
Docent, Inc. ("Docent") is pleased to extend to you an offer of employment for
the position of Vice President of Marketing on the terms described below. This
offer is valid for five business days.
You will be responsible for all Docent marketing activities and will report to
David R. Ellett, President and Chief Executive Officer. You will work at our
facility located at 2444 Charleston Road, Mountain View, CA. Of course, Docent
may change your position, duties and work location from time to time as it deems
necessary.
You will start as soon as possible, but in no event later than Monday, November
2, 1998.
Your monthly base salary will be $13,333.34 ($160,000 per year) less payroll
deductions and all required withholdings. You will be paid semi-monthly. You
will participate in Docent's management bonus plan with a target annual bonus of
$50,000 for 1998, prorated for your actual period of employment and payable
based upon achievement of MBOs. In addition to the above compensation, you will
be eligible to participate in Docent's standard benefit plans, which currently
include medical, dental, vision, long-term disability and term life insurance;
401(k) plan; flexible spending plan, vacation of three weeks per year up to a
maximum accrual of four weeks; sick leave and holidays. Details about these
benefit plans are available for your review. Docent may modify compensation and
benefits from time to time as it deems necessary.
Subject to approval by the Board of Directors, you will be granted an incentive
stock option for the purchase of up to 252,650 shares of Docent common stock
with an exercise price equal to the fair market value of Docent common stock on
the date of grant as determined by the Board of Directors. This option will be
granted pursuant to the Docent
<PAGE>
[LOGO]
Ms Kathleen Gogan
September 22, 1998
Page 2
1997 Stock Option Plan and will be subject to vesting over four years as
follows: 1/4 vests after 12 months of service, 1/48 vests each month of service
thereafter.
As a condition of your employment, you agree to sign Docent's Proprietary
Information and Inventions Agreement which prohibits unauthorized use or
disclosure of Docent proprietary information. This letter, together with your
Proprietary Information and Inventions Agreement, forms the complete and
exclusive statement of your employment agreement with Docent. The employment
terms in this letter supersede any other agreements or promises made to you by
anyone, whether oral or written. Further, by signing below and indicating your
acceptance of this offer, you represent that you may legally work in the United
State of America and agree to provide the necessary supporting documentation. As
a Docent employee, you will be expected to abide by Docent rules and regulations
as outlined in the Docent Employee Handbook.
Normal working hours are 8:00 a.m. to 5:00 p.m., Monday through Friday. As an
exempt salaried employee, you will be expected to work additional hours as
required by the nature of your work assignments.
Your employment with Docent is entered into voluntarily. As a result, you may
terminate your employment with Docent at any time and for any reason simply by
notifying Docent. Likewise, Docent may terminate your employment at any time and
for any reason, with or without cause or advanced notice. Also, Docent retains
its discretion to make all other decisions concerning your employment (e.g.
demotions, transfers, job responsibilities, compensation or any other managerial
decisions) with or without good cause. This at-will employment relationship
cannot be changed except in a writing signed by an officer of Docent.
Kathleen, we look forward to having you join us at Docent. If you wish to accept
employment at Docent under the terms described above, please sign and date and
confirm your start date and return a copy to me by September 29, 1998.
<PAGE>
[LOGO]
Ms Kathleen Gogan
September 22, 1998
Page 3
We look forward to your favorable reply and to a productive and enjoyable work
relationship.
Sincerely,
David R. Ellett
President and Chief Executive Officer
Accepted: _________________________ Date: __________________
Kathleen Gogan
Start Date: __________________
<PAGE>
EXHIBIT 10.9
DOCENT, INC.
OFFICER'S CHANGE IN CONTROL AGREEMENT
This Agreement ("Agreement") is made effective as of the 14th day of
October, 1999, by and between Docent, Inc. (the "Company"), a Delaware
corporation, and David Mandelkern (the "Officer").
Whereas, the Company has granted to Officer options for the purchase of the
Company's Common Stock (the "Officer's Option Shares"); and
Whereas, the Company seeks to retain the Officer as an at-will employee.
Now Therefore, in consideration of the covenants and with the intention of
being legally obligated by the provisions set forth herein, the parties hereby
agree as follows:
1. Definitions. Certain terms herein as defined as follows:
(a) "Change in Control" means (i) the sale, lease or other disposition
of all or substantially all of the assets of the Company or (ii) an acquisition
of the Company by another corporation or entity by consolidation, merger or
other reorganization in which the holders of the Company's outstanding voting
stock immediately prior to such transaction own, immediately after such
transaction, securities representing less than fifty percent (50%) of the voting
power of the corporation or other entity surviving such transaction, excluding
any consolidation or merger effected exclusively to change the domicile of the
Company.
(b) "Cause" means misconduct, including but not limited to: (i)
conviction of any felony or any crime involving moral turpitude or dishonesty,
(ii) participation in a fraud or act of dishonesty against the Company, (iii)
conduct that, based upon a good faith and reasonable factual investigation and
determination by the Board, demonstrates gross unfitness to serve, or (iv)
material violation of any contract between the Company and the Officer or any
statutory duty of the Officer to the Company that is not corrected within thirty
(30) days after written notice thereof. Physical disability shall not constitute
"Cause."
(c) "Compensation" means the Officer's current quarter's projected
aggregate cash remuneration based on the Officer's base salary, plus, as
applicable: (i) the Officer's current quarter's management bonus, assuming
performance of all quarterly bonus criteria; and/or (ii) the Officer's current
quarter's sales commissions, assuming performance of the Officer's quarterly
quota.
(d) "Good Re ason" means, with respect to the voluntary termination of
the continuous service of the Officer in connection with a Change in Control:
(i) reduction of Officer's current quarter's rate of Compensation as in effect
immediately prior to the Change in Control by greater than ten percent (10%),
except to the extent the compensations of at least a majority of other officers
of the Company that have signed agreements substantially similar to this
Agreement have been similarly reduced; (ii) failure to provide a package of
welfare benefit plans that, taken as a whole, provide substantially similar
benefits to those in which Officer is entitled to participate immediately prior
to the Change in Control (except that Officer's
<PAGE>
DOCENT, INC.
OFFICER'S CHANGE IN CONTROL AGREEMENT
David Mandelkern
14 October, 1999
Page 2
contributions may be raised to the extent of any cost increases imposed by third
parties) or any action by the Company or a successor to the Company that would
adversely affect Officer's participation or reduce Officer's benefits under any
of such plans; (iii) a significant change in Officer's responsibilities,
authority, titles or offices resulting in diminution of position, excluding for
this purpose an isolated action not taken in bad faith that is remedied by the
Company or a successor to the Company promptly after notice thereof is given by
Officer; or (iv) a request that Officer relocate to a worksite that is more than
fifty (50) miles from Officer's prior worksite, unless Officer accepts such
relocation opportunity.
2. Change in Control. If the Officer's employment with the Company is
terminated within six (6) months after any Change in Control either (i) by the
Company or a successor to the Company for any reason other than for Cause or
(ii) by the Officer for Good Reason, the vesting of all the unvested Officer's
Option Shares shall be accelerated one year forward. In the event of a Change in
Control, the references herein to the "Company" shall be deemed to refer to any
successor to the Company.
3. Waiver. Notwithstanding anything to the contrary contained in this
Agreement, if (i) the Company enters into a Change in Control transaction that
is to be accounted for as a pooling of interest, and (ii) the accountant(s) for
either the Company or the acquirer determines that a particular provision
contained in this Agreement, or that this Agreement in its entirety, would cause
the Change in Control transaction to be ineligible as a pooling of interest
transaction, then the particular provision or the entire Agreement, as the case
may be, shall not be applicable with respect to such Change in Control
transaction.
4. Parachute Payments.
(a) In the event it shall be determined that any payment or
distribution by the Company to or for the benefit of Officer (whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise) (a "Payment") would be nondeductible by the Company for federal
income tax purposes because of Section 280G of the Internal Revenue Code (the
"Code"), then the aggregate present value of such Payment shall be reduced to
the Reduced Amount. The "Reduced Amount" shall be an amount expressed in present
value that maximizes the aggregate present value of such Payment without causing
any Payment to be nondeductible by the Company because of Section 280G of the
Code. Anything to the contrary notwithstanding, if the Reduced Amount is zero
and it is determined further that any Payment would nevertheless be
nondeductible by the Company for federal income tax purposes because of Section
28OG of the Code, then the aggregate present value of such Payment shall also be
reduced (but not below zero) to an amount expressed in present value that
maximizes the aggregate present value of such Payment without causing such
Payment to be nondeductible by the Company because of Section 280G of the Code.
For purposes of this Section 4, present value shall be determined in accordance
with Section 280G(d)(4) of the Code.
(b) All determinations required to be made under this Section 4 shall
be made by the Company's independent auditors. Such auditors shall provide
detailed supporting calculations both to the Company and Officer within fifteen
(15) business days of the date that Officer's employment with the Company
terminates or such earlier time as is requested by the
<PAGE>
DOCENT, INC.
OFFICER'S CHANGE IN CONTROL AGREEMENT
David Mandelkern
14 October, 1999
Page 3
Company. Any such determination by the Company's independent auditors shall be
binding upon the Company and Officer. The Company shall determine which and how
much of the Payment or Payments, as the case may be, shall be eliminated or
reduced consistent with the requirements of this Section 4, within thirty (30)
business days of the receipt of the calculations made by the Company's
independent auditors and shall notify Officer promptly of such election. Within
five (5) business days thereafter, the Company shall pay to or distribute to or
for the benefit of Officer such amounts as are then due to Officer under this
Agreement.
(c) As a result of the uncertainty in the application of Section 280G
of the Code at the time of the initial determination by the Company's
independent auditors hereunder, it is possible that a Payment or Payments, as
the case may be, will have been made by the Company that should not have been
made ("Overpayment") or that an additional Payment or Payments, as the case may
be, which will not have been made by the Company could have been made
("Underpayment"), in each case, consistent with the calculations required to be
made hereunder. In the event that the Company's independent auditors, based upon
the assertion of a deficiency by the Internal Revenue Service against Officer or
the Company that the Company's independent auditors believe has a high
probability of success, determine that an Overpayment has been made, any such
Overpayment paid or distributed by the Company to or for the benefit of Officer
shall be treated for all purposes as a loan ab initio to Officer that Officer
shall repay to the Company together with interest at the applicable federal rate
provided for in Section 7872(f)(2) of the Code; provided however, that no such
loan shall be deemed to have been made and no amount shall be payable by Officer
to the Company if and to the extent such deemed loan and payment would not
either reduce the amount on which Officer is subject to tax under Section 1 and
Section 4999 of the Code or generate a refund of such taxes. In the event that
the Company's independent auditors, based upon controlling precedent or other
substantial authority, determine that an Underpayment has occurred, any such
Underpayment shall be promptly paid by the Company to or for the benefit of
Officer together with interest at the applicable federal rate provided for in
Section 7872(f)(2) of the Code.
5. Return of Materials. At the termination of your relationship with the
Company, Officer will promptly return to the Company, and will not take with or
use, all items of any nature that belong to the Company, and all materials (in
any form, format, or medium) containing or relating to the Company's business.
6. Entire Agreement. This Agreement constitutes the complete, final and
exclusive embodiment of the entire agreement between the Officer and the Company
with respect to the terms and conditions of the Officer's employment specified
herein. Officer enters into this Agreement voluntarily and without reliance upon
any promise, warranty or representation, written or oral, other than those
expressly contained herein. This Agreement supersedes any other such promises,
warranties, representations or agreements. This Agreement does not, however,
supersede or modify the Officer's Proprietary Information and Inventions
Agreement or the terms of the Officer's offer letter. This Agreement may not be
amended or modified except by a written instrument signed by Officer and a duly
authorized officer of the Company.
7. Enforceability. If any provision of this Agreement is determined to be
invalid or unenforceable, in whole or in part, this determination will not
affect any other provision of this
<PAGE>
DOCENT, INC.
OFFICER'S CHANGE IN CONTROL AGREEMENT
David Mandelkern
14 October, 1999
Page 4
Agreement, and the Agreement, including the invalid or unenforceable provisions,
should be enforced insofar as possible to achieve the intent of the parties.
8. Binding Nature. This Agreement will be binding upon and inure to the
benefit of the personal representatives and successors of the respective parties
hereto.
9. Governing Law. This Agreement shall be governed in all respects by the
laws of the State of California as such laws are applied to agreements between
California residents entered into and performed entirely in California. The
parties hereto hereby (a) expressly consent to the personal jurisdiction and
venue of the state and federal courts located in Santa Clara County, California
for any action brought by either party to interpret or enforce any provision of
this Agreement and (b) agree not to assert (by way of motion, as a defense or
otherwise), in any such action any claim that such legal proceeding has been
brought in an inconvenient forum.
10. Dispute Resolution/Attorneys' Fees. Unless otherwise prohibited by law
or specified below, all disputes, claims, and causes of action (including but
not limited to any claims of statutory discrimination of any type), in law or
equity, arising from or relating to this Agreement or its enforcement,
performance, breach, or interpretation, or to your employment with the Company
or the termination of that employment, shall be resolved solely and exclusively
by final, binding and confidential arbitration through Judicial Arbitration &
Mediation Services/Endispute, Inc. ("JAMS") under the then existing JAMS
arbitration rules. You understand and agree that this provision waives your
right to a jury trial on these claims. This arbitration shall be held in the San
Francisco Bay Area. Nothing in this Section 10 is intended to prevent either
party from obtaining injunctive relief in court to prevent irreparable harm
pending the conclusion of any such arbitration.
11. Severability. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
12. Restricted Activities. Officer agrees that during the period of
Officer's employment by the Company Officer will not, without the Company's
express written consent, engage in any employment or business activity other
than Officer's employment by the Company. Officer agrees further that for the
period of Officer's employment by the Company and for at least one (1) year
after the date of termination of Officer's employment by the Company, Officer
will not, either directly or indirectly, solicit or attempt to solicit any
employee, consultant or independent contractor of the Company to terminate his
or her relationship with the Company to become an employee, consultant or
independent contractor to or for any other person or entity. Officer agrees
further that for the period of Officer's employment by the Company and for at
least one (1) year after the date of termination of Officer's employment by the
Company, Officer will not solicit the business of any client or customer of the
Company (other than on behalf of the Company).
<PAGE>
DOCENT, INC.
OFFICER'S CHANGE IN CONTROL AGREEMENT
David Mandelkern
14 October, 1999
Page 5
In Witness Whereof, the parties have executed this agreement as of the date
first set forth above.
Docent, Inc. Officer
By: /s/ David R. Ellett /s/ David Mandelkern
------------------------------ --------------------------------
(David R. Ellett) (David Mandelkern)
Title: Chief Executive Officer
---------------------------------
<PAGE>
EXHIBIT 10.10
DOCENT, INC.
OFFICER'S CHANGE IN CONTROL AGREEMENT
This Agreement ("Agreement") is made effective as of the 14th day of
October, 1999, by and between Docent, Inc. (the "Company"), a Delaware
corporation, and Richard Dellinger (the "Officer").
Whereas, the Company has granted to Officer options for the purchase of the
Company's Common Stock (the "Officer's Option Shares"); and
Whereas, the Company seeks to retain the Officer as an at-will employee.
Now Therefore, in consideration of the covenants and with the intention of
being legally obligated by the provisions set forth herein, the parties hereby
agree as follows:
1. Definitions. Certain terms herein as defined as follows:
(a) "Change in Control" means (i) the sale, lease or other disposition of
all or substantially all of the assets of the Company or (ii) an acquisition of
the Company by another corporation or entity by consolidation, merger or other
reorganization in which the holders of the Company's outstanding voting stock
immediately prior to such transaction own, immediately after such transaction,
securities representing less than fifty percent (50%) of the voting power of the
corporation or other entity surviving such transaction, excluding any
consolidation or merger effected exclusively to change the domicile of the
Company.
(b) "Cause" means misconduct, including but not limited to: (i) conviction
of any felony or any crime involving moral turpitude or dishonesty, (ii)
participation in a fraud or act of dishonesty against the Company, (iii) conduct
that, based upon a good faith and reasonable factual investigation and
determination by the Board, demonstrates gross unfitness to serve, or (iv)
material violation of any contract between the Company and the Officer or any
statutory duty of the Officer to the Company that is not corrected within thirty
(30) days after written notice thereof. Physical disability shall not constitute
"Cause."
(c) "Compensation" means the Officer's current quarter's projected
aggregate cash remuneration based on the Officer's base salary, plus, as
applicable: (i) the Officer's current quarter's management bonus, assuming
performance of all quarterly bonus criteria; and/or (ii) the Officer's current
quarter's sales commissions, assuming performance of the Officer's quarterly
quota.
(d) "Good Reason" means, with respect to the voluntary termination of the
continuous service of the Officer in connection with a Change in Control: (i)
reduction of Officer's current quarter's rate of Compensation as in effect
immediately prior to the Change in Control by greater than ten percent (10%),
except to the extent the compensations of at least a majority of other officers
of the Company that have signed agreements substantially similar to this
Agreement have been similarly reduced; (ii) failure to provide a package of
welfare benefit plans that, taken as a whole, provide substantially similar
benefits to those in which Officer is entitled to participate immediately prior
to the Change in Control (except that Officer's
<PAGE>
DOCENT, INC.
OFFICER'S CHANGE IN CONTROL AGREEMENT
Richard Delinger
14 October, 1999
Page 2
contributions may be raised to the extent of any cost increases imposed by third
parties) or any action by the Company or a successor to the Company that would
adversely affect Officer's participation or reduce Officer's benefits under any
of such plans; (iii) a significant change in Officer's responsibilities,
authority, titles or offices resulting in diminution of position, excluding for
this purpose an isolated action not taken in bad faith that is remedied by the
Company or a successor to the Company promptly after notice thereof is given by
Officer; or (iv) a request that Officer relocate to a worksite that is more than
fifty (50) miles from Officer's prior worksite, unless Officer accepts such
relocation opportunity.
2. Change in Control. If the Officer's employment with the Company is
terminated within six (6) months after any Change in Control either (i) by the
Company or a successor to the Company for any reason other than for Cause or
(ii) by the Officer for Good Reason, the vesting of all the unvested Officer's
Option Shares shall be accelerated one year forward. In the event of a Change in
Control, the references herein to the "Company" shall be deemed to refer to any
successor to the Company.
3. Waiver. Notwithstanding anything to the contrary contained in this
Agreement, if (i) the Company enters into a Change in Control transaction that
is to be accounted for as a pooling of interest, and (ii) the accountant(s) for
either the Company or the acquirer determines that a particular provision
contained in this Agreement, or that this Agreement in its entirety, would cause
the Change in Control transaction to be ineligible as a pooling of interest
transaction, then the particular provision or the entire Agreement, as the case
may be, shall not be applicable with respect to such Change in Control
transaction.
4. Parachute Payments.
(a) In the event it shall be determined that any payment or
distribution by the Company to or for the benefit of Officer (whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise) (a "Payment") would be nondeductible by the Company for federal
income tax purposes because of Section 280G of the Internal Revenue Code (the
"Code"), then the aggregate present value of such Payment shall be reduced to
the Reduced Amount. The "Reduced Amount" shall be an amount expressed in present
value that maximizes the aggregate present value of such Payment without causing
any Payment to be nondeductible by the Company because of Section 280G of the
Code. Anything to the contrary notwithstanding, if the Reduced Amount is zero
and it is determined further that any Payment would nevertheless be
nondeductible by the Company for federal income tax purposes because of Section
28OG of the Code, then the aggregate present value of such Payment shall also be
reduced (but not below zero) to an amount expressed in present value that
maximizes the aggregate present value of such Payment without causing such
Payment to be nondeductible by the Company because of Section 280G of the Code.
For purposes of this Section 4, present value shall be determined in accordance
with Section 280G(d)(4) of the Code.
(b) All determinations required to be made under this Section 4 shall be
made by the Company's independent auditors. Such auditors shall provide detailed
supporting calculations both to the Company and Officer within fifteen (15)
business days of the date that Officer's employment with the Company terminates
or such earlier time as is requested by the
<PAGE>
DOCENT, INC.
OFFICER'S CHANGE IN CONTROL AGREEMENT
Richard Delinger
14 October, 1999
Page 3
Company. Any such determination by the Company's independent auditors shall be
binding upon the Company and Officer. The Company shall determine which and how
much of the Payment or Payments, as the case may be, shall be eliminated or
reduced consistent with the requirements of this Section 4, within thirty (30)
business days of the receipt of the calculations made by the Company's
independent auditors and shall notify Officer promptly of such election. Within
five (5) business days thereafter, the Company shall pay to or distribute to or
for the benefit of Officer such amounts as are then due to Officer under this
Agreement.
(c) As a result of the uncertainty in the application of Section 280G
of the Code at the time of the initial determination by the Company's
independent auditors hereunder, it is possible that a Payment or Payments, as
the case may be, will have been made by the Company that should not have been
made ("Overpayment") or that an additional Payment or Payments, as the case may
be, which will not have been made by the Company could have been made
("Underpayment"), in each case, consistent with the calculations required to be
made hereunder. In the event that the Company's independent auditors, based upon
the assertion of a deficiency by the Internal Revenue Service against Officer or
the Company that the Company's independent auditors believe has a high
probability of success, determine that an Overpayment has been made, any such
Overpayment paid or distributed by the Company to or for the benefit of Officer
shall be treated for all purposes as a loan ab initio to Officer that Officer
shall repay to the Company together with interest at the applicable federal rate
provided for in Section 7872(f)(2) of the Code; provided however, that no such
loan shall be deemed to have been made and no amount shall be payable by Officer
to the Company if and to the extent such deemed loan and payment would not
either reduce the amount on which Officer is subject to tax under Section 1 and
Section 4999 of the Code or generate a refund of such taxes. In the event that
the Company's independent auditors, based upon controlling precedent or other
substantial authority, determine that an Underpayment has occurred, any such
Underpayment shall be promptly paid by the Company to or for the benefit of
Officer together with interest at the applicable federal rate provided for in
Section 7872(f)(2) of the Code.
5. Return of Materials. At the termination of your relationship with the
Company, Officer will promptly return to the Company, and will not take with or
use, all items of any nature that belong to the Company, and all materials (in
any form, format, or medium) containing or relating to the Company's business.
6. Entire Agreement. This Agreement constitutes the complete, final and
exclusive embodiment of the entire agreement between the Officer and the Company
with respect to the terms and conditions of the Officer's employment specified
herein. Officer enters into this Agreement voluntarily and without reliance upon
any promise, warranty or representation, written or oral, other than those
expressly contained herein. This Agreement supersedes any other such promises,
warranties, representations or agreements. This Agreement does not, however,
supersede or modify the Officer's Proprietary Information and Inventions
Agreement or the terms of the Officer's offer letter. This Agreement may not be
amended or modified except by a written instrument signed by Officer and a duly
authorized officer of the Company.
7. Enforceability. If any provision of this Agreement is determined to be
invalid or unenforceable, in whole or in part, this determination will not
affect any other provision of this
<PAGE>
DOCENT, INC.
OFFICER'S CHANGE IN CONTROL AGREEMENT
Richard Delinger
14 October, 1999
Page 4
Agreement, and the Agreement, including the invalid or unenforceable provisions,
should be enforced insofar as possible to achieve the intent of the parties.
8. Binding Nature. This Agreement will be binding upon and inure to the
benefit of the personal representatives and successors of the respective parties
hereto.
9. Governing Law. This Agreement shall be governed in all respects by the
laws of the State of California as such laws are applied to agreements between
California residents entered into and performed entirely in California. The
parties hereto hereby (a) expressly consent to the personal jurisdiction and
venue of the state and federal courts located in Santa Clara County, California
for any action brought by either party to interpret or enforce any provision of
this Agreement and (b) agree not to assert (by way of motion, as a defense or
otherwise), in any such action any claim that such legal proceeding has been
brought in an inconvenient forum.
10. Dispute Resolution/Attorneys' Fees. Unless otherwise prohibited by law
or specified below, all disputes, claims, and causes of action (including but
not limited to any claims of statutory discrimination of any type), in law or
equity, arising from or relating to this Agreement or its enforcement,
performance, breach, or interpretation, or to your employment with the Company
or the termination of that employment, shall be resolved solely and exclusively
by final, binding and confidential arbitration through Judicial Arbitration &
Mediation Services/Endispute, Inc. ("JAMS") under the then existing JAMS
arbitration rules. You understand and agree that this provision waives your
right to a jury trial on these claims. This arbitration shall be held in the San
Francisco Bay Area. Nothing in this Section 10 is intended to prevent either
party from obtaining injunctive relief in court to prevent irreparable harm
pending the conclusion of any such arbitration.
11. Severability. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
12. Restricted Activities. Officer agrees that during the period of
Officer's employment by the Company Officer will not, without the Company's
express written consent, engage in any employment or business activity other
than Officer's employment by the Company. Officer agrees further that for the
period of Officer's employment by the Company and for at least one (1) year
after the date of termination of Officer's employment by the Company, Officer
will not, either directly or indirectly, solicit or attempt to solicit any
employee, consultant or independent contractor of the Company to terminate his
or her relationship with the Company to become an employee, consultant or
independent contractor to or for any other person or entity. Officer agrees
further that for the period of Officer's employment by the Company and for at
least one (1) year after the date of termination of Officer's employment by the
Company, Officer will not solicit the business of any client or customer of the
Company (other than on behalf of the Company).
<PAGE>
DOCENT, INC.
OFFICER'S CHANGE IN CONTROL AGREEMENT
Richard Delinger
14 October, 1999
Page 5
In Witness Whereof, the parties have executed this agreement as of the date
first set forth above.
Docent, Inc. Officer
By: /s/ David R. Ellett /s/ Richard Dellinger
------------------------------------ -------------------------------
(David R. Ellett) (Richard Dellinger)
Title: Chief Executive Officer
---------------------------------
<PAGE>
EXHIBIT 10.17
CHARLESTON BUSINESS PARK
STANDARD NNN LEASE -- Multi-Tenant Business Park
WITNESSETH
This lease ("Lease") is entered into by and between Limar Realty Corp. #17, a
California corporation ("Landlord") and Docent, Inc., a Delaware corporation
("Tenant"). For and in consideration of the payment of rents and the performance
of the covenants herein set forth by Tenant, Landlord does lease to Tenant and
Tenant accepts the Premises described below subject to the agreements herein
contained.
1. BASIC LEASE TERMS
a. DATE OF LEASE: September 22, 1999
b. TENANT: Docent, Inc.
Address (of the Premises): 2444 Charleston Road, Mountain View, CA
94043
Address (for Notices): (Please provide if other than Premises.)
c. LANDLORD: Limar Realty Corp. #17
Address (for Notices): 1730 South El Camino Real
Suite 400
San Mateo, California 94402
Attn: Thomas A. Numainville
d. TENANT'S USE OF PREMISES: General office use and research and
development for software and media products, sale and storage of
software products and customer training.
e. PREMISES AREA: "Temporary Premises": 2410 Charleston
Road = 12,000 Rentable Square Feet
"Original Premises": 2444 Charleston
Road = 12,200 Rentable Square Feet
"Expansion Premises": 2454 Charleston
Road = 13,800 Rentable Square Feet
The Temporary Premises, Original Premises,
and Expansion Premises are sometimes
collectively and/or individually referred to
herein as the Premises, provided however,
that the Premises shall only refer to space
actually delivered to Tenant pursuant to
this Lease.
f. BUILDING: 2444-2454 Charleston Road and/or 2410
Charleston Road as/when occupied by Tenant,
as the case may be
g. BUSINESS PARK: Charleston Business Park
h. INSURING PARTY: Landlord is the "Insuring Party" unless
otherwise stated herein.
i. TERM (inclusive): Commencement Date: See (P)29.
Expiration Date: See (P)30.
Number of Months from Temporary Premises
Commencement Date to Expiration Date of the
Original Premises and the Expansion
Premises: 68 (assumes 10/1/99 Temporary
Premises Commencement Date)
j TENANT'S SHARE OF BUILDING: See (P)31
k. TENANT'S SHARE OF BUSINESS PARK: See (P)31.
l. TENANT'S NUMBER OF NON-RESERVED PARKING SPACES: See (P)32.
m. INITIAL BASE RENT See (P)33.
n. BASE RENT ADJUSTMENT: See (P)34.
o. PREPAID BASE RENT: As to the Temporary
Premises = $30,000.00
p. SECURITY DEPOSIT: See (P)36.
q. BROKER(S): Cornish & Carey Commercial
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<PAGE>
r. EXHIBITS: Exhibits lettered "A" through "D" are attached hereto and
made a part hereof.
2. PREMISES, PARKING AND COMMON AREAS
a. Premises. The Premises as described in (P) 1. and Exhibit A, are a
---------
portion of a building, herein sometimes referred to as the
"Building" identified in (P) 1. The Premises, the Building, the
Common Areas, the ;land upon which the same are located, along with
all other buildings and improvements thereon or thereunder, are
herein collectively referred to as the "Business Park" as described
in (P) 1. and Exhibit B Landlord hereby leases to Tenant and Tenant
---------
leases from Landlord for the Term (as defined below), at the rental,
and upon all of the conditions set forth herein, the real property
referred to in the Basic Lease Terms, (P) 1 as the "Premises",
including rights to the Common Areas as hereinafter specified.
Subject to any additional work Landlord has agreed herein to do,
Tenant hereby accepts the Premises in their condition existing as of
the date of the execution hereof, subject to all applicable zoning,
municipal, county and state laws, ordinances and regulations
governing and regulating the use of the Premises, and accepts this
Lease subject thereto and to all matters disclosed thereby and by
any exhibits attached hereto. Tenant agrees with the square footage
specified for the Premises in (P) 1. and will not hereafter
challenge such determination and agreement. The rental payable by
Tenant pursuant to this Lease is not subject to revision in the
event of any discrepancy in the rentable square footage for the
Premises.
b Vehicle Parking. So long as Tenant is not in default, and subject to
the Rules and Regulations attached hereto as Exhibit C, and as
---------
established by Landlord from time to time, Tenant shall be entitled
to use the number of parking spaces set forth in (P) 1. If Tenant
commits, permits or allows any of the prohibited activities
described in the Lease or the Rules and Regulations then in effect,
then Landlord shall have the right, without notice, in addition to
such other rights and remedies that it may have, to remove or tow
away the vehicle involved and charge the cost to Tenant, which cost
shall be immediately payable upon demand by Landlord. Landlord shall
have the right following reasonable notice to Tenant, at any time
during the Lease Term, to implement a parking plan for the Business
Park whereby one or more of the tenants in the Business Park will be
allocated a designated portion of the Common Areas for the exclusive
parking by such tenant provided there is no disproportionate
reduction to the number of spaces allocated to Tenant In the event
Landlord elects to implement such parking plan for tenant(s)
representing at least 25% of the square footage in the Business
Park, Landlord shall provide Tenant with the exclusive right to park
in a designated portion of the Common Areas (which designated
portion shall be approximately located on all or a portion of the
Common Areas identified on Exhibit "A" attached hereto).
c. Common Areas -- Definition. The term "Common Areas" is defined as
all areas and facilities outside the Premises and within the
exterior boundary line of the Business Park that are provided and
designated by the Landlord from time to time for the general
non-exclusive use of Landlord, Tenant and of other tenants of the
Business Park and their respective employees, suppliers, shippers,
customers and invitees, including but not limited to common
entrances, lobbies, corridors, stairways and stairwells, public
restrooms, elevators, parking areas to the extent not otherwise
prohibited by this Lease, loading and unloading areas, trash areas,
roadways, sidewalks, walkways, parkways, ramps, driveways,
landscaped areas and decorative walls.
d. Common Areas - Rules and Regulations. Tenant agrees to abide by and
conform to the Rules and Regulations attached hereto as Exhibit C
---------
with respect to the Business Park and Common Areas, and to cause its
employees, suppliers, shippers, customers and invitees to so abide
and conform. Landlord, or such other person(s) as Landlord may
appoint, shall have the exclusive control and management of the
Common Areas and shall have the right, from time to time, to
reasonably modify, amend and enforce said rules and regulations.
Landlord shall not be responsible to Tenant for the non-compliance
with said rules and regulations by other tenants, their agents,
employees and invitees, Following a written request from Tenant,
Landlord shall use commercially reasonable efforts to enforce the
rules and regulations against other tenants of the Building subject
to the terms of each tenant's lease.
e. Building and Common Areas -- Changes. Landlord shall have the right,
in Landlord's reasonable discretion, from time to time:
1) To make changes to the Building interior and exterior and
Common Areas, including, without limitation, changes in the
location, size, shape, number and appearance thereof,
including but not limited to the lobbies, windows, stairways,
air shafts, elevators, restrooms, driveways, entrances,
parking spaces, parking areas, loading and unloading areas,
ingress, egress, direction of traffic. decorative walls,
landscaped areas and walkways;
2) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains
available;
3) To designate other land and improvements outside the
boundaries of the Business Park to be a part of the Common
Areas, provided that such other land and improvements have a
reasonable and functional relationship to the Business Park;
4) To add additional buildings and improvements to the Common
Areas;
5) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Business Park or
any portion thereof; and
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<PAGE>
6) To do and perform such other acts and make such other changes
in, to or with respect to the Common Areas and Business Park
as Landlord may, in the exercise of sound business judgment
deem to be appropriate. Landlord's rights pursuant to this (P)
2.e. shall be subject to the condition that exercise of any
such rights shall not unreasonably interfere with Tenant's use
of the Premises or disproportionately decrease the number of
Tenant's parking spaces.
f. Acceptance; Quiet Enjoyment. Landlord represents that it is the fee
simple owner of the Premises and has full right and authority to
make this Lease. Landlord hereby leases the Premises to Tenant and
Tenant hereby accepts the same from Landlord, in accordance with the
provisions of this Lease. Landlord covenants that Tenant shall have
peaceful and quiet enjoyment of the Premises during the Term (as
defined below) of this Lease. Tenant covenants that it will not
interfere with other tenants' quiet enjoyment of their premises.
3. TERM. The term ("Term") of this Lease is for the period that commences at
12:01 a.m. on the Temporary Premises Commencement Date and expires at
11:59 p.m. on the Expiration Date of the Original Premises and the
Expansion Premises. If Landlord, for any reason, cannot deliver possession
of the Temporary Premises to Tenant on or before the Temporary Premises
Commencement Date, this Lease shall not be void or voidable, nor shall
Landlord be liable to Tenant for any loss or damage resulting from such
delay, In that event, however, there shall be an abatement of Base Rent
(as defined below) and additional rent covering the period between the
Temporary Premises Commencement Date and the date when Landlord delivers
possession to Tenant, and all other terms and conditions of this Lease
shall remain in full force and effect. If a delay in possession is caused
by Tenant's failure to perform any obligation in accordance with this
Lease, the Term shall commence as of the Temporary Premises Commencement
Date, and the abatement of Base Rent and additional rent shall continue
only until the date Landlord would have delivered possession but not for
Tenant's failure.
4. RENT
a. Base Rent. Tenant shall pay Landlord in lawful money of the United
States, without notice, demand. offset or deduction, rent in the
amount(s) set forth in (P) 1. which shall be payable in advance on
the first day of each and every calendar month ("Base Rent")
provided, however, the first month's Base Rent is due and payable
upon execution of this Lease. Unless otherwise specified in writing
by Landlord, all installments of Base Rent shall be payable to Limar
Realty Corp. #17, Department #44294, P.O. Box 44000, San Francisco,
California 94144-4294. Base Rent for any partial month at the
beginning or end of this Lease will be prorated in accordance with
the number of days in the subject month.
For purposes of Section 467 of the Internal Revenue Code. the
parties to this Lease hereby agree to allocate the stated Base Rent
provided herein to the periods which correspond to the actual Base
Rent payments as provided under the terms and conditions of this
Agreement.
b. Cost of Living Adjustment. As to the Original Premises (See (P)
34.b.), the Base Rent shall be subject to increase on April 1 in the
years of 2000. 2001, 2002 and 2003. The base for computing the
increase is the Consumer Price Index All Urban Consumers for the
CMSA referenced in (P) 34.b.1) (1982-84 base year = 100), published
by the United States Department of Labor, Bureau of Labor Statistics
("Index"), which is in effect on the ninetieth (90th) day preceding
April 1, 1999 ("Beginning Index"). The Index ("Adjustment Index")
published and in effect on the ninetieth (90th) day preceding each
annual anniversary ("Annual Anniversary") of April 1, 1999 is to be
used in determining the amount of the increase from one year to the
next. Beginning with the Base Rent due on and after the first
anniversary, the Base Rent shall be increased to equal the product
achieved by multiplying the Base Rent amount by a fraction, the
numerator of which will be the Adjustment Index and the denominator
of which will be the Beginning Index. If there is a decline from one
Annual Anniversary to the next in the Adjustment Index. the Base
Rent due during the subsequent lease year shall equal the Base Rent
due during the then present lease year (i.e., there shall be no
decrease in Base Rent). Notwithstanding the foregoing provisions of
this (P) 4.b.), each Base Rent adjustment shall be subject to a
minimum adjustment in accordance with the Floor Limit if specified
in (P) 34.b.1) and a maximum adjustment in accordance with the
Ceiling Limit if specified in (P) 34.b.1).
If the Index is changed so that the base year differs from 1982-84 =
100, the Index shall be converted in accordance with the conversion
factor published by the United States Department of Labor, Bureau of
Labor Statistics, If the Index is discontinued or revised during the
Term, such other government index or computation with which it is
replaced shall be used in order to obtain substantially the same
result as, in Landlord's reasonable opinion, would be obtained if
the Index had not been discontinued or revised.
c. Step Increase. The Base Rent shall be increased periodically to the
amounts and at the times set forth in (P) 34.
d. Rent Without Offset and Late Charge. All Rent shall be paid without
prior demand or notice and without any deduction or offset
whatsoever. All Rent shall be paid in lawful currency of the United
States of America. Tenant acknowledges that late payment by Tenant
to Landlord of any Rent will cause Landlord to incur costs not
contemplated by this Lease, the exact amount of such cost being
extremely difficult and impracticable to ascertain. Such costs
include, without limitation, processing and accounting charges and
late charges that may be imposed on Landlord by the terms of any
encumbrance or note secured by the Premises. Therefor, if any Rent
is not received by Landlord within five (5) days of its due date,
Tenant
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<PAGE>
shall pay to Landlord a late charge equal to six percent (6%) of
such overdue payment. Landlord and Tenant hereby agree that such
late charge represents a fair and reasonable estimate of the costs
that Landlord will incur by reason of any such late payment and that
the late charge is in addition to any and all remedies available to
the Landlord and that the assessment and/or collection of the late
charge shall not be deemed a waiver of any other default.
Additionally, all such delinquent Rent or other sums, plus this late
charge, shall bear interest from the due date thereof at the lesser
of ten percent (10%) per annum or the maximum legal interest rate
permitted by law. Any payments of any kind returned for insufficient
funds will be subject to an additional handling charge of $25.00,
and thereafter for the remainder of the Term hereof, Landlord may
require Tenant to pay all future payments of Rent or other sums due
by cashier's check.
e. Prepaid Base Rent. Upon the execution of this Lease, Tenant shall
pay to Landlord the Prepaid Base Rent set forth in (P) 1., and such
Prepaid Base Rent shall be applied toward the Base Rent due for the
first month of the Term for which Rent is due.
f Rent. The term "Rent" as used in this Lease shall refer to Base
Rent, Prepaid Base Rent, Real Property Taxes, Operating Expenses,
Insurance Costs, repairs and maintenance costs, utilities, late
charges and other similar charges payable by Tenant pursuant to this
Lease either directly to Landlord or otherwise.
5. OPERATING EXPENSES.
a. Payment by Tenant. During the Term of this Lease, Tenant shall pay
to Landlord, as additional Rent, on a monthly basis Tenant's Share
of the Operating Expenses. To the extent that Operating Expenses are
accounted for on a building by building basis, the Tenant's Share of
Building shall apply. To the extent that Operating Expenses are
accounted for on an overall Business Park basis, then Tenant's Share
of Business Park shall apply.
b Operating Expenses. The term "Operating Expenses" shall mean all
expenses, costs and disbursements (not specifically excluded from
the definition of Operating Expenses below) of every kind and nature
which Landlord shall pay or become obligated to pay because of or in
connection with the ownership, maintenance, repair and operation of
the Business Park or any portion thereof (including all Buildings
and Common Areas of the Business Park). Operating Expenses shall
include, but not be limited to, the following:
1) Wages and salaries of all employees engaged in the operation,
maintenance and security of the Business Park, including
taxes, insurance and benefits relating thereto; and the rental
cost and overhead of any office and storage space used to
provide such services.
2) All supplies and materials used in the operation, repair or
maintenance of the Business Park
3) Cost of all utilities, including surcharges, for the Business
Park, including the cost of water, power and lighting which
are not separately billed to and paid for by Tenant.
4) Cost of all maintenance and service agreements for the
Business Park and the equipment thereon, including but not
limited to, security services, exterior window cleaning,
janitorial service, engineers, gardeners and trash removal
services.
5) All Insurance Costs, as such term is defined in (P) 16.
6) Cost of repairs and general maintenance (excluding repairs and
general maintenance paid by proceeds of insurance or by Tenant
or other third parties, and alterations attributable solely to
the other tenants of the Business Park).
7) A reasonable management fee for the property management of the
Business Park.
8) The costs of any additional services not provided to the
Business Park at the Commencement Date but thereafter provided
by Landlord to all tenants in its management of the Business
Park.
9) The cost of any capital improvements to the Business Park or
any part thereof which are made during the Term hereof
amortized over the useful life of the improvement.
10) Real Property Taxes, as that term is defined in (P) 11.
11) Assessments, dues and other amounts payable pursuant to the
CC&R's described in (P) 7.c.
12) All costs to maintain, repair and replace the heating,
ventilation and air conditioning systems ("HVAC") serving the
Building and/or the Premises, including the cost of
maintenance contracts.
c. Operating Expenses shall not include:
1) Costs paid for directly by Tenant or other tenants;
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<PAGE>
2) Principal and interest payments on loans secured by deeds of
trust recorded against the Business Park or the Building of
which the Business Park is a part;
3) Real estate sales or leasing brokerage commissions;
4) Executive salaries of off-site personnel employed by Landlord
except for the charge (or prorata share) of the property
manager of the Business Park;
5) Leasing commissions, attorneys' fees, costs, disbursements and
other expenses incurred in connection with negotiations or
disputes with tenants, or in connection with leasing,
renovating or improving space for tenants or other occupants
or prospective tenants or other occupants of the Business
Park;
6) The cost of any service sold to any tenant (including Tenant)
or other occupant for which Landlord is entitled to be
reimbursed as an additional charge or rental over and above
the basic rent and escalations payable under the lease with
that tenant;
7) Any depreciation on the Building or Business Park;
8) Expenses in connection with services or other benefits of a
type that are not provided to Tenant but which are provided
another tenant or occupant of the Building or Business Park;
9) Costs incurred due to Landlord's violation of any terms or
conditions of this Lease or any other lease relating to the
Building or Business Park;
10) Overhead profit increments paid to Landlord's subsidiaries or
affiliates for services on or to the Building or for supplies
or other materials to the extent that the cost of the
services, supplies, or materials exceeds the cost that would
have been paid had the services, supplies or materials been
provided by unaffiliated parties on a competitive basis;
11) Any compensation paid to clerks, attendants or other persons
in commercial concessions operated by Landlord;
12) Advertising and promotional expenditures;
13) Costs or repairs and other work occasioned by fire, windstorm
or other casualty of an insurable nature to the extent covered
by insurance;
14) Management costs to the extent they exceed management costs
charged for similar facilities in the area; or
15) Costs for sculpture, paintings or other objects of art (nor
insurance thereon or extraordinary security in connection
therewith).
d. Extraordinary Services. Tenant shall pay within ten (10) days of
receipt of an invoice from Landlord the cost of additional or
extraordinary services provided to Tenant and not paid or payable by
Tenant pursuant to other provisions of this Lease.
e. Impound. Landlord reserves the right, at Landlord's option, to
estimate the annual cost of Operating Expenses performed by Landlord
("Projected Operating Expenses") and to require same to be paid in
advance. Tenant shall pay to Landlord, monthly in advance as
additional Rent, one-twelfth (1/12) of the Projected Operating
Expenses.
f. Adjustment.
1) Accounting. Within ninety (90) days (or as soon thereafter as
possible) after the close of each calendar year or portion
thereof of occupancy, Landlord shall provide Tenant a
statement of such year's actual Operating Expenses compared to
the Projected Operating Expenses. If the actual Operating
Expenses are more than the Projected Operating Expenses then
Tenant shall pay Landlord, within ten (10) days of receipt of
a bill therefor, the difference. If the actual Operating
Expenses are less than the Projected Operating Expenses, then
Tenant shall receive a credit against future Operating
Expenses payments equal to the difference; provided, that in
the case of an overpayment for the final lease year of the
Term, Landlord shall credit the difference against any sums
due from Tenant to Landlord in accordance with the terms of
this Lease; and if no sums are due and unpaid, shall promptly
refund the net amount to Tenant.
2) Tenant's Right to Audit. Within sixty (60) days after receipt
of Landlord's statement setting forth actual Operating
Expenses (the "Statement"), Tenant shall have the right to
audit at Landlord's local offices, at Tenant's expense,
Landlord's accounts and records relating to Operating
Expenses. Such audit shall be conducted by a certified public
accountant approved by Landlord, which approval shall not be
unreasonably withheld. If such audit reveals that Landlord has
overcharged Tenant, the amount overcharged shall be paid to
Tenant within thirty (30) days after the audit is concluded.
In addition, if the Statement exceeds the actual Operating
Expenses
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<PAGE>
which should have been charged to Tenant by more than ten
percent (10%), the cost of the audit shall be paid by
Landlord.
3) Proration. Tenant's liability to pay Operating Expenses shall
be prorated on the basis of a 365 (or 366, as the case may be)
day year to account for any fractional portion of a year
included at the commencement or expiration of the Term of this
Lease.
4) Survival. Landlord and Tenant's obligations to pay for or
credit any increase or decrease in payments pursuant to this
(P) 5. shall survive this Lease.
g. Failure to Pay. Failure of Tenant to pay any of the charges required
to be paid under this (P) 5. shall constitute a material default and
breach of this Lease and Landlord's remedies shall be as specified
in (P) 21.
6. SECURITY DEPOSIT. Upon execution of this Lease, Tenant shall deposit a
security deposit ("Security Deposit") in the amount set forth in (P) 36.
with Landlord. If Tenant is in default, Landlord can (but without any
requirement to do so) use the Security Deposit or any portion of it to
cure the default or to compensate Landlord for any damages sustained by
Landlord resulting from Tenant's default. Upon demand, Tenant shall
immediately pay to Landlord a sum equal to the portion of the Security
Deposit expended or applied by Landlord to restore the Security Deposit to
its full amount. In no event will Tenant have the right to apply any part
of the Security Deposit to any Rent due under this Lease. Landlord's
obligations with respect to the Security Deposit are those of a debtor and
not a trustee, and Landlord can commingle the Security Deposit with
Landlord's general funds. Landlord shall not be required to pay Tenant
interest on the Security Deposit. Each time the Base Rent is increased,
Tenant shall deposit additional funds with Landlord sufficient to increase
the Security Deposit to an amount which bears the same relationship to the
Base Rent as the initial Security Deposit bore to the initial Base Rent.
If Tenant is not in default at the expiration or termination of this Lease
and has fully complied with the provisions of (P) 9., (P) 13.d.6) and (P)
26., Landlord shall return the Security Deposit to Tenant.
7. USE OF PREMISES
a. Tenant's Use. Tenant shall use the Premises solely for the purposes
stated in (P) 1. and for no other purposes without obtaining the
prior written consent of Landlord. Tenant acknowledges that neither
Landlord nor any agent of Landlord has made any representation or
warranty with respect to the Premises or with respect to the
suitability of the Premises to the conduct of Tenant's business, nor
has Landlord agreed to undertake any modification, alteration or
improvement to the Premises, except as provided in writing in this
Lease. Tenant shall promptly comply with all laws, statutes,
ordinances, orders and governmental regulations now or hereafter
existing affecting the Premises. Tenant shall not do or permit
anything to be done in or about the Premises or bring or keep
anything in the Premises that will in any way increase the premiums
paid by Landlord on its insurance related to the Premises. Tenant
will not perform any act or carry on any practices that may injure
the Premises. Tenant shall not use the Premises for sleeping,
washing clothes or the preparation, manufacture or mixing of
anything that emits any objectionable odor, noises, vibrations or
lights onto such other tenants, If, in Landlord's reasonable
judgment, sound insulation is required to muffle noise produced by
Tenant on the Premises, Tenant at its own cost shall provide all
necessary insulation. Tenant shall not do anything on the Premises
which will overload any existing parking or service to the Premises.
Pets and/or animals of any type shall not be kept on or about the
Premises. Tenant covenants that it will not interfere with other
tenants' quiet enjoyment of their premises. Notwithstanding the
foregoing or anything to the contrary contained in this Lease,
Tenant shall not be responsible for compliance with any laws, codes,
ordinances or other governmental directives where such compliance is
not related specifically to Tenant's use and occupancy of the
Premises.
b. Rules and Regulations. Tenant shall comply with and use the Premises
in accordance with the Rules and Regulations attached hereto as
Exhibit C and to any reasonable modifications to such Rules and
---------
Regulations as Landlord may adopt from time to time. Notwithstanding
the foregoing or anything to the contrary contained in this Lease,
if any rule or regulation is in conflict with any term, covenant or
condition of this Lease, this Lease shall prevail. In addition, no
such rule or regulation, or any subsequent amendment thereto adopted
by Landlord, shall in any way materially alter, reduce or adversely
affect any of Tenant's rights or materially enlarge Tenant's
obligations under this Lease.
c. CC&R's. Tenant agrees that this Lease is subject and subordinate to
the Covenants, Conditions and Restrictions, a copy of which is
attached hereto as Exhibit D, as they may be amended from time to
---------
time ("CC&R's"), and further agrees that the CC&R's are an integral
part of this Lease. Throughout the Term of any extension thereof,
notwithstanding any other provision hereof, Tenant shall faithfully
and timely comply with the CC&R's and any modifications or
amendments thereto. The CC&R's may require the payment of periodic
or special dues or assessments against the Premises, Such dues and
assessments shall be included within the definition of Operating
Expenses pursuant to (P) 5.b.11), and Tenant shall pay its pro rata
share of such amounts as further set forth in (P) 5. Tenant shall
hold Landlord, its subsidiaries, shareholders, directors, officers,
agents and employees harmless and indemnify Landlord, its
subsidiaries, shareholders, directors, officers, agents and
employees against any loss, expense and damage, including attorneys'
fees and costs, arising out of the failure of Tenant to comply with
the CC&R's.
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8. EMISSIONS; STORAGE, USE AND DISPOSAL OF WASTE
a. Emissions. Tenant shall not:
1) Knowingly permit any vehicle on the Premises or in the Commons
Areas to emit exhaust which is in violation of any
governmental law, rule, regulation or requirement;
2) Discharge, emit or permit to be discharged or emitted, any
liquid, solid or gaseous matter, or any combination thereof,
into the atmosphere or on, into or under the Premises, any
building or other improvements of which the Premises are a
part, or the ground or any body of water which matter. as
reasonably determined by Landlord or any governmental entity
to be in violation of law or regulation, and does or may
pollute or contaminate the same, or is, or may become,
radioactive or does, or may, adversely affect (a) the health
or safety of persons, wherever located, whether on the
Premises or anywhere else, (b) the condition, use or enjoyment
of the Premises or any other real or personal property,
whether on the Premises or anywhere else, or (c) the Premises
or any of the improvements thereto including buildings,
foundations, pipes, utility lines, landscaping or parking
areas;
3) Produce, or permit to be produced, any intense glare, light or
heat in violation of law or regulations;
4) Create, or permit to be created, any sound pressure level
which will interfere with the quiet enjoyment of any real
property outside the Premises, or which will create a nuisance
or violate any governmental law, rule, regulation or
requirement;
5) Create, or permit to be created, any vibration that is
discernible outside the Premises; or
6) Transmit, receive or permit to be transmitted or received from
or to the Premises. any electromagnetic, microwave or other
radiation which is or may be harmful or hazardous to any
person or property in, or about the Premises, or anywhere
else.
b. Storage and Use.
1) Storage. Subject to the uses permitted and prohibited to
Tenant under this Lease, Tenant shall store in appropriate
leak proof containers all solid, liquid or gaseous matter, or
any combination thereof, which matter, if discharged or
emitted into the atmosphere, the ground or any body of water
would be in violation of law or regulation, and does or may
(a) pollute or contaminate the same, or (b) adversely affect
the (i) health or safety of persons, whether on the Premises
or anywhere else, (ii) condition, use or enjoyment of the
Premises or any real or personal property, whether on the
Premises or anywhere else, or (iii) Premises.
2) Use. In addition, without Landlord's prior written consent,
Tenant shall not use, store or permit to remain on or about
the Premises any solid, liquid or gaseous matter which is, or
may become dangerously radioactive. If Landlord does give its
consent, Tenant shall store the materials in such a manner
that no radioactivity will be detectable outside a designated
storage area and Tenant shall use the materials in such a
manner that (a) no real or personal property outside the
designated storage area shall become contaminated thereby and
(b) there are and shall be no adverse effects on the (i)
health or safety of persons, whether on the Premises or
anywhere else, (ii) condition, use or enjoyment of the
Premises or any real or personal property thereon or therein,
or (iii) Premises or any of the improvements thereto or
thereon.
3) Hazardous Materials. Subject to the uses permitted and
prohibited to Tenant under this Lease, Tenant shall store,
use, employ, transport and otherwise deal with all Hazardous
Materials (as defined below) employed on or about the Premises
in accordance with all federal, state. Or local law,
ordinances, rules or regulations applicable to Hazardous
Materials in connection with or respect to the Premises.
c. Disposal of Waste.
1) Refuse Disposal. Tenant shall not keep any trash, garbage,
waste or other refuse on the Premises except in sanitary
containers and shall regularly and frequently remove same from
the Premises. Tenant shall keep all incinerators, containers
or other equipment used for storage or disposal of such
materials in a clean and sanitary condition.
2) Sewage Disposal. Tenant shall properly dispose of all sanitary
sewage and shall not use the sewage disposal system (a) for
the disposal of anything except sanitary sewage or (b) amounts
in excess of the lesser of: (i) that reasonably contemplated
by the uses permitted under this Lease or (ii) that permitted
by any governmental entity. Tenant shall keep the sewage
disposal system serving the Premises free of all obstructions
and in good operating condition.
3) Disposal of Other Waste. Tenant shall properly dispose of all
other waste or other matter delivered to, stored upon, located
upon or within, used on, or removed from the Premises in such
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a manner that it does not, and will not, violate any law or
regulation, and adversely affect the (a) health or safety of
persons, wherever located, whether on the Premises or
elsewhere, (b) condition, use or enjoyment of the Premises or
any other real or personal property, wherever located, whether
on the Premises or anywhere else, or (c) Premises or any of
the improvements thereto or thereon including buildings,
foundations, pipes, utility lines, landscaping or parking
areas.
d. Information. Tenant shall provide Landlord with any and all
information regarding Hazardous Materials in the Premises, including
copies of all filings and reports to governmental entities at the
time they are originated, and any other information requested by
Landlord. In the event of any accident, spill or other incident
involving Hazardous Materials, Tenant shall immediately report the
same to Landlord and supply Landlord with all information and
reports with respect to the same. All information described herein
shall be provided to Landlord regardless of any claim by Tenant that
it is confidential or privileged.
e. Compliance with Law. Notwithstanding any other provision in this
Lease to the contrary, Tenant shall comply with all laws, statutes,
ordinances, regulations, rules and other governmental requirements
now or hereafter existing in complying with its obligations under
this Lease, and in particular, relating to the storage, use and
disposal of Hazardous Materials.
f. Indemnity. Tenant hereby agrees to indemnify, defend and hold
Landlord, its agents, employees. lenders, shareholders, directors,
representatives, successors and assigns harmless from and against
any and all actions, causes of action, losses, damages, costs,
claims, expenses, penalties, obligations or liabilities of any kind
whatsoever (including but not limited to reasonable attorneys' fees)
arising out of or relating to any Hazardous Materials employed,
used, transported across, or otherwise dealt with by Tenant (or
invitees, or persons or entities under the control of Tenant) in
connection with or with respect to the Premises and the Business
Park. Notwithstanding any of the provisions of this Lease, the
indemnity obligation of Tenant pursuant to this (P) 8.f. shall
survive the termination of this Lease and shall relate to any
occurrence as described in this (P) 8. occurring in connection with
this Lease. Landlord hereby agrees to indemnify, defend and hold
Tenant harmless from and against any and all actions, causes of
action, losses, damages, costs, claims, expenses, penalties,
obligations or liabilities of any kind whatsoever (including
reasonable attorneys' fees) arising out of or relating to hazardous
materials employed, used, transported to the Property, for which the
Premises are a part thereof, by Landlord, its agents or employees.
For purposes of this Lease the term "Hazardous Materials" shall mean
any hazardous, toxic or dangerous waste, substance or material,
pollutant or contaminant, as defined for purposes of the
Comprehensive Environmental Response, Compensation and Liability Act
of 1980 (42 U.S.C. Sections 9601 et seq.), as amended, or the
Resource Conservation and Recovery Act (42 U.S.C. Sections 6901 et
seq.), as amended, or any other federal, state, or local law,
ordinance, rule or regulation applicable to the Premises, or any
substance which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic, or otherwise
hazardous, or any substance which contains gasoline, diesel fuel or
other petroleum hydrocarbons, polychlorinated biphenyls (PCB's), or
radon gas, urea formaldehyde, asbestos or lead.
9. SIGNS AND COMMUNICATIONS ANTENNAE. Tenant shall not place any sign or
communications antennae upon or adjacent to the Premises, except that
Tenant may, with Landlord's prior written consent, install (but not on the
roof) such signs as are reasonably required to indicate Tenant's company
name or logo provided such signs are in compliance with Landlord's
standard sign criteria or install communications antennae used exclusively
by Tenant provided such signs and/or communications antennae are in
compliance with all applicable governmental requirements and the CC&R's,
The installation of any sign or communications antennae on or adjacent to
the Premises by or for Tenant shall be subject to the provisions of (P)
13. (Repairs and Maintenance). Tenant shall remove any sign or
communications antennae placed on or adjacent to the Premises by Tenant
upon the expiration of the Term or sooner termination of this Lease, and
Tenant shall repair any damage or injury to the Premises caused thereby,
all at Tenant's expense. If any signs or communications antennae are not
removed, or necessary repairs not made, Landlord shall have the right to
remove the signs or communications antennae and repair any damage or
injury to the Premises at Tenant's sole cost and expense. Notwithstanding
any other provision of this Lease to the contrary, Landlord reserves all
rights to the use of the roof and the right to install and receive all
revenues' from the installation of such other signs or communications
antennae on the Premises, including the roof, as do not unreasonably
interfere with the conduct of Tenant's business within the Premises.
10. PERSONAL PROPERTY TAXES. Tenant shall pay at least ten (10) days prior to
delinquency all taxes assessed against and levied upon Tenant owned
leasehold improvements, trade fixtures, furnishings, equipment and all
personal property of Tenant contained in the Premises or elsewhere. When
possible, Tenant shall cause its leasehold improvements, trade fixtures,
furnishings, equipment and all other personal property to be assessed and
billed separately from the real property of Landlord. If any of Tenant's
said personal property shall be assessed with Landlord's real property,
Tenant shall pay Landlord the taxes attributable to Tenant within ten (10)
days prior to delinquency and otherwise after receipt of a written
statement setting forth the taxes applicable to Tenant's property.
11. REAL PROPERTY TAXES
a. Payment of Taxes. Landlord shall pay the Building's Real Property
Taxes, as defined in (P) 11.c. during the Term of this Lease.
Subject to (P) 11.b., Tenant shall promptly reimburse Landlord
according to (P) 5. for Tenant's Share of Business Park of such Real
Property Taxes paid by Landlord.
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<PAGE>
b. Advance Payment. In. order to ensure payment when due and before
delinquency of any or all Real Property Taxes, Landlord reserves the
right, at Landlord's option, to estimate the current Real Property
Taxes applicable to the Premises, and to require each installment of
the Real Property Taxes to be paid in advance to Landlord by Tenant,
either: (i) in a lump sum amount, at least twenty (20) days prior to
the applicable delinquency date, or (ii) monthly in advance with the
payment of the Base Rent. If Landlord elects to require payment
monthly in advance, the monthly payment shall be that equal monthly
amount which, over the number of months remaining before the month
in which the applicable tax installment would become delinquent,
would provide a fund large enough to fully discharge before
delinquency the estimated installment of Real Property Taxes to be
paid. When the actual amount of the applicable tax bill is known,
Landlord may, but is not required to, adjust the amount of such
equal monthly advance payment so as to provide the funds needed to
pay the applicable Real Property Taxes before delinquency. If the
amounts paid to Landlord by Tenant under the provisions of this (P)
11. are insufficient to discharge the obligations of Tenant to pay
such Real Property Taxes as the same become due, Tenant shall pay to
Landlord, upon Landlord's demand, such additional sums as are
necessary to pay such obligations. All moneys paid to Landlord under
this (P) 11. may be intermingled with other moneys of Landlord and
shall not bear interest. In the event of a breach by Tenant in the
performance of the obligations of Tenant under this Lease, then any
balance of funds paid to Landlord under the provisions of this (P)
11. may, at the option of Landlord, be treated as an additional
Security Deposit under (P) 6.
c. Definition of "Real Property Taxes". As used herein, the term "Real
Property Taxes" shall include any form of real estate tax or
assessment, general, special, ordinary or extraordinary, and any
license fee, commercial rental tax, improvement bond or bonds, levy
or tax or other fee, charge, or excise which may be imposed as a
substitute for any of the foregoing (other than inheritance,
personal income or estate taxes) imposed upon the Business Park by
any authority having the direct or indirect power to tax, including
any city, county, state or federal government, or any school,
agricultural, sanitary, fire, street, drainage or other improvement
district thereof, levied against any legal or equitable interest of
Landlord in the Business Park, Landlord's right to rent or other
income therefrom, and/or Landlord's business of leasing the Business
Park. The term "Real Property Taxes" shall also include any tax.
fee. levy, assessment or charge, or any increase therein, imposed by
reason of events occurring, or changes to applicable law taking
effect, during the Term of this Lease, including but not limited to
a change in the ownership of the Business Park or in the
improvements thereon, the execution of this Lease, or any
modification, amendment or transfer thereof, and whether or not
contemplated by the parties hereto.
12. UTILITIES. Tenant shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon. If any such services are not
separately metered to Tenant, Tenant shall pay a reasonable proportion, to
be determined by Landlord. of all charges jointly metered with other
premises. Notwithstanding anything to the contrary contained in this
Lease, Landlord shall use reasonable efforts to restore any service that
becomes unavailable. Should Tenant be prevented from making reasonable use
of the Premises for more than thirty (30) consecutive days because of
Landlord's failure or inability to provide services as stated herein,
Tenant shall be entitled to abate the rent for each consecutive day (after
the thirty (30) day period).
13. REPAIRS AND MAINTENANCE
a. Landlord's Obligations. Landlord shall keep the Business Park,
including the foundation, exterior walls, roof of the Building and
Common Areas, and the equipment whether used exclusively for the
Premises or in common with other premises, in good condition and
repair subject to reimbursement by Tenant in accordance with (P) 5.
There shall be no abatement of Rent or liability to Tenant on
account of any injury or interference with Tenant's business with
respect to any improvements, alterations or repairs made by Landlord
to the Business Park or any part thereof. Notwithstanding anything
to the contrary contained in this Lease, Landlord agrees as its
obligation, under this Lease, to repair, maintain and replace as
necessary the building structure, support structure, foundation,
roof (structure and membrane), load bearing walls, plumbing,
electrical, HVAC, elevator, building exterior and parking grounds
subject to reimbursement pursuant to (P) 5.
b. Tenant's Obligations.
1) General. Tenant shall, at Tenant's sole cost and expense and
at all times, contract for janitorial services and supplies,
keep the Premises in good order, condition and repair,
including, without limiting the generality of the foregoing,
all equipment or facilities serving the Premises, such as
plumbing, heating, air conditioning, ventilating, electrical,
lighting facilities, boilers, fired or unfired pressure
vessels, fixtures, interior walls, ceilings, floors, windows,
window frames, interior and exterior doors and door frames,
plate glass and skylights. Tenant shall not cause or permit
any Hazardous Material to be spilled or released in, on, under
or about the Premises (including through the plumbing or
sanitary sewer system) and shall promptly, at Tenant's
expense, take all investigatory and/or remedial action
reasonably recommended, whether or not formally ordered or
required, for the cleanup of any contamination of, and for the
maintenance, security and/or monitoring of the Premises, the
elements surrounding same, or neighboring properties, that was
caused or materially contributed to by Tenant, or pertaining
to or involving any Hazardous Materials and/or storage tank
brought onto the Premises by or for Tenant or under its
control. Tenant, in keeping the Premises in good order,
condition and repair, shall exercise and perform good
maintenance practices. Tenant's obligations shall include
restorations, replacements or
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renewals when necessary to keep the Premises and all
improvements thereon or a part thereof in good order,
condition and state of repair.
2) Contracts. Tenant shall, at Tenant's sole cost and expense,
procure and maintain contracts, with copies to Landlord, in
customary form and substance for, and with contractors
specializing and experienced in, the inspection, maintenance
and service of heating, air conditioning and ventilation
equipment, if any, servicing the Premises. Tenant shall keep a
detailed preventative maintenance schedule and log showing the
frequency of maintenance on all HVAC, mechanical, electrical
and other systems servicing the Premises and provide Landlord
with a copy of same quarterly.
3) As-is Condition. Except as otherwise provided herein, the
parties affirm that Landlord, its subsidiaries, officers,
shareholders, directors, agents and/or employees have made no
representations to Tenant respecting the condition of the
Premises except as specifically stated herein.
4) Americans with Disabilities Act. Tenant acknowledges that as
of the Commencement Date. the Premises may not comply with the
Americans with Disabilities Act of 1990 ("ADA"). and that
Landlord shall have no obligation with respect to any such
failure of the Premises to so comply Tenant shall, at its
cost, at any time during the Term as required by any
applicable governmental agency having jurisdiction over the
Premises, make such modifications and alterations to the
Premises as may be required in order to fully comply with the
provisions of the ADA, as from time to time amended, and any
and all regulations issued pursuant to or in connection with
the ADA in such a manner as to satisfy the applicable
governmental agency or agencies requiring remediation. Tenant
shall at least thirty (30) days prior to the commencement of
any construction in connection with satisfaction of the ADA,
give written notice to Landlord of its intended commencement
of construction together with sufficient details so as to
reasonably disclose to Landlord the nature of the proposed
construction, copies of any notices received by Tenant from
applicable governmental agencies in connection with the ADA
and such other documents or information as Landlord may
reasonably request. In any event, notwithstanding anything to
the contrary contained in this Lease, prior to the termination
of the Term, Tenant shall, at its Cost, make such
modifications and alterations to the Premises as may be
required to comply fully with the ADA as from time to time
amended and any and all regulations issued thereunder. Tenant
shall give the Landlord thirty (30) days prior written notice
as described above in connection with any such construction.
Any and all construction required to so comply with the ADA
shall be completed by Tenant prior to the expiration of the
Term.
c. Compliance with Governmental Regulations. Tenant shall, at its own
cost and expense, promptly and properly observe and comply with all
present and future orders, regulations, directions, rules, laws,
ordinances, and requirements of all governmental authorities
(including but not limited to state, municipal. county and federal
governments and their departments, bureaus, boards and officials)
arising from the use or occupancy of, or applicable to, the Premises
or privileges appurtenant to or in connection with the enjoyment of
the Premises. Tenant shall also comply with all such rules, laws,
ordinances and requirements at the time Tenant makes any alteration,
addition or change to the Premises Notwithstanding anything to the
contrary contained in this Lease, Tenant shall not be responsible
for compliance with any laws, codes, ordinances or other
governmental directives where such compliance is not related
specifically to Tenant's use and occupancy of the Premises.
d. Miscellaneous.
1) Landlord and Tenant shall each do all acts required to comply
with all applicable laws, ordinances and rules of any public
authority relating to their respective maintenance obligations
as set forth herein.
2) Tenant expressly waives the benefits of any statute now or
hereafter in effect which would otherwise afford the Tenant
the right to make repairs at Landlord's expense or to
terminate this Lease because of Landlord's failure to keep the
Premises and the Business Park in good order, condition and
repair, Specifically, Tenant waives the provisions of
California Civil Code Sections 1941 and 1942 with respect to
Landlord's obligations for Tenant tenantability of the
Premises and Tenant's right to make repairs and deduct the
expenses of such repairs from Rent.
3) Tenant shall not place a load upon any floor of the Premises
which exceeds the load per square foot which such floor was
designed to carry, as determined by Landlord or Landlord's
structural engineer.
4) Except as otherwise expressly provided in this Lease, Landlord
shall have no liability to Tenant nor shall Tenant's
obligations under this Lease be reduced or abated in any
manner whatsoever o by reason of any inconvenience, annoyance,
interruption or injury to business arising from Landlord
making any repairs or changes which Landlord is required to
make or is permitted to make by this Lease or by any tenant's
lease or is required by law to make in or to any portion of
the Premises. Landlord shall nevertheless use reasonable
efforts to minimize any interference with Tenant's business in
the Premises.
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5) Tenant shall give Landlord prompt notice of any damage to or
defective condition in any part or appurtenance of the
Premises' mechanical, electrical, plumbing, HVAC or other
systems serving, located in or passing through the Premises.
Upon request by Landlord, Tenant shall provide Landlord with
evidence reasonably acceptable to Landlord of a service
contract on the HVAC systems.
6) Upon the expiration or early termination of this Lease, Tenant
shall return the Premises to Landlord clean and in the same
condition as on the date Tenant took possession, except for
normal wear and tear. Any damage to the Premises, including
any structural damage, resulting from Tenant's use or from the
removal of Tenant's fixtures, furnishings and equipment shall
be repaired by Tenant prior to the end of the Term at Tenant's
expense.
7) Landlord may, at Landlord's option, choose to perform any of
the Tenant's obligations in this (P) 13 The cost of any such
Tenant's obligations so performed by Landlord shall be at
Tenant's sole cost and expense. Tenant shall reimburse
Landlord for any such COSTS incurred by Landlord in the
performance of such Tenant's obligations within thirty (30)
days of receipt of a billing from Landlord.
14. ALTERATIONS. Tenant shall not make any alterations to the Premises or the
Business Park without Landlord's prior written consent which shall not be
unreasonably withheld. If Landlord gives its consent to such alterations,
Landlord may post notices in accordance with the laws of the state in
which the Premises are located. All alterations made by Tenant, whether or
not subject to the approval of Landlord, shall be performed by Tenant and
its contractors in a first class workmanlike manner and permits and
inspections shall be obtained from all required governmental entities. Any
alterations made shall remain on and be surrendered with the Premises upon
expiration or termination of this Lease, except that Landlord may, within
thirty (30) days before or thirty (30) days after expiration of the Term,
elect to require Tenant to remove some or all of the alterations which
Tenant may have made to the Premises. If Landlord so elects, Tenant shall
at its own cost restore the Premises to the condition designated by
Landlord in its election, before the last day of the Term or within thirty
(30) days after notice of its election is given, whichever is later.
Should Landlord consent in writing to Tenant's alteration of the Premises,
Tenant shall contract with a contractor approved by Landlord for the
construction of such alterations. shall secure all appropriate
governmental approvals and permits, and shall complete such alterations
with due diligence in compliance with plans and specifications approved by
Landlord. Tenant shall pay all costs for such construction and shall keep
the Premises free and clear of all mechanics' liens which may result from
construction by Tenant. Notwithstanding anything in this Lease to the
contrary:
a. Tenant shall not be required to remove any improvement or fixture
installed by Tenant in, on or about the Premises pursuant to
Tenant's repair obligation under this Lease, and Tenant shall not be
required to remove any alterations, improvements, additions or
utility installations for which Tenant has obtained Landlord's
consent, unless Landlord has indicated, at the time of granting such
consent, that such removal will be required.
b. Tenant shall be entitled to remove Tenant's furniture, equipment,
trade fixtures and other personal property at the expiration of the
term, provided Tenant repairs all damages caused by such removal.
c. Tenant shall be entitled to make alterations and utility
installations in, on, under or about the Premises without consent of
Landlord, so long as the cost of such alteration or utility
installation does not (i) exceed the sum of $2,500; (ii) affect the
structural or exterior portions of the Building or adversely affect
the Building electrical, plumbing or HVAC systems; or (iii) involve
the removal or relocation of any walls. Tenant shall, however,
provide Landlord fifteen (15) days prior advance written notice and
copies of a description of the alteration along with building permit
plans(s) and specifications to enable Landlord to post any desired
notices of non-responsibility.
15. RELEASE AND INDEMNITY. As material consideration to Landlord, Tenant
agrees that Landlord shall not be liable to Tenant for any damage to
Tenant or Tenant's property from any cause, except for damages resulting
from Landlord's gross negligence or willful misconduct, and Tenant waives
all claims against Landlord for damage to persons or property arising for
any reason, except for damage resulting directly from Landlord's breach of
its express obligations under this Lease which Landlord has not cured
within a reasonable time after written notice of such breach from Tenant.
Tenant shall indemnify and hold Landlord harmless from all damages
including attorneys' fees and costs arising out of any damage to any
person or property occurring in, on or about the Premises or Tenant's use
of the Premises or Tenant's breach of any term of this Lease.
16. INSURANCE
a. Payment For Insurance. Regardless of whether the Landlord or Tenant
is the Insuring Party, Tenant shall pay its proportionate share of
all insurance required under this (P) 16. ("Insurance Costs") either
directly or by reimbursement to Landlord as specified in this (P)
16. Premiums for policy periods commencing prior to or extending
beyond the Lease Term shall be prorated to correspond to the Lease
Term. Payment shall be made by Tenant to Landlord within thirty (30)
days following receipt of an invoice for any amount due.
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b. Liability Insurance.
1) Carried by Tenant. Whether or not Tenant is the Insuring
Party, Tenant shall obtain and keep in force during the Term
of this Lease a commercial general liability policy of
insurance protecting Tenant and Landlord (as an additional
insured) against claims for bodily injury, personal injury and
property damage based upon, involving or arising out of the
ownership, use, occupancy or maintenance of the Premises and
all areas appurtenant thereto. Such insurance shall be on an
occurrence basis providing single limit coverage in an amount
not less than $5,000,000 per occurrence with an "Additional
Insured-Managers or Landlords of Premises" endorsement and
contain an "Amendment of the Pollution Exclusion" for damage
caused by heat, smoke or fumes from a hostile fire. The policy
shall not contain any intra-insured exclusions as between
insured persons or organizations, but shall include coverage
for liability assumed under this Lease as an "insured
contract" for the performance of Tenant's indemnity
obligations under this Lease. The limits of said insurance
required by this Lease or as carried by Tenant shall not,
however, limit the liability of Tenant nor relieve Tenant of
any obligation hereunder. All insurance to be carried by
Tenant shall be primary to and not contributory with any
similar insurance carried by Landlord. whose insurance shall
be considered excess insurance only. All insurance coverage
required pursuant to this (P) 16. which is to name Landlord as
a named insured shall also name Landlord's subsidiaries,
directors, agents, officers and employees as named insureds.
2) Carried by Landlord. In the event Landlord is the Insuring
Party Landlord shall also maintain liability insurance as
described in (P) 16.b.1), in addition to, and not in lieu of
the insurance required to be maintained by Tenant. In the
event Tenant is the Insuring Party, Landlord shall in addition
carry Landlord's Risk Coverage and insure the Premises on
Landlord's umbrella policy and Tenant shall reimburse Landlord
the cost thereof. Tenant shall not be named as an additional
insured therein under any insurance obtained by Landlord in
accordance with this (P) 16.b.2).
c. Property Insurance - Building, Improvements and Rental Value.
1) Building and Improvements. The Insuring Party shall obtain and
keep in force during the Term of this Lease a policy or
policies in the name of Landlord, with loss payable to
Landlord and to the holders of any mortgages, deeds of trust
or ground leases on the Business Park ("Lender(s)"), insuring
loss or damage to the Business Park. The amount of such
insurance shall be equal to the full replacement cost of the
Business Park, as the same shall exist from time to time, or
the amount required by Lender(s), but in no event more than
the commercially reasonable and available insurable value
thereof if, by reason of the unique nature or age of the
improvements involved, such latter amount is less than full
replacement cost. Such policy or policies shall insure against
all risks of direct physical loss or damage (including Boiler
and Machinery coverage and the perils of flood and earthquake)
(if available at a commercially reasonable cost), including
coverage for any additional costs resulting from debris
removal and reasonable amounts of coverage for the enforcement
of any ordinance or law regulating the reconstruction or
replacement of any undamaged sections of the Business Park
required to be demolished shall also contain an agreed
valuation provision in lieu of any coinsurance clause, waiver
of subrogation and inflation guard protection causing an
increase in the annual property insurance coverage amount by a
factor of not less than the adjusted U.S. Department of Labor
Consumer Price Index for All Urban Consumers for the city
nearest to where the Business Park is located. If such
insurance coverage has a deductible clause, then Tenant shall
be liable for its proportionate share of such deductible
amount not to exceed $10,000.00. Even if Landlord is the
Insuring Party, Tenant's personal property shall be insured by
Tenant under (P) 16.d. rather than by Landlord.
2) Rental Value. The Insuring Party shall, in addition, obtain
and keep in force during the term of this Lease a policy or
policies in the name of Landlord, with loss payable to
Landlord and Lender(s), insuring the loss of the full rental
and other charges payable by Tenant to Landlord under this
Lease for one (1) year (including all Real Property Taxes,
Insurance Costs and any scheduled Rent increases). Said
insurance shall provide that in the event the Lease is
terminated by reason of an insured loss, the period of
indemnity for such coverage shall be extended beyond the date
of the completion of repairs or replacement of the Premises,
to provide for one full year's loss of Rent from the date of
any such loss, Said insurance shall contain an agreed
valuation provision in lieu of any coinsurance clause, and the
amount of coverage shall be adjusted annually to reflect the
projected Rent, Real Property Taxes, Insurance Costs and other
expenses, if any, otherwise payable by Tenant, for the next
twelve (12) month period. Tenant shall be liable for any
deductible amount in the event of such loss.
3) Adjacent Premises. If the Premises are part of a larger
building, or if the Premises are part of a group of buildings
owned by Landlord which are adjacent to the Premises, the
Tenant shall pay for any increase in the premiums for the
property insurance of such building or buildings if said
increase is caused by Tenant's acts, omissions, use or
occupancy of the Premises.
4) Tenant's Improvements. If the Landlord is the Insuring Party,
the Landlord shall not be required to insure Tenant's personal
property and leasehold improvements unless the item in
question has become the property of Landlord under the terms
of this Lease. If Tenant is the Insuring Party,
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the policy carried by Tenant under this (P) 16.c. shall insure
Tenant's personal property and leasehold improvements.
d. Tenant's Property Insurance. Subject to the requirements of (P)
16.e., Tenant at its cost shall either by separate policy, or at
Landlord's option, by endorsement to a policy already carried,
maintain insurance coverage on all of Tenant's personal property and
Tenant owned leasehold improvements in, on or about the Premises
similar in coverage to that carried by the Insuring Party under (P)
16.c. Such insurance shall be full replacement cost coverage with a
deductible of not to exceed $10,000 per occurrence. The proceeds
from any such insurance shall be used by Tenant for the replacement
of personal property or the restoration of Tenant owned leasehold
improvements. Tenant shall be the Insuring Party with respect to the
insurance required by this (P) 16.d. and shall provide Landlord with
written evidence that such insurance is in force.
e. Insurance Policies. If Tenant is the Insuring Party, insurance
required per this (P) 16. shall be with companies duly licensed to
transact business in the state where the Premises are located, and
maintaining during the policy term a "General Policyholders Rating"
of at least A- X, or such other minimal rating as may be required by
Lender(s) as set forth in the most current issue of "Best's
Insurance Guide." Tenant shall not do or permit to be done anything
which shall invalidate the insurance policies referred to in this
(P) 16. If Tenant is the Insuring Party, Tenant shall cause to be
delivered to Landlord certified copies of policies of such insurance
or certificates evidencing the existence and amounts of such
insurance with the insureds and loss payable clauses as required by
this Lease. No such policy shall be cancelable or subject to
modification except after thirty (30) days prior written notice to
Landlord. Tenant shall at least thirty (30) days prior to the
expiration of such policies, furnish Landlord with evidence of
renewals or "insurance binders" evidencing renewal thereof, or
Landlord may order such insurance and charge the cost thereof to
Tenant, which amount shall be payable by Tenant to Landlord upon
demand. If the Insuring Party shall fail to procure and maintain the
insurance required to be carried by the Insuring Party under this
(P) 16., the other Party may, but shall not be required to, procure
and maintain the same, but at Tenant's expense.
f. Mutual Waiver. Notwithstanding anything to the contrary contained in
this Lease, to the extent that this release and waiver does not
invalidate or impair their respective insurance policies, the
parties hereto release each other and their respective agents,
employees, officers, directors, shareholders, successors, assignees
and subtenants from all liability for injury to any person or damage
to any property that is caused by or results from a risk which is
actually insured against pursuant to the provisions of this Lease
without regard to the negligence or willful misconduct of the
parties so released. Each party shall use its best efforts to cause
each insurance policy it obtains to provide that the insurer
thereunder waives all right of recovery by way of subrogation as
required herein in connection with any injury or damage covered by
the policy. If such insurance policy cannot be obtained with such
waiver of subrogation, or if such waiver of subrogation is only
available at additional cost and the party for whose benefit the
waiver is not obtained does not pay such additional costs after
reasonable notice, then the party obtaining such insurance shall
promptly notify the other party of the inability to obtain insurance
coverage with the waiver of subrogation.
17. DAMAGE AND DESTRUCTION
a. Damage - Restoration Required. In the event that the Building
containing the Premises is damaged by fire or other casualty which
is covered under insurance pursuant to the provisions of (P) 16.
above, Landlord shall restore such damage provided that: (i) the
destruction of the Building containing the Premises does not exceed
sixty percent (60%) of the then replacement value of the Building
containing the Premises; (ii) the insurance proceeds are available
(inclusive of any deductible amounts) to pay one hundred percent
(100%) of the cost of restoration; and (iii) in the reasonable
judgment of Landlord, the restoration can be completed within two
hundred and seventy (270) days after the date of the damage or
casualty under the laws and regulations of the state, federal,
county and municipal authorities having jurisdiction. The pro rata
portion of the deductible amount of any insurance coverage for
damage to the Premises shall be paid by Tenant. If such conditions
apply so as to require Landlord to restore such damage pursuant to
this (P) 17.a., this Lease shall continue in full force and effect,
unless otherwise agreed to in writing by Landlord and Tenant. Tenant
shall be entitled to a proportionate reduction of Rent while such
restoration takes place, such proportionate reduction to be based on
the extent to which the damage and restoration efforts interfere
with Tenant's business in the Premises. Tenant's right to a
reduction of Rent hereunder shall be Tenant's sole and exclusive
remedy in connection with any such damage.
b. Damage - Restoration Not Required. In the event that the Building
containing the Premises is damaged by a fire or other casualty and
Landlord is not required to restore such damage in accordance with
the provisions of (P) 17.a. immediately above, Landlord shall have
the option to either (i) repair or restore such damage, with the
Lease continuing in full force and effect, but Rent to be
proportionately abated as provided in (P) 17.a. above; or (ii) give
notice to Tenant at any time within thirty (30) days after the
occurrence of such damage terminating this Lease as of a date to be
specified in such notice which date shall not be less than thirty
(30) nor more than sixty (60) days after the date on which such
notice of termination is given. In the event of the giving of such
notice of termination, this Lease shall expire and all interest of
Tenant in the Premises shall terminate on the date so specified in
such notice and the Rent, reduced by any proportionate reduction in
Rent as provided for in (P) 17.a. above, shall be paid to the date
of such termination. Notwithstanding the foregoing, if Tenant
delivers to Landlord the funds necessary to make up the shortage (or
absence) in insurance proceeds and the restoration can be completed
in a two hundred seventy (270) day period, as reasonably determined
by Landlord, and the destruction of the
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Building containing the Premises does not exceed sixty percent (60%)
of the then replacement value, Landlord shall restore the Premises
as provided in (P) 17.a. above.
c. End of Term Casualty. Notwithstanding the provisions of (P) 17.a.
and (P) 17.b. above, either Landlord or Tenant may terminate this
Lease if the Building containing the Premises is damaged by fire or
other casualty, Landlord's reasonably estimated cost of restoration
of the Building containing the Premises exceeds ten percent (10%) of
the then replacement value of the Building containing the Premise's
and such damage or casualty occurs during the last twelve (12)
months of the Term of this Lease (or the Term of any renewal option,
if applicable) by giving the other notice thereof at any time within
thirty (30) days following the occurrence of such damage or
casualty. Such notice shall specify the date of such termination
which date shall not be less than thirty (30) nor more than sixty
(60) days following the date on which such notice of termination is
given. In the event of the giving of such notice of termination,
this Lease shall expire and all interest of Tenant in the Premises
shall terminate on the date so specified in such notice and the Rent
shall be paid to the date of such termination.
d. Termination by Tenant. In the event that the destruction to the
Building containing the Premises cannot be restored as required
herein under applicable laws and regulations within two hundred ten
(210) days of the damage or casualty, notwithstanding the
availability of insurance proceeds, Tenant shall have the right to
terminate this Lease by giving the Landlord notice thereof within
thirty (30) days of date of the occurrence of such casualty
specifying the date of termination which shall not be less than
thirty (30) days nor more than sixty (60) days following the date on
which such notice of termination is given. In the event of the
giving of such notice of termination, this Lease shall expire and
all interest of Tenant in the Premises shall terminate on the date
so specified in such notice and the Rent, reduced by any
proportionate reduction in Rent as provided for in (P) 17a. above,
shall be paid to the date of such termination.
e. Restoration. Landlord agrees that, in any case in which Landlord is
required to, or otherwise agrees to restore the Building containing
the Premises, Landlord shall proceed with due diligence to make all
appropriate claims and applications for the proceeds of insurance
and to apply for and obtain all permits necessary for the
restoration of the Building containing the Premises. Landlord shall
use reasonable efforts to enforce any and all provisions in any
mortgage, deed of trust or other encumbrance on the Building
containing the Premises requiring Landlord and Lender to permit
insurance proceeds to be used for restoration. Landlord shall
restore the Premises at least equal to the condition existing prior
to the date of the damage if permitted by applicable law. Landlord
shall not be required to restore alterations made by Tenant,
Tenant's improvements, Tenant's trade fixtures and Tenant's personal
property, such excluded items being the sole responsibility of
Tenant to restore provided, however, that Landlord shall, to the
extent of available insurance proceeds, restore Tenant Improvements
to the Premises made by Tenant such as interior offices, lab and
production improvements and other like improvements.
f. Waiver. Tenant waives the provisions of Civil Code (S) 1932(2) and
Civil Code (S) 1933(4) with respect to any destruction of the
Premises.
18. CONDEMNATION
a. Definitions. The following definitions shall apply: (1)
"Condemnation" means (a) the exercise of any governmental power of
eminent domain, whether by legal proceedings or otherwise by
condemnor, or (b) the voluntary sale or transfer by Landlord to any
condemnor either under threat of condemnation or while legal
proceedings for condemnation are proceeding; (2) "Date of Taking"
means the date the condemnor has right to possession of the property
being condemned; (3) "Award" means all compensation, sums or
anything of value awarded, paid or received on a total or partial
Condemnation; and (4) "Condemnor" means any public or quasi-public
authority, or. private corporation or individual, having power of
Condemnation.
b. Obligations to be Governed by Lease. If during the Term of the Lease
there is any taking of all or any part of the Building containing
the Premises, the rights and obligations of the parties shall be
determined strictly pursuant to this Lease. Each party waives the
provisions of Code of Civil Procedure (S) 1265.130 allowing either
party to petition the Superior Court to terminate this Lease in the
event of a partial condemnation of the Premises.
c Total or Partial Taking. If the Building containing the Premises are
totally taken by Condemnation, this Lease shall terminate on the
Date of Taking. If any portion of the Building containing the
Premises is taken by Condemnation, this Lease shall remain in
effect, except that Tenant can elect to terminate this Lease if the
remaining portion of the Premises is rendered unsuitable for
Tenant's continued use of the Premises. If Tenant elects to
terminate this Lease, Tenant must exercise its right to terminate by
giving notice to Landlord within thirty (30) days after the nature
and extent of the Condemnation have been finally determined. If
Tenant elects to terminate this Lease, Tenant shall also notify
Landlord of the date of termination, which date shall not be earlier
than thirty (30) days nor later than ninety (90) days after Tenant
has notified Landlord of its election to terminate; except that this
Lease shall terminate on the Date of Taking if the Date of Taking
falls on a date before the date of termination as designated by
Tenant. If any portion of the Premises is taken by Condemnation and
this Lease remains in full force and effect, on the Date of Taking
the Base Rent shall be reduced by an amount in the same ratio as the
total number of square feet in the Premises taken bears to the total
number of square feet in the Premises immediately before the Date of
Taking. Any Award for the taking of all or any part of the Premises
under the power of eminent domain or any payment made under threat
of the exercise of such power shall be the property of
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Landlord, whether such Award shall be made as compensation for
diminution in value of the leasehold or for the taking of the fee,
or as severance damages; provided, however, that Tenant shall be
entitled to any compensation separately awarded to Tenant for
Tenant's relocation expenses and/or loss of Tenant's trade fixtures.
19. ASSIGNMENT OR SUBLEASE
a. Tenant shall not assign or encumber its interest in this Lease or
the Premises or sublease all or any part of the Premises or allow
any other person or entity (except Tenant's authorized
representatives, employees, invitees or guests) to occupy or use all
or any part of the Premises without first obtaining Landlord's
consent, which consent shall not be unreasonably withheld. Any
assignment, encumbrance or sublease without Landlord's prior written
consent shall be voidable and at Landlord's election, shall
constitute a default. If Tenant is a partnership, a withdrawal or
change, voluntary, involuntary or by operation of law of any
partner, or the dissolution of the partnership, shall be deemed a
voluntary assignment. If Tenant consists of more than one person, a
purported assignment, voluntary or involuntary or by operation of
law from one person to the other shall be deemed a voluntary
assignment. If Tenant is a corporation, any dissolution, merger,
consolidation or other reorganization of Tenant, or sale or other
transfer of a controlling percentage of the capital stock of Tenant,
or the sale of at least fifty percent (50%) of the value of the
assets of Tenant shall be deemed a voluntary assignment.
Notwithstanding the sentence immediately above, if the Tenant is a
corporation, the Tenant shall be entitled to assign this Lease
without Landlord's prior written consent to: (i) a successor
corporation related to Tenant by merger consolidation or
non-bankruptcy reorganization, provided that the surviving
Corporation in connection with any such assignment shall have a
minimum net worth as of the date of the assignment at least equal to
that of Tenant immediately prior to completion of the subject
merger, consolidation or reorganization, (ii) a purchaser of
substantially all of Tenant's assets, provided that immediately
following such purchase, such purchaser shall have a net worth at
least equal to that of Tenant immediately prior to the completion of
the subject purchase, or (iii) a sale or transfer of a controlling
percentage of the capital stock of Tenant if (1) such sale or
transfer occurs in direct connection with any bona fide financing
for the benefit of Tenant or (2) at such time Tenant becomes a
publicly traded corporation (a transferee described in (i), (ii) or
(iii) shall be referred to as a "Permitted Transferee"). In
connection with any assignment as described in the sentence
immediately above, Landlord shall be entitled to require an increase
in the Security Deposit to the extent that such increase should be
commercially reasonable in Landlord's reasonable discretion given
the financial condition of Tenant and the assignee following such
event. Tenant shall give Landlord at least sixty (60) days prior
written notice of any intended transfer to a Permitted Transferee
and in connection with such transfer shall provide to Landlord
copies of any documents or other information as Landlord may
reasonably request. Unless otherwise expressly agreed in writing by
Landlord, no assignment shall relieve Tenant of any of its
obligations pursuant to this Lease. All Rent received by Tenant from
its subtenants in excess of the Rent payable by Tenant to Landlord
under this Lease applicable to the portion of the Premises
subleased, after deducting therefrom the commercially reasonable
brokerage commissions, moving allowance to subtenants, Tenant
Improvements made at request of subtenants and attorneys' fees
incurred by Tenant in negotiating and documenting the sublease,
shall be deemed "Bonus Rent" and 75% of the Bonus Rent shall be
promptly paid to Landlord or, as the case may be, 75% of any sums
(determined in the same manner as Bonus Rent) to be paid by an
assignee to Tenant in consideration of the assignment of this Lease
shall be promptly paid to Landlord. There shall be no deemed "Bonus
Rent" in the event of a Permitted Transfer. If Tenant requests
Landlord to consent to a proposed assignment or subletting, Tenant
shall pay to Landlord, whether or not consent is ultimately given,
an amount equal to Landlord's reasonable attorneys' fees and costs
incurred in connection with such request. Each request for consent
to an assignment or subletting shall be in writing, and shall be
accompanied by information as may be relevant to Landlord's
determination as to the financial and operational responsibility and
stability of the proposed assignee or sublessee and the
appropriateness of the proposed use by such assignee or sublessee.
Such information shall include a summary of the proposed use of, and
any proposed modifications to, the Premises. Tenant shall provide
Landlord with such other or additional information and/or
documentation as may reasonably be requested by Landlord. Tenant
shall, upon completion of any assignment or subletting of all or any
portion of the Premises, immediately and irrevocably assign to
Landlord as security for Tenant's obligations under the Lease. all
Rent from any such subletting or assignment. Upon a default by
Tenant, Landlord, as assignee and attorney in fact for Tenant, shall
have the right to collect all rent and other revenues collectable
pursuant to any such sublet or assignment and apply such rent and
other revenues towards Tenant's obligations under the Lease.
b. No interest of Tenant in this Lease shall be assignable by
involuntary assignment through operation of law (including without
limitation the transfer of this Lease by testacy or intestacy). Each
of the following acts shall be considered an involuntary assignment:
(a) if Tenant is or becomes bankrupt or insolvent, makes 1 an
assignment for the benefit of creditors, or institutes proceedings
under the Bankruptcy Act in which Tenant is the bankrupt; or if
Tenant is a partnership or consists of more than one person or
entity, if any partner of the partnership or other person or entity
is or becomes bankrupt or insolvent, or makes an assignment for the
benefit of creditors; or (b) if a writ of attachment or execution is
levied on this Lease: or (c) if in any proceeding or action to which
Tenant is a party, a receiver is appointed with authority to take
possession of the Premises. An involuntary assignment shall
constitute a default by Tenant and Landlord shall have the right to
elect to terminate this Lease, in which case this Lease shall not be
treated as an asset of Tenant.
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c. Notwithstanding any other provision of this Lease to the contrary,
in any event where Landlord's consent is required for (i) assignment
or (ii) sublease of more than 50% of the Premises, Landlord may, at
its option, elect to terminate the Lease instead of approving the
requested assignment or sublease. Should Landlord so elect to
terminate this Lease, all of the obligations of the parties
thereunder shall terminate on the later of sixty (60) days following
Landlord's notice to Tenant of its election hereunder, or the
effective date of the proposed assignment or subletting sought by
the Tenant, but in no event later than one hundred twenty (120) days
following the date of Landlord's election under this (P) 19.c. At
the time of termination, all obligations of both parties hereunder
shall terminate as to obligations thereafter accruing except as
otherwise expressly provided in this Lease.
20. DEFAULT. The occurrence of any of the following shall constitute a default
by Tenant: (a) a failure of Tenant to pay Rent within ten (10) days of its
due date; (b) abandonment of the Premises; or (c) failure to timely
perform any other provision of this Lease where such failure continues for
a period in excess of thirty days following notice of such failure,
provided however, that if the nature of such failure is such that it
cannot reasonably be cured within thirty days, then Tenant shall not be in
default if Tenant commences to cure such failure within thirty days and
thereafter diligently prosecutes the cure to completion. Tenant shall give
written notice to Landlord of any default by Landlord of its obligations
pursuant to this Lease asserted by Tenant (with a copy of such notice to
any lender ("Lender") against the Premises). Landlord and Landlord's
Lender shall be afforded a reasonable opportunity to cure any claimed
default by Landlord and Landlord shall not be considered in default so
long as Landlord (or Landlord's Lender) commences such cure within a
reasonable period of time and thereafter, continues to attempt to complete
such cure. Landlord, from time to time, shall provide Tenant with the name
and address of its Lender.
21. LANDLORD'S REMEDIES. Landlord shall have the following remedies if Tenant
is in default. (These remedies are not exclusive; they are cumulative and
in addition to any remedies now or later allowed by law):
a. Landlord may continue this Lease in full force and effect, and this
Lease will continue in effect so long as Landlord does not terminate
Tenant's right to possession, and Landlord shall have the right to
collect Rent when due. During the period Tenant is in default,
Landlord can enter the Premises and relet the Premises, or any part
of the Premises, to third parties for Tenant's account. Tenant shall
be liable immediately to Landlord for all costs Landlord reasonably
incurs in reletting the Premises, including without limitation,
brokers' commissions, reasonable expenses of remodeling the Premises
required by the reletting, and like costs. Reletting can be for a
period shorter or longer than the remaining Term of this Lease.
Tenant shall pay to Landlord the Rent due under this Lease on the
dates the Rent is due, less the Rent Landlord receives from any
reletting. No act by Landlord allowed by this (P) 21.a. shall
terminate this Lease unless Landlord notifies Tenant in writing that
Landlord elects to terminate this Lease After Tenant's default and
for so long as Landlord does not terminate Tenant's right to
possession of the Premises, if Tenant obtains Landlord's consent,
Tenant shall have the right to assign or sublet its interest in this
Lease, but Tenant shall not be released from liability. Landlord's
consent to such a proposed assignment or subletting shall not be
unreasonably withheld. If Landlord elects to relet the Premises as
provided in this (P) 21.a., Rent that Landlord receives from
reletting shall be applied to the payment of: first, any
indebtedness from Tenant to Landlord other than Rent due from
Tenant; second, all costs, including for maintenance incurred by
Landlord in reletting; and third, Rent due and unpaid under this
Lease. After deducting the payments referred to in this (P) 21.a.,
any sum remaining from the Rent Landlord receives from reletting
shall be held by Landlord and applied in payment of future Rent as
Rent becomes due under this Lease. In no event shall Tenant be
entitled to any excess Rent received by Landlord. If, on the date
Rent is due under this Lease, the Rent received from the reletting
is less than the Rent due on that date, Tenant shall pay to
Landlord. in addition to the remaining Rent due, all costs including
for maintenance Landlord incurred in reletting that remain after
applying the Rent received from the reletting as provided In this
(P) 21.a.; and
b. Landlord may terminate Tenant's right to possession of the Premises
at any time. No act by Landlord other than giving express written
notice thereof to Tenant shall terminate this Lease. Acts of
maintenance, efforts to relet the Premises, or the appointment of a
receiver on Landlord's initiative to protect Landlord's interest
under this Lease shall not constitute a termination of Tenant's
right to possession. Upon termination of Tenant's right to
possession, Landlord has the right to recover from Tenant: (1) the
Worth of the unpaid Rent that had been earned at the time of
termination of Tenant's right to possession: (2) the Worth of the
amount by which the unpaid Rent that would have been earned after
the date of termination until the time of award exceeds the amount
of the loss of Rent that Tenant proves could have been reasonably
avoided; (3) the Worth of the amount of the unpaid Rent that would
have been earned after the award throughout the remaining Term of
the Lease to the extent such unpaid Rent exceeds the amount of the
loss of Rent that Tenant proves could have been reasonably avoided;
and (4) any other amount including but not limited to, reasonable
expenses incurred to relet the Premises, court costs, attorneys'
fees and collection costs necessary to compensate Landlord for all
detriment proximately caused by Tenant's default. The "Worth", as
used above in (1) and (2) in this (P) 21.b. is to be computed by
allowing interest at the lesser of 18 percent per annum or the
maximum legal interest rate permitted by law. The "Worth", as used
above in (3) in this (P) 21.b., is to be computed by discounting the
amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of the award, plus one percent (1%)
22. ENTRY OF PREMISES. Landlord and/or its authorized representatives shall
have the right to enter the Premises at all reasonable times for any of
the following purposes: (a) to determine whether the Premises are in good
condition and whether Tenant is complying with its obligations under this
Lease; (b) to do any necessary maintenance and to make any restoration to
the Premises that Landlord has the right or obligation to perform: (c) to
post "for sale" signs at any time during the Term, or to post "for rent"
or "for lease" signs during the last one
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hundred eighty (180) days of the Term or during any period while Tenant is
in default; (d) to show the Premises to prospective brokers, agents,
buyers, tenants or persons interested in leasing or purchasing the
Premises. at any time during the Term; or (e) to repair, maintain or
improve the Premises and to erect scaffolding and protective barricades
around and about the Premises but not so as to prevent entry to the
Premises or to unreasonably interfere with Tenant's use of the Premises
and to do any other act or thing necessary for the safety or preservation
of the Premises. Landlord shall not be liable in any manner for any
inconvenience, disturbance loss of business, nuisance or other damage
arising out of Landlord's entry onto the Premises as provided in this (P)
22. Tenant shall not be entitled to an abatement or reduction of Rent if
Landlord exercises any rights reserved in this (P) 22. Landlord shall
conduct its activities on the Premises as provided herein in a
commercially reasonable manner that will lessen the inconvenience,
annoyance or disturbance to Tenant. Notwithstanding the provisions of this
(P) 22., Landlord shall provide Tenant with at least 24 hours prior actual
notice before entering the Premises except that in the event of an
emergency, the determination of which shall require Landlord to be
reasonable. Landlord shall use its best efforts to provide Tenant with
notice reasonable in such situation prior to performing any affirmative
duty or obligation of Tenant. In the event of any entry by Landlord onto
the Premises, Landlord shall use its best efforts not to interfere with
the conduct of Tenant's business.
23. SUBORDINATION
a. Automatic Subordination. Without the necessity of any additional
document being executed by Tenant for the purpose of effecting a
subordination, and at the election of Landlord or Landlord's Lender,
this Lease shall be subject and subordinate at all times to (i) all
ground leases or underlying leases which may now exist or hereafter
be executed affecting the Premises, (ii) the lien of any mortgage or
deed of trust which may now exist or hereafter be executed affecting
the Premises, and (iii) the lien of any mortgage or deed of trust
which may hereafter be executed in any amount for which the
Premises, ground leases or underlying leases, or Landlord's interest
or estate in any of said items is specified as security. In the
event that any ground lease or underlying lease terminates for any
reason or any mortgage or deed of trust is foreclosed or a
conveyance in lieu of foreclosure is made for any reason, Tenant
shall, notwithstanding any subordination, attorn to and become the
Tenant of the successor in interest (including without limitation to
Lender) to Landlord ("Successor"). In connection with any such
termination of a ground lease or underlying lease or any foreclosure
or conveyance in lieu of foreclosure made in connection with any
mortgage or deed of trust, then so long as Tenant is not in default
pursuant to this Lease, Tenant shall not be disturbed in its
possession of the Premises or in the enjoyment of its rights
pursuant to this Lease during the Term of this Lease or any
extension or renewal thereof. Notwithstanding any subordination of
this Lease to the lien of any mortgage or deed of trust, the Lender,
at any time shall be entitled to subordinate the lien of its
mortgage or deed of trust to this Lease by filing a notice of
subordination in the County in which the Premises are located, and
Lender shall agree in connection with any such filing, that Tenant
shall not be disturbed in its possession of the Premises so long as
Tenant is not in default pursuant to this Lease. In connection with
any such filing, Tenant shall be obligated to attorn to and to
become a Tenant of any Successor.
b. Additional Subordination. From time to time at the request of
Landlord, Tenant covenants and agrees to execute and deliver within
ten (10) days following the date of written request from Landlord,
documents evidencing the priority or subordination of this Lease
with respect to any ground lease or underlying lease or the lien of
any mortgage or deed of trust in connection with the Premises. Any
and all such documents shall be in such form as is reasonably
acceptable to the Lender(s). Any subordination agreement so
requested by Landlord shall provide for Tenant to attorn to the
Successor and shall further provide that Tenant shall not be
disturbed in its possession of the Premises or in the enjoyment of
its rights pursuant to this Lease so long as Tenant is not in
default with respect to its obligations pursuant to the Lease. Any
such Subordination, Non-disturbance and Attornment Agreement shall
be recorded in the official records of the office of the County
Recorder in the County in which the Premises is located.
c. Notice from Lender. Tenant shall be entitled to rely upon any notice
given by a Lender in connection with the Premises requesting that
Tenant make all future Rent payments to such Lender, and Tenant
shall not be liable to Landlord for any payment made to such Lender
in accordance with such notice. Notwithstanding any provision to the
contrary of this Lease, a Successor shall not be (i) obligated to
recognize the payment of Rent for a period of more than one month in
advance; (ii) responsible for liabilities accrued pursuant to this
Lease prior to the date ("Succession Date" ) upon which the
Successor becomes the "Landlord" hereunder; (iii) responsible to
cure defaults of the Landlord pursuant to this Lease existing as of
the Succession Date, except for defaults of a continuing nature of
which Successor received notice (as provided in Paragraph 20) and
in. respect of which Tenant afforded Successor a reasonable cure
period following such notice; (iv) responsible for any Security
Deposit delivered by Tenant pursuant to this Lease not actually
received by the Successor; or (v) bound by any execution,
modification, termination or extension of this Lease or any grant of
a purchase option or right of first refusal or any other action
taken by the Landlord pursuant to this Lease, except in accordance
with the provisions of that certain Absolute Assignment of Leases
and Rents executed by Landlord in favor of Lender.
24. ESTOPPEL CERTIFICATE; TENANT FINANCIAL STATEMENTS. Tenant, at any time and
from time to time, upon not less than ten (10) days written notice from
Landlord, will execute, acknowledge and deliver to Landlord and, at
Landlord's request, to any existing or prospective purchaser, ground
lessor or mortgagee of any part of the Premises, a certificate of Tenant
stating: (a) that Tenant has accepted the Premises, (or, if Tenant has not
done so, Tenant has not accepted the Premises and specifying the reasons
therefor); (b) the Commencement and Expiration Dates of this Lease; (c)
that this Lease is unmodified and in full force and effect (or, if there
have been modifications, that same is in full force and effect as modified
and stating the modifications); (d) whether or not to
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the best of Tenant's knowledge there are then existing any defenses
against the enforcement of any of the obligations of Tenant under this
Lease (and, if so, specifying same); (e) whether or not to the best of
Tenant's knowledge there are then existing any defaults by Landlord in the
performance of its obligations under this Lease (and, if so, specifying
same); (f) the dates, if any, to which the Rent and other charges under
this Lease have been paid; (g) whether or not there are Rent increases
during the Lease Term and if so the amount of same; (h) whether or not the
Lease contains any options or rights of first offer or first refusal; (i)
the amount of any Security Deposit or other sums due Tenant; (j) the
current notice address for Tenant; and (k) any other information that may
reasonably be required by any of such persons. It is intended that any
such certificate of Tenant delivered pursuant to this (P) 24. may be
relied upon by Landlord and any existing or prospective purchaser, ground
lessor or mortgagee of the Building containing the Premises. Tenant
agrees, at any time upon request by Landlord, to deliver to Landlord the
most recent quarterly current financial statements of Tenant with an
opinion from a certified public accountant, if available, including a
balance sheet and profit and loss statement for the most recent prior
three years, all prepared in accordance with generally accepted accounting
principles consistently applied; Landlord agrees to hold such financial
statements confidential and to share them only with prospective lenders
and purchasers of the Business Park. Other than for prospective lenders
and purchasers, Landlord shall not request financial statements more often
than twice in any calendar year.
25. WAIVER. No delay or omission in the exercise of any right or remedy by
Landlord shall impair such right or remedy or be construed as a waiver. No
act or conduct of Landlord, including without limitation, acceptance of
the keys to the Premises, shall constitute an acceptance of the surrender
of the Premises by Tenant before the expiration of the Term. Only written
notice from Landlord to Tenant shall constitute acceptance of the
surrender of the Premises and accomplish termination of the Lease.
Landlord's consent to or approval of any act by Tenant requiring
Landlord's consent or approval shall not be deemed to waive or render
unnecessary Landlord's consent to or approval of any subsequent act by
Tenant. Any waiver by Landlord of any Default must be in writing and shall
not be a waiver of any other Default concerning the same or any other
provision of the Lease.
26. SURRENDER OF PREMISES. Upon expiration of the Term, Tenant shall surrender
to Landlord the Premises and all tenant improvements and alterations in
the same condition as existed at the commencement date of the Old Lease
(as defined below), except for ordinary wear and tear and alterations
which Tenant has the right or is obligated to remove under the provisions
of (P) 14. herein. Tenant shall remove all personal property including,
without limitation, all wallpaper, paneling and other decorative
improvements or fixtures and shall perform all restoration made necessary
by the removal of any alterations or Tenant's personal property before the
expiration of the Term, including, for example, restoring all wall
surfaces to their condition as of the commencement date of the Old Lease.
Landlord can elect to retain or dispose of in any manner Tenant's personal
property not removed from the Premises by Tenant prior to the expiration
of the Term. Tenant waives all claims against Landlord for any damage to
Tenant resulting from Landlord's retention or disposition of Tenant's
personal property. Tenant shall be liable to Landlord for Landlord's cost
for storage, removal and disposal of Tenant's personal property.
27. HOLDOVER. If Tenant with Landlord's consent remains in possession of the
Premises after expiration of the Term or after the date in any notice
given by Landlord to Tenant terminating this Lease pursuant to (P) 17.
or (P) 18., such possession by Tenant shall be deemed to be a month to
month tenancy cancelable by either party on thirty (30) days written
notice given at any time by either party and all provisions of this Lease,
except those pertaining to Term, renewal options and Base Rent, shall
apply and Tenant shall thereafter pay monthly Base Rent computed on a per-
month basis, for each month or part thereof (without reduction for any
partial month) that Tenant remains in possession, in an amount equal to
one hundred fifty percent (150%) of the Base Rent that was in effect for
the last full calendar month immediately preceding expiration of the Term.
If Tenant holds over after the expiration or earlier termination of the
Term hereof, without the consent of Landlord, Tenant shall become a Tenant
at sufferance only with a continuing obligation to pay Rent provided that
the Base Rent shall be one hundred fifty percent (150%) of the Base Rent
that was in effect for the last full calendar month immediately preceding
expiration of the Term for the first thirty (30) days of such holdover,
and two hundred percent (200%) of such Base Rent thereafter during the
pendency of such holdover. Acceptance by Landlord of Rent after expiration
or earlier termination of the Term shall not constitute a consent to a
holdover hereunder or result in a renewal. The foregoing provisions of
this (P) 27 are in addition to and do not affect Landlord's right of
re-entry or any rights of Landlord hereunder or as otherwise provided by
law. If Tenant fails to surrender the Premises upon the expiration of this
Lease despite demand to do so by Landlord, Tenant shall indemnify and hold
Landlord harmless from all loss or liability arising out of such failure,
including without limitation, any claim made by any succeeding tenant
founded on or resulting from such failure to surrender. No provision of
this (P) 27 shall be construed as implied consent by Landlord to any
holding over by Tenant. Landlord expressly reserves the right to require
Tenant to surrender possession of the Premises to Landlord as provided in
this Lease upon expiration or other termination of this Lease. The
provisions of this (P) 27 shall not be considered to limit or constitute a
waiver of any other rights or remedies of Landlord provided in this Lease
or at law.
28. NOTICES. All notices, demands, or other communications required or
contemplated under this Lease, including any notice delivered to Tenant by
the Lender, shall be in writing and shall be deemed to have been duly
given 48 hours from the time of mailing if mailed by registered or
certified mail, return receipt requested, postage prepaid, or 24 hours
from the time of shipping by overnight carrier, or the actual time of
delivery if delivered by personal service to the parties at the addresses
specified in (P) 1. Either Tenant or Landlord may change the address to
which notices are to be given to such party hereunder by giving written
notice of such change of address to the other in accordance with the
notice provisions hereof.
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29. COMMENCEMENT DATE:
a. Temporary Premises: The term of the Lease as to the Temporary
Premises ("Temporary Premises Commencement Date") will commence upon
Landlord's substantial completion of Landlord's Tenant Improvements,
as evidenced by a temporary or permanent certificate of occupancy if
such is issued by the city of Mountain View, and delivery of
possession of the Premises to Tenant. Landlord will attempt to give
Tenant seven (7) days advance notice of the Commencement Date.
b. Original Premises: The term of the Lease as to the Original Premises
("Original Premises Commencement Date") will commence on the same
day as the Temporary Premises Commencement Date. Effective with the
Original Premises Commencement Date, that certain lease (the "Old
Lease") dated 2/23/98 by and between Limar Realty Corp. #17 as
successor in interest to 2400 Charleston Associates, LLC, and
Docent, Inc. for 2444 Charleston Road, Mountain View, California is
terminated except for any obligations and liabilities which are
accrued but unsatisfied as of said date. Upon the written request of
Landlord, the parties hereto agree to execute a separate Lease
Termination Agreement to further document the termination of the Old
Lease.
c. Expansion Premises: The term of the Lease as to the Expansion
Premises ("Expansion Premises Commencement Date") will commence on
the day following substantial vacation of the Expansion Premises by
the existing tenant (Optimal) and delivery of possession of the
Premises to Tenant. Landlord will attempt to give Tenant seven (7)
days advance notice of the Commencement Date. If the Expansion
Premises is not delivered by August 1, 2000, then the Initial Base
Rental for the Temporary Premises shall be reduced to $25,200 per
month effective August 1, 2000.
30. EXPIRATION DATE:
a. Temporary Premises: The term of the Lease as to the Temporary
Premises will expire on the last day of the calendar month in which
the space is fully vacated by Tenant in conformity with the
provisions of (P) 26. above.
b. Original Premises: The term of the Lease as to the Original Premises
will expire on May 31, 2005
c. Expansion Premises: The term of the Lease as to the Expansion
Premises will expire on May 31, 2005.
31. TENANT'S SHARE OF BUILDING. Tenant's Share of Building shall at any given
time be the sum of the Tenant Share of Building for any and all premises
for which the Lease for the Premises is in effect using the percentages
given below.
<TABLE>
<CAPTION>
Building Share Business Park Share
-------------- -------------------
<S> <C> <C> <C>
a. Temporary Premises: 100.00% (12,000 sq. ft. / 12,000 sq. ft.) 10.08% (12,000 sq. ft. / 119,080 sq. ft.)
b. Original Premises: 46.92% (12,200 sq. ft. / 26,000 sq. ft.) 10.25% (12,200 sq. ft. / 119,080 sq. ft.)
c. Expansion Premises: 53.08% (13,800 sq. ft. / 26,000 sq. ft.) 11.59% (13,800 sq. ft. / 119,080 sq. ft.)
</TABLE>
32. TENANT'S NUMBER OF NON-RESERVED PARKING SPACES. Tenant's Share of Parking
Spaces shall at any given time be the sum of the parking allowed below as
to that portion of the Premises for which the Lease is in effect:
a. Temporary Premises: 46 spaces.
b. Original Premises: 42 spaces.
c. Expansion Premises: 53 spaces.
33. INITIAL BASE RENT. The initial monthly base rent for each respective
portion of the Premises is as follows:
a. Temporary Premises = $30,000.00 per month.
b. Original Premises = $23,427.66 per month.
c. Expansion Premises = $28,980.00 per month.
34. BASE RENT ADJUSTMENT.
a. Temporary Premises: NONE, unless the Temporary Premises Expiration
Date is on or after 1/1/2001 in which case, effective 1/1/2001 and
each January 1 thereafter, the monthly Base Rent for the Temporary
Premises will increase by four percent (4%).
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b. Original Premises:
1) As to the following adjustment dates: 4/1/00, 4/1/01, 4/1/02
and 4/1/03, the cost of living provisions of (P) 4.b. apply
using the CPI Index for the CMSA of San Francisco-Oakland and
the annual floor limit ("Floor Limit") shall be an increase of
two percent (2%) and the annual ceiling limit ("Ceiling
Limit") shall be an increase of five percent (5%).
2) The Base Rent for the Original Premises shall be further
adjusted as follows:
Effective 10/1/03: $28,818.84 per month (12,200
rentable square feet x $2.3622)
Effective 1/1/04: $29,971.74 per month (12,200
rentable square feet x $2.4567)
Effective 1/1/05: $31,171.00 per month (12,200
rentable square feet x $2.5550)
c. Expansion Premises: The Base Rent for the Expansion Premises shall
be adjusted as follows:
Effective 1/1/01: $30,139.20 per month (13,800
rentable square feet @ $2.1840)
Effective 1/1/02: $31,345.32 per month (13,800
rentable square feet @ $2.2714)
Effective 1/1/03: $32,598.36 per month (13,800
rentable square feet @ $2.3622)
Effective 1/1/04: $33,902.46 per month (13,800
rentable square feet @ $2.4567)
Effective 1/1/05: $35,259.00 per month (13,800
rentable square feet @ $2.5550)
35. TENANT IMPROVEMENTS.
a. Temporary Premises: Landlord, at Landlord's sole cost and expense,
will demolish the existing tenant improvements as necessary and
provide and install new building standard tenant improvements for an
"open office" layout--namely, at least 6 private offices (which may
include 1 or more conference rooms). an equipment room to house
servers and telephone switching equipment, the existing
configuration of bathrooms, dropped ceiling and building standard
lighting, new floor covering, HVAC and sprinklers distributed in an
"open office" configuration and new paint throughout the Temporary
Premises ("Landlord's Tenant Improvements"). If Tenant requires
additional tenant improvements ("Tenant's Tenant Improvements"),
Landlord will provide and install the Tenant's Tenant Improvements.
subject to Landlord's approval of the scope of work, at Tenant's
sole cost and expense. Tenant shall be required to remove all or
part of Tenant's Tenant Improvements by the Temporary Premises
Expiration Date as specified by Landlord at the time of approval of
Tenant's Tenant Improvements.
b. Original Premises: Except as otherwise provided herein, the existing
Docent Space will be leased to Tenant in its "as is" condition
except that upon request by Tenant within the six (6) month period
preceding October 1, 2003, Landlord at its cost shall paint the
interior of the Premises and shall shampoo the carpets.
c. Expansion Premises: Except as otherwise provided herein, Landlord
shall deliver the Premises in its "as is" condition as of the
Expansion Premises Commencement Date except that Landlord at its
sole cost shall provide and install certain work in conjunction with
making the building into that of a single tenant - namely, the
partial removal of the present demising wall and in conjunction with
the removal of said wall. any needed paint touch-up and adjustments
to the HVAC, lighting and fire sprinkler systems Landlord shall be
responsible for assuring that the prior tenant in the Expansion
Premises leaves the Expansion Premises in broom clean condition with
all damage repaired except for normal wear and tear.
36. SECURITY DEPOSITS.
a. Security Deposits Required: The total Security Deposit required to
be held by Landlord at any given time is the sum of Security
Deposits for each portion of the Premises for which the Lease is
then in effect, subject to the reduction provision in (P) 36.b below
and the general provisions of (P) 6.
1) Temporary Premises Security Deposit equals $90,000.00.
2) Original Premises Security Deposit equals $67,710.00 (said
amount is held by Landlord per (P) 2.13 of the Old Lease).
3) Expansion Premises Security Deposit equals $86,940.00.
b. Security Deposit Reduction:
1) Subject to the general provisions of P. 6. and provided that
Tenant has not been in default under this Lease beyond any
applicable cure period, the Security Deposit on the Temporary
Premises shall be returned within five (5) business days of
the Temporary Premises Expiration Date.
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2) Subject to the general provisions of P. 6. and provided that
Tenant has not been in default under this Lease beyond any
applicable cure period, the Security Deposit on the Original
Premises and Expansion Premises combined shall be subject to
reduction as follows:
a) Reduction to two (2) months Rent, upon Tenant achieving a
public equity market capitalization of at least $150
million.
b) Reduction to one (1) months Rent, upon Tenant achieving a
public equity market capitalization of at least $400
million,
37. MISCELLANEOUS PROVISIONS.
a. Time of Essence, Time is of the essence of each provision of this
Lease,
b. Successor. This Lease shall be binding on and inure to the benefit
of the parties and their successors, except as provided (P) 19.
c. Landlord's Consent. Any consent required by Landlord under this
Lease must be granted in writing and may be withheld or conditioned
by Landlord in its sole and absolute discretion unless otherwise
provided.
d. Personal Rights. Notwithstanding any other provision(s) of this
Lease to the contrary, any provisions of this Lease providing for
the renewal, extension or early termination of the Lease and/or for
the expansion of the Premises (to include without limitation rights
to negotiate, rights of first refusal, etc.) shall be (i) personal
to the original Tenant and shall not be assignable or otherwise
transferable except to a Permitted Transferee (either voluntarily or
involuntarily) to any third party for any reason whatsoever, and
(ii) conditioned upon Tenant not then being in default under this
Lease.
e. Year 2000. Notwithstanding any covenant or provision contained in
this Lease to the contrary, Landlord shall have no liability or
responsibility whatsoever to Tenant for (i) any disruption or
interruption in Tenant's business, (ii) any disruption or
interruption in Tenant's use or possession of the Premises, or (iii)
any other damage or consequence suffered or experienced by Tenant,
arising from or relating in any way to the malfunction, shut down or
other abnormal behavior of any computer or computer controlled
system which provides utilities or services to the Premises, or
controls any systems serving the Premises (whether such computer is
within the control of Landlord or otherwise) resulting from the
inability or failure of any such computer or computer controlled
system to recognize the year 2000, and distinguish said year from
the year 1900 (sometimes referred to as the "Y2K problem", or the
"failure to be year 2000 compliant").
f. Commissions. Each party represents that it has not had dealings with
any real estate broker, finder or other person with respect to this
Lease in any manner, except for the Broker(s) identified (P) 1.,
who shall be compensated by Landlord in accordance with the separate
agreement between Landlord and the Broker(s).
g. Other Charges; Legal Fees. If Landlord through no fault of its own
becomes a party to any litigation concerning this Lease or the
Premises by reason of any act or omission of Tenant or Tenant's
authorized representatives, Tenant shall be liable to Landlord for
reasonable attorneys' fees and court costs incurred by Landlord in
the litigation. Should the court render a decision which is
thereafter appealed by any party thereto, Tenant shall be liable to
Landlord for reasonable attorneys' fees and court costs incurred by
Landlord in connection with such appeal.
If either party commences any litigation against the other party or
files an appeal of a decision arising out of or in connection with
the Lease, the prevailing party shall be entitled to recover from
the other party reasonable attorneys' fees and costs of suit. If
Landlord employs a collection agency to recover delinquent charges,
Tenant agrees to pay all collection agency and attorneys' fees
charged to Landlord in addition to Rent, late charges, interest and
other sums payable under this Lease.
h. Landlord's Successors. In the event of a sale or conveyance by
Landlord of the Building containing the Premises, the same shall
operate to release Landlord from any further liability under this
Lease, including as to any Security Deposit to the extent
transferred to Landlord's successor-in-interest, and in such event
Landlord's successor in interest shall be solely responsible for all
further obligations of Landlord under this Lease.
i. Interpretation. This Lease shall be construed and interpreted in
accordance with the laws of the state in which the Premises are
located. This Lease constitutes the entire agreement between the
parties with respect to the Premises, except for such guarantees or
modifications as may be executed in writing by the parties from time
to time. When required by the context of this Lease, the singular
shall include the plural, and the masculine shall include the
feminine and/or neuter. "Party" shall mean Landlord or Tenant. If
more than one person or entity constitutes Landlord or Tenant, the
obligations imposed upon that party shall be joint and several. The
enforceability, invalidity or illegality of any provision shall not
render the other provisions unenforceable, invalid or illegal,
j. Auctions. Tenant shall not conduct, nor permit to be conducted,
either voluntarily or involuntarily, any auction upon the Premises
without first having obtained Landlord's prior written consent.
Notwithstanding
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anything to the contrary in this Lease. Landlord shall not be obligated to
exercise any standard of reasonableness in determining whether to grant such
consent.
k. Conflict. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the
typewritten or handwritten provisions.
l. Offer. Preparation of this Lease by Landlord or Landlord's agent and
submission of same to Tenant shall not be deemed an offer to lease to
Tenant. This Lease is not intended to be binding until executed by all
Parties hereto.
m. Amendments. This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification. The parties shall
amend this Lease from time to time to reflect any adjustments that are
made to the Base Rent or other Rent payable under this Lease. As long as
they do not materially change Tenant's obligations hereunder. Tenant
agrees to make reasonable non-monetary modifications to this Lease as may
be reasonably required by Lender(s) in connection with the obtaining of
normal financing or refinancing of the property of which the Premises are
a part.
n. Construction. The Landlord and Tenant acknowledge that each has had its
counsel review this Lease. and hereby agree that the normal rule of
construction to the effect that any ambiguities are to be resolved against
the drafting party shall not be employed in the interpretation of this
Lease or in any amendments or exhibits hereto.
o. Captions. Article, section and paragraph captions are not a part hereof.
p. Exhibits. For reference purposes the Exhibits are listed below:
Exhibit A: The Premises
Exhibit B: Business Park
Exhibit C: Rules and Regulations
Exhibit D: Covenants, Conditions And Restrictions
LIMAR REALTY CORP. #17, a California DOCENT, INC., a Delaware corporation
corporation
By: /s/ Theodore H. Kruttschnitt By: /s/ Dave Ellett
----------------------------------- ---------------------------
Name: Theodore H. Kruttschnitt Name: Dave Ellett
---------------------------
Title: President Title: President & CEO
---------------------------
Date: 10/19/99 Date: 10/8/99
----------------------------------- ---------------------------
By: /s/ Theodore H. Kruttschnitt By: /s/ Donald V. Fluken
----------------------------------- ---------------------------
Name: Theodore H. Kruttschnitt Name: Donald V. Fluken
---------------------------
Title: Secretary Title: V.P. & CFO
---------------------------
Date: 10/19/99 Date: 10/7/99
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EXHIBIT A
The Premises
------------
This Exhibit A is attached to and made a part of that certain Lease (the
"Lease") dated September 22, 1999 by and between Limar Realty Corp. #17 as
Landlord and Docent, Inc. as Tenant.
[SITE PLAN APPEARS HERE]
<PAGE>
EXHIBIT B
The Business Park
-----------------
This Exhibit B is attached to and made a part of that certain Lease (the
"Lease") dated September 22. 1999 by and between Limar Realty Corp. #17 as
Landlord and Docent. Inc. as Tenant.
The land referred to in this report is situated in the State of
California, County of SANTA CLARA and is described as follows:
All that certain Real Property in the City of Mountain View, County of Santa
Clara, State of California, described as follows:
All of Parcel 1, as shown upon that certain Map entitled, "Parcel Map". which
Map was filed for record in the Office of the Recorder of the County of Santa
Clara, State of California, on May 8, 1972 in Book 300 of Maps, at Page 43.
<PAGE>
EXHIBIT C
Rules & Regulations
-------------------
This Exhibit C is attached to and made a part of that certain Lease dated
September 22, 1999 by and between Limar Realty Corp. #17 as Landlord and Docent,
Inc. as Tenant.
For the purpose of these Rules & Regulations the word Premises shall refer to
the Premises Tenant is leasing and the Property containing the Premises as
described in the Lease.
1. No sign, placard, picture, advertisement, name or notice (collectively,
"Signs") shall be installed or displayed on any part of the Premises
without the prior written consent of Landlord, except that Tenant may post
Signs inside the Building which are not visible from the exterior of the
Building. Landlord shall have the right to remove, at Tenant's expense and
without notice, any sign installed or displayed in violation of this rule.
All approved signs or lettering on doors and walls shall be printed,
painted, affixed or inscribed at the expense of Tenant.
2. Except as consented to in writing by Landlord, no draperies, curtains,
blinds, shades, screens or other devices shall be hung at or used in
connection with any window or exterior door or doors of the Premises and
no awning shall be permitted on any part of the Premises. Tenant shall not
place anything against or near glass partitions or doors or windows which
may appear unsightly from outside the Premises.
3. Neither Tenant nor any employee or invitee of Tenant, shall make any
structural roof or terrace penetrations.
4. Tenant shall not cause any unnecessary labor by carelessness or
indifference to the good order and cleanliness of the Premises. Landlord
shall not in any way be responsible to any Tenant for any loss of property
on the Premises, or for any damage to any Tenant's property.
5. Landlord will furnish Tenant, free of charge, with up to six (6) keys to
the Premises.
6. If Tenant requires telegraphic, telephonic, burglar alarm or similar
services, it shall first obtain, and comply with, Landlord's reasonable
instructions in their installation.
7. Tenant shall not place a load upon any floor of the Premises which exceeds
the load per square foot which such floor was designed to carry and which
is allowed by law. Landlord shall have the reasonable right to prescribe
the weight, size and position of all equipment, materials, furniture or
other property brought into the Premises. Heavy objects shall, if
considered necessary by Landlord, stand on such platforms as determined by
Landlord to be necessary to properly distribute the weight. Business
machines and mechanical equipment belonging to Tenant, which cause noise
or vibration that may be transmitted to the structure of the Premises to
such a degree as to be objectionable to Landlord, shall be placed and
maintained by Tenant, at Tenant's expense, on vibration eliminators or
other devices sufficient to eliminate noise or vibrations. Landlord will
not be responsible for loss of, or damage to, any such equipment or other
property from any cause, and all damage done to the Premises by
maintaining or moving such equipment or other property shall be repaired
at the expense of Tenant.
8. Tenant shall not use or keep in the Premises any kerosene, gasoline or
inflammable or combustible fluid or material other than those limited
quantities necessary for the operation or maintenance of office equipment.
Tenant shall not use or permit to be used in the Premises any foul or
noxious gas or substance, or permit or allow the Premises to be occupied
or used in a manner offensive or objectionable to Landlord by reason of
noise, odors or vibrations not bring or keep or permit to be brought or
kept in the Premises any animal life form, other than human, except seeing
eye dogs when in the company of their masters.
9. Tenant shall not waste electricity, water or air-conditioning and agrees
to cooperate fully with Landlord to comply with any governmental
energy-saving rules, laws or regulations of which Tenant has actual
notice.
10. Landlord reserves the right, exercisable with one hundred twenty (120)
days prior written notice but without liability to Tenant, to change the
name and street address of the Premises.
11. Tenant shall close and lock the doors of its Premises and entirely shut
off all water faucets or other water apparatus, and other equipment which
is not required to be continuously run.
12. The toilet rooms, toilets, urinals, wash bowls and other apparatus shall
not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be
thrown therein. The expense of any breakage, stoppage or damage resulting
for the violation of this rule shall be borne by the Tenant who, or whose
employees or invitees, shall have caused it.
<PAGE>
EXHIBIT C
Rules & Regulations
-------------------
(continued)
13. Tenant shall not sell, or permit the retail sale of newspapers, magazines,
periodicals, theater tickets or any other goods or merchandise to the
general public in or on the Premises. Tenant shall not make any
room-to-room solicitation of business from other tenants in the Business
Park. Tenant shall not use the Premises for any business or activity other
than that specifically provided for in Tenants Lease. Notwithstanding the
above, Tenant shall have the right to install vending machines for use by
Tenant, its employees and invitees.
14 Tenant shall not interfere with radio or television broadcasting or
reception from or in neighboring areas.
15. Canvassing, soliciting and distribution of handbills or any other written
materials, and peddling in the Business Park are prohibited, and Tenant
shall cooperate to prevent same.
16. Landlord reserves the right to exclude or expel from the Premises any
person who, in Landlord's judgment, is intoxicated or under the influence
of liquor or drugs or who is in violation of any of the Rules and
Regulations of the Premises or in violation of the CC&R's.
17. Tenant shall store all its trash and garbage within its Premises or in
reasonable locations specifically identified by Landlord for such
purposes. Tenant shall not place in any trash box or receptacle any
material which cannot be disposed of in the ordinary and customary manner
of trash and garbage disposal. All garbage and refuse disposal shall be
made in accordance with reasonable directions issued from time to time by
Landlord.
18. The Premises shall not be used for the storage of merchandise held for
sale to the general public, or for lodging nor shall the Premises by used
for any improper, immoral or objectionable purpose. No cooking shall be
done or permitted by any tenant on the Premises, except that use by Tenant
in its kitchen, if any, located in the Premises and Underwriters
Laboratory's approved equipment for brewing coffee, tea, hot chocolate and
similar beverages and microwaving food shall be permitted, provided that
such kitchen, equipment and use is in accordance with all applicable
federal, state, county and city laws, codes, ordinances, rules and
regulations.
19. Tenant shall not use in any part of the Premises any hand truck except
those equipped with rubber tires and side guards or such other reasonable
material-handling equipment as Landlord may approve.
20. Without the written consent of Landlord, Tenant shall not use the name of
the Business Park in connection with or in promoting or advertising the
business of Tenant except as Tenant's address.
21. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental
agency.
22. Tenant assumes any and all responsibility for protecting its Premises from
theft, robbery and pilferage, Which includes locking doors and securing
other means of entry to the Premises closed.
23. The requirements of Tenant will be attended to only upon appropriate
application to the office of Landlord by an authorized individual.
Employees of Landlord shall not perform any work or do anything outside of
their regular duties unless under special instructions from Landlord.
24. Tenant shall not park its vehicles in any parking areas outside the
Business Park. Tenant shall not store or abandon vehicles in the Business
Park parking areas nor park any vehicles in the Business Park parking
areas other than automobiles, motorcycles, motor driven or non-motor
driven bicycles, four-wheeled trucks, or other equipment used in the
operation of Tenant's business. Tenant, its agents, employees and invitees
shall not park any one (1) vehicle in more than one (1) parking space.
25. Landlord reserves the right to make such other reasonable Rules and
Regulations as, in its judgment, may from time to time be appropriate for
safety and security, for care and cleanliness of the Premises and for the
preservation of good order therein. Tenant agrees to abide for all such
Rules and Regulations hereinabove stated and any additional Rules and
Regulations which are adopted.
26. Tenant shall be responsible for the observance of all of the foregoing
Rules and Regulations by Tenant's employees, agents, clients, customers,
invitees and guests.
<PAGE>
EXHIBIT D
Covenants, Conditions and Restrictions
--------------------------------------
This Exhibit D is attached to and made a part of that certain Lease (the
"Lease") dated September 22, 1999 by and between Limar Realty Corp. #17 as
Landlord and Docent. Inc. as Tenant.
[IMAGE OMITTED]
<PAGE>
EXHIBIT D
Covenants, Conditions and Restrictions
--------------------------------------
(Continued)
[IMAGE OMITTED]
<PAGE>
EXHIBIT 10.18
DATE OF LEASE EXECUTION: _________________________________ ,2000
(To be Completed by Landlord)
ARTICLE I
REFERENCE DATA
1.1 SUBJECTS REFERRED TO: Each reference in this Lease to any of the following
subjects shall be construed to incorporate the data stated for that
subject in this Section 1.1:
LANDLORD: CONNECTICUT GENERAL LIFE INSURANCE COMPANY, a
Connecticut corporation, on behalf of its
Separate Account R
MANAGING AGENT: MEREDITH & GREW, INC.
LANDLORD'S & MANAGING
AGENT'S ADDRESS: Meredith & Grew, Inc.
160 Federal Street
Boston, Massachusetts 02110-1701
LANDLORD'S REPRESENTATIVE: David L. Pergola
TENANT: DOCENT, INC., a Delaware corporation
TENANT'S ADDRESS:
(For Notice and Billing) Docent, Inc.
2444 Charleston Road
Mountain View, CA 94043-1622
Attention: CFO and Vice President of HR
TENANT'S REPRESENTATIVE: Michael Bickford
BUILDING ADDRESS: 25 Burlington Mall Road
Burlington, Massachusetts 01803
RENTABLE FLOOR AREA OF
TENANT'S SPACE: 7,403 Square Feet (r.s.f.) approximately
TOTAL RENTABLE FLOOR AREA
OF THE BUILDING: 277,647 Square Feet (r.s.f.) approximately
<PAGE>
SCHEDULED TERM
COMMENCEMENT DATE: February 10, 2000
TERM EXPIRATION DATE: January 31, 2005
ANNUAL BASE RENT: $28.15 Per Rentable Square Foot (p.r.s.f.)
OPERATING EXPENSE BASE YEAR: Operating Costs incurred in calendar year 2000
REAL ESTATE TAX BASE YEAR: Real estate taxes incurred in fiscal year
ending June 30, 2000
ANNUAL-ESTIMATED ELECTRICAL
COST TO TENANTS SPACE
(included in Annual Rent): $7,403 : $1.00 (p.r.s.f.)
ANNUAL RENT: $215,797.45
SECURITY DEPOSIT: $35,966.24
PERMITTED USES: General Office Uses
COMPREHENSIVE GENERAL
LIABILITY INSURANCE
BODILY INJURY: $2,000,000
PROPERTY DAMAGE: $1,000,000
BROKER: Meredith & Grew Incorporated
2
<PAGE>
1.2 EXHIBITS
The Exhibits listed below in this section are incorporated in this Lease
by reference and are to be construed as part of this Lease:
Exhibit A - Plan showing Tenant's Space.
Exhibit B - Landlord's Services.
Exhibit C - Rules and Regulations.
Exhibit D - ERISA Parties in Interest List Separate Account R
3
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
ARTICLE II
PREMISES AND TERM 7
2.1 PREMISES 7
2.2 TERM 7
2.3 OPTION TO EXTEND 8
ARTICLE III
DELIVERY OF PREMISES; CONSTRUCTION 9
3.1 DELIVERY OF PREMISES 9
3.2 PREPARATION OF PREMISES FOR OCCUPANCY 10
3.3 GENERAL PROVISIONS APPLICABLE TO CONSTRUCTION 10
3.4 REPRESENTATIVES 11
ARTICLE IV
RENT 11
4.1 RENT 11
4.2 OPERATING COSTS: ESCALATION 11
4.3 ESTIMATED ESCALATION PAYMENTS 14
4.4 CHANGE OF FISCAL YEAR 14
4.5 PAYMENTS 14
ARTICLE V
LANDLORD'S COVENANTS 15
5.1 LANDLORD'S COVENANTS DURING THE TERM 15
5.1.1 Building Services 15
5.1.2 Additional Building Services 15
5.1.3 Repairs 15
5.1.4 Quiet Enjoyment 15
5.1.5 Food Service 15
5.2 INTERRUPTIONS. 16
ARTICLE VI
TENANT'S COVENANTS 17
6.1 TENANT'S COVENANTS DURING THE TERM 17
6.1.1 Tenant's Payments 17
6.1.2 Repairs and Yielding Up 18
6.1.3 Occupancy and Use 18
6.1.4 Rules and Regulations 18
6.1.5 Safety Appliances 19
6.1.6 Assignment and Subletting 19
6.1.7 Indemnity 20
6.1.8 Tenant's Liability Insurance 20
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
6.1.9 Tenant's Worker's Compensation Insurance 21
6.1.10 Landlord's Right of Entry 21
6.1.11 Loading 21
6.1.12 Landlord's Costs 21
6.1.13 Tenant's Property 21
6.1.14 Labor or Materialmen's Liens 22
6.1.15 Changes or Additions 22
6.1.16 Holdover 22
ARTICLE VII
CASUALTY AND TAKING 22
7.1 CASUALTY AND TAKING 22
7.2 RESERVATION OF AWARD 23
ARTICLE VIII
RIGHTS OF MORTGAGEE 23
8.1 PRIORITY OF LEASE 23
8.2 MORTGAGEE PROTECTION CLAUSE 24
8.3 NO PREPAYMENT OR MODIFICATION, ETC. 24
8.4 NO RELEASE OR TERMINATION 24
8.5 CONTINUING OFFER 25
ARTICLE IX
DEFAULT 25
9.1 EVENTS OF DEFAULT 25
9.2 OBLIGATIONS AFTER TERMINATION 26
ARTICLE X
MISCELLANEOUS 28
10.1 NOTICE OF LEASE 28
10.2 (INTENTIONALLY OMITTED) 28
10.3 NOTICES FROM ONE PARTY TO THE OTHER 28
10.4 BIND AND INURE 28
10.5 NO SURRENDER 29
10.6 NO WAIVER, ETC. 29
10.7 NO ACCORD AND SATISFACTION 29
10.8 CUMULATIVE REMEDIES 30
10.9 LANDLORD'S RIGHT TO CURE 36
10.10 ESTOPPEL CERTIFICATE. 30
10.11 WAIVER OF SUBROGATION 31
10.12 ACTS OF GOD 31
10.13 BROKERAGE 31
10.14 SUBMISSION NOT AN OFFER 31
10.15 APPLICABLE LAW AND CONSTRUCTION 32
10.16 TENANT CONDENSER WATER SYSTEM CHARGES 32
10.17 ERISA MATTERS. 33
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
ARTICLE XI
SECURITY DEPOSIT 33
</TABLE>
6
<PAGE>
ARTICLE II
PREMISES AND TERM
2.1 PREMISES.
Subject to and with the benefit of the provisions of this Lease (the
"Lot"), Landlord hereby leases to Tenant, and Tenant leases from Landlord,
Tenant's Space in the Building, excluding exterior faces of exterior walls, the
common facilities area and building service fixtures and equipment serving
exclusively or in common other parts of the Building. Tenant's Space, with such
exclusions, is hereinafter referred to as the "Premises".
Tenant shall have, as appurtenant to the Premises, the right to use in
common with others entitled thereto: (a) the common facilities included in the
Building or on the Lot, including the parking facility, on a first-come, first-
served basis, to the extent and in the location from time to time designated by
Landlord, and (b) the building service fixtures and equipment serving the
Premises.
Landlord reserves the right from time to time, without unreasonable
interference with Tenant's use, (a) to install, repair, replace, use, maintain
and relocate for service to the Premises and to other parts of the Building or
either, building service fixtures and equipment wherever located in the Building
and (b) to alter or relocate any common facilities, it being understood that if
any parking spaces are provided, the same may be relocated on or off the Lot
from time to time by Landlord, provided that in all events substitutions are
substantially equivalent.
2.2 TERM.
To have and to hold for a period (the "Term") commencing on the earlier of
(a) the Scheduled Term Commencement Date, or (b) the date on which Tenant
occupies all or any part of the Premises for the conduct of its business
(whichever of said dates is appropriate being hereafter referred to as the
"Commencement Date"), and continuing until the Term Expiration Date, unless
sooner terminated as provided in Section 3.2 or 7.1 or in Article IX. Landlord
and Tenant will execute, upon request of either, a certificate acknowledging the
Commencement Date of this Lease once such commencement date has occurred.
7
<PAGE>
2.3 OPTION TO EXTEND.
Tenant shall have the right and option to extend the Term for one
additional period of five (5) years (the "Extension Term") commencing upon the
Term Expiration Date set forth in Section 1.1 of the Lease, provided that Tenant
shall give Landlord notice of Tenant's exercise of such option at least six (6)
months prior to the Term Expiration Date and provided further that no event of
default by Tenant exists hereunder, and no condition exists which with the
giving of notice or the passage of time, or both, would constitute an event of
default hereunder, at the time of giving such notice. If an event of default by
Tenant exists hereunder, or a condition exists which with the giving of notice
or the passage of time, or both, would constitute an event of default hereunder,
at the time of the commencement of the Extension Term, at Landlord's option,
exercisable by notice to Tenant, the exercise of Tenant's option to extend the
Term shall be null and void and of no further force and effect. Prior to the
exercise by Tenant of such option, the expression "Term" shall mean the Term
until the Term Expiration Date set forth in Section 1.1 of the Lease, and after
the exercise by Tenant of such option, the expression "Term" shall mean the Term
as it has been extended by the Extension Term. Except as expressly otherwise
provided in the following paragraph and except for this Section 2.3, all the
terms, covenants, conditions, provisions and agreements in the Lease contained
shall be applicable to the Extension Term. If Tenant shall give notice of its
exercise of said option to extend in the manner and within the time period
provided aforesaid, the Term shall be extended upon the giving of such notice
without the requirement of any further action on the part of either Landlord or
Tenant. If Tenant shall fail to give timely notice of the exercise of any such
option as aforesaid, Tenant shall have no right to extend the Term of this
Lease, time being of the essence of the foregoing provisions.
The Annual Rent payable during the Extension Term shall be equal to the
Fair Market Rent for the Premises, as determined below, as of the commencement
of the Extension Term. If for any reason the Annual Rent payable during the
Extension Term has not been determined as of the commencement of the Extension
Term, Tenant shall pay the Annual Rent payable during the Original Term,
together with any applicable adjustment in the Annual Estimated Electrical Cost
to Tenant's Space, until the Annual Rent for the Extension Term is determined,
at which time, an appropriate adjustment, if any, shall be made.
For purposes here, the Fair Market Rent shall mean the fair rent for the
Premises as of the commencement of the Extension Term under market conditions
then existing. Fair Market Rent shall be determined by agreement between
Landlord and Tenant, but if Landlord and Tenant are unable to agree upon the
Fair Market Rent at least six (6) months prior to the date upon which the Fair
Market Rent is to take effect, then the Fair Market Rent shall be determined by
appraisal. made as hereinafter provided by a board of three reputable
independent commercial real estate consultants, appraisers, or brokers, each of
whom shall have at least ten years of experience in the suburban Rte. 128 Boston
office rental market and each of whom is hereinafter referred to as "appraiser".
Tenant and Landlord shall each appoint one such appraiser and the two appraisers
so appointed shall appoint the third appraiser. The cost and expenses of each
appraiser appointed separately by Tenant and Landlord shall be borne by the
party who appointed the appraiser. The cost and expenses of the third appraiser
shall be shared equally by Tenant and Landlord. Landlord and Tenant shall
appoint their respective appraisers at lease five (5) months prior to
commencement of the period for which Fair Market Rent is to be determined and
shall designate
8
<PAGE>
the appraisers so appointed by notice to the other party. The two appraisers so
appointed and designated shall appoint the third appraiser at least four (4)
months prior to the commencement of such period and shall designate such
appraisers by notice to Landlord and Tenant. The board of three appraisers shall
determine the Fair Market Rent of the space in question as of the commencement
of the period to which the Fair Market Rent shall apply and shall notify
Landlord and Tenant of their determinations at least sixty (60) days prior to
the commencement of such period. If the determinations of the Fair Market Rent
of any two or all three appraisers shall be identical in amount, said amount
shall be deemed to be the Fair Market Rent of the subject space. If the
determinations of all three appraisers shall be different in the amount, the
average of the two values nearest in amount shall be deemed the Fair Market
Rent. The Fair Market Rent of the subject space determined in accordance with
the foregoing shall be conclusive on Landlord and Tenant.
ARTICLE III
DELIVERY OF PREMISES; CONSTRUCTION
3.1 DELIVERY OF PREMISES.
Tenant acknowledges that Tenant has had an opportunity to inspect the
Premises. Except as hereinafter provided, the Premises, shall be delivered to
and accepted by Tenant, in its present condition As Is, Where Is, with all
faults and without representation, warranty or guaranty of any kind by Landlord
to Tenant, except that Landlord represents and warrants to Tenant that base
Building systems are currently in good operating condition and repair,
Notwithstanding the foregoing, prior to the Commencement Date, Landlord shall,
at Landlord's sole cost, steam clean the carpeting located in the Premises and
install a Building standard entryway door to the Premises in a location to be
mutually agreed upon by Landlord and Tenant ("Landlord's Work"). The Premises
shall be deemed ready for occupancy upon substantial completion of Landlord's
Work as reasonably determined by Landlord; provided, however, that if Landlord
is delayed in completing Landlord's Work as a result of the action or inaction
of Tenant, the Premises shall be deemed ready for occupancy on the Scheduled
Term Commencement Date.
Landlord will not approve any construction, alterations, or additions
requiring unusual expense to readapt the Premises to normal office use on lease
termination or increasing the cost of construction, insurance or taxes on the
Building or of Landlord's services called for by Section 5.1 unless Tenant first
gives assurances acceptable to Landlord that such readaptation will be made
prior to such termination without expense to Landlord and makes provisions
acceptable to Landlord for payment of such increased cost. Landlord will also
disapprove any alterations or additions requested by Tenant which will delay
completion of the Premises or the Building. All changes and additions shall be
part of the Building except such items as by writing at the time of approval the
parties agree either shall be removed by Tenant on termination of this Lease, or
shall be removed or left at Tenant's election.
9
<PAGE>
3.2 PREPARATION OF PREMISES FOR OCCUPANCY.
Landlord agrees to use reasonable efforts to complete Landlord's Work on
or before the Scheduled Term Commencement Date, which shall, however, be
extended for a period equal to that of any delays clue to governmental
regulations, unusual scarcity of or inability to obtain labor or materials,
labor difficulties, casualty or other causes beyond Landlord's reasonable
control.
Landlord shall permit Tenant access for installing equipment and
furnishings in the Premises prior to the Term if it can be done without material
interference with completion of the Premises.
3.3 GENERAL PROVISIONS APPLICABLE TO CONSTRUCTION.
All construction work required or permitted by this Lease, whether by
Landlord or by Tenant, shall be done in a good and workmanlike manner and in
compliance with all applicable laws and all lawful ordinances, regulations and
orders of governmental authority and insurers of the Building. Either party may
inspect the work of the other at reasonable times and promptly shall give notice
of observed defects. Landlord's obligations under Section 3.1 shall be deemed to
have been performed when Tenant commenced to occupy any portion of the Premises
for the Permitted Uses except for items which are incomplete or do not conform
with the requirements of Section 3.1 and as to which Tenant shall in either case
have given written notice to Landlord prior to such commencement. If Tenant
shall not have commenced to occupy the Premises for the Permitted Uses within 30
days after they are deemed ready for occupancy as provided in Section 3.2 a
certificate of completion by a licensed architect or registered engineer shall
be conclusive evidence that Landlord has performed all such obligations except
for items stated in such certificate to be incomplete or not in conformity with
such requirements.
3.4 REPRESENTATIVES.
Each party authorizes the other to rely in connection with their
respective rights and obligations under this Article III upon approval and other
actions on the party's behalf by Landlord's Representative in the case of
Landlord or Tenant's Representative in the case of Tenant or by any person
designated in substitution or addition by notice to the party relying.
ARTICLE IV
RENT
4.1 RENT.
Tenant agrees to pay rent to Landlord without any offset or reduction
whatever (except as made in accordance with the express provisions of this
Lease), equal to 1/12th of the Annual Rent in equal installments in advance on
the first day of each calendar month included in the Term; and for any portion
of a calendar month at the beginning or end of the Term, at the proportionate
rate payable for such portion, in advance.
10
<PAGE>
4.2 OPERATING COSTS: ESCALATION.
Tenant's proportionate share of the Annual Estimated Operating Costs shall
be determined by multiplying Annual Estimated Operating Costs by a fraction, the
numerator of which is the Rentable Floor Area of Tenant's Space, and the
denominator of which is the Total Rentable Floor Area of the Building.
With respect to the first year for Tenant's paying operating cost, or
fraction thereof, and any fiscal year or fraction thereof thereafter, Tenant
shall pay to Landlord, as additional rent, Operating Cost Escalation (as defined
below), if any, on or before the thirtieth (30th) day following receipt by
Tenant of Landlord's Statement (as defined below). As soon as practicable after
the end of each fiscal year ending during the Term and after Lease termination,
Landlord shall render a statement ("Landlord's Statement") in reasonable detail
and according to usual accounting practices certified by Landlord and showing
for the preceding Fiscal Year or fraction thereof, as the case may be,
Landlord's Operating Costs,
excluding the interest and amortization on mortgages for the Building and
Lot or leasehold interests therein and the cost of special services rendered to
tenants (including Tenant) for which a special charge is made,
but including, without limitation: real estate taxes on the Building and
Lot; installments and interest on assessments for public betterments or public
improvements; expenses of any proceedings for abatement of taxes and assessments
with respect to any fiscal year or fraction of a fiscal year; premiums for
insurance; reasonable fees payable to third parties for financial audits of
Landlord's Operating Costs; compensation and all fringe benefits, worker's
compensation insurance premiums and payroll taxes paid by Landlord to, for or
with respect to all persons engaged in the operating, maintaining, or cleaning
of the Building and Lot; all utility charges not billed directly to tenants by
Landlord or the utility; payments to independent contractors under service
contracts for cleaning, operating, managing, maintaining and repairing the
Building and Lot (which payments may be to affiliates of Landlord provided the
same are at reasonable rates consistent with the type of occupancy and the
services rendered); rent paid by the managing agent or imputed cost equal to the
loss of rent by Landlord for making available to the managing agent space for a
Building office on the ground floor or above; if the Building shares common
areas or facilities with another building or buildings, the Buildings' pro rata
share (as reasonably determined by Landlord) of the cost of cleaning, operating,
managing (including the cost of the management office for such buildings and
facilities), maintaining and repairing such common areas and facilities; and all
other reasonable and necessary expenses paid in connection with the cleaning,
operating, managing, maintaining and repairing of the Building and Lot, or
either, and properly chargeable against income, it being agreed that if Landlord
installs a new or replacement capital item, the cost thereof as reasonably
amortized by Landlord, with interest at the average prime commercial rate in
effect from time to time at the three largest national banks in Boston,
Massachusetts on the unamortized amount, shall be included in Landlord's
Operating Costs. Landlord's Statement shall also show the average number of
square feet of the Building which were occupied for the preceding fiscal year or
fraction thereof.
"Operating Cost Escalation" shall be equal to the difference, if any,
between:
11
<PAGE>
(a) the product of Landlord's (i) Operating Costs as indicated in
Landlord's Statement and (ii) a fraction, the numerator of which shall be the
Rentable Floor Area of Tenant's Space and the denominator of which shall be the
Total Rentable Floor Area of the Building and
(b) the product of (i) the sum of (x) Landlord's Operating Costs for the
Operating Costs Base Year (other than real estate taxes) and (y) real estate
taxes for the Real Estate Tax Base Year and (ii) a fraction, the numerator of
which shall be the Rentable Floor Area of Tenant's Space and the denominator of
which shall be the Total Rentable Floor Area of the Building.
In the event that the Building is less than 95% occupied, Landlord's
Operating costs shall be adjusted to reflect the costs which would be incurred
if the Building was 95% occupied. In case of special services which are not
rendered to all areas on a comparable basis, the proportion allocable to the
Premises shall he the same proportion which the Rentable Floor Area of Tenant's
Space bears to the total rentable floor area to which such service is so
rendered (such latter area to be determined in the same manner as the Total
Rentable Floor Area of the Building).
The term "real estate taxes" as used above shall mean all taxes of every
kind and nature assessed by any government authority on the Lot, the Building
and improvements, or both, which the Landlord shall become obligated to pay
because of or in connection with the ownership, leasing and operation of the
Lot, the Building and improvements, or both, subject to the following: There
shall be excluded from such taxes all income taxes, excess profits taxes, excise
taxes, franchise taxes, and estate, succession, inheritance and transfer taxes,
provided, however, that if at any time during the Term the present system of ad
valorem taxation of real property shall be changed so that in lieu of the whole
or any part of the ad valorem tax on real property, there shall be assessed on
Landlord a capital levy or other tax on the gross rents received with respect to
the Lot, Building, and improvements, or both, or a federal, state, county,
municipal or other local income, franchise, excise or similar tax, assessment,
levy or charge (distinct from any now in effect) measured by or based, in whole
or in part, upon any such gross rents, then any and all of such taxes,
assessments, levies or charges, to the extent so measured or based, shall be
deemed to be included within the term "real estate taxes".
Notwithstanding any other provision of this Section 4.2, if the Term
expires or is terminated as of a date other than the last day of a fiscal year,
then for such fraction of a fiscal year at the end of the Term, Tenant's last
payment to Landlord under this Section 4.2 shall be made on the basis of
Landlord's best estimate of the items otherwise includable in Landlord's
Statement and shall be made on or before the later of (a) 10 days after Landlord
delivers such estimate to Tenant or (b) the last day of the Term, with an
appropriate payment or refund to be made upon submission of Landlord's
Statement.
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4.3 ESTIMATED ESCALATION PAYMENTS.
If, with respect to any fiscal year or fraction thereof during the Term,
Landlord estimates that Tenant shall be obligated to pay Operating Cost
Escalation, then Tenant shall pay, as additional rent, on the first day of each
month of such fiscal year and each ensuing fiscal year thereafter, Estimated
Monthly Escalation Payments equal to 1/12th of the estimated Operating Cost
Escalation for the respective fiscal year, with an appropriate additional
payment or refund to be made within 30 days after Landlord's Statement is
delivered to Tenant. Landlord may adjust such Estimated Monthly Escalation
Payments from time to time and at any time during a fiscal year, and Tenant
shall pay, as additional rent, on the first day of each month following receipt
of Landlord's notice thereof, the adjusted Estimated Monthly Escalation Payment.
4.4 CHANGE OF FISCAL YEAR.
Landlord shall have the right from time to time to change the periods of
accounting under Section 4.2 to any annual period other than a calendar year,
and upon any such change all items referred to in this Section 4.4 shall be
appropriately apportioned. In all Landlord's Statements rendered under this
Section 4.4, amounts for periods partially within and partially without the
accounting periods shall be appropriately apportioned, and any items which are
not determinable at the time of a Landlord's Statement shall be included therein
on the basis of Landlord's estimate, and with respect thereto Landlord shall
render promptly after determination a supplemental Landlord's Statement, and
appropriate adjustment shall be made according thereto. All Landlord's
Statements shall be prepared on an accrual basis of accounting.
4.5 PAYMENTS.
All payments of Annual Rent and additional rent shall be made to Managing
Agent, or to such other person as Landlord may from time to time designate. If
any installment of Annual Rent or additional rent or on account of leasehold
improvements is paid more than 5 days after the due date thereof, at Landlord's
election, it shall bear interest at a rate equal to the average prime commercial
rate from time to time established by the three largest national banks in
Boston, Massachusetts plus 4% per annum from such due date, which interest shall
be immediately due and payable as further additional rent.
ARTICLE V
LANDLORD'S COVENANTS
5.1 LANDLORD'S COVENANTS DURING THE TERM.
Landlord covenants during the Term:
5.1.1 Building Services - To furnish, through Landlord's employees or
independent contractors, the services listed in Exhibit C;
5.1.2 Additional Building Services - To furnish, through Landlord's
employees or independent contractors, reasonable additional Building operation
services upon reasonable
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advance request of Tenant at equitable rates from time to time established by
Landlord to be paid by Tenant;
5.1.3 Repairs - Except as otherwise provided in Article VII, to make such
repairs to the roof, exterior walls, floor slabs, other structural components
and common facilities of the Building as may be necessary to keep them in
serviceable condition; and
5.1.4 Quiet Enjoyment - That Landlord has the right to make this Lease and
that Tenant on paying the rent and performing its obligations hereunder, shall
peacefully and quietly have, hold and enjoy the Premises throughout the Term
without any manner of hindrance or molestation from Landlord or anyone claiming
under Landlord, subject however to all the terms and provisions hereof.
5.1.5 Food Service - Landlord may provide, within the building, a food
service facility of a size, type, location and serving capacity as Landlord
shall deem suitable, in its sole discretion. In the event Landlord elects to
provide a food service facility, then the facility will service a luncheon meal
and, at Landlord's election, a breakfast meal or some other breakfast food and
beverage service, five days per week excluding weekends and holidays. All losses
incurred by Landlord in operating the food service facility during any fiscal
year (the "Food Service Losses") shall be added to the Landlord's Operating
Costs for the year in which such losses were incurred for the purpose of
calculating the Operating Costs Escalation pursuant to Section 4.2; provided,
however, that the amount of such food service losses added to Landlord's
Operating Costs in any one year shall not, except as otherwise set forth below,
exceed one percent of the sum of Annual Rent and additional rent from all
tenants in the building. All profits realized by the Landlord in operating the
food service facility during any fiscal year (the "Food Service Profits") shall
be credited against the Landlord's Operating Costs for such year. For the
purposes of this Section 5.1.5, the Food Service Profits or Losses for any year
shall be calculated by deducting from the gross receipts of the food service (as
hereinafter defined) all expenses of operation (as hereinafter defined). Gross
receipts of the food service as used herein are defined to mean the total amount
in dollars of the actual prices charged, in cash, for food and beverages served
at the facility, excluding sums collected for any sales tax or excise tax. The
Expense of Operation of the food service shall mean all expenses of operating
the food service facility, including without limitation, salaries, wages,
employment taxes and fringe benefits, food service administrative costs, food
costs, concessionaire's fees, operating costs, equipment maintenance and repair
costs, if any, plus an annual return to the Landlord upon its investment in
establishing the food service facility (including without limitation the cost of
furniture, equipment, furnishings, and related mechanical systems) equal to
fifteen percent (15%) of its said investment or $50,000, whichever is less.
If during any six-month period, the mathematical average of the number of
luncheon meals served by the food service facility per day is fewer than 300, or
the Food Service Losses incurred by the Landlord in operating the food service
facility during such six-month period exceed 525,000, then the Landlord shall
have the right and option, in its sole discretion, to take any steps necessary
to reduce or eliminate the losses (including without limitation, modification or
termination of the food service), unless one hundred percent (100%) of the
tenants occupying the building agree that Landlord's Operating Costs hereunder
for the purpose of calculating the
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Operating Expense Escalation shall include one hundred percent (100%) of the
food Service Losses, without limitation.
The terms of this Section 5.1.5 shall not apply to any restaurant or other
food service facility which leases space in the Building as a tenant and is not
owned, operated or controlled by Landlord.
Landlord reserves the right to approve any tenant's use of a food service
operator other than the Landlord's food service operator, if any. Such approval
will not be unreasonably withheld.
5.2 INTERRUPTIONS.
Landlord shall not be liable to Tenant for any compensation or reduction
of rent by reason of inconvenience or annoyance, or for loss of business arising
from power losses or shortages, or from the necessity of Landlord's entering the
Premises for any of the purposes in this Lease authorized, or for repairing the
Premises or any portion of the Building or Lot, or for interruption or
termination (by reason of any cause reasonably beyond Landlord's control,
including without limitation, loss of any applicable license or governmental
approval), of the food service provided by Landlord pursuant to Section 5.1.5,
or for excessive losses pursuant to Section 5.1.5. In case Landlord is prevented
or delayed from making any repairs, alterations or Improvements, or furnishing
any service or performing any other covenant or duty to be performed on
Landlord's part, by reason of any cause reasonably beyond Landlord's control,
Landlord shall not be liable to Tenant therefor, nor except as expressly
otherwise provided in Article VII, shall Tenant be entitled to any abatement or
reduction of rent by reason thereof, nor shall the same give rise to a claim in
tenant's favor that such failure constitutes actual or constructive, total or
partial, eviction from the Premises. Landlord shall use reasonable efforts in
case of power losses or shortages, air pollution or contamination by hazardous
substances, to restore the services required to be provided under this Lease.
However Landlord agrees to use its best efforts to diligently remedy the
situation and minimize the disruption to Tenant's business.
Landlord reserves the right to stop any service or utility system when
necessary by reason of accident or emergency or until necessary repairs have
been completed. Except in case of emergency repairs, Landlord will give Tenant
reasonable advance notice of any contemplated stoppage and will use reasonable
efforts to avoid unnecessary inconvenience to Tenant by reason thereof.
Landlord also reserves the right to institute such policies, programs and
measures as may be necessary, required or expedient for the conservation or
preservation of energy or energy services or as may be necessary or required to
comply with applicable codes, rules, regulations or standards.
ARTICLE VI
TENANT'S COVENANTS
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6.1 TENANT'S COVENANTS DURING THE TERM
Tenant covenants during the Term and such further time as Tenant occupies
any part of the Premises:
6.1.1 Tenant's Payments - To pay when due (a) all Annual Rent and
additional rent, (b) all taxes which may be imposed on Tenant's personal
property in the Premises (including, without limitation, Tenant's fixtures and
equipment) regardless to whomever assessed, (c) all charges by public utilities
for telephone and other utility services (including service inspections
therefor) rendered to the Premises not otherwise required hereunder to be
furnished by Landlord without charge and not consumed in connection with any
services required to be furnished by Landlord without charge, and (d) as
additional rent, all charges to Landlord for services rendered pursuant to
Section 5.1.2 hereof;
6.1.2 Repairs and Yielding Up - Except as otherwise provided in Article
VII and Section 5.1.3, to keep the Premises in good order, repair and condition,
reasonable wear only excepted; and at the expiration or termination of this
Lease peaceably to yield up the Premises and all changes and additions therein
in such order, repair and condition, first removing all goods and effects of
Tenant and any items, the removal of which is required by agreement or specified
herein to be removed at Tenant's election and which Tenant elects to remove, and
repairing all damage caused by such removal and restoring the Premises and
leaving them clean and neat;
6.1.3 Occupancy and Use - Continuously from the Commencement Date, to use
and occupy the Premises only for the Permitted Uses; not to injure or deface the
Premises, Building, or Lot; and not to permit in the Premises any use thereof
which is improper, offensive, contrary to law or ordinances, or liable to create
a nuisance or to invalidate or increase the premiums for any insurance on the
Building or its contents or liable to render necessary any alteration or
addition to the Building; not to dump, flush, or in any way introduce any
hazardous substances or any other toxic substances into the septic, sewage or
other waste disposal system serving the Premises, not to generate, store or
dispose of hazardous substances in or on the Premises or dispose of hazardous
substances from the Premises to any other location without the prior written
consent of Landlord and then only in compliance with the Resource Conservation
and Recovery Act of 1976, as amended, 42 U.S.C. (S) 6901 et seq., and all other
applicable laws, ordinances and regulations; to notify Landlord of any incident
which would require the filing of a notice under applicable federal, state, or
local law; not to store or dispose of hazardous substances on the Premises
without first submitting to Landlord a list of all such hazardous substances and
all permits required therefor and thereafter providing to Landlord on an annual
basis Tenant's certification that all such permits have been renewed with copies
of such renewed permits; and to comply with the orders and regulations of all
governmental authorities with respect to zoning, building, fire, health, and
other codes, regulations, ordinances or laws applicable to the Premises.
"Hazardous substances" as used in this paragraph shall mean "hazardous
substances" as defined in the Comprehensive Environmental Response Compensation
and Liability Act of 1980, as amended, 42 U.S.C. (S) 9601 and regulations
adopted pursuant to said Act.
6.1.4 Rules and Regulations - To comply with the Rules and Regulations set
forth in Exhibit C and all other reasonable Rules and Regulations hereafter made
by Landlord, of which Tenant has been given notice, for the care and use of the
Building and Lot and their facilities and
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approaches, it being understood that Landlord shall not be liable to Tenant for
the failure of other tenants of the Building to conform to such Rules and
Regulations;
6.1.5 Safety Appliances - To keep the Premises equipped with all safety
appliances required by law or ordinance or any other regulation of any public
authority because of any use made by Tenant (other than those required to obtain
a certificate of occupancy to permit Tenant's initial occupancy of the Premises,
which shall be provided by Landlord) and to procure all licenses and permits so
required because of such use and, if requested by Landlord, to do any work so
required because of such use, it being understood that the foregoing provisions
shall not be construed to broaden in any way Tenant's Permitted Uses;
6.1.6 Assignment and Subletting - Not without the prior written consent of
Landlord to assign this Lease, to make any sublease, or to permit occupancy of
the Premises or any part thereof by anyone other than Tenant, voluntarily or by
operation of law (it being understood that in no event shall Landlord consent to
any such assignment, sublease or occupancy if the same is on terms more
favorable to the successor occupant than to the then occupant); as additional
rent, to reimburse Landlord promptly for reasonable legal and other expenses
incurred by Landlord in connection with any request by Tenant for consent to
assignment or subletting; no assignment or subletting shall affect the
continuing primary liability of Tenant (which, following assignment, shall be
joint and several with the assignee); no consent to any of the foregoing in a
specific instance shall operate as a waiver in any subsequent instance.
Landlord's consent to any proposed assignment or subletting is required both as
to the terms and conditions thereof, and as to the creditworthiness of the
proposed assignee or subtenant and the consistency of the proposed assignee's or
subtenant's business with other uses and tenants in the Building. Landlord's
consent to assignment or subletting by Tenant shall not be unreasonably
withheld, provided that Tenant is not then in default under this Lease and such
assignee or subtenant pays therefor the greater of the Annual Rent and
additional rent then payable hereunder, or the then fair market rent for the
Premises; and provided further that Landlord shall not be deemed unreasonable
for withholding its consent to any assignment or subletting the arrangements for
which are to be made through any broker other than Landlord or its affiliates.
In the event that any assignee or subtenant pays to Tenant any amounts in excess
of the Annual Rent and additional rent then payable hereunder, or pro rata
portion thereof on a square footage basis for any portion of the Premises,
Tenant shall promptly pay 50% of said excess to Landlord as and when received by
Tenant after credit to Tenant for all reasonable out-of-pocket costs incurred by
Tenant in connection therewith. If Tenant requests Landlord's consent to assign
this Lease or sublet more than 25% of the Premises, Landlord shall have the
option, exercisable by written notice to Tenant given within 10 days after
receipt of such request, to terminate this Lease as of a date specified in such
notice which shall not be less than 30 or more than 60 days after the date of
such notice;
If, at any time during the Term of this Lease, Tenant is:
(i) a corporation or a trust (whether or not having shares of beneficial
interest) and there shall occur any change in the identity of a majority of the
persons then having power to participate in the election or appointment of the
directors, trustees or other persons exercising like functions and managing the
affairs of Tenant; or
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(ii) a partnership or association or otherwise not a natural person (and
is not a corporation or a trust) and there shall occur any change in the
identity of a majority of the persons who then are members of such partnership
or association or who comprise Tenant;
Tenant shall so notify Landlord and Landlord may terminate this Lease by
notice to Tenant given within 90 days thereafter if, in Landlord's reasonable
judgement; the credit of Tenant is thereby impaired. This paragraph shall not
apply if the initial Tenant named herein is a corporation and the outstanding
voting stock thereof is listed on a recognized securities exchange.
6.1.7 Indemnity - To defend, with counsel approved by Landlord, all
actions against Landlord, any partner, trustee, stockholder, officer, director,
employee or beneficiary of Landlord, holders of mortgages secured by the
Premises or the Building and Lot and any other party having an interest in the
Premises ("Indemnified Parties") with respect to, and to pay, protect, indemnify
and save harmless, to the extent permitted by law, all Indemnified Parties from
and against, any and all liabilities, losses, damages, costs, expenses
(including reasonable attorney's fees and expenses) causes of action, suits,
claims, demands or judgements of any nature arising from (i) injury to or death
or any person, or damage to or loss of property, on the Premises or connected
with the use, condition or occupancy of the Premises, unless caused by the
negligence of Landlord or its servants or agents, (ii) violation of this Lease,
or (iii) any act, fault, omission, or other misconduct of Tenant or its agents,
contractors, licensees, sublessees or invitees.
6.1.8 Tenant's Liability Insurance - To maintain public liability
insurance on the Premises indemnifying Landlord and Tenant against all claims
and demands for (i) injury to or death of any person or damage to or loss or
property, on the Premises or connected with the use, condition or occupancy of
the Premises, unless caused by the negligence of Landlord or its servants or
agents, (ii) violation of this Lease, or (iii) any act, fault or omission, or
other misconduct of Tenant or its agents, contractors, licensees, sublessees or
invitees, in amounts which shall, at the beginning of the Term, be at least
equal to the limits set forth in Section 1.1, and from time to time during the
Term, shall be for such higher limits, if any, as are customarily carried in the
area in which the Premises are located on property similar to the Premises and
used for similar purposes, and shall be written on the "Occurrence Basis" and
include Host Liquor liability insurance, and to furnish Landlord with
certificates thereof;
6.1.9 Tenant's Worker's Compensation Insurance - To keep all of Tenant's
employees working in the Premises covered by worker's compensation insurance in
statutory amounts and to furnish Landlord with certificates thereof;
6.1.10 Landlord's Right of Entry - To permit Landlord and Landlord's
agents entry after reasonable prior oral or written notice (except that no
notice shall be required in the event of an emergency): to examine the Premises
at reasonable times and, if Landlord shall so elect, to make repairs or
replacements; to remove, at Tenant's expense, any changes, additions, signs,
curtains, blinds, shades, awnings, aerials, flagpoles, or the like not consented
to in writing; and to show the Premises to prospective tenants during the 6
months preceding expiration of the Term and to prospective purchasers and
mortgagees at all reasonable times;
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6.1.11 Loading - Not to place Tenant's Property, as defined in Section
6.1.13, upon the Premises so as to exceed a rate of 50 pounds of live load per
square foot and not to move any safe, vault or other heavy equipment in, about
or out of the Premises except in such manner and at such times as Landlord shall
in each instance approve; Tenant's business machines and mechanical equipment
which cause vibration or noise that may be transmitted to the Building structure
or to any other leased space in the Building shall be placed and maintained by
Tenant in settings of cork, rubber, spring, or other types of vibration
eliminators sufficient to eliminate such vibration or noise;
6.1.12 Landlord's Costs - In case Landlord shall be made party to any
litigation commenced by or against Tenant or by or against any parties in
possession of the Premises or any part thereof claiming under Tenant, to pay, as
additional rent, all costs including, without implied limitation, reasonable
counsel fees incurred by or imposed upon Landlord in connection with such
litigation, and, as additional rent, also to pay all such costs and fees
incurred by Landlord in connection with the successful enforcement by Landlord
of any obligations of Tenant under this Lease;
6.1.13 Tenant's Property - All the furnishings, fixtures, equipment,
effects and property of every kind, nature and description of Tenant and of all
persons claiming by, through or under Tenant which, during the continuance of
this Lease or any occupancy of the Premises by Tenant or anyone claiming under
Tenant, may be on the Premises or elsewhere in the Building or on the Lot shall
be at the sole risk and hazard of Tenant, and if the whole or any part thereof
shall be destroyed or damaged by fire, water or otherwise, or by the leakage or
bursting of water pipes, steam pipes, or other pipes, by theft, or from any
other cause, no part of said loss or damage is to be charged to or to be borne
by Landlord unless due to the gross negligence of Landlord;
6.1.14 Labor or Materialmen's Liens - To pay promptly when due the entire
cost of any work done on the Premises by Tenant, its agents, employees, or
independent contractors; not to cause or permit any liens for labor or materials
performed or furnished in connection therewith to attach to the Premises; and
immediately to discharge any such liens which may so attach;
6.1.15 Changes or Additions - Not to make any changes or additions to the
Premises without Landlord's prior written consent, provided that Tenant shall
reimburse Landlord for all costs incurred by Landlord in reviewing Tenant's
proposed changes or additions, and provided further that, in order to protect
the functional integrity of the Building, all such changes and additions shall
be performed by contractors selected from a list of approved contractors
prepared by Landlord from time to time. Notwithstanding the foregoing,
Landlord's consent shall not be unreasonably withheld or delayed if the cost of
the proposed changes or additions are less than $10,000 in the aggregate in any
12-month period, provided such changes or additions do not affect structural
components of the Building, the exterior of the Building, or common Building
systems;
6.1.16 Holdover - To pay to Landlord 150% of the total of the Annual Rent
and additional rent then applicable for each month or portion thereof Tenant
shall retain possession of the Premises or any part thereof without Landlord's
permission after the termination of this Lease, whether by lapse of time or
otherwise, and also to pay all damages sustained by Landlord on account thereof;
the
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provisions of this subsection shall not operate as a waiver by Landlord of the
right of re-entry provided in this Lease.
ARTICLE VII
CASUALTY AND TAKING
7.1 CASUALTY AND TAKING.
In case during the Term all or any substantial part of the Premises,
Building, or Lot or any one or more of them, are damaged materially by fire or
any other cause, or by action of the public or other authority in consequence
thereof or are taken by eminent domain or Landlord receives compensable damage
by reason of anything lawfully done in pursuance of public or other authority,
this Lease shall terminate at Landlord's election, which may be made,
notwithstanding Landlord's entire interest may have been divested, by notice to
Tenant within 30 days after the occurrence of the event giving rise to the
election to terminate, which notice shall specify the effective date of
termination which shall be not less than 30 nor more than 60 days after the date
of notice of such termination. If in any such case the Premises are rendered
unfit for use and occupation and the Lease is not terminated, Landlord shall use
due diligence to put the Premises, or, in case of a taking, what may remain
thereof (excluding any items installed or paid for by Tenant which Tenant may be
required or permitted to remove) into proper condition for use and occupation to
the extent permitted by the net award of insurance or damages available to
Landlord, and a just proportion of the Annual Rent and additional rent according
to the nature and extent of the injury shall be abated until the Premises or
such remainder shall have been put by Landlord in such condition; and in case of
a taking which permanently reduces the area of the Premises, a just proportion
of the Annual Rent and additional rent shall be abated for the remainder of the
Term and an appropriate adjustment shall be made to the Annual Estimated
Operating Expenses.
7.2 RESERVATION OF AWARD.
Landlord reserves to itself any and all rights to receive awards made for
damages to the Premises, Building or Lot and the leasehold hereby created, or
any one or more of them, accruing by reason of exercise of eminent domain or by
reason of anything lawfully done in pursuance of public or other authority.
Tenant hereby releases and assigns to Landlord all Tenant's rights to such
awards, and covenants to deliver such further assignments and assurances thereof
as Landlord may from time to time request, and hereby irrevocably designates and
appoints Landlord its attorney-in-fact to execute and deliver in Tenant's name
and behalf all such further assignments thereof. It is agreed and understood,
however, that Landlord does not reserve to itself, and Tenant does not assign to
Landlord, any damages payable for (i) movable trade fixtures installed by Tenant
or anybody claiming under Tenant, at its own expense or (ii) relocation expenses
recoverable by Tenant from such authority in a separate action.
ARTICLE VIII
RIGHTS OF MORTGAGEE
8.1 PRIORITY OF LEASE.
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This Lease is and shall continue to be subject and subordinate to any
presently existing mortgage or deed of trust of record covering the Lot or
Building or both (the "mortgaged premises"). The holder of any such presently
existing mortgage or deed of trust shall have the election to subordinate the
same to the rights and interests of Tenant under this Lease exercisable by
filing with the appropriate recording office a notice of such election,
whereupon the Tenant's rights and interests hereunder shall have priority over
such mortgage or deed of trust. Notwithstanding the foregoing, Landlord
represents and warrants to Tenant that there is no existing mortgage or deed of
trust encumbering the mortgaged premises.
8.2 MORTGAGEE PROTECTION CLAUSE
Tenant agrees to give any Mortgagees and/or Trust/Deed Holders by
Registered Mail, a copy of any Notice of Default served upon the Landlord,
provided that prior to such notice Tenant has been notified, in writing, (by way
of Notice of Assignment of Rents and Leases, or otherwise) of the address of
Such Mortgagees and/or Trust/Deed Holders. Tenant further agrees that if
Landlord shall have failed to cure such default within the time provided for in
the Lease; then the Mortgagees and/or Trust/Deed Holders shall have an
additional thirty (30) days within which to cure such default or if such default
cannot, be cured within that time, then such additional time as may be necessary
if within such thirty (30) days, any Mortgagee and/or Trust/Deed Holder has
commenced and is diligently pursuing the remedies necessary to cure such
default, (including but not limited to commencement of foreclosure proceedings,
if necessary to effect such cure) in which event this Lease shall not be
terminated while such remedies are being so diligently pursued.
8.3 NO PREPAYMENT OR MODIFICATION, ETC.
Tenant shall not pay Annual Rent, additional rent, or any other charge
more than 10 days prior to the due date thereof. No prepayment of Annual Rent,
additional rent or other charge, no assignment of this Lease and no agreement to
modify so as to reduce the rent, change the Term, or otherwise materially change
the rights of the Landlord under this Lease, or to relieve Tenant of any
obligations or liability under this Lease, shall be valid unless consented to in
writing by Landlord's mortgagees of record, if any.
8.4 NO RELEASE OR TERMINATION.
No act or failure to act on the part of Landlord which would entitle
Tenant under the terms of this Lease, or by law, to be relieved of Tenant's
obligations hereunder or to terminate this Lease, shall result in a release or
termination of such obligations or a termination of this Lease unless (i) Tenant
shall have first given written notice of Landlord's act or failure to act to
Landlord's mortgagees of record, if any, specifying the act or failure to act on
the part of Landlord which could or would give basis to Tenant's rights and (ii)
such mortgagees, after receipt of such notice, have failed or refused to correct
or cure the condition complained of within a reasonable time thereafter, but
nothing contained in this Section 8.5 shall be deemed to impose any obligation
on any such mortgagee to correct or cure any such condition. "Reasonable time"
as used above means and includes a reasonable time to obtain possession of the
mortgaged premises, if the mortgagee elects to do so, and a reasonable time to
correct or cure the condition if such condition is determined to exist.
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8.5 CONTINUING OFFER.
The covenants and agreements contained in this Lease with respect to the
rights, powers and benefits of a mortgagee (particularly, without limitation
thereby, the covenants and agreements contained in this Article VIII) constitute
a continuing offer to any person, corporation or other entity, which by
accepting or requiring an assignment of this Lease or by entry or foreclosure
assumes the obligations herein set forth with respect to such mortgagee; such
mortgagee is hereby constituted a party to this Lease as an obligee hereunder to
the same extent as though its name were written hereon as such; and such
mortgagee shall be entitled to enforce such provisions in its own name. Tenant
agrees on request of Landlord to execute and deliver from time to time any
agreement which may reasonably be deemed necessary to implement the provisions
of this Article VIII.
ARTICLE IX
DEFAULT
9.1 EVENTS OF DEFAULT.
If any default by Tenant continues, in case of Annual Rent, additional
rent, Tenant Improvement Reimbursement or any other monetary obligation to
Landlord for more than 10 days, or in any other case for more than 30 days after
notice and such additional time, if any, as is reasonably necessary to cure the
default if the default is of such a nature that it cannot reasonably be cured in
30 days and Tenant promptly commences and diligently pursues such cure to
completion; or if Tenant becomes insolvent, fails to pay its debts as they fall
due, files a petition under any chapter of the U. S. Bankruptcy Code, 11 U.S.C.
101 et seq., as it may be amended (or any similar petition under any insolvency
law of any jurisdiction), or if such petition is filed against Tenant; or if
Tenant proposes any dissolution, liquidation, composition, financial
reorganization or recapitalization with creditors, makes an assignment or trust
mortgage for benefit of creditors, or if a receiver, trustee, custodian or
similar agent is appointed or takes possession with respect to any property of
Tenant; or if the leasehold hereby created is taken on execution or other
process of law in any action against Tenant; then, and in any such case,
Landlord and the agents and servants of Landlord may, in addition to and not in
derogation of any remedies for any preceding breach of covenant, immediately or
at any time thereafter while such default continues and without further notice,
at Landlord's election, do any one or more of the following: (1) give Tenant
written notice stating that the Lease is terminated, effective upon the giving
of such notice or upon a date stated in such notice, as Landlord may elect, in
which event the Lease shall be irrevocably extinguished and terminated as stated
in such notice without any further action, or (2) with or without process of
law, in a lawful manner, enter and repossess the Premises as of Landlord's
former estate, and expel Tenant and those claiming through or under Tenant, and
remove its and their effects, without being guilty of trespass, in which event
the Lease shall be irrevocably extinguished and terminated at the time of such
entry, or (3) pursue any other rights or remedies permitted by law. Any such
termination of the Lease shall be without prejudice to any remedies which might
otherwise be used for arrears of rent or prior breach of covenant, and in the
event of such termination Tenant shall remain liable under this Lease as
hereinafter provided. Tenant hereby waives all statutory rights (including,
without limitation, rights of redemption, if any) to the extent such rights may
be lawfully waived, and
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Landlord, with notice to Tenant, may store Tenant's effects and those of any
person claiming through or under Tenant at the expense and risk of Tenant and,
if Landlord so elects, may sell such effects at public auction or private sale
and apply the net proceeds to the payment of all sums due to Landlord from
tenant, if any, and pay over the balance, if any, to Tenant.
9.2 TENANT'S OBLIGATIONS AFTER TERMINATION
In the event that this Lease is terminated under any of the provisions
contained in Section 9.1 or shall be otherwise terminated for breach of any
obligation of Tenant, Tenant covenants to pay forthwith to Landlord, as
compensation, the excess of the total rent reserved for the residue of the Term
over the rental value of the Premises for said residue of the Term. In
calculating the rent reserved, there shall be included, in addition to the
annual Rent and all additional rent, the value of all other consideration agreed
to be paid or performed by Tenant for said residue. Tenant further covenants as
an additional and cumulative obligation after any such ending to pay punctually
to Landlord all the sums and perform all the obligations which Tenant covenants
in this Lease to pay and to perform in the same manner and to the same extent
and at the same time as if this Lease had not been terminated. In calculating
the amounts to be paid by Tenant under the next foregoing covenant, Tenant shall
be credited with any amount paid to Landlord as compensation as provided in the
first sentence of this Section 9.2 and also with the net proceeds of any rents
obtained by Landlord by reletting the Premises, after deducting all Landlord's
expenses in connection with such reletting, including, without implied
limitation, all repossession costs, brokerage commissions, fees for legal
services and expenses of preparing the Premises for such reletting, it being
agreed by Tenant that Landlord may (i) relet the Premises or any part or parts
thereof for a term or terms which may at Landlord's option be equal to or less
than or exceed the period which would otherwise have constituted the balance of
the Term and may grant such concessions and free rent as Landlord in its sole
judgment considers advisable or necessary to relet the same and (ii) make such
alterations, repairs and decorations in the Premises as Landlord in its
reasonable judgement considers advisable or necessary to relet the same, and no
action of Landlord in accordance with the foregoing or failure to relet or to
collect rent under reletting Shall operate or be construed to release or reduce
Tenant's liability as aforesaid.
So long as at least 12 months of the Term remain unexpired at the time of
such termination, in lieu of any other damages or indemnity and in lieu of full
recovery by Landlord of all sums payable under all the foregoing provisions of
this Section 9.2, Landlord may by written notice to Tenant, at any time after
this Lease is terminated under any of the provisions contained in Section 9.1,
or is otherwise terminated for breach of any obligation of Tenant and before
such full recovery, elect to recover, and Tenant shall thereupon pay, as
liquidated damages, an amount equal to the aggregate of the Annual Rent and
additional rent accrued under Article IV in the 12 months ended next prior to
such termination plus the amount of Annual Rent and additional rent of any kind
accrued and unpaid at the time of termination and less the amount of any
recovery by Landlord under the foregoing provisions of this Section 9.2 up to
the time of payment of such liquidated damages.
Nothing contained in this Lease shall, however, limit or prejudice the
right of Landlord to prove and obtain in proceedings for bankruptcy or
insolvency by reason of the termination of this Lease, an amount equal to the
maximum allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, the damages are to be proved, whether or
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not the amount be greater, equal to, to less than the amount of the loss or
damages referred to above.
ARTICLE X
MISCELLANEOUS
10.1 NOTICE OF LEASE.
Upon request of either party, both parties shall execute and deliver,
after the Term begins, a short form of this Lease in form appropriate for
recording or registration, and if this Lease is terminated before the Term
expires, an instrument in such form acknowledging the date of termination.
10.2 (INTENTIONALLY OMITTED.)
"\12
10.3 NOTICES FROM ONE PARTY TO THE OTHER.
All notices required or permitted hereunder shall be in writing and
addressed, if to the Tenant, at Tenant's Address or such other address as Tenant
shall have last designated by notice in writing to Landlord and, if to Landlord,
at Landlord's Address or such other address as Landlord shall have last
designated by notice in writing to the Tenant. Any notice shall have been deemed
duly given if mailed to such address postage prepaid, registered or certified
mail, return receipt requested, when deposited with the U.S. Postal Service, or
if delivered to such address by hand, when so delivered.
10.4 BIND AND INURE.
The obligations of this Lease shall run with the land, and this Lease
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Landlord named herein and
each successive owner of the Premises shall be liable only for the obligations
accruing during the period of its ownership. The obligations of Landlord shall
be binding upon the assets of Landlord which comprise the Premises but not upon
other assets of Landlord. No individual partner, trustee, stockholder, officer,
director, employee or beneficiary of Landlord shall be personally liable under
this Lease and Tenant shall look solely to Landlord's interest in the Premises
in pursuit of its remedies upon an event of default hereunder, and the general
assets of the individual partners, trustees, stockholders, officers, employees
or beneficiaries of Landlord shall not be subject to levy, execution or other
enforcement procedure for the satisfaction of the remedies of Tenant.
10.5 NO SURRENDER.
The delivery of keys to any employee of Landlord or to Landlord's agent or
any employee thereof shall not operate as a termination of this Lease or a
surrender of the Premises.
10.6 NO WAIVER, ETC.
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The failure of Landlord or of Tenant to seek redress for violation of, or
to insist upon the strict performance of any covenant or condition of this Lease
or, with respect to such failure of Landlord, any of the Rules and Regulations
referred to in Section 6.1.4, whether heretofore or hereafter adopted by
Landlord, shall not be deemed a waiver of such violation nor prevent a
subsequent act, which would have originally constituted a violation, from having
all the force and effect of an original violation, nor shall the failure of
Landlord to enforce any of said Rules and Regulations against any other tenant
in the Building be deemed a waiver of any such Rules or Regulations. The receipt
by Landlord of Annual Rent or additional rent with knowledge of the breach of
any covenant of this Lease shall not be deemed a waiver of such breach by
Landlord, unless such waiver be in writing and signed by Landlord. No consent or
waiver, express or implied, by Landlord or Tenant to or of any breach of any
agreement or duty shall be construed as a waiver or consent to or of any other
breach of the same or any other agreement or duty.
10.7 NO ACCORD AND SATISFACTION.
No acceptance by Landlord of a lesser sum than the Annual Rent and
additional rent then due shall be deemed to be other than on account of the
earliest installment of such rent due, nor shall any endorsement or statement on
any check or any letter accompanying any check or payment as rent be deemed as
accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such installment or
pursue any other remedy in this Lease provided.
10.8 CUMULATIVE REMEDIES.
The specific remedies to which Landlord may resort under the terms of this
Lease are cumulative and are not intended to be exclusive of any other remedies
or means of redress to which it may be lawfully entitled in case of any breach
or threatened breach by Tenant of any provisions of this Lease. In addition to
the other remedies provided in this Lease, Landlord shall be entitled to the
restraint by injunction of the violation or attempted or threatened violation of
any of the covenants, conditions or provisions of this Lease or to a decree
compelling specific performance of any such covenants, conditions or provisions.
10.9 LANDLORD'S RIGHT TO CURE.
If Tenant shall at any time default in the performance of any obligation
under this Lease, Landlord shall have the right, but shall not be obligated,
after notice and the expiration of any applicable cure period (except that no
notice and no cure period shall be required in the event of an emergency), to
enter upon the Premises and to perform such obligation, notwithstanding the fact
that no specific provision for such substituted performance by Landlord is made
in this Lease with respect to such default. In performing such obligation,
Landlord may make any payment of money or perform any other act. All sums so
paid by Landlord (together with interest at the rate of 4% per annum in excess
of the then average prime commercial rate of interest being charged by the three
largest national banks in Boston, Massachusetts) and all necessary incidental
costs and expenses in connection with the performance of any such act by
Landlord, shall be deemed to be additional rent under this Lease and shall be
payable to
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Landlord immediately on demand. Landlord may exercise the foregoing rights
without waiving any other of its rights or releasing Tenant from any of its
obligations under this Lease.
10.10 ESTOPPEL CERTIFICATE.
Tenant agrees, from time to time, upon not less than 20 days' prior
written request by Landlord, to execute, acknowledge and deliver to Landlord a
statement in writing certifying that this Lease is unmodified and in full force
and effect; that Tenant has no defenses, offsets or counterclaims against its
obligations to pay the Annual Rent and additional rent and to perform its other
covenants under this Lease; that there are no uncured defaults of Landlord or
Tenant under this Lease (or, if there have been modifications, that this Lease
is in full force and effect as modified and stating the modifications, and, if
there are any defenses, offsets, counterclaims, or defaults, setting them forth
in reasonable detail); and the dates to which the Annual Rent, additional rent
and other charges have been paid. Any such statement delivered pursuant to this
Section 10.10 shall be in a form reasonably acceptable to and may be relied upon
by any prospective purchaser or mortgagee of the premises which include the
Premises or any prospective assignee of any such mortgagee.
10.11 WAIVER OF SUBROGATION.
Any insurance carried by either party with respect to the Premises and
property therein or occurrences thereon shall include a clause or endorsement
denying to the insurer rights of subrogation against the other party to the
extent rights have been waived by the insured prior to occurrences of injury or
loss. Each party, notwithstanding any provisions of this Lease to the contrary,
hereby waives any rights of recovery against the other for injury or loss due to
hazards covered by insurance containing such clause or endorsement to the extent
of the indemnification received thereunder.
10.12 ACTS OF GOD.
In any case where either party hereto is required to do any act, delays
caused by or resulting from Acts of God, war, civil commotion, fire, flood or
other casualty, labor difficulties, shortages of labor, materials or equipment,
government regulations, unusually severe weather, or other causes beyond such
party's reasonable control shall not be counted in determining the time during
which work shall be completed, whether such time be designated by a fixed date,
a fixed time or a "reasonable time", and such time shall be deemed to be
extended by the period of such delay.
10.13 BROKERAGE.
Tenant represents and warrants that it has dealt with no broker in
connection with this transaction other than those listed in Article l, Section
I. I and agrees to defend, with counsel approved by Landlord, indemnify and save
Landlord harmless from and against any and all cost, expense or liability for
any compensation, commissions or charges claimed by a broker or agent, other
than those listed in Article 1, Section 1.1 with respect to Tenant's dealings in
connection with this Lease.
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10.14 SUBMISSION NOT AN OFFER.
The submission of a draft of this Lease or a summary of some or all of its
provisions does not constitute an offer to lease or demise the Premises, it
being understood and agreed that neither Landlord nor Tenant shall be legally
bound with respect to the leasing of the Premises unless and until this Lease
has been executed by both Landlord and Tenant and a fully executed copy has been
delivered to each of them.
10.15 APPLICABLE LAW AND CONSTRUCTION.
This Lease shall be governed by and construed in accordance with the laws
of the Commonwealth of Massachusetts. If any term, covenant, condition or
provision of this Lease or the application thereof to any person or
circumstances shall be declared invalid or unenforceable by the final ruling of
a court of competent jurisdiction having final review, the remaining terms,
covenants, conditions and provisions of this Lease and their application to
persons or circumstances shall not be affected thereby and shall continue to be
enforced and recognized as valid agreements of the parties, and in the place of
such invalid or unenforceable provision, there shall be substituted a like, but
valid and enforceable provision which comports to the findings of the aforesaid
court and most nearly accomplishes the original intention of the parties.
There are no oral or written agreements between Landlord and Tenant
affecting this Lease. This Lease may be amended, and the provisions hereof may
be waived or modified, only by instruments in writing executed by Landlord and
Tenant.
The titles of the several Articles and Sections contained herein are for
convenience only and shall not be considered in construing this Lease.
Unless repugnant to the context, the words "Landlord" and "Tenant"
appearing in this Lease shall be construed to mean those named above and their
respective heirs, executors, administrators, successors and assigns, and those
claiming through or under them respectively. If there be more than one Tenant,
the obligations imposed by this Lease upon Tenant shall be joint and several.
10.16 TENANT CONDENSER WATER SYSTEM CHARGES.
The Building is equipped with a separate tenant condenser water system to
accommodate the special HVAC requirements of tenants.
The initial charge for tying into the tenant condenser water system, (the
"hook-up) charge") shall be equal to $1,000 per ton of capacity connected,
payable within 30 days of Landlord's notice that the hook-up has been performed.
The annual operating charge for using the tenant condenser water system
(the "Annual Cooling Operating Charge") shall be equal to $365 per ton of
capacity connected and is payable as additional rent to Landlord, in equal
monthly installments in accordance with Article IV of the Lease. The Annual
Cooling Operating Charge shall be subject to escalation for any increases in
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energy, maintenance and/or labor costs incurred by Landlord with respect to the
operation and maintenance of such system.
In the event that Tenant disconnects from the tenant condenser water
system, the costs associated therewith shall be borne by Tenant.
Landlord reserves the right to refuse access to the tenant condenser water
system in its reasonable judgement based on the capacity of such system that is
available and/or the amount of capacity that tenant requires.
10.17 ERISA MATTERS.
It is understood that Landlord is subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended and in effect from
time to time ("ERISA") and as a result may be prohibited by law from engaging in
certain transactions. Tenant represents and warrants to the best of its
knowledge after due inquiry that neither Tenant nor its "affiliates" (as defined
in Part V (c) of Prohibited Transaction Exemption 84-14, issued March 12, 1984)
has, or within the immediately preceding one year has exercised the authority to
appoint or terminate CIGNA Investments, Inc. or its affiliates as an asset
manager with respect to the assets of any plan identified on Exhibit D attached
hereto.
ARTICLE XI
SECURITY DEPOSIT
Landlord acknowledges receipt from Tenant of the Security Deposit, to be
held by Landlord, as security, without interest, for and during the Term, which
deposit shall be returned to Tenant at the termination of this Lease, provided
there exists no breach of any undertaking of Tenant. If all or any part of the
Security Deposit is applied to an obligation of Tenant hereunder, Tenant shall
immediately upon request by Landlord restore the Security Deposit to its
original amount. Tenant shall not have the right to call upon Landlord to apply
all or any part of the Security Deposit to cure any default or fulfill any
obligation of Tenant, but such use shall be solely in the discretion of
Landlord. Upon any conveyance by Landlord of its interest under this Lease, the
Security Deposit may be delivered by Landlord to Landlord's grantee or
transferee. Upon any such delivery, Tenant hereby releases Landlord herein named
of any and all liability with respect to the Security Deposit, its application
and return, and Tenant agrees to look solely to such grantee or transferee. It
is further understood that this provision shall also apply to subsequent
grantees and transferees.
EXECUTED as a sealed instrument in three or more counterparts on the day
and year first written above.
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LANDLORD:
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY, on behalf of its Separate Account R
By: CIGNA Investments, Inc.
By: /s/ Julia B. Bazenas
------------------------------------
Name: Julia B. Bazenas
Title: Managing Director
TENANT:
DOCENT, INC.
By: /s/ Dave Ellett
------------------------------------
Name: Dave Ellett
Title: President
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EXHIBIT A
Plan Showing Tenant's Space
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[FLOOR PLAN APPEARS HERE]
<PAGE>
EXHIBIT B
LANDLORD'S SERVICES
I. CLEANING
A. General
1. All cleaning work will be performed between 8 a.m. and 12
midnight, Monday through Friday, unless otherwise necessary
for stripping, waxing, etc.
2. Abnormal waste removal (e.g., computer installation paper,
bulk packaging, wood or cardboard crates, refuse from
cafeteria operation, etc.) shall be Tenant's responsibility.
B. "Daily Operations (5 times per week)
1. Tenant Areas
a. Empty and clean all waste receptacles; wash receptacles
as necessary.
b. Vacuum all rugs and carpeted areas.
c. Empty, damp-wipe and dry all ashtrays.
2. Lavatories
a. Sweep and wash floors with disinfectant.
b. Wash both sides of toilet seats with disinfectant.
c. Wash all mirrors, basins, bowls, urinals.
d. Spot clean toilet partitions.
e. Empty and disinfect sanitary napkin disposal
receptacles.
f. Refill toilet tissue, towel, soap, and sanitary napkin
dispensers.
3. Public Areas
a. Wipe down entrance doors and clean glass (interior
and exterior).
b. Vacuum elevator carpets and wipe down doors and walls.
c. Clean water coolers.
C. Operations as Needed (but not less than every other day)
1. Tenant Areas, Lavatories, Public Areas
a. Buff all resilient floor areas.
D. Weekly Operations
1. Tenant Areas, Lavatories, Public Areas
a. Hand-dust and wipe clean all horizontal surfaces with
treated cloths to include furniture, office equipment,
window sills, door ledges, chair rails, baseboards,
convector tops, etc., within normal reach.
b. Remove finger marks from private entrance doors, light
switches, and doorways.
c. Sweep all stairways.
E. Monthly Operations
1. Tenant and Public Areas
a. Thoroughly vacuum seat cushions on chairs, sofas, etc.
b. Vacuum and dust grillwork.
2. Lavatories
a. Wash down interior walls and toilet partitions.
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F. As Required and Weather Permitting
1. Entire Building
a. Clean inside of all windows.
b. Clean outside of all windows.
G. Yearly
1. Tenant and Public Areas
a. Strip and wax all resilient tile floor areas.
II. HEATING, VENTILATING, AND AIR CONDITIONING
1. Heating, ventilating, and air conditioning as required to
provide reasonably comfortable temperatures for normal
business day occupancy (excepting holidays); Monday through
Friday from 8:00 a.m. to 5:00 p.m. and Saturday from 8:00 a.m.
to 1:00 p.m.
2. Maintenance of any additional or special air conditioning
equipment and the associated operating cost will be at
Tenant's expense.
III. WATER
Hot water for lavatory purposes and cold water for drinking, lavatory and
toilet purposes.
IV. ELEVATORS (if Building is Elevatored)
Elevators for the use of all tenants and the general public for access to
and from all floors of the Building. Programming of elevators (including,
but not limited to, service elevators) shall be as Landlord from time to
time determines best for the Building as a whole.
V. RELAMPING OF LIGHT FIXTURES
Tenant will reimburse Landlord for the cost of lamps, ballasts and
starters and the cost of replacing same within the Premises.
VI. CAFETERIA AND VENDING INSTALLATIONS
A. Any space to be used primarily for lunchroom or cafeteria operation
shall be Tenant's responsibility to keep clean and sanitary, it
being understood that Landlord's approval of such use must be first
obtained in writing.
B. Vending machines or refreshment service installations by Tenant must
approved by Landlord in writing and shall be restricted in use to
employees and business callers. All cleaning necessitated by such
installations shall be at Tenant's expense.
VII. ELECTRICITY
A. Landlord, at Landlord's expense, shall furnish electrical energy
required for lighting, electrical facilities, equipment, machinery,
fixtures, and appliances used in or for the benefit of Tenant's
Space, in accordance with the provisions of the Lease of which this
Exhibit is part.
B. Tenant shall not, without prior written notice to Landlord in each
instance, connect to the Building electric distribution system any
fixtures, appliances or equipment other than normal office machines
or any fixtures, appliances or
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equipment which Tenant on a regular basis operates beyond normal
building operating hours. In the event of any such connection.
Tenant agrees to an increase in the ANNUAL ESTIMATED ELECTRICAL COST
TO TENANT'S SPACE and a corresponding increase in Annual Rent by an
amount which will reflect the cost to Landlord of the additional
electrical service to be furnished by Landlord, such increase to be
effective as of the date of any such installation. If Landlord and
Tenant cannot agree thereon, such amount shall be conclusively
determined by a reputable independent electrical engineer or
consulting firm to be selected by Landlord and paid equally by both
parties, and the cost to Landlord will be included in Landlord's
Operating Costs provided in Section 4.2 hereof.
C. Tenant's use of electrical energy in Tenant's Space shall not at any
time exceed the capacity of any of the electrical conductors or
equipment in or otherwise serving Tenant's Space. In order to insure
that such capacity is not exceeded and to avert possible adverse
effect upon the Building electric service. Tenant shall not, without
prior written notice to Landlord in each instance, connect to the
Building electric distribution system any fixtures, appliances or
equipment which operate on a voltage in excess of 120 volts nominal
or make any alteration or addition to the electric system of
Tenant's Space. Unless Landlord shall reasonably object to the
connection of any such fixtures, appliances or equipment, all
additional risers or other equipment required therefor shall be
provided by Landlord, and the cost thereof shall be paid by Tenant
upon Landlord's demand. In the event of any such connection. Tenant
agrees to an increase in the ANNUAL ESTIMATED ELECTRICAL COST TO
TENANT'S SPACE and a corresponding in Annual Rent by an amount which
will reflect the cost to Landlord of the additional service to be
furnished by Landlord, such increase to be effective as of the date
of any such connection. If Landlord and Tenant cannot agree thereon,
such amount shall be conclusively determined by a reputable
independent electrical engineer or consulting firm to be selected by
Landlord and paid equally by both parties, and the cost to Landlord
will be included in Landlord's Operating Costs provided in Section
4.2 hereof.
D. If at any time after the date of this Lease, the rates at which
Landlord purchases electrical energy from the public utility
supplying electric service to the Building, or any charges incurred
or taxes payable by Landlord in connection therewith, shall be
increased or decreased, the Annual Rent and ANNUAL ESTIMATED
ELECTRICAL COST TO TENANT'S SPACE shall be increased or decreased,
as the case may be, by an amount equal to the estimated increase or
decrease, as the case may be, in Landlord's cost of furnishing the
electricity referred to in Paragraph A above as a result of such
increase or decrease in rates, charges, or taxes. If Landlord and
Tenant cannot agree thereon, such amount shall be conclusively
determined by a reputable independent electrical engineer or
consulting firm to be selected by Landlord and paid equally by both
parties, and the cost to Landlord will be included in Landlord's
Operating Costs as provided in Section 4.2 hereof. Any such increase
or decrease shall be effective as of the date of the increase or
decrease in such rate, charges, or taxes.
E. Landlord may, at any time, elect to discontinue the furnishing of
electrical energy. In the event of any such election by Landlord:
(l) Landlord agrees to give reasonable advance notice of any such
discontinuance to Tenant; (2) Landlord
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agrees to permit Tenant to receive electrical service directly from
the public utility supplying service to the Building and to permit
the existing feeders, risers, wiring and other electrical facilities
serving Tenant's Space to be used by Tenant and/or such public
utility for such purpose to the extent they are suitable and safely
capable; (3) Landlord agrees to pay such charges and costs, if any,
as such public utility may impose in connection with the
installation of Tenant's meters and to make or, at such public
utility's election, to pay for such other installations as such
public utility may require, as a condition of providing comparable
electrical service to Tenant; (4) the Annual Rent shall be equitably
decreased to reflect such discontinuance by an amount equal to the
ANNUAL ESTIMATED ELECTRICAL COST TO TENANTS SPACE then in effect;
and (5) Tenant shall thereafter pay, directly to the utility
furnishing the same, all charges for electrical services to the
Premises.
F. Whenever the Annual Rent is increased or decreased pursuant to any
of the foregoing paragraphs of this Article, the parties agree, upon
request of either, to execute and deliver each to the other an
amendment to this Lease confirming such increase or decrease.
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EXHIBIT C
RULES AND REGULATIONS
1. The entrances, lobbies, passages, corridors, elevators, halls, courts,
sidewalks, vestibules, and stairways shall not be encumbered or obstructed
by Tenant, Tenant's agents, servants, employees, licensees or visitors or
used by them for any purposes other than ingress or egress to and from the
Premises.
2. The moving in or out of all safes, freight, furniture, or bulky matter of
any description shall take place during the hours which Landlord may
determine from time to time. Landlord reserves the right to inspect all
freight and bulky matter to be brought into the Building and to exclude
from the Building all freight and bulky matter which violates any of these
Rules and Regulations or the Lease of which these Rules and Regulations
are a part. Landlord reserves the right to have Landlord's structural
engineer review Tenant's floor loads on the Premises at Tenant's expense
if Landlord has reasonable grounds to be concerned about the impact of
Tenant's floor loads on the Building.
3. Tenant, or the employees, agents, servants, visitors or licensees of
Tenant shall not at any time place, lease or discard any rubbish, paper,
articles, or objects of any kind whatsoever outside the doors of the
Premises or in the corridors or passageways of the Building. No animals or
birds shall be brought or kept in or about the Building. Bicycles shall
not be permitted in the Building.
4. Tenant shall not place objects against glass partitions or doors or
windows or adjacent to any common space which would be unsightly from the
Building corridors or from the exterior of the Building and will promptly
remove the same upon notice from Landlord.
5. Tenant shall not make noises, cause disturbances, create vibrations, odors
or noxious fumes or use or operate any electric or electrical devices or
other devices that emit sound waves or are dangerous to other tenants and
occupants of the Building or that would interfere with the operation of
any device or equipment or radio or television broadcasting or reception
from or within the Building or elsewhere, or with the operation of roads
or highways in the vicinity of the Building, and shall not place or
install any projections, antennae, aerials, or similar devices inside or
outside of the Premises, without the prior written approval of Landlord.
6. Tenant may not (without Landlord's approval therefor, which approval will
be signified on Tenant's Plans submitted pursuant to the Lease) and Tenant
shall not permit or suffer anyone to: (a) cook in the Premises, other than
microwave cooking; (b) place more than 3 vending or dispensing machines of
any kind in or about the Premises; (c) at any time sell, purchase or give
away, or permit the sale, purchase, or gift of food in any form.
7. Tenant shall not: (a) use the Premises for lodging, manufacturing or for
any immoral or illegal purposes; (b) use the Premises to engage in the
manufacture or sale of, or permit the use of spirituous, fermented,
intoxicating or alcoholic beverages on the Premises; (c)
1
<PAGE>
use the Premises to engage in the manufacture or sale of, or permit the
use of, any illegal drugs on the Premises.
8. No awning or other projections shall be attached to the outside walls or
windows. No curtains, blinds, shades, screens or signs other than those
furnished by Landlord shall be attached to, hung in, or used in connection
with any window or door of the Premises without prior written consent of
Landlord.
9. No signs, advertisement, object, notice or other lettering shall be
exhibited, inscribed, painted or affixed on any part of the outside or
inside of the Premises if visible from outside of the Premises. Interior
signs on doors shall be painted or affixed for Tenant by Landlord or by
sign painters first approved by Landlord at the expense of Tenant and
shall be of a size, color and style acceptable to Landlord.
10. Tenant shall not use the name of the Building or use pictures or
illustrations of the Building in advertising or other publicity without
prior written consent of Landlord. Landlord shall have the right to
prohibit any advertising by Tenant which, in Landlord's opinion, tends to
impair the reputation of the Building or its desirability for offices, and
upon written notice from Landlord, Tenant will refrain from or discontinue
such advertising.
11. Door keys for doors in the Premises will be furnished at the Commencement
of the Lease by Landlord. Tenant shall not affix additional locks on doors
and shall purchase duplicate keys only from Landlord and will provide to
landlord the means of opening of sales, cabinets, or vaults left on the
Premises. In the event of the loss of any keys so furnished by Landlord.
Tenant shall pay to Landlord the cost thereof. Notwithstanding the
foregoing, Tenant shall be permitted to install a security system in the
Premises (subject to applicable provisions of the Lease) so long as
Landlord is provided appropriate means of access to the Premises.
12. Tenant shall cooperate and participate in all security programs affecting
the Building.
13. Tenant assumes full responsibility for protecting its space from theft,
robbery and pilferage, which includes keeping doors locked and other means
of entry to the Premises closed and secured.
14. Tenant shall not make any room-to-room canvas to solicit business from
other tenants in the Building, and shall not exhibit, sell or offer to
sell, use, rent or exchange any item or services in or from the Premises
unless ordinarily embraced within Tenant's use of the Premises as
specified in its Lease. Canvassing, soliciting and peddling in the
Building are prohibited and Tenant shall cooperate to prevent the same.
Peddlers, solicitors and beggars shall be reported to the Management
Office.
15. Tenant shall not mark, paint, drill into, or in any way deface any part of
the Building or Premises (other than hanging pictures and the like on the
walls in a customary manner, provided all damage to the Building caused
thereby is repaired). No boring, driving of nails, or screws, cutting or
stringing of wires shall be permitted, except with the prior
2
<PAGE>
written consent of Landlord, and as Landlord may direct. Tenant shall not
install any resilient tile or similar floor covering the Premises except
with the prior written approval of Landlord. The use of cement or other
similar adhesive material is expressly prohibited.
16. Tenant shall not waste electricity or water and agrees to cooperate fully
with Landlord to assure the most effective operation of the Building's
heating and air conditioning and shall refrain from attempting to adjust
controls. Tenant shall keep corridor doors closed except when being used
for access.
17. The water and wash closets and other plumbing fixtures shall not be used
for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags, or other substances shall be thrown therein.
18. Building employees shall not be required to perform, and shall not be
requested by any tenant or occupant to perform, any work outside of their
regular duties, unless under specific instructions from the office of the
Managing Agent of the Building.
19. Tenant may request heating and/or air conditioning during other periods in
addition to normal working hours by submitting its request in writing to
the office of the Managing Agent of the Building no later than 2:00 p.m.
the preceding work day (Monday through Friday) on forms available from the
office of the Managing Agent. The request shall clearly state the start
and stop hours of the "off-hour" service. Tenant shall submit to the
Building Manager a list of personnel authorized to make such request. The
Tenant shall be charged for such operation in the form of additional rent;
such charges are to be determined by the Managing Agent and shall be fair
and reasonable and reflect the additional operating costs involved.
20. Tenant covenants and agrees that its use of the Premises shall not cause a
discharge of more than the gallonage per foot of Premises Design Floor
Area per day of sanitary (non- industrial) sewage allowed under the sewage
discharge permit for the Building. Discharges in excess of that amount,
and any discharge of industrial sewage, shall only be permitted if Tenant,
at its sole expense, shall have obtained all necessary permits and
licenses therefor, including without limitation permits from state and
local authorities having jurisdiction thereof. Tenant shall submit to
Landlord on December 31 of each year of the Term of this Lease a
statement, certified by an authorized officer of Tenant, which contains
the following information: name of all chemicals, gases, and hazardous
substances, used, generated, or stored on the Premises; type of substance
(liquid, gas or granular); quantity used, stored or generated per year;
method of disposal; permit number, if any, attributable to each substance,
together with copies of all permits for such substances; and permit
expiration date for each substance.
3
<PAGE>
EXHIBIT D
ERISA Parties in Interest List
Separate Account R
1. Treasurer of the State of North Carolina
2. The United Nations Joint Staff Pension Fund
3. Maryland State Retirement System
4. International Monetary Fund as Trustee of the Staff Retirement Plan
5. The School Employees Retirement Board of Ohio
6. Public School Teachers Pension & Retirement Fund of Chicago
PLEASE BE ADVISED THAT THE PRECEDING IS A LIST OF RETIREMENT PLANS WHICH MAY
HAVE AN INTEREST IN SEPARATE ACCOUNT R AS OF THE DATE HEREOF IN EXCESS OF FOUR
PERCENT (4%), THIS EXHIBIT IS SUBJECT TO CHANGE AS HOLDERS OF INTERESTS ARE
EITHER ADDED OR SUBTRACTED OR THE PERCENTAGE INTEREST HELD BY ANY PLAN CHANGES.
As of January 21, 2000
4
<PAGE>
EXHIBIT 10.19
[LOGO] Silicon Valley Bank
AMENDMENT TO QUICKSTART LOAN AND SECURITY AGREEMENT
Borrower: DOCENT, INC. Address: 444 Castro Street, Suite 440
Mountain View, CA 94041
Date: October 31, 1997
THIS AMENDMENT TO QUICKSTART LOAN AND SECURITY AGREEMENT IS ENTERED INTO ON THE
ABOVE DATE BETWEEN SILICON VALLEY BANK ("SILICON"), WHOSE ADDRESS IS 3003 TASMAN
DRIVE, SANTA CLARA, CALIFORNIA 95054 AND THE BORROWER NAMED ABOVE (JOINTLY AND
SEVERALLY, THE "BORROWER"), WHOSE CHIEF EXECUTIVE OFFICE IS LOCATED AT THE ABOVE
ADDRESS ("BORROWER'S ADDRESS").
The parties hereto agree to amend the QuickStart Loan and Security
Agreement between them dated August 1, 1997 (the "Loan Agreement"), effective
as of the date hereof, as follow: Capitalized terms used but not defined herein
shall have the same meanings set forth in the Loan Agreement.
1. Amended Schedule. The Schedule to QuickStart Loan and Security
Agreement (Letters of Credit Sublimit is replaced, effective on the date hereof,
with the Amended Schedule XXX QuickStart Loan and Security Agreement (Merchant
Services Sublimit) attached hereto.
2. Representations True. Borrower represents and warrants to Silicon
that all representations and warranties set forth in the Loan Agreement, as
amended hereby, are true and correct.
3. General Provisions. This Amendment, the Loan Agreement, and any
prior written amendments to the Loan Agreement signed by Silicon and the
Borrower, and other written documents between Silicon and Borrower set forth in
full all of the representations and agreements, of the parties with respect to
the subject matter hereof and supersede all prior discussions, representation
agreements, and understandings between the parties with respect to the subject
matter hereof. Except as expressly amended, all of the terms and provisions of
the Loan Agreement, and all other documents and agreement between Silicon and
Borrower shall remain in full force and effect and the same are hereto ratified
and confirmed.
Borrower:
DOCENT, INC.
By /s/ Julia A. O'Connor
---------------------------------------
President or Vice President
Silicon:
SILICON VALLEY BANK
By /s/ [ILLEGIBLE]
---------------------------------------
Title Vice President
------------------------------
<PAGE>
[LOGO] Silicon Valley Bank
Amended Schedule to
QuickStart Loan and Security Agreement (Merchant Services Sublimit)
BORROWER: DOCENT, INC.
DATE: October 31, 1997
THIS AMENDED SCHEDULE REPLACES THE "SCHEDULE TO QUICKSTART LOAN AND
SECURITY AGREEMENT (LETTERS OF CREDIT SUBLIMIT)" and is an integral part of the
Loan and Security Agreement between Silicon Valley Bank ("Silicon") and the
above-named borrower ("Borrower") date as of August 1, 1997, as may be amended.
Merchant Services/
Business Credit Card
Sublimit (Section 1): The aggregate Credit Limit shall be reduced by an
amount equal to the sum of $20,000.00 (the "Merchant
Service Reserve"). Silicon may, in its sole discretion,
charge as Loans, any amounts that may become due or
owing to Silicon in connection with merchant credit
card processing services furnished to Borrower by or
through Silicon (the "Credit Card Services"), Borrower
shall execute all standard form applications and
agreements, including without limitation, the
Indemnification and Pledge Agreement of Silicon in
connection with the Credit Card Services and, without
limiting any of the terms of such applications and
agreements, Borrower will pay all standard fees and
charges of Silicon in connection with the Credit Card
Services and, without limiting any of the terms of such
applications and agreements, Borrower will pay all
standard fees and charges of Silicon in connection with
the Credit Card Services.
Maturity Date (Section 4): February 1, 1999
Borrower: Silicon:
DOCENT, INC. SILICON VALLEY BANK
By: /s/ Julia A. O'Connor By: /s/ [ILLEGIBLE]
---------------------------------- --------------------------------
President or Vice President Title Vice President
--------------------------------
<PAGE>
Agreement Regarding Merchant Services/Business VISA Program
Client Name: Docent Software, Inc.
Service Type:
. Merchant Services (through Bank of America)
Merchant #: 43013 435 515 __ __ __ __ __
. Business VISA (Processor:____________________ )
Cardholders: (attach list if more than three names)
1)________________________________ Credit Limit: _________________
2)________________________________ Credit Limit: _________________
3)________________________________ Credit Limit: _________________
Type of Coverage:
. Subfacility of existing line of credit
Line Amount: $750,000.00 Expiration Date: February 1, 1999
Reserve Amount: $20,000.00
----------
. Certificate of Deposit
Amount:________________Certificate #.______________ Term:______________
The undersigned hereby indemnifies and holds Silicon Valley Bank ("SVB")
harmless from and against any and all claims, demands, liabilities, charges,
claims, costs, losses, damages, and expenses (including attorney's fees)
(collectively, the "Liabilities"), if any, that SVB incurs or may incur in
connection with the Merchant Services and/or Business VISA program referenced
above, To secure its obligations to SVB, the undersigned pledges and assigns to
SVB. and grants to SVB a security interest in, the above referenced certificate
of deposit(s) (the "Collateral"); and agrees that SVB, to satisfy all or any
portion of the Liabilities, may at any time or from time to time, exercise any
and all rights and remedies against said Collateral, all without notice to or
demand upon the undersigned, The undersigned further agrees that SVB may at
SVB's options, without notice or demand, pay any outstanding Liabilities by
charging such amount and/or making reserves against any line-of-credit the
undersigned may have with SVB, The foregoing agreements, indemnification
obligations, and pledge, assignment, and security interest grant shall survive
termination of the underlying programs.
Client Name: Docent Software, Inc.
---------------------
By: /s/ Julia A. O'Connor By:
-------------------------------- _________________________________
Title: VP and CFO Title:
----------------------------- ______________________________
Date: 11/4/97 Date:
------------------------------ ______________________________
<PAGE>
[LOGO] Silicon Valley Bank
QUICKSTART LOAN AND SECURITY AGREEMENT
Borrower: Docent, Inc. Address: 444 Castro St. Suite 440
----------------------- ------------------------------
Date: August l, 1997 Mountain View, CA 94041
------------------------ ------------------------------
SILICON'S OFFER TO EXTEND FINANCING ON THE TERMS SET FORTH HEREIN SHALL EXPIRE
IF THIS AGREEMENT IS NOT EXECUTED BY BORROWER AND RETURNED TO SILICON WITHIN 30
DAYS OF THE ABOVE DATE.
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
SILICON VALLEY BANK ("Silicon"), whose address is 3003 Tasman Drive, Santa
Clara, California 95054 and the borrower named above (joint and severally, the
"Borrower"), whose chief executive office is located at the above address
("Borrower's Address").
1. Loans. Silicon will make loans to Borrower (the "Loans") in amounts
determined by Silicon in its reasonable business judgment up to the amount (the
"Credit Limit") shown on the Schedule to this Agreement (the "Schedule"),
provided no Event Default and no event which, with notice or passage of time or
both would constitute an Event of Default has occurred. All Loans and other
monetary Obligations will bear interest at the rate shown on the Schedule.
Interest will be payable monthly, on the date shown on the monthly billing from
Silicon. Silicon may, in its discretion, charge interest to Borrower's deposit
accounts maintained with Silicon.
2. Security Interest. As security for all present and future indebtedness,
guarantees, Liabilities, and other obligations, of Borrower to Silicon
(collectively, the "Obligations"), Borrower hereby grants Silicon a continuing
security interest in all of Borrower's interest in the following types of
property, whether now owned or hereafter acquired, and wherever located
(collectively, the "Collateral"): All "accounts," "general intangibles,"
"contract rights," "chattel paper," "documents," "letters of credit,"
"instruments," "deposit accounts," "inventory," "farm products, "investment
property," "fixtures" and "equipment," as such terms defined in Division 9 of
the California Uniform Commercial Code in effect on the date hereof, and all
products, proceeds and insurance proceeds of the foregoing.
3. Representations and Agreements Of Borrower. Borrower represents to Silicon
as follows, and Borrower agrees that the following representations will continue
to be true, and that Borrower will comply with all of the following agreements
throughout the term of this Agreement:
3.1 Corporate Existence and Authority. Borrower, if a corporation, is and
will continue to be, duly authorized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation The execution, delivery
and performance by Borrower of this Agreement, and all other documents
contemplated hereby have been duly and validly authorized, and do not violate
any law or any provision of, and are not grounds for acceleration under, any
agreement or instrument which is binding upon Borrower.
3.2 Name; Places of Business. The name of Borrower set forth in this
Agreement is its correct name. Borrower shall give Silicon l5 days' prior
written notice before changing its name. The address set forth in the heading to
this Agreement is Borrower's chief executive office. In addition, Borrower has
places of business and Collateral is located only at the locations set forth on
the Schedule. Borrower will give Silicon at least 15 days prior written notice
before changing its chief executive office or locating the Collateral: any other
location.
3.3 Collateral. Silicon has and will at all times continue to have a
first-priority perfected security interest in all of the Collateral other than
specific equipment. Borrower will immediately advise Silicon in writing of any
material loss or damage to the Collateral.
3.4 Financial Condition and Statements. All financial statements now or in
the future delivered to Silicon have been, and will be, prepared in conformity
with generally accepted accounting principles. Since the last date covered by
any such statement, there has been no material adverse change in the financial
condition or business of Borrower. Borrower will provide Silicon: (i) within 30
days after the end of each mouth, a monthly financial statement prepared by
Borrower, and such other information as Silicon shall reasonably request; (ii)
within 120 days following the end of Borrower's fiscal year, complete annual
financial statements, certified by independent certified public accountants
acceptable to Silicon and accompanied by the unqualified report thereon by said
independent certified public accountants; and (iii) other financial information
reasonably requested by Silicon from time to time.
3.5 Taxes; Compliance with Law. Borrower has filed and will file, when due,
all tax returns and reports required by applicable law, and Borrower has paid,
and will pay, when due, all taxes, assessments, deposits and contributions now
or in the future owed by Borrower. Borrower has complied and will comply, in all
material respects, with all applicable news, rules and regulations.
3.6 Insurance. Borrower shall at all times insure all of the tangible and
personal property Collateral and carry such other business insurance as is
customary in Borrower's industry.
3.7 Access to Collateral and Books and Records. At reasonable times, on one
business day notice, Silicon, or its
-1-
<PAGE>
Silicon Valley Bank QuickStart Loan and Security Agreement
- --------------------------------------------------------------------------------
agents, shall have the right to inspect the Collateral, and the right to audit
and copy Borrower's books and records.
3.8 Operating Account. Borrower shall maintain its primary operating
accounts with Bank.
3.9 Additional Agreement. Borrower shall not, without Silicon's prior
written consent, do any of the following: (i) enter into any transaction outside
the ordinary course of business except for the sale of capital stock to venture
investors, provided that Borrower promptly delivers written notification to
Silicon of any such sale; (ii) sell or transfer any Collateral, except in the
ordinary course of business; (iii) pay or declare any dividends on Borrower's
stock (except for dividends payable solely in stock of Borrower); or (iv)
redeem, retire, purchase or otherwise acquire, directly or indirectly, any of
Borrower's stock other than the repurchase of up to five percent (5%) of
Borrower's then issued stock in any fiscal year from Borrower's employees or
directors pursuant to written agreement with Borrower.
4. Term. This Agreement shall continue in effect until the maturity date set
forth on the Schedule (the "Maturity Date"). This Agreement may be terminated,
without penalty, prior to the Maturity Date as follows: (i) by Borrower,
effective three business days after written notice of termination is given to
Silicon; or (ii) by Silicon at any time after the occurrence of an Event of
Default, without notice, effective immediately. On the Maturity Date or on any
earlier effective date of termination, Borrower shall pay all Obligations in
full, whether or not such Obligations are otherwise then due and payable. No
termination shall in any way affect or impair any security interest or other
right or remedy of Silicon, nor shall any such termination relieve Borrower of
any Obligation to Silicon, until all of the Obligations have been paid and
performed in full.
5. Events of Default and Remedies. The occurrence of any of the following events
shall constitute an "Event of Default" under this Agreement: (a) Any
representation, statement, report or certificate given to Silicon by Borrower or
any of its officers, employees or agents, now or in the future, is untrue or
misleading in a material respect; or (b) Borrower fails to pay when due any Loan
or any interest thereon or any other monetary Obligation; or (c) the total
Obligations outstanding at any time exceed the Credit Limit; or (d) Borrower
fails to perform any other non-monetary Obligation, which failure is not cured
within 5 business days after the date due; or (e) Dissolution, termination of
existence, failure of Borrower, or appointment of a receiver, trustee or
custodian, for all or any part of the property of, assignment for the benefit of
creditors by, or the commencement of any proceeding by or against Borrower under
any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect; or (f) a material adverse change in the business, operations,
or financial or other condition of Borrower. If an Event of Default occurs,
Silicon, shall have the right to accelerate and declare all of the Obligations
to be immediately due and payable, increase the interest rate by an additional
four percent per annum, and exercise all rights and remedies accorded it by
applicable law.
6. General. If any provision of this Agreement is held to be unenforceable, the
remainder of this Agreement shall still continue in full force and effect. This
Agreement and any other written agreements, documents and instruments executed
in connection herewith are the complete agreement between Borrower and Silicon
and supersede all prior and contemporaneous negotiations and oral
representations and agreements, all of which are merged and integrated in this
Agreement. There are no oral understandings, representations or agreements
between the parties which are not in this Agreement or in other written
agreements signed by the parties in connection this Agreement. The failure of
Silicon at any time to require Borrower to comply strictly with any of the
provisions of this Agreement shall not waive Silicon's right later to demand and
receive strict compliance. Any waiver of a default shall not waive any other
default. None of the provisions of this Agreement may be waived except by a
specific written waiver signed by an officer of Silicon and delivered to
Borrower. The provisions of this Agreement may not be mended, except in a
writing signed by Borrower and Silicon. Borrower shall reimburse Silicon for all
reasonable attorneys' fees and all other reasonable costs incurred by Silicon,
in connection with this Agreement (whether or not a lawsuit is filed). If
Silicon or Borrower files any lawsuit against the other predicated on a breach
of this Agreement, the prevailing party shall be entitled to recover its
reasonable costs and attorneys' fees from the non-prevailing party. Borrower may
not assign any rights under this Agreement without Silicon's prior written
consent This Agreement shall be governed by the laws of the State of California.
7. Mutual Waiver of Jury Trial. BORROWER AND SILICON EACH HEREBY WAIVE THE RIGHT
TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN
WAY RELATING TO, THIS AGREEMENT OR ANY CONDUCT, ACT OR OMISSION OF SILICON OR
BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEY OR
AFFILIATES.
Borrower:
Docent, Inc.
---------------------------------
By /s/ Pardner Wynn
------------------------------
President or Vice President
Silicon:
SILICON VALLEY BANK
By /s/ [ILLEGIBLE]^^
------------------------------
Title VP
---------------------------
-2-
<PAGE>
[LOGO] Silicon Valley Bank
Schedule to
QuickStart Loan and Security Agreement (Master)
BORROWER: Docent, Inc.
--------------------------
DATE: August l, 1997
--------------------------
This Schedule is an integral part of the Loan and Security Agreement
between Silicon Valley Bank ("Silicon") and the above-named borrower
("Borrower") of even date.
Credit Limit (Aggregate)
(Section 1): $750,000.00 (includes, without limitation,
----------
Equipment Advances and the Merchant Services
and Business Visa Reserve, if any)
Interest Rate (Section 1): A rate equal to the "Prime Rate" in effect
from time to time, plus. 0 %, per annum.
---
Interest shall be calculated on the basis of
a 360-day year for the actual number of days
elapsed. "Prime Rate" means the rate
amounted from time to time by Silicon as its
"prime rate;" it is a base rate upon which
other rates charged by Silicon are based,
and it is not necessarily the best rate
available at Silicon. The interest rate
applicable to the Obligations shall change
on each date there is a change in the Prime
Rate.
Maturity Date (Section 4): February 1, 1999
----------------
Other Locations and Addresses
(Section 3.2): 624 West Hastings Road, Spokane, WA 99218
-----------------------
Other Agreements: Borrower also agrees as follows:
1. Loan Fee. Borrower shall concurrently pay
Silicon a non-refundable Loan Fee in the
amount of $ 0
---
2. Banking Relationship. Borrower shall at
all times maintain its primary banking
relationship with Silicon.
Borrower: Silicon:
Docent, Inc. SILICON VALLEY BANK
- -----------------------------
By /s/ Pardner Wynn By /s/ [ILLEGIBLE]^^
--------------------------- ----------------------------
President or Vice President Title VP
-------------------------
<PAGE>
[LOGO] Silicon Valley Bank
Schedule to
QuickStart Loan and Security Agreement (Equipment Advance)
BORROWER: Docent, Inc.
--------------------------
DATE: August l, 1997
--------------------------
This Schedule is an integral part of the Loan and Security Agreement
between Silicon Valley Bank ("Silicon") and the above-named borrower
("Borrower") of even date.
Credit Limit (Equipment)
(Section 1): $750,000,00 (such, amount to be funded under
----------
the aggregate Credit Limit). Equipment Advances
will be made only an or prior to May 1, 1998 (the
------
"Last Advance Date") and only for the purpose of
purchasing equipment reasonably acceptable to
Silicon. Borrower must provide invoices for the
equipment to Silicon on or before the Last
Advance Date.
Interest Rate (Section 1): A rate equal to the "Prime Rate" in effect from
time to time, plus 0 % per annum. Interest shall
be calculated on the basis of a 360-day year for
the actual number of days elapsed. "Prime Rate"
means the rate amounted from time to time by
Silicon as its "prime rate," it is a base rate
upon which other rates charged by Silicon are
based, and it is not necessarily the best rate
available at Silicon. The interest rate
applicable to the Obligations shall change on
each date there is a change in the Prime Rate.
Maturity Date (Section 4): After the Last Advance Date, the unpaid principal
balance of the Equipment Advances shall be repaid
in 33 equal monthly installments of principal,
--
plus interest, commencing on July 1, 1998 and
------------
continuing on the same day of each month
thereafter until the entire unpaid principal
balance of the Equipment Advances unpaid
interest have been paid (subject to Silicon's
right to accelerate the Equipment Advances on an
Event of Default).
Borrower: Silicon:
Docent, Inc. SILICON VALLEY BANK
- -----------------------------
By /s/ Pardner Wynn By /s/ [ILLEGIBLE]^^
--------------------------- ----------------------------
President or Vice President Title VP
--------------------------
<PAGE>
[LOGO] Silicon Valley Bank
Schedule to QuickStart Loan and Security Agreement (Letters of Credit Sublimit)
BORROWER: Docent, Inc. DATE: August l, 1997
------------------------- --------------------------
This Schedule is an integral part of the Loan and Security Agreement
between Silicon Valley Bank ("Silicon") and the above-named borrower
("Borrower") of even date.
Letters of Credit
Sublimit (Section 1): The aggregate Credit limit shall be reduced by an
amount equal to the sum of the face amounts of all
outstanding letters of credit (including drawn but
unreimbursed letters of credit). Silicon agrees to
issue or cause to be issued letters of credit for
the account of Borrower, provided that the face
amount of outstanding letters of credit (including
drawn but unreimbursed letters of credit) shall not
in any case exceed Forty Thousand Dollars
--------------
($40,000.00). Each such letter of credit shall have
---------
an expiry date no later than one hundred eighty
(180) days alter the Maturity Date as stated in the
Schedule to QuickStart Loan and Security Agreement
of even date ("Maturity Date") provided that
Borrower's letter of credit reimbursement obligation
shall be secured by cash on terms acceptable to
Silicon at any time after the Maturity Date. All
such letters of credit shall be, in form and
substance, acceptable to Silicon in its sole
discretion and shall be subject to the terms and
conditions of Silicon's form of application and
letter of credit agreement.
Borrower shall indemnify, defend and hold Silicon
harmless from any loss, cost, expense or liability,
including, without limitation, reasonable attorneys'
fees, arising out of or in connection with any
letters of credit.
Borrower may request that Silicon issue a letter of
credit payable in a currency other than United
states Dollars. If a demand for payment is made
under any such letter of credit, Silicon shall treat
such demand as an Advance to Borrower of the
equivalent of the amount thereof (plus cable
charges) in United States currency at the then
prevailing rate of exchange in San Francisco,
California, for sales of that other currency for
cable transfer to the country of which it is the
currency.
Upon the issuance of any letter of credit payable in
a currency other than United States Dollars, Silicon
shall create a reserve (the "Letter of Credit
Reserve") under the aggregate Credit Limit for
letters of credit against fluctuations in currency
exchange rates, in an amount equal to ten percent
(10%) of the face amount of such letter of credit.
The amount of such reserve may be amended by Silicon
from time to time to account for fluctuations in the
exchange rate. The availability of funds under the
Credit Limit shall be reduced bit the amount of such
reserve for so long as such letter of credit remains
outstanding.
Borrower: Silicon:
Docent, Inc. SILICON VALLEY BANK
- ----------------------------
By /s/ Pardner Wynn By /s/ [ILLEGIBLE]^^
-------------------------- ----------------------------
President or Vice President Title VP
-------------------------
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EXHIBIT 10.20
SUBORDINATED LOAN AND SECURITY AGREEMENT
THIS AGREEMENT (the "Agreement"), dated as of April 23, 1999, is entered
into by and between Docent, Inc., a Delaware corporation, with its chief
executive office, and principal place of business located at 2444 Charleston
Road, Mountain View, CA 94043 (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 THREE MILLION and 00/100 DOLLARS
($3,000,000) in available immediately (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
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limitation, unpaid seller's rights of rescission, replevin, reclamation and
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
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9105(1)(f) of the UCC, now owned or hereafter acquired by Borrower or in which
Borrower now holds or hereafter acquires any interest.
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 April 23, 1999) 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 April 23, 1999 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
Loan due at the Closing Date plus transaction, due diligence and legal expense
of $5,000.
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
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9105(1)(i) of the UCC, now owned or hereafter acquired by Borrower or in which
Borrower now holds or hereafter acquires any interest.
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.
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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.
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.
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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.
1.33 "Senior Debt" means any indebtedness (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 by or against Borrower provided that Senior Debt
shall not include debt exceeding Two Hundred Fifty Three Thousand Dollars
($253,000) outstanding at any one time with accounts receivables debt excluded.
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 C 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 and sixteen one hundredths percent
(12.16%) percent per annum, shall be due and payable in thirty six (36) 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
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purposes only, and hereby grants to Lender a security interest in, all of
Borrower's right, title 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 General Intangibles;
(e) All Inventory;
(f) All other goods and personal property of Borrower whether tangible or
intangible and whether now or hereafter owned or existing, leased,
consigned by or to, or acquired by, Borrower and wherever located; and
(g) 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
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bankruptcy, insolvency, reorganization or other similar laws generally affecting
the enforcement of the rights of creditors.
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
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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
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 quarter, unaudited interim financial
statements as of the end of such quarter (prepared on a consolidated and
consolidating basis, if applicable), including balance sheet 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 one hundred
eighty (180) 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 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,
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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, to confirm, perfect, preserve and protect the
security interests intended to be granted hereby, and in addition, and for such
purposes only, 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
11
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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 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.
SECTION 7. CONDITIONS PRECEDENT TO LOAN
The obligation of Lender to fund the Loan on each Advance Date shall be
subject to Lender's discretion and satisfactory completion of its due diligence
and approval process, and 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
October 23, 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 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;
(f) such other documents as Lender may reasonably request.
12
<PAGE>
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 Lender provides notice of such default; 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
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
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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 which default is not cured or waived within the applicable
time allowed under the 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.
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.
14
<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.
15
<PAGE>
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:
--------------
DOCENT, INC.
Attention: Julie O'Connor
244 Charleston Road
Mountain View, CA 94043
Facsimile: (650) 962-9411
Phone: (650) 934-9500
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 January 14, 1999,
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.
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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 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
17
<PAGE>
right of either party to bring proceedings in the courts of any other
jurisdiction.
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.
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<PAGE>
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: DOCENT, INC.
Signature: /s/ Julia A. O'Connor
-------------------------------
Print Name: Julia A. O'Connor
-------------------------------
Title: VP and CFO
-------------------------------
Accepted in Rosemont, Illinois:
LENDER: COMDISCO, INC.
Signature: /s/ James Labe
-------------------------------
Print Name: James Labe, President
-------------------------------
Title: Comdisco Ventures Corporation
-------------------------------
19
<PAGE>
Exhibit C
Advance Request
Name: ___________________________ ("Borrower") Date:__________________
Address: ___________________________
___________________________
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 ___________________ (the "Agreement").
Please:
(a) Issue a check payable to Borrower ______________
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: ______________________________
BY: ______________________________
TITLE: ______________________________
PRINT: ______________________________
20
<PAGE>
Exhibit A
SUBORDINATED PROMISSORY NOTE
$3,000,000 Date: April 28, 1999
Due: May 1, 2002
FOR VALUE RECEIVED, Docent, Inc., 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 Three Million and 00/100 Dollars ($3,000,000) together with
interest at twelve percent and sixteen one hundredths (12.16%) 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 36
equal monthly installments of $99,939.13 each, commencing June 1, 1999 and on
the same day of each month thereafter to and including May 1, 2002, 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
April 23, 1999 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.
-1-
<PAGE>
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: DOCENT, INC.
2444 Charleston Road
Mountain View, CA 94043
Signature: _______________________________
Print Name:_______________________________
Title: _______________________________
-2-
<PAGE>
EXHIBIT 10.21
PROMISSORY NOTE
Mountain View, California
September 30, 1998
For Valued Received, the undersigned hereby unconditionally promise to pay
to the order of Docent, Inc., a Delaware corporation (the "Company"), at the
Company's corporate office in Mountain View, California, or at such other place
as the holder hereof may designate in writing, in lawful money of the United
States of America and in immediately available funds, the principal sum of One
Hundred Three Thousand Dollars ($103,000), plus interest at the rate of Five and
54/100 percent (5.54%) per annum as follows:
Principal and Interest Repayment. The outstanding principal and interest
due and payable hereunder shall be due and payable in full at the time that
1,030,000 shares of Common Stock of the Company acquired by the undersigned as
of the date hereof are sold or transferred by the undersigned, but in any event,
before September 30, 2003 (the "Principal Repayment Date"); provided, however,
(i) that the Company, in its sole discretion may extend the Principal Repayment
Date, and (ii) in the event that the undersigned's employment by or association
with the Company is terminated for any reason prior to payment in full of this
Note, this Note shall be accelerated and all remaining unpaid principal and
interest shall become due and payable immediately after such termination.
If the undersigned fails to pay the principal and interest when due, the
Company, at its sole option, shall have the right to accelerate this Note, in
which event the entire principal and interest due shall become immediately due
and payable, and immediately collectible by the Company pursuant to applicable
law.
This Note may be prepaid at any time without penalty.
The full amount of this Note is secured by a pledge of 1,030,000 shares of
the Common Stock of the Company and by a pledge of 100 municipal bonds of Orange
County, CA, issued as five percent (5%) Local Transportation Authority Sales Tax
Revenue MBIA, jointly owned by David R. Ellett and Leslie K. Ellett (Mr.
Ellett's spouse), and is subject to all of the terms and provisions of that
certain Stock Pledge Agreement, of even date herewith, between the undersigned
and the Company.
The undersigned hereby represents and agrees that the amounts due under
this Note are not consumer debt, and are not incurred primarily for personal,
family or household purposes, but are for business and commercial purposes only.
The undersigned hereby waives presentment, protest and notice of protest,
demand for payment, notice of dishonor and all other notices or demands in
connection with the delivery, acceptance, performance, default or endorsement of
this Note.
1.
<PAGE>
The holder hereof shall he entitled to recover, and the undersigned agrees
to pay when incurred, all costs and expenses of collection of this Note,
including without limitation, reasonable attorneys' fees.
This Note shall be governed by, and construed, enforced and interpreted in
accordance with, the laws of the State of California, excluding conflict of laws
principles that would cause the application of laws of any other jurisdiction.
/s/ David Ellett
--------------------------
David Ellett
/s/ Leslie K. Ellett
--------------------------
Leslie K. Ellett
2.
<PAGE>
EXHIBIT 10.22
PROMISSORY NOTE
Mountain View, California
July 9, 1997
For Value Received, the undersigned hereby unconditionally promises to pay
to the order of DOCENT, INC., a Delaware corporation (the "Company"), at the
Company's corporate office in Mountain View, California, or at such other place
as the holder hereof may designate in writing, in lawful money of the United
States of America and in immediately available funds, the principal sum of
Ninety-Seven Thousand Five Hundred Dollars ($97,500), plus interest at the rate
of six percent (6%) per annum as follows:
Principal And Interest Repayment. The outstanding principal and interest
due and payable hereunder shall be due and payable in full at the time that the
975,000 shares of Common Stock of the Company acquired by the undersigned as of
the date hereof are sold or transferred by the undersigned, but in any event,
before July 9, 2017 (the "Principal Repayment Date"); provided, however, (i)
that the Company, in its sole discretion may extend the Principal Repayment
Date, and (ii) in the event that the undersigned's employment by or association
with the Company is terminated for any reason prior to payment in full of this
Note, this Note shall be accelerated and all remaining unpaid principal and
interest shall become due and payable immediately after such termination.
If the undersigned fails to pay the principal and interest when due, the
Company, at its sole option, shall have the right to accelerate this Note, in
which event the entire principal and interest due shall become immediately due
and payable, and immediately collectible by the Company pursuant to applicable
law.
This Note may be prepaid at any time without penalty.
The full amount of this Note is secured solely by a pledge of shares of
Common Stock of the Company, and is subject to all of the terms and provisions
of the Stock Pledge Agreement, of even date herewith, between the undersigned
and the Company.
The undersigned hereby represents and agrees that the amounts due under
this Note are not consumer debt, and are not incurred primarily for personal,
family or household purposes, but are for business and commercial purposes only.
The undersigned hereby waives presentment, protest and notice of protest,
demand for payment, notice of dishonor and all other notices or demands in
connection with the delivery, acceptance, performance, default or endorsement of
this Note.
A-1
<PAGE>
The holder hereof shall be entitled to recover, and the undersigned agrees
to pay when incurred, all costs and expenses of collection of this Note,
including without limitation, reasonable attorneys' fees.
This Note shall be governed by, and construed, enforced and interpreted in
accordance with, the laws of the State of California, excluding conflict of laws
principles that would cause the application of laws of any other jurisdiction.
/s/ David Mandelkern
-----------------------------
David Mandelkern
A-2
<PAGE>
EXHIBIT 10.23
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT ("Pledge Agreement") is made by DAVID
MANDELKERN, an individual with a residence at PO Box 1964, Burlingame, CA 94105
("Pledgor"), in favor of DOCENT, INC., a Delaware corporation with its principal
place of business at Mountain View, California ("Pledgee").
WHEREAS, Pledgor has concurrently herewith executed that certain Promissory
Note (the "Note") in favor of Pledgee in the amount of Ninety-Seven Thousand
Five Hundred Dollars ($97,500) plus interest thereon in payment for the total
purchase price of Ninety-Seven Thousand Five Hundred Dollars ($97,500) for
975,000 shares of the Common Stock of Pledgee; and
WHEREAS, Pledgee is willing to accept the Note from Pledgor, but only upon
the condition, among others, that Pledgor shall have executed and delivered to
Pledgee this Pledge Agreement and the Collateral (as defined below):
NOW, THEREFORE, in consideration of the foregoing recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and intending to be legally bound, Pledgor hereby agrees as
follows:
1. As security for the full, prompt and complete payment and performance
when due (whether by stated maturity, by acceleration or otherwise) of all
indebtedness of Pledgor to Pledgee created under the Note (all such indebtedness
being the "Liabilities"), together with, without limitation, the prompt payment
of all expenses, including, without limitation, reasonable attorneys' fees and
legal expenses, incidental to the collection of the Liabilities and the
enforcement or protection of Pledgee's lien in and to the collateral pledged
hereunder, Pledgor hereby pledges to Pledgee, and grants to Pledgee, a first
priority security interest in all of the following (collectively, the "Pledged
Collateral"):
(a) 975,000 shares of Common Stock of Pledgee represented by
Certificate No. 4 (the "Pledged Shares"), and all dividends, cash, instruments,
and other property or proceeds from time to time received, receivable, or
otherwise distributed in respect of or in exchange for any or all of the Pledged
Shares;
(b) all voting trust certificates held by Pledgor evidencing the right
to vote any Pledged Shares subject to any voting trust; and
(c) all additional shares and voting trust certificates from time to
time acquired by Pledgor in any manner (which additional shares shall be deemed
to be part of the Pledged Shares), and the certificates representing such
additional shares, and all dividends, cash, instruments, and other property or
proceeds from time to time received, receivable, or otherwise distributed in
respect of or in exchange for any or all of such shares.
C-1
<PAGE>
The term "indebtedness" is used herein in its most comprehensive sense and
includes any and all advances, debts, obligations and Liabilities heretofore,
now or hereafter made, incurred or created, whether voluntary or involuntary and
whether due or not due, absolute or contingent, liquidated or unliquidated,
determined or undetermined, and whether recovery upon such indebtedness may be
or hereafter becomes unenforceable.
2. At any time, without notice, and at the expense of Pledgor, Pledgee in
its name or in the name of its nominee or of Pledgor may, but shall not be
obligated to: (i) collect by legal proceedings or otherwise all dividends
(except cash dividends other than liquidating dividends), interest, principal
payments and other sums now or hereafter payable upon or on account of said
Pledged Collateral; (ii) enter into any extension, reorganization, deposit,
merger or consolidation agreement, or any agreement in any way relating to or
affecting the Pledged Collateral, and in connection therewith may deposit or
surrender control of such Pledged Collateral thereunder, accept other property
in exchange for such Pledged Collateral and do and perform such acts and things
as it may deem proper, and any money or property received in exchange for such
Pledged Collateral shall be applied to the indebtedness or thereafter held by it
pursuant to the provisions hereof; (iii) insure, process and preserve the
Pledged Collateral; (iv) cause the Pledged Collateral to be transferred to its
name or to the name of its nominee; (v) exercise as to such Pledged Collateral
all the rights, powers and remedies of an owner, except that so long as no
default exists under the Note or hereunder, Pledgor shall retain all voting
rights as to the Pledged Shares.
3. Pledgor agrees to pay prior to delinquency, all taxes, charges, liens
and assessments against the Pledged Collateral, and upon the failure of Pledgor
to do so, Pledgee at its option may pay any of them and shall be the sole judge
of the legality or validity thereof and the amount necessary to discharge the
same.
4. At the option of Pledgee and without necessity of demand or notice, all
or any part of the indebtedness of Pledgor shall immediately become due and
payable irrespective of any agreed maturity, upon the happening of any of the
following events: (i) failure to keep or perform any of the terms or provisions
of this Pledge Agreement; (ii) failure to pay any installment of principal or
interest on the Note when due; (iii) the levy of any attachment, execution or
other process against the Pledged Collateral; or (iv) the insolvency, commission
of an act of bankruptcy, general assignment for the benefit of creditors, filing
of any petition in bankruptcy or for relief under the provisions of Title 11 of
the United States Code of, by, or against Pledgor.
5. In the event of the nonpayment of any indebtedness when due, whether by
acceleration or otherwise, or upon the happening of any of the events specified
in the last preceding paragraph, Pledgee may then, or at any time thereafter, at
its election, apply, set off, collect or sell in one or more sales, or take such
steps as may be necessary to liquidate and reduce to cash in the hands of
Pledgee in whole or in part, with or without any previous demands or demand of
performance or notice or advertisement, the whole or any part of the Pledged
Collateral in such order as Pledgee may elect, and any such sale may be made
either at public or private sale at its place of business or elsewhere, or at
any broker's board or securities exchange, either for cash or upon credit or for
future delivery; provided, however,
C-2
<PAGE>
that if such disposition is at private sale, then the purchase price of the
Pledged Collateral shall be equal to the public market price then in effect, or,
if at the time of sale no public market for the Pledged Collateral exists, then,
in recognition of the fact that the sale of the Pledged Collateral would have to
be registered under the Securities Act of 1933 and that the expenses of such
registration are commercially unreasonable for the type and amount of collateral
pledged hereunder, Pledgee and Pledgor hereby agree that such private sale shall
be at a purchase price mutually agreed to by Pledgee and Pledgor or, if the
parties cannot agree upon a purchase price, then at a purchase price established
by a majority of three independent appraisers knowledgeable of the value of such
collateral, one named by Pledgor within ten (10) days after written request by
the Pledgee to do so, one named by Pledgee within such ten (10) day period, and
the third named by the two appraisers so selected, with the appraisal to be
rendered by such body within 30 days of the appointment of the third appraiser.
The cost of such appraisal, including all appraiser's fees, shall be charged
against the proceeds of sale as an expense of such sale. Pledgee may be the
purchaser of any or all Pledged Collateral so sold and hold the same thereafter
in its own right free from any claim of Pledgor or right of redemption. Demands
of performance, notices of sale, advertisements and presence of property at sale
are hereby waived, and Pledgee is hereby authorized to sell hereunder any
evidence of debt pledged to it. Any sale hereunder may be conducted by any
officer or agent of Pledgee.
6. The proceeds of the sale of any of the Pledged Collateral and all sums
received or collected by Pledgee from or on account of such Pledged Collateral
shall be applied by Pledgee to the payment of expenses incurred or paid by
Pledgee in connection with any sale, transfer or delivery of the Pledged
Collateral, to the payment of any other costs, charges, attorneys' fees or
expenses mentioned herein, and to the payment of the indebtedness or any part
hereof, all in such order and manner as Pledgee in its discretion may determine.
Pledgee shall then pay any balance to Pledgor.
7. Subject to the terms and conditions of that certain Stock Restriction
Agreement, dated of even date herewith, including the Company's Purchase Option
as set forth therein, upon the transfer of all or any part of the indebtedness
Pledgee may transfer all or any part of the Pledged Collateral and shall be
fully discharged thereafter from all liability and responsibility with respect
to such Pledged Collateral so transferred, and the transferee shall be vested
with all the rights and powers of Pledgee hereunder with respect to such Pledged
Collateral so transferred; but with respect to any Pledged Collateral not so
transferred Pledgee shall retain all rights and powers hereby given.
8. Until all indebtedness shall have been paid in full the power of sale
and all other rights, powers and remedies granted to Pledgee hereunder shall
continue to exist and may be exercised by Pledgee at any time and from time to
time irrespective of the fact that the indebtedness or any part thereof may have
become barred by any statute of limitations, or that the personal liability of
Pledgor may have ceased.
9. Pledgee agrees that so long as no default exists under the Note or
hereunder, the Pledged Shares shall, upon the request of Pledgor, be released
from pledge as the indebtedness is paid. Such releases shall be at the rate of
one share for each Ten Cents ($0.10) of principal amount of indebtedness paid.
Release from pledge, however, shall not result in release from
C-3
<PAGE>
the provisions of those certain Joint Escrow Instructions, if any, of even date
herewith among the parties to this Pledge Agreement and the Escrow Agent named
therein.
10. With respect to interest owed on the Pledged Shares, Pledgor shall not
be responsible for interest that accrues on the Pledged Shares if such shares
are purchased by the Company under its Purchase Option.
11. Pledgee may at any time deliver the Pledged Collateral or any part
thereof to Pledgor, and the receipt of Pledgor shall be a complete and full
acquittance for the Pledged Collateral so delivered, and Pledgee shall
thereafter be discharged from any liability or responsibility therefor.
12. Pledgor may at any time deliver the Pledged Collateral or any part
thereof to Pledgee, and the receipt of Pledgee shall be a complete and full
acquittance for the debt incurred under the Note, and Pledgor shall thereafter
be discharged from any liability or responsibility therefor.
13. The rights, powers and remedies given to Pledgee by this Pledge
Agreement shall be in addition to all rights, powers and remedies given to
Pledgee by virtue of any statute or rule of law. Any forbearance or failure or
delay by Pledgee in exercising any right, power or remedy hereunder shall not be
deemed to be a waiver of such right, power or remedy, and any single or partial
exercise of any right, power or remedy hereunder shall not preclude the further
exercise thereof; and every right, power and remedy of Pledgee shall continue in
full force and effect until such right, power or remedy is specifically waived
by an instrument in writing executed by Pledgee.
14. If any provision of this Pledge Agreement is held to be unenforceable
for any reason, it shall be adjusted, if possible, rather than voided in order
to achieve the intent of the parties to the extent possible. In any event, all
other provisions of this Pledge Agreement shall be deemed valid and enforceable
to the full extent possible.
15. This Pledge Agreement shall be governed by, and construed in
accordance with, the laws of the State of California as applied to contracts
made and performed entirely within the State of California by residents of such
State.
Dated: July 9, 1997.
/s/ David Mandelkern
--------------------------
David Mandelkern
C-4
<PAGE>
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT ("Pledge Agreement") is made by DAVID ELLETT,
and LESLIE K. ELLETT, individuals with a residence at San Jose, California
("Pledgors"), in favor of DOCENT, INC., a Delaware corporation with its
principal place of business at Mountain View, California ("Pledgee").
WHEREAS, Pledgors have concurrently herewith executed that certain
Promissory Note (the "Note") in favor of Pledgee in the amount of One Hundred
Three Thousand Dollars ($103,000) plus interest thereon in payment for the total
purchase price for 1,030,000 shares of the Common Stock of Pledgee; and
WHEREAS, Pledgee is willing to accept the Note from Pledgors, but only upon
the condition, among others, that Pledgors shall have executed and delivered to
Pledgee this Pledge Agreement and the Collateral (as defined below):
NOW, THEREFORE, in consideration of the foregoing recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and intending to be legally bound, Pledgors hereby agrees as
follows:
1. As security for the full, prompt and complete payment and performance
when due (whether by stated maturity, by acceleration or otherwise) of all
indebtedness of Pledgors to Pledgee created under the Note (all such
indebtedness being the "Liabilities"), together with, without limitation, the
prompt payment of all expenses, including, without limitation, reasonable
attorneys' fees and legal expenses, incidental to the collection of the
Liabilities and the enforcement or protection of Pledgee's lien in and to the
collateral pledged hereunder, Pledgors hereby pledges to Pledgee, and grants to
Pledgee, a first priority security interest in all of the following
(collectively, the "Pledged Collateral"):
(a) One million thirty thousand (1,030,000) shares of Common Stock of
Pledgee represented by Stock Certificate numbered C-12 (the "Pledged Shares"),
and all dividends, cash, instruments, and other property or proceeds from time
to time received, receivable, or otherwise distributed in respect of or in
exchange for any or all of the Pledged Shares;
(b) all voting trust certificates held by Pledgors evidencing the
right to vote any Pledged Shares subject to any voting trust;
(c) all additional shares and voting trust certificates from time to
time acquired by Pledgors in any manner (which additional shares shall be deemed
to be part of the Pledged Shares), and the certificates representing such
additional shares, and all dividends, cash, instruments, and other property or
proceeds from time to time received, receivable, or otherwise distributed in
respect of or in exchange for any or all of such shares; and
1.
<PAGE>
(d) 100 municipal bonds of Orange County, CA, issued as five percent
(5%) Local Transportation Authority Sales Tax Revenue MBIA.
2. The term "indebtedness" is used herein in its most comprehensive sense
and includes any and all advances, debts, obligations and Liabilities
heretofore, now or hereafter made, incurred or created, whether voluntary or
involuntary and whether due or not due, absolute or contingent, liquidated or
unliquidated, determined or undetermined, and whether recovery upon such
indebtedness may be or hereafter becomes unenforceable.
3. At any time, without notice, and at the expense of Pledgors, Pledgee
in its name or in the name of its nominee or of Pledgors may, but shall not be
obligated to: (i) collect by legal proceedings or otherwise all dividends
(except cash dividends other than liquidating dividends), interest, principal
payments and other sums now or hereafter payable upon or on account of said
Pledged Shares; (ii) enter into any extension, reorganization, deposit, merger
or consolidation agreement, or any agreement in any way relating to or affecting
the Pledged Shares, and in connection therewith may deposit or surrender control
of such Pledged Shares thereunder, accept other property in exchange for such
Pledged Shares and do and perform such acts and things as it may deem proper,
and any money or property received in exchange for such Pledged Shares shall be
applied to the indebtedness or thereafter held by it pursuant to the provisions
hereof; (iii) insure, process and preserve the Pledged Collateral; (iv) cause
the Pledged Collateral to be transferred to its name or to the name of its
nominee; (v) exercise as to such Pledged Collateral all the rights, powers and
remedies of an owner, except that so long as no default exists under the Note or
hereunder, Pledgors shall retain all voting rights as to the Pledged Shares.
4. Pledgors agree to pay prior to delinquency, all taxes, charges, liens
and assessments against the Pledged Collateral, and upon the failure of Pledgors
to do so, Pledgee at its option may pay any of them and shall be the sole judge
of the legality or validity thereof and the amount necessary to discharge the
same.
5. At the option of Pledgee and without necessity of demand or notice,
all or any part of the indebtedness of Pledgors shall immediately become due and
payable irrespective of any agreed maturity, upon the happening of any of the
following events: (i) failure to keep or perform any of the terms or provisions
of this Pledge Agreement; (ii) failure to pay any installment of principal or
interest on the Note when due; (iii) the levy of any attachment, execution or
other process against the Pledged Collateral; or (iv) the insolvency, commission
of an act of bankruptcy, general assignment for the benefit of creditors, filing
of any petition in bankruptcy or for relief under the provisions of Title 11 of
the United States Code of, by, or against Pledgors.
6. In the event of the nonpayment of any indebtedness when due, whether
by acceleration or otherwise, or upon the happening of any of the events
specified in the last preceding paragraph, Pledgee may then, or at any time
thereafter, at its election, apply, set off, collect or sell in one or more
sales, or take such steps as may be necessary to liquidate and reduce to cash in
the hands of Pledgee in whole or in part, with or without any previous demands
or demand of performance or notice or advertisement, the whole or any part of
the Pledged Collateral in such order as Pledgee may elect, and any such sale may
be made either at public or
2.
<PAGE>
private sale at its place of business or elsewhere, or at any broker's board or
securities exchange, either for cash or upon credit or for future delivery;
provided, however, that if such disposition is at private sale, then the
purchase price of the Pledged Collateral shall be equal to the public market
price then in effect, or, if at the time of sale no public market for the
Pledged Collateral exists, then, in recognition of the fact that the sale of the
Pledged Collateral would have to be registered under the Securities Act of 1933
and that the expenses of such registration are commercially unreasonable for the
type and amount of collateral pledged hereunder, Pledgee and Pledgors hereby
agree that such private sale shall be at a purchase price mutually agreed to by
Pledgee and Pledgors or, if the parties cannot agree upon a purchase price, then
at a purchase price established by a majority of three independent appraisers
knowledgeable of the value of such collateral, one named by Pledgors within ten
(10) days after written request by the Pledgee to do so, one named by Pledgee
within such ten (10) day period, and the third named by the two appraisers so
selected, with the appraisal to be rendered by such body within 30 days of the
appointment of the third appraiser. The cost of such appraisal, including all
appraiser's fees, shall be charged against the proceeds of sale as an expense of
such sale. Pledgee may be the purchaser of any or all Pledged Collateral so sold
and hold the same thereafter in its own right free from any claim of Pledgors or
right of redemption. Demands of performance, notices of sale, advertisements and
presence of property at sale are hereby waived, and Pledgee is hereby authorized
to sell hereunder any evidence of debt pledged to it. Any sale hereunder may be
conducted by any officer or agent of Pledgee.
7. The proceeds of the sale of any of the Pledged Collateral and all sums
received or collected by Pledgee from or on account of such Pledged Collateral
shall be applied by Pledgee to the payment of expenses incurred or paid by
Pledgee in connection with any sale, transfer or delivery of the Pledged
Collateral, to the payment of any other costs, charges, attorneys' fees or
expenses mentioned herein, and to the payment of the indebtedness or any part
hereof, all in such order and manner as Pledgee in its discretion may determine.
Pledgee shall then pay any balance to Pledgors.
8. Subject to the terms and conditions of that certain Early Exercise
Stock Purchase Agreement, dated of even date herewith, including the Company's
Purchase Option as set forth therein, upon the transfer of all or any part of
the indebtedness Pledgee may transfer all or any part of the Pledged Collateral
and shall be fully discharged thereafter from all liability and responsibility
with respect to such Pledged Collateral so transferred, and the transferee shall
be vested with all the rights and powers of Pledgee hereunder with respect to
such Pledged Collateral so transferred; but with respect to any Pledged
Collateral not so transferred Pledgee shall retain all rights and powers hereby
given.
9. Until all indebtedness shall have been paid in full the power of sale
and all other rights, powers and remedies granted to Pledgee hereunder shall
continue to exist and may be exercised by Pledgee at any time and from time to
time irrespective of the fact that the indebtedness or any part thereof may have
become barred by any statute of limitations, or that the personal liability of
Pledgors may have ceased.
10. Pledgee agrees that so long as no default exists under the Note or
hereunder, the Pledged Shares shall, upon the request of Pledgors, be released
from pledge as the indebtedness
3.
<PAGE>
provisions of those certain Joint Escrow Instructions, if any, of even date
herewith among the parties to this Pledge Agreement and the Escrow Agent named
therein.
11. With respect to interest owed on the Pledged Shares, Pledgors shall
not be responsible for interest that accrues on the Pledged Shares if such
shares are purchased by the Company under its Purchase Option.
12. Pledgee may at any time deliver the Pledged Collateral or any part
thereof to Pledgors, and the receipt of Pledgors shall be a complete and full
acquittance for the Pledged Collateral so delivered, and Pledgee shall
thereafter be discharged from any liability or responsibility therefor.
13. Pledgors may at any time deliver the Pledged Collateral or any part
thereof to Pledgee, and the receipt of Pledgee shall be a complete and full
acquittance for the debt incurred under the Note, and Pledgors shall thereafter
be discharged from any liability or responsibility therefor.
14. The rights, powers and remedies given to Pledgee by this Pledge
Agreement shall be in addition to all rights, powers and remedies given to
Pledgee by virtue of any statute or rule of law. Any forbearance or failure or
delay by Pledgee in exercising any right, power or remedy hereunder shall not be
deemed to be a waiver of such right, power or remedy, and any single or partial
exercise of any right, power or remedy hereunder shall not preclude the further
exercise thereof, and every right, power and remedy of Pledgee shall continue in
full force and effect until such right, power or remedy is specifically waived
by an instrument in writing executed by Pledgee.
15. If any provision of this Pledge Agreement is held to be unenforceable
for any reason, it shall be adjusted, if possible, rather than voided in order
to achieve the intent of the parties to the extent possible. In any event, all
other provisions of this Pledge Agreement shall be deemed valid and enforceable
to the full extent possible.
16. This Pledge Agreement shall be governed by, and construed in
accordance with, the laws of the State of California as applied to contracts
made and performed entirely within the State of California by residents of such
State.
Dated: September 30, 1998.
/s/ Dave Ellett
-------------------------------
David Ellett
/s/ Leslie K. Ellett
-------------------------------
Leslie K. Ellett
4.
<PAGE>
EXHIBIT 10.24
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 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 SECURITIES LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series C Preferred Stock of
DOCENT, INC.
Dated as of April 23, 1999 (the "Effective Date")
WHEREAS, Docent, Inc. a Delaware corporation (the "Company") has entered
into a Subordinated Loan and Security Agreement dated as of April 23, 1999, 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 C 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, 215,053 fully paid and
non-assessable shares of the Company's Series C Preferred Stock ("Preferred
Stock") at a purchase price of $1.86 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 longer.
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
acknowledgement of exercise in the form attached hereto as Exhibit II (the
"Acknowledgement 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
-1-
<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 the 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 the
---------------------------------------
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 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
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<PAGE>
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.
-----------------------------
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 chase 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 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
-3-
<PAGE>
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 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 a (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 resulting in a dilutive event; (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.
-4-
<PAGE>
(c) Consents and Approvals. No consent or approval of, giving 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 notice 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 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) The authorized capital of the Company consists of (A) 25,000,000
shares of Common Stock, of which 5,126,843 shares are issued and
outstanding, and (B) 11,983,816 shares of preferred stock, of which
11,211,363 shares are issued and outstanding and are convertible into
11,211,383 shares of Common Stock at prices ranging from $0.675 to $1.86
per share.
(ii) The Company has reserved 4,500,000 shares of Common Stock for
issuance under its Incentive Stock Option Plan, under which 1,825,345
options are outstanding at an average price of $0.20 per share. There are
no other options, warrants, conversion privileges or other rights
presently outstanding to purchase or otherwise acquire any authorized but
unissued shares of the Company's capital stock or other securities of the
Company.
(iii) 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.
(a) Investment Purpose. The right to acquire Preferred Stock or the
------------------
Preferred Stock issuable upon the 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 1993
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.
-5-
<PAGE>
(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 1744 under the 1933 Act, or (3) a letter 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 Warrant holder has such knowledge and experience
--------------
in financial and business matters as to be capable of evaluating the merits and
risks of it investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. the Warrant holder 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. Warrant holder is an "accredited investor" within
-------------------
the meaning of the Securities and Exchange rule 501 of Regulation D, as
presently in effect.
11. RIGHT OF FIRST OFFER.
--------------------
In accordance with the provisions of Section 4 of Amended and restated
Investor Rights Agreement dated as of March 23, 1999 and as may be amended form
time to time ("Investor Rights Agreement"). Warrantholder shall have the right
of first refusal to purchase up to its pr rata share of all Equity Securities,
as defined in Section 4 of the Investor Rights Agreement, that the Company may,
from time to time, sell and issue after the Effective Date hereof, other than
the Equity Securities excluded by Section 4.5 thereof. This right of first
refusal shall not apply to and shall terminate upon the effective date of the
registration statement pertaining to the company first firm commitment
underwritten public offering of its common Stock registered under the Securities
Act of 1933. The company and Warrantholder agree to be bound by the Notice.
Exercise and Waiver of Rights provisions of Section 4.2 of the Investor Rights
Agreement.
12. 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 hereof 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.
-6-
<PAGE>
13. 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 an 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 2444
Charleston Road, Mountain View, CA 94043-1622. Attention: Julie O'Connor (and/or
if by facsimile, (650) 962-9411 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 weather 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
of all provision 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 carving 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 the 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
form 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 thereto duly authorized as of the Effective Date.
Company: DOCENT, INC.
By: /s/ Julia A. O'Connor
-------------------------------------
Title: V.P. and CFO
----------------------------------
Warrantholder: COMDISCO, INC.
By: /s/ James Labe
-------------------------------------
James Labe, President
Title: Comdisco Ventures Division
----------------------------------
-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 or the Warrant Agreement dated the ________ day of ____________,
1999 (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 10.25
THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR STATE SECURITIES LAWS. THEY
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURITIES UNDER THE ACT OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
WARRANT TO PURCHASE SERIES D CONVERTIBLE PREFERRED STOCK
No. PDW-1 December ___, 1999
Void After December ___, 2002
This Certifies That, Gilde IT Fund, with its principal office at P.O. Box
85067, 3508 AB Utrecht Netherlands, or assigns (the "Holder"), is entitled to
subscribe for and purchase at the Exercise Price (defined below) from Docent,
Inc., a Delaware Company, with its principal office at 2444 Charleston Road,
Mountain View, CA 94043 (the "Company") up to Two Hundred Fifty Thousand
(250,000) shares of the Series D Convertible Preferred Stock of the Company (the
"Series D Preferred"), contingent on certain conditions being met by Holder
contained in that certain Collaboration Agreement, dated as of September __,
1999 by and between the Company and Holder, such terms and conditions attached
hereto as Exhibit A.
1. Definitions. As used herein, the following terms shall have the
following respective meanings:
(a) "Exercise Period" shall mean the period commencing with the date
hereof and ending three years from the date hereof.
(b) "Exercise Price" shall mean $2.86 per share, subject to adjustment
pursuant to Section 5 below.
(c) "Exercise Shares" shall mean the shares of the Series D Preferred
issuable upon exercise of this Warrant.
2. Exercise of Warrant. The rights represented by this Warrant may be
exercised in whole or in part at any time during the Exercise Period, by
delivery of the following to the Company at its address set forth above (or at
such other address as it may designate by notice in writing to the Holder):
(a) An executed Notice of Exercise in the form attached hereto;
(b) Payment of the Exercise Price either (i) in cash or by check, or
(ii) by net exercise as set forth in Section 2.1 herein; and
(c) This Warrant.
<PAGE>
Upon the exercise of the rights represented by this Warrant, a
certificate or certificates for the Exercise Shares so purchased, registered in
the name of the Holder or persons affiliated with the Holder, if the Holder so
designates, shall be issued and delivered to the Holder within a reasonable time
after the rights represented by this Warrant shall have been so exercised.
The person in whose name any certificate or certificates for Exercise
Shares are to be issued upon exercise of this Warrant shall be deemed to have
become the holder of record of such shares on the date on which this Warrant was
surrendered and payment of the Exercise Price was made, irrespective of the date
of delivery of such certificate or certificates, except that, if the date of
such surrender and payment is a date when the stock transfer books of the
Company are closed, such person shall be deemed to have become the holder of
such shares at the close of business on the next succeeding date on which the
stock transfer books are open.
2.1. Net Exercise. Notwithstanding any provisions herein to the contrary,
if the fair market value of one share of the Company's Series D Preferred is
greater than the Exercise Price (at the date of calculation as set forth below),
in lieu of exercising this Warrant by payment of cash, the Holder may elect to
receive shares equal to the value (as determined below) of this Warrant (or the
portion thereof being canceled) by surrender of this Warrant at the principal
office of the Company together with the properly endorsed Notice of Exercise in
which event the Company shall issue to the Holder a number of shares of Series D
Preferred computed using the following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Series D Preferred to be issued to the
Holder
Y = the number of shares of Series D Preferred purchasable under the
Warrant or, if only a portion of the Warrant is being exercised,
the number of shares underlying the Warrant being exercised (at
the date of such calculation)
A = the fair market value of one share of the Company's Series D
Preferred (at the date of such calculation)
B = Exercise Price (as adjusted to the date of such calculation)
For purposes of the above calculation, the fair market value of one share
of Series D Preferred shall be determined by the Company's Board of Directors in
good faith; provided, however, that in the event that this Warrant is exercised
pursuant to this Section 2.1 in connection with the Company's initial public
offering of its Common Stock, the fair market value per share shall be the per
share offering price to the public of the Company's initial public offering.
<PAGE>
3. Covenants of the Company.
3.1. Covenants as to Exercise Shares. The Company covenants and agrees that
all Exercise Shares that may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued and
outstanding, fully paid and nonassessable, and free from all taxes, liens and
charges with respect to the issuance thereof. The Company further covenants and
agrees that the Company will at all times during the Exercise Period, have
authorized and reserved, free from preemptive rights, a sufficient number of
shares of its Series D Preferred to provide for the exercise of the rights
represented by this Warrant. If at any time during the Exercise Period the
number of authorized but unissued shares of Series D Preferred shall not be
sufficient to permit exercise of this Warrant, the Company will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Series D Preferred to such number of
shares as shall be sufficient for such purposes.
3.2. No Impairment. Except and to the extent as waived or consented to by
the Holder, the Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Warrant and in
the taking of all such action as may be necessary or appropriate in order to
protect the exercise rights of the Holder against impairment.
3.3. Notices of Record Date. In the event of any taking by the Company of a
record of the holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend (other than a cash
dividend which is the same as cash dividends paid in previous quarters) or other
distribution, the Company shall mail to the Holder, at least ten (10) days prior
to the date specified herein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend or distribution.
4. Representations of Holder.
4.1. Acquisition of Warrant for Personal Account. The Holder represents and
warrants that it is acquiring the Warrant solely for the Holder's account for
investment and not with a view to or for sale or distribution of said Warrant or
any part thereof. The Holder also represents that the entire legal and
beneficial interests of the Warrant and Exercise Shares the Holder is acquiring
is being acquired for, and will be held for the Holder's account only.
4.2. Securities Are Not Registered.
(a) The Holder understands that the Warrant and the Exercise Shares
have not been registered under the Securities Act of 1933, as amended (the
"Act") on the basis that no distribution or public offering of the stock of
the Company is to be effected. The Holder realizes that the basis for the
exemption may not be present if, notwithstanding the Holder's
representations, the Holder has a present intention of acquiring the
securities for a fixed or determinable period in the future, selling (in
connection with a distribution or otherwise),
<PAGE>
granting any participation in, or otherwise distributing the securities. The
Holder has no such present intention.
(b) The Holder recognizes that the Warrant and the Exercise Shares
must be held indefinitely unless they are subsequently registered under the Act
or an exemption from such registration is available. The Holder recognizes that
the Company has no obligation to register the Warrant or the Exercise Shares of
the Company, or to comply with any exemption from such registration.
(c) The Holder is aware that neither the Warrant nor the Exercise
Shares may be sold pursuant to Rule 144 adopted under the Act unless certain
conditions are met, including, among other things, the existence of a public
market for the shares, the availability of certain current public information
about the Company, the resale following the required holding period under Rule
144 and the number of shares being sold during any three month period not
exceeding specified limitations. Holder is aware that the conditions for resale
set forth in Rule 144 have not been satisfied and that the Company presently has
no plans to satisfy these conditions in the foreseeable future.
4.3. Disposition of Warrant and Exercise Shares.
(a) The Holder further agrees not to make any disposition of all or
any part of the Warrant or Exercise Shares in any event unless and until:
(i) The Company shall have received a letter secured by the
Holder from the Securities and Exchange Commission stating that no action will
be recommended to the Commission with respect to the proposed disposition; or
(ii) There is then in effect a registration statement under the
Act covering such proposed disposition and such disposition is made in
accordance with said registration statement; or
(iii) The Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and if reasonably
requested by the Company, the Holder shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, for the Holder to
the effect that such disposition will not require registration of such Warrant
or Exercise Shares under the Act or any applicable state securities laws.
(b) The Holder understands and agrees that all certificates
evidencing the shares to be issued to the Holder may bear the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT") OR STATE SECURITIES LAWS.
THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER THE ACT
<PAGE>
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
(c) The Holder hereby agrees not to sell or otherwise transfer or
dispose of all or any part of this Warrant or the Exercise Shares during a
period specified by the representative of the underwriters of Common Stock (not
to exceed one hundred eighty (180) days) following the effective date of the
registration statement of the Company filed under the Act. Holder further agrees
that the Company may impose stop-transfer instructions with respect to
securities subject to the foregoing restrictions until the end of such period.
5. Adjustment of Exercise Price. In the event of changes in the
outstanding Series D Preferred of the Company by reason of stock dividends,
split-ups, recapitalizations, reclassifications, combinations or exchanges of
shares, separations, reorganizations, liquidations, or the like, the number and
class of shares available under the Warrant in the aggregate and the Exercise
Price shall be correspondingly adjusted to give the Holder of the Warrant, on
exercise for the same aggregate Exercise Price, the total number, class, and
kind of shares as the Holder would have owned had the Warrant been exercised
prior to the event and had the Holder continued to hold such shares until after
the event requiring adjustment; provided, however, that such adjustment shall
not be made with respect to, and this Warrant shall terminate if not exercised
prior to, the events set forth in Section 7 below. The form of this Warrant need
not be changed because of any adjustment in the number of Exercise Shares
subject to this Warrant.
6. Fractional Shares. No fractional shares shall be issued upon the
exercise of this Warrant as a consequence of any adjustment pursuant hereto.
All Exercise Shares (including fractions) issuable upon exercise of this Warrant
may be aggregated for purposes of determining whether the exercise would result
in the issuance of any fractional share. If, after aggregation, the exercise
would result in the issuance of a fractional share, the Company shall, in lieu
of issuance of any fractional share, pay the Holder otherwise entitled to such
fraction a sum in cash equal to the product resulting from multiplying the then
current fair market value of an Exercise Share by such fraction.
7. Notice of Event. In the event of, at any time during the Exercise
Period, an initial public offering of securities of the Company registered under
the Act, or any capital reorganization, or any reclassification of the capital
stock of the Company (other than a change in par value or from par value to no
par value or no par value to par value or as a result of a stock dividend or
subdivision, split-up or combination of shares), or the consolidation or merger
of the Company with or into another corporation (other than a merger solely to
effect a reincorporation of the Company into another state), or the sale or
other disposition of all or substantially all the properties and assets of the
Company in its entirety to any other person, the Company shall provide to the
Holder twenty (20) days advance written notice of such public offering,
reorganization, reclassification, consolidation, merger or sale or other
disposition of the Company's assets. Should the Series D Preferred convert, by
virtue of one of transactions contemplated above or for any other reason, into
Common Stock of the Company, then the exercise of this warrant shall be for
Common Stock of the Company.
<PAGE>
8. No Stockholder Rights. This Warrant in and of itself shall not entitle
the Holder to any voting rights or other rights as a stockholder of the Company.
9. Registration Rights. The Company will cause this Warrant to be
included in the definition of "Series D Stock" pursuant to that certain Amended
and Restated Investor Rights Agreement dated as of August 27, 1999, when the
Company amends such agreement pursuant to any future financing.
10. Transfer of Warrant. Subject to applicable laws, the restriction on
transfer set forth on the first page of this Warrant, this Warrant and all
rights hereunder are transferable, by the Holder in person or by duly authorized
attorney, upon delivery of this Warrant and the form of assignment attached
hereto to any transferee designated by Holder. The transferee shall sign an
investment letter in form and substance, substantially the same as Section 4 of
this Warrant, and satisfactory to the Company.
11. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant is lost,
stolen, mutilated or destroyed, the Company may, on such terms as to indemnity
or otherwise as it may reasonably impose (which shall, in the case of a
mutilated Warrant, include the surrender thereof), issue a new Warrant of like
denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed.
Any such new Warrant shall constitute an original contractual obligation of the
Company, whether or not the allegedly lost, stolen, mutilated or destroyed
Warrant shall be at any time enforceable by anyone.
12. Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be sent by telex, telegram,
express mail or other form of rapid communications, if possible, and if not then
such notice or communication shall be mailed by first-class mail, postage
prepaid, addressed in each case to the party entitled thereto at the following
addresses: (a) if to the Company, to Docent, Inc., Attention: President, 2444
Charleston Road, Mountain View, CA 94043 and (b) if to the Holder, to President,
P.O. Box 85067, 3508 AB Utrecht Netherlands, or at such other address as one
party may furnish to the other in writing. Notice shall be deemed effective on
the date dispatched if by personal delivery, telecopy, telex or telegram, two
days after mailing if by express mail, or three days after mailing if by first-
class mail.
13. Acceptance. Receipt of this Warrant by the Holder shall constitute
acceptance of and agreement to all of the terms and conditions contained herein.
14. Governing Law. This Warrant and all rights, obligations and
liabilities hereunder shall be governed by the laws of the State of California
without giving effect to principles of conflict of laws. Any legal action or
other legal proceeding relating to this Warrant must be brought or otherwise
commenced in a state or federal court located in the counties of San Francisco,
San Mateo or Santa Clara in the State of California. Each of the Company and the
Holder irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the laying of the venue of
any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
<PAGE>
In Witness Whereof, the Company has caused this Warrant to be granted by
its duly authorized officer as of December __, 1999.
Docent, Inc.
By _______________________________
David R. Ellett
President and Chief Executive Officer
<PAGE>
Exhibit A
Gilde will actively support the Company and be involved in the European
operations by:
. Helping recruit the members of the European management team through Gilde's
extensive contact network and, if necessary, executive search firms;
. Helping the Company with senior level introductions to European top-tier
players in the Company's commercial focus areas;
. Introducing the Company to relevant European content providers; and
. Introducing the company to senior level people in the top-tier European
consultancy organizations.
<PAGE>
NOTICE OF EXERCISE
TO: Docent, Inc.
(1) [_] The undersigned hereby elects to purchase ________ shares of the
Series D Convertible Preferred Stock of Docent, Inc. (the "Company") pursuant to
the terms of the attached Warrant, and tenders herewith payment of the exercise
price in full, together with all applicable transfer taxes, if any.
[_] The undersigned hereby elects to purchase ________ shares of the
Series D Convertible Preferred Stock of Docent, Inc. (the "Company") pursuant to
the terms of the net exercise provisions set forth in Section 2.1 of the
attached Warrant, and shall tender payment of all applicable transfer taxes, if
any.
(2) Please issue a certificate or certificates representing said shares of
Series D Convertible Preferred Stock in the name of the undersigned or in such
other name as is specified below:
________________________
(Name)
________________________
________________________
(Address)
(3) The undersigned represents that (i) the aforesaid shares of Series D
Convertible Preferred Stock are being acquired for the account of the
undersigned for investment and not with a view to, or for resale in connection
with, the distribution thereof and that the undersigned has no present intention
of distributing or reselling such shares; (ii) the undersigned is aware of the
Company's business affairs and financial condition and has acquired sufficient
information about the Company to reach an informed and knowledgeable decision
regarding its investment in the Company; (iii) the undersigned is experienced in
making investments of this type and has such knowledge and background in
financial and business matters that the undersigned is capable of evaluating the
merits and risks of this investment and protecting the undersigned's own
interests; (iv) the undersigned understands that the shares of Series D
Convertible Preferred Stock issuable upon exercise of this Warrant have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
by reason of a specific exemption from the registration provisions of the
Securities Act, which exemption depends upon, among other things, the bona fide
nature of the investment intent as expressed herein, and, because such
securities have not been registered under the Securities Act, they must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available; (v) the undersigned is aware that
the aforesaid shares of Series D Convertible Preferred Stock may not be sold
pursuant to Rule 144 adopted under the Securities Act unless certain conditions
are met and until the undersigned has held the shares for the number of years
prescribed by Rule 144, that among the conditions for use of the Rule is the
availability of current information to the public about the Company and the
Company has not made such information available and has no present plans to do
so; and (vi) the undersigned agrees not to make any disposition of all or any
part of the aforesaid shares of Series D Convertible Preferred Stock unless and
until there is then in effect a registration statement under the Securities Act
covering such proposed disposition and such disposition is made in accordance
with said registration statement, or the undersigned has provided the Company
with an opinion of counsel satisfactory to the Company, stating that such
registration is not required.
_______________________ _____________________________
(Date) (Signature)
_____________________________
(Print name)
<PAGE>
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute
this form and supply required information.
Do not use this form to purchase shares.)
For Value Received, the foregoing Warrant and all rights evidenced thereby
are hereby assigned to
Name:___________________________________________________________________________
(Please Print)
Address:________________________________________________________________________
(Please Print)
Dated: _________________
Holder's
Signature:___________________________________
Holder's
Address:_____________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, 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.
<PAGE>
Exhibit 10.27
June 27, 1997
Dear Messrs. Mandelkern and Wynn:
For consideration given and intending to be legally bound, in addition to the
transactions contemplated in that certain Series S Convertible Preferred Stock
Purchase Agreement and Ancillary Agreements (as defined therein), dated of even
date herewith, Norwest Equity Partners, V and Advanced Technology Ventures IV
hereby agree that upon such date that David Mandelkern and Pardner Wynn (each, a
"Founder") are involuntarily terminated (with reference to Section 1(a)(iii) of
that certain Stock Restriction Agreement, dated of even date herewith), such
Founder shall receive from Docent, Inc. (the "Company"" upon the date of such
termination, notwithstanding any additional benefits to which the Founder is
eligible, the following severance benefits: six (6) months of salary and health
benefits at the same salary rate and health benefit coverage that such Founder
was earning, or was entitled to earn, on the date of termination. In addition,
the Company shall forgive that portion of a loan to Mr. Mandelkern from the
Company that is in connection with any debt owed by such Founder to the Company
that was incurred for the Founder's purchase of shares of the Company's stock
that are vested on the date of termination.
Norwest and Advanced hereby warrant, covenant and agree that their, their
assignees' and/or their successors' delegatees, respectively, who serve on the
Company's Board of Directors at the times of such involuntary termination, shall
vote to implement the terms of this agreement and shall assure that such
severance benefits are paid to the Founders.
This Agreement may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute one instrument.
NORWEST EQUITY PARTNERS, V
By: /s/ Kevin Hall
-------------------------
Title: Partner
----------------------
ADVANCED TECHNOLOGY VENTURES IV
By: /s/ Jos C. Henkens
-------------------------
Title: General Partner
----------------------
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of
our report dated March 28, 2000 relating to the consolidated financial
statements of Docent, Inc., which appear in such Registration Statement. We
also consent to the reference to us under the heading "Experts" in such
Registration Statement.
PricewaterhouseCoopers LLP
San Jose, CA
April 7, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 DEC-31-1999
<CASH> 2,968 12,773
<SECURITIES> 0 0
<RECEIVABLES> 307 809
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 3,292 14,165
<PP&E> 716 1,390
<DEPRECIATION> (158) (426)
<TOTAL-ASSETS> 4,183 15,302
<CURRENT-LIABILITIES> 1,430 4,227
<BONDS> 0 0
10,615 33,288
0 0
<COMMON> 5 5
<OTHER-SE> (8,029) (23,335)
<TOTAL-LIABILITY-AND-EQUITY> 4,183 15,502
<SALES> 297 141
<TOTAL-REVENUES> 541 792
<CGS> 23 29
<TOTAL-COSTS> 773 1,230
<OTHER-EXPENSES> 6,231 18,227
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 20 310
<INCOME-PRETAX> (6,434) (18,713)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (6,434) (18,713)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 (1,354)
<NET-INCOME> (6,434) (20,067)
<EPS-BASIC> (1.99) (5.00)
<EPS-DILUTED> (1.99) (5.00)
</TABLE>
