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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 13, 2000
REGISTRATION NO. 333-________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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WEBRIDGE, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 7372 93-1211734
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
225 S.W. BROADWAY, SUITE 600
PORTLAND, OREGON 97205
(503) 219-8500
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
DAVID L. BRINKER
CHIEF FINANCIAL OFFICER
WEBRIDGE, INC.
225 S.W. BROADWAY, SUITE 600
PORTLAND, OREGON 97205
(503) 219-8500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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COPIES TO:
ANNETTE M. MULEE RICHARD R. PLUMRIDGE, ESQ.
ROBERT J. MOORMAN JOHN E. HAYES, III, ESQ.
STEVEN H. HULL DAVID KENDALL, ESQ.
STOEL RIVES LLP BROBECK PHLEGER & HARRISON LLP
900 SW FIFTH AVENUE, SUITE 2600 370 INTERLOCKEN BOULEVARD, SUITE 500
PORTLAND, OREGON 97204 BROOMFIELD, COLORADO 80021
(503) 224-3380 (303) 410-2000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
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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, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ______
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ______
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ______
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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==============================================================================================================
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------
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Common Stock.................................... $50,000,000 $13,200
==============================================================================================================
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(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457 based on the estimate of the maximum
aggregate offering price.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE OR 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 SUCH SECTION 8(a),
MAY DETERMINE.
<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MARCH 13, 2000
[Webridge logo appears here]
_________ SHARES
COMMON STOCK
Webridge, Inc. is offering __________ shares of its common stock. This
is our initial public offering, and no public market currently exists for our
shares. We have applied to have our common stock approved for quotation on the
Nasdaq National Market under the symbol "WEBR."
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INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE ___.
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PER SHARE TOTAL
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Public offering price................................... $ $
Underwriting discounts and commissions.................. $ $
Proceeds to Webridge.................................... $ $
</TABLE>
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS
HAVE NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
We have granted the underwriters a 30-day option to purchase up to an
additional ________ shares of our common stock to cover over-allotments.
--------------------
ROBERTSON STEPHENS
U.S. BANCORP PIPER JAFFRAY
BANC OF AMERICA SECURITIES LLC
THE DATE OF THIS PROSPECTUS IS _______________, 2000
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[Inside of front cover]
[Graphic depicts a server behind the Webridge trademark with the caption
"e-Business Website" surrounded by photographs of people and a catalog with the
captions: "Support Information Corporation Database," "Product/Price
Information," "Order Management Corporate Database," "Partners," "Customers" and
"Employees."]
<PAGE> 4
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE 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 THE COMMON STOCK. IN THIS PROSPECTUS, REFERENCE TO
"WEBRIDGE," "WE," "US" AND "OUR" REFERS TO WEBRIDGE, INC.
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TABLE OF CONTENTS
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PAGE
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Summary................................................................................ 3
Risk Factors........................................................................... 6
Cautionary Note Regarding Forward-Looking Statements; Market Data...................... 17
Use of Proceeds........................................................................ 17
Dividend Policy........................................................................ 17
Capitalization......................................................................... 18
Dilution............................................................................... 19
Selected Financial Data................................................................ 20
Management's Discussion and Analysis of Financial Condition and Results of Operations.. 22
Business............................................................................... 29
Management............................................................................. 43
Related-party Transactions............................................................. 50
Principal Stockholders................................................................. 52
Description of Capital Stock........................................................... 55
Shares Eligible for Future Sale........................................................ 58
Underwriting........................................................................... 61
Legal Matters.......................................................................... 63
Experts................................................................................ 63
Where You Can Find More Information.................................................... 63
Index To Financial Statements........................................................... F-1
</TABLE>
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Webridge's(R) name and logo and the names of products and services
offered by us (including those referred to in "Business") are trademarks,
registered trademarks, service marks or registered service marks of Webridge,
Inc. Other service marks, trademarks and trade names referred to in this
prospectus are the property of their respective owners.
<PAGE> 5
SUMMARY
This summary highlights information contained elsewhere in this
prospectus. It contains a summary of the most significant aspects of the
offering that you should consider before investing in our common stock. This
summary may not contain all of the information that is important to you. You
should read the entire prospectus carefully.
WEBRIDGE, INC.
OUR BUSINESS
We provide Web-based packaged application software for online
business-to-business enterprise commerce initiatives. Our software products and
services help our customers rapidly and efficiently deploy, maintain and extend
a comprehensive and secure business-to-business enterprise commerce solution for
interacting with business customers, partners, suppliers, distributors and
employees.
Business worldwide is accelerating and becoming increasingly
competitive, fueled by the Internet and other technologies, shortened product
cycles and the globalization of the economy. However, the fundamental need for
businesses to deliver value, customer focus, competitive differentiation and
operational excellence has changed little. What has changed are the tools
available to help businesses create and manage the collaborative relationships
that achieve these objectives. Business-to-business enterprise commerce is an
emerging approach to conducting online business which exploits the ability of
the Internet to digitally weave the employees and core information systems of
disparate organizations into a rich fabric of collaborative information
partnerships. This approach requires businesses to establish a framework for
online relationships with all of their important constituencies, using formats
and protocols that are compatible with computers and understood by humans,
including sales prospects, customers, sales channel partners, employees,
distributors and suppliers.
Businesses are increasingly demanding online business-to-business
enterprise commerce applications in a single, integrated solution. These
applications must be designed to keep up with the growth of the business and
adapt to changes in Internet and other technologies. In this fast-paced
marketplace, businesses are being driven by their customers, partners,
distributors, suppliers and employees to quickly capture the sustainable
competitive advantage that can come through exploiting business-to-business
enterprise commerce technology.
We develop, market and support enterprise commerce packaged applications
for commerce, content management and collaboration, with additional specialized
add-on application modules and software tools used to customize and maintain the
solutions built with these products. Our products are built on the Microsoft
operating system and related software. We sell our software products, including
Webridge Partner Express, Webridge Portal Express, and Webridge Commerce
Express, through a direct sales force.
Our goal is to establish our position as the leading provider of online
business-to-business enterprise commerce solutions. Key elements of our strategy
to achieve this objective include:
- Leveraging our product leadership;
- Building upon our network of relationships;
- Increasing focus on the applications service provider model; and
- Expanding internationally.
CORPORATE INFORMATION
Webridge, Inc. was incorporated in Oregon in June 1996 and commenced
operations that year. Webridge was reincorporated in Delaware in August 1997.
Our executive offices are at 225 S.W. Broadway, Suite 600, Portland, Oregon
97205. Our telephone number is (503) 219-8500. Our corporate Internet address is
www.webridge.com. The information contained on our Web site is not a part of
this prospectus.
3
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THE OFFERING
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Common stock offered by Webridge.................. _________ shares
Common stock outstanding after this offering...... _________ shares
Nasdaq National Market Symbol..................... WEBR
Use of proceeds................................... Working capital and other general corporate
purposes. See "Use of Proceeds."
</TABLE>
The number of shares outstanding after this offering is based on the
shares of our common stock outstanding as of February 29, 2000 and gives effect
to the automatic conversion of all outstanding shares of our convertible
preferred stock into 17,723,476 shares of common stock upon the completion of
this offering. The number of shares excludes:
- 2,140,841 shares issuable upon exercise of options outstanding as
of February 29, 2000 at a weighted average exercise price of
$0.40 per share;
- 608,636 additional shares reserved for issuance under our 1996
Stock Incentive Plan;
- 120,003 shares subject to warrants outstanding as of February 29,
2000 at a weighted average exercise price of $1.75 and
- ___________ shares issuable upon exercise of the underwriters'
over-allotment option.
Except as otherwise noted, all information in this prospectus assumes no
exercise of the underwriters' over-allotment option and gives effect to the
automatic conversion of all outstanding shares of our convertible preferred
stock into 17,723,476 shares of common stock upon the completion of this
offering.
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SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Set forth below are our summary statement of operations data for the
years ended December 31, 1997, 1998 and 1999 and summary balance sheet data as
of December 31, 1999, on an actual basis, on a pro forma basis to reflect our
sale of 103,838 shares of Series C convertible preferred stock in January 2000
for net proceeds of $526,000 and on a pro forma basis adjusted to give effect to
our sale of ______________ shares of common stock in this offering at an assumed
initial public offering price of $_____ per share, after deducting underwriting
discounts and commissions and the estimated offering expenses payable by us.
This information should be read in conjunction with our financial
statements and related notes appearing elsewhere in this prospectus. See
"Capitalization," "Selected Financial Data," and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
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<CAPTION>
YEARS ENDED DECEMBER 31,
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1997 1998 1999
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STATEMENT OF OPERATIONS DATA:
Total revenue .......................... $ -- $ 323 $ 4,447
Total cost of revenue .................. -- 144 1,332
-------- -------- --------
Gross profit ........................... -- 179 3,115
Total operating expenses ............... 2,268 6,053 11,441
Net loss ............................... $ (2,197) $ (5,815) $ (8,028)
Basic and diluted net loss per share ... $ (1.53) $ (1.08) $ (0.94)
Shares used in computing basic and
diluted net loss per share-- .......... 1,433 5,389 8,539
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DECEMBER 31, 1999
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PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
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BALANCE SHEET DATA:
Cash and cash equivalents ................. $ 22,214 $ 22,740 $
Working capital ........................... 22,695 23,221
Total assets .............................. 27,400 27,926
Long-term debt and capital lease
obligations, net of current portion .... 16 16
Total stockholders' equity ................ 23,254 23,780
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5
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RISK FACTORS
This offering involves a high degree of risk. You should carefully
consider the following risks and all other information contained in this
prospectus before you decide to buy our common stock. If any of the following
risks actually occur, our business, financial condition and results of
operations could be seriously harmed. This could cause the market price of our
common stock to decline, and you could lose all or part of your investment.
RISKS RELATED TO OUR BUSINESS
BECAUSE WE HAVE A SHORT OPERATING HISTORY, THERE IS A LIMITED AMOUNT OF
INFORMATION ABOUT US UPON WHICH YOU CAN EVALUATE OUR BUSINESS AND POTENTIAL FOR
FUTURE SUCCESS.
We began operating in June 1996 and have only a limited operating
history upon which you can evaluate our business and prospects. Our business
will not be successful unless companies widely undertake online
business-to-business activities and they choose our applications to implement
those activities. The market for online business-to-business applications
software and services is new, and accordingly you should consider the risks and
uncertainties frequently encountered by early stage companies in new and rapidly
evolving markets. If we are unsuccessful in addressing these risks and
uncertainties, our business and operations and our ability to execute our
business plan will be seriously harmed.
OUR FUTURE RESULTS OF OPERATIONS WILL VARY FROM QUARTER TO QUARTER AND, AS A
RESULT, WE MAY FAIL TO MEET THE EXPECTATIONS OF OUR INVESTORS AND FINANCIAL
ANALYSTS, WHICH COULD CAUSE OUR STOCK PRICE TO FLUCTUATE.
Our revenue and results of operations have fluctuated significantly in
the past and could fluctuate significantly in the future due to a variety of
factors, many of which are outside of our control. These factors include:
- demand for and market acceptance of our current products and
services;
- size and timing of specific sales;
- level of product and price competition, including new products
and services offered by our competitors;
- unexpected delays in introducing new products and services by us;
- functionality and timing of Microsoft releases of products for
which we have developed new related products or upgrades;
- our ability to hire, train and retain sales and other personnel;
- the length of our sales cycle;
- our ability to establish and maintain relationships with
third-party integration service providers and business partners;
- failure of customers to renew subscriptions for our products and
services;
- mix of products and services sold;
- changes in pricing policies by us or our competitors;
- mix of distribution channels through which products are sold;
- customer order deferrals in anticipation of new products or
enhancements by us or our competitors;
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- mix of international and domestic sales;
- changes in our sales force incentives;
- the rate at which new sales people become productive;
- software defects and other product quality problems;
- changes in the level of operating expenses to support projected
growth;
- personnel changes;
- changes in our strategy or those of our competitors; and
- budgeting cycles of our customers.
While our business has not experienced significant seasonality in the
past, seasonality in customer buying may occur in the future. Specifically,
because of typical customer project budgeting cycles, we could experience
relatively higher North American demand for our products in quarters ending June
30 and December 31 of each year and relatively lower demand in quarters ending
March 31 and September 30.
Due to these and other factors, our quarterly revenue and operating
results are difficult to forecast accurately. It is likely that in some future
periods our results of operations will be below the expectations of public
market analysts and investors, which could cause our stock price to decline. We
believe period-to-period comparisons of our operating results may not be
meaningful and you should not rely upon them as a reliable indication of future
performance.
OUR QUARTERLY RESULTS OFTEN DEPEND ON A SMALL NUMBER OF LARGE ORDERS, AND OUR
REVENUE AND OPERATING RESULTS COULD BE LOWER THAN EXPECTED IF WE ARE UNABLE TO
COMPLETE ONE OR MORE SUBSTANTIAL SALES IN A PARTICULAR QUARTER.
We anticipate that a significant portion of our revenue in each quarter
will be derived from a limited number of orders. Individual purchase orders have
been as large as $1.5 million and could be larger in the future. We expect the
timing of receipt and fulfillment of large orders will cause our quarterly
operating results to fluctuate. Our three largest customers accounted for 96% of
our total revenue in 1998 and 45% of our total revenue in 1999.
EXISTING AND POTENTIAL COMPETITORS COULD MAKE IT MORE DIFFICULT FOR US TO
ACQUIRE AND RETAIN CUSTOMERS.
The market for online business-to-business applications is rapidly
evolving and intensely competitive. Our customers' requirements and the
technology available to satisfy those requirements continually change. We expect
competition in this market to increase in the future. Our primary competition
includes:
- in-house development by prospective customers or partners, which
may be encouraged by providers of point products;
- other vendors of applications software or applications
development platforms and tools directed at interactive commerce,
such as BroadVision, Art Technology Group and Vignette;
- marketing solutions providers such as ChannelWave and MarketSoft;
and
- Web site developers that develop custom software or integrate
other application software into custom solutions.
In addition, companies that produce software products with broad market
penetration, such as IBM, Microsoft and Oracle, could enter the market for
online business-to-business applications by bundling their products to create a
product that is competitive to ours, which could discourage users from
purchasing our products. Compared to us, many
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of these and other existing and potential competitors have longer operating
histories and significantly greater financial, technical, marketing and other
resources. As a result, they may be able to respond more quickly to new
opportunities, technologies and customer requirements. Many existing and
potential competitors may also use their greater name recognition and more
extensive customer base to gain market share at our expense. Competitors may be
able to undertake more extensive promotional activities, adopt more aggressive
pricing policies and offer more attractive terms to purchasers than we can,
which may adversely affect the pricing of our products and could cause our
revenue to decline. In addition, some of our competitors have established or may
establish cooperative relationships among themselves or with others to sell,
distribute or enhance their products. Accordingly, it is possible that new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share. Competitive pressures may make it difficult for us to
acquire and retain customers, and it may require us to reduce the price of our
products which in turn could reduce our revenue.
OUR REPUTATION AND REVENUE WOULD BE HARMED IF WE EXPERIENCE ANY IMPLEMENTATION
DIFFICULTIES OR OTHER PROBLEMS WITH OUR WEBRIDGE eBUSINESS EXPRESS APPLICATION
PRODUCTS AND ASSOCIATED SERVICES.
To date, all of our revenue has been attributable to sales of our
Webridge eBusiness Express application products and associated services. We
expect these products and services to account for most of our future revenue. If
any of our customers are unable to successfully develop and deploy their online
business-to-business initiatives using our Webridge eBusiness Express
application product, our reputation could be damaged, which would harm our
business.
WE EXPECT TO SUBSTANTIALLY EXPAND OUR BUSINESS AND OPERATIONS, AND WE MUST
EFFECTIVELY MANAGE AND SUPPORT THIS EXPANSION.
We have substantially expanded our business and operations since our
inception in 1996. We expect to continue to experience periods of rapid change
and growth. Our past expansion has placed, and any future expansion would place,
significant demands on our managerial, administrative, operational, financial
and other resources. If we are unable to support this growth effectively, we
will need to divert resources from expanding our business and toward operational
systems, procedures and controls. We expect operating expenses and staffing
levels to increase substantially in the future. In particular, we intend to
continue hiring a significant number of employees this year and in later years.
We also expect to expend resources on expanding accounting and internal
management systems and implementing a variety of new systems and procedures. If
our revenue does not increase in proportion to our operating expenses, our
management systems do not expand to meet increasing demands or our management
otherwise fails to support our expansion effectively, our business will be
harmed.
OUR EXECUTIVE OFFICERS AND KEY EMPLOYEES ARE CRITICAL TO OUR BUSINESS, THEY MAY
NOT REMAIN WITH US IN THE FUTURE, AND WE MAY NOT BE ABLE TO RECRUIT AND RETAIN
QUALIFIED EMPLOYEES NECESSARY FOR OUR GROWTH.
Our performance substantially depends on the performance of our
executive officers and key employees, particularly Gary Fielland, our Chief
Executive Officer, and Mark Anastas, our Chief Operating Officer. We rely on our
ability to attract, retain and motivate highly qualified personnel, especially
our management and highly skilled development teams. The loss of the services of
any of our executive officers or key employees could cause us to incur increased
operating expenses and divert senior management resources to search for
replacements. The loss of their services could also harm our reputation if our
customers become concerned about our future operations as the result of employee
departures. We do not have key person life insurance policies on any of our
employees. Our future success also depends on our ability to identify, hire,
train and retain additional highly qualified technical and managerial personnel.
Competition for these personnel is especially intense in the software industry.
We have experienced difficulty hiring and retaining sufficient numbers of highly
skilled employees and we expect this difficulty to continue. If we fail to
recruit and retain sufficient qualified employees our business will be harmed.
WE DEPEND ON DIRECT SALES PERSONNEL AND BUSINESS RELATIONSHIPS TO ACHIEVE
REVENUE GROWTH.
To date, we have sold our products primarily through our direct sales
force. Our ability to achieve significant revenue growth will largely depend on
our success recruiting and training sufficient direct sales personnel and
establishing and maintaining relationships with consultants and third-party
integration service providers. Our products
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and services require a sophisticated sales effort targeted at the senior
management of our prospective customers. New hires require training and take
time to achieve full productivity. Our recent hires may not become as productive
as necessary, and we may be unable to hire sufficient numbers of qualified
individuals in the future. We have business relationships with third-party
integration service providers and Internet consulting companies. These companies
have provided us with sales leads and increased the market acceptance of our
products. We do not assure you that these companies will continue to refer sales
prospects to us or look at our products favorably or that these relationships
will continue. If we fail to expand our direct sales force or business
relationships, our revenue may not grow or it may decline and as a result our
business will be seriously harmed.
IN MANY CASES, WE RELY ON THIRD-PARTY INTEGRATION SERVICE PROVIDERS TO HELP
DEPLOY AND MAINTAIN OUR PRODUCTS.
In many cases, we rely on third-party integration service providers to
help deploy and maintain our products. If we are unable to adequately train a
sufficient number of third-party integration service providers or if for any
reason a large number of these integrators adopt a different product or
technology instead of our Webridge eBusiness Express application products, our
business could be seriously harmed.
WE HAD AN ACCUMULATED DEFICIT OF $16.3 MILLION AS OF DECEMBER 31, 1999, AND WE
EXPECT TO INCUR OPERATING LOSSES FOR THE FORESEEABLE FUTURE.
We have had substantial losses since our inception and our operating
losses may continue and even increase in the future. We expect our operating
expenses to increase significantly, especially in the areas of sales, marketing,
research and development and recruiting, and, as a result, we will need to
generate increased revenue to become profitable. Accordingly, we do not assure
you that we will ever become profitable. The growth rates we have experienced in
recent periods may not continue. If our revenue fails to grow at anticipated
rates or our operating expenses increase without a commensurate increase in our
revenue, our business and financial condition will be seriously harmed.
OUR PRODUCTS ARE NOT COMPATIBLE WITH MANY EXISTING MAJOR PLATFORMS, WHICH WILL
LIMIT OUR REVENUE.
Our products now operate only on the Microsoft Windows NT operating
system. We must continually modify and enhance our products to keep pace with
changes in this operating system. Many businesses do not use the Windows NT
operating system and therefore are not potential customers for our products. If
our products are incompatible with a new operating system or Internet business
application that becomes widely accepted, or if the Microsoft Windows NT
operating system becomes less popular, our business would be harmed. In
addition, uncertainties related to the timing and nature of new product
announcements, introductions or modifications by vendors of operating systems,
browsers, back-office applications, and other Internet-related applications,
could also seriously harm our business.
THE MARKET FOR THE WINDOWS NT OPERATING SYSTEM OR ITS SUCCESSOR VERSION, WINDOWS
2000, MAY FAIL TO DEVELOP FULLY, DEVELOP MORE SLOWLY THAN WE EXPECT OR OTHERWISE
BE HARMED.
Windows NT and its successor version, Windows 2000, are two of several
operating systems developed for computers, and their future acceptance is
uncertain. Because all of our revenue has been from products and services
dependent on the Windows NT operating system, if the market for Windows NT or
Windows 2000 fails to develop fully or develops more slowly than we expect, our
business and operating results will be seriously harmed. Market acceptance of
Windows NT and Windows 2000 will depend on many factors, including:
- Microsoft's development and support of the Windows NT and Windows
2000 market;
- the ability of the Windows NT and Windows 2000 operating systems
to compete against existing and emerging operating systems for
the computer market, including Unix, Linux and mainframe
operating systems;
- the acceptance by original equipment manufacturers and consumers
of the mix of features and functions offered by Windows NT and
Windows 2000; and
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- the willingness of software developers to continue to develop and
expand the applications that run on Windows NT and Windows 2000.
If Windows NT and Windows 2000 do not gain wide market acceptance for any
reason, potential customers could select competing operating systems, which
would reduce the demand for our products and services.
Our products use the Microsoft Windows NT operating system and related
software as a platform and interact with it during operation. If Microsoft
discontinues production or support of any of these programs, it would cause
significant delays in deployment of our products and in introduction of new
products and services until equivalent technology, if available, is identified
and integrated. Delays in deploying products or in introducing new products and
services could seriously harm our business.
The United States government is suing Microsoft for alleged violations
of anti-trust laws. If as a result of this lawsuit businesses are less willing
to purchase the Windows NT operating system, Microsoft is prohibited from
shipping its Internet Explorer product or Microsoft delays releasing new
products, for some of which we have already created new applications, our
business and operating results will be seriously harmed.
Microsoft is engaged in litigation with Sun Microsystems relating to
Microsoft's rights with respect to the Java programming language. We use the
version of Java copyrighted by Microsoft. If Sun prevails, we may need to obtain
the right to use Java from Sun or another vendor. This right might not be
available to us on reasonable terms or at all. The loss of our ability to use
Java could cause delays in introducing our products and services until
replacement language, if available, is identified, licensed, if necessary, and
integrated, which could seriously harm our business.
IF WE DO NOT MAINTAIN OUR RELATIONSHIP WITH MICROSOFT, WE WILL HAVE DIFFICULTY
MARKETING OR PRODUCING OUR SOFTWARE PRODUCTS AND SERVICES AND MAY NOT RECEIVE
DEVELOPER RELEASES OF WINDOWS NT AND WINDOWS 2000, WHICH WILL SERIOUSLY HARM OUR
BUSINESS.
We work closely with Microsoft on joint marketing efforts to promote the
benefits of the Windows NT and Windows 2000 operating systems for
Internet-related functions. If our relationship with Microsoft deteriorates, our
efforts to market and sell our products and services could be adversely affected
and our business would be seriously harmed. Microsoft has great influence over
the development plans and buying decisions of businesses using Windows NT and
Windows 2000 for their computers. Some of our customers are referred to us by
Microsoft and we expect this referral source to increase in the future.
Microsoft has no obligation to refer customers to us or to undertake joint
marketing efforts with us. Moreover, Microsoft controls the marketing campaigns
related to Windows NT and Windows 2000. Microsoft's marketing activities,
including trade shows, direct mail campaigns and print advertising, are
important to the continued promotion and market acceptance of Windows NT and
Windows 2000 and, consequently, of our software products and services. We must
maintain a satisfactory relationship with Microsoft, including participating
with Microsoft at trade shows and listing our services on Microsoft's Website,
to receive referrals from Microsoft. If we are unable to continue our joint
marketing efforts with Microsoft or fail to receive referrals from Microsoft, we
could be required to devote substantial additional resources and incur
additional expenses to market our software products and services directly to
potential customers. Furthermore, Microsoft may refer potential customers to our
competitors or otherwise support products and services that compete with our
own.
In addition, we depend on receiving from Microsoft developer releases of
new versions of, and upgrades to, Windows NT, Windows 2000 and related Microsoft
software in order to timely develop and deploy our products and provide
services. If we are unable to receive these developer releases, our business
will be seriously harmed.
THE MARKET FOR OUR PRODUCTS AND SERVICES IS NEW AND MAY NOT CONTINUE TO DEVELOP
OR BE SUSTAINED.
Our products and services facilitate online commerce and communication
over public and private networks. The market for packaged applications for
online business-to-business enterprise commerce applications and related
services is new and rapidly evolving, and a viable market may fail to emerge or
be sustainable. It is difficult to accurately predict the level of demand and
market acceptance for our products and services, especially because the
10
<PAGE> 13
deployment of our products and services requires a significant commitment of
capital, technology, human and other resources from customers.
Adoption of online business-to-business enterprise commerce
applications, particularly by parties that have previously relied on traditional
means of commerce and communication, will require a broad acceptance of new
methods of conducting business and exchanging information. Our future revenue
and profits will substantially depend on the Internet being accepted and widely
used for commerce and communication. Furthermore, the Internet and the market
for our products may develop more slowly than expected because of inadequate
development of communication, network and other necessary infrastructure. If
online business-to-business enterprise commerce does not continue to grow or
grows more slowly than expected, our business will be seriously harmed.
Companies that have invested substantial resources in other methods of
conducting business may be reluctant to adopt a new approach that may replace,
limit or compete with their existing systems. Similarly, purchasers with
established patterns of commerce may be reluctant to alter those patterns or may
otherwise resist providing the personal data necessary to support our consumer
profiling capability. In addition, the security and privacy concerns of existing
and potential online purchasers may inhibit the growth of online business
generally and the market's acceptance of our products and services in
particular. Accordingly, a viable market for our products and services may not
emerge or be sustained which in turn would seriously harm our business.
OUR LENGTHY SALES AND PRODUCT IMPLEMENTATION CYCLES AFFECT OUR REVENUE
RECOGNITION AND MAKE IT DIFFICULT TO ACCURATELY FORECAST OUR QUARTERLY RESULTS.
Our lengthy sales and product implementation cycles are subject to
delays over which we have little control. These delays will affect the timing of
revenue recognition and make it difficult to accurately forecast our quarterly
results. Licensing our Webridge eBusiness Express application products is often
a company-wide decision by prospective customers that results in a lengthy sales
cycle. During the sales process, we educate our customers about the uses and
benefits of our products and services. Once the decision has been made to choose
our products and services, our customers must commit significant resources over
an extended period of time to develop content for the Website and to learn how
to operate our software. We generally recognize the revenue related to the sale
of our products upon the customer's deployment of our products. Delays in
license transactions due to unusually lengthy sales cycles, delays in customer
preparation or delays in deploying our products could harm our business and may
cause our operating results to vary significantly from quarter to quarter.
OUR COMPLEX PRODUCTS MAY BE ESPECIALLY SUSCEPTIBLE TO PRODUCT DEFECTS THAT COULD
HARM OUR REPUTATION AND REVENUE.
Complex software products like ours may contain undetected errors that
will not become apparent until after the products are introduced or when the
volume of provided services increases. Product defects could result in all or
any of the following consequences, which individually or together could
seriously harm our business:
- loss of revenue;
- delay in market acceptance;
- diversion of development resources;
- damage to our reputation;
- increased service and warranty costs; and
- loss of customers and market share to our competitors.
In addition, defects, like any other problem with our products, could
damage our reputation. Because our reputation is important to our success, any
damage to our reputation could seriously harm our business.
11
<PAGE> 14
A BREACH OF THE SECURITY TECHNOLOGY THAT WE USE COULD EXPOSE US TO LIABILITY,
HARM OUR REPUTATION OR OTHERWISE SERIOUSLY HARM OUR BUSINESS.
If any breach of the security features of our products or products that
we use as a platform occurs, we could be exposed to liability, and our
reputation and business could be seriously harmed. Advances in computer
capabilities, new discoveries in cryptography or other events or developments
could cause a breach of these security features.
OUR SUCCESS AND COMPETITIVE POSITION DEPENDS ON OUR ABILITY TO PROTECT OUR
PROPRIETARY TECHNOLOGY.
We do not have any patents or patent applications pending. Existing
intellectual property laws afford us only limited protection against
infringement or misappropriation of our technology. Others may attempt to
disclose, obtain, misappropriate, copy or use our solutions or technologies.
This is particularly true in foreign countries where laws or law enforcement
practices may not protect our proprietary rights as fully as in the United
States. Policing unauthorized use of our products is difficult, particularly
because the global nature of the Internet makes it difficult to control the
ultimate destination or security of software and other transmitted data. Others
may independently develop and obtain patents or copyrights for technologies that
are similar or superior to our technologies. If that happens, we may need or
want to license these technologies and we may not be able to obtain licenses on
reasonable terms, if at all.
The steps we have taken to prevent misappropriation of our technology,
including entering into agreements for that purpose, may be insufficient. In
addition, 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 proprietary rights of others or to defend against claims of
infringement or invalidity. We may not prevail in an action to protect our
intellectual property rights. Litigation like this, even if we prevail, could
result in substantial costs and diversions of our management resources, either
of which could seriously harm our business.
WE MAY BE SUBJECT TO CLAIMS OF INTELLECTUAL PROPERTY INFRINGEMENT, WHICH COULD
DIVERT MANAGEMENT RESOURCES AND HARM OUR REPUTATION.
Issues relating to ownership of and rights to use intellectual property
can be complicated. In recent years there has been significant litigation in the
United States regarding intellectual property rights. We may become involved in
disputes that affect our ability to resell or use this intellectual property.
Others may claim that we have infringed their patent, trademark, copyright or
other proprietary rights. It is also possible that claims will be made for
indemnification resulting from allegations of infringement. Claims like these
could divert management attention, affect our reputation and otherwise seriously
harm our business. In addition, intellectual property claims may be asserted
against us as a result of the use by us, our customers or others of our products
for the transmission, dissemination or display of information on the Internet.
Any claims, with or without merit, could be time consuming and costly, delay
product shipments or require that we enter into royalty or licensing agreements.
As a result, an infringement claim could seriously harm our business. If we are
unsuccessful in any future intellectual property litigation, we may be forced to
do one or more of the following which could, individually or together, seriously
harm our business:
- stop selling or using technology or services that incorporate the
challenged intellectual property;
- obtain a license to use the relevant technology, which may not be
available on reasonable terms or at all;
- configure products and services or develop new technology to
avoid infringement;
- refund license fees or other payments that we have previously
received; and
- pay damages in these disputes.
12
<PAGE> 15
IF OUR SYSTEMS AND THE SYSTEMS OF OUR KEY PARTNERS AND CUSTOMERS ARE NOT YEAR
2000 COMPLIANT, WE COULD INCUR INCREASED COSTS, DELAY OR LOSS OF REVENUE,
DIVERSION OF DEVELOPMENT RESOURCES OR DAMAGE TO OUR REPUTATION.
Computer systems problems relating to the year 2000 may still be
discovered months after January 1, 2000. Our products are generally integrated
into computer systems involving sophisticated hardware and complex software
products, which may not be Year 2000 compliant. The failure of our customers'
systems to be Year 2000 compliant and the related problems that may be
discovered in early 2000 could impede the success of applications that we or our
partners have developed for them. Accordingly, known or unknown defects that
affect the operation of our software, including any defects or errors in our
product applications or systems that implement our products, could result in
delay or loss of revenue, diversion of development resources, damage to our
reputation, or increased service or warranty costs and litigation costs.
TO REMAIN COMPETITIVE, WE WILL NEED ADDITIONAL FINANCING, WHICH MAY NOT BE
AVAILABLE ON SATISFACTORY TERMS OR AT ALL.
We expect the net proceeds from this offering, together with existing
cash and available borrowings under our credit facilities, will be sufficient
for us to meet our working capital and capital expenditure requirements for at
least the next 12 months. We may, however, need additional financing sooner if
we:
- expand faster than planned;
- develop services or products ahead of schedule;
- need to respond to competition; or
- decide to acquire complementary products, businesses or
technologies.
If we raise additional funds through the sale of equity or convertible
debt securities, your percentage ownership will be reduced. In addition, these
transactions may dilute the value of our common stock. We may issue securities
with rights, preferences and privileges senior to our common stock. We may not
be able to raise additional funds on terms satisfactory to us or at all.
WE HAVE NO SIGNIFICANT EXPERIENCE OPERATING INTERNATIONALLY, WHICH MAY MAKE IT
DIFFICULT AND COSTLY TO EXPAND OVERSEAS.
To date, we have derived most of our revenue from sales to customers in
the United States. We recently opened one office in Europe and we plan to expand
our international operations. There are many barriers to competing successfully
internationally, including:
- costs of customizing products for use in foreign countries;
- difficulties staffing and managing foreign operations;
- political and economic instability;
- fluctuations in currency exchange rates;
- reduced protection for intellectual property rights in some
countries;
- varying technology standards and capabilities;
- dependence on local vendors;
- language and other cultural barriers;
13
<PAGE> 16
- compliance with multiple, conflicting and changing governmental
laws and regulations;
- insufficient or unreliable telecommunications infrastructure and
Internet access;
- potentially adverse tax consequences;
- restrictions on the movement of profits back to the United
States;
- longer sales cycles; and
- import and export restrictions and tariffs.
As a result of these factors, we may not be able to profitably market,
sell and deliver our products and services in international markets.
RISKS RELATED TO THE INTERNET INDUSTRY
IF WE ARE UNABLE TO MEET THE RAPID TECHNOLOGICAL CHANGES IN ONLINE COMMERCE AND
COMMUNICATION, OUR EXISTING PRODUCTS AND SERVICES COULD BECOME OBSOLETE.
Our products and services may fail to be competitive if we do not match
the pace of technological developments in Internet commerce and communication.
The information services, software and communications industries are
characterized by rapid technological change, changes in customer requirements,
frequent new product and service introductions and enhancements, and evolving
industry standards and practices. The introduction of products and services
embodying new technologies and the emergence of new industry standards and
practices can render our existing products and services obsolete. Our future
success will depend, in part, on our ability to:
- develop leading technologies;
- enhance our existing products and services;
- develop new products and services that address the increasingly
sophisticated and varied needs of our prospective customers; and
- respond to technological advances and emerging industry standards
and practices on a timely and cost-effective basis.
Internet commerce technology is complex and new products and
enhancements can require long development periods. If we are unable to develop
and introduce new products and services or enhancements in a timely manner in
response to changing market conditions or customer requirements, or if new
products and services do not achieve market acceptance, our business will be
seriously harmed.
NEW AND EXISTING LAWS COULD EITHER DIRECTLY RESTRICT OUR BUSINESS OR INDIRECTLY
AFFECT OUR BUSINESS BY LIMITING THE GROWTH OF INTERNET COMMERCE.
The adoption of laws or regulations that restrict our methods of doing
business or limit the growth of the Internet could decrease demand for our
products and services and increase our cost of doing business. There are now
relatively few laws specifically directed towards online services, and it may
take years to determine whether and how existing laws, such as those governing
intellectual property, privacy, libel, consumer protection and taxation, apply
to the Internet. Due to the increasing popularity of the Internet generally and
Internet commerce specifically, we expect that federal, state or foreign
agencies will enact laws and regulations with respect to the Internet. These new
laws and regulations may address issues like online user privacy, pricing,
taxation, content and quality of products and services. If enacted, these laws
and regulations could prohibit different aspects of our business, increase our
costs and administrative
14
<PAGE> 17
burdens and limit the market for our products and services or those of our
customers, which could seriously harm our business. For example, because our
products involve the solicitation of personal data regarding individual
consumers, our business could be limited by laws regulating the solicitation,
collection or processing of this data. The Telecommunications Act of 1996
prohibits the transmission of some types of information and content over the
Internet. The scope of the prohibition and the liability associated with a
Telecommunications Act violation are unsettled. Legislation imposing potential
liability upon us for information carried on or disseminated through our
products could cause us to implement costly measures to reduce our exposure to
this liability or to discontinue certain services. Our business could be harmed
by the expense involved in reacting to actual or potential liability associated
with the Telecommunications Act or other Internet-related laws and regulations.
In addition, the increased attention focused upon liability issues as a result
of the Telecommunications Act could limit the growth of Internet commerce, which
could decrease demand for our products.
LIMITATIONS ON THE ONLINE COLLECTION OF PROFILE INFORMATION COULD HARM THE
MARKET FOR OUR PRODUCTS.
The reluctance of online users to provide personal data and laws and
regulations prohibiting use of personal data gathered online, without express
consent or notification of the possible dissemination of their personal data,
could limit the effectiveness of our products. One of the principal features of
our Webridge eBusiness Express application products is the ability to develop
and maintain profiles of online users to assist business managers in determining
the nature of the content to be provided to these online users. Profile
information is often captured when consumers, business customers and employees
visit a Web site and volunteer information in response to survey questions
concerning their backgrounds, interests and preferences. Profiles are augmented
over time through the subsequent collection of usage data. The mere perception
by prospective customers that substantial security and privacy concerns exist
among online users, whether or not valid, may inhibit market acceptance of our
products. In addition, new laws and regulations could heighten privacy concerns
by requiring businesses to notify Web site users that the data captured from
them while online may be used by marketing entities to direct product messages
to them. While we are not aware of any laws or regulations like this in effect,
being proposed or in development in the United States, other countries and
political entities, including the European Union and its member states, have
adopted legal restrictions on the collection, use and processing of personal
data. It is possible that similar legal requirements could be adopted in the
United States. If the privacy concerns of consumers are not adequately
addressed, the market for our Webridge eBusiness Express application products
could be harmed.
RISKS RELATED TO THIS OFFERING
WE EXPECT THE MARKET PRICE OF OUR COMMON STOCK TO BE VOLATILE, AND IT MAY DROP
UNEXPECTEDLY.
The initial public offering price will be determined through
negotiations between us and the representatives of the underwriters based on
factors that may not be indicative of future market performance. The initial
public offering price may be higher than the price at which the common stock
will trade on completion of this offering. An active public market for our
common stock may not develop or be sustained after this offering.
The market price of our common stock is likely to be highly volatile
following this offering and could be subject to wide fluctuations in response to
quarterly variations in operating results, announcements of new products or
services by us or our competitors, market conditions affecting Internet
companies generally, changes in financial estimates by securities analysts or
other events or factors, many of which are beyond our control.
The stock market and specifically the stock prices of Internet related
companies have been very volatile. This volatility is often not related to the
operating performance of these companies. This broad market and industry
volatility may reduce or increase the price of our common stock, without regard
to our operating performance. Due to this volatility, the market price of our
common stock could significantly decrease.
In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
securities. We may in the future be the target of similar litigation. Securities
litigation could result in substantial costs and divert management's attention
and resources, which could seriously harm our business and the market price of
our common stock.
15
<PAGE> 18
THE FUTURE SALE OF SUBSTANTIAL AMOUNTS OF OUR COMMON STOCK MAY NEGATIVELY AFFECT
OUR STOCK PRICE.
The price of our common stock could decline as a result of sales by our
existing stockholders of shares of common stock in the market after this
offering, or the perception that these sales could occur. In addition, we have a
significant number of shares that are subject to outstanding options and
warrants. The exercise of these options and warrants and the subsequent sale of
the underlying common stock could cause a decline in our stock price. These
sales also might make it difficult for us to sell equity securities in the
future at a time and at a price that we believe appropriate. For a more detailed
description of the number of shares that may be sold following this offering,
see "Shares Eligible for Future Sale."
ANY PREFERRED STOCK ISSUED IN THE FUTURE WILL HAVE RIGHTS SUPERIOR TO THE RIGHTS
OF OUR COMMON STOCK.
Following this offering, our board of directors will have the authority
to issue up to 30 million shares of preferred stock and to determine the price,
voting power, preferences and other terms of the shares. The board of directors
may exercise this authority without any further approval by the stockholders.
The rights of the holders of common stock may be adversely affected by the
rights of the holders of any preferred stock that may be issued in the future.
BECAUSE WE ARE UNABLE TO IDENTIFY THE SPECIFIC USES FOR THE NET PROCEEDS OF THIS
OFFERING, YOU WILL BE RELYING ON THE JUDGMENT OF OUR MANAGEMENT REGARDING THE
APPLICATION OF THE PROCEEDS.
We have not identified any specific use for the net proceeds of this
offering. Rather, we expect to use the net proceeds for general corporate
purposes, including working capital. Consequently, our management will have
significant flexibility in applying the net proceeds of this offering. You will
be relying on the judgment of our management regarding the application of the
proceeds.
BECAUSE OUR EXECUTIVE OFFICERS AND DIRECTORS OWN A SIGNIFICANT PERCENTAGE OF OUR
COMMON STOCK, THEY WILL BE ABLE TO EXERCISE SIGNIFICANT INFLUENCE OVER US.
Upon completion of this offering, our directors and executive officers
and their affiliates will beneficially own approximately ___% of the outstanding
common stock. As a result, if these stockholders act together, they will be able
to exercise significant influence over all matters requiring stockholder
approval, including the election of directors and approval of significant
corporate transactions like mergers and other business combinations. This
concentration of ownership may also have the effect of delaying or preventing a
change in control of us unless it is supported by our directors and executive
officers.
16
<PAGE> 19
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS; MARKET DATA
This prospectus contains forward-looking statements that are subject to
risks and uncertainties. Discussions containing forward-looking statements may
be found in the material set forth under "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Business" as well as
elsewhere in the prospectus. We generally use words such as "believes,"
"intends," "expects," "anticipates," "plans," and similar expressions to
identify forward-looking statements. This prospectus also contains estimates by
others regarding the size and growth of the Internet professional services
market and Internet usage in general. You should not place undue reliance on
these forward-looking statements. Our actual results could differ materially and
adversely from those anticipated in the forward-looking statements for many
reasons, including the risk factors described above and elsewhere in this
prospectus.
Although we believe the expectations reflected in the forward-looking
statements are reasonable, they relate only to events as of the date on which
the statements are made, and our future results, levels of activity, performance
or achievements may not meet these expectations.
This prospectus contains data related to the commerce over the Internet,
commonly referred to as e-commerce or eCommerce, economic sector and the
Internet professional services industry. These market data have been included in
studies published by the market research firms International Data Corporation
and Forrester Research. These data include projections that are based on a
number of assumptions, including increasing worldwide business use of the
Internet, the growth in the number of Web access devices per user, the absence
of any failure of the Internet and the continued improvement of security on the
Internet. If any of these assumptions is incorrect, actual results may differ
from the projections based on those assumptions and these markets may not grow
at the rates projected by these data, or at all, or these markets may decline.
The failure of these markets to grow at these projected rates may have a
material adverse effect on our business and the market price of our common
stock.
USE OF PROCEEDS
We estimate that we will receive net proceeds from this offering of
approximately $____ million, or approximately $_____ million if the
underwriters' overallotment option is exercised in full, after deducting the
estimated underwriting discounts and commissions and offering expenses payable
by us. These estimates are based on an initial public offering price of $_____ a
share.
We expect to use the net proceeds from this offering for working capital
and other general corporate purposes. In addition, although we have no
understandings, commitments or agreements concerning any acquisition, we might
use a portion of the remaining proceeds for acquisitions. Before we use the net
proceeds of this offering, we intend to invest them in short-term,
interest-bearing, investment grade securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock
and we do not anticipate paying cash dividends. We intend to retain earnings, if
any, to fund the development and growth of our business.
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<PAGE> 20
CAPITALIZATION
The following table sets forth, as of December 31, 1999, our cash and
cash equivalents and our capitalization on an actual basis, on a pro forma basis
to give effect to our sale of 103,838 shares of Series C convertible preferred
stock in January 2000 for net proceeds of $526,000 and the automatic conversion
of all of our outstanding preferred stock into common stock upon the completion
of this offering, and on a pro forma as adjusted basis to give effect to the
sale by us of _____________ shares of common stock offered at an assumed initial
public offering price of $______ per share, after deducting underwriting
discounts and commissions and the estimated offering expenses payable by us.
This information should be read in conjunction with our financial statements and
related notes appearing elsewhere in this prospectus.
The shares issued and outstanding do not include 162,055 shares issuable
on the exercise of outstanding options at a weighted-average exercise price of
$0.11 as of December 31, 1999, and 120,003 warrants to purchase preferred stock
at a weighted-average exercise price of $1.75 at December 31, 1999.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
--------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents................................................. $ 22,214 $ 22,740
========= =========
Long-term debt and capital lease obligations, net of current portion...... 16 16
Stockholders' equity:
Convertible preferred stock, 17,844,000 shares authorized, 17,619,000
issued and outstanding, actual; no shares issued or outstanding,
pro forma and pro forma as adjusted.................................... 17 --
Common stock, 50,000,000 shares authorized, 13,074,000 issued and
outstanding, actual; 30,797,000 shares issued and outstanding, pro
forma; and __________ shares issued and outstanding
pro forma as adjusted.................................................. 13 30
Additional paid-in capital............................................. 40,432 40,958
Deferred stock-based compensation...................................... (959) (959)
Accumulated deficit.................................................... (16,249) (16,249)
--------- ---------
Total stockholders' equity................................................ 23,254 23,780
--------- ---------
Total capitalization...................................................... 23,270 23,796
========= =========
</TABLE>
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<PAGE> 21
DILUTION
Our pro forma net tangible book value as of December 31, 1999, which
gives effect to the sale of Series C convertible preferred stock in January 2000
for net proceeds of $526,000 and the automatic conversion of all of our
outstanding preferred stock into 17,723,476 shares of common stock upon the
completion of this offering, was $23,780,000, or $0.77 per share of common
stock. Pro forma net tangible book value per share is determined by dividing our
pro forma tangible net worth by the pro forma number of shares of common stock
outstanding. Assuming our sale of _______ shares of common stock, and after
deducting underwriting discounts and commissions and the estimated offering
expenses payable by us, our pro forma net tangible book value as of December 31,
1999 would have been $_____ million, or $_____ per share. This represents an
immediate increase in pro forma net tangible book value of $_____ per share to
existing stockholders and an immediate dilution of $_____ per share to investors
purchasing shares in this offering. The following table illustrates this 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 $0.77
------
Increase attributable to this offering
------
Pro forma net tangible book value per share after this offering
Dilution to new investors $
=========
</TABLE>
The following table summarizes, as of December 31, 1999 on the pro forma basis
described above, the total number of shares of common stock purchased from us,
the total consideration paid and the average price paid per share by the
existing stockholders and by the new investors based on an initial public
offering price of $_____ per share before deducting the estimated underwriting
discounts and commissions and offering expenses payable by us:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............ 30,797,417 % $39,941,105 % $
New investors....................
---------- ---- ----------- -----
Total............................ 100% $ 100%
========== ==== =========== =====
</TABLE>
The tables and calculations above assume no exercise of any stock
options and warrants after December 31, 1999. Of the excluded stock options,
options to purchase 162,055 shares were exercisable as of December 31, 1999, at
a weighted average exercise price of $0.21 per share. In addition, as of
December 31, 1999, there were warrants outstanding to purchase a total of
120,003 shares of preferred stock at a weighted average exercise price of 1.75
per share. To the extent the excluded options and warrants are exercised, there
will be further dilution to new investors.
19
<PAGE> 22
SELECTED FINANCIAL DATA
The following selected financial data should be read with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and notes that are included in this prospectus. The
following information has been derived from the audited financial statements
beginning on page F-1:
- Statements of operations data for each of the years in the
three-year period ended December 31, 1999; and
- Balance sheet data as of December 31, 1998 and 1999.
The following information has been derived from audited financial
statements that do not appear in this prospectus:
- Statement of Operations data for the period from June 26, 1996
(inception) to December 31, 1996; and
- Balance sheet data as of December 31, 1996 and 1997.
We encourage you to read the financial statements included in this
prospectus because they contain the complete audited financial statements of
Webridge for the periods presented. Historical results of operations are not
necessarily indicative of future results.
20
<PAGE> 23
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 26, 1996
(INCEPTION) TO YEARS ENDED DECEMBER 31,
DECEMBER 31, ----------------------------------------
1996 1997 1998 1999
--------------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenue:
Product licenses ................... $ -- $ -- $ 175 $ 1,879
Services ........................... -- -- 148 2,568
------ -------- -------- --------
Total revenue .................. -- -- 323 4,447
------ -------- -------- --------
Cost of Revenue:
Cost of product licenses ........... -- -- 9 --
Cost of services ................... -- -- 135 1,332
------ -------- -------- --------
Total cost of revenue .......... -- -- 144 1,332
------ -------- -------- --------
Gross profit ........................... -- -- 179 3,115
------ -------- -------- --------
Operating expenses:
Research and development ........... 163 1,514 3,403 4,809
Sales and marketing ................ -- 427 1,926 5,240
General and administrative ......... 41 327 724 1,304
Amortization of deferred stock-
based compensation................ -- -- -- 88
------ -------- -------- --------
Total operating expenses ........... 204 2,268 6,053 11,441
------ -------- -------- --------
Loss from operations ................... (204) (2,268) (5,874) (8,326)
Other income (expense), net ............ (5) 71 59 298
------ -------- -------- --------
Net loss ............................... $ (209) $ (2,197) $ (5,815) $ (8,028)
====== ======== ======== ========
Basic and diluted net loss per share ... $ 0.00 $ (1.53) $ (1.08) $ (0.94)
====== ======== ======== ========
Shares used in computing basic and
diluted net loss per share ........... 0 1,433 5,389 8,539
====== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------
1996 1997 1998 1999
------ ------ ------ --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents ........................ $ 79 $4,995 $5,951 $ 22,214
Working capital (deficit) ........................ (233) 4,822 7,431 22,695
Total assets ..................................... 108 5,276 8,721 27,400
Long-term debt and capital lease obligations,
net of current portion ........................ -- 38 252 16
Total stockholders' equity (deficit) ............. (204) 5,025 7,621 23,254
</TABLE>
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<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
financial statements and related notes included in this prospectus.
OVERVIEW
We provide Web-based packaged application software for online
business-to-business enterprise commerce initiatives. Our software products and
services help our customers rapidly and efficiently deploy, maintain and extend
a comprehensive and secure business-to-business enterprise commerce solution for
interacting with business customers, partners, suppliers, distributors and
employees. Our products include a multi-functional business-to-business engine
to perform online transactions, partner relationship applications to efficiently
manage a full range of online business relationships, and an information portal
to allow companies to interact instantly with their business customers,
partners, suppliers, distributors and employees. Webridge eBusiness Express
customers include Deutsche Bank AG London, Exabyte Corporation, Executone
Information Systems, Inc., Honeywell, Inc., Primedia Workplace Learning, Inc.
and Xerox Corporation.
We were incorporated in 1996 and were a development stage company from
incorporation through the first half of 1998. We initially developed our
Webridge Express Framework for building online applications, Webridge
Studio-Site Designer for building page layouts and Webridge Studio-Entity
Manager for data modeling. These products were first released in 1998. Following
our first product release in 1998, we have developed and released several
versions of our products.
In 1999, we introduced three packaged applications: Webridge Partner
Express for managing partner relationships, Webridge Portal Express for
knowledge management and Webridge Commerce Express for online commerce. In 1999
we also introduced four add-on application modules: Webridge Lead Manager for
automating sales lead management, Webridge Notification Manager for outbound
email and fax messaging, Webridge Configuration Manager, a rules-driven
configuration engine, and Webridge Commerce Manager, a comprehensive online
order management and processing system. We expect to continue to develop
additional online business applications in the future. As of February 29, 2000,
we have licensed Webridge eBusiness Express to 27 companies. To date, all of our
products and services are sold through our domestic direct sales force and are
deployed by our professional services organization, third-party integration
service providers or a combination of both.
Our revenue is derived from the sale of perpetual and subscription-based
product licenses and deployment, support, hosting and training services. Our
perpetual product license revenue is based on per-server license fees for
software and per-user license fees for authenticated users. Subscription-based
product licenses revenue is based on monthly or quarterly fees for time-based
contracts for the use of server software and authenticated user licenses.
Product licenses revenue is recognized when persuasive evidence of a
customer agreement exists, the product has been delivered, we have no remaining
significant implementation obligations, the license fee is fixed or determinable
and collection of the fee is probable. Subscription-based product licenses
revenue is recognized ratably over the period of the subscription contract,
typically two years.
Our professional services are comprised of deployment, hosting, support
and training services. Deployment services revenue is based on fees for
time-and-materials and fixed-price contracts for deployment, application
development, integration and software installation. Deployment services revenue
from time-and-material based contracts is recognized as the services are
performed. We recognize deployment services fees on fixed-price contracts when
specific contractual milestones are achieved, or based on an estimated
percentage of completion as work progresses. Our non-subscription customers
typically purchase annual support agreements for periodic product upgrades,
online support and phone support. For subscription-based customers, support
services are paid monthly or quarterly. Support revenue is recognized ratably
over the period of the contract, typically one year for non-subscription based
contracts and two years for subscription based contracts. Hosting services
include initial setup and ongoing operation of a server to host our software
and are based on monthly or quarterly fees. Revenue for hosting services is
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<PAGE> 25
recognized ratably over the period of the contract, typically one year. We
recognize billable amounts due from customers in excess of revenue recognized as
deferred revenue. The timing of customer billings can vary significantly
depending on specific contract terms and can therefore have a significant impact
on deferred revenue in any period.
Cost of revenue consists of license fees necessary to manufacture our
products, as well as personnel and other expenses relating to professional
services. Since inception, we have incurred substantial research and development
costs and have invested heavily in the expansion of our sales, marketing and
professional services organizations to build an infrastructure to support our
long-term growth. As a result of investments in our infrastructure, we have
incurred net losses in each quarter since inception and, as of December 31,
1999, had an accumulated deficit of $16.3 million. We anticipate that our
operating expenses will increase substantially for the foreseeable future as we
expand our product development, sales, marketing and professional services
staff. In addition, we expect to incur substantial expenses associated with
development of third-party-based integration service provider and joint
marketing programs. Accordingly, we expect to incur net losses for the
foreseeable future.
As of December 31, 1999, we had recorded aggregate deferred stock-based
compensation of $1.0 million. Deferred stock-based compensation is amortized as
options become exercisable, generally over a period of four years. During 1999,
we amortized $88,000 of deferred stock-based compensation. Amortization of
deferred stock-based compensation recorded as of December 31, 1999 will
approximate $502,000 in 2000, $262,000 in 2001, $142,000 in 2002 and $53,000 in
2003. We expect that additional deferred stock-based compensation will be
recorded for options issued during the period January 1, 2000 through the
completion of this offering.
RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data as a
percentage of total revenue for the periods indicated.
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------
1998 1999
------ ----
<S> <C> <C>
Revenue:
Product licenses ................................... 54% 42%
Services ........................................... 46 58
------ ----
Total revenue .................................... 100 100
Cost of revenue:
Cost of product licenses ........................... 3 --
Cost of services ................................... 42 30
------ ----
Total cost of revenue ............................ 45 30
------ ----
Gross profit ....................................... 55 70
------ ----
Operating expenses:
Research and development .............................. 1,054 108
Sales and marketing ................................... 596 118
General and administrative ............................ 224 29
Amortization of deferred stock-based compensation ..... -- 2
------ ----
Total operating expenses ......................... 1,874 257
Loss from operations ............................. (1,819) (187)
Other income (expense), net ........................... 19 6
------ ----
Net loss ......................................... (1,800)% (181)%
====== ====
</TABLE>
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<PAGE> 26
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
Revenue
Our revenue was $0 in 1997, $323,000 in 1998 and $4.4 million in 1999,
an increase of $4.1 million from 1998 to 1999. Our three largest customers in
1998 accounted for 96% of our total revenue in 1998 and our three largest
customers in 1999 accounted for 45% of our total revenue in 1999.
Our product licenses revenue was $175,000 in 1998 and $1.9 million in
1999, an increase of $1.7 million. The increase in our product licenses revenue
from 1998 to 1999 was due to the initial introduction of the Webridge eBusiness
Express application products in late 1998, the release of packaged applications
and add-on modules, and increases in both the size and productivity of our sales
force. Virtually none of this revenue increase was attributable to increased
prices.
Our services revenue was $148,000 in 1998 and $2.6 million in 1999, an
increase of $2.5 million. In 1998 and 1999, services revenue consisted primarily
of deployment services fees and, to a lesser extent, support and hosting
services, associated with increasing product licenses revenue during these
periods. The increase in services revenue from 1998 to 1999 reflects an
increased number of customers for our applications and the recognition of
revenue from contracts entered into in prior periods. Services revenue
represented 46% of our total revenue in 1998 and 58% in 1999. The increase in
services revenue as a percentage of total revenue from 1998 to 1999 is due to
the required accounting method used to allocate revenue among the various
elements of our contracts and the timing of the recognition of those
elements.
Cost of Revenue
Cost of Product Licenses Revenue. Cost of product licenses revenue was
$9,000 in 1998 and was nominal in 1999. In 1998 we incurred one-time license
fees for third-party software included in our product.
Cost of Services Revenue. Cost of services revenue was $135,000 in 1998
and $1.3 million in 1999, an increase of $1.2 million. The increase from 1998 to
1999 was a result of growth in our professional services organization and the
use of third-party integration service providers to deploy an increased number
of our products for our growing customer base. Cost of services revenue as a
percentage of services revenue was 91% in 1998 and 52% in 1999. The decrease in
cost of services revenue as a percentage of services revenue from 1998 to 1999
was the result of allocation of deployment services fixed costs over increased
1999 services revenue.
Operating Expenses
Research and Development. Research and development expenses were $1.5
million in 1997, $3.4 million in 1998 and $4.8 million in 1999, increases of
$1.9 million, or 125%, from 1997 to 1998, and $1.4 million, or 41%, from 1998 to
1999. The increases from 1997 through 1999 were primarily related to the
addition of software developers and outside contractors to support our product
development and testing activities related to the development and release of our
applications. We added 17 employees in 1997, eight in 1998 and six in 1999. We
believe that continued investment in research and development is critical to our
future success and we expect these expenses to increase over time.
Sales and Marketing. Sales and marketing expenses were $427,000 in 1997,
$1.9 million in 1998 and $5.2 million in 1999, increases of $1.5 million, or
351%, from 1997 to 1998, and $3.3 million, or 172%, from 1998 to 1999. The
increases from 1997 through 1999 mainly reflect significant personnel-related
costs, such as salaries, benefits, commissions and travel and entertainment
expenses, due to the addition of six sales and marketing employees in 1997, 11
in 1998 and 13 in 1999. To a lesser degree, the increases result from increased
sales and marketing activities, which included tradeshows, advertising, public
relations and other promotional expenses. We expect sales and marketing expenses
to increase in the future.
General and Administrative. General and administrative expenses were
$327,000 in 1997, $724,000 in 1998 and $1.3 million in 1999, increases of
$397,000, or 121%, from 1997 to 1998, and $580,000, or 80%, from 1998 to
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<PAGE> 27
1999. The increases from 1997 through 1999 were primarily the result of
additional finance, executive and administrative personnel to support the growth
of our business during these periods. General and administrative costs
represented 29% of our total revenue in 1999. We expect general and
administrative expenses to increase in the future as we expand our corporate
infrastructure to meet the requirements of a public company.
Other Income (Expense), Net. Other income (expense), net, was $71,000 in
1997, $59,000 in 1998 and $298,000 in 1999 and primarily consisted of interest
income offset by interest expense.
Income Taxes. For income tax purposes, we were an S corporation from
inception through August 1997 and, accordingly, any losses for that period
passed through to the stockholders. As of December 31, 1999, we had net
operating loss carryforwards for federal and state income tax reporting purposes
of approximately $14.8 million and tax credit carryforwards of $529,000, which
expire at various dates through 2019. The United States tax laws contain
provisions that limit the use in any future period of net operating loss and
credit carryforwards upon the occurrence of certain events, including a
significant change in ownership interests. We had significant changes in
ownership interests that occurred in August 1997 and December 1999. We had
deferred tax assets, including our net operating loss carryforwards and tax
credits, totaling approximately $6.1 million as of December 31, 1999. A
valuation allowance has been recorded for the entire deferred tax asset as a
result of uncertainties regarding the realization of the asset balance.
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth unaudited statement of operations data for each
of the quarters in 1999, as well as this data expressed as a percentage of our
total revenue for the periods indicated. This data has been derived from our
unaudited financial statements that have been prepared on the same basis as the
audited financial statements and, in the opinion of our management, include all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of the information when read in conjunction with the financial
statements and related notes. See "Risk Factors--Our future results of
operations will vary from quarter to quarter, and as a result we may fail to
meet the expectations of our investors and financial analysts, which could cause
our stock price to fluctuate".
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<PAGE> 28
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1999 1999 1999 1999
--------- -------- ------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Product licenses ......................... $ 243 $ 280 $ 599 $ 757
Services ................................. 100 249 749 1,470
-------- -------- -------- --------
Total revenue .......................... 343 529 1,348 2,227
Cost of revenue:
Cost of product licenses ................. -- -- -- --
Cost of services ......................... 237 215 286 594
-------- -------- -------- --------
Total cost of revenue .................. 237 215 286 594
-------- -------- -------- --------
Gross Profit ............................... 106 314 1,062 1,633
Operating expenses:
Research and development ................. 1,104 1,085 1,191 1,427
Sales and marketing ...................... 882 1,089 1,394 1,875
General and administrative ............... 293 297 292 423
Amortization of deferred stock-based
compensation ........................... -- -- -- 88
-------- -------- -------- --------
Total operating expenses ............... 2,279 2,471 2,877 3,813
Loss from operations ....................... (2,173) (2,157) (1,815) (2,180)
Other income (expense), net ................ 88 92 48 69
-------- -------- -------- --------
Net loss ................................... $ (2,085) $ (2,065) $ (1,767) $ (2,111)
======== ======== ======== ========
AS A PERCENTAGE OF TOTAL REVENUE:
Revenue:
Product licenses ......................... 70.9% 52.9% 44.4% 34.0%
Services ................................. 29.1 47.1 55.6 66.0
-------- -------- -------- --------
Total revenue .......................... 100.0 100.0 100.0 100.0
Cost of revenue:
Cost of product licenses ................. -- -- -- --
Cost of services ......................... 69.1 40.6 21.2 26.7
-------- -------- -------- --------
Total cost of revenue .................. 69.1 40.6 21.2 26.7
-------- -------- -------- --------
Gross Profit ............................... 30.9 59.4 78.8 73.3
Operating expenses:
Research and development ................. 321.9 205.1 88.4 64.1
Sales and marketing ...................... 257.1 205.9 103.4 84.2
General and administrative ............... 85.4 56.2 21.6 19.0
Amortization of deferred stock-based
compensation ........................... 0.0 0.0 0.0 [0.0]
-------- -------- -------- --------
Total operating expenses ............... 664.4 467.2 213.4 171.2
Loss from operations ....................... (633.5) (407.8) (134.6) (97.9)
Other income (expense), net ................ 25.6 17.4 3.6 3.1
-------- -------- -------- --------
Net loss ................................... (607.9)% (390.4)% (131.0)% (94.8)%
======== ======== ======== ========
</TABLE>
The trends discussed in the annual comparisons of operating results
apply generally to the comparison of results of operations for each of the
quarters in 1999.
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<PAGE> 29
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have funded our operations primarily through sales
of equity securities and, to a lesser degree, the use of long-term debt and
capital leases. Between August 1997 and January 2000 we raised approximately
$36.1 million from the issuance of convertible preferred stock and approximately
$2.5 million from the issuance of long-term debt, and we financed capital
acquisitions through leases totaling approximately $144,000. In August 1999 we
established a $2.0 million revolving line of credit and as of December 31, 1999,
$750,000 was drawn against this line of credit. Our sources of liquidity as of
December 31, 1999 consisted principally of cash and cash equivalents of $22.2
million, investments of $958,000 and approximately $1.1 million of available
borrowings under our line of credit.
Net cash used in operating activities was $1.5 million in 1997, $5.3
million in 1998 and $8.2 million in 1999. For these periods, net cash used by
operating activities was primarily a result of funding ongoing operations.
Since 1997, our investing activities have consisted primarily of
purchases of property and equipment and purchases and maturities of investments.
Capital expenditures, including those under capital leases, totaled $276,000 in
1997, $339,000 in 1998 and $412,000 in 1999. We have financed the acquisition of
property and equipment primarily through capital leases. Our acquisition of
property and equipment was primarily computer hardware and software for our
increasing employee base as well as for our Web site and management information
systems. We anticipate that we will experience an increase in our capital
expenditures and lease commitments consistent with our anticipated growth in
operations, infrastructure and personnel.
Our financing activities provided $6.6 million in 1997, $8.5 million in
1998 and $23.9 million in 1999. In 1997 cash provided by financing activities
consisted primarily of $6.5 million received in connection with the sale of
Series A convertible preferred stock. In 1998 cash provided by financing
activities consisted primarily of $6.1 million received in connection with the
sale of Series B convertible preferred stock, $1.9 million from the conversion
of notes payable into Series B convertible preferred stock and $439,000 in
proceeds from long-term debt. In 1999 cash provided by financing activities
consisted primarily of $2.0 million received in connection with the sale of
Series B convertible preferred stock, $21.5 million from issuance of Series C
convertible preferred stock and $750,000 in proceeds from a line of credit
offset by principal payments on long-term debt and capital lease obligations and
the purchase of a restricted investment.
As of December 31, 1999, we had a line of credit with a bank for $2.0
million, bearing interest at the lending bank's prime rate plus 1.0% (9.5% at
December 31, 1999). Borrowings are limited to the lesser of 80% of eligible
accounts receivable or $2.0 million and were secured by substantially all of our
non-leased assets. As of December 31, 1999, we had borrowed $750,000 under the
line of credit. Additional borrowing of $1.1 million was available under this
line as of December 31, 1999. The expiration date of this line of credit is
August 28, 2000. As of December 31, 1999, there was an outstanding letter of
credit of approximately $250,000 to secure a facilities lease outstanding under
a separate facility with another bank. This letter of credit is cash
collateralized.
We anticipate that the net proceeds of this offering, together with our
existing lines of credit and available funds, will be sufficient to meet our
anticipated needs for working capital and capital expenditures for at least the
next 12 months. We may, however, be required, or could elect, to seek additional
funding before that time. Our future capital requirements will depend on several
factors, including our future revenue, spending to support product development
and expansion of sales, general and administrative activities, the timing of
introductions of new products and market acceptance of our products. If
additional equity or debt financing is required, it may not be available on
acceptable terms or at all.
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
As of December 31, 1999 our cash included money market securities. Due
to the short duration of our investment portfolio, an immediate 10% change in
interest rates would not have a material effect on the fair market value of our
portfolio. Therefore, we would not expect our operating results or cash flows to
be affected to any significant degree by the effect of a sudden change in market
interest rates on our securities portfolio.
27
<PAGE> 30
YEAR 2000 COMPLIANCE
Many computer systems had been expected to experience problems
distinguishing between dates in different centuries because such systems were
developed using two digits rather than four digits to determine the applicable
year. Consequently, there was concern that these systems would be unable to
distinguish between dates in different centuries and could have experienced
errors resulting in system failures or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices or engage in similar normal business activities. To
date, we have not experienced any problems complying with the Year 2000 issue
and have not been informed of any failures of our products from customers. These
problems, however, may not be discovered until months after January 1, 2000.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board, or FASB, issued
Statement of Financial Accounting Standards, or SFAS, No. 133, Accounting for
Derivative Instruments and Hedging Activities. SFAS No. 133 establishes methods
of accounting for derivative financial instruments and hedging activities
related to those instruments as well as other hedging activities. Because we
currently hold no derivative financial instruments and do not currently engage
in hedging activities, adoption of SFAS No. 133 is expected to have no material
impact on our financial condition or results of operations. In June 1999, the
FASB issued Statement No. 137, Accounting for Derivative Instruments and Hedging
Activities and Deferral of the Effective Date of FASB Statement No. 133.
Statement No. 137 defers the effective date of Statement No. 133 for one year.
Statement No. 133 is now effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000.
28
<PAGE> 31
BUSINESS
OVERVIEW
We provide Web-based packaged application software for online
business-to-business enterprise commerce initiatives. Our software products and
services help our customers rapidly and efficiently deploy, maintain and extend
a comprehensive and secure business-to-business enterprise commerce solution for
interacting with business customers, partners, suppliers, distributors and
employees. Our products include a multi-functional business-to-business engine
to perform online transactions, partner relationship applications to efficiently
manage a full range of online business relationships, and an information portal
to allow companies to interact instantly with their business customers,
partners, suppliers, distributors and employees. Webridge eBusiness Express
customers include Deutsche Bank AG London, Exabyte Corporation, Executone
Information Systems, Inc., Honeywell, Inc., Primedia Workplace Learning, Inc.
and Xerox Corporation.
INDUSTRY BACKGROUND
IMPACT OF THE INTERNET
Business worldwide is accelerating and becoming increasingly
competitive, fueled by the Internet and other technologies, shortened product
cycles and the globalization of the economy. However, the fundamental need for
businesses to deliver value, customer focus, competitive differentiation and
operational excellence has changed little. What has changed are the tools
available to help businesses create and manage the collaborative relationships
that achieve these objectives. The adoption rate of the Internet and its
associated multi-point technologies has been notably faster than more gradual
adoption rates for earlier point-to-point communication tools such as the
telephone and the fax. International Data Corporation reports that the number of
Internet users was 69 million in 1997 and will grow to 320 million by 2002. This
rapidly expanding technology has introduced a new era of digital communication
enabling businesses to interact globally across industries in ways that can have
a revolutionary impact on their success.
In this time-compressed and increasingly competitive environment, direct
access 24 hours a day, 365 days a year to a business partner's processes and
secure personalized information could accelerate the vital business
relationships that create sustainable competitive advantages. Many
organizations, however, still use an 8 hours a day, 5 days a week model that
builds walls around core information systems and business processes, limiting
access to human gatekeepers who in turn diminish information availability as
they dole data out one element at a time through point-to-point communication
tools. We believe organizations that adhere to this model will limit their
ability to take advantage of the rapid growth of online business-to-business
transactions, which Forrester Research reports totaled only $43 billion in 1998
but will reach $2.7 trillion by 2004.
EMERGENCE OF BUSINESS-TO-BUSINESS ENTERPRISE COMMERCE
Business-to-business enterprise commerce is an emerging approach to
conducting online business which exploits the ability of the Internet to
digitally weave the employees and core information systems of disparate
organizations into a rich fabric of collaborative information partnerships. The
intent of business-to-business enterprise commerce is to encompass, streamline
and automate the repetitive, daily interactions among a multi-point network of
cooperating business partners. This approach requires businesses to establish a
framework for online relationships with all of their important constituencies,
using formats and protocols that are compatible with computers and understood by
humans, including sales prospects, customers, sales channel partners, employees,
distributors and suppliers. This enterprise commerce framework must fuse the
typically separate intranet, extranet, and Internet networks into a single,
unified enterprise commerce network. This framework must also provide the data
integrity and security facilities required for this network. The types of
information that flow across this network are diverse and limited principally by
the range of enterprise commerce applications available to serve the
constituents. Enterprise commerce businesses need to constantly upgrade existing
applications and acquire or develop new applications to maximize the reach,
productivity and value of their interactive business relationships.
Much as companies adopted enterprise resource planning software in the
late 1980s to manage back-office operations and sales force automation software
in the mid-1990s to manage front-office operations, many businesses are
29
<PAGE> 32
now seeking solutions that can help them gain competitive advantage by
accelerating the development of interactive business relationships.
International Data Corporation projects that the Internet commerce applications
market will grow from $444 million in 1999 to $13 billion in 2003.
THE TECHNOLOGY CHALLENGE TO ACHIEVE BUSINESS-TO-BUSINESS ENTERPRISE COMMERCE
Businesses are increasingly demanding online business-to-business
enterprise commerce applications that in one integrated solution:
- perform commerce transactions with high integrity;
- deliver pinpoint, targeted, personalized content with security;
and
- process cross-organizational business rules, which are computer
programs that embody business policies.
These applications must be designed to keep up with the growth of the business
and adapt to changes in Internet and other technologies. Businesses recognize
that these large-scale solutions are complex, mission-critical software systems
which raise major technological challenges and require significant resource
commitments.
Early approaches by companies to develop business-to-business enterprise
commerce solutions were undertaken by in-house information technology
programmers. More recently, companies turned to vendors of higher-level
technology point products, which manage only discrete portions of a
comprehensive business-to-business enterprise commerce solution, such as Web
page authoring, Web application servers, commerce components, content
management, personalization, security frameworks and general application
development. Enterprise commerce solutions built by integrating these point
products typically require significant planning, custom development, testing and
integration of the disparate technological elements, often requiring multiple
programming tools. Consequently, both these approaches involve long development
cycles and high maintenance costs, frequently offer limited functionality and
scalability and are often unreliable or unmanageable in the long term. In
addition, business rules and content, such as pricing formulas, product
promotions, partner groupings, and financial policies, are often written in
complex programming languages and are very difficult for non-technical managers
to change quickly. Business managers, therefore, may not have the capability to
directly control business policies embedded in the system or to react in
real-time to changing market conditions, and instead must submit each change as
a request to frequently overloaded technical specialists.
PACKAGED APPLICATIONS FOR BUSINESS-TO-BUSINESS ENTERPRISE COMMERCE
In this fast-paced marketplace, businesses are being driven by their
customers, partners, distributors, suppliers and employees to quickly capture
the sustainable competitive advantage that can come through exploiting
business-to-business enterprise commerce technology. Businesses cannot afford to
make costly mistakes, nor can they sit idly by while their competitors establish
market share and mind share. The inherent risks and unpredictable schedules
associated with in-house development lead businesses to seek packaged
applications specifically designed for business-to-business enterprise commerce.
These packaged applications provide an attractive alternative to in-house and
third-party custom-developed solutions, enabling businesses to get to market
quicker with a solution that can be more readily maintained and extended as the
business evolves. Packaged applications can be an even more attractive
alternative if made available as part of an overall enterprise commerce business
framework that not only includes additional applications but is also designed to
integrate with a company's existing software infrastructure and can be tailored
and extended using a company's existing skill base.
To maximize the competitive advantage of the business-to-business
enterprise commerce approach, packaged applications should:
- support collaborative, cross-organizational business activities
ranging from support forums and shared calendars to joint
marketing and sales campaign management with sales channel
partners;
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<PAGE> 33
- securely apply personalized processing of business rules and
content that dynamically adapts to an individual user's
organizational relationship and personal preferences;
- allow non-technical business managers to define and modify
business rules, content and organizational profiles in real-time
and enable flexible cross-organizational delegation of these
duties;
- expedite commerce interactions with extensively cross-referenced,
targeted content and automatic configuration assistance to
increase order accuracy and minimize delivery times;
- execute distributed, high-integrity financial and business rule
transactions that are coordinated with and make use of a
company's existing business applications and databases; and
- provide a development and execution framework in which custom
software extensions can be easily integrated, allowing
enterprise-class features and attributes to be inherited
automatically.
THE WEBRIDGE SOLUTION FOR BUSINESS-TO-BUSINESS ENTERPRISE COMMERCE
We provide Web-based packaged application software for online
business-to-business enterprise commerce initiatives. Our software products and
services help our customers rapidly and efficiently deploy, maintain, and extend
a comprehensive and secure business-to-business enterprise commerce solution for
interacting with business customers, partners, suppliers, distributors and
employees. Key benefits of our solution include:
Comprehensive Business-to-Business Solution. Our products include a
highly functional business-to-business engine to perform online transactions,
partner relationship applications to efficiently manage a full range of online
business relationships, and an information portal to allow companies to interact
instantly with their business customers, partners, suppliers, distributors and
employees. Underlying our products are multi-functional, integrated components
for content management, organizational and user profile management, security and
data integrity. Our comprehensive solution minimizes the need for individual
point products and reduces the need for lengthy custom development.
Business-to-Business Personalization. Our products allow companies to
create a unique Web experience for each user, with an environment that is
assembled dynamically according to established business rules in real-time to
meet the changing needs of companies and their business customers, partners,
suppliers, distributors and employees. Our products allow companies to profile
their business customers at the enterprise level as well as at the individual
user level. This enables companies to more effectively serve their business
customers, partners, suppliers, distributors and employees by meeting a full
range of corporate-level requirements, such as company policies and
business-to-business contract provisions.
Security and Integrity. Our products offer a flexible, sophisticated and
integrated security system. Business managers can create and manage user
profiles and group definitions to control information access and to target
information to specific users. This is particularly important in
business-to-business transactions where the system contains sensitive
information about business customers, partners, distributors and suppliers, who
may compete with one another. Group definitions and access control can be
changed in real time with a high level of security and data integrity, which
encourages a higher level of confidence and promotes more commercial activity.
Rapid Deployment and Ongoing Adaptability. Our single platform
architecture, with its integrated development environment, is easy to integrate
into our customers' existing systems, eliminating the need for individual point
products that require costly and lengthy integration into a comprehensive
solution. Our platform architecture allows companies to complete their online
business-to-business initiatives more rapidly, thereby reducing time to market
and decreasing costs. We believe our products can be implemented faster than
those of our competitors, sometimes in less than 60 days. Once deployed, our
solution is easy to use, maintain, modify and expand to meet a company's
changing needs, capable of supporting tens of thousands of users and many
business relationships. With simple development environments and a central,
shared repository, business managers, rather than information technology
personnel, can quickly and easily modify business rules, user profiles and
content in real time, offering a personalized experience to each visitor.
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Ease of Customization. To complement our packaged applications, we offer
add-on application modules and a library of software representing highly
customizable enterprise commerce business components, commonly referred to as
business objects, that allow our product to be easily assembled and tailored for
each customer's unique practices, processes and expertise. Instead of a
"one-size-fits-all" approach, customers can choose one of the packaged
applications as a starting point, add specialized application modules that
provide needed functionality, and then augment applications with additional and
supporting business objects to rapidly produce a cost-effective custom solution
for their particular requirements.
STRATEGY
Our goal is to establish our position as the leading provider of online
business-to-business enterprise commerce solutions. To achieve this goal, we
intend to:
Leverage our Product Leadership. We believe our applications are the
most integrated online business-to-business enterprise commerce solution on the
market today. We intend to leverage this position to become a leading provider
of online business-to-business applications. We will continue to offer
comprehensive, rapidly deployable, easy-to-use and reliable products that
address our customers' complete business-to-business needs as they build,
maintain and extend their online business-to-business solutions.
Build Upon Our Network of Relationships. We are building relationships
with leading system integrators, consultants, software and hardware providers
and industry strategists. We also plan to build relationships with value-added
resellers and original equipment manufacturers to develop indirect sales
channels. We intend to use and extend this network to reach target markets,
accelerate the adoption of our current products and technologies, and test and
validate our next-generation products and technologies. These relationships
enable us to focus on our core competencies, while offering our customers
complementary technologies from industry leaders and innovators. We believe
these relationships, in addition to others that we intend to pursue, will help
validate and accelerate the widespread adoption of our online
business-to-business enterprise commerce solutions.
Increase Focus on the Applications Service Provider Model. In addition
to offering our customers the option to pay a one-time fee for a perpetual
license, we intend increasingly to offer our software using two monthly payment
licensing models, both directly and through Internet-based applications service
providers.
- In one model, we provide our customers software tailored to their
requirements, together with the necessary hardware and
facilities. We also provide both system-level and
application-level administrative management services so that the
customer need only provide normal business-level administrative
services.
- In another model, we license our software through applications
service providers. These applications service providers run, or
host, our software on their own servers and allow their customers
to use our software over the Internet for a fee. We believe this
applications service provider model will be particularly
attractive to small and mid-sized companies that typically have
more limited internal information technology resources, thereby
expanding our addressable market.
Expand Internationally. We intend to take advantage of the worldwide
growth of the Internet by expanding our global marketing efforts. We believe
there will be significant international opportunities for our products and
services and plan to continue our international expansion by adding direct sales
personnel and increasing our indirect sales channels. We are currently
establishing and staffing a field sales office in Europe and plan to expand into
Asia in the next 12 months. We also expect to establish relationships with
system integrators, consultants, software and hardware providers and industry
strategists in these international markets.
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PRODUCTS
We develop, market and support comprehensive, Web-based packaged
application software for online business-to-business enterprise commerce
initiatives. Our products are packaged applications for commerce, content
management and collaboration, with additional specialized add-on application
modules and software tools used to customize and maintain the solutions built
using these products.
Webridge eBusiness Express is our business-to-business enterprise
commerce offering. Our customers use Webridge eBusiness Express to deploy
business-to-business Web sites aimed at increasing sales, strengthening customer
and partner relationships, lowering costs and streamlining internal systems and
interactions with external systems. The development and deployment of these Web
sites is expedited using Webridge Express Framework architecture, which tightly
integrates multi-functional, customizable, pre-built application subsystems with
application subsystems custom built to meet the requirements of a particular
corporate customer. A principal feature of Webridge eBusiness Express is a set
of building blocks, called business objects or layouts, that implement
capabilities required to conduct business-to-business commerce, content and
collaboration management on Web sites. These building blocks enable
non-technical business managers to deliver personalized content that is secure
and targeted, selectively promote products and brands, manage closed-loop
marketing campaigns, fulfill financial and information transactions, and foster
long-term relationships with customers, business partners, suppliers,
distributors and employees on a real-time basis.
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The table below summarizes the major components of our
business-to-business enterprise commerce solution.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
NAME DESCRIPTION
- -----------------------------------------------------------------------
Framework:
- -----------------------------------------------------------------------
<S> <C>
Webridge Express Framework Comprehensive
business-to-business
framework including
integrated object-oriented
data management services for
robustness, usually meaning
enhanced security,
reliability, availability,
scalability and performance.
- -----------------------------------------------------------------------
Packaged applications:
- -----------------------------------------------------------------------
Webridge Partner Express Enables companies to automate
and accelerate all the
labor-intensive, day-to-day
tasks of partner management.
- -----------------------------------------------------------------------
Webridge Portal Express Provides a powerful,
easy-to-use interface for
navigating and browsing very
large collections of
information.
- -----------------------------------------------------------------------
Webridge Commerce Express Provides a flexible template
to create an online product
catalog.
- -----------------------------------------------------------------------
Add-on application modules:
- -----------------------------------------------------------------------
Webridge Commerce Manager Provides comprehensive online
order management and
processing system.
- -----------------------------------------------------------------------
Webridge Configuration Manager Generates Web-based
configuration pages.
- -----------------------------------------------------------------------
Webridge Notification Manager Sends targeted and
personalized bulk email
and/or fax notifications and
tracks responses.
- -----------------------------------------------------------------------
Webridge Lead Manager Captures, qualifies, assigns,
distributes and manages
leads with flexible
reporting tools.
- -----------------------------------------------------------------------
Visual Development Environment Tools:
- -----------------------------------------------------------------------
Webridge Studio - Entity Manager A Windows application used
to define and manage
transactional business object
entities. Includes a
point-and-click query
building tool.
- -----------------------------------------------------------------------
Webridge Studio - Site Designer A Windows application used
to design and manage
sophisticated data-driven
hypertext markup language,
or HTML, page and form
layouts with object-oriented
what-you-see-is-what-you-get,
or WYSIWYG, ease.
- -----------------------------------------------------------------------
</TABLE>
WEBRIDGE eBUSINESS EXPRESS PACKAGED APPLICATIONS
Webridge Partner Express, Webridge Portal Express and Webridge Commerce
Express are each built on the Webridge Express Framework architecture.
Webridge Partner Express is designed for product or service companies that have
indirect sales channels or other complex business relationships. Webridge
Partner Express enables companies to automate and accelerate all the
labor-intensive, day-to-day tasks of partner management including
administration, contact and lead management, publication and distribution of
product information and marketing programs, product configuration, and partner
notification. A business can immediately provide its business partners with
customized, multi-tier pricing, cross-selling opportunities and targeted
marketing campaigns based on their pre-established business relationships.
Webridge Partner Express also allows users to create multiple, customized views
of content and to collaborate in secure discussion forums on the Web site.
Webridge Portal Express is designed for securely sharing cross-organizational
information and managing collaborative projects. This application provides a
powerful, easy-to-use interface for navigating and browsing very large
collections
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of information by automatically organizing information into distinct workspaces.
The administration of these workspaces, including content and access control,
can be delegated to users or groups of users within the company or its business
partners. The workspaces can be organized using folders, and the information can
range from simple office documents to interactive applications such as group
calendars and discussion forums. Users can create multiple, customized views of
information. Webridge Portal Express allows a company to quickly assemble and
apply its information assets to improve productivity, collaboration, business
performance and profitability.
Webridge Commerce Express is designed for companies that need to extend their
businesses by implementing online commerce and order management processes.
Webridge Commerce Express provides a flexible template to create an online
product catalog that enables non-technical business managers to instantly change
products, prices, promotions and other information to react to fast-changing
marketplaces. With Webridge Commerce Express, companies have the ability to sell
goods and services directly to consumers online. This application also supports
complicated business-to-business transactions, such as those that have
individually negotiated pricing and other contract terms and conditions.
Webridge Commerce Express is designed to allow the use of a large number of
commercially available commerce components, including components specialized for
global sales tax calculations, domestic and international shipping and handling
cost computation, payment processing, order management, and connectors to most
major back-end inventory and financial systems.
WEBRIDGE ADD-ON APPLICATION MODULES
We offer four additional application modules that can be either added to
our packaged applications for additional functions or added to a custom
application built on Webridge Express Framework as a way to reduce
implementation time.
Webridge Commerce Manager provides the commerce capability of Webridge Commerce
Express in an independent module for easy integration with other applications
built on Webridge Express Framework.
Webridge Configuration Manager provides business managers with a visual
interface to specify all possible product configurations. The module
automatically generates Web-based configuration pages that guide the Web site
visitor in selecting options and product configurations that satisfy the
constraints specified by the business manager. This improves order accuracy for
companies. In addition, Web site visitors can easily generate pricing quotes,
analyze alternative scenarios, and save configurations for later use.
Webridge Notification Manager allows marketing personnel to create and manage
closed-loop, targeted and personalized email and fax marketing campaigns. This
module can measure the effectiveness of the marketing campaigns by automatically
tracking responses to the notifications.
Webridge Lead Manager automates the capture, qualification, assignment and
distribution of sales leads cross-organizational recipients. The recipients can
use this module to manage the lead while business managers monitor the progress.
Business managers can capture leads directly from the Web site or load leads in
bulk from other sources. Sales leads can be assigned and distributed manually or
automatically using easily customizable business rules.
VISUAL DEVELOPMENT ENVIRONMENT TOOLS
We also provide comprehensive tools for our clients to develop, deploy
and extend Webridge eBusiness Express solutions. Our visual development
environment tools include the ability to integrate with widely used software
source code management tools to facilitate and coordinate large projects using
teams of developers.
Webridge Studio Entity Manager is a Windows-based tool that allows developers to
design and manage sets of business objects, including the creation of business
rules and queries that select subsets of the business objects for display,
reporting or other purposes.
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Webridge Studio Site Designer is a Windows-based WYSIWYG tool that allows
graphic designers to create visually sophisticated HTML pages and forms that
display data from business objects. This tool's open architecture also supports
design using the other widely used HTML editors.
[Graphic depicts Webridge's architecture and products. The
graphic sets forth the Webridge Express Framework's (i) integrated
application services, including (A) content management with workflow,
(B) personalization, (C) product catalog, (D) threaded discussions, (E)
user and site administration, (F) site analysis and reporting, and (G)
legacy access, (ii) enterprise-class dynamic Web architecture and (iii)
Webridge Studio WYSIWYG tools. Above the Webridge Express Framework, the
graphic presents add-on application modules, Webridge Lead Manager,
Webridge Commerce Manager, Webridge Configuration Manager and Webridge
Notification Manager. Above the add-on application modules, the graphic
presents packaged business solutions, Webridge Portal Express, Webridge
Partner Express, Webridge Commerce Express.]
TECHNOLOGY
We designed a comprehensive architectural approach that provides
enterprise-class robustness, rapid application development and a standard way to
easily extend functionality by integrating third-party software components. We
believe our advanced technology architecture, which is based on industry
standards, enables our clients, partners, and consultants to build, deliver and
manage more robust business-to-business enterprise commerce solutions in less
time and at lower cost than existing alternatives.
APPLICATION ARCHITECTURE
The application code in our products is based on modular components,
allowing developers and system integrators to use, integrate, modify, adapt or
extend the applications with minimal impact on other areas, and do so more
quickly than with alternative approaches. Code can be written using Microsoft
programming language products, including VBScript, JScript and Java, which
minimizes the need for specialized programming skills. There are numerous
compatible, pre-built visual and logic components included in our products,
which minimize the amount of new code that needs to be written to create a
custom application. Programmers can easily create components that compatibly
extend the library of available pre-built components. By emphasizing the re-use
of pre-built and easily customizable visual designs and software components, the
Webridge solution provides an efficient architecture for clients to build and
deploy business-to-business enterprise commerce applications quickly and
cost-effectively.
A key feature of the Webridge Express Framework architecture is its
strong compatibility with Microsoft's Component Object Model, or COM, standard
for distributed component computing. We believe COM is the most widely supported
distributed component standard in the information technology industry with
millions of developers producing programs compatible with COM. Nearly all of
Microsoft's products are COM-compatible and thousands of additional
COM-compatible software components are available in the market. By emphasizing
COM compatibility, our solution provides our clients with an easy and standard
way to extend their solutions using compatible components from a large library
of pre-built commercial software.
APPLICATION SERVICES
Our Webridge Express Framework's integrated application services help
our customers create a unique, compelling experience for each user with a
personalized presentation assembled dynamically to meet the changing needs of
each user and business relationship. These services are built using customizable
business objects and can be easily modified to satisfy custom requirements.
Content Management with Workflow allows business managers to publish
secure information without HTML programming required, provides a workflow
approval process, manages networks of related content and includes secure
full-text search capabilities.
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Pinpoint Personalization delivers content and processes business rules
based on stored user profiles, click trails through a Web site, business
policies, and third-party recommendation engines. This feature supports user
driven personalization like My Yahoo, and can accommodate various Web browsers
and national language choices.
User and Organizational Profiles give business managers the ability to
create, enhance and change user profiles and group definitions to control
information access and to target specific users or groups with information. This
feature also supports delegation of subset authority to other organizations or
directly to users.
MULTI-TIER NETWORK ARCHITECTURE
We use a modular multi-tier network architecture to provide scalable
processing power and to enhance system availability. The presentation tier
manages secure visitor authentication, delivers streaming and cached content,
and encrypts the data for secure transmission. The application tier hosts the
Webridge Express Framework, which generates personalized content and executes
business rules. The structured data tier is a relational database management
system that manages tables of structured data and executes queries against that
database. The unstructured data tier manages the repository of uploaded office
document content and other unstructured content and executes queries against
that content database. The delivery tier runs bulk notification jobs and
interfaces with the customer's email and fax communications facility. Within any
tier, the processing load can be further distributed and balanced across
multiple servers, providing both increased processing bandwidth and redundancy
for automatic recovery in the event of failure.
ADHERENCE TO INDUSTRY STANDARDS
Adherence to software industry standards enables us and our customers to
benefit from a workforce already trained in industry standards. Adherence to
these standards also provides compatibility with other existing and future
software products, including extensible markup language, or XML. We have
invested significant resources in developing our architecture to comply with
widely adopted commercial software industry standards for building large scale
Internet applications, including XML.
WEBRIDGE EXPRESS FRAMEWORK ARCHITECTURE
Webridge Express Framework architecture enables our customers to create,
manage and extend their business-to-business enterprise commerce initiatives.
This architecture provides four key capabilities:
- XML data services provides a means to create XML data
interchanges with business partners' computers and dynamically
adapts each interchange to the specific pre-existing business
relationship;
- automatic data management moves business objects back and forth
between fast RAM memory and slower database memory to maximize
performance and ensure data integrity;
- security services provides a comprehensive means of securing data
and business rules, including tools that allow non-technical
business managers to specify and control user access to data and
business rules; and
- external integration services coordinates reliable access to, and
updates of, data held in mainframe or other back-end systems, and
stores data in case of a systems failure and forwards it when the
connection is reestablished.
WEBRIDGE PROFESSIONAL SERVICES
Deployment Services. We offer a wide range of services to help ensure a
timely and comprehensive deployment of our enterprise commerce solution for our
customers. Our deployment services group consists of highly trained and
experienced professional Web developers, technical architects and project
managers who assist our customers with planning, designing and rapidly
implementing their enterprise commerce solutions. Our personnel are involved
early in the process to provide both technical guidance as well as overall
system design prior to completion of
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the sale. After the sale, we assume control of the project and work hand-in-hand
with customer personnel to deploy and test the Webridge solution.
In many cases, we work with third-party integration service providers to
deploy our solution. In these cases, a joint team is assembled, typically
consisting of one or two Webridge personnel and several integration service
provider personnel. We have relationships with several independent integration
service providers and we intend to further broaden the involvement of
third-party integration service providers in our solution deployments. Through
these relationships our customers have access to a wider range of services and
expertise to ensure a complete solution.
We offer our customers several deployment services, primarily focused on
the design and rapid implementation of our enterprise commerce solutions,
including:
- needs analysis;
- data schema and system architecture design;
- Web site layout and navigation design;
- project management;
- application deployment;
- customized business application development;
- software integration; and
- performance tuning.
Hosting Services. We also provide hosting services for customers who
prefer to outsource operation of the server(s) running Webridge eBusiness
Express. Hosting services consist of continuous server operation, including
performance and security monitoring, statistical reporting and software
updating. Hosting services are provided directly by Webridge and through an
outsourcing arrangement with a national online service provider.
Support Services. After deployment, we provide support services for
customers. These services include telephone and online support. The support
contract also provides customers with upgrade rights.
Training Services. We offer basic and advanced training for customers
and independent integration service providers. Courses are led by instructors in
a classroom setting either at our offices or at the client's facilities. Classes
teach the skills necessary to quickly become productive and proficient using the
Webridge programming tools.
BUSINESS RELATIONSHIPS
We have a number of business relationships to assist us in marketing,
selling and developing our online business-to-business applications. We have
business relationships with the following systems integration, design,
consulting and other service organizations: AGENCY.COM LTD., Cohesion, Inc.,
Cotelligent, Inc., Crowe, Chizek and Company LLP, CTR Business Systems, Inc.,
Emerald-Delaware, Inc. (Emerald Solutions), Frank Lynn & Associates, Inc., Front
Line Solutions, Proxicom, Inc., Technology Channels Group Inc. and USWeb
Corporation. Through these relationships, a broader range of offerings are
available to our customers. These relationships also provide us with additional
sales leads.
In addition, we have business relationships with leading software and
hardware providers to enable our products to leverage our clients' information
technology investments and to provide complete online business-to-business
solutions. Our current relationships are with the following technology
companies:
- Microsoft Corporation. Our online business-to-business solutions
are designed to run exclusively on the Microsoft platform. We
collaborate with Microsoft on joint marketing activities to
highlight the benefits of our products on the Microsoft platform.
We participate in the Microsoft E-Commerce Alliance, a group of
companies working together to provide customers with an easy
one-stop shopping experience using Microsoft-based online
commerce solutions, and fully support the Microsoft BizTalk
framework to offer our customers packaged online
business-to-business solutions that seamlessly integrate with
hundreds of independent software products.
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<PAGE> 41
- Intel Corporation. We work closely with Intel to optimize the
performance of our solutions on Intel's architecture. We also
collaborate with Intel on joint marketing activities to highlight
the benefits of our products on the Intel platform.
CUSTOMERS
As of February 29, 2000, we had licensed our products and provided
related services to 27 customers. Our customers represent a broad spectrum of
enterprises within diverse sectors. Primedia Workplace Learning, Inc. and Xerox
Corportion each accounted for more than 10% of our revenue in 1999.
As of February 29, 2000, our customers were:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
TECHNOLOGY AND COMMUNICATIONS FINANCIAL SERVICES
<S> <C>
Adtran, Inc. Deutsche Bank AG London
AGENCY.COM LTD. BenefitMall.com
AristaSoft Corporation
Axent Technologies, Inc. MANUFACTURING AND SERVICES
CellIt Honeywell Inc.
Cohesion Technologies, Inc. M2R2 Corporation
Exabyte Corporation Outboard Marine Corporation
Executone Information Systems Inc. Premiere Group
Genesys Telecommunications Laboratories, Inc. Schweitzer Engineering Laboratories, Inc.
Hughes Network Systems Unicast
In Focus Systems, Inc. VetLife
Juniper Networks, Inc.
NCR Corporation
NEC Technologies
PanAmSat Corporation
Primedia Workplace Learning, Inc.
Think3
Xerox Corporation
- ----------------------------------------------------------------------------------------------
</TABLE>
CASE STUDIES
DEUTSCHE BANK
Deutsche Bank is one of the world's five largest banks and is the global
leader in foreign exchange services. Deutsche Bank's customers include large
international companies, international banks and strategic investment partners.
Deutsche Bank needed a highly secure, Internet-based application to support
foreign currency trading and to deliver rapidly changing financial information
to its major customers. Deutsche Bank required an online solution that would:
- provide global customers with instant access to its trading
exchange;
- provide market differentiation for Deutsche Bank Foreign
Exchange;
- provide lower transaction costs; and
- be operational in 65 days.
Webridge Express Framework was selected because it enabled Deutsche Bank
to build its secure FX Markets Web site within Deutsche Bank's time constraints.
The FX Markets secure Web site provides:
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- customers the ability to place foreign exchange orders and
check the status of their trades through the Internet site;
- extensive security to assure that only authorized users have
access to restricted information;
- transactional connections to the Deutsche Bank back office
systems; and
- automatic extraction of relevant information from external
real-time news feeds with instant indexing and personalized
information delivery.
The site was operational within nine weeks of commencement of the
project.
XEROX'S RESELLER CHANNELS GROUP
Xerox, through its Reseller Channels Group, launched aggressive channels
programs three years ago to expand sales coverage. Expanding sales channels
programs for printers and its supplies business is a key part of Xerox's
strategy going forward. To support this strategy, Xerox is focusing on enhancing
resellers' awareness of, and ability to sell, Xerox products. Xerox selected
Webridge Partner Express, Webridge Lead Manager and Webridge Notification
Manager to serve as its Web-based partner management system to support a
comprehensive Internet strategy for the Reseller Channels Group that would:
- build loyalty among resellers;
- significantly shorten volume channel sales and improve reseller
productivity; and
- reduce selling costs.
Xerox required a complete, dynamic Web-based partner management solution
that could deploy quickly, and give it an immediate advantage over its
competitors. Xerox chose Webridge because the Webridge solution:
- securely delivers customized product, training, promotion and
pricing information to different categories of resellers based
upon business rules defined by Xerox channel managers;
- provides personalized, pertinent information;
- allows the Reseller Channels Group to manage day-to-day operation
of its Web site;
- integrates a complete lead management system to ensure timely
distribution, Web-based follow-up, monitoring, reporting and
forecasting of leads; and
- sends personalized emails or faxes regularly to notify resellers
of new information and programs customized to the unique needs of
various partner categories.
The reseller Web site Xerox developed using the Webridge solution
adheres to the Xerox corporate look and feel guidelines and consolidates
multiple partner Web sites into one site powered by Webridge.
SALES AND MARKETING
We market our products mainly through a combination of a
headquarters-based telesales group and a field-based direct sales organization
with offices throughout the United States. We generate sales leads from a
variety of marketing activities, as well as from other businesses with which we
have strategic relationships. These leads are qualified by our telesales group
and passed to our field-based direct sales group for follow up. Our typical
sales process includes a needs assessment and a demonstration of our products
followed by a more detailed technical solution plan developed jointly by our
technical sales and services personnel and the customer.
We intend to expand our direct sales presence by opening sales offices
internationally and additional sales offices in the United States. We also plan
to develop an indirect sales channel using value-added reseller and original
equipment manufacturer relationships worldwide to further penetrate the market
for our products and services and to further develop our business relationships
with third-party integration service providers as a means of broadening our
marketing reach.
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Our marketing activities are designed primarily to generate sales leads
and, to a lesser degree, to increase the overall awareness of the Webridge brand
and products. Our lead generating activities include Web-based events, seminars,
tradeshows and other promotional programs which highlight the value of the
Webridge eBusiness Express product for the online business-to-business
enterprise commerce market. We also participate in and conduct industry
conferences, market research, speaking events, public relations activities and
developer conferences.
COMPETITION
The market for online business-to-business applications is rapidly
evolving and intensely competitive. We expect competition to persist and
intensify in the future. Our primary competition includes:
- in-house development efforts by prospective customers and
partners, which may be encouraged by providers of point products;
- vendors of application software or application development
platforms and tools directed at interactive commerce, like
BroadVision, Art Technology Group and Vignette;
- marketing solution providers such as ChannelWave and MarketSoft;
and
- Web site developers that develop custom software or integrate
other application software into custom solutions.
We believe the primary factors upon which we compete are the
capabilities of our products, the extent to which, and the ease with which, our
products integrate with other software and existing operating systems, our
deployment time, our prices and our ability to provide quality services to
assist our customers and our partners. Our applications provide faster
implementation and lower cost of ownership compared to in-house development
efforts, application software vendors, vendors of application development
platforms and tools, and independent Web site developers. We believe the
capabilities of our products, along with their ability to integrate with systems
using Windows NT and software designed to run on Windows NT, provide us with an
advantage over all of our competitors with respect to customers using the
Windows NT operating system. Because our product only operates on the Windows NT
operating system, we are at a disadvantage to our competitors with respect to
customers using other operating systems. See "Risk Factors -- Existing and
potential competitors could make it more difficult for us to acquire and retain
customers".
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
Our success and ability to compete are substantially dependent on our
internally developed technologies, software and trademarks, which we seek to
protect through a combination of copyright, trade secret and trademark law, and
contractual restrictions and operational safeguards. These legal protections
afford only limited protection for our technology. We seek to protect our source
code for our software, documentation and other written materials pursuant to
signed license agreements. We also seek to avoid disclosure of our intellectual
property by requiring employees, consultants and other companies with whom we
have concluded marketing agreements with access to our proprietary information
to execute confidentiality agreements. Additionally, we have operational
safeguards in place that provide security for our network and facilities.
Despite these precautions, it may be possible for a third party to copy or
otherwise obtain and use our proprietary information without authorization or to
develop similar technology independently. We pursue the registration of our
trade and service marks in the United States, and we have registered the
trademark "Webridge" in the United States. We have a trademark application
pending in the United States for our logo. Effective trademark, service mark,
copyright and trade secret protection may not be available in every country in
which our products are distributed or made available through the Internet, and
policing unauthorized use of our proprietary information is difficult. See "Risk
Factors--Our success and competitive position depends on our ability to protect
our proprietary technology."
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We rely upon technology developed by third parties, including Visual
Studio and Java Virtual Machine software and Java language from Microsoft. We do
not assure you that our third-party technology will not infringe on the
intellectual property rights of others or continue to be available to us on
commercially reasonable terms, if at all. The loss of or inability to maintain
any of these technologies could result in delays in introduction of our products
and services until equivalent technology, if available, is identified, licensed,
if necessary, and integrated, which could seriously harm our business. See "Risk
Factors--The market for the Windows NT operating system or its successor
version, Windows 2000, may fail to develop fully, develop more slowly than we
expect or otherwise be harmed".
EMPLOYEES
As of December 31, 1999, we employed 100 persons on a full-time basis.
None of our employees is covered by a collective bargaining agreement and we
have never experienced a work stoppage. We believe we have good relations with
our employees.
FACILITIES
Our headquarters are now located in a leased facility in Portland,
Oregon, consisting of approximately 25,000 square feet under a lease expiring in
September 2000. In the year ended December 31, 1999, our rent for this facility
was $282,666. In November 1999, we entered into a lease for new facilities
located in Beaverton, Oregon. We expect to move into these new offices in April
2000. The facility we will occupy consists of approximately 49,762 square feet
for an average monthly rent of approximately $47,500. The new lease expires in
February 2007.
We also rent space in other cities to support our sales and support
activities, including Seattle, San Francisco, Los Angeles, Minneapolis, Dallas,
Boston, New York, Philadelphia, Atlanta, and London. We believe our facilities
are adequate to meet our needs for the foreseeable future.
LEGAL PROCEEDINGS
We are not a party to any litigation or arbitration proceedings that
would have, or during the last two fiscal years has had, a material effect on
our business.
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<PAGE> 45
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table includes information about our executive officers
and directors.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ---- --- -----------
<S> <C> <C>
Gary N. Fielland 50 Chief Executive Officer, President and Director
Mark S. Anastas 44 Chief Operating Officer, Corporate Secretary and Director
David L. Brinker 49 Chief Financial Officer
Robert F. Dunne 46 Vice President of Sales
Jon F. Jackson 45 Vice President of Research and Development
Gary M. Raetz 49 Vice President of Customer Services
Gary A. Whitney 42 Vice President of Marketing
David A. Shrigley 52 Director
C. Scott Gibson 47 Director
Gerard H. Langeler 49 Director
James A. Lash 56 Director
</TABLE>
GARY N. FIELLAND co-founded Webridge and has served as our President,
Chief Executive Officer and a Director since June 1996. Prior to co-founding
Webridge, from 1983 to June 1996, Mr. Fielland was a co-founder, Chief Architect
and Fellow of Sequent Computer Systems, Inc. (now the NUMA-Q division of IBM) a
provider of scalable Intel-based server solutions for e-business, where he led
the development of one of the computer industry's first commercial symmetric
multiprocessing microcomputer architecture. Mr. Fielland received a Bachelor of
Science degree in Mechanical Engineering and a Master of Engineering degree in
Computer Science and Electrical Engineering from the University of Florida.
MARK S. ANASTAS co-founded Webridge and has served as our Chief
Operating Officer, Corporate Secretary and a Director since June 1996. Prior to
co-founding Webridge, and from July 1995 to May 1996, Mr. Anastas was the
Product Line Architect for Intel Corporation's Internet Product Division, where
he was responsible for product definition and partner recruitment. He also
served as President and Chief Executive Officer of a start-up client/server CRM
application software company, from May 1994 to July 1995. Mr. Anastas received a
Bachelor of Science degree in Computer Science from the University of Illinois
and a Master of Science degree in Computer Science from the University of
Washington.
DAVID L. BRINKER has served as our Chief Financial Officer since August
1998. Before joining Webridge, Mr. Brinker was the General Manager for the Test
Software Division of Integrated Measurement Systems, Inc., a producer of
engineering test stations and virtual test software from January 1997 to July
1998. From June 1995 to August 1996, Mr. Brinker was the President and Chief
Executive Officer of TView, Inc., a developer of computer peripherals. From
March 1994 to June 1995, Mr. Brinker served as the Chief Financial Officer of
Summit Design, Inc., a software company. From 1983 to 1994, Mr. Brinker held a
variety of management positions with Mentor Graphics Corporation, a provider of
electronic hardware and software design solutions and consulting services,
serving most recently as Vice President for World Trade responsible for all
field operations. Mr. Brinker received a Bachelor of Science degree in Economics
from Portland State University.
ROBERT F. DUNNE has served as our Vice President of Sales since August
1998. Prior to joining Webridge, Mr. Dunne served as Vice President and General
Manager of the Network Computer Group at Tektronix, Inc., a leading test and
measurement equipment company, from September 1997 to April 1998 and was
responsible for launching the sales channel strategy for Tektronix's Color
Printer Division (now owned by Xerox Corporation). At Tektronix, Mr. Dunne also
served as the Vice President of Sales of Tektronix' Video and Networking
Division, from July 1993 to September 1997. Additionally, Mr. Dunne began his
career with IBM Corporation and held key sales and marketing
43
<PAGE> 46
management positions with Mentor Graphics Corporation and Zycad Corporation. Mr.
Dunne received a Bachelor of Science degree in Marketing from the University of
Colorado.
JON F. JACKSON is a co-founder of Webridge and has served as our Vice
President of Research and Development since June 1996. From 1989 to May 1996,
Mr. Jackson was a Principal Engineer and Senior Manager for Sequent Computer
Systems, Inc. where he was responsible for its engineering product planning and
other software development activities. Prior to joining Sequent, and from 1986
to 1989, Mr. Jackson served as Engineering Manager at Intel Corporation and was
responsible for developing a real-time operating system. Mr. Jackson holds a
Bachelor of Arts degree in Information Science from the University of
California, Santa Cruz.
GARY M. RAETZ is a co-founder of Webridge and has served as Vice
President of Customer Service since February, 1997. Prior to joining us, Mr.
Raetz was Senior Manager at Intel Corporation, from July 1995 to January 1997,
where he was responsible for working with Microsoft Corporation on the "Net-PC"
platform initiative. From April 1985 to January 1994, Mr. Raetz served as a
Director of Technical Marketing, Professional Services, and Integration Services
and Custom Products for Sequent Computer Systems, Inc. and was responsible for
building its Custom Products and Professional Services business units. Mr. Raetz
received a Bachelor of Arts degree in Computer Science and Mathematics from
Portland State University and a Master of Science degree in Computer Science
from the Naval Postgraduate School in Monterey, California.
GARY A. WHITNEY has served as our Vice President of Marketing since
February 1997. Mr. Whitney was the Director of Consumer Marketing and co-founder
of The Palace, a real-time, interactive, rich-media network company formed by
Intel Corporation and Time Warner, Inc., from June 1996 to February 1997. From
April 1995 to June 1996, Mr. Whitney was a Product Marketing Manager for Intel
Corporation. From 1988 to 1994, Mr. Whitney held a number of marketing
management positions at Sequent most recently serving as the Marketing Manager
for Sequent's Windows NT server family. From 1982 to 1988, Mr. Whitney served in
a variety of development and marketing positions with Hewlett-Packard
Corporation. Mr. Whitney holds both Bachelor of Science and Master of Arts
degrees in Industrial and Management Engineering from Montana State University.
C. SCOTT GIBSON has served as a director since April 1997. Mr. Gibson
co-founded Sequent Computer Systems, Inc. in 1983 and served as President until
March 1992. Mr. Gibson currently serves as a Director of Triquint Semiconductor,
Inc., RadiSys Corporation, Inference Corporation, Integrated Management
Systems, Inc., Egghead.com and Emerald Solutions, Inc. Mr. Gibson also serves as
a director to several development-stage technology companies. Mr. Gibson is the
Chairman of the Board of Trustees of the Oregon Graduate Institute of Science
and Technology. Mr. Gibson received a Bachelor of Science degree in Electrical
Engineering and Masters of Business Administration from the University of
Illinois.
GERARD H. LANGELER has served as a director since August 1997. Since
1992, Mr. Langeler has been a General Partner of Olympic Venture Partners, a
venture capital firm. Prior to joining Olympic Venture Partners, Mr. Langeler
co-founded Mentor Graphics Corporation and served as President and Chief
Operating Officer from 1987 to 1991. Mr. Langeler is a director of Preview
Systems, an e-commerce solutions provider, and several other private technology
start-up companies. Mr. Langeler holds a Bachelor of Arts degree in Chemistry
from Cornell University and a Masters of Business Administration from Harvard
University.
JAMES A. LASH has served as a director since December 1998. Mr. Lash has
been a venture capitalist since 1976 and focuses investments on the computer,
software, telecommunications and life sciences industries. Mr. Lash is also a
director of several other private technology start-up companies. Mr. Lash
received Bachelor of Science degrees in Aeronautical and Astronautical
Engineering from the Massachusetts Institute of Technology and a Masters degree
in Business Administration from Tulane University.
DAVID A. SHRIGLEY has served as a director since February 2000. Since
July 1999, Mr. Shrigley has been a principal with Sevin Rosen funds, a venture
capital firm. Prior to joining Sevin Rosen, from November 1996 to April 1999,
Mr. Shrigley was Executive Vice President in charge of marketing, sales and
service for Bay Networks (now owned by Nortel Networks Corporation). Prior to
that time, Mr. Shrigley spent 18 years at Intel in a variety of management
positions. Mr. Shrigley is a director of SonicWALL, Inc., a provider of Internet
security for small and
44
<PAGE> 47
medium-sized companies, and several private technology companies. Mr. Shrigley
holds a Bachelor of Arts degree in Business Administration and an Associate of
Science degree in Electrical Engineering from Franklin University.
Our executive officers serve at the discretion of the board of
directors. There are no family relationships among any of our directors or
officers.
Our directors are elected for a period of one year at our annual meeting
of stockholders and serve until the next annual meeting and until their
successors are duly elected and qualified.
COMMITTEES OF THE BOARD OF DIRECTORS
Our board of directors established a Compensation Committee in June 1999
and an Audit Committee in May 1998. The Compensation Committee reviews and
recommends to the board of directors the compensation and benefits of all our
officers and establishes and reviews the general policies relating to
compensation and benefits of our employees. The Audit Committee reviews our
internal accounting procedures and consults with and reviews the reports and
services provided by our independent accountants. The members of our Audit
Committee are Mr. Gibson and Mr. Langeler, neither of whom has ever been an
officer or employee of Webridge. The members of our Compensation Committee are
Mr. Gibson and Mr. Langeler.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation Committee has ever been an
officer or employee of Webridge. Prior to establishing the Compensation
Committee in June 1999 our board of directors as a whole performed the function
delegated to the Compensation Committee. None of our executive officers serves
as a member of the board of directors or compensation committee of any entity
that has one or more executive officers serving as a member of our board of
directors or Compensation Committee.
DIRECTOR COMPENSATION
Our directors do not receive any cash compensation from us for their
service as members of our board of directors. Under our stock incentive plan,
non-employee directors are eligible to receive stock option grants and
restricted stock at the discretion of the board of directors or other
administrator of the plan.
EXECUTIVE COMPENSATION
The following table includes the total compensation paid or accrued for
services rendered to us in all capacities during the year ended December 31,
1999 by our chief executive officer and our four highest compensated executive
officers whose salary and bonus exceeded $100,000 for the year ended December
31, 1999 (collectively, the named executive officers).
45
<PAGE> 48
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL AWARDS
COMPENSATION SECURITIES
----------------- UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS (#)
- --------------------------- -------- ----- ------------
<S> <C> <C> <C>
Gary N. Fielland $149,862 $-- 300,000
Chief Executive Officer
and President
Mark S. Anastas 142,608 -- 300,000
Chief Operating Officer
David L. Brinker 134,583 -- 80,000
Chief Financial Officer
Robert F. Dunne 200,000 -- 80,000
Vice President of Sales
Jon F. Jackson 128,120 -- 240,000
Vice President of Research
and Development
</TABLE>
We did not pay our chief executive officer or any other named executive
officer any compensation intended to serve as an incentive for performance to
occur over a period longer than one year pursuant to a long-term incentive plan
for the year ended December 31, 1999. We do not have a defined benefit or
actuarial plan with respect to our chief executive officer or any other named
executive officer under which benefits are determined primarily by final
compensation and years of service.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides summary information regarding stock options
granted to the named executive officers during 1999. All options granted to
these individuals were granted under our 1996 stock incentive plan. Unless
otherwise noted, options granted under the plan generally vest 25% on the
anniversary of the vesting commencement date and monthly thereafter in 36 equal
installments. The percentage of total options set forth in table below is based
on options for 2,607,350 shares granted to our employees and consultants in
1999. All options were granted at the fair market value as determined by our
board of directors on the date of grant. The potential realizable value is
calculated assuming the exercise price on the date of grant appreciates at the
indicated rate for the entire term of the option and that the option is
exercised at the exercise price and sold on the last day of its term at the
appreciated price. All options listed have a term of 10 years. The 5% and 10%
assumed annual rates of compounded stock price appreciation are mandated by the
Securities and Exchange Commission and do not represent our estimate or
projection of the future stock price. Unless the market price of the common
stock appreciates over the option term, no value will be realized from the
option grants made to the named executive officers. The assumed 5% and 10% rates
of stock appreciation are based on the assumed offering price of $____ per
share.
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<PAGE> 49
<TABLE>
<CAPTION>
OPTION GRANTS IN 1999
POTENTIAL REALIZABLE
NUMBER OF PERCENT OF VALUE AT ASSUMED ANNUAL
SHARES TOTAL EXERCISE RATES OF STOCK PRICE
UNDERLYING OPTIONS PRICE APPRECIATION FOR OPTION
OPTIONS GRANTED TO PER EXPIRATION TERM
NAME GRANTED (#) EMPLOYEES SHARE DATE 5% 10%
---- ----------- --------- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Gary N. Fielland 300,000(1) 11.5% $0.21 07/09/09
Mark S. Anastas 300,000(1) 11.5% 0.21 07/09/09
David L. Brinker 80,000(2) 3.1% 0.21 07/09/09
Robert F. Dunne 80,000(3) 3.1% 0.21 07/09/09
Jon F. Jackson 240,000(1) 9.2% 0.21 07/09/09
</TABLE>
- ------------------------------
(1) The options become exercisable at the rate of 1/36th of the total number of
shares beginning July 26, 2000. Mr. Fielland exercised these options on
December 20, 1999 pursuant to an Early Exercise Agreement with us. These
shares are subject to a right of repurchase in our favor in the event Mr.
Fielland ceases to be an employee or director before June 26, 2001.
(2) The options become exercisable at the rate of 1/12th of the total number of
shares beginning September 1, 2002.
(3) The options become exercisable at the rate of 1/12th of the total number of
shares beginning September 10, 2002.
OPTION EXERCISES AND HOLDINGS
The following table sets forth the number of shares of common stock
acquired upon the exercise of stock options by our chief executive officer and
our four other highest compensated executive officers during 1999, and the
number and value of the shares of common stock underlying unexercised
in-the-money options held by these individuals as of December 31, 1999. The
value of exercised in-the-money options is calculated based on:
- the fair market value of our common stock as of December 31,
1999, which was $1.25 per share, as determined by our board of
directors,
- less the exercise price, and
- multiplied by the number of shares underlying the option.
All options were granted under our 1996 stock incentive plan.
<TABLE>
<CAPTION>
YEAR-END OPTION VALUES
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED IN-THE-
NUMBER OF UNEXERCISED OPTIONS AT MONEY OPTIONS AT
SHARES DECEMBER 31,1999 DECEMBER 31, 1999
ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gary N. Fielland(1) 325,292 $315,035 -- 300,000 -- --
Mark S. Anastas(2) 11,925 1,431 -- 300,000 -- $312,000
David L. Brinker(3) 80,383 9,645 25,000 280,000 $29,000 315,200
Robert F. Dunne(4) 108,333 13,000 25,000 346,667 29,000 392,534
Jon F. Jackson(2) -- -- -- 240,000 -- 249,600
- ------------------------------
</TABLE>
(1) An option for 300,00 shares was exercised pursuant to an Early Exercise
Agreement on December 20, 1999, subject to a right of repurchase in our
favor in the event Mr. Fielland ceases to be an employee or director before
June 26, 2001.
(2) The option becomes exercisable at the rate of 1/36th of the total number of
shares monthly beginning July 26, 2000.
(3) Of the unexercisable options, 6,250 become exercisable monthly from January
1, 2000 through August 1, 2002 and an additional 6,667 options become
exercisable monthly from September 1, 2002 through August 1, 2003.
(4) Of the unexercisable options, 8,333 become exercisable monthly from January
10, 2000 through August 10, 2002 and an additional 6,667 options become
exercisable monthly from September 10, 2002 through August 10, 2003.
47
<PAGE> 50
1996 STOCK INCENTIVE PLAN
In June 1996, the board of directors adopted and our stockholders
approved our 1996 Stock Incentive Plan. We have reserved a total of 17,040,134
shares of common stock for issuance under this plan. As of February 29, 2000,
options to purchase a total of 2,140,841 shares of common stock were outstanding
under this plan. These options had a weighted average exercise price of $0.40
per share. As of February 29, 2000, 608,636 shares remained available for future
issuance.
The 1996 plan authorizes the grant of incentive options and nonqualified
options. This plan also provides for awards of stock appreciation rights,
performance shares, restricted shares and other stock-based awards.
Incentive options may be granted under the 1996 plan to our employees,
officers and directors. The exercise price of incentive options granted under
the plan must be at least equal to the fair market value of our common stock on
the date of grant. Payment of the exercise price must be made in cash or, with
the approval of the board of directors, in shares of our common stock.
Under the terms of our 1996 plan, we may grant nonqualified options to
our employees, officers, and directors and to our non-employee agents,
consultants, advisers and independent contractors. There are no limits on the
exercise price of nonqualified options granted under this plan.
In the event of a merger with, or acquisition by another company, or a
sale of substantially all of our assets, options and other awards outstanding
under the 1996 plan may be:
- terminated as of the date of the merger, acquisition, or sale of
assets, provided that holders have a prior 30-day period in which
to exercise the options or stock appreciation rights to the
extent vested;
- accelerated by the board of directors to become exercisable
during the 30 day period before the date of the merger,
acquisition or sale of assets; or
- exchanged for or converted into similar options or awards of the
acquiring or surviving entity.
The 1996 plan is administered by the board and may be delegated to a
committee of the board. The board selects the individuals to whom options will
be granted and determines the exercise price and other terms of each award,
subject to the provisions of the plan. The board has the authority to amend or
terminate the plan as long as such action does not affect any outstanding
options and provided that stockholder approval is obtained for any amendment to
the extent required by applicable law. This plan will otherwise expire when all
shares available for issuance have been issued.
2000 STOCK INCENTIVE PLAN
Subject to approval by our board of directors and stockholders, our 2000
Stock Incentive Plan will be implemented before the completion of this offering.
The purpose of the plan is to attract and retain the services of our directors,
officers, and selected employees as well as selected consultants to our
business.
The 2000 plan provides for the granting of:
- incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended, to employees;
- nonqualified stock options to employees and consultants; and
- restricted stock and stock bonuses to all eligible participants
in the 2000 plan.
Subject to approval by our board of directors and stockholders, we will
reserve a total of _________ shares under the 2000 plan, plus an automatic
annual increase in the number of shares, to be added on the first day of the
second month of each fiscal year beginning on February 1, 2000, equal to the
lesser of ________ shares or _____% of the adjusted average number of shares
outstanding used to calculate fully diluted earnings per share for the
preceding fiscal year.
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<PAGE> 51
No incentive stock options can be granted under the plan after ____________,
2010.
The 2000 plan will be initially administered by our board of directors.
Authority for administration of this plan may be delegated by the board of
directors to any committee of the board. The plan administrator will make
proportional adjustments to the total number of shares issuable under the 2000
plan.
The exercise price of incentive stock options must not be less than the
fair market value of the common stock at the date of the grant. The maximum term
of incentive stock options is 10 years. The aggregate market value, on the date
of the grant, of the common stock for which incentive stock options are
exercisable for the first time by an employee during any calendar year may not
exceed $100,000.
In the event of a corporate transaction, such as a merger with or into
another corporation, or sale of substantially all of our assets, each
outstanding option to purchase shares under the 2000 plan may be assumed or an
equivalent option substituted by the successor corporation. If the successor
corporation does not assume or provide an equivalent substitute for the option,
the board may provide a period of time before the transaction is completed for
all holders to exercise their outstanding options.
EMPLOYEE STOCK PURCHASE PLAN
Our 2000 employee stock purchase plan, or ESPP, is an employee benefit
program that allows eligible employees to purchase shares of our common stock at
a discount from fair market value. Subject to approval by our board of directors
and stockholders, it will be implemented upon the effectiveness of this
offering. A total of ___________ shares will be reserved for issuance under the
ESPP plus an automatic increase in the number of shares, to be added on the
first day of the second month of each fiscal year beginning on February 1,
2000, equal to the lesser of _______ shares or ______% of the adjusted average
number of shares outstanding used to calculate fully diluted earnings per share
for the preceding fiscal year.
With certain exceptions, all our full-time employees will be eligible to
participate in the ESPP. Except for the first offering period, offering periods
are one year long and are divided into two six-month purchase periods. The first
offering period will begin on the date of this prospectus, will run for
approximately two years, and will be divided into four purchase periods. On the
first day of each offering period, known as the offering date, each eligible
employee is automatically granted an option to purchase shares of our common
stock. That option will be automatically exercised on the last day of each
purchase period during the offering. The last day of a purchase period is known
as a purchase date. No employee may purchase more than 10,000 shares or accrue
the right to purchase shares at a rate that exceeds $25,000 of fair market
value, as determined on the offering date, for each calendar year that the
option is outstanding. Each eligible employee may elect to participate in the
ESPP by filing a subscription and payroll deduction authorization. Shares may be
purchased under the ESPP only through payroll deductions of not more than 15
percent of an employee's total compensation. On each purchase date, the amounts
withheld will be applied to purchase shares for the employee. The purchase price
will be the lesser of 85 percent of the fair market value of our common stock:
- On the offering date; or
- On the purchase date.
The ESPP will be administered by our board of directors. The board of
directors may adopt rules and regulations for the operation of the ESPP, adopt
forms for use in connection with the ESPP, decide any questions of
interpretation of the ESPP or rights arising under the ESPP and generally
supervise the administration of the ESPP. We pay all expenses of the ESPP other
than commissions on sales of shares for our employees' accounts by the
custodian.
The board of directors may amend the ESPP, except that increases in the
number of reserved shares, other than adjustments authorized by the ESPP, or
decreases in the purchase price of shares offered under the ESPP require
stockholder approval. The board of directors may terminate the ESPP at any time.
49
<PAGE> 52
LIMITATIONS ON DIRECTORS' LIABILITY AND INDEMNIFICATION
Our certificate of incorporation limits the liability of directors to
the fullest 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 liability for:
- any breach of the director's duty of loyalty to the corporation
or its stockholders;
- acts of omissions not in good faith or that involve intentional
misconduct or knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
- any transaction from which a director derives an improper
personal benefit.
Although liability for monetary damages has been eliminated by our certificate
of incorporation, the availability of equitable remedies such as injunctive
relief or rescission are not affected.
Our certificate of incorporation and bylaws provide that we shall
indemnify our directors and officers and may indemnify our agents to the fullest
extent permitted by law. We believe that indemnification under our certificate
and bylaws covers at least negligence on the part of an indemnified party. Our
certificate of incorporation and bylaws also permit us to advance expenses
incurred by an indemnified party in connection with the defense of any action or
proceeding arising out of the person's service as a director, officer, or agent
of Webridge upon an undertaking by the person to repay any advances if it is
determined that the person is not entitled to indemnification.
We have entered into agreements to indemnify Messrs. Anastas, Gibson,
Langeler, Whitney, Raetz and Fielland in addition to the indemnification
provided for in our certificate of incorporation. These agreements, among other
things, provide additional contractual assurances with respect to the scope of
the indemnification described above and additional procedural protections. We
believe that our certificate of incorporation and bylaw provisions and
indemnification agreements are necessary to attract and retain qualified persons
as directors and officers. Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to our directors and officers, we have
been informed that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy and is therefore unenforceable.
We are not aware of any pending litigation or proceeding involving any
director, officer, employee or agent in which indemnification would be required
or permitted. Furthermore, we are not aware of any threatened litigation or
proceeding that might result in a claim for indemnification.
RELATED-PARTY TRANSACTIONS
We have accepted promissory notes from the following persons in the
amounts listed below as consideration for restricted stock issued to them:
In November 1998, James Lash loaned $1.5 million to us, represented by a
promissory note that bore interest at a rate of 10%. In December 1998, Mr. Lash
contributed the promissory note to Manchester Bridge Principal LP of which he is
the general partner. On December 24, 1998, Manchester Bridge Principal converted
its promissory note and paid an additional $1.5 million in return for 1,764,706
shares of Series B preferred stock. Mr. Lash was appointed as a director upon
the closing of the sale of Series B preferred stock.
In July 1996, Mr. Fielland loaned us $100,000 represented by a
promissory note that bore interest at a rate of 12%. On August 25, 1997, Mr.
Fielland converted this promissory note into 127,295 shares of Series A
preferred stock.
In November 1998, Mr. Fielland loaned us $100,000 represented by a
promissory note that bore interest at a rate of 9%. On December 24, 1998, Mr.
Fielland converted this promissory note and paid an additional $900,000 for
588,977 shares of Series B preferred stock.
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<PAGE> 53
The following table summarizes the shares of common stock and preferred
stock purchased by our directors and 5% stockholders and persons associated with
them in private placement transactions. The Series A preferred stock was sold
for $0.903 per share on August 25, 1997. The Series B preferred stock was sold
for $1.70 per share on December 24, 1998. The Series C preferred stock was sold
for $5.07 per share on December 22, 1999. Each share of preferred stock
automatically converts into one share of common stock upon the closing of this
offering. See "Principal Stockholders."
<TABLE>
<CAPTION>
COMMON SERIES A SERIES B SERIES C
ENTITIES AFFILIATED WITH DIRECTORS STOCK PREFERRED PREFERRED PREFERRED
---------------------------------- ----- --------- --------- ---------
<S> <C> <C> <C> <C>
Entities affiliated with Olympic Venture Partners
(Gerard H. Langeler)(1) ........................... -- 2,768,549 656,974 302,343
Entities affiliated with Sevin Rosen Funds
(David A. Shrigley)(2) ............................ -- 3,323,513 788,666 362,949
Manchester Bridge Principal LP
(James A. Lash) ................................... -- -- 1,764,706 --
C. Scott Gibson ...................................... 350,000 57,232 -- 5,051
Gary N. Fielland ..................................... 1,424,724 127,295 588,977 63,220
Mark S. Anastas ..................................... 1,111,357 -- -- --
OTHER 5% STOCKHOLDERS
Meritech Capital Partners L.P.(3) .................... -- -- -- 3,343,057
</TABLE>
- ---------------------------
(1) Includes shares held by OVP IV Entrepreneurs Fund L.P. and shares held
by Olympic Venture Partners IV L.P. OVMC IV, L.L.C. is the general
partner of OVP IV Entrepreneurs Fund and Olympic Venture Partners IV
L.P., and exercises investment and voting power over the shares held by
these entities. Mr. Langler is a general partner of the general partner
of the Olympic Venture Partners entities and is a director of Webridge.
He disclaims beneficial ownership of the shares held by those entities
except to the extent of his proportionate interest therein.
(2) Includes shares held by Sevin Rosen Fund V L.P., Sevin Rosen V
Affiliates Fund L.P. and Sevin Rosen Bayless Management Company. SRB
Associates V L.P. is the general partner of Sevin Rosen Fund V L.P. and
Sevin Rosen V Affiliates Fund L.P. and exercises investment and voting
power over the shares held by these entities. Mr. Shrigley is an
employee of Sevin Rosen Bayless Management Company, an affiliate of SRB
Associates V L.P. and is a director of Webridge. He disclaims beneficial
ownership of the shares held by the entities.
(3) Includes shares held by Meritech Capital Partners L.P. and Meritech
Affiliate Partners L.P. Meritech Capital Associates, L.L.C. is the
general partner of both Meritech Capital Partners L.P. and Meritech
Affiliate Partners L.P. and exercises voting and investment power over
the shares held by these entities.
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<PAGE> 54
PRINCIPAL STOCKHOLDERS
The following table sets forth information about the beneficial
ownership of our common stock, including our preferred stock on an as-converted
basis for common stock, as of February 29, 2000 and as adjusted to reflect the
sale of common stock in this offering, by:
- each stockholder known by us to own beneficially more than 5% of
the common stock,
- each director,
- our named executive officers, and
- all directors and executive officers as a group.
Unless otherwise indicated, the address for each of the named
individuals is c/o Webridge, Inc., 225 SW Broadway, Suite 600, Portland, Oregon
97205. Except as otherwise indicated, and subject to applicable community
property laws, the persons named in the table have sole voting and investment
power with respect to all shares of common stock held by them.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
SHARES BENEFICIALLY OWNED PRIOR OWNED AFTER THE
TO OFFERING OFFERING
NAME NUMBER PERCENTAGE(1) PERCENTAGE
----------------------------------------------------------
<S> <C> <C> <C>
Entities affiliated with Meritech 3,353,057 10.5% --%
Capital Partners
90 Middlefield Road, Suite 201
Menlo Park, CA 94025 (2)
Entities affiliated with Sevin 4,475,128 14.0 --
Rosen funds (3)
13455 Noel Road, Suite 1670
Dallas, TX 75240
Entities affiliated with Olympic 3,727,866 11.6 --
Venture Partners (4)
2420 Carillon Point
Kirkland, WA 98033
Manchester Bridge Principal LP 1,764,706 5.5 --
411 Theodore Fremd Avenue
Rye, NY 10580
Gary N. Fielland (5) 1,954,216 6.1 --
Mark Anastas (6) 1,047,357 3.3 --
David Brinker(6) 385,383 1.2 --
Robert Dunne (8) 166,666 * --
Jon Jackson 974,575 3.0 --
David Shrigley (9) 4,475,128 14.0 --
C. Scott Gibson 412,283 1.3 --
Gerard H. Langeler (10) 3,727,866 11.6 --
James A. Lash (11) 1,764,706 5.5 --
All directors and executive officers
as a group (11 persons) (12) 15,971,604 49.9% --%
- -----------------
</TABLE>
* Less than 1% of the outstanding shares of common stock.
52
<PAGE> 55
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage of ownership of that
person, shares of common stock subject to options or warrants held by
that person that are exercisable or will become exercisable within 60
days after February 29, 2000 are considered outstanding, but these
shares are not considered outstanding for computing percentage ownership
of any other person. Unless otherwise indicated in the footnotes below,
the persons and entities named in the table have sole voting and
investment power with respect to all shares beneficially owned, subject
to community property laws where applicable.
(2) Includes 3,299,408 shares held by Meritech Capital Partners L.P. and
53,649 shares held by Meritech Affiliate Partners L.P. Meritech Capital
Associates, L.L.C. is the general partner of both Meritech Capital
Partners L.P. and Meritech Affiliate Partners L.P. and exercises voting
and investment power over the shares held by these entities.
(3) Includes 4,283,540 shares held by Sevin Rosen Fund V L.P., 183,135
shares held by Sevin Rosen V Affiliates Fund L.P. and 8,453 shares held
by Sevin Rosen Bayless Management Company. SRB Associates V L.P. is the
general partner of Sevin Rosen Fund V L.P. and Sevin Rosen V Affiliates
Fund L.P. and exercises investment and voting power over the shares held
by these entities.
(4) Includes 184,415 shares held by OVP IV Entrepreneurs Fund L.P. and
3,543,451 shares held by Olympic Venture Partners IV L.P. OVMC IV,
L.L.C. is the general partner of OVP IV Entrepreneurs Fund and Olympic
Venture Partners IV L.P. and exercises investment and voting power over
the shares held by these entities.
(5) 300,000 of these shares are subject to a right of repurchase in our
favor. These shares will be released from the repurchase right at the
rate of 8,333 shares per month beginning on July 26,2000. Includes
240,000 shares held by the Fielland Limited Partnership, of which Mr.
Fielland is the general partner and exercises investment and voting
power over the shares held by the partnership.
(6) 261,250 of these shares are subject to a right of repurchase in our
favor. 80,000 of the shares will be released from the repurchase right
at the rate of 6,667 shares per month beginning on September 1, 2000.
The remaining 181,250 shares will be released from the repurchase right
at the rate of 6,250 shares per month beginning on April 1, 2000.
(7) Includes 300,000 shares held by the Anastas Family Limited Partnership,
of which Mr. Anastas is a general partner and exercises investment and
voting power over the shares held by the partnership.
(8) Includes 58,333 shares issuable upon exercise of options exercisable
within 60 days of February 29, 2000.
(9) Includes 4,283,540 shares held by Sevin Rosen Fund V L.P., 183,135
shares held by Sevin Rosen V Affiliates Fund L.P. and 8,453 shares held
by Sevin Rosen Bayless Management Company. SRB Associates V L.P. is the
general partner of Sevin Rosen Fund V L.P. and Sevin Rosen Affiliates V
Fund L.P. and exercises investment and voting power over the shares held
by these entities. Mr. Shrigley is an employee of Sevin Rosen Bayless
Management Company, an affiliate of SRB Associates V L.P. and is a
director of Webridge. He disclaims beneficial ownership of the shares
held by the entities.
(10) Includes 184,415 shares held by OVP IV Entrepreneurs Fund L.P. and
3,543,451 shares held by Olympic Venture Partners IV L.P. OVMC IV,
L.L.C. is the general partner of OVP IV Entrepreneurs Fund and Olympic
Venture Partners IV L.P. and exercises investment and voting power over
the shares held by these entities. Mr. Langler is a general partner of
the general partner of the Olympic Venture Partners entities and is a
director of Webridge. He disclaims beneficial ownership of the shares
held by those entities except to the extent of his proportionate
interest therein.
(11) Includes 1,764,706 shares held by Manchester Bridge Principal LP.
Manchester Principal LP is the general partner of Manchester Bridge
Principal LP and exercises investment and voting power over the shares
held by the partnership. Mr. Lash is the manager of the general partner
and is a director of Webridge. He disclaims beneficial ownership of the
shares held by the entities except to the extent of this proportionate
interest therein.
(12) Includes the shares described in Notes 5 through 11.
53
<PAGE> 56
DESCRIPTION OF CAPITAL STOCK
GENERAL
Upon the completion of this offering, we will be authorized to issue
________ shares of common stock and 30 million shares of undesignated preferred
stock. The following summary describes all material provisions of our capital
stock. We encourage you to read the provisions of our certificate of
incorporation and bylaws, which are included as exhibits to the registration
statement of which this prospectus forms a part, and which, together with
applicable Delaware law, contain the legal terms that govern our capital stock.
COMMON STOCK
As of February 29, 2000, there were 32,012,134 shares of our common
stock outstanding, which were held of record by 118 stockholders, after giving
effect to the conversion of the outstanding shares of preferred stock into
common stock. In addition, as of February 29, 2000, there were 120,003 shares
subject to outstanding warrants, and 2,140,841 shares of common stock subject to
outstanding options. Upon completion of this offering, there will be _________
shares of common stock outstanding, assuming full exercise of the warrants to
purchase shares and no exercise of the underwriter's overallotment option or
additional exercise of outstanding options.
The holders of common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may be
applicable to any outstanding preferred stock, the holders of common stock are
entitled to receive ratably dividends, if any, declared from time to time by the
board of directors out of funds legally available for that purpose. If we
liquidate, dissolve or wind up, the holders of common stock are entitled to
share ratably in all assets remaining after payment of liabilities, subject to
the prior distribution rights of preferred stock, if any, then outstanding. The
holders of common stock have no preemptive or conversion rights or other
subscription rights. There are no redemption or sinking fund provisions
applicable to our common stock. The outstanding shares of common stock are, and
the shares of common stock offered by this prospectus when issued will be, fully
paid and nonassessable.
PREFERRED STOCK
As of February 29, 2000, we had three series of preferred stock: Series
A preferred stock, Series B preferred stock and Series C preferred stock. Each
series of preferred stock has the rights, preferences and privileges set forth
in our current Amended and Restated Certificate of Incorporation and the Second
Amended and Restated Investors' Rights Agreement dated as of December 22, 1999,
which is included as an exhibit to the registration statement of which this
prospectus forms a part. As of February 29, 2000, the number of outstanding
shares for each series of our preferred stock was:
- 7,464,134 shares of Series A preferred stock;
- 6,037,739 shares of Series B preferred stock which number
reflects the full exercise of a warrant to purchase 117,647
shares of Series B preferred stock; and
- 4,341,606 shares of Series C preferred stock, which number
reflects the full exercise of a warrant to purchase 2,356 shares
of Series C preferred stock.
Upon the completion of this offering, all outstanding shares of preferred stock
will be automatically converted into a total of 17,843,504 shares of common
stock, which reflects the full exercise of a warrant to purchase 117,647 shares
of Series B preferred stock and a warrant to purchase 2,356 shares of Series C
preferred stock. Thereafter, the board of directors will have the authority,
without further action by the stockholders, to issue up to 10,000,000 shares of
preferred stock in one or more series and to designate the rights, preferences,
privileges and restrictions of each such series. The issuance of preferred stock
could have the effect of restricting dividends on the common stock, diluting the
voting power of the common stock, impairing the liquidation rights of the common
stock or delaying or preventing a change in our corporate control without
further action by the stockholders. We have no present plans to issue any shares
of preferred stock after the completion of this offering.
54
<PAGE> 57
REGISTRATION RIGHTS
The holders of 29,213,203 shares of common stock, referred to as the
registrable securities, are entitled to have their shares registered by us under
the Securities Act under the terms of an agreement between us and the holders of
these registrable securities.
Subject to limitations specified in the agreement, these registration
rights include the following:
- The holders of at least 25% of the then outstanding registrable
securities may require, on two occasions beginning 12 months
after the date of this prospectus, that we use our best efforts
to register at least 20% of the then-outstanding registrable
securities for public resale.
- If we register any common stock, either for our own account or
for the account of other security holders, the holders of these
registrable securities are entitled to
-- notice of registration; and
-- include their shares of common stock in such registration,
subject to the ability of the underwriters to limit the
number of shares included in the offering in view of
market conditions.
- The holders of these registrable securities may require us on six
occasions to register all or a portion of their registrable
securities on Form S-3 when use of such form becomes available to
us, provided that the proposed aggregate selling price is at
least $500,000.
We will bear all registration expenses other than underwriting discounts
and commissions. All registration rights terminate on the date five years
following the closing of this offering, or, with respect to each holder of
registrable securities, at such time as the holder is entitled to sell all of
its shares in any three-month period under Rule 144 of the Securities Act.
WARRANTS
As of February 29, 2000, there was a warrant outstanding to purchase a
total of 2,356 shares of our Series C preferred stock at a price of $4.24 per
share. In addition, there was a warrant to purchase 117,647 shares of our Series
B preferred stock at a price of $1.70 per share, which expires on April 12, 2000
if certain performance milestones set forth in a research collaboration
agreement are not met by the warrant holder.
DELAWARE ANTI-TAKEOVER LAW AND CHARTER PROVISIONS
Delaware law and our restated certificate of incorporation and by-laws
could make it more difficult to acquire us by means of a tender offer, a proxy
contest, open market purchases, and removal of incumbent directors. These
provisions, summarized below, are expected to discourage types of coercive
takeover practices and inadequate takeover bids and to encourage persons seeking
to acquire control of us to first negotiate with us. 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 us
outweigh the disadvantages of discouraging takeover or acquisition proposals
because negotiation of these proposals could result in an improvement of their
terms.
We must comply with Section 203 of the Delaware General Corporation Law,
an anti-takeover law. In general, Section 203 prohibits a publicly held Delaware
corporation from engaging in a business combination with an interested
stockholder for a period of three years following the date the person became an
interested stockholder, unless the business combination or the transaction in
which the person became an interested stockholder is approved in a prescribed
manner. Generally, a business combination includes a merger, asset or stock
sale, or other transaction resulting in a financial benefit to an interested
stockholder. An interested stockholder includes a person who, together with
affiliates and associates, owns, or did own within three years prior to the
determination of interested stockholder
55
<PAGE> 58
status, 15% or more of the corporation's voting stock. The existence of this
provision generally will have an anti-takeover effect for 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.
Upon the closing of this offering, our restated certificate of
incorporation and bylaws will require that any action required or permitted to
be taken by our stockholders must be effected at a duly called annual or special
meeting of the stockholders and may not be effected by a consent in writing. In
addition, upon the completion of this offering, special meetings of our
stockholders may be called only by the board of directors or some of our
officers. These provisions may have the effect of deterring hostile takeovers or
delaying changes in our control or management.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is _________________.
LISTING
We have applied for listing on the Nasdaq Stock Market's National Market
System under the symbol "WEBR."
56
<PAGE> 59
SHARES ELIGIBLE FOR FUTURE SALE
Before this offering, there has been no public market for our common
stock. We cannot predict the effect, if any, that sales of shares of our common
stock to the public or the availability of shares for sale to the public will
have on the market price of our common stock prevailing from time to time.
Nevertheless, if a significant number of shares of our common stock are sold in
the public market, or if people believe these sales may occur, the market price
of our common stock could decline, which could impair our future ability to
raise capital through the sale of our equity securities.
Upon completion of this offering, we will have outstanding ___________
shares of our common stock, assuming no exercise of options after February 29,
2000. Of these shares, the ___________ shares sold in this offering will be
freely tradable without restriction under the Securities Act except for any
shares purchased by any of our "affiliates" as that term is defined in Rule 144
under the Securities Act.
The remaining 32,012,134 shares of common stock were issued and sold by
us in reliance on exemptions from the registration requirements of the
Securities Act, ____________ of which are subject to lock-up agreements with the
underwriters described below. In addition, shares of our common stock will be
eligible for sale in the public market as described below.
<TABLE>
<CAPTION>
NUMBER OF SHARES ELIGIBLE FOR
RELEVANT DATES FUTURE SALE COMMENT
-------------- ----------- -------
<S> <C> <C>
As of the date of this
prospectus....................... [____________]
180 days after effective date
(________, 2000)................. All shares subject to lock-up
released; shares eligible for
sale under Rules 144 and 701
More than 181 days after
effective date (after ______,
2000)............................ Additional shares becoming
eligible for sale under Rule
144 more than 180 days the
effective date
</TABLE>
In addition, as of February 29, 2000, there were outstanding options to
purchase 2,140,841 shares of common stock, all of which are subject to lock-up
agreements.
LOCK-UP AGREEMENTS
Each of our executive officers and directors and certain of our
stockholders, who together will own a total of _________ shares of our common
stock after the offering, have entered into lock-up agreements generally
providing that, with limited exceptions, they will not offer to sell, contract
to sell or transfer any of the shares of our common stock or any securities
convertible into, or exercisable or exchangeable for, our common stock for 180
days after the date of this prospectus, without the prior written consent of
FleetBoston Robertson Stephens Inc.
FleetBoston Robertson Stephens Inc. may, in its sole discretion and at
any time without notice, release all or any portion of the securities subject to
lock-up agreements. When determining whether or not to release shares from the
lock-up agreements, FleetBoston Robertson Stephens Inc. will consider the
stockholder's reasons for requesting the release, the number of shares for which
the release is being requested and market conditions at the time. Following the
expiration of the 180 day lock-up period, additional shares of our common stock
will be available for sale in the public market subject to compliance with Rule
144 or Rule 701.
We have agreed not to sell or dispose of any shares of our common stock
during the 180-day period following the date of this prospectus, except we may
issue, and grant options to purchase, shares of our common stock under our stock
incentive plan.
57
<PAGE> 60
RULE 144
In general, under Rule 144, beginning 90 days after the date of this
prospectus, any person (or persons whose shares are aggregated) who has
beneficially owned restricted shares for at least one year, will be entitled to
sell in any three-month period a number of shares that does not exceed the
greater of:
- one percent of the then-outstanding shares of common stock
(approximately __________ shares immediately after this
offering), or
- the average weekly trading volume during the four calendar weeks
preceding the date on which notice of the sale is filed with the
SEC.
Sales under Rule 144 must also comply with manner of sale provisions and
notice requirements and are subject to the availability of public information
about us. We are unable to estimate the number of shares that will be sold under
Rule 144 as this will depend on the market price for the common stock, the
personal circumstances of the sellers and other factors.
RULE 144(k)
Under Rule 144(k), a person who is not considered to have been one of
our "affiliates" at any time during the three months preceding a sale and who
has beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner other than an "affiliate," is
entitled to sell these shares without complying with the manner of sale, notice
filing, volume limitation or public information provisions of Rule 144.
Therefore, unless otherwise restricted, shares of our common stock that have
been held by a non-affiliate for at least two years may be sold in the open
market immediately after the lock-up agreements expire or upon completion of
this offering to the extent any shares of our common stock are not subject to
lock-up agreements.
RULE 701
In general under Rule 701, our employees, officers, directors and
consultants who purchased shares of our common stock in connection with written
compensatory benefit plans or written contracts relating to the compensation of
the purchaser may rely on Rule 701 to resell those shares. The Securities and
Exchange Commission has indicated that Rule 701 will apply to stock options
granted by an issuer before it becomes subject to the reporting requirements of
the Securities Exchange Act of 1934, as amended, along with the shares acquired
upon exercises of those options, including exercises after the date of this
offering. Shares issued in reliance on Rule 701 are restricted and beginning 90
days after the date of this prospectus:
- may be sold by persons other than our affiliates subject only to
the manner of sale provisions of Rule 144; and
- may be sold by our affiliates under Rule 144 without complying
with its one-year holding period requirement.
STOCK OPTIONS
At February 29, 2000, options to purchase 2,140,841 shares of common
stock were outstanding under our 1996 stock incentive plan and an additional
608,636 remained available for grant under the plan. The holders of outstanding
options to purchase _________ shares which are currently exercisable or become
exercisable within 90 days after the date of this prospectus are subject to
lock-up for 180 days following the date of this offering.
Upon the completion of this offering, we intend to file a registration
statement on Form S-8 under the Securities Act covering, among other things,
shares of common stock covered by outstanding options under the 1996 stock
incentive plan. We expect the registration statement will cover a total of
approximately _________ shares. The
58
<PAGE> 61
registration statement will become effective upon filing. Accordingly, any
shares issued upon the exercise of stock options will be eligible for immediate
public sale, subject to the lock-up agreements noted above.
59
<PAGE> 62
UNDERWRITING
The underwriters named below, acting through their representatives,
FleetBoston Robertson Stephens Inc., Banc of America Securities LLC and U.S.
Bancorp Piper Jaffray Inc. have severally agreed with us, subject to the terms
and conditions of the underwriting agreement, to purchase from us the number of
shares of our common stock set forth opposite their names below. The
underwriters are committed to purchase and pay for all of the shares if any are
purchased.
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
<S> <C>
FleetBoston Robertson Stephens Inc. .............. --
Banc of America Securities LLC ................... --
U.S. Bancorp Piper Jaffray Inc. .................. --
--
----------------
Total .................................... --
----------------
</TABLE>
We have been advised that the underwriters propose to offer the shares
of our common stock to the public at the public offering price located on the
cover page of this prospectus and to dealers at that price less a concession of
not in excess of $ per share, of which $ may be reallowed to other dealers.
After the initial public offering, the public offering price, concession and
reallowance to dealers may be reduced by the representatives. No reduction in
this price will change the amount of proceeds to be received by us as indicated
on the cover page of this prospectus.
The underwriters have advised us that they do not expect sales to
discretionary accounts to exceed five percent of the total number of shares
offered.
Over-Allotment Option. We have granted to the underwriters an option,
exercisable during the 30-day period after the date of this prospectus, to
purchase up to _________ additional shares of our common stock to cover over-
allotments, if any, at the same price per share as we will receive for the
_________ shares that the underwriters have agreed to purchase. To the extent
that the underwriters exercise this option, each of the underwriters will have a
firm commitment to purchase approximately the same percentage of such additional
shares that the number of shares of our common stock to be purchased by it shown
in the above table represents as a percentage of the __________ shares offered
by this prospectus. If purchased, the additional shares will be sold by the
underwriters on the same terms as those on which the ___________ shares are
being sold. We will be obligated, under this option, to sell shares to the
extent the option is exercised. The underwriters may exercise the option only to
cover over-allotments made in connection with the sale of the ___________ shares
of our common stock offered by this prospectus.
The following table shows the per share and total underwriting discounts
and commissions to be paid by us to the underwriters. This information is
presented assuming either no exercise or full exercise by the underwriters of
their over-allotment option.
<TABLE>
<CAPTION>
WITHOUT OVER- WITH OVER-
PER SHARE ALLOTMENT OPTION ALLOTMENT OPTION
<S> <C> <C> <C>
Assumed public offering price $ $ $
Underwriting discounts and commissions $ $ $
Proceeds, before expenses, to us $ $ $
</TABLE>
The expenses of the offering, other than underwriting discounts and
commissions, payable by us are estimated at $____________. FleetBoston Robertson
Stephens Inc. expects to deliver the shares of our common stock to purchasers on
___________ ___ , 2000.
Indemnity. The underwriting agreement contains covenants of indemnity
among the underwriters and us against certain civil liabilities, including
liabilities under the Securities Act, and liabilities arising from breaches of
representations and warranties contained in the underwriting agreement.
60
<PAGE> 63
Lock-up Agreements. Under the terms of lock-up agreements, each of our
officers and directors and certain of our stockholders have agreed with the
representatives, for a period of 180 days after the date of this prospectus,
subject to limited exceptions, not to offer to sell, contract to sell, or
otherwise sell, dispose of, loan, pledge or grant any rights with respect to any
shares of our common stock or any options or warrants to purchase any shares of
our common stock, or any securities convertible into or exchangeable for shares
of our common stock owned as of the date of this prospectus or later acquired
directly by such holders or with respect to which they have the power of
disposition, without the prior written consent of FleetBoston Robertson Stephens
Inc. However, FleetBoston Robertson Stephens Inc. may, in its sole discretion
and at any time without notice, release all or any portion of the securities
subject to these agreements not to sell shares. There are no existing agreements
between the representatives of the underwriters and any of our stockholders
providing consent to the sale of shares prior to the expiration of the period
180 days after this prospectus.
Future Sales by Us. In addition, we have agreed that during the 180 days
after the date of this prospectus, we will not, subject to certain exceptions,
without the prior written consent of FleetBoston Robertson Stephens:
- Consent to the disposition of any shares held by stockholders
subject to agreements not to sell shares prior to the expiration
of the period 180 days after the date of this prospectus; or
- Issue, sell, contract to sell, or otherwise dispose of any shares
of common stock or any securities convertible into, exercisable
for or exchangeable for shares of our common stock, other than:
-- the sale of shares in this offering;
-- the issuance of common stock upon the exercise of
outstanding options or warrants; and
-- the issuance of options of shares under our stock
incentive plan.
Directed Share Program. At our request, the underwriters have reserved
up to at least 7% of the shares of our common stock offered by this prospectus
for sale to our officers, directors, employees and their family members and to
our business associates at the public offering price set forth on the cover page
of this prospectus. These business associates are current and former clients,
vendors, suppliers and other individuals who, in the judgment of our management,
have contributed to our success. These persons must commit to purchase no later
than the close of business on the day following the date of this prospectus. The
number of shares available for sale to the general public will be reduced to the
extent these persons purchase the reserved shares.
Listing. We have applied to have our common stock approved for quotation
on the Nasdaq National Market under the symbol "WEBR."
No Prior Public Market. Prior to this offering, there has been no public
market for our common stock. Consequently, the initial public offering price for
the common stock offered by this prospectus will be determined through
negotiations among us and the representatives of the underwriters. Among the
factors to be considered in these negotiations are prevailing market conditions,
our financial information, market valuations of other companies that we and the
representatives of the underwriters believe to be comparable to us, estimates of
our business potential, the present state of our development and other factors
deemed relevant.
Stabilization. The representatives of the underwriters have advised us
that, under Regulation M under the Securities and Exchange Act of 1934, some
participants in this offering may engage in transactions, including stabilizing
bids, syndicate covering transactions or the imposition of penalty bids, that
may have the effect of stabilizing or maintaining the market price of our common
stock at a level above that which might otherwise prevail in the open market. A
"stabilizing bid" is a bid for or the purchase of the common stock on behalf of
the underwriters for the purpose of fixing or maintaining the price of the
common stock. A "syndicate covering transaction" is the bid for or the purchase
of the common stock on behalf of the underwriters to reduce a short position
incurred by the underwriters in connection with this offering. A "penalty bid"
is an arrangement permitting the representatives to reclaim the selling
61
<PAGE> 64
concession otherwise accruing to an underwriter or syndicate member in
connection with this offering if the common stock originally sold by the
underwriter or syndicate member is purchased by the representatives in a
syndicate covering transaction and has therefore not been effectively placed by
such underwriter or syndicate member. The representatives of the underwriters
have advised us that such transactions may be effected on the Nasdaq National
Market or otherwise and, if commenced, may be discontinued at any time.
LEGAL MATTERS
The validity of the shares of our common stock offered hereby will be
passed upon for us by Stoel Rives LLP, Portland, Oregon. Certain legal matters
in connection with this offering will be passed upon for the underwriters by
Brobeck, Phleger & Harrison LLP, Broomfield, Colorado.
EXPERTS
The financial statements of Webridge, Inc. as of December 31, 1998 and
1999, and for each of the years in the three-year period ended December 31,
1999, have been included in this prospectus and elsewhere in the registration
statement in reliance upon the report of KPMG LLP, independent auditors,
appearing elsewhere in this prospectus and registration statement and upon the
authority of KPMG LLP as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 for our common stock offered by this prospectus. This
prospectus, which constitutes a part of that registration statement, does not
contain all of the information included in the registration statement or the
exhibits and schedules that are part of the registration statement. For further
information on us and our common stock, you should review the registration
statement and its exhibits and schedules. Any document we file may be read and
copied at the Commission's public reference rooms at the following locations:
<TABLE>
<S> <C> <C>
Room 1024 Suite 1300 Citicorp Center
450 Fifth Street, N.W. Seven World Trade Center 500 West Madison Street,
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661
</TABLE>
Please call the Commission at 1-800-SEC-0330 for further information about the
public reference rooms. Our filings with the Commission are also available to
the public from the Commission's Web site at http:/ /www.sec.gov.
Upon completion of this offering, we will become subject to the information and
periodic reporting requirements of the Securities Exchange Act and will file
periodic reports, proxy statements and other information with the Commission.
These periodic reports, proxy statements and other information will be available
for inspection and copying at the Commission's public reference rooms and the
Web site of the Commission referred to above.
62
<PAGE> 65
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
WEBRIDGE, INC. FINANCIAL STATEMENTS:
<S> <C>
Report of KPMG LLP............................................... F-2
Balance Sheets................................................... F-3
Statements of Operations......................................... F-4
Statements of Stockholders' Equity (Deficit)..................... F-5
Statements of Cash Flows......................................... F-6
Notes to Financial Statements.................................... F-7
</TABLE>
F-1
<PAGE> 66
[Inside back cover]
[Graphic displays examples of Web site pages of Webridge customers.]
<PAGE> 67
[WEBRIDGE LOGO]
________ SHARES
COMMON STOCK
-----------------------
PROSPECTUS
-----------------------
ROBERTSON STEPHENS
U.S. BANCORP PIPER JAFFRAY
BANC OF AMERICA SECURITIES LLC
UNTIL __________, OR 25 DAYS AFTER THE DATE OF THIS PROSPECTUS, ALL
DEALERS THAT EFFECT TRANSACTIONS IN THESE SHARES OF COMMON STOCK MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALER'S OBLIGATION TO
DELIVER A PROSPECTUS WHEN ACTING AS AN UNDERWRITER AND WHEN SELLING THEIR
PREVIOUSLY UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE> 68
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses, all of which will
be borne by the Registrant, in connection with the sale and distribution of the
securities being registered, other than the estimated underwriting discounts and
commissions. All amounts shown are estimates except for the Securities and
Exchange Commission registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee .............................................. $ 13,200
NASD filing fee ................................................... 6,250
Nasdaq National Market listing fee ................................ 95,000
Blue Sky fees and expenses ........................................ 5,000
Transfer agent and registrar fees ................................. 5,000
Accounting fees and expenses ...................................... 200,000
Legal fees and expenses ........................................... 275,000
Director's and officer's insurance ................................ 225,000
Printing and mailing expenses ..................................... 175,000
Miscellaneous ..................................................... 100,650
----------
Total .................................................... $1,100,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article IX of the Registrant's Amended and Restated Certificate of
Incorporation (the "Restated Certificate of Incorporation") provides that no
director of the Registrant shall be personally liable for any monetary damages
for any breach of fiduciary duty as a director, except to the extent that the
Delaware General Corporation Law prohibits the elimination or limitation of
liability of directors for breach of fiduciary duty.
Article VI of the Registrant's Bylaws provides that any current or
former director or officer of the Registrant shall be indemnified to the fullest
extent not prohibited by law who is made, or threatened to be made, a party to
any threatened, pending or completed action, suit or proceeding, whether
criminal, civil, administrative, investigative or other, by reason of the fact
that the director or officer served or serves at the request of the corporation
as a director or officer. The Registrant shall pay for or reimburse the
reasonable expenses incurred by the director or officer in any such proceeding
in advance of final disposition of the proceeding if the director or officer
sets forth in writing the person's agreement to repay all advances if the
Registrant ultimately determines that the director or officer is not entitled to
indemnification.
Article VI of the Registrant's Bylaws further provides that the
indemnification provided therein is not exclusive of any other provisions for
indemnification or advancement of expenses of directors, officers, employees,
agents and fiduciaries that may be included in any statute, bylaw, agreement,
general or specific action of the board of directors, vote of stockholders or
other document or arrangement.
Section 145 of the Delaware General Corporation Law provides that a
corporation has the power to indemnify a director, officer, employee or agent of
the corporation and certain other persons serving at the request of the
corporation in related capacities against amounts paid and expenses incurred in
connection with an action or proceeding to which he is or is threatened to be
made a party by reason of such position, if such person shall have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, in any criminal proceeding, if such person
had no reasonable cause to believe his conduct was unlawful; provided that, in
the case of actions brought by or in the right of the corporation, no
indemnification shall be made with respect to any matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the adjudicating court determines that such indemnification is
proper under the circumstances.
II-1
<PAGE> 69
Under Section ___ of the Underwriting Agreement, the Underwriters are
obligated, under certain circumstances, to indemnify directors and officers of
the Registrant against certain liabilities, including liabilities under the
Securities Act. Reference is made to the form of Underwriting Agreement filed as
Exhibit 1 hereto.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth in chronological order is information regarding shares of our
common stock sold and options granted by the Registrant since February 1997.
Further included is the consideration, if any, received by the Registrant for
the shares and options and information relating to the section of the Securities
Act of 1933, as amended (the "Securities Act"), or rule of the Securities and
Exchange Commission under which exemption from registration was claimed.
1. On June 26, 1996, the Registrant issued 5,000,000 shares of common stock
to five founders for an aggregate purchase price of $5,000 ($0.001 per
share).
2. On August 19, 1997, the Registrant issued 781,132 shares of common stock
to 15 founders for an aggregate purchase price of $39,057 ($0.05 per
share).
3. On August 25, 1997, the Registrant issued 6,092,062 shares of Series A
convertible preferred stock for $0.90 per share to nine accredited
investors for an aggregate purchase price of $5,740,113.
4. On January 27, 1997, the Registrant issued 500,000 shares of common
stock to one founder for $5,000 ($0.01 per share).
5. On February 10, 1997, the Registrant issued 500,000 shares of common
stock to one founder for $5,000 ($0.01 per share).
6. On February 18, 1997, the Registrant issued 500,000 shares of common
stock to one founder for $5,000 ($0.01 per share).
7. On February 19, 1997, the Registrant issued 500,000 shares of common
stock to one founder for $5,000 ($0.01 per share).
8. On March 3, 1997, the Registrant issued 500,000 shares of common stock
to one founder for $5,000 ($0.01 per share).
9. On March 13, 1997, the registrant issued 500,000 shares of common stock
to two founders for an aggregate purchase price of $5,000 ($0.01 per
share).
10. On March 17, 1997, the Registrant issued 750,000 shares of common stock
to one founder for $7,500 ($0.01 per share).
11. On March 25, 1997, the Registrant issued 500,000 shares of common stock
to one founder for $5,000 ($0.01 per share).
12. On April 16, 1997, the Registrant issued 350,000 shares of common stock
to one founder for $3,500 ($0.01 per share).
13. On April 25, 1997, the Registrant issued 500,000 shares of common stock
to one founder for $5,000 ($0.01 per share).
14. On April 28, 1997, the Registrant issued 500,000 shares of common stock
to one founder for $5,000 ($0.01 per share).
II-2
<PAGE> 70
15. On May 5, 1997, the Registrant issued 100,000 shares of common stock to
one employee for $1,000 ($0.01 per share).
16. On July 14, 1997, the Registrant issued 50,000 shares of common stock to
one employee for $500 ($0.01 per share).
17. On July 15, 1997, the Registrant issued 65,000 shares of common stock to
one employee for $650 ($0.01 per share).
18. On August 4, 1997, the Registrant issued 190,000 shares of common stock
to two employees for an aggregate purchase price of $185 ($0.01 per
share).
19. On August 25, 1997, the Registrant issued 7,464,134 shares of Series A
convertible preferred stock for $0.903 per share to twelve accredited
investors for an aggregate purchase price of $6,740.113.
20. On December 24, 1998, the Registrant issued 4,743,621 shares of Series B
convertible preferred stock for $1.70 per share to fourteen accredited
investors for an aggregate purchase price of $8,014,156.
21. On March 12, 1999, the Registrant issued 1,176,471 shares of Series B
convertible preferred stock for $1.70 per share to one accredited
investor for an aggregate purchase price of $2,000,000.
22. On March 12, 1999, the Registrant issued a warrant to one accredited
investor to purchase 117,647 shares of Series B convertible preferred
stock at an exercise price of $1.70 based upon achievement of
performance milestones set forth in a research collaboration agreement
between the Registrant and the accredited investor.
23. On September 24, 1999, the Registrant issued a warrant to one accredited
investor to purchase 2,356 shares of Series C Preferred Stock at an
exercise price of $4.24 in connection with a lease for office furniture
and equipment.
24. On December 23, 1999, the Registrant issued 4,235,412 shares of Series C
convertible preferred stock for $5.07 per share to fourteen accredited
investors for an aggregate purchase price of approximately $21,473,541.
25. On January 12, 2000, the Registrant issued 103,838 shares of C
convertible preferred stock for $5.07 per share to one accredited
investor for $526,459.
26. The Registrant from time to time has granted stock options to employees,
directors and consultants in reliance upon exemptions from registration
pursuant to either (i) issuances to accredited investors in private
placements pursuant to Section 4(2) of the Securities Act, or (ii)
issuances to employees, directors and consultants for services pursuant
to Rule 701 promulgated under the Securities Act. The following table
sets forth certain information regarding such grants:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
SHARES PRICES
----------- ---------------
<S> <C> <C>
February 1, 1997 to December 31, 1997............................ 911,135 $0.05 to $0.09
January 1, 1998 to December 31, 1998............................. 1,447,931 $0.09
January 1, 1999 to December 31, 1999............................. 2,607,350 $0.21 to $1.25
January 1, 2000 to February 29, 2000............................. 231,250 $1.25 to $3.00
</TABLE>
No underwriters were involved in connection with the sales of securities
referred to in this paragraph 26.
The issuances described in paragraphs 19, 20, 24 & 25 above were offered
and sold in reliance upon exemptions from the Securities Act registration
requirements set forth in Section 4(2) of the Securities Act relating to sales
by an issuer not involving any public offering. All other issuances described in
this Item 15 were made in reliance upon an exemption from registration pursuant
to Rule 701 under the Securities Act. The recipients of securities in each
II-3
<PAGE> 71
such transaction represented their intentions to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the share
certificates and warrants issued in such transactions. All recipients had
adequate access, through their relationships with us, to information about us.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
1.1* Form of Underwriting Agreement
3.1 Registrant's Amended and Restated Articles of Incorporation, as currently in effect
3.2* Form of Registrant's Restated Articles of Incorporation, to be in effect upon the closing of the
offering
3.3 Registrant's Bylaws, as currently in effect
3.4* Form of Registrant's Bylaws, to be in effect upon the closing of the offering
4.1* See Articles _______ and ______ of Exhibit 3.2 and Section _____ and _____ of Exhibit 3.4
4.2 Second Amended and Restated First Refusal and Co-Sale Agreement, dated December 22, 1999 between
the Registrant and certain investors
4.3 Second Amended and Restated Investors' Rights Agreement, dated December 22, 1999 between the
Registrant and certain investors
5.1* Opinion of Stoel Rives LLP as to the legality of the securities being registered, including
consent
10.1 Registrant's 1996 Stock Incentive Plan
10.2 Lease Agreement between Registrant and Amberjack, Ltd. dated as of October 14, 1999
10.3 Amended and Restated Loan and Security Agreement between Silicon Valley Bank and the Registrant,
dated as of August 25, 1999
10.4 Master Equipment Lease between Comdisco, Inc. and the Registrant, dated as of September 24, 1999
10.5 Office Space Sublease between Creative MultiMedia Corporation and the Registrant, dated as of
September 11, 1997 under an Office Lease between Commerce
Building Limited Partnership and Creative Multimedia
Corporation, dated as of April 7, 1995
10.6 Second Amended and Restated First Refusal and Co-Sale Agreement, dated December 22, 1999 between
the Registrant and certain investors (included as Exhibit 4.2)
10.7 Second Amended and Restated Investors' Rights Agreement, dated December 22, 1999 between the
Registrant and certain investors (included as Exhibit 4.2)
10.8 Form of Indemnification Agreement between the Registrant and Messrs. Anastas, Gibson, Whitney,
Raetz and Langeler Fielland
10.9* Form of Registrant's 2000 Stock Incentive Plan
10.10* Form of Registrant's Employee Stock Purchase Plan
23.1 Consent of KPMG LLP, Independent Auditors
23.2* Consent of Stoel Rives LLP (included in Exhibit 5.1)
24.1 Power of Attorney (See page II-6)
27.1 Financial Data Schedule
</TABLE>
- -------------
* to be filed by amendment
II-4
<PAGE> 72
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions contained in the Amended and Restated
Certificate of Incorporation of the Registrant and the laws of the State of
Delaware, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, 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
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement certificates
in such denominations and registered in such names as required by the
Underwriters to permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance 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 Securities Act shall be deemed to be part of
this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 73
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Portland, Oregon, on
this 10th day of March 2000.
WEBRIDGE, INC.
By: GARY N. FIELLAND
--------------------------------------
Gary N. Fielland,
President and Chief Executive Officer
II-6
<PAGE> 74
POWER OF ATTORNEY
KNOW ALL THESE PERSON BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints, jointly and severally, Gary N.
Fielland, David Brinker and Mark S. Anastas, and each of them, attorneys-in-fact
for the undersigned, each with the power of substitution, for the undersigned in
any and all capacities to sign any and all amendments to this Registration
Statement (including post-effective amendments and any registration statement
relating to the same offering as this Registration Statement that is to be
effective upon filing 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, hereby ratifying and
confirming all that each of said attorneys-in-fact, of his substitute or
substitutes, may 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 by the following persons in the
capacities held on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
GARY N. FIELLAND President, Chief Executive Officer and Director
- ------------------------------------ (Principal Executive Officer) March 10, 2000
Gary N. Fielland
DAVID L. BRINKER Chief Financial Officer
- ------------------------------------ (Principal Financial Officer and March 10, 2000
David L. Brinker Principal Accounting Officer)
MARK S. ANASTAS Chief Operating Officer and Director
- ------------------------------------
Mark S. Anastas March 9, 2000
C. SCOTT GIBSON Director
- ------------------------------------
C. Scott Gibson March 8, 2000
GERARD LANGELER Director
- ------------------------------------
Gerard Langeler March 8, 2000
JAMES A. LASH Director
- ------------------------------------
James A. Lash March 8, 2000
DAVID A. SHRIGLEY Director
- ------------------------------------
David A. Shrigley March 10, 2000
</TABLE>
II-7
<PAGE> 75
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
1.1* Form of Underwriting Agreement
3.1 Registrant's Amended and Restated Articles of Incorporation, as currently in effect
3.2* Form of Registrant's Restated Articles of Incorporation, to be in effect upon the closing of the
offering
3.3 Registrant's Bylaws, as currently in effect
3.4* Form of Registrant's Bylaws, to be in effect upon the closing of the offering
4.1* See Articles _______ and ______ of Exhibit 3.2 and Section _____ and _____ of Exhibit 3.4
4.2 Second Amended and Restated First Refusal and Co-Sale Agreement, dated December 22, 1999 between
the Registrant and certain investors
4.3 Second Amended and Restated Investors' Rights Agreement, dated December 22, 1999 between the
Registrant and certain investors
5.1* Opinion of Stoel Rives LLP as to the legality of the securities being registered, including
consent
10.1 Registrant's 1996 Stock Incentive Plan
10.2 Lease Agreement between Registrant and Amberjack, Ltd. dated as of October 14, 1999
10.3 Amended and Restated Loan and Security Agreement between Silicon Valley Bank and the Registrant,
dated as of August 25, 1999
10.4 Master Equipment Lease between Comdisco, Inc. and the Registrant, dated as of September 24, 1999
10.5 Office Space Sublease between Creative MultiMedia Corporation and the Registrant, dated as of September 11, 1997
under an Office Lease between Commerce Building Limited Partnership and Creative Multimedia Corporation, dated
as of April 7, 1995
10.6 Second Amended and Restated First Refusal and Co-Sale Agreement, dated December 22, 1999 between
the Registrant and certain investors (included as Exhibit 4.2)
10.7 Second Amended and Restated Investors' Rights Agreement, dated December 22, 1999 between the
Registrant and certain investors (included as Exhibit 4.2)
10.8 Form of Indemnification Agreement between the Registrant and Messrs. Anastas, Gibson, Whitney,
Raetz and Langeler Fielland
10.9* Form of Registrant's 2000 Stock Incentive Plan
10.10* Form of Registrant's Employee Stock Purchase Plan
23.1 Consent of KPMG LLP, Independent Auditors
23.2* Consent of Stoel Rives LLP (included in Exhibit 5.1)
24.1 Power of Attorney (See page II-6)
27.1 Financial Data Schedule
</TABLE>
- -----------
* to be filed by amendment
<PAGE> 76
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Webridge, Inc.:
We have audited the accompanying balance sheets of Webridge, Inc. as of December
31, 1998 and 1999, and the related statements of operations, stockholders'
equity (deficit), and cash flows for each of the years in the three-year period
ended December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Webridge, Inc. as of December
31, 1998 and 1999, and the results of its operations and its cash flows for each
of the years in the three-year period ended December 31, 1999 in conformity with
generally accepted accounting principles.
/s/ KPMG LLP
Portland, Oregon
March 6, 2000
F-2
<PAGE> 77
WEBRIDGE, INC.
Balance Sheets
(In thousands, except per share data)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1999
-------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,951 22,214
Investments 1,981 958
Restricted investment -- 250
Accounts receivable 347 2,935
Prepaids and other current assets -- 468
-------- -------
Total current assets 8,279 26,825
Furniture and equipment, net 422 575
Other assets 20 --
-------- -------
Total assets $ 8,721 27,400
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ -- 750
Accounts payable 124 763
Accrued expenses 347 843
Deferred revenue 113 1,490
Current portion of long-term debt and capital
lease obligations 264 284
-------- -------
Total current liabilities 848 4,130
Long-term debt and capital lease obligations, net of
current portion 252 16
-------- -------
Total liabilities 1,100 4,146
-------- -------
Commitments
Stockholders' equity:
Preferred stock, $.001 par value. Authorized 17,844 shares consisting of:
Series C convertible preferred stock; liquidation preference $21,474.
Authorized 4,342 shares; issued and outstanding -0- and 4,235
shares at December 31, 1998 and 1999, respectively -- 4
Series B convertible preferred stock; liquidation preference $10,064.
Authorized 6,038 shares; issued and outstanding 4,744 and 5,920
shares at December 31, 1998 and 1999, respectively 5 6
Series A convertible preferred stock; liquidation preference $6,740.
Authorized 7,464 shares; issued and outstanding 7,464 shares
at December 31, 1998 and 1999 7 7
Common stock, $.001 par value. Authorized 50,000 shares; issued and
outstanding 12,374 and 13,074 shares at December 31, 1998 and 1999,
respectively 12 13
Additional paid-in capital 15,818 40,432
Deferred stock-based compensation -- (959)
Accumulated deficit (8,221) (16,249)
-------- -------
Total stockholders' equity 7,621 23,254
-------- -------
Total liabilities and stockholders' equity $ 8,721 27,400
======== =======
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 78
WEBRIDGE, INC.
Statements of Operations
(In thousands, except per share data)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1997 1998 1999
-------- ------ -------
<S> <C> <C> <C>
Revenue:
Product licenses $ -- 175 1,879
Services -- 148 2,568
-------- ------ -------
Total revenue -- 323 4,447
Cost of revenue:
Cost of product licenses -- 9 --
Cost of services -- 135 1,332
-------- ------ -------
Total cost of revenue -- 144 1,332
-------- ------ -------
Gross profit -- 179 3,115
-------- ------ -------
Operating expenses:
Research and development 1,514 3,403 4,809
Sales and marketing 427 1,926 5,240
General and administrative 327 724 1,304
Amortization of deferred stock-based
compensation -- -- 88
-------- ------ -------
Total operating expenses 2,268 6,053 11,441
-------- ------ -------
Loss from operations (2,268) (5,874) (8,326)
-------- ------ -------
Other income (expense):
Interest income 94 134 321
Interest expense (23) (69) (45)
Other -- (6) 22
-------- ------ -------
Total other income (expense) 71 59 298
-------- ------ -------
Net loss before provision for
income taxes (2,197) (5,815) (8,028)
Provision for income taxes -- -- --
-------- ------ -------
Net loss $ (2,197) (5,815) (8,028)
======== ====== =======
Basic and diluted net loss per share $ (1.53) (1.08) (0.94)
======== ====== =======
Shares used in computing basic and
diluted net loss per share 1,433 5,389 8,539
======== ====== =======
Pro forma basic and diluted net loss
per share $ (0.37)
=======
Shares used in computing pro forma
basic and diluted net loss per share 21,798
=======
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 79
WEBRIDGE, INC.
Statement of Stockholders' Equity (Deficit)
(In thousands, except per share data)
<TABLE>
<CAPTION>
SERIES C SERIES B SERIES A
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK COMMON STOCK
----------------- ----------------- ---------------- -------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------ ------ ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as of December 31, 1996 -- $ -- -- $-- -- $-- 5,000 $ 5
Issuance of common stock -- -- -- -- -- -- 6,301 6
Exercise of common stock options -- -- -- -- -- -- 781 1
Issuance of Series A preferred
stock -- -- -- -- 7,464 7 -- --
Issuance of common stock
options for services -- -- -- -- -- -- -- --
Net loss -- -- -- -- -- -- -- --
----- ----- ------ --- ------ --- -------- ---
Balance as of December 31, 1997 -- -- -- -- 7,464 7 12,082 12
Exercise of common stock options -- -- -- -- -- -- 292 --
Issuance of Series B preferred
stock -- -- 4,744 5 -- -- -- --
Issuance of common stock
options for services -- -- -- -- -- -- -- --
Repayment of common stock
subscription receivable -- -- -- -- -- -- -- --
Net loss -- -- -- -- -- -- -- --
----- ----- ------ --- ------ --- -------- ---
Balance as of December 31, 1998 -- -- 4,744 5 7,464 7 12,374 12
Exercise of common stock options -- -- -- -- -- -- 750 1
Repurchase of common stock -- -- -- -- -- -- (50) --
Issuance of Series B preferred
stock -- -- 1,176 1 -- -- -- --
Issuance of Series C preferred
stock 4,235 4 -- -- -- -- -- --
Deferred stock-based compensation -- -- -- -- -- -- -- --
Amortization of stock-based
compensation -- -- -- -- -- -- -- --
Net loss -- -- -- -- -- -- -- --
----- ----- ------ --- ------ --- -------- ---
Balance as of December 31, 1999 4,235 $ 4 5,920 $ 6 7,464 $ 7 13,074 $13
===== ===== ====== === ====== === ======== ===
</TABLE>
<TABLE>
<CAPTION>
COMMON TOTAL
ADDITIONAL DEFERRED STOCK STOCKHOLDERS'
PAID-IN STOCK-BASED SUBSCRIPTION ACCUMULATED EQUITY
CAPITAL COMPENSATION RECEIVABLE DEFICIT (DEFICIT)
---------- ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance as of December 31, 1996 $ -- $ -- $ -- $ (209) $ (204)
Issuance of common stock 78 -- -- -- 84
Exercise of common stock options 38 -- (35) -- 4
Issuance of Series A preferred
stock 6,697 -- -- -- 6,704
Issuance of common stock
options for services 634 -- -- -- 634
Net loss -- -- -- (2,197) (2,197)
-------- ------- ----- -------- --------
Balance as of December 31, 1997 7,447 -- (35) (2,406) 5,025
Exercise of common stock options 26 -- -- -- 26
Issuance of Series B preferred
stock 8,044 -- -- -- 8,049
Issuance of common stock
options for services 301 -- -- -- 301
Repayment of common stock
subscription receivable -- -- 35 -- 35
Net loss -- -- -- (5,815) (5,815)
-------- ------- ----- -------- --------
Balance as of December 31, 1998 15,818 -- -- (8,221) 7,621
Exercise of common stock options 103 -- -- -- 104
Repurchase of common stock (4) -- -- -- (4)
Issuance of Series B preferred
stock 1,999 -- -- -- 2,000
Issuance of Series C preferred
stock 21,469 -- -- -- 21,473
Deferred stock-based compensation 1,047 (1,047) -- -- --
Amortization of stock-based
compensation -- 88 -- -- 88
Net loss -- -- -- (8,028) (8,028)
-------- ------- ----- -------- --------
Balance as of December 31, 1999 $ 40,432 $ (959) $ -- $(16,249) $ 23,254
======== ======= ===== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 80
WEBRIDGE, INC.
Statements of Cash Flows
(In thousands, except per share data)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1997 1998 1999
------- ------ -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(2,197) (5,815) (8,028)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization 49 163 256
(Gain) loss on disposal of assets -- 5 (2)
Non-cash interest expense 19 10 --
Non-cash expense for services 634 301 --
Amortization of deferred stock-based compensation -- -- 88
Change in operating assets and liabilities:
Accounts receivable -- (347) (2,588)
Accounts payable and accrued expenses 11 279 1,135
Deferred revenue -- 113 1,377
Other assets -- -- (448)
------- ------ -------
Net cash used for operating activities (1,484) (5,291) (8,210)
------- ------ -------
Cash flows from investing activities:
Proceeds on sale of fixed assets -- 6 5
Purchase of furniture and equipment (211) (282) (412)
Purchase of investments -- (1,981) (2,198)
Maturities of investments -- -- 3,221
Deposit on facility lease (24) 4 --
------- ------ -------
Net cash (used for) provided by
investing activities (235) (2,253) 616
------- ------ -------
Cash flows from financing activities:
Proceeds from issuance of preferred stock 6,465 6,139 23,473
Repurchase of common stock -- -- (4)
Proceeds from issuance of common stock 88 26 104
Proceeds from notes payable -- 439 --
Proceeds from line of credit -- -- 750
Proceeds from sale/leaseback -- -- 22
Repayments of common stock subscriptions receivable -- 35 --
Principal payments on capital leases (7) (39) (19)
Principal payments on notes payable -- -- (219)
Principal payments on notes payable to stockholders (31) -- --
Proceeds from notes payable to stockholders 120 1,900 --
Restricted investment -- -- (250)
------- ------ -------
Net cash provided by financing activities 6,635 8,500 23,857
------- ------ -------
Net increase in cash and cash equivalents 4,916 956 16,263
Cash and cash equivalents at beginning of year 79 4,995 5,951
------- ------ -------
Cash and cash equivalents at end of year $ 4,995 5,951 22,214
======= ====== =======
Supplemental disclosures:
Cash paid for interest $ 10 57 45
Non-cash investing activities:
Equipment acquired under capital lease 65 57 --
Common stock issued in exchange for notes receivable 35 -- --
Conversion of notes payable to stockholders and
related accrued interest into preferred stock 239 1,910 --
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 81
WEBRIDGE, INC.
Notes to Financial Statements
(In thousands, except per share data)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) NATURE OF BUSINESS
Webridge, Inc. (Webridge) was incorporated in Delaware in June 1996.
Webridge develops, markets and supports online business-to-business
enterprise commerce packaged applications for commerce, content
management and collaboration, with additional specialized add-on
application modules and software tools used to customize and maintain
the solutions built with these products. Webridge sells their
software products through a direct sales force primarily in the U.S.
Webridge was a development stage company through the first half of
1998.
(b) REVENUE RECOGNITION
Webridge has adopted Statement of Position (SOP) 97-2, Software
Revenue Recognition, as amended by SOP 98-9, since inception. Revenue
on software arrangements involving multiple elements, which generally
include perpetual and subscription-based software product licenses,
deployment services, post-contractual customer support (PCS), and
hosting services, is allocated to the elements using the residual
method. Webridge has determined that deployment services, PCS, and
hosting services can be separated from product licenses because they
are not essential to the functionality of any other element in the
arrangement and have sufficient vendor-specific objective evidence
(VSOE) to permit the allocation of revenue to these elements.
Under the residual method, the fair value of deployment services, PCS
and hosting services is deferred and subsequently recognized as the
services are performed. The difference between the total software
arrangement fee and the amount deferred for deployment services, PCS
and hosting services is allocated to product licenses and recognized
in accordance with SOP 97-2.
Webridge's software is not functionally dependent on deployment
services. Revenue from product licenses is generally recognized when
persuasive evidence of an arrangement exists, the product has been
delivered, there are no remaining significant obligations, the fee is
fixed or determinable and collection of the fee is probable.
Subscription-based product licenses revenue is recognized ratably
over the period of the subscription contract, typically two years.
Services revenue consists of deployment services for product
installation and integration, hosting, support and training. Services
are billed using either a fixed fee arrangement or based on time and
materials. Deployment service revenue from time and materials based
contracts is recognized as the service is performed. Revenue is
recognized on fixed fee arrangements on the completion of specific
contractual milestone events, or based on an estimated percentage of
completion as work progresses.
F-7
<PAGE> 82
WEBRIDGE, INC.
Notes to Financial Statements
(In thousands, except per share data)
Hosting services are sold to customers based on a monthly or
quarterly fee. Revenue for hosting services is recognized ratably
over the term of the arrangement, typically one year.
PCS arrangements for non-subscription customers typically have a
one-year term and are billed annually. For subscription customers,
PCS is billed monthly or quarterly and typically has a two-year term.
Services provided to customers under customer support agreements
generally include technical support and unspecified product upgrades.
PCS is recognized ratably over the contract period.
Customers are billed in accordance with contractual specifications.
Webridge records the unrecognized portion of billable fees as
deferred revenue.
(c) CASH AND CASH EQUIVALENTS
Webridge considers all highly liquid securities purchased with
original maturities of three months or less to be cash equivalents.
(d) INVESTMENTS
Investments consist of commercial paper and government obligations
which have original maturities between three and six months. These
investments are classified as held-to-maturity and are recorded at
cost which approximates fair value.
(e) RESTRICTED INVESTMENTS
Webridge has a letter of credit secured by a certificate of deposit
with a bank in the amount of $250. The certificate of deposit matures
January 2001.
(f) ACCOUNTS RECEIVABLE
Credit is extended to customers as deemed necessary and generally
does not require collateral. Management believes that the risk of
loss is significantly reduced by the financial position of its
customers. Management evaluates customer information and historical
statistics in providing for an allowance of doubtful accounts.
Historically, Webridge has incurred no write-offs of accounts
receivable. At December 31, 1998 and 1999, the allowance for doubtful
accounts was $-0-.
At December 31, 1999, Webridge had accounts receivable from four
customers representing approximately 60% of trade accounts
receivable. Loss or non-performance by these significant customers
could adversely affect Webridge's financial position, liquidity or
results of operations.
F-8
<PAGE> 83
WEBRIDGE, INC.
Notes to Financial Statements
(In thousands, except per share data)
(g) FURNITURE AND EQUIPMENT
Furniture and equipment are stated at cost. Furniture and equipment
recorded under capital lease arrangements are stated at the lower of
the present value of the minimum lease payments at the beginning of
the lease or the fair value of the leased assets at the inception of
the lease.
Depreciation on furniture and equipment is calculated on the
straight-line method over the estimated useful life of the assets,
generally three years. Furniture and equipment acquired under capital
leases are amortized straight-line over the shorter of the lease term
or estimated useful life of the assets.
(h) SOFTWARE DEVELOPMENT COSTS
Webridge accounts for software development costs in accordance with
SFAS No. 86, Accounting for the Costs of Computer Software to be
Sold, Leased or Otherwise Marketed. Software development costs are
capitalized beginning when a product's technological feasibility has
been established by completion of a working model of the product and
ending when a product is available for general release to customers.
To date, the establishment of technological feasibility of Webridge's
products has occurred concurrently with general release and,
accordingly, no costs have been capitalized.
(i) RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
(j) STOCK-BASED EMPLOYEE COMPENSATION
Webridge accounts for stock-based compensation using the Financial
Accounting Standard Board's (FASB) Statement of Financial Accounting
Standards No. 123 (SFAS No. 123), Accounting for Stock-Based
Compensation. This statement permits a company to choose either a
fair value based method of accounting for its stock-based
compensation arrangements or to comply with the current Accounting
Principles Board Opinion 25 (APB 25) intrinsic value-based method
adding pro forma disclosures of net loss computed as if the fair
value-based method had been applied in the financial statements.
Webridge applies SFAS No. 123 by retaining the APB 25 (and
interpretations) method of accounting for stock-based compensation
for employees with annual pro forma disclosure of net loss. Webridge
accounts for stock and stock options issued to non-employees in
accordance with the provisions of SFAS No. 123 and Emerging Issues
Task Force (EITF) consensus on Issue No. 96-18, Accounting for Equity
Instruments that are Issued to Other than Employees for Acquiring, or
in Conjunction with Selling, Goods or Services. Expense associated
with stock-based compensation is amortized on an accelerated basis
over the vesting period of the individual stock option awards
consistent with the method prescribed in FASB Interpretation No. 28.
F-9
<PAGE> 84
WEBRIDGE, INC.
Notes to Financial Statements
(In thousands, except per share data)
(k) INCOME TAXES
Prior to August 23, 1997, Webridge was taxed under the S Corporation
provisions of the Internal Revenue Code. Under those provisions, the
taxable loss was passed through to the stockholders for inclusion in
their personal returns.
Since August 23, 1997, Webridge accounts for income taxes under the
asset and liability method. Deferred tax assets and liabilities are
recognized for the future tax consequences of events that have been
included in the financial statements and tax returns. Under this
method, deferred tax assets and liabilities are determined based on
the difference between the financial statement and tax bases of
assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to be recovered or settled.
Valuation allowances are established when necessary to reduce
deferred tax assets to the amounts expected to be realized.
(l) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheet for cash and cash
equivalents, investments, accounts receivable, accounts payable,
accrued liabilities and deferred revenue approximate fair values due
to the short-term maturities of those instruments. The carrying
amount of capital leases approximate fair value as the stated
interest rates reflect current market rates. Fair value estimates are
made at a specific point in time, based on relevant market
information about the financial instruments when available. These
estimates are subjective in nature and involve uncertainties and
matters of significant judgment and, therefore, cannot be determined
with precision.
(m) CONCENTRATIONS OF CREDIT RISK
Results of operations are substantially derived from United States
operations and substantially all assets reside in the United States.
Webridge is exposed to concentration of credit risk principally from
accounts receivable. For the years ended December 31, 1998 and 1999,
two customers each accounted for greater than 10% of Webridge's
revenues. For 1998, the largest customer accounted for $160, or 50%
of total revenues; the next largest customer accounted for $125, or
39% of total revenues. For 1999, the largest customer accounted for
$1,114, or 25% of total revenues; the next largest customer accounted
for $477, or 11% of total revenues.
Webridge is subject to concentrations of credit risk from its cash
and cash equivalents, investments and trade receivables. Webridge
limits its exposure to credit risk associated with cash and cash
equivalents and investments by placing its cash and cash equivalents
with a major financial institution and by investing in
investment-grade securities.
(n) ADVERTISING COSTS
Webridge's policy is to expense advertising costs as incurred. Total
advertising expenses were $-0-, $-0- and $272 for the years ended
December 31, 1997, 1998 and 1999, respectively. Included in prepaid
expenses was $-0- and $146 at December 31, 1998 and 1999,
respectively, relating to prepaid advertising and promotion expenses.
F-10
<PAGE> 85
WEBRIDGE, INC.
Notes to Financial Statements
(In thousands, except per share data)
(o) COMPREHENSIVE LOSS
Webridge has adopted the provisions of SFAS No. 130, Reporting
Comprehensive Income. Comprehensive income is defined as changes in
stockholders' equity exclusive of transactions with owners, such as
capital contributions and dividends. There are no differences between
net loss and comprehensive loss for the periods presented.
(p) NET LOSS PER SHARE
Webridge follows the provisions of Statement of Financial Accounting
Standards No. 128, Earnings Per Share, (SFAS 128) and SEC Staff
Accounting Bulletin No. 98 (SAB No. 98). Under the provisions of SFAS
128 and SAB No. 98, basic and diluted net loss per share is computed
by dividing net loss available to common stockholders by the weighted
average number of common shares outstanding during the period less
the weighted average shares of common stock subject to repurchase.
Diluted net loss per share has not been presented as the effect of
the assumed exercise of stock options, warrants for preferred stock
and convertible securities is antidilutive due to Webridge's net
loss.
Webridge's historical capital structure is not indicative of its
prospective structure due to the automatic conversion of all shares
of convertible preferred stock into common stock concurrent with the
closing of Webridge's anticipated initial public offering.
Accordingly, a pro forma calculation assuming the conversion of all
outstanding shares as of December 31, 1999 of convertible preferred
stock into common stock upon Webridge's initial public offering using
the if-converted method from their respective dates of issuance is
presented.
The following table sets forth for the periods indicated the weighted
average potential shares of common stock issuable under stock options
using the treasury stock method, warrants and convertible preferred
stock on an if-converted basis, which are not included in calculating
net loss per share due to their antidilutive effect:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, PRO FORMA
------------------------------ DECEMBER 31,
1997 1998 1999 1999
------ ------ ------ ------------
<S> <C> <C> <C> <C>
Shares issuable under stock options .... -- 207 162 162
Shares issuable under warrants ......... -- -- 95 95
Restricted stock ....................... 8,649 6,944 3,990 3,990
Weighted average shares of common
stock issuable upon conversion
of preferred stock .................. 2,618 7,555 13,260 --
------ ------ ------ -----
11,267 14,706 17,507 4,247
====== ====== ====== =====
</TABLE>
F-11
<PAGE> 86
WEBRIDGE, INC.
Notes to Financial Statements
(In thousands, except per share data)
Pro forma net loss per share is computed using the weighted average
number of common shares outstanding, including the pro forma effects
of the automatic conversion of all outstanding convertible preferred
stock into shares of common stock effective upon the closing of
Webridge's initial public offering as if such conversion occurred at
the date of original issuance.
Pursuant to SAB No. 98, common shares issued for nominal
consideration in each of the periods presented, if any, would be
included in the per share calculations as if they were outstanding
for all periods presented. No such shares have been issued.
The following table sets forth the computation of basic and diluted
net loss per share and pro forma basic and diluted net loss per share
for the periods indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, PRO FORMA
-------------------------------- DECEMBER 31,
1997 1998 1999 1999
-------- ------ ------ ------------
<S> <C> <C> <C> <C>
Numerator:
Net loss ..................... $ (2,197) (5,815) (8,028) (8,028)
======== ====== ====== ======
Denominator:
Weighted average common
shares outstanding ......... 1,433 5,389 8,539 8,539
-------- ------ ------
Denominator for basic
and diluted calculation .... 1,433 5,389 8,539
======== ====== ======
Weighted average effect of
pro forma conversion of
securities:
Series A convertible
preferred stock ......... 7,464
Series B convertible
preferred stock ......... 5,691
Series C convertible
preferred stock ......... 104
------
Denominator for pro
forma basic and
diluted calculation ........ 21,798
======
</TABLE>
F-12
<PAGE> 87
WEBRIDGE, INC.
Notes to Financial Statements
(In thousands, except per share data)
(q) SEGMENT REPORTING
Effective January 1, 1998, Webridge adopted the provisions of SFAS
No. 131, Disclosures About Segments of an Enterprise and Related
Information. Webridge identifies its operating segment based on
business activities, management responsibilities and geographic
location. During all periods presented, Webridge operated in a single
business segment providing integrated Internet software applications.
(r) USE OF ESTIMATES
The preparation of the accompanying 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 at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
(s) RISK OF TECHNOLOGICAL CHANGE
A substantial portion of Webridge's revenues are generated from the
development and rapid release to market of computer software
products. In the extremely competitive industry environment in which
Webridge operates, product generation, development and marketing
processes are uncertain and complex, requiring accurate prediction of
market trends and demand as well as successful management of various
risks. Additionally, Webridge's production strategy relies on certain
employees' ability to deliver implemented products in time to meet
critical development and distribution schedules. In light of these
dependencies, it is reasonably possible that failure to successfully
manage a significant product introduction or failure of certain
employees to deliver and deploy products as needed could have a
severe impact on Webridge's growth and results of operations.
F-13
<PAGE> 88
WEBRIDGE, INC.
Notes to Financial Statements
(In thousands, except per share data)
(2) BALANCE SHEET COMPONENTS
(a) FURNITURE AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1998 1999
------ -----
<S> <C> <C>
Leased furniture and equipment .... $ 122 185
Furniture and fixtures ............ 5 10
Equipment ......................... 504 842
------ -----
631 1,037
Less accumulated depreciation and
amortization ................... 209 462
------ -----
$ 422 575
====== =====
</TABLE>
Accumulated amortization for furniture and equipment acquired under
capital leases was $41 and $88 as of December 31, 1998 and 1999,
respectively.
(b) ACCRUED LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1998 1999
------ -----
<S> <C> <C>
Payroll and related expenses ...... $ 235 513
Commissions ....................... 85 247
Accrued sales taxes ............... 3 67
Other accrued liabilities ......... 24 16
------ -----
$ 347 843
====== =====
</TABLE>
(3) BORROWINGS
(a) LINE OF CREDIT
Webridge has a secured line of credit of $2,000 for general operating
purposes with a maturity date of August 28, 2000. At Webridge's
option, the line may be increased by $500 upon payment of a minimal
increase fee. The line is secured by Webridge's accounts receivable.
F-14
<PAGE> 89
WEBRIDGE, INC.
Notes to Financial Statements
(In thousands, except per share data)
(b) DEBT
Webridge has a term loan with a bank that bears interest at the
bank's prime rate plus 1% (9.5% at December 31, 1999). Principal and
interest are due in consecutive monthly payments commencing January
1999 through December 28, 2000. As of December 31, 1998 and 1999,
Webridge had $439 and $220 outstanding under the note payable. The
notes are secured by substantially all of Webridge's assets.
(4) COMMITMENTS
(a) LEASES
In September 1999, Webridge entered into an agreement with a leasing
company for a line of credit for up to $500 for the purchase of fixed
assets. The equipment delivery period is September 1999 through
September 2000. As of December 31, 1999, Webridge had $22 outstanding
under the lease with a 36-month term.
Webridge also has noncancelable operating leases for office space
that will expire at various dates through 2007. Future minimum lease
payments under existing capital leases and noncancelable operating
leases as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
Year ending December 31:
2000.............................. $ 67 560
2001.............................. 8 850
2002.............................. 8 1,048
2003.............................. -- 1,232
2004.............................. -- 1,309
Thereafter........................ -- 3,172
---- -------
Total minimum lease payments... 83 $ 8,171
=======
Less amount representing interest.... 3
----
Present value of net minimum
capital lease payments....... 80
Less current installments of
obligations under capital leases.. 64
----
Obligations under capital
leases, excluding current
installments................. $ 16
====
</TABLE>
F-15
<PAGE> 90
WEBRIDGE, INC.
Notes to Financial Statements
(In thousands, except per share data)
Rent expense was $82, $216 and $266 for the years ended December 31,
1997, 1998 and 1999, respectively.
F-16
<PAGE> 91
WEBRIDGE, INC.
Notes to Financial Statements
(In thousands, except per share data)
(b) PREFERRED STOCK
During 1999, Webridge agreed, in conjunction with the above leasing
arrangement, to allow participation in the next round of preferred
financing by this leasing company. The agreement allowed the leasing
company to purchase up to 20 shares of preferred stock at the
preferred stock price. The next round of financing occurred in
December 1999 at $5.07 without participation by this company.
Webridge plans to sell additional shares of preferred stock to this
company in 2000 in accordance with the agreement.
(5) STOCKHOLDERS' EQUITY
(a) SERIES C, B AND A PREFERRED STOCK
The terms of the Series C, B and A preferred stock are:
- The holders of preferred stock shall have the right to one vote
for each share of common stock into which such preferred shares
could then be converted.
- Upon declaration of the Board of Directors, the Series C
stockholders are entitled to receive 11% per share per annum, or
if greater, an amount equal to that paid on any other outstanding
shares of Webridge. Dividends on Series C shares are in preference
to any declaration or payment on common stock or for Series A or
Series B. Series A and Series B stockholders are entitled to
receive dividends at the rate of 8% and 11% per annum of the
original Series A and Series B issue prices of $.903 per share and
$1.70 per share, respectively. The right to receive dividends on
all series of preferred stock is non-cumulative. No dividends may
be paid on common stock until all declared dividends on preferred
stock have been paid.
- In the event of any voluntary or involuntary dissolution,
liquidation, or winding-up of the affairs of Webridge, the holders
of Series C shall be entitled to receive, prior, and in preference
to any distribution of any assets to the holders of common stock
or Series A or Series B, an amount per share equal to $5.07 per
share plus any declared but unpaid dividends on such shares.
- In the event of any voluntary of involuntary dissolution,
liquidation or winding-up of the affairs of Webridge, and after
the completion of distribution to the Series C preferred
stockholders, the holders of Series B shall be entitled to
receive, prior, and in preference to any distribution of any
assets to the holders of common stock or Series A, an amount per
share equal to $1.70 per share plus any declared but unpaid
dividends on such shares.
- In the event of any voluntary or involuntary dissolution,
liquidation or winding-up of the affairs of Webridge, and after
completion of the initial distribution to preferred stockholders,
holders of Series C, B and A are entitled to participate on a
pro-rata basis in the distributions of the liquidation up to two
times the original investment. After receiving two times the
original investment, any remaining assets are distributed only to
common stockholders.
F-17
<PAGE> 92
WEBRIDGE, INC.
Notes to Financial Statements
(In thousands, except per share data)
- In the event of any voluntary or involuntary dissolution,
liquidation, or winding-up of the affairs of Webridge, and after
the completion of distribution to the Series C and Series B
preferred stockholders, the holders of Series A shall be entitled
to receive, prior, and in preference to any distribution of any
assets to the holders of common stock, an amount per share equal
to $.903 per share plus any declared but unpaid dividends on such
shares.
- Each share of preferred stock is voluntarily convertible into
common stock at any time after the date of issuance, at an initial
rate of one-to-one. Each share of preferred stock shall
automatically be converted into shares of common stock immediately
upon Webridge's sale of common stock in a firm commitment
underwritten public offering with a minimum offering price of
$7.60 per share, and aggregate offering proceeds of not less than
$30,000.
As of December 31, 1999, Webridge had reserved 17,619 shares of its
common stock pursuant to the conversion privileges of the Series C,
Series B and Series A preferred stock.
(b) COLLABORATION AGREEMENT AND WARRANT
In March 1999, Webridge granted a warrant to a company to purchase
118 shares of Series B preferred stock at $1.70 per share in
conjunction with a collaboration agreement. The holder of the warrant
must meet a performance milestone in order to purchase the shares. If
performance has not been met by April 2000, the warrant will be
canceled. As of December 31, 1999, the performance criteria defined
in the agreement had not been met, and management does not anticipate
that the performance criteria will be met. The warrant will be valued
in accordance with EITF 98-16 upon establishment of a measurement
date.
(c) STOCK REPURCHASE AGREEMENT
As of December 31, 1999, Webridge had sold 13,124 shares of common
stock to employees for prices ranging from $.001 to $.21 under
agreements which allow Webridge, at its option, to repurchase shares
of common stock at the original purchase price if the employee ceases
employment for any reason. Generally, the shares subject to
repurchase are reduced by 25% subsequent to the first year of
employment and monthly over the next three years.
Under the terms of the repurchase agreements, if Webridge is acquired
by a publicly traded company through merger or sale of asset or upon
an underwritten public offering, the repurchase agreements will cease
to apply for 2,666 shares of common stock.
(d) WARRANTS
In September 1999, Webridge granted a warrant to purchase
approximately 2 shares of Webridge's Series C preferred stock at
$4.24 per share in connection with a lease of furniture and
equipment. At December 31, 1999, the warrant had not been exercised.
The warrant was valued using the Black-Scholes model using the
following assumptions: expected dividends, -0-; risk-free interest
rate, 6.0%; volatility, 100%; and expected life of three years. The
fair value of the warrant was $8.
F-18
<PAGE> 93
WEBRIDGE, INC.
Notes to Financial Statements
(In thousands, except per share data)
(e) STOCK INCENTIVE PLAN
Webridge has authorized to issue up to 17,040 shares of common stock
in connection with its Stock Incentive Plan (the Plan) to directors,
employees and consultants. The Plan provides for the issuance of
incentive or nonqualified stock options, appreciation rights, stock
bonuses or cash bonus rights or to sell shares subject to
restrictions.
Webridge uses the intrinsic-value method in accounting for its
employee stock-based compensation plans. Accordingly, no compensation
cost has been recognized for any of its stock options granted or
restricted stock sold because the exercise price of each option or
purchase price of each share of restricted stock equaled or exceeded
the deemed fair value of the underlying common stock as of the grant
date for each stock option or purchase date of each restricted stock
share, except for stock options granted and restricted stock sold
from October 1, 1999 through December 31, 1999.
With respect to the stock options granted and restricted stock sold
during the year ended December 31, 1999, Webridge recorded deferred
stock compensation of $1,047 for the difference at the grant or
issuance date between the exercise price of each stock option granted
or purchase price of each restricted share sold and the deemed fair
value of the underlying common stock. This amount is being amortized
on an accelerated basis over the vesting period, generally four
years, consistent with the method described in FASB Interpretation
No. 28. Amortization of the December 31, 1999 balance of deferred
stock-based compensation for fiscal years ended 2000, 2001, 2002 and
2003 would approximate $502, $262, $142 and $53, respectively. The
amortization of deferred stock-based compensation relates to the
following items in the accompanying statements of operations:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1999
------------
<S> <C>
Cost of revenues.................................. $ 16
Research and development.......................... 20
Sales and marketing............................... 42
General and administrative........................ 10
-----
Total.................................... $ 88
=====
</TABLE>
F-19
<PAGE> 94
WEBRIDGE, INC.
Notes to Financial Statements
(In thousands, except per share data)
Had compensation costs been determined in accordance with SFAS No.
123 for all of Webridge's stock-based compensation plans, net loss
and basic and diluted net loss per share would have been as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1997 1998 1999
--------- ------ ------
<S> <C> <C> <C>
Net loss:
As reported ........... $ (2,197) (5,815) (8,028)
Pro forma ............. (2,236) (5,875) (8,165)
Net loss per share:
As reported ........... $ (1.53) (1.08) (0.94)
Pro forma ............. (1.56) (1.09) (0.96)
</TABLE>
The per share weighted average fair market value, as determined by
applying the Black-Scholes option pricing model to stock options
granted during 1997, 1998 and 1999, was $.01, $.07 and $.21,
respectively, with the following weighted average assumptions:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1997 1998 1999
--------- ------ ------
<S> <C> <C> <C>
Expected dividend ........ $ -- -- --
Risk-free interest rate .. 6.0% 5.5% 6.1%
Volatility ............... 100% 100% 100%
Expected life ............ 4 years 4 years 4 years
</TABLE>
F-20
<PAGE> 95
WEBRIDGE, INC.
Notes to Financial Statements
(In thousands, except per share data)
A summary of stock option activity follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER EXERCISE
OF SHARES PRICE
--------- --------
<S> <C> <C>
Options outstanding at December 31, 1996 .. -- $ --
Granted ................................... 911 .06
Exercised ................................. 781 .05
----- ----
Options outstanding at December 31, 1997 .. 130 .07
Granted ................................... 1,713 .09
Exercised ................................. 292 .09
Canceled .................................. 28 .09
Forfeited ................................. 65 .05
----- ----
Options outstanding at December 31, 1998 .. 1,458 .09
Granted ................................... 2,607 .25
Exercised ................................. 750 .14
Canceled .................................. 176 .13
Forfeited ................................. -- --
----- ----
Options outstanding at December 31, 1999 .. 3,139 $.21
===== ====
</TABLE>
At December 31, 1999, the exercise price and weighted average
remaining contractual life of outstanding options was $.21 and 9.25
years, respectively. At December 31, 1999, there were 162 options
exercisable.
The following table summarizes information regarding stock options
outstanding and exercisable as of December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------------- ----------------------
NUMBER WEIGHTED NUMBER
OUTSTANDING AVERAGE WEIGHTED- EXERCISABLE WEIGHTED
RANGE OF AS OF REMAINING AVERAGE AS OF AVERAGE
EXERCISE DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
PRICES 1999 LIFE PRICE 1999 PRICE
----------- ------------ ----------- --------- ------------ --------
<S> <C> <C> <C> <C> <C>
$ 0.09 885 8.56 $ 0.09 153 $ 0.09
0.21 1,996 9.47 0.21 7 0.21
0.40 181 9.90 0.40 -- 0.00
1.25 77 9.98 1.25 2 1.25
----------- ----- ---- ------ --- ------
0.09-1.25 3,139 9.25 $ 0.21 162 $ 0.11
=========== ===== ==== ====== === ======
</TABLE>
F-21
<PAGE> 96
WEBRIDGE, INC.
Notes to Financial Statements
(In thousands, except per share data)
(6) INCOME TAXES
Due to Webridge's net losses for the years ended December 31, 1997, 1998
and 1999, there has been no provision for federal and state income taxes.
The reconciliation of the statutory federal income tax rate to Webridge's
effective income tax rate is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Computed "expected" income tax benefit (34.0)% (34.0)% (34.0)%
Increases (decreases) resulting from:
State income taxes, net of federal
tax benefit .............................. (4.4) (3.8) (4.3)
Research and experimentation credit ........ (2.8) (3.5) (2.9)
Impact of S Corporation period
passed through to stockholders ........... (3.0) -- --
Amortization of deferred stock-
based compensation ....................... -- -- .4
Non-deductible meals ....................... -- 1.9 .2
Change in valuation allowance .............. 44.2 39.4 40.6
------- ------- -------
Actual tax benefit ............................ --% --% --%
======= ======= =======
</TABLE>
The tax effects of temporary differences that give rise to deferred tax
assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1998 1999
------ -----
<S> <C> <C>
Deferred tax assets:
Research and experimentation credit
carryforwards .......................... $ 245 458
Net operating loss carryforwards ......... 2,686 5,686
Accrued commissions ...................... -- 32
Depreciable assets ....................... -- 3
------ -----
Total gross deferred tax assets .. 2,931 6,179
Less valuation allowance ................. 2,925 6,179
------ -----
6 --
Deferred tax liabilities:
Depreciable assets ....................... 6 --
------ -----
Net deferred tax assets .......... -- --
====== =====
</TABLE>
F-22
<PAGE> 97
WEBRIDGE, INC.
Notes to Financial Statements
(In thousands, except per share data)
The valuation allowance for deferred tax assets as of August 23, 1997, the
date Webridge terminated the Subchapter Corporation election, was $-0-.
The net change in the total valuation allowance for the period from August
23, 1997 to December 31, 1997 was an increase of $673. The change in the
valuation allowance during 1998 and 1999 was an increase of $2,252 and
$3,254, respectively.
At December 31, 1998 and 1999, Webridge has net operating loss
carryforwards of approximately $7,031 and $14,822, respectively, and
research and experimentation credit carryforwards of approximately $245
and $529, respectively, which are available to offset future federal
taxable income and income taxes respectively, if any, through 2019.
A provision of the Internal Revenue Code requires the utilization of net
operating losses and research and experimentation credits be limited when
there is a change of more than 50% in ownership of a company. Such a
change occurred with the sale of preferred stock in August of 1997 and
December of 1999. Accordingly, the utilization of the net operating loss
carryforwards generated from periods to the change in ownership will be
subject to annual limitations.
(7) 401(K) PLAN
During 1998, Webridge adopted the Webridge Employee 401(k) Savings Plan
(the Plan) covering all employees. Employees become eligible to
participate in the Plan upon employment and may begin contributing to the
Plan on the first day of any subsequent calendar quarter. Employees may
contribute up to 15% of their pay to the Plan, or the statutorily
prescribed annual limit. Webridge, at its discretion, may make
contributions to the Plan. To date, Webridge has made no contributions to
the Plan.
(8) RELATED PARTY TRANSACTION
During 1998, Webridge received cash in exchange for promissory notes
payable, with interest of 9%, from an officer, director and employee of
Webridge. The total of the promissory notes was $1,900. The notes and
accrued interest were converted to Series B convertible preferred stock on
December 24, 1998 at $1.70 per share.
(9) SUBSEQUENT EVENT
Webridge sold 104 additional shares of Series C preferred stock in January
2000 for net proceeds of $526.
During January and February 2000, Webridge granted options to purchase 296
shares of common stock to employees with an exercise price below the
deemed fair market value. In connection with the grants, Webridge expects
to recognize approximately $1,800 in deferred stock-based compensation.
F-23
<PAGE> 1
EXHIBIT 3.1
SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF WEBRIDGE, INC.
a Delaware Corporation
Webridge, Inc. (the "Corporation"), a corporation organized and existing
under and by virtue of the provisions of the General Corporation Law of the
State of Delaware (the "General Corporation Law"), does hereby certify that:
FIRST: The name of the Corporation is Webridge, Inc. and the Corporation
was originally incorporated on August 18, 1997, pursuant to the General
Corporation Law, under the name of WEBRIDGE MERGER COMPANY.
SECOND: The following resolutions amending and restating the
Corporation's Certificate of Incorporation were approved by the Board of
Directors of the Corporation at a meeting held on December 10, 1999 and by
shareholders of the Corporation by written consent in accordance with the
provisions of Sections 242 and 245 of the General Corporation Law:
NOW, THEREFORE, BE IT RESOLVED, that the Certificate of Incorporation of
the Corporation be amended and restated in its entirety as follows:
ARTICLE I
The name of this corporation is Webridge, Inc.
ARTICLE II
The address of the registered office of this corporation in the State of
Delaware is 1013 Centre Street, in the City of Wilmington, County of New Castle,
19805. The name of its registered agent at such address is the Corporation
Service Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
ARTICLE IV
A. Classes of Stock. This corporation is authorized to issue two classes
of stock, to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares that this corporation is authorized to issue is
67,843,504 shares. 50,000,000 shares shall be Common Stock, par value $.001 per
share, and 17,843,504 shares shall be Preferred Stock,
<PAGE> 2
consisting of 7,464,134 shares of Series A Preferred Stock, par value $.001 per
share, 6,037,739 shares of Series B Preferred Stock, par value $.001 per share,
and 4,341,631 shares of Series C Preferred Stock, par value $.001 per share.
B. Rights, Preferences and Restrictions of Preferred Stock. The rights,
preferences, privileges, and restrictions granted to and imposed on the Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock are as
set forth below in this Article IV(B).
1. Dividend Provisions.
(a) The holders of shares of Series C Preferred Stock shall be
entitled to receive dividends, out of any assets legally available therefor,
prior and in preference to any declaration or payment or setting aside for
payment or making of any dividend or other distribution (payable other than in
Common Stock or other securities and rights convertible into or entitling the
holder thereof to receive, directly or indirectly, additional shares of Common
Stock of this corporation) on the Common Stock or on the Series A Preferred
Stock and Series B Preferred Stock of this corporation, at the rate of $0.56 per
share per annum, or, if greater (as determined on a per annum basis and an as
converted basis for the Series C Preferred Stock), an amount equal to that paid
on any other outstanding shares of this corporation, payable when, as and if
declared by the Board of Directors. Such dividends shall not be cumulative.
Declared but unpaid dividends with respect to a share of Series C Preferred
Stock shall, upon conversion of such share to Common Stock, be paid to the
extent assets are legally available therefor either in cash or in Common Stock
(valued at the fair market value on the date of payment as determined by the
Board of Directors of this corporation). Any amounts for which assets are not
legally available shall be paid promptly as assets become legally available
therefor.
(b) The holders of shares of Series B Preferred Stock shall be
entitled to receive dividends, out of any assets legally available therefor,
prior and in preference to any declaration or payment or setting aside for
payment or making of any dividend or other distribution (payable other than in
Common Stock or other securities and rights convertible into or entitling the
holder thereof to receive, directly or indirectly, additional shares of Common
Stock of this corporation) on the Common Stock or on the Series A Preferred
Stock of this corporation, at the rate of $0.19 per share per annum, or, if
greater (as determined on a per annum basis and an as converted basis for the
Series B Preferred Stock), an amount equal to that paid on any other outstanding
shares of this corporation, payable when, as and if declared by the Board of
Directors. Such dividends shall not be cumulative. Declared but unpaid dividends
with respect to a share of Series B Preferred Stock shall, upon conversion of
such share to Common Stock, be paid to the extent assets are legally available
therefor either in cash or in Common Stock (valued at the fair market value on
the date of payment as determined by the Board of Directors of this
corporation). Any amounts for which assets are not legally available shall be
paid promptly as assets become legally available therefor.
2
<PAGE> 3
(c) The holders of shares of Series A Preferred Stock shall be
entitled to receive dividends, out of any assets legally available therefor,
prior and in preference to any declaration or payment or setting aside for
payment or making of any dividend or other distribution (payable other than in
Common Stock or other securities and rights convertible into or entitling the
holder thereof to receive, directly or indirectly, additional shares of Common
Stock of this corporation) on the Common Stock of this corporation, at the rate
of $0.10 per share per annum, or, if greater (as determined on a per annum basis
and an as converted basis for the Series A Preferred Stock, an amount equal to
that paid on any other outstanding shares of Common Stock of this corporation,
payable when, as and if declared by the Board of Directors. Such dividends shall
not be cumulative. Declared but unpaid dividends with respect to a share of
Series A Preferred Stock shall, upon conversion of such share to Common Stock,
be paid to the extent assets are legally available therefor either in cash or in
Common Stock (valued at the fair market value on the date of payment as
determined by the Board of Directors of this corporation). Any amounts for which
assets are not legally available shall be paid promptly as assets become legally
available therefor.
2. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up
of this corporation, either voluntary or involuntary, the holders of Series C
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets of this corporation to the holders of Common
Stock or holders of Series A Preferred Stock or Series B Preferred Stock by
reason of their ownership thereof, an amount per share equal to the sum of (A)
$5.07 for each outstanding share of Series C Preferred Stock (the "Original
Series C Issue Price") and (B) an amount equal to declared but unpaid dividends
on such share. If, upon the occurrence of such event, the assets and funds thus
distributed among the holders of the Series C Preferred Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then the entire assets and funds of this corporation
legally available for distribution shall be distributed ratably among the
holders of the Series C Preferred Stock in proportion to the preferential amount
each such holder is otherwise entitled to receive.
(b) In the event of any liquidation, dissolution or
winding up of this corporation, either voluntary or involuntary, after
completion of the distribution required by subparagraph (a) of this Section 2,
the holders of Series B Preferred Stock shall be entitled to receive, prior and
in preference to any distribution of any of the assets of this corporation to
the holders of Common Stock or holders of Series A Preferred Stock by reason of
their ownership thereof, an amount per share equal to the sum of (A) $1.70 for
each outstanding share of Series B Preferred Stock (the "Original Series B Issue
Price") and (B) an amount equal to declared but unpaid dividends on such share.
If upon the occurrence of such event, the assets and funds thus distributed
among the holders of the Series B Preferred Stock shall be insufficient to
permit the payment to such holders of the full aforesaid preferential amounts,
3
<PAGE> 4
then the entire assets and funds of this corporation legally available for
distribution after the distribution required by subparagraph (a) of this Section
2 shall be distributed ratably among the holders of the Series B Preferred Stock
in proportion to the preferential amount each such holder is otherwise entitled
to receive.
(c) In the event of any liquidation, dissolution or winding up
of this corporation, either voluntary or involuntary, after completion of the
distribution required by subparagraphs (a) and (b) of this Section 2, the
holders of Series A Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets of this corporation to the
holders of Common Stock by reason of their ownership thereof, an amount per
share equal to the sum of (A) $.903 for each outstanding share of Series A
Preferred Stock (the "Original Series A Issue Price") and (B) an amount equal to
declared but unpaid dividends on such share. If upon the occurrence of such
event, the assets and funds thus distributed among the holders of the Series A
Preferred Stock shall be insufficient to permit the payment to such holders of
the full aforesaid preferential amounts, then the entire assets and funds of
this corporation legally available for distribution after the distribution
required by subparagraphs (a) and (b) of this Section 2 shall be distributed
ratably among the holders of the Series A Preferred Stock in proportion to the
preferential amount each such holder is otherwise entitled to receive.
(d) Upon the completion of the distributions required by
subparagraphs (a), (b) and (c) of this Section 2, the remaining assets of this
corporation available for distribution to stockholders shall be distributed
among the holders of Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock and Common Stock pro rata based on the number of shares of
Common Stock held by each (assuming conversion of all such Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock) until, with
respect to the holders of Series A Preferred Stock, such holders shall have
received an aggregate of $1.806 per share (including amounts paid pursuant to
subparagraph (c) of this Section 2) and until, with respect to the holders of
Series B Preferred Stock, such holders shall have received an aggregate of $3.40
per share (including amounts paid pursuant to subparagraph (b) of this Section
2) and until, with respect to the holders of Series C Preferred Stock, such
holders shall have received an aggregate of $10.14 per share (including amounts
paid pursuant to subparagraph (a) of this Section 2); thereafter, subject to the
rights of series of Preferred Stock that may from time to time come into
existence, if assets remain in this corporation, the holders of the Common Stock
of this corporation shall receive all of the remaining assets of this
corporation pro rata based on the number of shares of Common Stock held by each.
(i) For purposes of this Section 2, then a
liquidation, dissolution or winding up of this corporation shall be deemed to be
occasioned by, or to include, (A) the acquisition of this corporation by another
entity by means of any transaction or series of related transactions (including,
without limitation, any reorganization, merger or consolidation) that results in
the transfer of fifty percent (50%) or more of the outstanding
4
<PAGE> 5
voting power of this corporation; or (B) a sale of all or substantially all of
the assets of this corporation.
(ii) In any of such events, if the consideration
received by this corporation is other than cash, the value of such consideration
will be deemed its fair market value. Any securities shall be valued as follows:
(A) Securities not subject to investment
letter or other similar restrictions on free marketability covered by (B) below:
(1) If traded on a securities
exchange or through the Nasdaq National Market, the value shall be deemed to be
the average of the closing prices of the securities on such quotation system
over the thirty (30) day period ending three (3) days prior to the closing;
(2) If actively traded
over-the-counter, the value shall be deemed to be the average of the closing bid
or sale prices (whichever is applicable) over the thirty (30) day period ending
three (3) days prior to the closing; and
(3) If there is no active public
market, the value shall be the fair market value thereof, as mutually determined
by this corporation and the holders of at least a majority of the voting power
of all then outstanding shares of Preferred Stock.
(B) The method of valuation of securities
subject to investment letter or other restrictions on free marketability (other
than restrictions arising solely by virtue of a stockholder's status as an
affiliate or former affiliate) shall be to make an appropriate discount from the
market value determined as above in (A) (1), (2) or (3) to reflect the
approximate fair market value thereof, as mutually determined by this
corporation and the holders of at least a majority of the voting power of all
then outstanding shares of such Preferred Stock.
(iii) In the event the requirements of this
subsection 2(c) are not complied with, this corporation shall forthwith either:
(A) cause such closing to be postponed until
such time as the requirements of this Section 2 have been complied with; or
(B) cancel such transaction, in which event
the rights, preferences and privileges of the holders of the Series A Preferred
Stock, Series B Preferred Stock and Series C 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 subsection 2(c)(iv) hereof.
5
<PAGE> 6
(iv) This corporation shall give each holder of
record of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock written notice of such impending transaction not later than
twenty (20) days prior to the stockholders' meeting called to approve such
transaction, if any, 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 2, and this corporation shall thereafter give such
holders prompt notice of any material changes. The transaction shall in no event
take place sooner than twenty (20) days after this corporation has given the
first notice provided for herein or sooner than ten (10) days after this
corporation has given notice of any material changes provided for herein;
provided, however, that such periods may be shortened upon the written consent
of the holders of 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 then outstanding shares of such Preferred Stock.
3. Redemption. The Series A Preferred Stock, the Series B
Preferred Stock and the Series C Preferred Stock are not redeemable.
4. Conversion. The holders of the Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock shall have conversion
rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock shall be convertible, at
the option of the holder thereof, at any time after the date of issuance of such
share, at the office of this corporation or any transfer agent for such stock,
into such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing (i) with respect to the Series A Preferred Stock, the
Original Series A Issue Price by the Conversion Price applicable to such share,
determined as hereafter provided, in effect on the date the certificate is
surrendered for conversion, (ii) with respect to the Series B Preferred Stock,
the Original Series B Issue Price by the Conversion Price applicable to such
share, determined as hereafter provided, in effect on the date the certificate
is surrendered for conversion and (iii) with respect to the Series C Preferred
Stock, the Original Series C Issue Price by the Conversion Price applicable to
such share, determined as hereafter provided, in effect on the date the
certificate is surrendered for conversion. The initial Conversion Price per
share for shares of Series A Preferred Stock shall be the Original Series A
Issue Price, the initial Conversion Price per share for shares of Series B
Preferred Stock shall be the Original Series B Issue Price and the initial
Conversion Price per share for shares of Series C Preferred Stock shall be the
Original Series C Issue Price; provided, however, that the Conversion Price for
each of the Series A Preferred Stock, the Series B Preferred Stock and the
Series C Preferred Stock shall be subject to adjustment as set forth in
subsection 4(d).
6
<PAGE> 7
(b) Automatic Conversion. Each share of Series A Preferred
Stock, the Series B Preferred Stock and the Series C Preferred Stock shall
automatically be converted into shares of Common Stock at the Conversion Price
at the time in effect for such series of Preferred Stock immediately upon the
earlier of (i) this corporation's sale of its Common Stock in a firm commitment
underwritten public offering pursuant to a registration statement on Form S-1 or
Form SB-2 under the Securities Act of 1933, as amended, the public offering
price of which was not less than $7.60 per share (adjusted to reflect subsequent
stock dividends, stock splits or recapitalizations) and the aggregate offering
proceeds of which were not less than $30,000,000 (before deducting underwriters'
discounts, commissions and expenses), and (ii) with respect to the Series A
Preferred Stock, the date specified by written consent or agreement of the
holders of a majority of the then outstanding shares of Series A Preferred
Stock, with respect to the Series B Preferred Stock, the date specified by
written consent or agreement of the holders of a majority of the then
outstanding shares of Series B Preferred Stock, and with respect to the Series C
Preferred Stock, the date specified by written consent or agreement of the
holders of a majority of the then outstanding shares of Series C Preferred
Stock.
(c) Mechanics of Conversion. Before any holder of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock shall be
entitled to convert the same into shares of Common Stock, he or she shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of this corporation or of any transfer agent for the Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock, as applicable, and shall
give written notice to this corporation at its principal corporate office of the
election to convert the same and shall state therein the name or names in which
the certificate or certificates for shares of Common Stock are to be issued.
This corporation shall, as soon as practicable thereafter, issue and deliver at
such office to such holder of Series A Preferred Stock, Series B Preferred Stock
or Series C Preferred Stock, or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of the shares of Series A Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock to be converted, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock as of such date. If the conversion is in connection with an
underwritten offering of securities registered pursuant to the Securities Act of
1933, as amended, the conversion may, at the option of any holder tendering
Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock
for conversion, be conditioned upon the closing with the underwriters of the
sale of securities pursuant to such offering, in which event the person(s)
entitled to receive the Common Stock upon conversion of the Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock shall not be deemed
to have converted such Series A Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock until immediately prior to the closing of such sale of
securities.
7
<PAGE> 8
(d) Conversion Price Adjustments of Preferred Stock for Splits
and Combinations. The Conversion Price of the Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock shall be subject to adjustment from
time to time as follows:
(i) (A) If this corporation shall issue, after
the date upon which any shares of Series A Preferred Stock, Series B Preferred
Stock or Series C Preferred Stock were first issued (the "Purchase Date"), any
Additional Stock (as defined below) without consideration or for a consideration
per share less than the Conversion Price for such series in effect immediately
prior to the issuance of such Additional Stock, the Conversion Price for such
series in effect immediately prior to each such issuance shall forthwith (except
as otherwise provided in this clause (i)) be adjusted to a price determined by
multiplying the Conversion Price for such series by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issuance (including shares of Common Stock deemed to be issued
pursuant to subsection 4(d)(i)(E)(1) or (2)) plus the number of shares of Common
Stock that the aggregate consideration received by this corporation for such
issuance would purchase at such Conversion Price; and the denominator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such issuance (including shares of Common Stock deemed to be issued pursuant to
subsection 4(d)(i)(E)(1) or (2)) plus the number of shares of such Additional
Stock.
(B) No adjustment of the Conversion Price
for the Series A Preferred Stock, the Series B Preferred Stock or the Series C
Preferred Stock shall be made in an amount less than one cent per share,
provided that any adjustments that are not required to be made by reason of this
sentence shall be carried forward and shall be either taken into account in any
subsequent adjustment made prior to three (3) years from the date of the event
giving rise to the adjustment being carried forward, or shall be made at the end
of three (3) years from the date of the event giving rise to the adjustment
being carried forward. Except to the limited extent provided for in subsections
(E)(3) and (E)(4), no adjustment of such Conversion Price pursuant to this
subsection 4(d)(i) shall have the effect of increasing the Conversion Price
above the Conversion Price in effect immediately prior to such adjustment.
(C) In the case of the issuance of Common
Stock for cash, the consideration shall be deemed to be the amount of cash paid
therefor before deducting any reasonable discounts, commissions or other
expenses allowed, paid or incurred by this corporation for any underwriting or
otherwise in connection with the issuance and sale thereof.
(D) In the case of the issuance of the
Common Stock for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair value thereof as
determined by the Board of Directors irrespective of any accounting treatment.
(E) In the case of the issuance (whether
before, on or after the applicable Purchase Date) of options to purchase or
rights to subscribe for Common Stock, securities by their terms convertible into
or exchangeable for Common Stock or options to purchase or rights to subscribe
for such convertible or exchangeable securities, the following provisions shall
apply for all purposes of this subsection 4(d)(i) and subsection 4(d)(ii).
(1) The aggregate maximum number of
shares of Common Stock deliverable upon exercise (assuming the satisfaction of
any conditions to
8
<PAGE> 9
exercisability, including without limitation, the passage of time, but without
taking into account potential antidilution adjustments) of such options to
purchase or rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a consideration
equal to the consideration (determined in the manner provided in subsections
4(d)(i)(C) and (d)(i)(D)), if any, received by the corporation upon the issuance
of such options or rights plus the minimum exercise price provided in such
options or rights (without taking into account potential antidilution
adjustments) for the Common Stock covered thereby.
(2) The aggregate maximum number of
shares of Common Stock deliverable upon conversion of or in exchange (assuming
the satisfaction of any conditions to convertibility or exchangeability,
including, without limitation, the passage of time, but without taking into
account potential antidilution adjustments) for any such convertible or
exchangeable securities or upon the exercise of options to purchase or rights to
subscribe for such convertible or exchangeable securities and subsequent
conversion or exchange thereof shall be deemed to have been issued at the time
such securities were issued or such options or rights were issued and for a
consideration equal to the consideration, if any, received by the corporation
for any such securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus the minimum
additional consideration, if any, to be received by the corporation (without
taking into account potential antidilution adjustments) upon the conversion or
exchange of such securities or the exercise of any related options or rights
(the consideration in each case to be determined in the manner provided in
subsections 4(d)(i)(C) and (d)(i)(D)).
(3) In the event of any change in
the number of shares of Common Stock deliverable or in the consideration payable
to this corporation upon exercise of such options or rights or upon conversion
of or in exchange for such convertible or exchangeable securities, including,
but not limited to, a change resulting from the antidilution provisions thereof
(unless such options or rights or convertible or exchangeable securities were
merely deemed to be included in the numerator and denominator for purposes of
determining the number of shares of Common Stock outstanding for purposes of
subsection 4(d)(i)(A)), the Conversion Price of the Series A Preferred Stock,
the Conversion Price of the Series B Preferred Stock and the Conversion Price of
the Series C Preferred Stock, to the extent in any way affected by or computed
using such options, rights or securities, shall be recomputed to reflect such
change, but no further adjustment shall be made for the actual issuance of
Common Stock or any payment of such consideration upon the exercise of any such
options or rights or the conversion or exchange of such securities.
(4) Upon the expiration of any such
options or rights, the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such convertible or
exchangeable securities, the Conversion Price of the Series A Preferred Stock,
the Conversion Price of the Series B Preferred Stock and the Conversion Price of
the Series C Preferred Stock, to the extent in any way affected by or
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computed using such options, rights or securities or options or rights related
to such securities (unless such options or rights were merely deemed to be
included in the numerator and denominator for purposes of determining the number
of shares of Common Stock outstanding for purposes of subsection 4(d)(i)(A)),
shall be recomputed to reflect the issuance of only the number of shares of
Common Stock (and convertible or exchangeable securities that remain in effect)
actually issued upon the exercise of such options or rights, upon the conversion
or exchange of such securities or upon the exercise of the options or rights
related to such securities.
(5) The number of shares of Common
Stock deemed issued and the consideration deemed paid therefor pursuant to
subsections 4(d)(i)(E)(1) and (2) shall be appropriately adjusted to reflect any
change, termination or expiration of the type described in either subsection
4(d)(i)(E)(3) or (4).
(ii) "Additional Stock" shall mean any shares of
Common Stock issued (or deemed to have been issued pursuant to subsection
4(d)(i)(E)) by this corporation after the applicable Purchase Date other than
(A) Common Stock issuable or issued pursuant
to a transaction described in subsection 4(d)(iii) hereof; or
(B) shares of Common Stock issuable or
issued to employees, consultants or directors of this corporation directly or
pursuant to a stock incentive plan or restricted stock plan approved by the
Board of Directors of this corporation;
(C) shares of Common Stock issuable or
issued in a firm commitment underwritten public offering before or in connection
with which all outstanding shares of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock will be automatically converted to
Common Stock;
(D) shares of Common Stock issuable or
issued upon conversion of the Series A Preferred Stock, the Series B Preferred
Stock or the Series C Preferred Stock or as dividends or distributions on the
Series A Preferred Stock, the Series B Preferred Stock or the Series C Preferred
Stock; or
(E) shares of Common Stock issuable or
issued upon exercise of warrants issued to banks or equipment lessors, which
warrants were approved by the Board of Directors.
(iii) In the event this corporation should at any
time or from time to time after the applicable Purchase Date fix a record date
for the effectuation of a split or subdivision of the outstanding shares of
Common Stock or the determination of holders of Common Stock entitled to receive
a dividend or other distribution payable in additional shares of Common Stock or
other securities or rights convertible into, or entitling the holder
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thereof to receive directly or indirectly, additional shares of Common Stock
(hereinafter referred to as "Common Stock Equivalents") without payment of any
consideration by such holder for the additional shares of Common Stock or the
Common Stock Equivalents (including the additional shares of Common Stock
issuable upon conversion or exercise thereof), then, as of such record date (or
the date of such dividend distribution, split or subdivision if no record date
is fixed), the Conversion Price of the Series A Preferred Stock, the Conversion
Price of the Series B Preferred Stock and the Conversion Price of the Series C
Preferred Stock shall be appropriately decreased so that the number of shares of
Common Stock issuable on conversion of each share of such series shall be
increased in proportion to such increase of the aggregate of shares of Common
Stock outstanding and those issuable with respect to such Common Stock
Equivalents.
(iv) If the number of shares of Common Stock
outstanding at any time after the applicable Purchase Date is decreased by a
combination of the outstanding shares of Common Stock, then, following the
record date of such combination, the Conversion Price for the Series A Preferred
Stock, the Conversion Price of the Series B Preferred Stock and the Conversion
Price of the Series C Preferred Stock shall be appropriately increased so that
the number of shares of Common Stock issuable on conversion of each share of
such series shall be decreased in proportion to such decrease in outstanding
shares.
(e) Other Distributions. In the event this corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 4(d)(iii), then,
in each such case for the purpose of this subsection 4(e), the holders of the
Series A Preferred Stock, the Series B Preferred Stock and the Series C
Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of this corporation into which their shares of Series A Preferred Stock,
Series B Preferred Stock or the Series C Preferred Stock are convertible as of
the record date fixed for the determination of the holders of Common Stock of
this corporation entitled to receive such distribution.
(f) Recapitalizations. If at any time or from time to time
there shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4 or in Section 2) provision shall be made so that the holders of
the Series A Preferred Stock, the Series B Preferred Stock and the Series C
Preferred Stock shall thereafter be entitled to receive upon conversion of the
Series A Preferred Stock, the Series B Preferred Stock or the Series C Preferred
Stock, as applicable, the number of shares of stock or other securities or
property of this corporation or otherwise to which a holder of Common Stock
deliverable upon conversion would have been entitled on such recapitalization.
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 the
Series A Preferred Stock, the Series B Preferred Stock and the Series C
Preferred Stock after the recapitalization to the end that the provisions of
this Section 4 (including adjustment of the
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Conversion Price then in effect and the number of shares purchasable upon
conversion of the Series A Preferred Stock, Series B Preferred Stock and the
Series C Preferred Stock) shall be applicable after that event as nearly
equivalent as may be practicable.
(g) No Impairment. This corporation will not, by amendment of
its Certificate of Incorporation or through any reorganization,
recapitalization, 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 this corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Preferred Stock, the Series B
Preferred Stock and the Series C Preferred Stock against impairment.
(h) No Fractional Shares and Certificate as to Adjustments.
(i) No fractional shares shall be issued upon the
conversion of any share or shares of the Series A Preferred Stock, the Series B
Preferred Stock or the Series C Preferred Stock, and the number of shares of
Common Stock to be issued shall be determined by rounding to the nearest whole
share. Such conversion shall be determined on the basis of the total number of
shares of Series A Preferred Stock, Series B Preferred Stock or the Series C
Preferred Stock the holder is at the time converting into Common Stock and such
rounding shall apply to the number of shares of Common Stock issuable upon such
aggregate conversion.
(ii) Upon the occurrence of each adjustment or
readjustment of the Conversion Price of Series A Preferred Stock, the Conversion
Price of the Series B Preferred Stock or the Conversion Price of the Series C
Preferred Stock pursuant to this Section 4, this corporation, at its expense,
shall promptly compute such adjustment or readjustment in accordance with the
terms hereof and prepare and furnish to each holder of Series A Preferred Stock,
Series B Preferred Stock or the Series C Preferred Stock, as applicable, a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. This corporation
shall, upon the written request at any time of any holder of Series A Preferred
Stock, Series B Preferred Stock or the Series C Preferred Stock, furnish or
cause to be furnished to such holder a like certificate setting forth (C) such
adjustment and readjustment, (D) the Conversion Price for such series of
Preferred Stock at the time in effect, and (E) the number of shares of Common
Stock and the amount, if any, of other property that at the time would be
received upon the conversion of a share of such series of Preferred Stock.
(i) Notices of Record Date. In the event of any taking by this
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 (other than a cash dividend) or
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other distribution, any right to subscribe for, purchase or otherwise acquire
any shares of stock of any class or any other securities or property, or to
receive any other right, this corporation shall mail to each holder of Series A
Preferred Stock, each holder of Series B Preferred Stock and each holder of
Series C Preferred Stock, at least twenty (20) days prior to the date specified
therein, a notice specifying the date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and the amount and
character of such dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. This
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 Series A Preferred Stock, the Series B Preferred
Stock and the Series C 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 Series A Preferred Stock, the Series B Preferred Stock
and the Series C Preferred Stock; and 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 Series A Preferred Stock, the
Series B Preferred Stock and the Series C Preferred Stock, in addition to such
other remedies as shall be available to the holder of such Series A Preferred
Stock, Series B Preferred Stock or the Series C Preferred Stock, this
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 purposes,
including, without limitation, engaging in best efforts to obtain the requisite
stockholder approval of any necessary amendment to this Certificate.
(k) Notices. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Series A Preferred Stock,
Series B Preferred Stock or the Series C Preferred Stock shall be deemed given
if deposited in the United States mail, postage prepaid, and addressed to each
holder of record at his address appearing on the books of this corporation.
5. Voting Rights.
(a) General Voting Rights. The holder of each share of Series
A Preferred Stock, the holder of each share of Series B Preferred Stock and the
holder of each share of Series C Preferred Stock shall have the right to one
vote for each share of Common Stock into which such share of Preferred Stock
could then be converted, and with respect to such vote, such holder shall have
full voting rights and powers equal to the voting rights and powers of the
holders of Common Stock, and shall be entitled, notwithstanding any provision
hereof, to notice of any stockholders' meeting in accordance with the bylaws of
this Corporation, and shall be entitled to vote, together with holders of Common
Stock, with respect to any question upon which holders of Common Stock have the
right to vote. Fractional votes shall not, however, be permitted and any
fractional voting rights available on
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an as-converted basis (after aggregating all shares into which shares of Series
A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock held by
each holder could be converted) shall be rounded to the nearest whole number
(with one-half being rounded upward).
(b) Voting for the Election of Directors. As long as 1,000,000
or more of the shares of Series A Preferred Stock originally issued remain
outstanding, the holders of such shares of Series A Preferred Stock shall be
entitled to elect two (2) directors of this corporation at each annual election
of directors. The holders of outstanding Common Stock shall be entitled to elect
two (2) directors of this corporation at each annual election of directors. As
long as 1,000,000 or more of the shares of Series B Preferred Stock originally
issued remain outstanding, the holders of Series B Preferred Stock shall be
entitled to elect one (1) director of this corporation at each annual election
of directors. The holders of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Common Stock (voting together as a single class and
not as a separate series, and on an as-converted basis) shall be entitled to
elect any remaining directors of this corporation.
In the case of any vacancy (other than a vacancy caused by removal) in
the office of a director occurring among the directors elected by the holders of
a class or series of stock pursuant to this Section 5(b), the remaining
directors so elected by that class or series may by affirmative vote of a
majority thereof (or the remaining director so elected if there be but one, or
if there are no such directors remaining, by the affirmative vote of the holders
of a majority of the shares of that class or series), elect a successor or
successors to hold office for the unexpired term of the director or directors
whose place or places shall be vacant. Any director who shall have been elected
by the holders of a class or series of stock or by any directors so elected as
provided in the immediately preceding sentence hereof may be removed during the
aforesaid term of office, either with or without cause, by, and only by, the
affirmative vote of the holders of the shares of the class or series of stock
entitled to elect such director or directors, given either at a special meeting
of such stockholders duly called for that purpose or pursuant to a written
consent of stockholders, and any vacancy thereby created may be filled by the
holders of that class or series of stock represented at the meeting or pursuant
to unanimous written consent.
6. Protective Provisions.
(a) This corporation shall not take any of the actions set
forth in this Section 6(a) without first obtaining the approval (by vote or
written consent, as provided by law) of the holders of at least seventy-five
percent (75%) of the then outstanding shares of Series A Preferred Stock (, the
Series B Preferred Stock and the Series C Preferred Stock provided that the
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
shall vote together as a single class. With respect to the actions set forth in
(a)(ii), (a)(iv), (a)(v), (a)(vi) and (a)(vii), however, only the approval of a
majority of the shares of each of the series affected (provided at least
1,000,000 shares of such series remain
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outstanding, except for Series C Preferred Stock in which case at least 575,000
shares remain outstanding) is required in the event that less than all of the
series are affected by such action of this corporation.
(i) sell, convey, or otherwise dispose of all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly-owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than
fifty percent (50%) of the voting power of this corporation is disposed of;
(ii) alter or change the rights, preferences or
privileges of the shares of Series A Preferred Stock, Series B Preferred Stock
or Series C Preferred Stock;
(iii) increase or decrease (other than by redemption
or conversion) the total number of authorized shares of Common Stock Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock;
(iv) authorize or issue, or obligate itself to issue,
any other equity security, including any other security convertible into or
exercisable for any equity security, having a preference over, or being on a
parity with, the Series A Preferred Stock, the Series B Preferred Stock or the
Series C Preferred Stock with respect to voting, dividends or upon liquidation;
(v) make a repurchase of any shares held by an
employee or stockholder that would cause the shares of Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock to lose their status as
"qualified small business stock" within the meaning of Section 1202 of the
Internal Revenue Code of 1986, as amended;
(vi) declare or pay any dividends on its Common Stock
or redeem, purchase or otherwise acquire (or pay into or set aside for a sinking
fund for such purpose) any share or shares of Preferred Stock or Common Stock;
provided, however, that this restriction shall not apply to the repurchase of
shares of Common Stock from employees, officers, directors, consultants or other
persons performing services for this corporation or any subsidiary pursuant to
agreements under which this corporation has the option to repurchase such shares
at cost or at cost upon the occurrence of certain events, such as the
termination of employment;
(vii) amend or waive any provision of this
corporation's Certificate of Incorporation or Bylaws affecting the Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock; or
(b) In addition, unless unanimously approved by the Board of
Directors of this corporation, this corporation shall not take any of the
following actions without first obtaining the approval (by vote or written
consent, as provided by law) of the
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holders of at least a majority of the then outstanding shares of Series A
Preferred Stock (so long as at least 1,000,000 shares of such series remain
outstanding) and the holders of at least a majority of the then outstanding
shares of Series B Preferred Stock (so long as at least 1,000,000 shares of such
series remain outstanding) and the holders of at least a majority of the then
outstanding shares of Series C Preferred Stock (so long as at least 575,000
shares of such series remain outstanding) (provided that the Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock shall vote together
as a single class so long as at least 1,000,000 shares of each such series
remain outstanding, in the case of Series A and Series B Preferred Stock, and in
the case of Series C Preferred Stock at least 575,000 shares remain
outstanding):
(i) make any loans or advances to its employees or
any members of their immediate families, other than travel advances and other
advances made in the ordinary course of business or loans to employees made
pursuant to promissory notes issued for the purchase of shares under a stock
option plan or restricted stock plan approved by the Board of Directors of this
corporation;
(ii) guarantee any indebtedness or obligation of any
other party other than in the ordinary course of business;
(iii) create or suffer to be imposed any lien,
mortgage, security interest or other charge on or against all or substantially
all of the properties or assets of this corporation or any subsidiary; or
(iv) acquire, or permit any subsidiary to acquire,
any stock or other securities of any corporation, partnership or entity unless
immediately following such acquisition such corporation, partnership or entity
would be wholly owned by this corporation or a subsidiary of this corporation.
7. Status of Converted Stock. In the event any shares of
Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock
shall be converted pursuant to Section 4 hereof, the shares so converted shall
be canceled and shall not be issuable by this corporation. The Certificate of
Incorporation of this corporation shall be appropriately amended to effect the
corresponding reduction in this corporation's authorized capital stock.
C. Common Stock.
1. Dividend Rights. Subject to the prior rights of holders of
all classes of stock at the time outstanding having prior rights as to
dividends, the holders of the Common Stock shall be entitled to receive, when
and as declared by the Board of Directors, out of any assets of this corporation
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors.
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2. Liquidation Rights. Upon the liquidation, dissolution or
winding up of this corporation, the assets of this corporation shall be
distributed as provided in Section 2 of Division (B) of this Article IV hereof.
3. Redemption. The Common Stock is not redeemable.
4. Voting Rights. The holder of each share of Common Stock
shall have the right to one vote, and shall be entitled to notice of any
stockholders' meeting in accordance with the bylaws of this corporation, and
shall be entitled to vote upon such matters and in such manner as may be
provided by law.
ARTICLE V
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors is expressly authorized to make, repeal, alter, amend and rescind
any or all of the Bylaws of this corporation.
ARTICLE VI
The number of directors of this corporation shall be fixed from time to
time by a bylaw or amendment thereof duly adopted by the stockholders.
ARTICLE VII
Elections of directors need not be by written ballot unless the Bylaws
of this corporation shall so provide.
ARTICLE VIII
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of this corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of this corporation.
ARTICLE IX
A director of this corporation shall, to the full extent permitted by
the Delaware General Corporation Law as it now exists or as it may hereafter be
amended, not be liable to this corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director. Neither any amendment nor
repeal of this Article IX, nor the adoption of any provision of this Amended and
Restated Certificate of Incorporation inconsistent with this Article IX, shall
eliminate or reduce the effect of this Article IX in respect of any matter
occurring, or any cause of action, suit or claim that, but for this Article IX,
would accrue or arise, prior to such amendment, repeal or adoption of an
inconsistent provision.
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ARTICLE X
This corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
ARTICLE XI
To the fullest extent permitted by applicable law, this corporation is
authorized to provide indemnification of (and advancement of expenses to) agents
of this corporation (and any other persons to which General Corporation Law
permits this corporation to provide indemnification) through bylaw provisions,
agreements with such agents or other persons, vote of stockholders or
disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the General Corporation Law,
subject only to limits created by applicable General Corporation Law (statutory
or non-statutory), with respect to actions for breach of duty to this
corporation, its stockholders, and others.
Any amendment, repeal or modification of the foregoing provisions of this
Article XI shall not adversely affect any right or protection of a director,
officer, agent, or other person existing at the time of, or increase the
liability of any director of this corporation with respect to any acts or
omissions of such director, officer or agent occurring prior to, such amendment,
repeal or modification.
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This Second Amended and Restated Certificate of Incorporation has been
signed by the President of this corporation on December __, 1999.
------------------------------------
Gary N. Fielland,
Chief Executive Officer
19
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<PAGE> 1
EXHIBIT 3.3
EXHIBIT C
BYLAWS OF
OF
WEBRIDGE, INC.
ARTICLE I
Stockholders
Section 1.1 Annual Meetings. An annual meeting of stockholders shall be
held for the election of directors at such date, time and place, either within
or without the State of Delaware, as may be designated by resolution of the
Board of Directors from time to time.
Section 1.2. Special Meetings. Special meetings of stockholders for any
purpose or purposes may be called at any time by the Board of Directors, or by a
committee of the Board of Directors that has been duly designated by the Board
of Directors and whose powers and authority, as expressly provided in a
resolution of the Board of Directors, include the power to call such meetings,
but such special meetings may not be called by any other person or persons.
Section 1.3. Notice of Meetings. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given that shall state the place, date and hour of the meeting and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called. Unless otherwise provided by law, the certificate of incorporation or
these bylaws, the written notice of any meeting shall be given not less than ten
nor more than sixty days before the date of the meeting to each stockholder
entitled to vote at such meeting. If mailed, such notice shall be deemed to be
given when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation.
Section 1.4. Adjournments. Any meeting of stockholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such 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 days, or if after the adjournment a new record date is fixed
for the adjourned meeting, notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 1.5. Quorum. Except as otherwise provided by law, the certificate of
incorporation or these bylaws, at each meeting of stockholders the presence in
person or by proxy of the holders of shares of stock having a majority of the
votes which could be cast by the holders of all outstanding shares of stock
entitled to vote at the meeting shall be necessary and sufficient to constitute
a quorum. In the absence of a quorum, the stockholders so present may, by
majority vote, adjourn the meeting from time to time in the manner provided in
Section 1.4 of these bylaws
<PAGE> 2
until a quorum shall attend. Shares of its own stock belonging to the
corporation or to another corporation, if a majority of the shares entitled to
vote in the election of directors of such other corporation is held, directly or
indirectly, by the corporation, shall neither be entitled to vote nor be counted
for quorum purposes; provided, however, that the foregoing shall not limit the
right of the corporation to vote stock, including but not limited to its own
stock, held by it in a fiduciary capacity.
Section 1.6. Organization. Meetings of stockholders shall be presided
over by the Chairman of the Board, if any, or in his absence by the Vice
Chairman of the Board, if any, or in his absence by the President, or in his
absence by a Vice President, or in the absence of the foregoing persons by a
chairman designated by the Board of Directors, or in the absence of such
designation by a chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting. The chairman of the
meeting shall announce at the meeting of stockholders the date and time of the
opening and the closing of the polls for each matter upon which the stockholders
will vote.
Section 1.7. Voting; Proxies. Except as otherwise provided by the
certificate of incorporation, each stockholder entitled to vote at any meeting
of stockholders shall be entitled to one vote for each share of stock held by
him which has voting power upon the matter in question. Each stockholder
entitled to vote at a meeting of stockholders or to express consent or dissent
to corporate action in writing without a meeting may authorize another person or
persons to act for him by proxy, but no such proxy shall be voted or acted upon
after three years from its date unless the proxy provides for a longer period. A
proxy shall be irrevocable if it states that it is irrevocable and if, and only
as long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A stockholder may revoke any proxy which is not irrevocable
by attending the meeting and voting in person or by filing an instrument in
writing revoking the proxy or by delivering a proxy in accordance with
applicable law bearing a later date to the Secretary of the corporation. Voting
at meetings of stockholders need not be by written ballot and, unless otherwise
required by law, need not be conducted by inspectors of election unless so
determined by the holders of shares of stock having a majority of the votes
which could be cast by the holders of all outstanding shares of stock entitled
to vote thereon which are present in person or by proxy at such meeting. At all
meetings of stockholders for the election of directors a plurality of the votes
cast shall be sufficient to elect. All other elections and questions shall,
unless otherwise provided by law, the certificate of incorporation or these
bylaws, be decided by the vote of the holders of shares of stock having a
majority of the votes which could be cast by the holders of all shares of stock
outstanding and entitled to vote thereon.
Section 1.8. Fixing Date for Determination of Stockholders of Record. 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, or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange
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of stock or for the purpose of any other lawful action, 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 record date: (1) in the case of determination of stockholders entitled to
vote at any meeting of stockholders or adjournment thereof, shall, unless
otherwise required by law, not be more than sixty nor less than ten days before
the date of such meeting; (2) in the case of determination of stockholders
entitled to express consent to corporate action in writing without a meeting,
shall not be more than ten days from the date upon which the resolution fixing
the record date is adopted by the Board of Directors; and (3) in the case of any
other action, shall not be more than sixty days prior to such other action. If
no record date is fixed: (1) 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; (2) the record date for determining
stockholders entitled to express consent to corporate action in writing without
a meeting when no prior action of the Board of Directors is required by 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 in
accordance with applicable law, or, if prior action by the Board of Directors is
required by law, shall be at the close of business on the day on which the Board
of Directors adopts the resolution taking such prior action; and (3) the record
date for determining stockholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto. 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 1.9. List of Stockholders Entitled to Vote. The Secretary shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present. Upon the willful
neglect or refusal of the directors to produce such a list at any meeting for
the election of directors, they shall be ineligible for election to any office
at such meeting. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list of stockholders or
the books of the corporation, or to vote in person or by proxy at any meeting of
stockholders.
Section 1.10. Action by Consent of Stockholders. Unless otherwise
restricted by the certificate of incorporation, any action required or permitted
to 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 or
consents in writing, setting forth the action so taken, shall be signed by the
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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 and shall be
delivered (by hand or by certified or registered mail, return receipt requested)
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 minutes of
stockholders are recorded. 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.
Section 1.11. Conduct of Meetings. The Board of Directors of the
corporation may adopt by resolution such rules and regulations for the conduct
of the meeting of stockholders as it shall deem appropriate. Except to the
extent inconsistent with such rules and regulations as adopted by the Board of
Directors, the chairman of any meeting of stockholders 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 appropriate for the proper
conduct of the meeting. Such rules, regulations or procedures, whether adopted
by the Board of Directors or prescribed by the chairman of the meeting, may
include, without limitation, the following: (i) the establishment of an agenda
or order of business for the meeting; (ii) rules and procedures for maintaining
order at the meeting and the safety of those present; (iii) limitations on
attendance at or participation in the meeting to stockholders of record of the
corporation, their duly authorized and constituted proxies or such other persons
as the chairman of the meeting shall determine; (iv) restrictions on entry to
the meeting after the time fixed for the commencement thereof; and (v)
limitations on the time allotted to questions or comments by participants.
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 the rules of parliamentary procedure.
ARTICLE II
Board of Directors
Section 2.1. Number; Qualifications. The Board of Directors shall consist
of seven members. Directors need not be stockholders.
Section 2.2. Election; Resignation; Removal; Vacancies. The Board of
Directors shall initially consist of the persons named as directors by the
incorporator, and each director so elected shall hold office until the first
annual meeting of stockholders or until his successor is elected and qualified.
At the first annual meeting of stockholders and at each annual meeting
thereafter, the stockholders shall elect directors each of whom shall hold
office for a term of one year or until his successor is elected and qualified.
Any director may resign at any time upon written notice to the corporation. Any
newly created directorship or any vacancy occurring in the Board of Directors
for any cause may be filled by a majority of the remaining members of the Board
of Directors, although such majority is less than a quorum, or by a plurality of
the votes cast at a
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meeting of stockholders, and each director so elected shall hold office until
the expiration of the term of office of the director whom he has replaced or
until his successor is elected and qualified.
Section 2.3. Regular Meetings. Regular meetings of the Board of
Directors may be held at such places within or without the State of Delaware and
at such times as the Board of Directors may from time to time determine, and if
so determined notices thereof need not be given.
Section 2.4. Special Meetings. Special meetings of the Board of
Directors may be held at any time or place within or without the State of
Delaware whenever called by the President, any Vice President, the Secretary, or
by any member of the Board of Directors. Notice of a special meeting of the
Board of Directors shall be given by the person or persons calling the meeting
at least twenty-four hours before the special meeting.
Section 2.5. Telephonic Meetings Permitted. Members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting thereof 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 pursuant to this
bylaw shall constitute presence in person at such meeting.
Section 2.6. Quorum: Vote Required for Action. At all meetings of the
Board of Directors a majority of the whole Board of Directors shall constitute a
quorum for the transaction of business; provided, however, that if the number of
directors is three or less, a quorum shall consist of all directors. Except in
cases in which the certificate of incorporation or these bylaws otherwise
provide, the vote of a majority of the directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors.
Section 2.7. Organization. Meetings of the Board of Directors shall be
presided over by the Chairman of the Board, if any, or in his absence by the
Vice Chairman of the Board, if any, or in his absence by the President, or in
their absence by a chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting.
Section 2.8. Informal Action by Directors. 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 such committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
of Directors or such committee.
ARTICLE III
Committees
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Section 3.1. Committees. The Board of Directors may, by resolution passed
by a majority of the whole Board of Directors, designate one or more committees,
each committee to consist of one or more of the directors of the corporation.
The Board of Directors may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of the
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 place of any such absent or disqualified member. Any such committee,
to the extent permitted by law and to the extent provided in the resolution of
the Board of Directors, shall have and may exercise all the powers and authority
of the Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it.
Section 3.2. Committee Rules. Unless the Board of Directors otherwise
provides, each committee designated by the Board of Directors may make, alter
and repeal rules for the conduct of its business. In the absence of such rules
each committee shall conduct its business in the same manner as the Board of
Directors conducts its business pursuant to Article II of these bylaws.
ARTICLE IV
Officers
Section 4.1. Executive Officers; Election; Qualifications; Term of
Office; Resignation; Removal; Vacancies. The Board of Directors shall elect a
President and Secretary, and it may, if it so determines, choose a Chairman of
the Board and a Vice Chairman of the Board from among its members. The Board of
Directors may also choose one or more Vice Presidents, one or more Assistant
Secretaries, a Treasurer and one or more Assistant Treasurers. Each such officer
shall hold office until the first meeting of the Board of Directors after the
annual meeting of stockholders next succeeding his election, and until his
successor is elected and qualified or until his earlier resignation or removal.
Any officer may resign at any time upon written notice to the corporation. The
Board of Directors may remove any officer with or without cause at any time, but
such removal shall be without prejudice to the contractual rights of such
officer, if any, with the corporation. Any vacancy occurring in any office of
the corporation by death, resignation, removal or otherwise may be filled for
the unexpired portion of the term by the Board of Directors at any regular or
special meeting.
Section 4.2. President and Chief Executive Officer. Subject to such
supervisory powers, if any, as may be given by the Board of Directors to the
Chairman of the Board, if there be such an officer, 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 the officers of the corporation. He shall preside at all meetings
of the shareholders and, in the absence of the Chairman of the Board, or if
there be none, at all meetings of the Board of Directors. He shall have the
general powers and duties of management usually vested in the
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office of President of a corporation, and shall have such other powers and
duties as may be prescribed, from time to time, by the Board of Directors or the
Bylaws.
Section 4.3. Secretary. The Secretary shall keep, or cause to be kept,
at the principal executive office or such other place as the Board of Directors
may order, a book of minutes of all meetings and actions of directors,
committees of directors and shareholders, with the time and place of holding,
whether regular or special, and, if special, how authorized, the notice thereof
given, the names of those present at directors' and committee meetings, the
number of shares present or represented by proxy at shareholders' meetings, and
the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer agent or
registrar, as determined by resolution of the Board of Directors, a share
register, or a duplicate share register, showing the names of all shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates issued for the same, and the number and date of
cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the Board of Directors required by the Bylaws or by
law to be given, and shall keep the seal of the corporation, if one be adopted,
in safe custody, and shall have such other powers and perform such other duties
as may be prescribed, from time to time, by the Board of Directors or the
Bylaws.
Section 4.4. Powers and Duties of Other Executive Officers. The other
officers of the corporation shall have such powers and duties in the management
of the corporation as may be prescribed in a resolution by the Board of
Directors and, to the extent no so provided, as generally pertain to their
respective offices, subject to the control of the Board of Directors. The Board
of Directors may require any officer, agent or employee to give security for the
faithful performance of his duties.
ARTICLE V
Stock
Section 5.1. Certificates. Every holder of stock shall be entitled to
have a certificate signed by or in the name of the corporation by the Chairman
or Vice Chairman of the Board of Directors, if any, or the President or a Vice
President, and by the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary, of the corporation certifying the number of shares owned
by him in the corporation. Any of or all the signatures on the certificate may
be a facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent, or registrar before such certificate
is issued, it may be issued by the corporation with the same effect as if he
were such officer, transfer agent, or registrar at the date of issue.
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Section 5.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of
New Certificates. The corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it, alleged to have been lost,
stolen or destroyed, and the corporation may require the owner of the lost,
stolen or destroyed certificate, or his legal representative, to give the
corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
ARTICLE VI
Indemnification
Section 6.1. Right to Indemnification. The corporation shall indemnify
and hold harmless, to the fullest extent permitted by applicable law as it
presently exists or may hereafter be amended, any director or officer of the
corporation who was or is made or is threatened to be made a party or is
otherwise involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "proceeding") by reason of the fact that he,
or a person for whom he is the legal representative, is or was a director or
officer of the corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust, enterprise or nonprofit entity,
including service with respect to employee benefit plans, against all liability
and loss suffered and expenses (including attorneys' fees) reasonably incurred
by such person.
Section 6.2. Prepayment of Expenses. The corporation may, in its
discretion, pay the expenses (including attorneys' fees) incurred in defending
any proceeding in advance of its final disposition, provided, however, that the
payment of expenses incurred by a director or officer in advance of the final
disposition of the proceeding shall be made only upon receipt of an undertaking
by the director or officer to repay all amounts advanced if it should be
ultimately determined that the director or officer is not entitled to be
indemnified under this Article or otherwise.
Section 6.3. Claims. If a claim for indemnification or payment of
expenses under this Article is not paid in full within sixty days after a
written claim therefor has been received by the corporation, the claimant may
file suit to recover the unpaid amount of such claim and, if successful in whole
or in part, shall be entitled to be paid the expense of prosecuting such claim.
In any such action the corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification or payment of
expenses under applicable law.
Section 6.4. Nonexclusivity of Rights. The rights conferred on any
person by this Article VI shall not be exclusive of any other rights which such
person may have or hereafter acquire under any statute, provision of the
certificate of incorporation, these by-laws, agreement, vote of stockholders or
disinterested directors or otherwise.
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Section 6.5. Other Indemnification. The corporation's obligation, if
any, to indemnify any person who was or is serving at its request as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, enterprise or nonprofit entity shall be reduced by any amount such person
may collect as indemnification from such other corporation, partnership, joint
venture, trust, enterprise or nonprofit enterprise.
Section 6.6. Amendment or Repeal. Any repeal or modification of the
foregoing provisions of this Article VI shall not adversely affect any right or
protection hereunder of any person in respect of any act or omission occurring
prior to the time of such repeal or modification.
ARTICLE VII
Miscellaneous
Section 7.1. Fiscal Year. The fiscal year of the corporation shall be
determined by resolution of the Board of Directors.
Section 7.2. Seal. The corporate seal shall have the name of the
corporation inscribed thereon and shall be in such form as may be approved from
time to time by the Board of Directors.
Section 7.3. Waiving of Notice of Meetings of Stockholders, Directors
and Committees. Any written waiver of notice, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at nor the purpose of any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
Section 7.4. Interested Directors; Quorum. No contract or transaction
between the corporation and one or more of its directors or officers, or between
the corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose, if: (1) the material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board of Directors or committee in
good faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (2) the material facts as to his relationship or
interest as to the contract or transaction are disclosed or are known to the
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stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (3) the
contract or transaction is fair as to the corporation as of the time it is
authorized, approved or ratified, by the Board of Directors, a committee
thereof, or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
Section 7.5. Form of Records. Any records maintained by the corporation
in the regular course of its business, including its stock ledger, books of
account, and minute books, may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, microphotographs, or any other information storage
device, provided that the records so kept can be converted into clearly legible
form within a reasonable time.
Section 7.6. Amendment of By-Laws. These by-laws may be altered or
repealed, and new by-laws, made, by the Board of Directors, but the stockholders
may make additional by-laws and may alter and repeal any by-laws whether adopted
by them or otherwise.
Adopted: August 18, 1997
Amended: Effective August 25, 1997
Amended: Effective December 24, 1998
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EXHIBIT 4.2
SECOND AMENDED AND RESTATED
FIRST REFUSAL AND CO-SALE AGREEMENT
THIS SECOND AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE AGREEMENT is
made as of December 22, 1999, by and among Webridge, Inc., a Delaware
corporation (the "Company"), the founders listed on Exhibit A (each a "Founder"
and collectively the "Founders"), and the investors in the Company's Preferred
Stock listed on Exhibit A (the "Investors");
WHEREAS, the Company and certain Investors are parties to the Series A
Preferred Stock Purchase Agreement dated as of August 25, 1997 (the "Series A
Agreement"); pursuant to which the Investors have purchased shares of the
Company's Series A Preferred Stock;
WHEREAS, the Company and certain Investors are parties to the Series B
Preferred Stock Purchase Agreement dated as of December 24, 1998 (the "Series B
Agreement"); pursuant to which the Investors have purchased shares of the
Company's Series B Preferred Stock;
WHEREAS, the Company and certain Investors are parties to the Series C
Preferred Stock Purchase Agreement of even date herewith (the "Series C
Agreement"), pursuant to which those Investors are purchasing shares of the
Company's Series C Preferred Stock (the Series A Preferred Stock, the Series B
Preferred Stock and the Series C Preferred Stock are referred to collectively
herein as the "Preferred Stock");
WHEREAS, the Company and certain Investors and the Founders are parties
to a First Refusal and Co-Sale Agreement dated as of August 25, 1997 that was
amended by the Amended and Restated First Refusal and Co-Sale Agreement dated
December 24, 1998 (the "Prior Agreement"), and wish to amend and restate the
Prior Agreement in its entirety;
WHEREAS, the Founders are the beneficial owners of the number of shares
of Common Stock and Preferred Stock of the Company set forth opposite their
names on Exhibit A (the "Stock," which term shall also include any additional
shares of Common Stock and/or Preferred Stock of the Company, or securities
convertible into or exchangeable for such shares, now owned or hereafter
acquired by the Founders); and
WHEREAS, the Founders wish to provide a further inducement to the
Investors to purchase shares of the Company's Series C Preferred Stock pursuant
to the terms of the Series C Agreement;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
ARTICLE I
RIGHT OF FIRST REFUSAL
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1.1 Grant. The Company and the Investors are hereby each granted a right
of first refusal with respect to any proposed disposition of Stock by the
Founders (or any permitted transferee of the Stock under paragraph 3.1 hereof,
hereafter collectively included in all references to "Founders"), in the
following order of priority: The Company shall have the first right to purchase
any Stock proposed to be transferred to a third party by the Founders. In the
event the Company elects not to exercise its first refusal rights with respect
to all or any portion of such proposed transfer, the Company agrees to waive
such rights with respect to such portion in favor of the Investors' first
refusal and co-sale rights under this Agreement.
1.2 Notice of Intended Disposition. In the event a Founder desires to
accept a bona fide third-party offer for the transfer of any or all of the Stock
(such Founder to be hereafter called the "Selling Founder" and the shares
subject to such offer to be hereafter called the "Target Shares"), the Selling
Founder shall promptly deliver to the Company and the Investors written notice
of the intended disposition ("Disposition Notice") and the basic terms and
conditions thereof, including the identity of the proposed purchaser.
1.3 Exercise of Right by Company. The Company shall, for a period of
fifteen (15) days following receipt of the Disposition Notice, have the right to
repurchase all or any portion of the Target Shares upon the same terms and
conditions specified in the Disposition Notice, subject to the following
conditions. Such right shall be exercisable by written notice (the "Exercise
Notice") delivered to the Selling Founder and the Investors prior to the
expiration of the fifteen (15) day exercise period. If such right is exercised
with respect to all the Target Shares specified in the Disposition Notice, then
the Company shall effect the repurchase of such Target Shares, including payment
of the purchase price, not more than five (5) business days after the delivery
of the Exercise Notice. At such time, the Selling Founder shall deliver to the
Company the certificates representing the Target Shares to be repurchased, each
certificate to be properly endorsed for transfer. Alternatively, if such right
is exercised with respect to only a portion of the Target Shares specified in
the Disposition Notice, the Company shall notify the Investors of its intent to
repurchase only a portion of the Target Shares within the fifteen (15) day
exercise period above defined. The Company's repurchase of such Target Shares
shall be consummated at the time of the Investors' exercise of its repurchase
rights in accordance with paragraph 1.5 herein. In the event the Investors do
not elect to repurchase any of the remaining Target Shares, the Company's
repurchase of that portion of the Target Shares that the Company desires to
repurchase shall be consummated not more than five (5) business days after date
of expiration of the Investors' first refusal right.
Should the purchase price specified in the Disposition Notice be payable
in property other than cash or evidences of indebtedness, the Company shall have
the right to pay the purchase price in the form of cash equal in amount to the
value of such property. If the Selling Founder and the Company cannot agree on
such cash value within ten (10) days after the Company's receipt of the
Disposition Notice, the valuation shall be made by an appraiser of recognized
standing selected by the Selling Founder and the Company or, if they cannot
agree on an appraiser within twenty (20) days after the Company's receipt of the
Disposition Notice, each shall select an appraiser of recognized standing and
the two appraisers shall designate a third appraiser of recognized standing,
whose appraisal shall be determinative of such value. The cost of such appraisal
shall be shared equally by the Selling Founder and the Company.
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The closing shall then be held on the later of (i) the fifth business day
following the delivery of the Exercise Notice, or (ii) the fifth business day
after such cash valuation shall have been made.
1.4 Non-Exercise of Right. In the event the Exercise Notice is not given
by the Company to the Selling Founder and the Investors within fifteen (15) days
following the date of the Company's receipt of the Disposition Notice, the
Company shall be deemed to have waived its right of first refusal.
1.5 Exercise of Right by the Investors. Subject to the rights of the
Company, the Investors shall, for a period of the shorter of (i) thirty (30)
days from receipt of the Disposition Notice or (ii) fifteen (15) days from
receipt of written notice of the Company's election either to waive its right of
first refusal or to repurchase only a portion of the Target Shares have the
right to purchase all, or any portion of the remaining balance after the
Company's repurchase, of the Target Shares, upon the terms and conditions
specified in the Disposition Notice. The Investors shall exercise this right of
first refusal in the same manner and subject to the same rights and conditions
as the Company, as more specifically set forth in paragraph 1.3 above. To the
extent that the Target Shares need to be allocated among the Investors, they
shall be allocated based on the holdings of Common Stock (assuming the
conversion of all outstanding shares of Preferred Stock) of each Investor that
desires to exercise the right of first refusal.
1.6 Non-Exercise of Right. Subject to the Investors' co-sale rights
described in Article II below, in the event the Exercise Notice with respect to
any portion of the Target Shares is not given to the Selling Founder within
sixty (60) days following the date of the Company's and the Investors' receipt
of the Disposition Notice, the Selling Founder shall have a period of thirty
(30) days thereafter in which to sell the portion of the Target Shares that
neither the Company nor the Investors have elected to purchase upon terms and
conditions (including the purchase price) no more favorable to the third-party
transferee than those specified in the Disposition Notice. The third-party
transferee shall acquire the Target Shares free and clear of subsequent rights
of first refusal under this section. In the event the Selling Founder does not
notify the Investors or consummate the sale or disposition of the Target Shares
within the sixty (60) day period, the Company's and the Investors' first refusal
rights shall continue to be applicable to any subsequent disposition of the
Target Shares by the Selling Founder until such right lapses in accordance with
paragraph 6.1 herein.
ARTICLE II
CO-SALE RIGHTS IN SALES BY A FOUNDER
2.1 Notice of Offer. The provisions of paragraph 1.2 requiring the
Selling Founder to give notice of any intended transfer of the Stock are
incorporated in this Article.
2.2 Grant of Co-Sale Rights. If the Selling Founder proposes to enter
into a transaction regarding the sale of Common Stock, the Investors shall have
the right, exercisable upon written notice to the Selling Founder within thirty
(30) days after receipt of the Selling Founder's Disposition Notice, to
participate in such sale of the Target Stock on the same terms
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and conditions as those set forth in the Disposition Notice. To the extent the
Investors exercise such right of participation, the number of shares of Target
Stock that the Selling Founder may sell in the transaction shall be
correspondingly reduced. The right of participation of the Investors shall be
subject to the terms and conditions set forth in this Section.
(a) Each Investor shall be deemed to own the number of shares of
Common Stock that such Investor actually holds plus the number of shares of
Common Stock that are issuable upon conversion of any shares of Preferred Stock
then held by such Investor.
(b) Each Investor may sell all or any part of a number of shares
of Common Stock of the Company equal to the product obtained by multiplying (i)
the aggregate number of shares of Common Stock covered by the purchase offer by
(ii) a fraction, the numerator of which is the number of shares of Common Stock
of the Company at the time owned by such Investor and the denominator of which
is the combined number of shares of Common Stock of the Company at the time
owned by the Selling Founder and all of the Investors.
(c) Each Investor may effect its participation in the sale by
delivering to the Selling Founder for transfer to the purchase offeror one or
more certificates, properly endorsed for transfer, which represent:
(i) the number of shares of Common Stock that it elects to
sell pursuant to this paragraph 2.2; or
(ii) that number of shares of Preferred Stock that is at such
time convertible into the number of shares of Common Stock that it has elected
to sell pursuant to this paragraph 2.2; provided, however, that if the purchase
offeror objects to the delivery of Preferred Stock in lieu of Common Stock, such
Investor may convert and deliver Common Stock as provided in subparagraph (i)
above.
2.3 Payment of Proceeds. The stock certificates that the Investors
deliver to the Selling Founder pursuant to paragraph 2.2 shall be transferred by
the Selling Founder to the purchase offeror in consummation of the sale of the
Common Stock pursuant to the terms and conditions specified in the paragraph 2.1
notice to the Investors, and the Selling Founder shall promptly thereafter remit
to the Investors that portion of the sale proceeds to which the Investors are
entitled by reason of their participation in such sale.
2.4 Non-exercise. The exercise or non-exercise of the rights of the
Investors hereunder to participate in one or more sales of Common Stock made by
the Selling Founder shall not adversely affect their rights to participate in
subsequent Common Stock sales by the Selling Founder.
ARTICLE III
EXEMPT TRANSFERS
4
<PAGE> 5
3.1 Permitted Transactions. Notwithstanding the foregoing, the first
refusal rights of the Company and the Investors and the co-sale right of the
Investors shall not apply to any transfer to the ancestors, descendants,
siblings or spouse of the Selling Founder or to trusts for the benefit of such
persons; provided that the transferee shall furnish the Investors and the
Company with a written agreement to be bound by and comply with all provisions
of this Agreement. Such transferred Stock shall remain "Stock" hereunder, and
such transferee shall be treated as a "Founder" for the purposes of this
Agreement.
3.2 Company Repurchase or Public Offering. The provisions of this
Agreement shall not apply to the sale of any Stock (i) to the public pursuant to
a registration statement filed with, and declared effective by, the Securities
and Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act") or (ii) to the Company.
ARTICLE IV
PROHIBITED TRANSFERS
4.1 Grant. In the event the Selling Founder should sell any Stock of the
Company in contravention of the participation rights of the Investors under this
Agreement (a "Prohibited Transfer"), then, in addition to all other rights the
Investors may have in law or equity or by contract, the Investors shall have the
put option provided in paragraph 4.2.
4.2 Put Option. In the event of a Prohibited Transfer, the Investors
shall have the option to sell to the Selling Founder a number of shares of
Common Stock of the Company (either directly or through delivery of Preferred
Stock) equal to the number of shares that the Investors would have been entitled
to sell had such Prohibited Transfer been effected in accordance with Article II
hereof, on the following terms and conditions:
(a) The price per share at which the shares are to be sold to
the Selling Founder shall be equal to the price per share paid to the Selling
Founder by the third party purchaser or purchasers of the Selling Founder's
Stock.
(b) The Investors shall deliver to the Selling Founder, within 30
days after they have received notice from the Selling Founder or otherwise
become aware of the Prohibited Transfer, the certificate or certificates
representing shares to be sold, each certificate to be properly endorsed for
transfer.
(c) The Selling Founder shall, upon receipt of the certificates
for the repurchased shares, pay the aggregate section 4.2 purchase price
therefor, by certified check or bank draft made payable to the order of the
Investors, and shall reimburse the Investors for any additional expenses,
including legal fees and expenses, incurred in effecting such purchase and
resale.
ARTICLE V
LEGEND REQUIREMENTS
5
<PAGE> 6
5.1 Legend. Each certificate representing the Stock owned by the Founders
shall be endorsed with the following legend:
"THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN
FIRST REFUSAL AND CO-SALE AGREEMENT BY AND AMONG THE COMPANY, THE
FOUNDERS OF THE COMPANY AND THE INVESTORS IN THE PREFERRED STOCK
OF THE COMPANY. A COPY OF SUCH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICE OF THE COMPANY."
5.2 Removal. The Section 5.1 legend shall be removed upon termination of
this Agreement in accordance with the provisions of section 6.1.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.1 Termination. The rights of the Company and the Investors under this
Agreement and the correlative obligations of the Founders with respect to the
Company and the Investors shall terminate at such time as the Investors shall no
longer be the owners of any shares of capital stock of the Company. Unless
sooner terminated in accordance with the preceding sentence, this Agreement
shall terminate immediately prior to the closing of a bona fide firm commitment
underwritten public offering of the Company's Common Stock registered under the
Securities Act of 1933 on Form SB-2 or Form S-1 (or any successor form
designated by the Securities and Exchange Commission), the public offering price
of which was not less than $7.60 per share (adjusted to reflect subsequent stock
dividends, stock splits or recapitalizations), and resulted in $30,000,000 in
gross proceeds to the Company (before deducting underwriters' discounts,
commissions and expenses).
6.2 Notice. Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be deemed effectively
given upon personal delivery to the party to be notified or upon delivery by
confirmed facsimile transmission or nationally recognized overnight courier
service or upon deposit with the United States Post Office, by registered or
certified mail, postage prepaid and addressed to the party to be notified at the
address indicated for such party on the signature page hereof, or at such other
address as such party may designate by ten (10) days' advance written notice to
the other parties.
6.3 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 and interpreted in such manner as to be effective and valid
under applicable law.
6
<PAGE> 7
6.4 Waiver or Modification. Any amendment or modification of this
Agreement shall be effective only if evidenced by a written instrument executed
by (i) Founders holding a majority of the Common Stock of the Company then held
by all of the Founders, (ii) the Company and (iii) Investors holding sixty
percent (60%) of the Common Stock issuable or issued upon conversion of the
Preferred Stock of the Company then held by all Investors.
6.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware as applied in contracts among
Delaware residents entered into and performed entirely within Delaware .
6.6 Attorneys' Fees. In the event of any dispute involving the terms
hereof, the prevailing parties shall be entitled to collect legal fees and
expenses from the other party to the dispute.
6.7 Further Assurances. Each party agrees to act in accordance herewith
and not to take any action that is designed to avoid the intention hereof.
6.8 Successors and Assigns. This Agreement and the rights and obligations
of the parties hereunder shall inure to the benefit of, and be binding upon,
their respective successors, assigns and legal representatives.
6.9 Aggregation of Stock. For the purposes of determining the
availability of any rights under this Agreement, the holdings of transferees and
assignees of an individual or a partnership who are spouses, ancestors, lineal
descendants or siblings of such individual or partners or retired partners of
such partnership or partnerships affiliated with such transferring or assigning
partnership (including spouses and ancestors, lineal descendants and siblings of
such partners or spouses who acquire Common Stock by gift, will or intestate
succession) shall be aggregated together with the individual or partnership, as
the case may be, for the purpose of exercising any rights or taking any action
under this Agreement.
6.10 Conflict with Other Rights of First Refusal. Each of the Founders
has entered into a Stock Transfer Restriction Agreement with the Company, which
agreement contains a right of first refusal provision in favor of the Company.
For so long as this Agreement remains in existence, the right of first refusal
provisions contained in this Agreement shall supersede the right of first
refusal provisions contained in any other agreements. If, however, this
Agreement shall terminate, the right of first refusal provisions contained in
the other agreements shall be in full force and effect.
6.11 Prior Agreement Superseded. This Agreement is the entire
understanding of the parties about its subject matter. This Agreement supersedes
all prior or contemporaneous agreements, including without limitation the Prior
Agreement, regarding the subject matter of this Agreement, and all such prior or
contemporaneous agreements are terminated and of no further force or effect.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first indicated above.
THE COMPANY:
WEBRIDGE, INC.
By:
--------------------------------------
Gary N. Fielland
Chief Executive Officer
Address: 225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE> 9
INVESTORS:
MERITECH CAPITAL PARTNERS L.P.
By: Meritech Capital Associates L.L.C.
its General Partner
By: Meritech Management Associates L.L.C.
a managing member
By:
---------------------------------------------
Michael B. Gordon, a managing member
MERITECH CAPITAL AFFILIATES L.P.
By: Meritech Capital Associates L.L.C.
its General Partner
By: Meritech Management Associates L.L.C.
a managing member
By:
---------------------------------------------
Michael B. Gordon, a managing member
Address: 90 Middlefield Road, Suite 201
Menlo Park, CA 94025
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE> 10
INTEL CORPORATION
By:
--------------------------------------------
(signature)
Name:
------------------------------------------
Title:
-----------------------------------------
Address: 2200 Mission College Blvd.
Santa Clara, California 95052
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE> 11
MANCHESTER BRIDGE PRINCIPAL L.P.
By: Manchester Principal LLC, its General
Partner
By:
--------------------------------------------
(signature)
Name:
------------------------------------------
Title:
-----------------------------------------
Address: 411 Theodore Fremd Avenue
Rye, NY 10580
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE> 12
SEVIN ROSEN FUND V L.P.
By: SRB Associates V L.P.
Its General Partner
By:
--------------------------------------------
(signature)
Name:
------------------------------------------
Title: General Partner
SEVIN ROSEN V AFFILIATES FUND L.P.
By: SRB Associates V L.P.
Its General Partner
By:
--------------------------------------------
(signature)
Name:
------------------------------------------
Title: General Partner
SEVIN ROSEN BAYLESS MANAGEMENT COMPANY
By:
--------------------------------------------
(signature)
Name:
------------------------------------------
Title:
-----------------------------------------
Address: c/o The Sevin Rosen Funds
13455 Noel Road, Suite 1670
Dallas, Texas 75240
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE> 13
OLYMPIC VENTURE PARTNERS IV, L.P.
By: OVMC IV, L.L.C., General Partner
By:
--------------------------------------------
(signature)
Name:
------------------------------------------
Title: Member
Address: 2420 Carillon Point
Kirkland, Washington 98033
OVP IV ENTREPRENEURS FUND, L.P.
By: OVMC IV, L.L.C., General Partner
By:
--------------------------------------------
(signature)
Name:
------------------------------------------
Title: Member
Address: 2420 Carillon Point
Kirkland, Washington 98033
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE> 14
WORLDVIEW TECHNOLOGY PARTNERS I, L.P.
By: Worldview Capital I, L.P., its General Partner
By: Worldview Equity I, L.L.C., its General
Partner
By:
-------------------------------------------------
Mike Orsak, General Partner
WORLDVIEW TECHNOLOGY INTERNATIONAL I, L.P.
By: Worldview Capital I, L.P., its General Partner
By: Worldview Equity I, L.L.C., its General
Partner
By:
-------------------------------------------------
Mike Orsak, General Partner
WORLDVIEW STRATEGIC PARTNERS I, L.P.
By: Worldview Capital I, L.P., its General Partner
By: Worldview Equity I, L.L.C., its General
Partner
By:
-------------------------------------------------
Mike Orsak, General Partner
Address: 435 Tasso Street, Suite 120
Palo Alto, CA 94301
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE> 15
KAUFMAN FAMILY LLC
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
Address: 660 Madison Avenue, 15th Floor
New York, NY 10021
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE> 16
INDIVIDUAL INVESTOR:
--------------------------------------------
Gary N. Fielland
Address: 11255 NW Ridge Road
Portland, Oregon 97229
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE> 17
INDIVIDUAL INVESTOR:
------------------------------------
C. Scott Gibson
Address: 1900 Twin Points Road
Lake Oswego, Oregon 97034
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE> 18
INDIVIDUAL INVESTOR:
------------------------------------
Lary L. Evans
Address: 508 Newhall CV
Austin, Texas 78746
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE> 19
INDIVIDUAL INVESTOR:
---------------------------------------------------
William W. Lattin, as Trustee for The William and
June Lattin Revocable Living Trust
Address: The William and June Lattin Revocable
Living Trust
10911 NW Quarry Road
Portland, Oregon 97231
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE> 20
INDIVIDUAL INVESTOR:
------------------------------------
Gregory Darmohray
Address: 8350 NW Ash
Portland, OR 97229
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE> 21
INDIVIDUAL INVESTOR:
------------------------------------
Marcia Hooper
Address: 4 Claybrook Road
Dover, MA 02030
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE> 22
FOUNDER:
------------------------------------
Gary N. Fielland
Address: c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE> 23
FOUNDER:
------------------------------------
Mark S. Anastas
Address: c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE> 24
FOUNDER:
------------------------------------
Gary M. Raetz
Address: c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE> 25
FOUNDER:
------------------------------------
Jon F. Jackson
Address: c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE> 26
FOUNDER:
------------------------------------
Arun Garg
Address: c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE> 27
FOUNDER:
------------------------------------
Jeffrey J. Berkowitz
Address: c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE> 28
FOUNDER:
------------------------------------
Gary A. Whitney
Address: c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE> 29
FOUNDER:
------------------------------------
Joseph A. Hull
Address: c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE> 30
FOUNDER:
------------------------------------
Steven "Shap" Shapiro
Address: c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE> 31
FOUNDER:
------------------------------------
Peter J. Bray
Address: c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE> 32
FOUNDER:
------------------------------------
Laura M. Freeman
Address: c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE> 33
FOUNDER:
------------------------------------
Satish M. Doshi
Address: c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE> 34
FOUNDER:
------------------------------------
Steve P. Paquin
Address: c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE> 35
FOUNDER:
------------------------------------
Phillip E. Hochstetler
Address: c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE> 36
FOUNDER:
------------------------------------
Robert D. Beck
Address: c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE> 37
FOUNDER:
------------------------------------
Sylvia Giroux
Address: 6123 SW Frances
Hillsboro, OR 97124
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE> 38
EXHIBIT A
Names and Addresses of the Investors
MERITECH CAPITAL PARTNERS L.P.
MERITECH CAPITAL AFFILIATES L.P.
90 Middlefield Road, Suite 201
Menlo Park, CA 94025
INTEL CORPORATION
2200 Mission College Blvd.
Santa Clara, California 95052
MANCHESTER BRIDGE PRINCIPAL LP
411 Theodore Fremd Avenue
Rye, New York 10580
SEVIN ROSEN FUND V L.P.
SEVIN ROSEN V AFFILIATES FUND L.P.
SEVIN ROSEN BAYLESS MANAGEMENT COMPANY
13455 Noel Road, Suite 1670
Dallas, Texas 75240
OLYMPIC VENTURE PARTNERS IV, L.P.
OVP IV ENTREPRENEURS FUND, L.P.
2420 Carillon Point
Kirkland, Washington 98033
GARY N. FIELLAND
11255 NW Ridge Road
Portland, Oregon 97229
C. SCOTT GIBSON
1900 Twin Points Road
Lake Oswego, Oregon 97034
WILLIAM W. LATTIN
The William and June Lattin Revocable Living Trust
10911 NW Quarry Road
Portland, Oregon 97231
LARY EVANS
508 Newhall CV
Austin, Texas 78746
1
<PAGE> 39
WORLDVIEW TECHNOLOGY PARTNERS I, L.P.
WORLDVIEW TECHNOLOGY INTERNATIONAL I, L.P.
WORLDVIEW STRATEGIC PARTNERS I, L.P.
435 Tasso Street
Suite 120
Palo Alto, CA 94301
KAUFMAN FAMILY LLC
660 Madison Avenue, 15th Floor
New York, NY 10021
GREGORY DARMOHRAY
8350 NW Ash
Portland, OR 97229
MARCIA HOOPER
4 Claybrook Road
Dover, MA 02030
2
<PAGE> 40
<TABLE>
<CAPTION>
Shares of Shares of
Common Stock Preferred Stock
Name and Address of the Founder Held by the Founder Held by the Founder
- ------------------------------- ------------------- -------------------
<S> <C> <C>
MARK S. ANASTAS 1,099,432 0
c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
ROBERT D. BECK 803,647 0
c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
JEFFREY J. BERKOWITZ 263,042 0
c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
PETER J. BRAY 529,917 0
c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SATISH M. DOSHI 505,114 0
c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
GARY N. FIELLAND 1,099,432 127,295 Series A Preferred
c/o Webridge, Inc. 63,220 Series C
225 SW Broadway, Suite 400 Preferred
Portland, OR 97205
LAURA M. FREEMAN 506,156 0
c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
ARUN GARG 1,099,432 0
c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
PHILLIP E. HOCHSTETLER 550,114 0
c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
JOSEPH A. HULL 561,079 0
c/o Webridge, Inc.
225 SW Broadway, Suite 400
</TABLE>
3
<PAGE> 41
<TABLE>
<CAPTION>
Shares of Shares of
Common Stock Preferred Stock
Name and Address of the Founder Held by the Founder Held by the Founder
- ------------------------------- ------------------- -------------------
<S> <C> <C>
Portland, OR 97205
JON F. JACKSON 1,074,575 0
c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
STEVE P. PAQUIN 1,000,000 0
c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
GARY M. RAETZ 557,866 0
c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
STEVEN "SHAP" SHAPIRO 532,466 0
c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
GARY A. WHITNEY 554,975 0
c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SYLVIA GIROUX 263,042 0
6123 SW Frances
Hillsboro, OR 97124
</TABLE>
4
<PAGE> 1
EXHIBIT 4.3
WEBRIDGE, INC.
SECOND AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
DECEMBER 22, 1999
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C> <C>
1. Registration Rights...........................................................1
1.1 Definitions...........................................................1
1.2 Request for Registration..............................................3
1.3 Company Registration..................................................5
1.4 Obligations of the Company............................................5
1.5 Furnish Information...................................................6
1.6 Expenses of Demand Registration.......................................6
1.7 Expenses of Company Registration......................................7
1.8 Underwriting Requirements.............................................7
1.9 Delay of Registration.................................................8
1.11 Reports Under Securities Exchange Act of 1934.........................9
1.12 Form S-3 Registration.................................................10
1.13 Assignment of Registration Rights....................................11
1.14 "Market Stand-Off" Agreement..........................................11
1.15 Termination of Registration Rights...................................12
2. Covenants of the Company.....................................................12
2.1 Delivery of Financial Statements.....................................12
2.2 Inspection...........................................................13
2.3 Confidentiality, Assignment and Termination of Covenants.............13
2.4 Right of First Offer.................................................14
2.5 Board of Directors...................................................15
2.6 Section 1202 Compliance..............................................16
2.7 Indemnification Agreements...........................................16
2.8 Assignments of Rights of First Refusal...............................16
3. Miscellaneous................................................................17
3.1 Successors and Assigns...............................................17
3.2 Governing Law........................................................17
3.3 Counterparts.........................................................17
3.4 Titles and Subtitles.................................................17
3.5 Notices..............................................................17
3.6 Expenses.............................................................18
3.7 Amendments and Waivers...............................................18
3.8 Severability.........................................................18
3.9 Aggregation of Stock.................................................18
3.10 Prior Agreement Superseded...........................................18
</TABLE>
Schedule A Schedule of Investors and Founders
<PAGE> 3
AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT is made as of
December 22, 1999, by and among Webridge, Inc., a Delaware corporation (the
"Company"), and the investors and the founders of the Company listed on Schedule
A hereto (the "Investors" and the "Founders," respectively).
RECITALS
WHEREAS, the Company and certain Investors are parties to the Series A
Preferred Stock Purchase Agreement dated as of August 25, 1997 (the "Series A
Agreement");
WHEREAS, the Company and certain Investors are parties to the Series B
Preferred Stock Purchase Agreement dated as of December 24, 1998 (the "Series B
Agreement");
WHEREAS, the Company and certain Investors are parties to the Series C
Preferred Stock Purchase Agreement of even date herewith (the "Series C
Agreement");
WHEREAS, the Company, certain Investors and the Founders are parties to
an Investors' Rights Agreement dated as of August 25, 1997 that was amended by
the Amended and Restated Investors' Rights Agreement dated as of December 24,
1998 (the "Prior Agreement"); and
WHEREAS, in order to induce the Company to enter into the Series C
Agreement and to induce the Investors to invest funds in the Company pursuant to
the Series C Agreement, the Investors, the Founders and the Company hereby agree
that this Agreement shall govern the rights of the Investors and the Founders to
cause the Company to register shares of Common Stock issuable to the Investors
and certain other matters as set forth herein and shall supersede the Prior
Agreement;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights. The Company covenants and agrees as
follows:
1.1 Definitions. For purposes of this Agreement:
(a) The term "Act" means the Securities Act of 1933,
as amended.
(b) The term "Form S-3" means such form under the Act
as in effect on the date hereof or any registration form under the Act
subsequently adopted by the SEC that permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
<PAGE> 4
(c) The term "Holder" means any person owning or
having the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 1.13 hereof.
(d) The term "1934 Act" means the Securities Exchange
Act of 1934, as amended.
(e) The term "Preferred Stock" means the Series A
Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock
of the Company.
(f) The term "register," "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration statement or
document.
(g) The term "Registrable Securities" means (i) the
Common Stock issuable or issued upon conversion of the Preferred Stock (whether
currently issued or hereafter acquired), (ii) for purposes of Section 1.3 (and
other portions of this Section 1, to the extent they relate to rights or
registration under Section 1.3), the term "Registrable Securities" shall also
include shares of Common Stock of the Company held by Founders (other than
shares described in clauses (i) and (iii) of this subsection 1.1(g)) eligible
for registration pursuant to subsection 1.3(b), and (iii) any Common Stock of
the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security that is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of the shares
referenced in (i) and (ii) above; provided, however, that the term "Registrable
Securities" shall exclude in all cases any Registrable Securities sold by a
person in a transaction in which his rights under this Section 1 are not
assigned.
(h) The number of shares of "Registrable Securities
then outstanding" shall be determined by the number of shares of Common Stock
outstanding that are, and the number of shares of Common Stock issuable pursuant
to then exercisable or convertible securities that are, Registrable Securities.
(i) The term "SEC" shall mean the Securities and
Exchange Commission.
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<PAGE> 5
1.2 Request for Registration.
(a) If the Company shall receive at any time after
the earlier of (i) August 25, 2000 or (ii) twelve (12) months after the
effective date of the first registration statement for a public offering of
securities of the Company (other than a registration statement relating either
to the sale of securities to employees of the Company pursuant to a stock
option, stock purchase or similar plan or a SEC Rule 145 transaction), a written
request from either (x) the Holders of a majority of the Registrable Securities
then outstanding or (y) in the case of a request made after a registration
requested pursuant to this Section 1.2 has already been declared effective or
such registration has been terminated and the foregoing demand right has been
forfeited pursuant to Section 1.6, the Holders of at least twenty-five percent
(25%) of the Registrable Securities then outstanding, that the Company file a
registration statement under the Act covering the registration of at least
twenty percent (20%) of the Registrable Securities then outstanding and having
an aggregate offering price, net of underwriting discounts and commissions, of
at least $7,500,000, then the Company shall:
(i) within ten (10) days of the receipt
thereof, give written notice of such request to all Holders; and
(ii) effect as soon as practicable, and in
any event within one hundred twenty (120) days of the receipt of such request,
the registration under the Act of all Registrable Securities that the Holders
request to be registered, subject to the limitations of subsection 1.2(b),
within twenty (20) days of the mailing of such notice by the Company in
accordance with Section 3.5.
(b) If the Holders initiating the registration
request hereunder ("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 subsection 1.2(a)
and the Company shall include such information in the written notice referred to
in subsection 1.2(a). The underwriter will be selected by the Company and shall
be reasonably acceptable to a majority in interest of the Initiating Holders. In
such event, the right of any Holder to include his 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
(together with the Company as provided in subsection 1.4(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting. Notwithstanding any other provision of this
Section 1.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities that would otherwise be underwritten pursuant hereto, and
the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders electing to include shares in
the offering, including the Initiating Holders, in proportion (as nearly as
practicable) to the amount of Registrable Securities of the Company owned by
each Holder; provided, however, that the number of shares of Registrable
Securities
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<PAGE> 6
to be included in such underwriting shall not be reduced unless all other
securities, including securities of the Founders under subsection 1.2(e) below,
are first entirely excluded from the underwriting.
(c) Notwithstanding the foregoing, if the Company
shall furnish to Holders requesting a registration statement pursuant to this
Section 1.2, a certificate signed by the Chief Executive Officer (or, if there
is no Chief Executive Officer, the President) 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 registration
statement to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period of not more than one hundred twenty
(120) days after receipt of the request of the Initiating Holders; provided,
however, that the Company may not utilize this right more than once in any
twelve (12) month period.
(d) In addition, the Company shall not be obligated
to effect, or to take any action to effect, any registration pursuant to this
Section 1.2:
(i) After the Company has effected two
registrations pursuant to this Section 1.2 and such registrations have been
declared or ordered effective;
(ii) During the period starting with the
date sixty (60) days prior to the Company's good faith estimate of the date of
filing of, and ending on a date one hundred eighty (180) days after the
effective date of, a registration subject to Section 1.3 hereof; provided that
the Company is actively employing in good faith all reasonable efforts to cause
such registration statement to be effective; or
(iii) If the Initiating Holders propose to
dispose of shares of Registrable Securities that may be immediately registered
on Form S-3 pursuant to a request made pursuant to Section 1.12 below.
(e) In connection with a registration under this
Section 1.2, the Founders shall be entitled to include any of their shares of
Common Stock in any registration by the Company under this subsection 1.2,
provided that (A) such persons rights under this Section 1.2 shall be
subordinate to the rights of the Investors, (B) such persons who request
inclusion of their securities in such registration shall continue to serve as
employees of the Company on the effective date of such registration, and (C)
such persons agree to be bound by all other provisions of this Agreement and
participate in any such registration on the same basis as each Holder in
accordance with all applicable provisions of this Agreement.
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<PAGE> 7
1.3 Company Registration.
(a) If (but without any obligation to do so) the Company
proposes to register (including for this purpose a registration effected by the
Company pursuant to Section 1.2 on behalf of Initiating Holders and including
registration effected by the Company for stockholders other than the Holders)
any of its stock or other securities under the Act in connection with the public
offering of such securities solely for cash (other than a registration relating
solely to the sale of securities to participants in a Company stock plan or a
registration on any form that does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities), the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon the
written request of each Holder given within twenty (20) days after mailing of
such notice by the Company in accordance with Section 3.5, the Company shall,
subject to the provisions of Section 1.8, include in the registration statement
all of the Registrable Securities that each such Holder has requested to be
registered.
(b) Upon any sale by the Company of shares of its Common Stock
to the public in a firmly underwritten public offering solely for cash, the
Founders shall be entitled to include any of their shares of Common Stock in any
registration by the Company under this subsection 1.3, if (A) such persons who
choose to include any of the securities in such registration shall continue to
serve as employees of the Company on the effective date of such registration
statement, and (B) such persons agree to be bound by all other provisions of
this Agreement and participate in any such registration on the same basis as
each Holder (except as specifically set forth in Section 1.8 below) in
accordance with all applicable provisions of this Agreement.
1.4 Obligations of the Company. Whenever required under this
Section 1 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 its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for a period of up to ninety (90) days.
(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 Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
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<PAGE> 8
(d) Use its best 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 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 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) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange or nationally recognized
quotation system on which similar securities issued by the Company are then
listed.
1.5 Furnish Information.
(a) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's Registrable Securities.
(b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.12 if, due to the
operation of subsection 1.5(a), 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 subsection 1.2(a) or subsection
1.12(b)(2), whichever is applicable.
1.6 Expenses of Demand Registration. All expenses other than
underwriting discounts and commissions for any selling Holder (if other than
counsel to the Company) incurred in connection with registrations, filings or
qualifications pursuant to Section 1.2, including (without limitation) all
registration, filing and qualification fees, printers' and accounting fees, and
fees and disbursements of counsel for the Company and one special counsel for
the Selling Holders shall be borne by the Company; provided, however, that the
Company shall not be required to pay for any expenses of any registration
proceeding begun
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<PAGE> 9
pursuant to Section 1.2 if the registration request is subsequently withdrawn at
the request of the Holders of a majority of the Registrable Securities to be
registered (in which case all participating Holders shall bear such expenses),
unless the Holders of a majority of the Registrable Securities agree to forfeit
their right to one demand registration pursuant to Section 1.2; provided
further, however, that if at the time of such withdrawal, the Holders have
learned of a material adverse change in the condition, business, or prospects of
the Company from that known to the Holders at the time of their request and have
withdrawn the request with reasonable promptness following disclosure by the
Company of such material adverse change, then the Holders shall not be required
to pay any of such expenses and shall retain their rights pursuant to Section
1.2.
1.7 Expenses of Company Registration. The Company shall bear and
pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as provided
in Section 1.13), including (without limitation) all registration, filing, and
qualification fees, printers and accounting fees relating or apportionable
thereto and the fees and disbursements of counsel for the Company and one
special counsel to the Selling Holders, but excluding underwriting discounts and
commissions relating to Registrable Securities.
1.8 Underwriting Requirements. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not,
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling stockholders according to
the total amount of securities entitled to be included therein owned by each
selling stockholder or in such other proportions as shall mutually be agreed to
by such selling stockholders; provided, however, that the number of shares of
Registrable Securities to be included in such underwriting shall not be reduced
unless all other securities of selling stockholders are first entirely excluded
from the underwriting). For purposes of the preceding parenthetical concerning
apportionment, for any selling stockholder that is a holder of Registrable
Securities and that is a partnership or corporation, the affiliated
partnerships, the partners, retired partners and stockholders of such holder, or
the estates and family members of any such partners and retired partners and any
trusts for the benefit of any of the foregoing persons shall be deemed to be a
single "selling stockholder," and any pro-rata reduction with respect to such
"selling stockholder" shall be based upon the aggregate amount of shares
carrying registration rights owned by all entities and individuals included in
such "selling stockholder," as defined in this sentence.
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<PAGE> 10
1.9 Delay of Registration. 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 1.
1.10 Indemnification.
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the 1934 Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the Act,
or the 1934 Act or other federal or state securities 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"): (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 Act, the 1934 Act, any state securities law or
any rule or regulation promulgated under the Act, or the 1934 Act or any state
securities law; and the Company will pay to each such Holder, underwriter or
controlling person, as incurred, 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 subsection 1.10(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 that occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, the 1934 Act or other federal or state
securities 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 expressly for use in connection with such registration; and each such
Holder will pay, as incurred, any legal or other expenses reasonably incurred by
any person intended to be indemnified pursuant to this subsection 1.10(b), in
connection with investigating or defending
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<PAGE> 11
any such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 1.10(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, that, in no event shall any
indemnity under this subsection 1.10(b) exceed the net proceeds from the
offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 1.10 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 1.10, 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
(together with all other indemnified parties that may be represented without
conflict by one counsel) shall have the right to retain one separate 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 materially prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 1.10, 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 1.10.
(d) The obligations of the Company and Holders under this
Section 1.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.11 Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after the effective
date of the first registration statement filed by the Company for the offering
of its securities to the general public;
(b) take such action, including the voluntary registration of
its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
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<PAGE> 12
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC that permits the
selling of any such securities without registration or pursuant to such form.
1.12 Form S-3 Registration. In case the Company shall receive from
any Holder or Holders a written request or requests that the Company effect a
registration on Form S-3 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; 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 1.12: (1) if
Form S-3 is not available for such offering by the Holders; (2) if 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 (net of any
underwriters' discounts or commissions) of less than $500,000; (3) if the
Company shall furnish to the Holders a certificate signed by the President 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 one hundred twenty (120)
days after receipt of the request of the Holder or Holders under this Section
1.12; provided, however, that the Company shall not utilize this right more than
once in any twelve (12) month period; (4) if the Company has, within the six (6)
month period preceding the date of such request, already effected one (1)
registration on Form S-3 for the Holders
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pursuant to this Section 1.12; (5) if the Company has already effected a total
of six (6) registrations on Form S-3 for the Holders pursuant to this Section
1.12; or (6) 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
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 expenses incurred in connection with a
registration requested pursuant to Section 1.12, including (without limitation)
all registration, filing, qualification, printer's and accounting fees and the
reasonable fees and disbursements of counsel for the Company, but excluding any
underwriters' discounts or commissions associated with Registrable Securities
and fees and expenses of counsel for any selling Holder (if other than counsel
to the Company), shall be borne by the Company. Registrations effected pursuant
to this Section 1.12 shall not be counted as demands for registration or
registrations effected pursuant to Sections 1.2 or 1.3, respectively.
1.13 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities who (i) either acquires all of the Registrable
Securities previously held by such Holder or, after such assignment or transfer,
holds at least 500,000 shares of Registrable Securities (subject to appropriate
adjustment for stock splits, stock dividends, combinations and other
recapitalizations), the Holder retaining such registration rights with respect
to the balance of such Holder's shares, (ii) is a partnership or partner that is
affiliated with the transferring Holder that is also a partnership, (iii) a
corporation that is a majority-owned subsidiary of the transferring Holder or
controls, is controlled by or is under common control with the transferring
Holder, (iv) is a limited liability company or member or former member
affiliated with the Holder that is a limited liability company, or (v) is a
party who controls, is controlled by or is under common control with the
transferring Holder; provided (a) the Company is, within a reasonable time after
such transfer, furnished with 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; (b) such transferee or assignee agrees
in writing to be bound by and subject to the terms and conditions of this
Agreement, including without limitation the provisions of Section 1.14 below;
and (c) such assignment shall be effective only if immediately following such
transfer the further disposition of such securities by the transferee or
assignee is restricted under the Act. For the purposes of determining the number
of shares of Registrable Securities held by a transferee or assignee, the
holdings of transferees and assignees of a partnership who are partners or
retired partners of such partnership (including spouses and ancestors, lineal
descendants and siblings of such partners or spouses who acquire Registrable
Securities by gift, will or intestate succession) shall be aggregated together
and with the partnership; provided that all assignees and transferees who would
not qualify individually for assignment of registration rights shall have a
single attorney-in-fact for the purpose of exercising any rights, receiving
notices or taking any action under this Section 1.
1.14 "Market Stand-Off" Agreement. Each Investor and Founder hereby
agrees that, during the period of duration (not to exceed one hundred eighty
(180) days)
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specified by the Company and an underwriter of common stock or other securities
of the Company, following the effective date of the registration statement for
an initial public offering of the Company's securities filed under the Act, it
shall not, to the extent requested by the Company and such underwriter, directly
or indirectly sell, offer to sell, contract to sell (including, without
limitation, any short sale), grant any option to purchase or otherwise transfer
or dispose of (other than to donees who agree to be similarly bound) any
securities of the Company held by it at any time during such period, except
common stock included in such registration; provided, however, that all
officers, directors and greater than five percent (5%) stockholders of the
Company enter into similar agreements. In order to enforce the foregoing
covenant, the Company may impose stop-transfer instructions with respect to the
securities of each Investor and Founder (and the shares or securities of every
other person subject to the foregoing restriction) until the end of such period.
1.15 Termination of Registration Rights. No Holder shall be
entitled to exercise any right provided for in this Section 1 after the earlier
of (i) five (5) years following the consummation of the sale of securities
pursuant to a registration statement filed by the Company under the Act in
connection with the initial firm commitment underwritten offering of its
securities to the general public, the public offering price of which was not
less than $7.60 per share (adjusted to reflect subsequent stock dividends, stock
splits or recapitalizations), and $30,000,000 gross proceeds to the Company
(before deducting underwriters' discounts, commissions and expenses) or (ii) as
to any Holder, such time at which all Registrable Securities held by such Holder
can be sold in any three-month period without registration in compliance with
Rule 144 of the Act.
2. Covenants of the Company.
2.1 Delivery of Financial Statements. The Company shall deliver to
each Investor that holds at least 500,000 shares (as adjusted for subsequent
stock splits, stock dividends, combinations and other recapitalizations) of
Preferred Stock (or Common Stock issued upon conversion thereof) of the Company:
(a) as soon as practicable, but in any event within ninety
(90) days after the end of each fiscal year of the Company, an income statement
for such fiscal year, a balance sheet of the Company and statement of
stockholder's equity as of the end of such fiscal year, and a statement of cash
flows for such fiscal year, such year-end financial reports to be in reasonable
detail, prepared in accordance with generally accepted accounting principles
("GAAP"), and audited and certified by independent public accountants of
nationally recognized standing selected by the Company;
(b) as soon as practicable, but in any event within forty-five
(45) days after the end of each of the first three (3) quarters of each fiscal
year of the Company, an unaudited income statement for such quarter, statement
of cash flows for such quarter and an unaudited balance sheet as of the end of
such quarter;
12
<PAGE> 15
(c) within thirty (30) days of the end of each month, an
unaudited income statement and statement of cash flows for such month, and a
balance sheet for and as of the end of such month, in reasonable detail;
(d) as soon as practicable, but in any event thirty (30) days
prior to the end of each fiscal year, a budget and business plan for the next
fiscal year, prepared on a monthly basis, including balance sheets and income
statements for such months and, as soon as prepared, any other budgets or
revised budgets prepared by the Company;
(e) with respect to the financial statements called for in
subsections (b) and (c) of this Section 2.1, an instrument executed by the Chief
Financial Officer or President of the Company and certifying that such financial
statements were prepared in accordance with GAAP consistently applied with prior
practice for earlier periods (with the exception of footnotes that may be
required by GAAP) and fairly present the financial condition of the Company and
its results of operation for the period specified, subject to year-end audit
adjustment;
(f) such other information relating to the financial
condition, business, prospects or corporate affairs of the Company as the
Investor or any assignee of the Investor may from time to time request,
provided, however, that the Company shall not be obligated under this subsection
(f) or any other subsection of Section 2.1 to provide information that it deems
in good faith to be a trade secret or similar confidential information.
2.2 Inspection. The Company shall permit each Investor, at such
Investor's expense, to visit and inspect the Company's properties, to examine
its books of account and records and to discuss the Company's affairs, finances
and accounts with its officers, all at such reasonable times as may be requested
by the Investor; provided, however, that the Company shall not be obligated
pursuant to this Section 2.2 to provide access to any information that it
reasonably considers to be a trade secret or similar confidential information.
2.3 Confidentiality, Assignment and Termination of Covenants.
(a) Each Investor receiving information under the covenants
set forth in Section 2.1 and Section 2.2 hereby agrees to hold in confidence and
trust and to act in a fiduciary manner with respect to all information so
provided; provided, however, that notwithstanding the foregoing, the Investors
may include summary financial information concerning the Company and general
statements concerning the nature and progress of the Company's business in their
reports to their limited partners.
(b) The covenants set forth in Section 2.1, Section 2.2 and
Section 2.7 shall terminate as to Investors and be of no further force or effect
(i) when the sale of securities pursuant to a registration statement filed by
the Company under the Act in connection with the firm commitment underwritten
offering of its securities to the general public is consummated, the public
offering price of which was not less than $7.60 per share (adjusted to reflect
subsequent stock dividends, stock splits or recapitalizations), and $30,000,000
in gross proceeds to the Company (before deducting underwriters' discounts,
13
<PAGE> 16
commissions and expenses) or (ii) when the Company first becomes subject to the
periodic reporting requirements of Sections 12(g) or 15(d) of the 1934 Act,
whichever event shall first occur.
2.4 Right of First Offer. Subject to the terms and conditions
specified in this paragraph 2.4, the Company hereby grants to each Investor a
right of first offer to purchase its Pro Rata Share (as hereinafter defined) (in
whole or in part) with respect to future sales by the Company of its
Shares (as hereinafter defined). Each Investor shall be entitled to assign or
apportion the right of first offer hereby granted it among itself and its
partners and affiliates (including in the case of a venture capital fund other
venture capital funds affiliated with such fund) in such proportions as it deems
appropriate. For purposes of this Section 2.4, a Investor's "Pro Rata Share" of
Shares shall mean that number of Shares that equals the proportion that (x) the
number of shares of Common Stock issued and held, or issuable upon conversion of
the Preferred Stock then held, by such Investor bears to (y) the total
number of shares of Common Stock of the Company then outstanding (assuming full
conversion and exercise of all convertible or exercisable securities).
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock ("Shares"), the Company shall first make an offering of such Shares to
each Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by confirmed facsimile
transmission, certified mail or a nationally recognized overnight courier
service ("Notice") to each of the Investors stating (i) its bona fide intention
to offer such Shares, (ii) the number of such Shares to be offered, and (iii)
the price and a summary of the terms, if any, upon which it proposes to offer
such Shares.
(b) By written notification received by the Company within ten
(10) calendar days after receipt of the Notice, each Investor may elect to
purchase or obtain, at the price and on the terms specified in the Notice, up to
its Pro Rata Share of such Shares.
(c) If all Shares that the Investors are entitled to obtain
pursuant to subsection 2.4(b) are not elected to be obtained as provided in
subsection 2.4(b) hereof, the Company may, during the sixty (60)-day period
following the expiration of the period provided in subsection 2.4(b) hereof,
offer the remaining unsubscribed portion of such Shares to any person or persons
at a price not less than, and upon terms no more favorable to the offeree than
those specified in the Notice. If the Company does not enter into an agreement
for the sale of the Shares within such period, or if such agreement is not
consummated within thirty (30) days of the execution thereof, the right provided
hereunder shall be deemed to be revived and such Shares shall not be offered
unless first reoffered to the Investors in accordance herewith.
(d) The right of first offer in this Section 2.4 shall not be
applicable (i) to shares of Common Stock issuable or issued to employees,
consultants, or directors of the Company directly or pursuant to a stock option
plan, stock incentive or restricted stock plan
14
<PAGE> 17
approved by the Board of Directors, (ii) to shares of Common Stock issued or
issuable in a firm commitment underwritten public offering in connection with
which all outstanding shares of Preferred Stock will be automatically converted
to Common Stock, (iii) to shares of Common Stock issued or issuable upon
conversion of shares of Preferred Stock or as a dividend or distribution on the
shares of Preferred Stock, (iv) to securities issued or issuable to banks or
equipment lessors, provided such issuances are for other than primarily equity
financing purposes, and (v) to shares of Series C Preferred Stock issued
pursuant to the Series C Agreement.
(e) The rights provided in this Section 2.4 shall terminate as
to all Investors and be of no further force or effect (i) when the sale of
securities pursuant to a registration statement filed by the Company under the
Act in connection with the firm commitment underwritten offering of its
securities to the general public is consummated, the public offering price of
which was not less than $7.60 per share (adjusted to reflect subsequent stock
dividends, stock splits or recapitalizations), and $30,000,000 in gross proceeds
to the Company (before deducting underwriters' discounts, commissions and
expenses) or (ii) when the Company first becomes subject to the periodic
reporting requirements of Sections 12(g) or 15(d) of the 1934 Act, whichever
event shall first occur.
2.5 Board of Directors.
(a) With respect to those two (2) members of the Company's
Board of Directors that the Certificate of Incorporation provides are to be
elected by the holders of Series A Preferred Stock (the "Series A Board
Members"), the Investors hereby agree to vote all of their shares of Preferred
Stock now owned or hereafter acquired in favor of the election of one designee
of each of Sevin Rosen Fund V L.P. ("Sevin Rosen") and Olympic Venture Partners
("Olympic"), and with respect to the one member of the Company's Board of
Directors that the Certificate of Incorporation provides is to be elected by the
holders of the Series B Preferred Stock (the "Series B Board Member"), the
Investors hereby agree to vote all of their shares of Preferred Stock now owned
or hereafter acquired in favor of the election of the designee of Manchester
Bridge Principal LP (Olympic, Sevin Rosen and Manchester Bridge Principal LP
collectively, the "Venture Investors").
(b) With respect to those two (2) members of the Company's
Board of Directors that the Certificate of Incorporation provides are to be
elected by the holders of Common Stock (the "Common Board Members"), the
Founders and the Investors hereby agree to vote all of their shares of Common
Stock now owned or hereafter acquired in favor of the election of (1) the Chief
Executive Officer of the Company (or, if there is no Chief Executive Officer of
the Company, the President), and (2) a person designated by the holders of at
least a majority of the Common Stock.
(c) With respect to the remaining members of the Company's
Board of Directors that the Certificate of Incorporation provides are to be
elected by the holders of Common Stock and Preferred Stock (voting together as a
single class and on an as-converted basis) (the "Combined Board Members"), the
Founders and the Investors hereby agree to vote all of their shares of Common
Stock and Preferred Stock now owned or hereafter acquired in
15
<PAGE> 18
favor of the election of only such persons as shall be acceptable to at least
five (5) of the other members of the Board of Directors.
(d) As long as Meritech Capital Partners ("Meritech") holds at
least 575,000 shares of Series C Preferred Stock of the Company, the Company
will permit a mutually acceptable representative of Meritech to attend all
meetings of the Company's Board of Directors (the "Board") and all committees
thereof (whether in person, telephonic or other) in a non-voting, observer
capacity and shall provide to Meritech, concurrently with the members of the
Board, and in the same manner, notice of such meeting and a copy of all
materials provided to such members. The confidentiality provisions of Section
2.3 of this Agreement shall apply to all information obtained by Meritech as a
result of its rights under this section.
(e) This Section 2.5 shall terminate in its entirety and be of
no further force or effect upon the earlier to occur of (i) the sale of
securities pursuant to a registration statement filed by the Company under the
Act in connection with the firm commitment underwritten offering of its
securities to the general public is consummated, the public offering price of
which was not less than $7.60 per share (adjusted to reflect subsequent stock
dividends, stock splits or recapitalizations), and $30,000,000 in gross proceeds
to the Company (before deducting underwriting discounts, commissions and
expenses), or (ii) the date upon which the Company first becomes subject to the
periodic reporting requirements of Sections 12(g) or 15(d) of the 1934 Act.
2.6 Section 1202 Compliance. The Company shall:
(a) use its best efforts to comply with the reporting and
recordkeeping requirements of Section 1202 of the Internal Revenue Code of 1986,
as amended (the "Code"), and any regulations promulgated thereunder; and
(b) unless otherwise unanimously approved by the Board of
Directors, use its best efforts to not take any action that would cause the
Preferred Stock (or the Common Stock issuable upon conversion thereof) to lose
its status as "qualified small business stock" within the meaning of the Code.
For purposes of the foregoing, any valuation or other determination
made by the Company's Board of Directors in good faith or for which there was,
at the time made, a reasonable basis in law or fact shall be conclusive.
2.7 Indemnification Agreements. The Company shall enter into
Indemnification Agreements with the directors and executive officers of the
Company on or promptly as possible after the date hereof.
2.8 Assignments of Rights of First Refusal. So long as shares of
Preferred Stock are outstanding, the Company agrees that, as a condition to
issuing any shares of Common Stock to any employee or director of the Company
under the Company's 1996 Stock Incentive Plan, or any successor or subsequent
stock option or stock purchase plan adopted by
16
<PAGE> 19
the Company (each a "Plan"), such employee or director shall be required to
enter into an agreement with the Company that shall provide the Company, or any
assignee or assignees of the Company, with a right of first refusal to purchase
any shares that such employee or director proposes to sell or transfer to a
person other than the Company. The Company further covenants and agrees that, in
the event (i) an employee or director proposes to sell or transfer such shares
to a person other than the Company, (ii) the Company has not sold shares of the
Company's capital stock in an offering registered under the Act and (iii) the
Company has determined not to elect to exercise its right of first refusal to
purchase all of the shares that are proposed to be sold or transferred by such
employee or director (such balance of the shares not elected to be purchased by
the Company being the "Available Shares"), then the Company agrees that it shall
assign its right of first refusal to purchase the Available Shares to the
Investors by notice to the Investors made at least seven (7) business days prior
to the expiration of the Company's right of first refusal, and each Investor
shall thereafter have the right to elect to exercise such right of first refusal
to purchase its proportionate share of the Available Shares based on the number
of shares of Registrable Securities then held by such Investor bears to the
aggregate number of shares of Registrable Securities then held by all Investors
(excluding the Founders). The exercise of such right of first refusal by the
Investors shall be made subject to and in compliance with the terms applicable
to the right of first refusal in favor of the Company as set forth in the
applicable agreements used under the Plan.
3. Miscellaneous.
3.1 Successors and Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties
(including transferees of any shares of Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
3.2 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware as applied to agreements among
Delaware residents entered into and to be performed entirely within Delaware.
3.3 Counterparts. This 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.
3.4 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
delivery by confirmed facsimile transmission or nationally recognized overnight
courier service or upon deposit with the United
17
<PAGE> 20
States Post Office, by registered or certified mail, postage prepaid and
addressed to the party to be notified at the address indicated for such party on
the signature page hereof, or at such other address as such party may designate
by ten (10) days' advance written notice to the other parties.
3.6 Expenses. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
3.7 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
at least sixty percent (60%) of the Registrable Securities then outstanding
(excluding the shares held by the Founders); provided, however, that in the
event such amendment or waiver adversely affects the rights and/or obligations
of the Founders under Section 1 of this Agreement in a different manner than the
other Holders, such amendment or waiver shall also require the written consent
of holders of at least a majority of the Common Stock (assuming the conversion
of all outstanding shares of Preferred Stock) then held by the Founders then
employed by the Company.
3.8 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement, and the balance of the Agreement shall be
interpreted as if such provision were so excluded, and shall be enforceable in
accordance with its terms.
3.9 Aggregation of Stock. All shares of Registrable Securities
of the Company held or acquired by a stockholder and its Affiliates shall be
aggregated together for the purpose of determining the availability of any
rights under this Agreement. For purposes of the foregoing, the shares held by
any stockholder that (i) is a partnership or corporation shall be deemed to
include shares held by affiliated partnerships or the partners, retired partners
and stockholders of such holder or members of the "immediate family" (as defined
below) of any such partners, retired partners and stockholders, and any
custodian or trustee for the benefit of any of the foregoing persons and (ii) is
an individual shall be deemed to include shares held by any members of the
stockholder's immediate family ("immediate family" shall include any spouse,
father, mother, brother, sister, lineal descendant of spouse or lineal
descendant) or to any custodian or trustee for the benefit of any of the
foregoing persons.
3.10 Prior Agreement Superseded. This Agreement is the entire
understanding of the parties about its subject matter. This Agreement supersedes
all prior or contemporaneous agreements, including without limitation the Prior
Agreement, regarding the subject matter of this Agreement, and all such prior or
contemporaneous agreements are terminated and of no further force or effect.
18
<PAGE> 21
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
WEBRIDGE, INC.
By:
-------------------------------------
Gary N. Fielland
Chief Executive Officer
Address: 225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 22
INVESTORS:
MERITECH CAPITAL PARTNERS L.P.
By: Meritech Capital Associates L.L.C.
its General Partner
By: Meritech Management Associates L.L.C.
a managing member
By:
-------------------------------------------
Michael B. Gordon, a managing member
MERITECH CAPITAL AFFILIATES L.P.
By: Meritech Capital Associates L.L.C.
its General Partner
By: Meritech Management Associates L.L.C.
a managing member
By:
-------------------------------------------
Michael B. Gordon, a managing member
Address: 90 Middlefield Road, Suite 201
Menlo Park, CA 94025
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 23
INTEL CORPORATION
By:
---------------------------------
(signature)
Name:
-------------------------------
Title:
------------------------------
Address: 2200 Mission College Blvd.
Santa Clara, California 95052
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 24
MANCHESTER BRIDGE PRINCIPAL LP
By: Manchester Principal LLC, its
General Partner
By:
---------------------------------
(signature)
Name:
-------------------------------
Title:
------------------------------
Address: 411 Theodore Fremd Avenue
Rye, New York 10580
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 25
SEVIN ROSEN FUND V L.P.
By: SRB Associates V L.P.
Its General Partner
By:
---------------------------------
(signature)
Name:
-------------------------------
Title: General Partner
SEVIN ROSEN V AFFILIATES FUND L.P.
By: SRB Associates V L.P.
Its General Partner
By:
---------------------------------
(signature)
Name:
-------------------------------
Title: General Partner
SEVIN ROSEN BAYLESS MANAGEMENT COMPANY
By:
---------------------------------
(signature)
Name:
-------------------------------
Title:
------------------------------
Address: c/o The Sevin Rosen Funds
13455 Noel Road, Suite 1670
Dallas, Texas 75240
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 26
OLYMPIC VENTURE PARTNERS IV, L.P.
By: OVMC IV, L.L.C., General Partner
By:
---------------------------------
(signature)
Name:
-------------------------------
Title: Member
Address: 2420 Carillon Point
Kirkland, Washington 98033
OVP IV ENTREPRENEURS FUND, L.P.
By: OVMC IV, L.L.C., General Partner
By:
---------------------------------
(signature)
Name:
-------------------------------
Title: Member
Address: 2420 Carillon Point
Kirkland, Washington 98033
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 27
WORLDVIEW TECHNOLOGY PARTNERS I, L.P.
By: Worldview Capital I, L.P., its General Partner
By: Worldview Equity I, L.L.C., its General
Partner
By:
-----------------------------------------------
Mike Orsak, General Partner
WORLDVIEW TECHNOLOGY INTERNATIONAL I, L.P.
By: Worldview Capital I, L.P., its General Partner
By: Worldview Equity I, L.L.C., its General
Partner
By:
-----------------------------------------------
Mike Orsak, General Partner
WORLDVIEW STRATEGIC PARTNERS I, L.P.
By: Worldview Capital I, L.P., its General Partner
By: Worldview Equity I, L.L.C., its General
Partner
By:
-----------------------------------------------
Mike Orsak, General Partner
Address: 435 Tasso Street, Suite 120
Palo Alto, CA 94301
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 28
KAUFMAN FAMILY LLC
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Address: 660 Madison Avenue, 15th Floor
New York, NY 10021
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 29
INDIVIDUAL INVESTOR:
------------------------------------
Gary N. Fielland
Address: 11255 NW Ridge Road
Portland, Oregon 97229
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 30
INDIVIDUAL INVESTOR:
------------------------------------
Lary L. Evans
Address: 508 Newhall CV
Austin, Texas 78746
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 31
INDIVIDUAL INVESTOR:
-------------------------------------------------
William W. Lattin, as Trustee for The William and
June Lattin Revocable Living Trust
Address: The William and June Lattin Revocable
Living Trust
10911 NW Quarry Road
Portland, Oregon 97231
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 32
INDIVIDUAL INVESTOR:
------------------------------------
Gregory Darmohray
Address: 8350 NW Ash
Portland, OR 97229
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 33
INDIVIDUAL INVESTOR:
------------------------------------
Marcia Hooper
Address: 4 Claybrook Road
Dover, MA 02030
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 34
INDIVIDUAL INVESTOR:
------------------------------------
C. Scott Gibson
Address: 1900 Twin Points Road
Lake Oswego, Oregon 97034
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 35
FOUNDER:
------------------------------------
Gary N. Fielland
Address: c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 36
FOUNDER:
------------------------------------
Mark S. Anastas
Address: c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 37
FOUNDER:
------------------------------------
Gary M. Raetz
Address: c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 38
FOUNDER:
------------------------------------
Arun Garg
Address: c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 39
FOUNDER:
------------------------------------
Jon F. Jackson
Address: c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 40
FOUNDER:
------------------------------------
Jeffrey J. Berkowitz
Address: c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 41
FOUNDER:
------------------------------------
Joseph A. Hull
Address: c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 42
FOUNDER:
------------------------------------
Gary A. Whitney
Address: c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 43
FOUNDER:
------------------------------------
Steven "Shap" Shapiro
Address: c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 44
FOUNDER:
------------------------------------
Peter J. Bray
Address: c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 45
FOUNDER:
------------------------------------
Laura M. Freeman
Address: c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 46
FOUNDER:
------------------------------------
Satish M. Doshi
Address: c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 47
FOUNDER:
------------------------------------
Steve P. Paquin
Address: c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 48
FOUNDER:
------------------------------------
Phillip E. Hochstetler
Address: c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 49
FOUNDER:
------------------------------------
Robert D. Beck
Address: c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED INVESTOR'S RIGHTS AGREEMENT
<PAGE> 50
FOUNDER:
------------------------------------
Sylvia Giroux
Address: 6123 SW Frances
Hillsboro, OR 97124
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 51
SCHEDULE A
SCHEDULE OF INVESTORS AND FOUNDERS
INVESTORS
- ---------
MERITECH CAPITAL PARTNERS
90 Middlefield Road, Suite 201
Menlo Park, CA 94025
INTEL CORPORATION
2200 Mission College Blvd.
Santa Clara, CA 95052
MANCHESTER BRIDGE PRINCIPAL LP
411 Theodore Fremd Avenue
Rye, New York 10580
SEVIN ROSEN FUND V L.P.
SEVIN ROSEN V AFFILIATES FUND L.P.
SEVIN ROSEN BAYLESS MANAGEMENT COMPANY
13455 Noel Road, Suite 1670
Dallas, Texas 75240
OLYMPIC VENTURE PARTNERS IV, L.P.
OVP IV ENTREPRENEURS FUND, L.P.
2420 Carillon Point
Kirkland, Washington 98033
GARY N. FIELLAND
11255 NW Ridge Road
Portland, Oregon 97229
C. SCOTT GIBSON
1900 Twin Points Road
Lake Oswego, Oregon 97034
WILLIAM W. LATTIN
The William and June Lattin Revocable Living Trust
10911 NW Quarry Road
Portland, Oregon 97231
LARY EVANS
508 Newhall CV
SIGNATURE PAGE TO WEBRIDGE, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 52
Austin, Texas 78746
WORLDVIEW TECHNOLOGY PARTNERS I, L.P.
WORLDVIEW TECHNOLOGY INTERNATIONAL I, L.P.
WORLDVIEW STRATEGIC PARTNERS I, L.P.
435 Tasso Street
Suite 120
Palo Alto, CA 94301
KAUFMAN FAMILY LLC
660 Madison Avenue, 15th Floor
New York, NY 10021
GREGORY DARMOHRAY
8350 NW Ash
Portland, OR 97229
MARCIA HOOPER
4 Claybrook Road
Dover, MA 02030
FOUNDERS
- --------
MARK S. ANASTAS
c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
ROBERT D. BECK
c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
JEFFREY J. BERKOWITZ
c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
PETER J. BRAY
c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SATISH M. DOSHI
c/o Webridge, Inc.
A-50
<PAGE> 53
225 SW Broadway, Suite 400
Portland, OR 97205
GARY N. FIELLAND
c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
LAURA M. FREEMAN
c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
ARUN GARG
c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
PHILLIP E. HOCHSTETLER
c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
JOSEPH A. HULL
c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
JON F. JACKSON
c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
STEVE P. PAQUIN
c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
GARY M. RAETZ
c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
STEVEN "SHAP" SHAPIRO
c/o Webridge, Inc.
A-51
<PAGE> 54
225 SW Broadway, Suite 400
Portland, OR 97205
GARY A. WHITNEY
c/o Webridge, Inc.
225 SW Broadway, Suite 400
Portland, OR 97205
SYLVIA GIROUX
6123 SW Frances
Hillsboro, OR 97124
A-52
<PAGE> 1
EXHIBIT 10.1
WEBRIDGE, INC.
1996 STOCK INCENTIVE PLAN
1. PURPOSE. The purpose of this Stock Incentive Plan (the "Plan") is to
enable Webridge, Inc. (the "Company") to attract and retain the services of (1)
selected employees, officers and directors of the Company or of any subsidiary
of the Company and (2) selected nonemployee agents, consultants, advisors and
independent contractors of the Company or any subsidiary.
2. SHARES SUBJECT TO THE PLAN. Subject to adjustment as provided below
and in PARAGRAPHS 12 and 13, the shares to be offered under the Plan shall
consist of Common Stock of the Company, and the total number of shares of Common
Stock that may be issued under the Plan shall not exceed 5,000,000 shares. The
shares issued under the Plan may be authorized and unissued shares or reacquired
shares. If an option, stock appreciation right or performance unit granted under
the Plan expires, terminates or is canceled, the unissued shares subject to such
option, stock appreciation right or performance unit shall again be available
under the Plan. If shares sold or awarded as a bonus under the Plan are
forfeited to the Company or repurchased by the Company, the number of shares
forfeited or repurchased shall again be available under the Plan.
3. EFFECTIVE DATE AND DURATION OF PLAN.
(a) EFFECTIVE DATE. The Plan shall become effective when adopted
by the Board of Directors of the Company, but no Incentive Stock Option granted
under the Plan shall become exercisable until the Plan is approved by the
affirmative vote of the holders of a majority of the shares of Common Stock
represented at a shareholders meeting at which a quorum is present and any
Incentive Stock Options granted under the Plan prior to such approval shall be
conditioned on and subject to such approval. Subject to this limitation,
options, stock appreciation rights and performance units may be granted and
shares may be awarded as bonuses or sold under the Plan at any time after the
effective date and before termination of the Plan.
(b) DURATION. The Plan shall continue in effect until all shares
available for issuance under the Plan have been issued and all restrictions on
such shares have lapsed. The Board of Directors may suspend or terminate the
Plan at any time except with respect to options, performance units and shares
subject to restrictions then outstanding under the Plan. Termination shall not
affect any outstanding options, any right of the Company to repurchase shares or
the forfeitability of shares issued under the Plan.
<PAGE> 2
4. ADMINISTRATION.
(a) BOARD OF DIRECTORS. The Plan shall be administered by the
Board of Directors of the Company, which shall determine and designate from time
to time the individuals to whom awards shall be made, the amount of the awards
and the other terms and conditions of the awards. Subject to the provisions of
the Plan, the Board of Directors may from time to time adopt and amend rules and
regulations relating to administration of the Plan, advance the lapse of any
waiting period, accelerate any exercise date, waive or modify any restriction
applicable to shares (except those restrictions imposed by law) and make all
other determinations in the judgment of the Board of Directors necessary or
desirable for the administration of the Plan. The interpretation and
construction of the provisions of the Plan and related agreements by the Board
of Directors shall be final and conclusive. The Board of Directors may correct
any defect or supply any omission or reconcile any inconsistency in the Plan or
in any related agreement in the manner and to the extent it shall deem expedient
to carry the Plan into effect, and it shall be the sole and final judge of such
expediency.
(b) COMMITTEE. The Board of Directors may delegate to a committee
of the Board of Directors or specified officers of the Company, or both (the
"Committee") any or all authority for administration of the Plan. If authority
is delegated to a Committee, all references to the Board of Directors in the
Plan shall mean and relate to the Committee except (i) as otherwise provided by
the Board of Directors, and (ii) that only the Board of Directors may amend or
terminate the Plan as provided in PARAGRAPHS 3 and 16.
5. TYPES OF AWARDS; ELIGIBILITY. The Board of Directors may, from time
to time, take the following actions, separately or in combination, under the
Plan: (i) grant Incentive Stock Options, as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), as provided in
PARAGRAPHS 6(a) and 6(b); (ii) grant options other than Incentive Stock Options
("Non-Statutory Stock Options") as provided in PARAGRAPHS 6(a) and 6(c); (iii)
award stock bonuses as provided in PARAGRAPH 7; (iv) sell shares subject to
restrictions as provided in PARAGRAPH 8; (v) grant stock appreciation rights as
provided in PARAGRAPH 9; (vi) grant cash bonus rights as provided in PARAGRAPH
10; and (vii) grant performance units as provided in PARAGRAPH 11. Any such
awards may be made to employees, including employees who are officers or
directors, and to other individuals described in PARAGRAPH 1 who the Board of
Directors believes have made or will make an important contribution to the
Company or any subsidiary of the Company; provided, however, that only employees
of the Company shall be eligible to receive Incentive Stock Options under the
Plan. The Board of Directors shall select the individuals to whom awards shall
be made and shall specify the action taken with respect to each individual to
whom an award is made. At the discretion of the Board of Directors, an
individual may be given an election to surrender an award in exchange for the
grant of a new award.
2
<PAGE> 3
6. OPTION GRANTS.
(a) GENERAL RULES RELATING TO OPTIONS.
(i) Terms of Grant. The Board of Directors may grant
options under the Plan. With respect to each option grant, the Board of
Directors shall determine the number of shares subject to the option,
the option price, the period of the option, the time or times at which
the option may be exercised and whether the option is an Incentive Stock
Option or a Non-Statutory Stock Option. At the time of the grant of an
option or at any time thereafter, the Board of Directors may provide
that an optionee who exercised an option with Common Stock of the
Company shall automatically receive a new option to purchase additional
shares equal to the number of shares surrendered and may specify the
terms and conditions of such new options.
(ii) Exercise of Options. Except as provided in PARAGRAPH
6(a)(iv) or as determined by the Board of Directors, no option granted
under the Plan may be exercised unless at the time of such exercise the
optionee is employed by or providing service to the Company or any
subsidiary of the Company and shall have been so employed or provided
such service continuously since the date such option was granted.
Absence on leave or on account of illness or disability under rules
established by the Board of Directors shall not, however, be deemed an
interruption of employment or service for this purpose. Unless otherwise
determined by the Board of Directors, vesting of options shall not
continue during an absence on leave (including an extended illness) or
on account of disability. Except as provided in PARAGRAPHS 6(a)(iv), 13
and 14, options granted under the Plan may be exercised from time to
time over the period stated in each option in such amounts and at such
times as shall be prescribed by the Board of Directors, provided that
options shall not be exercised for fractional shares. Unless otherwise
determined by the Board of Directors, if the optionee does not exercise
an option in any one period with respect to the full number of shares to
which the optionee is entitled in that period, the optionee's rights
shall be cumulative and the optionee may purchase those shares in any
subsequent period during the term of the option.
(iii) Nontransferability. Each Incentive Stock Option and,
unless otherwise determined by the Board of Directors, each other option
granted under the Plan by its terms shall be nonassignable and
nontransferable by the optionee, either voluntarily or by operation of
law, except by will or by the laws of descent and distribution of the
state or country of the optionee's domicile at the time of death.
(iv) Termination of Employment or Service.
(A) General Rule. Unless otherwise determined by
the Board of Directors, in the event the employment or service of
the optionee with or to
3
<PAGE> 4
the Company or a subsidiary terminates for any reason other than
because of physical disability or death as provided in PARAGRAPH
6(a)(iv)(B), the option may be exercised at any time prior to
the expiration date of the option or the expiration of 30 days
after the date of such termination, whichever is the shorter
period, but only if and to the extent the optionee was entitled
to exercise the option at the date of such termination.
(B) Termination Because of Death or Total
Disability. Unless otherwise determined by the Board of
Directors, in the event of the termination of employment or
service because of death or total disability, the option may be
exercised at any time prior to the expiration date of the option
or the expiration of one year after the date of such death or
termination, whichever is the shorter period, but only if and to
the extent the optionee was entitled to exercise the option at
the date of such death or termination. The term "total
disability" means permanent and total disability as defined in
Section 22(e)(3) of the Code. Total disability shall be deemed to
have occurred on the first day after the Company and the two
independent physicians have furnished their opinion of total
disability to the Company. In the event of death, the option may
be exercised only by the person or persons to whom such
optionee's rights under the option shall pass by the optionee's
will or by the laws of descent and distribution of the state or
country of domicile at the time of death.
(C) Amendment of Exercise Period Applicable to
Termination. The Board of Directors, at the time of grant or at
any time thereafter, may extend the 30-day and one-year exercise
periods any length of time not longer than the original
expiration date of the option, and may increase the portion of an
option that is exercisable, subject to such terms and conditions
as the Board of Directors may determine, and, in the case of
Incentive Stock Options, subject to any limitations in the Code.
(D) Failure to Exercise Option. To the extent that
the option of any deceased optionee or of any optionee whose
employment or service terminates is not exercised within the
applicable period, all further rights to purchase shares pursuant
to such option shall cease and terminate.
(v) Purchase of Shares.
(A) Written Notice. Unless the Board of Directors
determines otherwise, shares may be acquired pursuant to an option granted under
the Plan only upon receipt by the Company of notice in writing from the optionee
of the optionee's intention to exercise, specifying the number of shares as to
which the optionee desires to exercise the option and the date on which the
optionee desires to complete the transaction, and if required in order to comply
with the Securities Act of 1933, as amended, containing a representation
4
<PAGE> 5
that it is the optionee's present intention to acquire the shares for investment
and not with a view to distribution.
(B) Transfer Restrictions. Unless the Board
of Directors determines otherwise, any shares acquired by the optionee shall be
subject to any stock transfer restrictions in any agreement then in effect
between the Company and the holders of the Company's Common Stock, and the
exercise of an option shall not be effective until the optionee has signed and
delivered a signature page to such stock transfer restriction agreement.
(C) Payment. Unless the Board of Directors
determines otherwise, on or before the date specified for completion of the
purchase of shares pursuant to an option, the optionee must have paid the
Company the full purchase price of such shares in cash (including, with the
consent of the Board of Directors, cash that may be the proceeds of a loan from
the Company, which loan, in the case of an Incentive Stock Option, shall have
been approved at the time of the option grant) or, with the consent of the Board
of Directors, in whole or in part, in Common Stock of the Company valued at fair
market value, restricted stock, performance units or other contingent awards
denominated in either stock or cash, promissory notes and other forms of
consideration. The fair market value of Common Stock provided in payment of the
purchase price shall be determined by the Board of Directors. If the Common
Stock of the Company is not publicly traded on the date the option is exercised,
the Board of Directors may consider any valuation methods it deems appropriate
and may, but is not required to, obtain one or more independent appraisals of
the Company. If the Common Stock of the Company is publicly traded on the date
the option is exercised, the fair market value of Common Stock provided in
payment of the purchase price shall be the closing price of the Common Stock as
reported in The Wall Street Journal on the last trading day preceding the date
the option is exercised, or such other reported value of the Common Stock as
shall be specified by the Board of Directors. No shares shall be issued until
full payment for the shares has been made. With the consent of the Board of
Directors (which, in the case of an Incentive Stock Option, shall be given only
at the time of grant), an optionee may request the Company to apply
automatically the shares to be received upon the exercise of a portion of a
stock option (even though stock certificates have not yet been issued) to
satisfy the purchase price for additional portions of the option.
(D) Taxes. Each optionee who has exercised
an option shall immediately upon notification of the amount due, if any, pay to
the Company in cash amounts necessary to satisfy any applicable federal, state
and local tax withholding requirements. If additional withholding is or becomes
required beyond any amount deposited before delivery of the certificates, the
optionee shall pay such amount to the Company on demand. If the optionee fails
to pay the amount demanded, the Company may withhold that amount from other
amounts payable by the Company to the optionee, including salary, subject to
applicable law. With the consent of the Board of Directors an optionee may
satisfy this obligation, in whole or in part, by having the Company withhold
from the shares to be issued upon the exercise that
5
<PAGE> 6
number of shares that would satisfy the withholding amount due or by delivering
to the Company Common Stock to satisfy the withholding amount.
(E) Reduction of Shares. Upon the exercise
of an option, the number of shares reserved for issuance under the Plan shall be
reduced by the number of shares issued upon exercise of the option.
(b) INCENTIVE STOCK OPTIONS. Incentive Stock Options shall be
subject to the following additional terms and conditions:
(i) Limitation on Amount of Grants. No employee may be
granted Incentive Stock Options under the Plan if the aggregate fair
market value, on the date of grant, of the Common Stock with respect to
which Incentive Stock Options are exercisable for the first time by that
employee during any calendar year under the Plan and under any other
incentive stock option plan (within the meaning of Section 422 of the
Code) of the Company or any parent or subsidiary of the Company exceeds
$100,000.
(ii) Limitations on Grants to 10 Percent Shareholders. An
Incentive Stock Option may be granted under the Plan to an employee
possessing more than 10 percent of the total combined voting power of
all classes of stock of the Company or of any parent or subsidiary of
the Company only if the option price is at least 110 percent of the fair
market value of the Common Stock subject to the option on the date it is
granted, as described in PARAGRAPH 6(b)(iv), and the option by its terms
is not exercisable after the expiration of five years from the date it
is granted.
(iii) Duration of Options. Subject to PARAGRAPHS 6(a)(ii)
and 6(b)(ii), Incentive Stock Options granted under the Plan shall
continue in effect for the period fixed by the Board of Directors,
except that no Incentive Stock Option shall be exercisable after the
expiration of 10 years from the date it is granted.
(iv) Option Price. The option price per share shall be
determined by the Board of Directors at the time of grant. Except as
provided in PARAGRAPH 6(b)(ii), the option price shall not be less than
100 percent of the fair market value of the Common Stock covered by any
Incentive Stock Option at the date the option is granted. The fair
market value shall be determined by the Board of Directors. If the
Common Stock of the Company is not publicly traded on the date the
option is granted, the Board of Directors may consider any valuation
methods it deems appropriate and may, but is not required to, obtain one
or more independent appraisals of the Company. If the Common Stock of
the Company is publicly traded on the date the option is exercised, the
fair market value shall be deemed to be the closing price of the Common
Stock as reported in The Wall Street Journal on the day preceding the
date the option is granted, or if there has been no sale on that date,
on the last preceding date on which a sale
6
<PAGE> 7
occurred, or such other value of the Common Stock as shall be specified
by the Board of Directors.
(v) Limitation on Time of Grant. No Incentive Stock Option
shall be granted on or after the tenth anniversary of the effective date
of the Plan.
(c) NON-STATUTORY STOCK OPTIONS. Non-Statutory Stock Options
shall be subject to the following terms and conditions in addition to those set
forth in PARAGRAPH 6(a) above:
(i) Option Price. The option price for Non-Statutory Stock
Options shall be determined by the Board of Directors at the time of
grant and may be any amount determined by the Board of Directors.
(ii) Duration of Options. Non-Statutory Stock Options
granted under the Plan shall continue in effect for the period fixed by
the Board of Directors.
7. STOCK BONUSES. The Board of Directors may award shares under the Plan
as stock bonuses. Shares awarded as a bonus shall be subject to the terms,
conditions, and restrictions determined by the Board of Directors. The
restrictions may include restrictions concerning transferability and forfeiture
of the shares awarded, together with such other restrictions as may be
determined by the Board of Directors. If shares are subject to forfeiture, all
dividends or other distributions paid by the Company with respect to the shares
shall be retained by the Company until the shares are no longer subject to
forfeiture, at which time all accumulated amounts shall be paid to the
recipient. The Board of Directors may require the recipient to sign an agreement
as a condition of the award, but may not require the recipient to pay any
monetary consideration other than amounts necessary to satisfy tax withholding
requirements. The agreement may contain any terms, conditions, restrictions,
representations and warranties required by the Board of Directors. The
certificates representing the shares awarded shall bear any legends required by
the Board of Directors. The Company may require any recipient of a stock bonus
to pay to the Company in cash upon demand amounts necessary to satisfy any
applicable federal, state or local tax withholding requirements. If the
recipient fails to pay the amount demanded, the Company may withhold that amount
from other amounts payable by the Company to the recipient, including salary or
fees for services, subject to applicable law. With the consent of the Board of
Directors, a recipient may deliver Common Stock to the Company to satisfy this
withholding obligation. Upon the issuance of a stock bonus, the number of shares
reserved for issuance under the Plan shall be reduced by the number of shares
issued.
8. RESTRICTED STOCK. The Board of Directors may issue shares under the
Plan for such consideration (including promissory notes and services) as
determined by the Board of Directors. Shares issued under the Plan shall be
subject to the terms, conditions and restrictions determined by the Board of
Directors. The restrictions may include restrictions
7
<PAGE> 8
concerning transferability, repurchase by the Company and forfeiture of the
shares issued, together with such other restrictions as may be determined by the
Board of Directors. If shares are subject to forfeiture or repurchase by the
Company, all dividends or other distributions paid by the Company with respect
to the shares shall be retained by the Company until the shares are no longer
subject to forfeiture or repurchase, at which time all accumulated amounts shall
be paid to the recipient. All Common Stock issued pursuant to this PARAGRAPH 8
shall be subject to a purchase agreement, which shall be executed by the Company
and the prospective recipient of the shares prior to the delivery of
certificates representing such shares to the recipient. The purchase agreement
may contain any terms, conditions, restrictions, representations and warranties
required by the Board of Directors. The certificates representing the shares
shall bear any legends required by the Board of Directors. The Company may
require any purchaser of restricted stock to pay to the Company in cash upon
demand amounts necessary to satisfy any applicable federal, state or local tax
withholding requirements. If the purchaser fails to pay the amount demanded, the
Company may withhold that amount from other amounts payable by the Company to
the purchaser, including salary, subject to applicable law. With the consent of
the Board of Directors, a purchaser may deliver Common Stock to the Company to
satisfy this withholding obligation. Upon the issuance of restricted stock, the
number of shares reserved for issuance under the Plan shall be reduced by the
number of shares issued.
9. STOCK APPRECIATION RIGHTS.
(a) GRANT. Stock appreciation rights may be granted under the
Plan by the Board of Directors, subject to such rules, terms, and conditions as
the Board of Directors prescribes.
(b) EXERCISE.
(i) General. Each stock appreciation right shall entitle
the holder, upon exercise, to receive from the Company in exchange
therefor an amount equal in value to the excess of the fair market value
on the date of exercise of one share of Common Stock of the Company over
its fair market value on the date of grant (or, in the case of a stock
appreciation right granted in connection with an option, the excess of
the fair market value of one share of Common Stock of the Company over
the option price per share under the option to which the stock
appreciation right relates), multiplied by the number of shares covered
by the stock appreciation right or the option, or portion thereof, that
is surrendered. No stock appreciation right shall be exercisable at a
time that the amount determined under this paragraph is negative.
Payment by the Company upon exercise of a stock appreciation right may
be made in Common Stock valued at fair market value, in cash, or partly
in Common Stock and partly in cash, all as determined by the Board of
Directors.
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<PAGE> 9
(ii) Exercisability. A stock appreciation right shall be
exercisable only at the time or times established by the Board of
Directors. If a stock appreciation right is granted in connection with
an option, the following rules shall apply: (1) the stock appreciation
right shall be exercisable only to the extent and on the same conditions
that the related option could be exercised; (2) upon exercise of the
stock appreciation right, the option or portion thereof to which the
stock appreciation right relates terminates; and (3) upon exercise of
the option, the related stock appreciation right or portion thereof
terminates.
(iii) Conditions. The Board of Directors may withdraw any
stock appreciation right granted under the Plan at any time and may
impose any conditions upon the exercise of a stock appreciation right or
adopt rules and regulations from time to time affecting the rights of
holders of stock appreciation rights. Such rules and regulations may
govern the right to exercise stock appreciation rights granted prior to
adoption or amendment of such rules and regulations as well as stock
appreciation rights granted thereafter.
(iv) Fair Market Value. For purposes of this PARAGRAPH 9,
the fair market value of the Common Stock shall be determined as of the
date the stock appreciation right is exercised, under the methods set
forth in PARAGRAPH 6(b)(iv).
(v) No Fractional Shares. No fractional shares shall be
issued upon exercise of a stock appreciation right. In lieu thereof,
cash may be paid in an amount equal to the value of the fraction or, if
the Board of Directors shall determine, the number of shares may be
rounded downward to the next whole share.
(vi) Nontransferability. Each stock appreciation right
granted in connection with an Incentive Stock Option, and unless
otherwise determined by the Board of Directors, each other stock
appreciation right granted under the Plan by its terms shall be
nonassignable and nontransferable by the holder, either voluntarily or
by operation of law, except by will or by the laws of descent and
distribution of the state or country of the holder's domicile at the
time of death, and each stock appreciation right by its terms shall be
exercisable during the holder's lifetime only by the holder.
(vii) Taxes. Each participant who has exercised a stock
appreciation right shall, upon notification of the amount due, pay to
the Company in cash amounts necessary to satisfy any applicable federal,
state and local tax withholding requirements. If the participant fails
to pay the amount demanded, the Company may withhold that amount from
other amounts payable by the Company to the participant including
salary, subject to applicable law. With the consent of the Board of
Directors a participant may satisfy this obligation, in whole or in
part, by having the Company withhold from any shares to be issued upon
the exercise that number of shares that
9
<PAGE> 10
would satisfy the withholding amount due or by delivering Common Stock
to the Company to satisfy the withholding amount.
(viii) Reduction in Shares. Upon the exercise of a stock
appreciation right for shares, the number of shares reserved for
issuance under the Plan shall be reduced by the number of shares issued.
Cash payments of stock appreciation rights shall not reduce the number
of shares of Common Stock reserved for issuance under the Plan.
10. CASH BONUS RIGHTS.
(a) GRANT. The Board of Directors may grant cash bonus rights
under the Plan in connection with (i) options granted or previously granted,
(ii) stock appreciation rights granted or previously granted, (iii) stock
bonuses awarded or previously awarded and (iv) shares sold or previously sold
under the Plan. Cash bonus rights will be subject to rules, terms and conditions
as the Board of Directors may prescribe. Unless otherwise determined by the
Board of Directors, each cash bonus right granted under the Plan by its terms
shall be nonassignable and nontransferable by the holder, either voluntarily or
by operation of law, except by will or by the laws of descent and distribution
of the state or country of the holder's domicile at the time of death. The
payment of a cash bonus shall not reduce the number of shares of Common Stock
reserved for issuance under the Plan.
(b) CASH BONUS RIGHTS IN CONNECTION WITH OPTIONS. A cash bonus
right granted in connection with an option will entitle an optionee to a cash
bonus when the related option is exercised (or terminates in connection with the
exercise of a stock appreciation right related to the option) in whole or in
part if, in the sole discretion of the Board of Directors, the bonus right will
result in a tax deduction that the Company has sufficient taxable income to use.
If an optionee purchases shares upon exercise of an option and does not exercise
a related stock appreciation right, the amount of the bonus, if any, shall be
determined by multiplying the excess of the total fair market value of the
shares to be acquired upon the exercise over the total option price for the
shares by the applicable bonus percentage. If the optionee exercises a related
stock appreciation right in connection with the termination of an option, the
amount of the bonus, if any, shall be determined by multiplying the total fair
market value of the shares and cash received pursuant to the exercise of the
stock appreciation right by the applicable bonus percentage. The bonus
percentage applicable to a bonus right, including a previously granted bonus
right, shall be determined and may be changed from time to time by the Board of
Directors but shall in no event exceed 75 percent.
(c) CASH BONUS RIGHTS IN CONNECTION WITH STOCK BONUS. A cash
bonus right granted in connection with a stock bonus will entitle the recipient
to a cash bonus payable when the stock bonus is awarded or restrictions, if any,
to which the stock is subject lapse. If bonus stock awarded is subject to
restrictions and is repurchased by the Company or forfeited by the holder, the
cash bonus right granted in connection with the stock bonus shall terminate
10
<PAGE> 11
and may not be exercised. The amount and timing of payment of a cash bonus shall
be determined by the Board of Directors.
(d) CASH BONUS RIGHTS IN CONNECTION WITH STOCK PURCHASES. A cash
bonus right granted in connection with the purchase of stock pursuant to
PARAGRAPH 8 will entitle the recipient to a cash bonus when the shares are
purchased or restrictions, if any, to which the stock is subject lapse. Any cash
bonus right granted in connection with shares purchased pursuant to PARAGRAPH 8
shall terminate and may not be exercised in the event the shares are repurchased
by the Company or forfeited by the holder pursuant to applicable restrictions.
The amount of any cash bonus to be awarded and timing of payment of a cash bonus
shall be determined by the Board of Directors.
(e) TAXES. The Company shall withhold from any cash bonus paid
pursuant to PARAGRAPH 10 the amount necessary to satisfy any applicable federal,
state and local withholding requirements.
11. PERFORMANCE UNITS.
(a) GRANT. The Board of Directors may grant performance units
consisting of monetary units which may be earned in whole or in part if the
Company achieves certain goals established by the Board of Directors over a
designated period of time, but not in any event more than 10 years. The goals
established by the Board of Directors may include earnings per share, return on
shareholders' equity, return on invested capital, and such other goals as may be
established by the Board of Directors. In the event that the minimum performance
goal established by the Board of Directors is not achieved at the conclusion of
a period, no payment shall be made to the participants. In the event the maximum
corporate goal is achieved, 100 percent of the monetary value of the performance
units shall be paid to or vested in the participants. Partial achievement of the
maximum goal may result in a payment or vesting corresponding to the degree of
achievement as determined by the Board of Directors. Payment of an award earned
may be in cash or in Common Stock or in a combination of both, and may be made
when earned, or vested and deferred, as the Board of Directors determines.
Deferred awards shall earn interest on the terms and at a rate determined by the
Board of Directors.
(b) NONTRANSFERABILITY. Unless otherwise determined by the Board
of Directors, each performance unit granted under the Plan by its terms shall be
nonassignable and nontransferable by the holder, either voluntarily or by
operation of law, except by will or by the laws of descent and distribution of
the state or country of the holder's domicile at the time of death.
(c) TAXES. Each participant who has been awarded a performance
unit shall, upon notification of the amount due, pay to the Company in cash
amounts necessary to satisfy any applicable federal, state and local tax
withholding requirements. If the participant fails to
11
<PAGE> 12
pay the amount demanded, the Company may withhold that amount from other amounts
payable by the Company to the participant, including salary or fees for
services, subject to applicable law. With the consent of the Board of Directors
a participant may satisfy this obligation, in whole or in part, by having the
Company withhold from any shares to be issued that number of shares that would
satisfy the withholding amount due or by delivering Common Stock to the Company
to satisfy the withholding amount.
(d) REDUCTION IN SHARES. The payment of a performance unit in
cash shall not reduce the number of shares of Common Stock reserved for issuance
under the Plan. The number of shares reserved for issuance under the Plan shall
be reduced by the number of shares issued upon payment of an award.
12. FOREIGN QUALIFIED GRANTS. Awards under the Plan may be granted to
such officers and employees of the Company and its subsidiaries and such other
persons described in paragraph 1 residing in foreign jurisdictions as the Board
of Directors may determine from time to time. The Board of Directors may adopt
such supplements to the Plan as may be necessary to comply with the applicable
laws of such foreign jurisdictions and to afford participants favorable
treatment under such laws; provided, however, that no award shall be granted
under any such supplement with terms which are more beneficial to the
participants than the terms permitted by the Plan.
13. CHANGES IN CAPITAL STRUCTURE.
(a) STOCK SPLITS; COMBINATIONS; DIVIDENDS. If the outstanding
Common Stock of the Company is hereafter increased or decreased or changed into
or exchanged for a different number or kind of shares or other securities of the
Company by reason of any stock split, combination of shares, reclassification,
or dividend payable in shares, appropriate adjustment shall be made by the Board
of Directors in the number and kind of shares available for awards under the
Plan. In addition, the Board of Directors shall make appropriate adjustment in
the number and kind of shares as to which outstanding options and stock
appreciation rights, or portions thereof then unexercised, shall be exercisable,
so that the optionee's proportionate interest before and after the occurrence of
the event is maintained. Notwithstanding the foregoing, the Board of Directors
shall have no obligation to effect any adjustment that would or might result in
the issuance of fractional shares, and any fractional shares resulting from any
adjustment may be disregarded or provided for in any manner determined by the
Board of Directors. Any such adjustments made by the Board of Directors shall be
conclusive.
(b) MERGERS, REORGANIZATIONS, ETC. In the event of a merger,
consolidation, plan of exchange, acquisition of property or stock, separation or
reorganization to which the Company or a subsidiary is a party or a sale of all
or substantially all of the Company's assets (each, a "Transaction"), the Board
of Directors shall, in its sole discretion and to the extent
12
<PAGE> 13
possible under the structure of the Transaction, select one of the following
alternatives for treating outstanding awards under the Plan:
(i) The Board of Directors may provide that all
outstanding awards, including options, shall remain in effect in
accordance with their terms.
(ii) If the stockholders of the Company receive capital
stock of another corporation ("Exchange Stock") in exchange for their
shares of Common Stock in any Transaction, the Board of Directors may
provide that all options granted hereunder shall be converted into
options to purchase shares of Exchange Stock. The amount and price of
converted options shall be determined by adjusting the amount and price
of the options granted hereunder in the same proportion as used for
determining the number of shares of Exchange Stock the holders of the
Common Stock receive in such Transaction. Unless otherwise determined by
the Board of Directors, the converted options shall be vested only to
the extent that the vesting requirements relating to options granted
hereunder have been satisfied.
(iii) The Board of Directors may provide a 30-day period
prior to the consummation of the Transaction during which optionees
shall have the right to exercise options and stock appreciation rights
to the extent vested and upon the expiration of which 30-day period all
unexercised options and stock appreciation rights shall immediately
terminate. The Board of Directors may, in its sole discretion,
accelerate the exercisability of options and stock appreciation rights
so that they are exercisable in full during such 30-day period.
14. DISSOLUTION. In the event of the dissolution of the Company, options
and stock appreciation rights shall be treated in accordance with PARAGRAPH
13(c)(iii).
15. RIGHTS ISSUED BY ANOTHER CORPORATION. The Board of Directors may
also grant options, stock appreciation rights, performance units, stock bonuses
and cash bonuses and issue restricted stock under the Plan having terms,
conditions and provisions that vary from those specified in this Plan provided
that any such awards are granted in substitution for, or in connection with the
assumption of, existing options, stock appreciation rights, stock bonuses, cash
bonuses, restricted stock and performance units granted, awarded or issued by
another corporation and assumed or otherwise agreed to be provided for by the
Company pursuant to or by reason of a Transaction.
16. AMENDMENT OF PLAN. The Board of Directors may at any time, and from
time to time, modify or amend the Plan in such respects as it shall deem
advisable because of changes in the law while the Plan is in effect or for any
other reason. Except as provided in PARAGRAPHS 6(a)(iv)(C), 9(b)(iii), 10, 13
and 14, however, no change in an award already granted shall be made without the
written consent of the holder of such award.
13
<PAGE> 14
17. APPROVALS. The obligations of the Company under the Plan are subject
to the approval of state and federal authorities or agencies with jurisdiction
in the matter. The Company will use its best efforts to take steps required by
state or federal law or applicable regulations, including rules and regulations
of the Securities and Exchange Commission and any stock exchange on which the
Company's shares may then be listed, in connection with the grants under the
Plan. The foregoing notwithstanding, the Company shall not be obligated to issue
or deliver Common Stock under the Plan if such issuance or delivery would
violate applicable state or federal securities laws.
18. EMPLOYMENT AND SERVICE RIGHTS. Nothing in the Plan or any award
pursuant to the Plan shall (i) confer upon any employee any right to be
continued in the employment of the Company or any subsidiary or interfere in any
way with the right of the Company or any subsidiary by whom such employee is
employed to terminate such employee's employment at any time, for any reason,
with or without cause, or to decrease such employee's compensation or benefits,
or (ii) confer upon any person engaged by the Company to provide services any
right to be retained or engaged by the Company or to the continuation,
extension, renewal, or modification of any compensation, contract, or
arrangement with or by the Company.
19. RIGHTS AS A SHAREHOLDER. The recipient of any award under the Plan
shall have no rights as a shareholder with respect to any Common Stock until the
date of issue to the recipient of a stock certificate for such shares. Except as
otherwise expressly provided in the Plan, no adjustment shall be made for
dividends or other rights for which the record date occurs prior to the date
such stock certificate is issued.
20. NOTICES. Any notices required or permitted to be given to holders of
awards pursuant to the Plan shall be in writing, addressed to the most recent
address on the Company's records, and shall be deemed to be effectively given
when (a) mailed by registered or certified mail with postage and fees prepaid,
(b) sent by overnight delivery service, (c) personally delivered, or (d) sent by
facsimile with confirmed transmission.
DATE ADOPTED BY THE BOARD OF DIRECTORS: JUNE 26, 1996
DATE APPROVED BY THE SHAREHOLDERS: JUNE 26, 1996
14
<PAGE> 1
EXHIBIT 10.2
LEASE AGREEMENT
FOR
AMBERGLEN BUSINESS CENTER
BY AND BETWEEN
AMBERJACK, LTD.
"Landlord"
and
WEBRIDGE, INC.
"Tenant"
<PAGE> 2
LEASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1. BASIC LEASE INFORMATION:.......................................................................1
ARTICLE 2. DEMISE AND RENT:...............................................................................4
2.1 Demise.........................................................................................4
2.2 Premises.......................................................................................4
2.3 Commencement and Expiration Dates..............................................................4
2.4 Rent...........................................................................................4
2.5 Late Charge....................................................................................4
ARTICLE 3. USE:...........................................................................................4
3.1 Authorized Use.................................................................................4
3.2 Hazardous Substances...........................................................................5
ARTICLE 4. TENANT'S ACCEPTANCE AND MAINTENANCE OF PREMISES:...............................................6
4.1 Acceptance of Premises.........................................................................6
4.2 Building Maintenance...........................................................................6
4.3 Tenant's Obligations...........................................................................6
4.4 Tenant Improvements............................................................................6
ARTICLE 5. OPERATING EXPENSES AND TAXES:..................................................................6
5.1 Operating Expenses.............................................................................6
5.2 Exclusions From Operating Expenses.............................................................7
5.3 Taxes..........................................................................................7
ARTICLE 6. PAYMENT OF OPERATING EXPENSES:..................................................................8
6.1 Operating Year.................................................................................8
6.2 Tenant's Pro Rata Share........................................................................8
6.3 Written Statement of Estimate..................................................................8
6.4 Reestimations..................................................................................8
6.5 Annual Adjustments.............................................................................9
6.6 Tenant Examination.............................................................................9
6.7 Disputes.......................................................................................9
6.8 Payment........................................................................................9
6.9 No Reduction in Amount of Monthly Base Rent....................................................9
ARTICLE 7. SECURITY DEPOSIT:..............................................................................9
7.1 Security Deposit...............................................................................9
7.2 Disposition of Security Deposit................................................................9
ARTICLE 8. SUBORDINATION, NOTICE TO SUPERIOR LESSORS AND MORTGAGEES:.....................................10
8.1 Subordination.................................................................................10
8.2 Notice........................................................................................10
8.3 Attornment....................................................................................10
8.4 Landlord's Breach of Lease....................................................................10
ARTICLE 9. QUIET ENJOYMENT:..............................................................................11
ARTICLE 10. ASSIGNMENT AND SUBLETTING:....................................................................11
10.1 Generally.....................................................................................11
10.2 Conditions of Landlord's Consent..............................................................11
10.3 Subletting by Landlord........................................................................11
10.4 Permitted Transfers...........................................................................11
ARTICLE 11. INSURANCE:....................................................................................12
11.1 Public Liability Insurance....................................................................12
11.2 Property Insurance............................................................................12
11.3 Acceptable Insurance Companies................................................................12
11.4 Increase in Coverage..........................................................................12
11.5 Waiver of Subrogation.........................................................................12
ARTICLE 12. RULES AND REGULATIONS:........................................................................12
ARTICLE 13. ALTERATIONS:..................................................................................12
13.1 Requirements..................................................................................12
13.2 Removal and Restoration.......................................................................13
13.3 Compliance....................................................................................13
13.4 No Liens......................................................................................13
ARTICLE 14. LANDLORD'S AND TENANT'S PROPERTY:.............................................................13
14.1 Landlord's Property...........................................................................13
14.2 Tenant's Property.............................................................................13
14.3 Abandonment...................................................................................14
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE 15. SERVICES AND UTILITIES:.......................................................................14
15.1 Utilities.....................................................................................14
15.2 Excess Usage..................................................................................14
15.3 Disclaimer....................................................................................14
15.4 Use of Common Areas and Facilities............................................................14
15.5 Parking Facilities............................................................................15
15.6 Signage.......................................................................................15
15.7 Mailbox.......................................................................................15
ARTICLE 16. ACCESS:.......................................................................................15
ARTICLE 17. NOTICE OF OCCURRENCES:........................................................................15
ARTICLE 18. NONLIABILITY AND INDEMNIFICATION:.............................................................16
18.1 Waiver........................................................................................16
18.2 Indemnification...............................................................................16
ARTICLE 19. DAMAGE OR DESTRUCTION:........................................................................16
19.1 General.......................................................................................16
19.2 Condemnation..................................................................................16
ARTICLE 20. SURRENDER AND HOLDING OVER:...................................................................17
20.1 General.......................................................................................17
20.2 Surrender.....................................................................................17
20.3 Holding Over..................................................................................17
ARTICLE 21. EVENTS OF DEFAULT:............................................................................17
ARTICLE 22. REMEDIES UPON DEFAULT:........................................................................18
22.1 Remedies......................................................................................18
22.2 Cumulative Remedies...........................................................................18
22.3 Termination...................................................................................18
22.4 Interest on Damages...........................................................................18
ARTICLE 23. RELOCATION....................................................................................19
ARTICLE 24. NO WAIVERS OF PERFORMANCE:....................................................................19
ARTICLE 25. CURING TENANT'S DEFAULTS:.....................................................................19
ARTICLE 26. BROKER:.......................................................................................19
ARTICLE 27. NOTICES:......................................................................................19
ARTICLE 28. ESTOPPEL CERTIFICATES:........................................................................19
ARTICLE 29. MEMORANDUM OF LEASE:..........................................................................20
ARTICLE 30. ADJUSTMENT OF COMMENCEMENT AND EXPIRATION DATES:..............................................20
30.1 Commencement Date.............................................................................20
30.2 Delay in Commencement.........................................................................20
30.3 Expiration Date...............................................................................20
30.4 Early Occupancy...............................................................................20
ARTICLE 31. MISCELLANEOUS:................................................................................20
31.1 Merger........................................................................................20
31.2 Modifications.................................................................................21
31.3 Successors and Assigns........................................................................21
31.4 Nonrecourse Lease.............................................................................21
31.5 Force Majeure.................................................................................21
31.6 Definitions...................................................................................21
31.7 Effect of Expiration..........................................................................22
31.8 Excavation....................................................................................22
31.9 Union Contracts...............................................................................22
31.10 Prorations....................................................................................22
31.11 Governing Law.................................................................................22
31.12 Light, Air and View...........................................................................22
31.13 Tenant Representations........................................................................22
31.14 Defined Terms.................................................................................22
31.15 Counterparts..................................................................................22
31.16 Costs and Attorney Fees.......................................................................23
31.17 Effect of Failure to Consent..................................................................23
</TABLE>
ii
<PAGE> 4
LEASE AGREEMENT
This Lease dated for reference purposes of October 14, 1999, by and between
AmberJack, Ltd., an Arizona corporation ("LANDLORD") and Webridge, Inc., a
Delaware corporation ("TENANT").
ARTICLE 1. BASIC LEASE INFORMATION:
Each reference in the Lease to any of the Basic Lease Information shall
mean the respective information set forth below, and such information shall be
deemed incorporated as a part of the terms provided under the particular Lease
Section pertaining to such information. In the event of any conflict between any
Basic Lease Information and the Lease, the former shall control.
1.1 Building: 1925 Building
1925 NW AmberGlen Parkway
Beaverton OR 97006
1.2 Landlord: AmberJack, Ltd., an Arizona corporation
1.3 Landlord's Address for Giving of Notices and Payment of Rent:
Birtcher Property Services
Attn: Portfolio Manager
27611 La Paz Road
PO Box 30009
Laguna Niguel CA 92607-0009
Copy to:
AmberJack, Ltd.
c/o Birtcher Property Services
1600 NW Compton Drive #106
Beaverton OR 97006
1.4 Tenant's Address for Giving of Notices Prior to the Commencement Date:
Webridge, Inc.
725 SW Broadway, Suite 600
Portland, OR 97205
Tenant's Address for Giving of Notices After the Commencement Date:
Premises Address
1.5 Premises: The third floor (approximately 24,881 rsf) and fourth floor
(approximately 24,881 rsf) of the Building. Tenant shall have the option to
expand the Premises to include the entire (but not less than the entire) second
floor (approximately 24,881 rsf) of the Building, if Tenant gives Landlord
written notice unconditionally exercising this option by no later than July 1,
2000 (the "Second Floor Option"). If Tenant does not timely give such notice,
the second floor shall not be part of the Premises. The Premises are outlined on
the floor plan of the Building attached hereto as EXHIBIT A. (Section 2.2)
1.6 Building: The Building located at 1925 NW AmberGlen Parkway,
Beaverton, Oregon, as shown on EXHIBIT A.
1.7 Park Common Areas: As outlined on EXHIBIT B attached hereto, Landlord
may, from time to time, adjust the size and configuration of the Park Common
Areas as each are defined herein, subject to Section 1.8.
1.8 Project: Shall be defined as the Premises, Building and Park Common
Areas as each are defined in this Lease (as they may be expanded, altered or
contracted from time-to-time in Landlord's sole discretion; provided, however,
that such alteration shall not reduce the parking ratio for the Project below 4
per 1000 rentable square feet in the Building or materially adversely alter
access to the Building.
1.9 Parking Allowance: Parking shall be in common with all other tenants
of the Building within parking spaces striped on the surface lot constructed on
the Land described on EXHIBIT A.
1.10 Use of Premises: General Office Uses, excluding (i) uses which are
primarily call centers, data-processing centers, and other similar high-density
uses, and (ii) manufacturing facilities. (Article 3)
1.11 Construction Information Submittal Date: Tenant shall provide
Landlord's office planner with all of the construction information requested by
Landlord's office planner, in accordance with EXHIBIT D of this Lease (Exhibit
D, Section 3.1), (i) for the fourth floor, no later than 10 business days after
the
1
<PAGE> 5
mutual execution of this Lease, and (ii) for the other Areas, no later than 180
days prior to the Outside Commencement Date for such Area stated in Section
1.1.13.
1.12 Construction Document Approval Date: Landlord and Tenant shall
approve the Construction Document Package in accordance with the terms and
conditions set forth in Section 3.2 of the Exhibit D Work Letter.
1.13 Commencement Date by Area:
Fourth Floor: March 1, 2000 or such earlier or later date as provided in
Article 30.
Third Floor (1st Half): July 1, 2000 or 180 days after delivery of Tenant
Submittal Package (defined in Exhibit D), whichever is earlier.
Third Floor (2nd Half): January 1, 2001 or 180 days after delivery of
Tenant Submittal Package, whichever is earlier.
Second Floor (First Half) (if option exercised): April 1, 2001 or 180
days after delivery of Tenant Submittal Package, whichever is earlier.
Second Floor (Second Half) (if option exercised): July 1, 2001 or 180
days after delivery of Tenant Submittal Package, whichever is earlier.
The outside Commencement Dates for the third and fourth floors stated
above are referred to as the "Outside Commencement Dates."
1.14 Expiration Date: February 28, 2007 or such earlier or later date as
provided in Article 30 of the Lease Agreement. (Section 2.3)
1.15 Base Rent (Fourth Floor):
<TABLE>
4th Floor Annual Base Rent
Period Amount/PSF
------ --------------------------
<S> <C>
Months 1-6 Abated
Months 7-18 $13.00
Months 19-36 $20.00
Months 37-60 $27.00
Months 61-84 $30.00
</TABLE>
The months referred to above are the full calendar months after any
first partial month of the Lease Term. The Base Rent for any such partial month
shall be prorated based on the same rents as specified for the first full
calendar month when Base Rent is payable. Upon Tenant's execution of this
Lease, Tenant has deposited with Landlord $0.00 to be applied against the first
month's Rent. (Section 2.4)
1.16 Tenant's Initial Percentage Share shall be 25.86% of the Building
until the third and second floors are added; thereafter as calculated by
Landlord pursuant to Section 6.2.
1.17 Base Year for Adjustments to Operating Expenses: The 2000 Calendar
Year. (Section 6.2).
1.18 Base Year for Adjustments to Taxes: The 2000 Calendar Year.
1.19 Security Deposit: $250,000 Unconditional, Irrevocable Letter of
Credit, to be provided at the time of execution of this Lease.
1.20 Guarantor(s) Name and Address: N/A
1.21 Brokers: Landlord: N/A
Tenant: Norris, Beggs & Simpson
2
<PAGE> 6
<TABLE>
<CAPTION>
LANDLORD TENANT
<S> <C>
AmberJack Ltd., an Arizona corporation Webridge, Inc., a Delaware corporation
By: /s/ [signature illegible] By: /s/ [signature illegible]
---------------------------------- ----------------------------------
Title: Development Manager Title: CFO
------------------------------- -------------------------------
Date: 11/15/99 Date: 11/10/99
-------------------------------- --------------------------------
By: /s/ [signature illegible] By: /s/ [signature illegible]
---------------------------------- ----------------------------------
Title: VP Title: VP Finance
------------------------------- -------------------------------
Date: 11/16/99 Date: 11/12/99
-------------------------------- --------------------------------
</TABLE>
3
<PAGE> 7
LEASE AGREEMENT
TERMS AND CONDITIONS
ARTICLE 2. DEMISE AND RENT:
2.1 DEMISE: Landlord hereby leases to Tenant, and Tenant hereby leases
from Landlord, upon and subject to the terms, covenants, provisions and
conditions of this Lease Agreement (herein called the "Lease"), the Premises in
the Building (herein called the "Building") located on the property described on
Exhibit A attached hereto and incorporated herein ("Land"). Landlord hereby
grants to Tenant, and Tenant hereby accepts from Landlord, upon and subject to
the terms, covenants, provisions and conditions of this Lease, a non-exclusive
right to use the common areas of the Building ("Building Common Areas"), if any,
and the Park Common Areas, subject to the provisions of Section 15.5 below and
the Rules and Regulations attached hereto as Exhibit E.
2.2 PREMISES: The Premises (herein called "Premises") leased to Tenant are
described in the Basic Lease Information, are outlined on the floor plan(s) for
the Building attached hereto as Exhibit A, which is incorporated herein by this
reference, and shall be computed by the BOMA Standard Method for Measure Floor
Area in Office Buildings, 1996 ANSI/BOMA Z65, 1-1996. The precise amount of the
rentable area in the Premises indicated in the approved Construction Document
Package (the "CDP") shall be controlling in the event of any variance from the
approximate rentable area specified in the Basic Lease Information; however, the
rentable area of the Premises shall not vary from the rentable area specified in
the Basic Lease Information by more than plus or minus 5%. Base Rent, Tenant's
Percentage, and any similar item based upon the size of the Premises shall be
adjusted to reflect the precise rentable area in the Premises determined by the
approved CDP. The parties shall execute an addendum to this Lease following
preparation of the CDP and the Commencement Date for each Area stating such
adjusted figures, and stating the Commencement Date for the Area and Expiration
Date; provided that Tenant's failure to execute such addendum shall not affect
Tenant's obligations under this Lease.
2.3 COMMENCEMENT AND EXPIRATION DATES: The term of this Lease (herein
called "Lease Term") shall be for the period specified in the Basic Lease
Information subject to adjustment as provided in Section 30.1 and 30.4 of this
Lease (or until sooner terminated as provided herein). The Lease shall commence
on an area by area basis, as such areas are described in Section 1.13 (the
"Areas") if Landlord gives Tenant notice of an adjustment in the Commencement
Date pursuant to Section 30.1, it shall be deemed a request for an estoppel
statement from Tenant confirming the adjustment pursuant to Article 28.
2.4 RENT: The rents shall be and consist of a Base Rent (herein called
"Base Rent") and Additional Rent (herein called "Additional Rent"). For purposes
of this Lease Agreement, Base Rent and Additional Rent are referred to
collectively as "Rent." Base Rent shall be the amount indicated in the Basic
Lease Information. Base Rent shall be payable in equal monthly installments in
advance on the first day of each and every calendar month during the term of
this Lease (except to the extent otherwise specifically provided elsewhere in
this Lease and except that Tenant shall pay, upon the execution and delivery of
this Lease by Tenant, the sum indicated in the Basic Lease Information, to be
applied against the first installment of Base Rent becoming due under this
Lease). Additional Rent shall consist of all other sums of money as shall become
due from and payable by Tenant to Landlord under this Lease. All Rent shall be
paid in lawful money of the United States of America to Landlord at its office
or such other place, as Landlord shall designate by notice to Tenant. Tenant
shall pay the Base Rent and Additional Rent promptly when due without notice or
demand and without any abatement, deduction or offset for any reason whatsoever,
except as expressly provided in this Lease. If the Commencement Date for an Area
occurs on a day other than the first day of a calendar month, the Base Rent for
that partial calendar month shall be prorated as provided in Section 30.
2.5 LATE CHARGE: Tenant agrees that if Rent from Tenant to Landlord
remains unpaid five (5) days after said amount is due, the amount of such unpaid
Rent or other payments shall be increased by a late charge to be paid to
Landlord by Tenant in an amount equal to two percent (2%) of the amount of the
delinquent Rent or other payment. The provisions of this Section in no way
relieve Tenant of the obligation to pay Rent or other payments on or before the
date on which they are due, nor do the terms of this Section in any way affect
Landlord's remedies pursuant to Article 22 of this Lease in the event Rent is
past due.
2.6 CONFIDENTIALITY: Tenant shall not disclose and shall instruct its
employees and representatives not to disclose the Rent and other terms of this
Lease except to the extent disclosure is reasonably necessary in the conduct of
Tenant's business.
ARTICLE 3. USE:
3.1 AUTHORIZED USE: Tenant shall use the Premises only for the use
specified in Section 1.10 of the Basic Lease Information and for no other
purpose. If any governmental license or permit, other than a Certificate of
Occupancy, shall be required for the proper and lawful conduct of Tenant's
business in the Premises or any part thereof, Tenant, at its expense, shall
duly procure and thereafter maintain such license or permit and submit the same
to Landlord for inspection. Tenant shall at all times comply with the terms and
conditions of each such license or permit. Tenant shall not do or permit
4
<PAGE> 8
anything to be done in, on or, about the Project which will: (i) in any way
obstruct or interfere with the rights of other tenants or occupants of the
Building, injure or unreasonably annoy them; (ii) use of allow the Project to
be used for any unlawful purpose; (iii) cause or maintain or permit any
nuisance, nor commit or allow the commission of any waste, nor use or permit
anything to be done which will in any way conflict with any law, statute,
ordinance, or governmental rule or regulation applicable to Tenant now in force
or which may hereafter be enacted or promulgated; and (iv) not do or permit
anything to be done on the Project or bring or keep anything therein which will
in any way increase the rate of any insurance upon the Project or any of its
contents or cause a cancellation of said insurance or otherwise affect said
insurance in any manner. Tenant shall, at its sole cost and expense, promptly
comply with all laws, statutes, ordinances, and governmental rules,
regulations, or requirements applicable to Tenant now in force or which may
hereafter be in force ("Legal Requirements") and with the requirements of any
board of fire underwriters or similar body now or hereafter constituted
relating to or affecting the condition, use, or occupancy of the Premises or
the Building. Tenant shall not be required to make structural changes unless
related to or affected by; (i) alterations or improvements made by or for
Tenant; or (ii) Tenant's acts. The judgment of any court of competent
jurisdiction or the admission of Tenant in an action against Tenant, whether
Landlord be a party thereto or not, that Tenant has so violated any such law,
statute, ordinance, rule, regulation, or requirement, shall be conclusive of
such violation as between Landlord and Tenant. Tenant shall use its best
efforts to prevent any violation of applicable Legal Requirements by its
partners, directors, officers, agents, employees, invitees and contractors.
3.2 HAZARDOUS SUBSTANCES: Tenant shall not cause or permit the release,
discharge, or disposal nor the presence, use, transportation, generation, or
storage of any Hazardous Material (as hereafter defined) in, on, under, about,
to, or from the Premises, the Building, the Land or the Park Common Areas by
either Tenant, Tenant's employees, agents, contractors, or invitees
(collectively the "Tenant") except customary office supplies used in compliance
with Environmental Laws. Tenant further agrees and covenants to Landlord, its
agents, employees, affiliates and shareholders (collectively the "Landlord")
that:
3.2.1 Tenant shall comply with all Environmental Laws in effect,
or that may come into effect, applicable to the Tenant or Tenant's use and
occupancy of the Premises;
3.2.2 Tenant shall immediately notify Landlord, in writing, of
any existing, pending or threatened (i) investigation, inquiry, claim or action
by any governmental authority in connection with any Environmental Laws; (ii)
third party claims; (iii) regulatory actions; and/or (iv) contamination of the
Premises if the foregoing arise from Tenant's occupancy or otherwise comes to
Tenant's attention;
3.2.3 Tenant shall, at Tenant's expense, investigate, monitor,
remediate, and/or clean up any Hazardous Material or other environmental
condition on, about, or under the Premises required as a result of Tenant's use
of occupancy of the Premises;
3.2.4 Tenant shall keep the Premises free of any lien imposed
pursuant to any Environmental Laws arising from Tenant's occupancy; and
3.2.5 Tenant shall indemnify, defend, and save Landlord harmless
from and against any and all claims, (including personal injury, real, or
personal property damage), actions, judgments, damages, penalties, fines,
costs, liabilities, interest, or attorney fees that arise, directly or
indirectly, from Tenant's violation of any Environmental Laws or the presence
of any Hazardous Material on, under or about the Premises as a result of
Tenant's occupancy.
3.2.6 Landlord shall deliver the Premises in compliance with
Environmental Laws.
The Parties' obligations, responsibilities, and liabilities under this
Section shall survive the expiration or termination of the Lease.
For purposes of this Section the following definitions apply:
"Hazardous Materials" shall mean: (1) any "hazardous waste" and/or
"hazardous substance" defined pursuant to any Environmental Laws; (2) asbestos
or any substance containing asbestos; (3) polychlorinated biphenyls; (4) lead;
(5) radon; (6) pesticides; (7) petroleum or any other substance containing
hydrocarbons; (8) any substance which, when on the Premises, is prohibited by
any Environmental Laws; (9) petroleum; and (10) any other substance, material,
or waste which, (i) by any Environmental Laws requires special handling or
notification of any governmental authority in its collection, storage,
treatment, or disposal or (ii) is defined or classified as hazardous, dangerous
or toxic pursuant to any legal requirements.
"Environmental Laws" shall mean: any and all federal, state and local laws,
statutes, codes, ordinances, regulations, rules or other requirements, relating
to human health or safety or to the environment, including, but not limited to,
those applicable to the storage, treatment, disposal, handling and release of
any Hazardous Materials, all as amended or modified from time to time.
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ARTICLE 4. TENANT'S ACCEPTANCE AND MAINTENANCE OF PREMISES;
4.1 ACCEPTANCE OF PREMISES: Subject to punch list items identified as
provided for in EXHIBIT D, by taking possession of the Premises, Tenant accepts
the Premises as being in the condition in which Landlord is obligated to
deliver them and otherwise in good order, condition and repair.
4.2 BUILDING MAINTENANCE: Landlord shall maintain the Project including
public lobbies, stairs, elevators, corridors and rest rooms, the windows in the
Building, the mechanical, plumbing and electrical equipment serving the
Building, and the Premises in reasonably good order and condition except as
provided in Section 4.3 and except for damage occasioned by the use, misuse, or
abuse of the Tenant, which damage shall be repaired by Landlord at Tenant's
expense subject to Section 11.5; provided that neither Tenant nor Landlord shall
be obligated to repair damage arising from ordinary wear and tear to the
Premises.
4.3 TENANT'S OBLIGATIONS: Except for Landlord's maintenance
responsibilities stated in Section 4.2 above, Tenant shall, at all times during
the term hereof at Tenant's sole cost and expense, keep the Premises in good
order, condition and repair, which obligation shall include, without limitation,
the obligation to maintain, repair and replace as necessary: (i) floor
coverings; (ii) wall coverings; (iii) paint; (iv) casework; (v) heating,
ventilating and air conditioning systems ("HVAC Systems") exclusively serving
the Premises; (vi) window coverings; (vii) nonstandard lights and ballasts
(viii) nonstandard locks and hardware: (ix) all of Tenant's Property (as defined
in Section 14.2 herein) and equipment (whether installed or otherwise); (x) any
and all other Tenant Improvements; provided that Landlord shall provide standard
janitorial services to the Premises. Except as set forth in Section 4.2 above,
Landlord shall have no obligation to repair or maintain the Premises, and except
for Landlord's work described in Exhibit D, Landlord shall have no obligation to
alter, remove, improve, decorate, or paint the Premises or any part thereof, and
Tenant accepts the Premises in their "AS IS" condition; provided, however, that
Landlord shall repair any latent defects in Landlord's work described in Exhibit
D of which Tenant gives Landlord written notice with one (1) year after Tenant's
initial occupancy of the Premises.
4.4 TENANT IMPROVEMENTS: A description of the tenant improvements to be
performed by Landlord ("Tenant Improvements") and the terms under which they are
to be executed is attached hereto as Exhibit D. Landlord shall construct the
Tenant Improvements in accordance with Exhibit D and in a good and workmanlike
manner.
ARTICLE 5. OPERATING EXPENSES AND TAXES:
5.1 OPERATING EXPENSES: For the purpose of this Lease, the term
"Operating Expenses" shall mean all expenses paid or incurred by Landlord (or on
Landlord's behalf) as reasonably determined by Landlord to be necessary or
appropriate for the efficient use, operation, maintenance, repair and
replacement of the Project, including without limitation:
5.1.1 All costs and expenses to Landlord in maintaining fire
and extended coverage insurance including all risk endorsement on the property,
public liability, fidelity, rent loss insurance, difference in conditions and
any other insurance maintained by Landlord covering the use and operation of the
Project, and the part of any claim required to be paid under the deductible
portion of any insurance policies carried by Landlord in connection with the
Project (all such insurance shall be in such amounts as Landlord may reasonably
determine).
5.1.2 All costs and expenses of repairing, replacing,
operating and maintaining the heating, ventilating and air conditioning systems
for the Building (excepting such HVAC Systems as tenants of the Building are
required to maintain under the terms of their leases), including maintenance
contracts therefor and the cost of all utilities required in the operating of
all such systems, except those required to be paid directly by a tenant of the
Building.
5.1.3 All costs and expenses to Landlord in providing
standard services and utilities to tenants of the Building, including common
area janitorial services, window washing and utilities not separately metered;
together with the costs of replacement of electric light bulbs and fluorescent
tubes and ballasts, which Landlord shall have the exclusive right to provide and
install at Tenant's sole cost and expense.
5.1.4 Reasonable costs incurred by accountants, attorneys or
other experts or consultants incurred in connection with operation, maintenance
or management of the Project.
5.1.5 All costs and expenses incurred by Landlord in
operating, managing (including administrative costs), maintaining and repairing
the Project, including without limitation (i) all sums expended in connection
with the Building Common Areas and Park Common Areas for general maintenance and
repairs, resurfacing, painting, restriping, cleaning, sweeping and janitorial
services, window washing, maintenance and repair of elevators, stairways,
sidewalks, curbs, Building signs, sprinkler systems, planting and landscaping;
(ii) the cost of all charges for gas, steam, electricity, heat, air
conditioning, ventilation, water, lighting and other utilities together with any
taxes thereon; (iii) maintenance, repair and replacement of any fire protection
systems, automatic sprinkler systems, lighting systems, storm drainage systems
and any other utility systems; (iv) cost of all tools, equipment and supplies
and personnel to implement such services and to generally monitor and maintain
the Project;
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(v) rental and/or depreciation of machinery and equipment used in such
maintenance and services; (vi) security and fire protection services; trash
removal services; (vii) all costs and expenses pertaining to snow and ice
removal, alarm systems, utilities; (viii) premiums and other costs for worker's
compensation insurance; salaries, wages, withholding taxes, social security
taxes, medical, surgical, union and general welfare benefits (including without
limitation, group life insurance), and pension or other retirement payments of
employees of Landlord or Landlord's property manager engaged in the repair,
maintenance and operation; (ix) personal property taxes, fees for required
licenses and permits, supplies and charges; (x) alterations or improvements
including, without limitation, repair or replacement of furnishings, fixtures,
accessories, floor coverings and painting; (xi) all other charges allocable to
the operation, maintenance, repair of the Project.
Costs and expenses incurred by Landlord in operating, managing and
maintaining the Project which are incurred exclusively for the benefit of
specific tenants of the Building will be billed accordingly and will not be
included within the Operating Expenses. Landlord, however, may cause any or all
of said services to be provided by an independent contractor(s).
5.1.6 Cost of capital improvements, structural repairs or
replacements made to the Project in order to conform to changes subsequent to
the date of this Lease in any applicable laws, ordinances, rules, regulations,
or orders of any governmental or quasi-governmental authority having
jurisdiction over the Project or any such capital improvements, structural
repairs or replacements designed primarily to reduce Operating Expenses.
Expenditures for the foregoing shall be amortized at market rate of return over
the useful life of capital improvement or structural repair or replacement, as
determined by Landlord.
5.2 EXCLUSIONS FROM OPERATING EXPENSES: Operating expenses shall not
include: (i) depreciation or amortization (except as provided above in Section
5.1); (ii) interest on and amortization of debts (except as provide above in
Section 5.1); (iii) Tenant improvements made for any tenants of the Building
including those for Landlord or its tenants; (iv) leasing commissions,
attorneys' fees, costs and disbursements and other expenses incurred in
connection with leasing, renovating, or improving space for tenants or
prospective tenants; (v) costs associated with the collection of rent under any
such lease or defense of Landlord's title to or interest in the Project; (vi)
refinancing costs; (vii) the cost of any work or services performed for any
occupants of any leased space in the Building (including Tenant), whether at
the expense of Landlord or such occupants, to the extent that such work or
services is in excess of the work or services which Landlord makes available to
tenants generally or is required to furnish to Tenant under this Lease; (viii)
damages recoverable by any occupant due to violation by Landlord of any of the
terms and conditions of this Lease or any other lease relating to the Building;
(ix) capital repairs and replacements (except as provided above in Section
5.1); (x) advertising and promotional expenses; (xi) repairs and other work
occasioned by fire or other casualty to the extent Landlord is actually
reimbursed or entitled to reimbursements by insurance proceeds; (xii) fines or
penalties incurred due to violations by Landlord or governmental laws,
regulations, orders and the like: (xiii) expenses for vacant rentable space
within the Building, including the cost of utilities, security and renovation;
(xiv) all overhead, costs and expenses associated with the operation of
Landlord's business, as distinguished from costs and expenses associated with
the operation of the Project such as, without limitation, corporate accounting
and legal fees, fidelity and office liability insurance premiums, cost and
expense of defending or prosecuting litigation not related to the Project,
costs and expense of selling, syndicating, financing or mortgaging Landlord's
interest in the Project, and cost and expense of collection of rent from other
tenants; and (xv) any items of expense as to which the Landlord is reimbursed
by means other than Operating Expense payments by tenants of the Building such
as through insurance proceeds or litigation against the party who wrongfully
caused the expense.
5.3 TAXES: The term "Taxes" shall include (i) all real property taxes
and assessments and personal property taxes, charges, rates, duties and
assessments charged, levied or imposed by any governmental authority with
respect to the Project, and any improvements, fixtures and equipment located
therein or thereon, and with respect to all other property of Landlord, real or
personal, of the Project or any obligation to any governmental entity assessed
upon Landlord as a result of its ownership or operation used in connection with
the operation; (ii) any tax in lieu of a real property tax; (iii) any tax or
excise levied or assessed by any governmental authority on the rentals payable
under this Lease or rentals accruing from the use of the Project; provided that
this shall not include federal or state, corporate or personal income taxes;
and (iv) any tax or excise imposed or assessed against Landlord which is
measured or based in whole or in part on the capital employed by Landlord to
improve the project, or to construct the Building, and (v) all reasonable costs
and expenses incurred by Landlord in contesting or negotiating the same with
governmental authority if Landlord, in its reasonable discretion, elects to
contest or negotiate the same.
If Landlord receives a refund of Taxes then Landlord shall credit such
refund, net of any professional fees and costs incurred by Landlord to obtain
the same, against the Taxes for the Operating Year to which the refund is
applicable. The amount of the Taxes for the Base Year shall reflect any refund
resulting from any appeal, protest, or other action by Landlord contesting the
amount claimed by the governmental authorities and any statements by Landlord
as to the amount of Base Year Taxes shall be tentative until any such contest
is completed.
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ARTICLE 6. PAYMENT OF OPERATING EXPENSES:
6.1 OPERATING YEAR: As used in this Article 6, the term "Operating Year"
shall mean each calendar year of the Lease Term and in the event this Lease
begins or ends on any date other than the first day of the calendar year, the
calculations, costs and payments referred to herein shall be prorated as
provided in Section 30.
6.2 TENANT'S PRO RATA SHARE: Throughout the entire Lease Term, Tenant
shall pay, as Additional Rent, the Tenant's Percentage of the increase in
Operating Expenses and Taxes for the Project, if any, over the Operating
Expenses and Taxes for the applicable Base Year as defined in Sections 1.17 and
1.18 of the Basic Lease Information. Tenant's pro rata share of the increase in
Operating Expenses and Taxes for the Project for each Operating Year shall be
calculated as follows: the Operating Expenses (or Taxes) for each Operating Year
less the Operating Expenses for the Base Year shall be multiplied by Tenant's
Percentage. If in any Operating Year Tenant occupies the Premises for less than
the full Operating Year, then the product from the foregoing multiplication
shall be multiplied by the percentage of the Operating Year in which Tenant
occupied the Premises. "Tenant's Percentage" shall mean a percentage, the
numerator of which is the number of rentable square feet of the Premises and the
denominator of which is the total number of rentable square feet of the
Building, whether or not such space is actually rented (currently estimated at
96,211 rsf). Tenant acknowledges that, to the extent Operating Expenses do not
apply to the Building exclusively, Landlord will allocate Operating Expenses of
the Project to the Building based on Landlord's determination of a fair
allocation of costs among the buildings at the Project on a basis consistently
applied. Landlord shall not change its basis of Project Operating Costs
allocation in a manner that would materially increase the percentage of Project
Operating Expenses allocated to the Building, provided that this sentence
applies only to Landlord's allocation method, and does not apply to changes in
the results of application of Landlord's allocation methods over time. The
Tenant's Percentage (as specified in the Basic Lease Information, and adjusted
as provided herein) may be changed from time to time to reflect any change in
the total rentable square footage in the Building. All calculations of rentable
area shall be on the basis as originally used to determine the rentable area
shown in the Basic Lease Information.
During the periods when the Building is not fully occupied, Landlord shall
reasonably adjust Operating Expenses to reflect the costs that would normally
have been incurred had the Building been fully occupied for the entire period
and the Building had been fully assessed for property tax purposes. The Building
shall be considered fully occupied when occupancy reached ninety-five percent
(95%). If during any Operating Year the tenant of any space in the Building
performs work or services thereon pursuant to a written agreement between
Landlord and such tenant in lieu of having Landlord perform the same and the
cost thereof would have been included in Landlord's Operating Expenses, then in
any such event(s), at Landlord's option, the Operating Expenses for such
Operating Year shall be adjusted to reflect the Operating Expenses that would
have been incurred if Landlord had performed such work or services, as the case
may be. If the total rentable area of the Building changes, Landlord shall
reasonably determine a revised Tenant's Percentage reflecting the changes as of
the date of such change.
6.3 WRITTEN STATEMENT OF ESTIMATE: For each Operating Year during the
Lease Term after the Base Year, Landlord shall furnish Tenant with a written
statement setting forth Tenant's Pro Rate Share of the estimated increase in
Operating Expenses and Taxes for the next Operating Year. Tenant shall pay to
Landlord as Additional Rent commencing on January 1 of the Operating Year, and
thereafter on the first day of each calendar month, an amount equal to
one-twelfth of the amount of Tenant's Pro Rata Share of such increase as shown
in Landlord's written statement. In the event Landlord delivers the written
statement late, Tenant shall continue to pay to Landlord an amount equal to
one-twelfth of Tenant's Pro Rata Share of the estimated increase in Operating
Expenses for the immediately preceding Operating Year until Landlord furnishes
the written statement, at which time Tenant shall pay the amount of any excess
of the Tenant's Pro Rata Share for the expired portion of the current Operating
Year over the Tenant's actual payments during such time and any excess payments
by Tenant shall be credited to the net due payment of Rent from Tenant. The late
delivery of any written statement by Landlord shall not constitute a waiver of
Tenant's obligation to pay its Pro Rata Share of the increase in Operating
Expenses nor subject the Landlord to any liability, but Landlord shall use
reasonable efforts to deliver such written statements of Operating Expenses as
soon as reasonably possible.
6.4 REESTIMATIONS: At any time from time to time during the Lease Term,
Landlord may furnish Tenant with written notice of a reestimation of the annual
Operating Expenses and Taxes to reflect more accurately Landlord's most recent
estimate of the current Operating Expenses and Taxes. Commencing with the first
day of the calendar quarter next succeeding delivery of such notice to Tenant,
and continuing on the first day of each calendar month during the Term (until
subsequently reestimated), Tenant shall pay to Landlord one-twelfth (1/12th) of
the Tenant's share of the estimated Operating Expenses and Taxes, as
reestimated.
6.5 ANNUAL ADJUSTMENTS: Within a reasonable time following the end of each
calendar year during the Lease Term, Landlord shall furnish to Tenant an
itemized statement certified as correct by Landlord, setting forth the total
Operating Expenses and Taxes for the preceding calendar year, the amount of
Tenant's share of such Operating Expenses and the payments made by Tenant with
respect to such calendar year. Landlord will use all reasonable commercial
efforts to deliver such statement by not later than June 30 of each calendar
year. If Tenant's share of the actual Operating Expenses and Taxes
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for such year exceeds the payment so made by Tenant, based on the Landlord's
estimate. Tenant shall pay Landlord the deficiency within thirty (30) days
after receipt of said statement. If said payments by Tenant, based on
Landlord's estimate, exceed Tenant's share of the actual Operating Expenses and
Taxes, Landlord will credit the amount of such overpayment against Tenant's
next Operating Expense and Tax payment due; or, if the Lease has expired or
terminated, Landlord will refund such amount to Tenant within thirty (30) days
after the date of such estimate, subject to set off by Landlord against any
sums then due Landlord by Tenant.
6.6 TENANT EXAMINATION: In addition, Tenant may, upon at least five days
advance written notice to Landlord and during business hours, examine any
invoices, receipts, canceled checks, vouchers or other instruments used to
support the figures shown on the Operating Statement; provided, however, that
Tenant shall only be entitled to such an examination once in each Operating
Year, and the examination shall not be conducted by anyone who is engaged on a
contingent fee basis to represent Tenant or who is a competitor of Landlord.
Property managers and commercial building owners shall be deemed competitors of
Landlord. The person conducting the examination on behalf of Tenant shall enter
into a confidentiality agreement reasonably satisfactory to Landlord. In the
event the examination discovers an overcharge in excess of 5% of the Operating
Expense payments during the Operating Year covered by the examination, Landlord
shall reimburse Tenant for the actual out-of-pocket costs reasonably incurred
by Tenant due to the examination.
6.7 DISPUTES: Each such statement given by Landlord pursuant to this
Section shall be conclusive and binding upon Tenant unless within one-hundred
twenty (120) days after the receipt of such statement Tenant shall notify
Landlord that it disputes the correctness of the statement, specifying the
particular respects in which the statement is claimed to be incorrect. If such
disputes shall not have been settled by agreement, either party may request to
have the dispute mediated, and if the parties agree to mediate, the mediation
shall be conducted upon application of either party through the Arbitration
Service of Portland, Inc. ("ASP"), with a single mediator. Tenant hereby agrees
that a dispute over the statement or ay good faith error by Landlord in
interpreting or applying Article 5 or in calculating the amounts in the
statement shall not be a breach of this Lease by Landlord. If any legal
proceeding over the statement is resolved against Landlord, this Lease shall
remain in full force and effect and Landlord shall not be liable for any
consequential damages, and pending the determination of such dispute, Tenant,
within ten (10) days of receipt of such statement, shall pay Additional Rent in
accordance with the statement, without prejudice to Tenant's positions. If the
dispute shall be determined in Tenant's favor, landlord shall forthwith pay to
Tenant the amount of Tenant's overpayment of Additional Rents resulting from
compliance with the statement.
6.8 PAYMENT: If an Operating Year ends after the expiration or termination
of this Lease, the Additional Rent in respect thereof payable under this
Section shall be paid by Tenant within ten (10) days of its receipt of the
Operating Statement for such Operating Year.
6.9 NO REDUCTION IN AMOUNT OF MONTHLY BASE RENT: Nothing in the Lease
shall be construed to mean the Monthly Base Rent amount specified in the Basic
Lease Information shall be reduced due to any decrease in Operating Expenses, it
being intended that the amount of the Monthly Base Rent remain fixed as
specified in the Basic Lease Information throughout the Lease Term.
ARTICLE 7. SECURITY DEPOSIT:
7.1 SECURITY DEPOSIT: Upon the execution of this Lease by Tenant, Tenant
shall deliver to Landlord the Security Deposit indicated in the Basic Lease
Information as security for the full and faithful performance and observance by
Tenant of Tenant's covenants and obligations under this Lease and Tenant shall
not be entitled to interest thereon (the "SECURITY DEPOSIT"). Failure to
promptly deliver or (not later than thirty days prior to expiration) extend
such Security Deposit shall be considered an Event of Default under this Lease.
If Tenant defaults in the full and prompt payment and performance of any of
Tenant's covenants and obligations under this Lease, including without
limitation the payment of Base Rent and Additional Rent and fails to cure such
default as provided for under this Lease, Landlord may use, apply or retain the
whole or any part of the Security Deposit so deposited to the extent required
for the payment of any Base Rent and Additional Rent or any other sums as to
which Tenant is in default or for any such sums which Landlord may expend or
may be required to expend by reason of Tenant's default in respect of any of
the terms, covenants and conditions of this Lease, including, but not limited
to, any damages or deficiency in rent in the reletting of the Premises, whether
such damages or deficiency accrue before or after summary proceedings or other
re-entry by Landlord.
7.2 DISPOSITION OF SECURITY DEPOSIT: If Landlord shall so use, apply or
retain the whole or any part of the Security Deposit, Tenant shall upon demand
immediately deposit with Landlord a sum equal to the amount so used, applied or
retained, as security. If Tenant shall fully and faithfully comply with all of
Tenant's covenants and obligations under this Lease, the Security Deposit or
any balance thereof shall be returned or paid over to Tenant within thirty (30)
days after the date on which this Lease shall expire or sooner end or
terminate. In the event of any sale of Landlord's interest in the Building or
any master lease of the Building by Landlord to a third party, whether or not
in connection with a sale or leasing of the Land, Landlord shall either
transfer the Security Deposit to the vendee or master lessee or the vendee or
master lessee shall assume Landlord's obligations under this Lease in respect
of the Security Deposit. Upon transfer of the Security Deposit to the vendee or
master lessee, Landlord shall thereupon be released by Tenant from all
liability for the return or payment thereof; and if the vendee or
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master lease expressly assumes Landlord's obligations in respect of the
Security Deposit, Tenant shall look solely to the new landlord for the return
or payment of the same. Further, the provisions hereof shall apply to every
transfer or assignment made of the same to a new landlord. Tenant shall not
assign or encumber or attempt to assign or encumber the monies deposited herein
as security and neither Landlord nor its successors or assigns shall be bound
by any such assignment, encumbrance, attempted assignment or attempted
encumbrance.
ARTICLE 8. SUBORDINATION, NOTICE TO SUPERIOR LESSORS AND MORTGAGEES:
8.1 SUBORDINATION: Any lease to which this Lease is, at the time referred
to, subject and subordinate is herein called "Superior Lease" and the lessor of
a Superior Lease or its successor in interest, at the time referred to, is
herein called "Superior Lessor," and any mortgage to which this Lease is, at
the time referred to, subject and subordinate is herein called "Superior
Mortgage" and the holder of a Superior Mortgage, or its successor in interest,
at the time referred to, is herein called "Superior Mortgagee." This Lease, and
all rights of Tenant hereunder, are and shall be subject and subordinate to any
ground leases covering the Land and/or the Building now or hereafter existing,
and to all mortgages which may now or hereafter affect the Land and/or the
Building and/or any of such leases, whether or not such mortgages shall also
cover other lands and/or buildings and/or leases, to each and every advance
made or hereafter to be made under such mortgages, and to all renewals,
modifications, replacements and extensions of such leases and such mortgages.
This Section shall be self-operative, and no further instrument of
subordination shall be required. In confirmation of subordination, Tenant shall
execute, acknowledge or deliver any instrument that Landlord, any Superior
Lessor or any Superior Mortgagee may reasonably request to evidence such
subordination within fifteen (15) days after written demand from Landlord;
failing to deliver such instrument, Tenant does hereby make, constitute and
irrevocably appoint Landlord as Tenant's attorney-in-fact in Tenant's name and
stead to do so. Landlord represents that there is no current ground lease,
trust deed or mortgage on the Project. As to any subsequently recorded ground
lease, trust deed or mortgage, Tenant's subordination to the same shall be
subject to such ground lessor, lender or their Successor Landlord's agreement
no to disturb Tenant's right to possession under this Lease, so long as Tenant
is not in default of this Lease at the time of succession, in the event of
exercise of any rights under the Superior Lease or the Superior Mortgage, as
the case may be.
8.2 NOTICE: If any act or omission of Landlord would give Tenant the
right, immediately or after lapse of a period of time, to cancel or terminate
this Lease, or to claim a partial or total eviction, Tenant shall not exercise
such right; (i) until it has given written notice of such act or omission to
Landlord and each Superior Mortgagee and each Superior Lessor whose name and
address shall previously have been furnished to Tenant; and (ii) until a
reasonable period of time for such parties to cure the condition has passed.
8.3 ATTORNMENT: For the purposes of this Section, the term "Successor
Landlord" shall mean the Superior Lessor or Superior Mortgagee if the same
succeeds to the rights of Landlord under this Lease, whether through possession
or foreclosure action or delivery of a new lease or deed, or any third party
that succeeds to the rights of Landlord under this Lease by virtue of having
purchased the Land, the Building or the Park Common Areas at a foreclosure
sale. So long as Tenant is not in default of this Lease at the time of
succession, the Successor Landlord shall accept Tenant's attornment, and shall
not disturb Tenant's quiet possession of the Premises. Tenant shall attorn to
and recognize such Successor Landlord as Tenant's Landlord under this Lease and
shall promptly execute and deliver any instrument that such Successor Landlord
may reasonably request to evidence such attornment.
8.4 LANDLORD'S BREACH OF LEASE: Landlord shall not be in default unless
Landlord fails to perform obligations required of Landlord within thirty (30)
calendar days after written notice by Tenant to Landlord specifying wherein
Landlord has failed to perform such obligations; provided, however, that if the
nature of Landlord's obligation is such that more than thirty (30) calendar days
are required for performance, then Landlord shall not be in default if Landlord
commences performance within such thirty (30) calendar day period and thereafter
diligently prosecutes the same to completion. If Landlord fails to perform such
obligations within the period allowed by this Section, and such obligations
relate to the repair or maintenance of the Premises, Tenant may at its option
deliver to Landlord an additional written notice stating that Tenant intends to
exercise its rights under this Section 8.4 and specifying the remedial action
Tenant intends to take, and if Landlord fails to perform the obligation
specified in such notice within such ten days, Tenant may perform such
obligation, in which case Landlord shall reimburse tenant's reasonable
out-of-pocket costs for such performance within ten (10) days after invoicing,
with interest at the rate stated in Section 22.4 accruing from the date of
Tenant's expenditure.
ARTICLE 9. QUIET ENJOYMENT:
So long as Tenant pays all of the Base Rent and Additional Rent and
performs all of Tenant's other obligations hereunder, Tenant shall peaceably
and quietly have, hold and enjoy the Premises and its nonexclusive rights in
the common areas of the Project without hindrance, ejection or molestation by
Landlord or any person lawfully claiming through or under Landlord, subject
nevertheless, to the provisions of this Lease and to any Superior Lease and/or
Superior Mortgage.
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ARTICLE 10. ASSIGNMENT AND SUBLETTING:
10.1 GENERALLY: - Tenant shall not sell, assign, sublet, encumber or
otherwise transfer by operation of law or otherwise this Lease or any interest
herein, or the Premises or any portion thereof, without the prior written
consent of Landlord (which Landlord shall not unreasonably withhold or delay)
nor shall Tenant permit any lien to be placed on the Tenant's interest by
operation of law or otherwise. Subject to Section 10.4, any change in effective
control of a corporation, partnership, limited liability company, or other
entity which is Tenant shall be deemed a transfer of this Lease. Regardless of
Landlord's consent, no transfer hereunder by Tenant shall release or discharge
Tenant from its obligations or liability under this Lease. This Lease shall
bind any assignee, transferee or sublessee. Any sale, assignment, encumbrance,
subletting, occupation, lien or other transfer of this Lease which does not
comply with the provisions of this Article 10 shall be void. Consent to one
transfer, assignment or sublease shall not be deemed consent to a subsequent
transfer, assignment or sublease. Any listing on Building directories or other
signage using a name other than Tenant's in conjunction with the Premises will
not be deemed and it will not substitute for, Landlord's consent, as required
by this Lease, to any sublease, assignment or other occupancy of the Premises.
10.1.1 Tenant shall, by written notice, advise Landlord of its
desire from and after a stated date (which shall not be less than thirty (30)
days after the date of Tenant's notice), to transfer its interest in the
Premises or any portion thereof for any part of the term hereof, and such
notice by Tenant shall state the name and address and business of the proposed
transferee, include a true, complete and executed original counterpart of the
proposed transfer instrument with said notice, financial statements of the
proposed transferee, the intended use of the Premises, and such other
information as the Landlord may reasonably request.
10.1.2 Upon any request by Tenant to transfer all or any part of
the Premises, Landlord shall have the right to either: (i) permit the transfer
on the conditions referred to in Section 10.2 and any other conditions Landlord
may impose; or (ii) reasonably deny Tenant's request, in which event this Lease
shall continue in full force and effect and unmodified; or (iii) except for
Permitted Transfers, if the transfer (in one or more transactions) consists of
50% or more of the Premises, terminate this Lease within thirty (30) days unless
Tenant withdraws its proposed transfer within ten (10) days after the date of
Landlord's written notice of its intent to terminate. If Tenant fails to timely
withdraw its proposed transfer, Landlord may then terminate this Lease with
respect to the entire Premises or the portion of the Premises described in
Tenant's notice and if Landlord desires, to then lease such space to any party
including the transferee identified in Tenant's notice at whatever times
Landlord establishes. Any such termination with respect to less than all of the
Premises shall result in a reduction in Rent equal to the percentage of the
Premises as to which the Lease is terminated.
10.2 CONDITIONS OF LANDLORD'S CONSENT: As a condition to Landlord's
prior written consent as provided for in this Section, (i) Tenant shall pay
Landlord's reasonable legal fees and costs incurred due to the transfer not to
exceed One Thousand Dollars ($1,000); (ii) the transferee(s) shall agree in
writing to comply with and be bound by all of the terms, covenants, conditions,
provisions and agreements of this Lease; and (iii) Tenant shall deliver to
Landlord, promptly after execution, an executed copy of each transfer
instrument and an agreement of said compliance by each transferee. Landlord may
require as a condition of granting consent to a transfer that Tenant shall pay
to Landlord one-half (50%) of all profits from the transfer determined by
deducting from the total consideration paid directly or indirectly to or for
the benefit of Tenant or its designee for the transferred interest, the
reasonable costs of the transfer incurred by the Tenant and subtracting the
remaining rent obligations of the Tenant at such time under this Lease. For
purposes of determining all profits from the transfer, substance shall control
over form such that Landlord may ignore any attempt by Tenant to inflate the
purchase price of any other assets transferred in an attempt to conceal the
profit on the transfer of the Tenant's interest in this Lease. Sums payable
hereunder shall be paid to Landlord as and when paid by the transferee to
Tenant. This provision shall not apply to Permitted Transfers.
10.3 SUBLETTING BY LANDLORD: If Tenant shall at any time request
Landlord to sublet the Premises for Tenant's account, Landlord or its agent is
authorized to receive the keys for such purposes without releasing Tenant from
any of its obligations under this Lease, and Tenant hereby releases Landlord of
any liability for loss or damage to any of the Tenant's Property in connection
with such subletting.
10.4 PERMITTED TRANSFERS: Provided that no Event of Default of Tenant
under this Lease shall then exist, Landlord's consent shall not be required in
connection with transfers of shares in Tenant in connection with venture
capital financing, initial public offerings or if Tenant is publicly listed.
Tenant shall be permitted to assign this Lease or to sublet all or part of the
Premises without Landlord's consent to an entity controlling, controlled by or
under common control with Tenant, or in connection with a merger or
consolidation or in connection with the sale of all or substantially all of
Tenant's stock or assets, provided the same shall not release the original
Tenant, and provided further that Tenant provides Landlord with not less than
thirty (30) days prior written notice of such transaction, and provided further
that the transferee must continue to comply with all other provisions of this
Lease.
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ARTICLE 11. INSURANCE:
11.1 PUBLIC LIABILITY INSURANCE: Tenant at its expense, shall maintain at
all times during the term of this Lease, comprehensive public liability
insurance, contractual liability insurance and property damage liability
insurance in respect of the Premises and the conduct or operation of business
therein, with Landlord, its asset manager and property manager, if any, and any
Superior Lessor or Superior Mortgagee whose name and address shall previously
have been furnished to Tenant, as additional insureds, with Two Million and
No/100 Dollars ($2,000,000.00) minimum combined single limit coverage, or its
equivalent. The limits of such insurance shall not limit the liability of
Tenant. All such insurance shall insure the performance by Tenant of the
indemnity agreement as to liability for injury to, illness of, or death of
persons and damage to property set forth in Article 18. For insurance required
to be maintained by Tenant under Sections 11.1 and 11.2, Tenant shall deliver to
Landlord and any additional insured ACORD Form 25-S certificates of insurance,
or any other form reasonably requested by Landlord, issued by the insurance
company or its authorized agent, at least ten (10) days before the Commencement
Date. Tenant shall procure and pay for renewals of such insurance from time to
time before the expiration thereof, and Tenant shall deliver to Landlord and
any additional insured such renewal certificate before the expiration of any
existing policy.
11.2 PROPERTY INSURANCE: Landlord shall maintain fire and extended
coverage insurance on the Building, subject to such reasonable deductible as
Landlord may establish. Landlord shall have the right to place on the Building
any other insurance as Landlord shall deem necessary. Tenant shall obtain and
bear the expense of casualty insurance insuring the property of Tenant and
Tenant Improvements on the Premises against such risks and naming Landlord and
any Superior Lessor or Superior Mortgagee of the Building of whose identity
Tenant is notified, as additional insureds. As Additional Rent for the
Premises, Tenant shall reimburse Landlord for Tenant's proportionate share of
the cost of all insurance maintained by Landlord with respect to the Building
as set forth in Section 5.1.1.
11.3 ACCEPTABLE INSURANCE COMPANIES: All insurance policies required to be
carried by Tenant hereunder shall be issued by responsible insurance companies
authorized to issue insurance in the State of Oregon rated A-7 or higher by
Best's Insurance Rating Service.
11.4 INCREASE IN COVERAGE: Landlord may from time to time, but not more
frequently than once every five (5) years, require that the amount of
comprehensive public liability insurance to be maintained by Tenant under this
Section be increased so that the amount thereof adequately protects the
Landlord's interest based on amounts of coverage required of comparable tenants
in comparable buildings.
11.5 WAIVER OF SUBROGATION: The insurance coverage required by this
Article 11 shall contain a clause pursuant to which the insurance carriers
waive all rights of subrogation against Landlord or Tenant, as the case may be,
with respect to losses payable under such policies. Tenant and Landlord each
waives any and all right of recovery against the other, or against the
officers, partners, employees, agents and representatives of the other, for
loss of or damage to such waiving party or its property or the property of
others under its control, if and to the extent that such loss or damage is
insured against under any casualty insurance policy in force at the time of
such loss or damage, or which is to be insured against under the terms of this
Lease. Any applicable deductible amount or self-insured amount shall be treated
as through it were recoverable under such policies.
ARTICLE 12. RULES AND REGULATIONS:
Tenant shall faithfully observe and comply with the rules and regulations
printed on or annexed to this Lease as Exhibit E and all reasonable
modifications thereof and additions thereto from time to time established by
Landlord by written notice to Tenant; provided, however, that no such
modification shall materially adversely affect Tenant's rights or obligations
under this Lease. Landlord shall not be responsible for the nonperformance by
any other tenant or occupant of the Building of any said rules and regulations
but Landlord shall use reasonable efforts to enforce the rules and regulations
applicable to any other Building occupant upon Tenant's request.
ARTICLE 13. ALTERATIONS:
13.1 REQUIREMENTS: Tenant shall not make or suffer to be made any
alterations, additions, or improvements ("ALTERATIONS") in, on, or to the
Premises or any part thereof without the prior written consent of Landlord.
Landlord will not unreasonably withhold its consent to any Alterations
provided (i) the Alterations are nonstructural, do not impair the strength of
the Building or any part thereof, and are not visible from the exterior of the
Premises; (ii) the Alterations do not affect the proper functioning of HVAC
Systems, mechanical, electrical, sanitary or other utilities, systems and
services of the Building, or increase the usage thereof by Tenant; (iii)
Landlord shall have approved the final plans and specifications for
the Alterations and all contractors who will perform the alterations; (iv) if
Landlord is performing the Alterations, Tenant pays to Landlord a fee for
Landlord's indirect costs, field supervision or coordination in connection with
the Alterations equal to fifteen percent (15%) of the actual cost of such
Alterations; (v) materials used are consistent with the existing materials in
the Premises and comply with Building standards; and (vi) before proceeding
with any
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Alteration which will cost more than $10,000, Tenant obtains and delivers to
Landlord a performance bond and a labor and materials payment bond for the
benefit of Landlord, issued by a corporate surety licensed to do business in
Oregon each in an amount equal to one hundred twenty-five percent (125%) of the
estimated cost of the Alterations and in form satisfactory to Landlord, or such
other security as shall be reasonable satisfactory to Landlord. Unless all of
the foregoing conditions are satisfied, Landlord shall have the right to
withhold its consent to the Alterations in Landlord's sole and absolute
discretion. This provision shall not apply to the initial build out of the
Premises including the third floor and second floor.
13.2 REMOVAL AND RESTORATION: After the expiration or sooner termination of
the Lease Term and upon demand by Landlord, Tenant shall remove any or all
Alterations and Tenant Improvements made by or for the account of Tenant,
designated by Landlord at the time of approval to be removed, and Tenant shall
repair and restore the Premises to their original condition, subject to
ordinary wear and tear. Such removal, repair and restoration work shall be done
promptly and with all due diligence at Tenant's cost and expense. The
provisions of this Article 13 shall not apply to the initial Tenant Improvements
described in to this Lease.
13.3 COMPLIANCE: All Alterations (including any modifications of the
Building or Building Common Areas occasioned by the Alterations) shall comply
with applicable laws in effect at the time they are made, the other terms of
this Lease, and plans and specifications approved by Landlord. Landlord shall
have no duty to Tenant with respect to the safety, adequacy, construction,
efficiency or compliance with laws, with regard to the design of the
Alterations, the plans or specifications therefore, or any other matter related
to the Alterations, nor shall the approval by Landlord of any such alterations
be deemed to be a representation as to the safety, adequacy, construction,
efficiency or compliance of said alterations.
13.4 NO LIENS: Except to the extent of any initial Tenant Improvements
described in Exhibit D which are to be performed by or on behalf of Landlord,
Tenant, at its expense, and with diligence and dispatch, shall procure the
cancellation or discharge of all notices of violation arising from or otherwise
connected with Alterations, or any other work, labor, services, equipment, or
materials done for or supplied to tenant, or any other person claiming through
or under Tenant, which shall be issued by any public authority having or
asserting jurisdiction. Tenant shall notify Landlord of, and shall defend,
indemnify and save harmless Landlord and any Superior Lessor or Superior
Mortgagee from and against any and all construction and other liens and
encumbrances filed in connection with Alterations, or any other work, labor,
services or materials done for or supplied to Tenant, or any person claiming
through or under Tenant, including, without limitation, security interests in
any materials, fixtures, equipment, or articles so installed in and constituting
part of the Premises and against all costs, expenses and liabilities incurred
in connection with any such lien or encumbrance or any action or proceeding
brought thereon. Tenant, at its expense, shall procure the satisfaction or
discharge of record of all such liens and encumbrances within thirty (30) days
after the filing thereof. Nothing herein contained shall prevent Tenant from
contesting, in good faith and at its own expense, any notice of violation, or
lien provided Tenant posts for the protection of Landlord security acceptable
to Landlord.
ARTICLE 14. LANDLORD'S AND TENANT'S PROPERTY:
14.1 LANDLORD'S PROPERTY: Except as otherwise provided in Section 14.2, all
fixtures, carpeting, equipment, improvements and appurtenances attached to or
built into the Premises at the commencement of or during the Lease Term, whether
or not by or at the expense of Tenant, shall upon the expiration or earlier
termination be and remain a part of the Premises, shall be deemed the property
of Landlord and shall not be removed by Tenant, except as provided in Section
13.2 and 14.2 of this Lease; provided, that at Landlord's written request,
Tenant shall, at its sole expense and upon the expiration or earlier termination
of the Lease, remove those items specified by Landlord at the commencement or
during the term, including any or all fixtures, equipment, improvements,
appurtenances and other personal property, which are deemed herein the property
of Landlord, but not including the initial Tenant Improvements provided by
Landlord pursuant to Exhibit D of this Lease. Tenant's covenant to remove
property specified by Landlord shall survive the expiration or earlier
termination of this Lease.
14.2 TENANT's PROPERTY: All unattached business and trade fixtures,
machinery and equipment, computer and communications equipment and office
equipment which are installed in the Premises by or for the account of Tenant
without expense to Landlord and which can be removed without structural damage
to the Building and all furniture, furnishings (excluding window coverings) and
other articles of movable personal property owned by Tenant and located in the
Premises (herein collectively called "TENANT'S PROPERTY") shall be and remain
the property of Tenant and may be removed by Tenant at any time during the term
of this Lease; provided, that if any of Tenant's Property is removed, Tenant
shall repair or pay the cost of repairing any damage to the Premises or to the
Building resulting from the installation and/or removal thereof. Any equipment
or other property for which Landlord shall have granted any allowance or credit
to Tenant shall be deemed not to have been installed by or for the account of
Tenant without expense to Landlord, shall not be considered Tenant's Property,
and shall be deemed the property of Landlord.
14.3 ABANDONMENT: Any items of Tenant's Property may be deemed, at the
option of Landlord, to have been abandoned if left in the Premises after the
abandonment deadline, and in such case such items may be retained by Landlord,
without accountability, in such a commercially reasonable manner as Landlord
shall determine at Tenant's expense. The abandonment deadline means the earlier
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of the expiration date of this Lease, or five (5) days following an earlier
termination date, or three (3) business days following entry of an order of
possession for restoration of the Premises to Landlord.
ARTICLE 15. SERVICES AND UTILITIES:
15.1 UTILITIES: Provided the Tenant shall not be in default
hereunder, and subject to any contrary provisions of this Lease and to the
rules and regulations of the Building, Landlord agrees to furnish to the
Premises (i) heat and air conditioning from 7:00 A.M. to 6:00 P.M. on weekdays
and 8:00 A.M. to 1:00 P.M. on Saturdays, exclusive of legal holidays, (ii)
continuous water and electricity service reasonably suitable for the intended
use of the Premises, (iii) janitorial services after 6:00 P.M. on weekdays
exclusive of legal holidays, and (iv) continuous elevator service which shall
mean service by unattended automatic elevators. Landlord may provide additional
or after-hours heating or air-conditioning on such terms as Landlord may
establish from time to time. Landlord shall base such charge on Landlord's
actual costs of providing such service (inclusive of wear and tear on the HVAC
system) without profit to Landlord. Tenant shall be responsible for providing
HVAC service to Tenant's computer rooms, and Landlord may separately meter
electrical draw of such computer room HVAC usage, in which case Tenant shall
pay to Landlord such metered charge with the next payment of Rent. Tenant
agrees to use reasonable efforts to keep and cause to be kept closed all window
coverings when necessary because of sun's position, and Tenant also agrees at
all times to cooperate fully with Landlord and to abide by all the regulations
and requirements which Landlord may prescribe for the proper functioning and
protection of the heating, ventilating, and air-conditioning system. Wherever
heat-generating machines, excess lighting or equipment are used in the Premises
which affect the temperature otherwise maintained by the air-conditioning
system, Landlord reserves the right after thirty (30) days' notice to Tenant and
opportunity to cure (except in cases of emergency or threatened damage to
Building systems) to install supplementary air-conditioning units in the
Premises, and the cost thereof, including the cost of installation and the cost
of operation and maintenance thereof, shall be paid by Tenant to Landlord upon
demand by Landlord. Any sums payable under this Article 15 shall be considered
Additional Rent and may be added to any installment of Base Rent thereafter
becoming due, and Landlord shall have the same remedies for a default in
payment of such sum as for a default in the payment of Base Rent.
15.2 EXCESS USAGE: If Tenant uses excessive amounts of utilities or
services of any kind as reasonably determined by Landlord because of operation
outside of normal use or normal Building hours, high demands from nonstandard
or excessive amounts of office machinery or equipment, nonstandard lighting, or
any other cause, Landlord may impose a reasonable charge for supplying such
extra utilities services, which charge shall be payable monthly by Tenant in
conjunction with Rent payments. Landlord may install a special meter at
Tenant's expense to measure the amount of water, electric current or other
resource consumed for any such other use. In case of dispute over any extra
charge under this Section, Landlord shall designate a qualified independent
engineer whose decision shall be conclusive on both parties. The party not
prevailing in such dispute shall pay the cost of such engineer's determination.
Tenant may not use equipment at the Premises with an overall electrical draw in
excess of 7.5 watts per rentable square foot of the area of the Premises.
15.3 DISCLAIMER: Landlord shall not be in default hereunder or be
liable for any damages directly or indirectly resulting from, or by reason of
(i) the installation, use or interruption of any use of any equipment in
connection with the furnishing of the foregoing utilities and services, unless
such interruption is caused by Landlord's failure to reasonably maintain and
operate such equipment (including HVAC), (ii) failure to furnish or delay in
furnishing any such utilities or services when such failure or delay is caused
by acts of God or the elements, labor disturbances of any character, any other
accidents or other condition beyond the reasonable control of Landlord, or by
the making of regular maintenance repairs or improvements to the Premises or
the Building, or (iii) the limitation, curtailment, rationing or restriction on
uses of water or electricity, gas or any other form of energy or any other
service or utility whatsoever serving the Premises or Building. Furthermore,
Landlord shall be entitled to cooperate voluntarily in a reasonable manner with
the efforts of national, state or local governmental agencies or utilities
suppliers in reducing energy or other resource consumption.
15.4 USE OF COMMON AREAS AND FACILITIES: The Project, including,
without limitation, parking areas, lighting facilities, pedestrian sidewalks
and ramps, landscaped areas, exterior stairways, rest rooms, and other areas
and improvements shall at all times be subject to the exclusive control and
management of Landlord. Without limiting the scope of such discretion, Landlord
shall have the full right and authority to employ all personnel and to
establish, modify and enforce reasonable rules and regulations necessary for
the proper operation and maintenance of the Project. Landlord shall have the
right to close from time to time all or any portion of the Project to such
extent as, in the opinion of Landlord's legal counsel, may be legally sufficient
to prevent a dedication thereof or the accrual of any rights to any person
(other than Tenant) or the public therein. If the amount of such areas be
diminished, Landlord shall not be subject to any liability nor shall Tenant be
entitled to any compensation or diminution or abatement of Rent, nor shall such
diminution of such areas be deemed constructive or actual eviction.
15.5 PARKING FACILITIES: Tenant shall have the right throughout the
Lease Term to use non-reserved parking spaces, on a non-exclusive basis jointly
with the other tenants of the Building, and their employees, agents and
invitees, subject to terms and conditions which may be changed from time to
time. Landlord shall maintain a parking ratio of 4 spaces per 1,000 square feet
of rentable area in the Building.
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15.6 SIGNAGE: Tenant shall not install or keep any of its own signs
on or about the Premises which are visible from any public areas without the
prior written consent of Landlord, which Landlord shall not unreasonably
withhold if such signage is in compliance with Landlord's signage program. Any
such sign request shall be made in accordance with the application process in
place at the time of the request, and all such signs shall be in compliance with
Landlord's signage program. If there is any sign on or about the Premises or
Building without the consent of Landlord, Landlord may remove any such signs and
Tenant shall pay Landlord the cost of removal together with interest as set
forth in Section 22.4 from date of expenditure until payment is made in full.
Tenant shall pay promptly after Landlord invoices Tenant for such costs. If
Landlord consents to such signs, Tenant shall repair any damage which
alteration, renovation or removal of its signs may cause during or at the
expiration or termination of the Lease Term. Tenant, at its expense, shall
remove its signs from the Premises at the termination or expiration of this
Lease, repair any damage and restore the Premises.
15.6.1 DIRECTORIES. After the Commencement Date of this Lease,
Landlord will provide Tenant with Building standard signage indicating Tenant's
location in the Building. The location of the Premises shall be designated by
Building standard signage on a Building lobby directory and at the entry of the
Premises. All such identification signs and directories shall be designed and
installed at the sole discretion of Landlord. The expenses associated with the
initial inclusion and maintenance of Tenant's name and location on such signs
shall be treated as Operating Expenses, but the expenses associated with any
changes to such directory signs requested by Tenant shall be Tenant's
responsibility and shall be treated as Additional Rent pursuant to Section 2.4
of this Lease.
15.7 MAILBOX: Landlord shall furnish Tenant, without additional charge,
a locked mailbox in the building.
ARTICLE 16. ACCESS:
Landlord reserves, and shall at all times have, the right to re-enter the
Premises upon 24 hours' prior notice to Tenant (except in an emergency and
except for janitorial services) and subject to Tenant's reasonable security
requirements (except in an emergency) to inspect the same, to supply janitor
service (if provided for under this Lease), and to perform any other service to
be provided by Landlord to Tenant, to show the Premises to prospective
purchasers, mortgagees or (during the last twelve (12) months prior to
expiration of the term) tenants, to post notices of non-responsibility, and to
alter, improve or repair the Premises and any portion of the Building of which
the Premises are a part, without abatement of Rent. For such purpose, Landlord
may erect, use and maintain scaffolding, pipes, conduits and other necessary
structures in and through the Premises where reasonably required by the
character of the work to be performed, provided that entrance to the Premises
shall not be blocked thereby, and further provided that the business of Tenant
shall not be interfered with unreasonably. Tenant hereby waives any claim for
damages for any injury or inconvenience to or interference with Tenant's
business, any loss of occupancy or quiet enjoyment of the Premises and any
other loss occasioned by Landlord's conduct pursuant to and in compliance with
the Section. For each of the purposes stated in this Section, Landlord shall at
all times have and retain a key to all of the doors in, upon and about the
Premises, excluding Tenant's vaults and safes or special security areas
(designated in advance). Landlord shall have the right to use any and all means
which Landlord may deem necessary or proper to open all doors in an emergency,
in order to obtain entry to any portion of the Premises, and any entry to any
portion of the Premises obtained by Landlord by any such means, or otherwise
shall not under any circumstances be construed or deemed to be forcible or
unlawful entry into, or a detainer of, the Premises, or an eviction, actual or
constructive, of Tenant from all or part of the Premises. So long as Landlord
does not unreasonably impede access to and from the Premises for Tenant and its
employees and invitees, Landlord shall also have the right at any time, to
modify the Park Common Areas, to change the arrangement and/or location of
entrances, lobbies, parking facilities, passageways, doors and doorways,
corridors, elevators, stairs, toilets or other public parts of the Building and
to change the name, number or designation by which the Building is commonly
known.
ARTICLE 17. NOTICE OF OCCURRENCES:
Tenant shall use reasonable effort to give prompt notice to Landlord of:
(i) any known occurrence in or about the Premises for which Landlord might be
held liable; (ii) any known fire or other casualty in the Premises; (iii) any
known damage to or defect in the Premises including the fixtures, equipment and
appurtenances thereof, for the repair of which Landlord might be responsible;
and (iv) known damage to or defect in any part or appurtenances of the
Building's sanitary, electrical, heating, ventilating, air-conditioning,
elevator or other systems located in or passing through the Premises or any
part thereof but failure to give such notice shall not be a default hereunder
or otherwise affect the rights or obligations of the parties.
ARTICLE 18. NONLIABILITY AND INDEMNIFICATION:
18.1 WAIVER: Neither Landlord nor any director, officer, agent, servant or
employee of Landlord shall be liable to Tenant for any loss, injury or damage
to Tenant or to any other person, or to its or their property, irrespective of
the cause of such injury, damage or loss (except to the extent caused by or
resulting from the negligence or intentional torts of Landlord; provided
further that the provisions of the next two sentences and the waiver of
subrogation in Section 11.5 shall supersede this exception). It is the
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intent of the parties that it be Tenant's obligation to carry and look to its
own all risk insurance policy for coverage of any such item resulting from an
accident even if caused by the negligence of Landlord. Further, neither
Landlord nor any director, officer, agent, servant or employee of Landlord shall
be liable: (i) for any such damage caused by other tenants or persons in, upon
or about the Project or caused by operations in construction of any private,
public or quasi-public work; or (ii) in any event for consequential damages,
including lost profits, of Tenant or any person claiming through or under
Tenant.
18.2 INDEMNIFICATION: Tenant shall defend, indemnify and hold harmless
Landlord and all Superior Lessors and/or Superior Mortgagees and its and their
respective partners, directors, officers, agents and employees from and against
any and all third party claims for bodily injury and/or property damage arising
from or in connection with any accident, injury or damage whatever to the
extent caused by Tenant, its employees, agents, officers, subtenants,
contractors and invitees, together with all costs, expenses and liabilities
incurred or in connection with each such claim or action of proceeding brought
thereon, including, without limitation, all attorneys' fees and expenses at
trial and upon appeal. Nothing contained herein shall be construed to make
Tenant liable for the actions of the Landlord or Landlord's manager, employees
or contractors.
ARTICLE 19. DAMAGE OR DESTRUCTION:
19.1 CASUALTY: If the Premises or the Building are damaged by fire or
other casualty, Landlord shall forthwith repair the same unless this Lease is
terminated as permitted herein. Within forty-five (45) days from the date of
such damage, Landlord shall notify Tenant if the Building is damaged in excess
of twenty-five percent (25%) of the Building's precasualty value, as reasonably
determined by Landlord (damage in excess of such amount being referred to
as "MAJOR DAMAGE" and damage equal to or less than such amount being referred
to as "MINOR DAMAGE"). If Major Damage occurs, Landlord may elect to terminate
the Lease. If Minor Damage occurs then Landlord shall repair such damage and
rebuild that portion of the Building or the Premises damaged. In the event of
Major Damage, if Landlord gives its written notice to Tenant electing to
rebuild, within sixty (60) days of the date of damage, or in the event of Minor
Damage, this Lease shall remain in full force and effect provided the repairs
are completed within three hundred (300) days except the Rent shall be
reasonably abated during the period of repair based on that portion of the
rentable square feet of the Premises not reasonably useable by Tenant. If such
repairs are not completed within three hundred (300) days after the date of the
casualty, Tenant may terminate this Lease by written notice to Landlord given
at any time thereafter, unless Landlord completes such repairs within sixty
(60) days after delivery of such notice. If in the event of Major Damage,
Landlord elects by written notice to Tenant not to rebuild, then this Lease
shall automatically terminate as of the effective date of such notice, the Rent
shall be reduced by a proportionate amount based upon the extent to which
Tenant's use of the Premises is impaired, and the Tenant shall pay such reduced
Rent up to the date of termination. Landlord agrees to refund to Tenant any
Rent previously paid for any period of time subsequent to such date of
termination. Landlord shall not be required to repair any damage by fire or
other cause to the property of Tenant.
19.2 CONDEMNATION: If more than twenty-five percent (25%) of the Land
and/or Building shall be taken or appropriated under the power of eminent
domain or conveyed in lieu thereof, Landlord shall have the right to terminate
this Lease. If this Lease is terminated, Landlord shall receive (and Tenant
shall assign to Landlord upon demand from Landlord) any and all income, rent,
award or any interest thereon which may be paid or owned in connection with the
exercise of such power of eminent domain or conveyance in lieu thereof, and
Tenant shall have no claim against the agency exercising such power or
receiving such conveyance, for any part of such sum paid by virtue of such
proceedings, whether or not attributable to the value of the unexpired term of
this Lease, except for the unamortized value of Tenant Improvements paid for by
Tenant and relocation benefits, if any. If a part of the Land and/or Building
shall be so taken or appropriated or conveyed and Landlord hereto shall elect
not to terminate this Lease, Landlord shall nonetheless receive (and Tenant
shall assign to Landlord upon demand from Landlord) any and all income, rent,
award or any interest thereon paid or owed in connection with such taking,
appropriation or conveyance; and if the Premises have been damaged as a
consequence of such partial taking or appropriation or conveyance, Landlord
shall restore the Premises and this Lease shall remain in full force and effect
except that the Rent shall be equitably adjusted according to the remaining
rentable area of the Premises and the Building while such restoration is being
made by Landlord. Notwithstanding the foregoing, Landlord's obligation to
restore the Premises if this Lease is not terminated, shall be limited to the
extent of available condemnation proceeds. Such proportionate reduction shall
be based upon the extent to which the restoration being made by Landlord shall
interfere with the business carried on by Tenant in the demised Premises.
Landlord will not be required to repair or restore any injury or damage to the
property of Tenant.
ARTICLE 20. SURRENDER AND HOLDING OVER:
20.1 GENERAL: On the last day of the term of this Lease, or upon re-entry
by Landlord upon the Premises, Tenant shall quit and surrender the Premises to
Landlord "broom-clean" and in good order, condition and repair, except for
ordinary wear and tear, and in accordance with the restoration provisions of
Articles 3 and 4 and EXHIBIT D of this Lease.
20.2 SURRENDER: No agreement relating to the surrender of the Premises by
Tenant shall be valid unless in writing and signed by Landlord.
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20.3 HOLDING OVER: If Tenant shall retain possession of the Premises or
any part thereof without Landlord's consent (express or implied) following the
expiration or sooner termination of this Lease for any reason, then Tenant shall
pay to Landlord for each day of the first ninety (90) days of such retention one
hundred twenty five percent (125%) of the daily prorated amount of the Rent for
the last period prior to the date of such expiration or termination subject to
adjustment as provided in Article 5 and for each day of such retention after
such ninety (90) day period one hundred fifty percent (150%) of the daily
prorated amount of the Rent for the last period prior to the date of such
expiration or termination, subject to adjustment as provided in Article 5.
Tenant shall also indemnify and hold harmless from any loss or liability
resulting from delay by Tenant in surrendering the Premises, including, without
limitation, any claims made by any succeeding tenant founded on such delay.
Holding over with Landlord's consent shall constitute renewal of this Lease from
month to month. Acceptance of Rent by Landlord following expiration or
termination shall not constitute a renewal of this Lease, and nothing contained
in this Section shall waive Landlord's right of re-entry or any other right.
Tenant shall be only a Tenant at sufferance, whether or not Landlord accepts any
Rent from Tenant while Tenant is holding over.
ARTICLE 21. EVENTS OF DEFAULT:
The following shall constitute Events of Default:
21.1 If Tenant shall default in the payment of any Security Deposit, Base
Rent or Additional Rent, and such default shall continue for five (5) days
after written notice that payment is due; provided that during any consecutive
twelve (12) month period, Tenant shall be entitled to only one notice of payment
default under this Section 21.1, and any subsequent payment default in such
twelve (12) month period shall constitute an Event of Default if payment is not
made within five (5) days after it is due.
21.2 If Tenant shall, whether by action or inaction, be in default of any
of its obligations under this Lease (other than a default in the payment of
Rent) and such default shall continue and not be remedied within thirty (30)
days after Landlord shall have given to Tenant a notice specifying the same, or,
in the case of a default which cannot with due diligence be cured within such
time period and the continuance of which for the period required for cure will
not subject Landlord or any Superior Lessor to prosecution for a crime or
termination of any Superior Lease or foreclosure of any Superior Mortgage, if
Tenant shall not, (i) within such time period advise Landlord of Tenant's
intention to take all steps necessary to remedy such default; (ii) duly commence
within such time period, and thereafter diligently prosecute to completion all
steps necessary to remedy the default; and (iii) complete such remedy within a
reasonable time after the date of said notice of Landlord;
21.3 If any event shall occur whereby this Lease or the estate hereby
granted or the unexpired balance of the term hereof would, by operation of law
or otherwise, be transferred to any person, firm or corporation, except as
expressly permitted by Article 10;
21.4 If Tenant or any guarantor of Tenant's obligations shall make a
general assignment for the benefit of creditors, or shall be unable to pay its
debts as they become due, or shall file a petition in bankruptcy, or shall be
adjudicated as bankrupt or insolvent, or shall file a petition seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or shall fail timely to contest the material allegations of a
petition filed against it in any such proceeding, or shall seek or consent to or
acquiesce in the appointment of any trustee, receiver or liquidator of Tenant or
any material part of its properties;
21.5 If within thirty (30) days after the commencement of any proceeding
against Tenant seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, such proceeding shall not have been dismissed
or if, within thirty (30) days after the appointment without the consent or
acquiescence of Tenant of any trustee, receiver or liquidator of Tenant or of
any material part of its properties, such appointment shall not have been
vacated; or
21.6 If this Lease or any estate of Tenant hereunder shall be levied upon
under any attachment or execution and such attachment or execution is not
vacated within ten (10) days.
ARTICLE 22. REMEDIES UPON DEFAULT:
22.1 REMEDIES: Upon the occurrence of an Event of Default constituting a
breach of this Lease under Article 21, Landlord may exercise any one or more of
the remedies set forth in this Article 22 or in Article 25, or any other remedy
available under applicable law or contained in this Lease.
22.1.1 Landlord or Landlord's agents and employees may immediately or at
any time thereafter re-enter the Premises, or any part thereof, either by
summary eviction proceedings or by any suitable action or proceeding at law, or
by force or otherwise, without being liable to indictment, prosecution or
damages therefor, and may repossess the same, and may remove any person
therefrom, to the end that Landlord may have, hold and enjoy the Premises.
22.1.2 Landlord at its option may relet the whole or any part of the
Premises from time to time, either in the name of the Landlord or otherwise, to
such tenants, for such terms ending before, on or after the expiration date of
the Lease Term, at such rentals and upon such other conditions (including
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concessions, tenant improvements, and free rent periods) as Landlord may
reasonably determine to be appropriate. Landlord at its option may make such
physical changes to the Premises as Landlord reasonably considers advisable or
necessary in connection with any such reletting or proposed reletting, without
relieving Tenant of any liability under this Lease or otherwise affecting
Tenant's liability. If there is other unleased space in the Building, Landlord
may lease such other space without prejudice to its remedies against Tenant;
provided, however, that Landlord shall not unreasonably discriminate against
the Premises in its leasing efforts.
22.1.3 Whether or not Landlord retakes possession or relets the
Premises, Landlord shall have the right to recover unpaid rent and all damages
caused by the default as well as all costs and expenses incurred in the
connection with the enforcement of this Lease, including reasonable attorney
fees and court costs. Damages shall include, without limitation: (i) all
rentals lost; (ii) all legal expenses and other related costs incurred by
Landlord following Tenant's default; (iii) all reasonable costs incurred by
Landlord in restoring the Premises to good order and condition, or in
remodeling, renovating or otherwise preparing the Premises for reletting; (iv)
all unamortized tenant improvement allowance and lease commissions; and (v) all
reasonable costs incurred by Landlord in reletting the Premises, including,
without limitation, any brokerage commissions and the value of Landlord's time.
22.1.4 To the extent permitted under applicable law, Landlord may
sue periodically for damages as they accrue without barring a later action for
further damages. Landlord may in one action recover accrued damages plus
damages attributable to the remaining Lease Term equal to the difference
between the rent reserved in this Lease (including an estimated amount of
Additional Rent as determined by Landlord) for the balance of the Lease Term
after the time of award, and the fair rental value of the Premises for the
same discounted to the time of award at the rate of nine percent (9%) per
annum. If Landlord has relet the Premises for the period which otherwise would
have constituted the unexpired portion of the Lease Term or any part, the
amount of rent reserved upon such reletting shall be deemed, prime facie, to
be the fair and reasonable rental value for the part or the whole of the
Premises so relet during the term of the reletting.
22.1.5 To seize and dispose of Tenant's Property (as that term is
defined in Section 14.2) in any manner permitted by law.
22.1.6 Nothing in this Section 22 shall alter any duty to mitigate
damages in accordance with Oregon law.
22.2 CUMULATIVE REMEDIES: The remedies provided for in this Lease are
cumulative and are not intended to be exclusive of any other remedies to which
Landlord may lawfully be entitled at any time.
22.3 TERMINATION: In the event of a default, this Lease may be terminated
at the option of Landlord by Landlord giving written notice to Tenant. If this
Lease is not terminated by election of Landlord or otherwise, Landlord shall be
entitled to recover damages from Tenant for the default. If this Lease is
terminated, Tenant's liability to Landlord for damages shall survive such
termination, and Landlord may re-enter, take possession of the Premises, and
remove any persons or property by legal action or by self-help with the use of
reasonable force and without liability for damages to Tenant, its property, any
other persons, and/or their property. Acts of maintenance or preservation or
efforts to relet the Premises or the appointment of a receiver upon initiative
of Landlord to protect Landlord's interest under this Lease shall not
constitute a termination of Tenant's contractual liability under the Lease
unless written release of liability is given by Landlord to Tenant.
22.4 INTEREST ON DAMAGES: In addition to any other remedies Landlord may
have under this Lease, and without reducing or adversely affecting any of
Landlord's rights and remedies under this Article 22, if any Base Rent,
Additional Rent or damages payable hereunder by Tenant to Landlord are not paid
within ten (10) days after demand therefor, the same shall bear interest at the
annual rate equal to four percent (4%) over the prime rate as announced in The
Wall Street Journal from time to time or the maximum rate permitted by law,
whichever is less, calculated monthly from the due date thereof until paid, and
the amount of such interest shall be included as Additional Rent.
ARTICLE 23. RELOCATION
Intentionally deleted.
ARTICLE 24. NO WAIVERS OF PERFORMANCE:
The failure of Landlord to insist in any one or more instances upon the
strict performance of any one or more of the obligations of this Lease, or to
exercise any election herein contained, shall not be construed as a waiver or
relinquishment for the future of the performance of such one or more
obligations or any other obligations of this Lease or of the right to exercise
such election, but the same shall continue and remain in full force and effect
with respect to any subsequent breach, act or omission. The receipt by Landlord
of Rent with knowledge of a breach by Tenant of any obligation of this Lease
shall not be deemed a waiver of such breach.
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ARTICLE 25. CURING TENANT'S DEFAULTS:
All covenants and agreements to be performed by Tenant under any of the
terms of this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any abatement of Rent. If Tenant shall fail to pay any sum
of money, other than Rent, required to be paid by it hereunder or shall fail to
perform any other act on its part to be performed hereunder, and such failure
shall continue for the periods referred to in Article 21, hereof, Landlord may
make any such payment or perform any such act on Tenant's part to be made or
performed as in this Lease provided but shall not be obligated so to do. Any
such payment or performance shall not be a waiver or release of Tenant's
obligations. All sums so paid by Landlord and all necessary incidental costs
together with interest thereon at the rate specified in Section 22.4 from the
date of such payment by Landlord shall be payable as Additional Rent to
Landlord on demand, and Tenant covenants to pay any such sums, and Landlord
shall have, in addition to any other right or remedy of Landlord, the same
rights and remedies in the event of the nonpayment thereof by Tenant as in the
case of default by Tenant in the payment of Rent.
ARTICLE 26. BROKER:
Tenant and Landlord covenant, warrant and represent that no broker except
as provided in the Basic Lease Information (the "BROKER") was instrumental in
bringing about or consummating this Lease and that neither party has had
conversations or negotiations with any broker except the Broker concerning the
leasing of the Premises. Tenant agrees to indemnify and hold harmless Landlord
against and from any claims for any brokerage commissions and all costs,
expenses and liabilities in connection therewith, including without limitation,
attorneys' fees and expenses, arising out of any conversations or negotiations
had by Tenant with any broker other than the Broker. Landlord shall pay any
brokerage commissions due the Broker as per a separate agreement between
Landlord and the Broker.
ARTICLE 27. NOTICES:
Any notice, statement, demand, consent, approval or other communication
required or permitted to be given, rendered or made by either party to the
other, pursuant to this Lease or pursuant to any applicable law or requirement
of public authority, shall be in writing (whether or not so stated elsewhere in
this Lease). Notices shall be deemed to have been properly given, rendered or
made: upon delivery if delivered in person or by confirmed facsimile to the
Landlord or Tenant; or, if sent postage prepaid by registered or certified
mail, return receipt requested, effective seventy-two (72) hours after posted in
a United States post office station or letter box in the continental United
States, addressed to the other party at the address designated by the party
(except that after the Commencement Date, Tenant's address, unless Tenant shall
give notice to the contrary, shall be the Tenant's address at the Premises in
the Building). Either party may, by notice as aforesaid, designate a different
address or addresses for notices, statements, demands, consents, approvals or
other communications intended for it.
ARTICLE 28. ESTOPPEL CERTIFICATES:
Tenant agrees, at any time and from time to time, as requested by Landlord
with not less than ten (10) days' prior notice, to execute and deliver to
Landlord a statement certifying that this Lease is unmodified and in full force
and effect (or if there have been modifications, that the same is in full force
and effect as modified and stating the modifications), certifying the dates to
which the Base Rent and Additional Rent have been paid, stating whether or not,
to the best knowledge of Tenant, the Landlord is in default in performance of
any of its obligations under this Lease, and, if so, specifying each such
default of which the Tenant shall have knowledge, and stating whether or not,
to the best knowledge of Tenant, any event has occurred which with the giving
of notice or passage of time, or both, would constitute such a default, and, if
so, specifying each such event, it being intended that any such statement
delivered pursuant hereto shall be deemed a representation and warranty to be
relied upon by the Landlord and by others with whom Landlord may be dealing,
regardless of independent investigation. Tenant also shall include in any such
statement such other information concerning this Lease as Landlord may
reasonably request. If Tenant fails to respond within fifteen (15) days of
receipt by the party of a written request for such a statement, such failure
shall constitute an Event of Default and Tenant shall be deemed to have given
such statement and shall be deemed to have admitted the accuracy of any
information contained in the request for such statement and that the Lease is
unmodified and in full force and effect, that there are not uncured defaults in
Landlord's performance, and that not more than one (1) month's Rent has been
paid in advance.
ARTICLE 29. MEMORANDUM OF LEASE:
Tenant shall not record this Lease. If requested by Landlord, Tenant shall
execute, acknowledge and deliver to Landlord a memorandum of lease in respect
of this Lease sufficient for recording. Such memorandum shall not be deemed to
change or otherwise affect any of the obligations or provisions of this Lease.
ARTICLE 30. ADJUSTMENT OF COMMENCEMENT AND EXPIRATION DATES:
30.1 COMMENCEMENT DATE: The term of this Lease shall commence on an Area
by Area basis on the dates (herein the "COMMENCEMENT DATE" for each Area) which
shall be the Commencement Date specified in the Basic Lease information unless:
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30.1.1 Landlord and Tenant otherwise agree in writing; or
30.1.2 Tenant actually occupies the Area of the Premises for
the purpose of conducting business earlier than the date specified in the Basic
Lease Information or in any writing made pursuant to Section 30.1.1, in which
event the occupancy date shall be the Commencement Date for that Area.
30.2 DELAY IN COMMENCEMENT: If Landlord fails to deliver an Area of
the Premises with Tenant Improvements substantially complete by the above
Commencement Date for the Area, due to the fault of the Landlord or due to the
occurrence of an event of force majeure, Landlord shall not be considered in
default of this Lease, but the Commencement Date for the Area shall be deferred
until the Premises are so delivered. If such failure of delivery for an Area
extends thirty (30) days or more beyond the Commencement Date for the Area,
Tenant shall be entitled to a day-for-day credit against Base Rent for that
Area (as Base Rent first falls due for that Area) in addition to deferral of
the Commencement Date as provided above. If such delay, for the fourth floor
Area only, extends beyond ninety (90) days after the Commencement Date, Tenant
may terminate this Lease by written notice given to Landlord at any time
thereafter but prior to substantial completion of the fourth floor Area, unless
Landlord delivers the Area substantially complete within thirty (30) days after
such notice (in which case such termination notice will be deemed rescinded).
The foregoing rent credit and termination rights shall not apply to the extent
the delay in delivery results from Tenant Delay. "Tenant Delay" shall mean
delays for which Tenant is responsible pursuant to this Lease. If the Tenant
Improvements are not completed on the Commencement Date for an Area due to (i)
the failure of Tenant to fulfill any obligation pursuant to the terms of this
Lease or any exhibit hereto, including without limitation, Tenant's failure to
comply with the Construction Information Submittal Dates (i.e., timely delivery
of the applicable Tenant Submittal Package) and Construction Approval Dates
specified in the Basic Lease Information; or (ii) any changes in the Tenant
Improvements requested by Tenant, such shall be considered causes of Tenant
Delay and the Commencement Date for the Area shall be the date specified in the
Basic Lease Information.
30.3 EXPIRATION DATE: In the event the Commencement Date for the
Fourth Floor is adjusted to a date other than as specified in the Basic Lease
Information, the Expiration Date shall be extended as necessary so that the
Lease Term will contain the number of full calendar months indicated in the
Rent Schedule of the Basic Lease Information and so that the Expiration Date
will fall on the last day of a calendar month.
30.4 EARLY OCCUPANCY: If Landlord has given Tenant permission to
enter into the possession of the Premises prior to the Commencement Date of the
applicable Area, unless such possession is granted for the purpose of
completing tenant-provided improvements and move-in as provided in Exhibit D,
such possession or occupancy shall be deemed to be upon all the terms,
covenants, conditions and provisions of this Lease, including, without
limitation, the payment of Base Rent and the Additional Rent.
ARTICLE 31. MISCELLANEOUS:
31.1 MERGER: All understandings and agreements heretofore had
between the parties are merged in this Lease, which alone fully and completely
expresses the agreement of the parties and which is entered into after full
investigation, neither party relying upon any statement or representation not
embodied in this Lease.
31.2 MODIFICATIONS: No agreement shall be effective to change,
modify, waive, release, discharge, terminate or effect an abandonment of this
Lease, in whole or in part, unless such agreement is in writing, refers
expressly to this Lease and is signed by the party against whom enforcement is
sought.
31.3 SUCCESSORS AND ASSIGNS: Except as otherwise expressly provided
in this Lease, the obligations of this Lease shall bind and benefit the
successors and permitted assigns of the parties hereto.
31.4 NONRECOURSE LEASE: Tenant shall look only to Landlord's estate
and property in the Land and the Building (or the proceeds thereof) for the
satisfaction of Tenant's remedies for the collection of a judgment (or other
judicial process) requiring the payment of money by Landlord in the event of
any default by Landlord hereunder, and no other property or assets of Landlord
or its partners or principals, disclosed or undisclosed, shall be subject to
levy, execution or other enforcement procedure for the satisfaction of Tenant's
remedies under or with respect to this Lease, the relationship of Landlord and
Tenant hereunder or Tenant's use or occupancy of the Premises.
31.5 FORCE MAJEURE: The obligations of Tenant hereunder shall be in
no way affected, impaired or excused, nor shall Landlord have any liability
whatsoever to Tenant because:
31.5.1 Landlord is unable to fulfill, or is delayed in
fulfilling, any of his obligations under this Lease by reason of strike, other
labor trouble, governmental preemption of priorities or other controls in
connection with a national or other public emergency or shortages of fuel,
supplies or labor resulting therefrom, delays in governmental processing and
issuance of permits and/or inspections, or any other cause, whether similar or
dissimilar, beyond Landlord's reasonable control; or
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31.5.2 of any failure or defect in the supply, quantity or
character of electricity, water or other utilities furnished to the Premises,
by reason of any requirement, act or omission of the public utility or others
serving the Building with electric energy, steam oil, gas or water, or for any
other reason whether similar or dissimilar, beyond Landlord's reasonable
control.
31.6 DEFINITIONS: For the purpose of this Lease, the following terms
have the meanings indicated:
31.6.1 The term "mortgage" shall include a mortgage and/or deed
of trust, and the term "holder of a mortgage" or "mortgagee" or words of similar
import shall include a mortgagee of a mortgage or a beneficiary of a deed of
trust.
31.6.2 The term "laws" and "requirements of any public
authorities" and words of similar import shall mean laws and ordinances of any
or all of the federal, state, regional, city, and county governments and rules,
regulations, orders and directives of any and all departments, subdivisions,
bureaus, agencies or offices thereof, and of any other governmental, public or
quasi-public authorities having jurisdiction over the Building and/or the
Premises, and the direction of any public officer pursuant to law, whether now
or hereinafter in force.
31.6.3 The term "requirements of insurance bodies" and words of
similar import shall mean rules, regulations, orders, and other requirements of
the Oregon Surveying and Rating Bureau and/or any other similar body performing
the same or similar functions and having jurisdiction or cognizance over the
Building and/or the Premises, whether now or hereafter in force.
31.6.4 The term "Tenant" shall mean the Tenant herein named or
any assignee or other successor in interest (immediate or remote) of Tenant
herein named, which at the time in question is the owner of Tenant's estate and
interest granted by this Lease; but the foregoing provisions of this subsection
shall not be construed to permit any assignment of this Lease or to relieve
Tenant herein named or any assignee or other successor in interest (whether
immediate or remote) of Tenant herein named from the full and prompt payment,
performance and observance of the covenants, obligations and conditions to be
paid, performed and observed by Tenant under this Lease.
31.6.5 The term "Land" shall mean the real property lot or
parcel upon which the Building is located including without limitation parking
areas, landscaped areas, walkways, driveways, sidewalks and curbs.
31.6.6 The term "Landlord" shall mean only the owner at the time
in question of the Building or of a lease of the Building, so that in the event
of any transfer or transfers of title to the Building or of Landlord's interest
in a lease of the Building, the transferor shall be and hereby is relieved and
freed of all obligations of Landlord under this Lease accruing after such
transfer, and it shall be deemed without further agreement that such transferee
has assumed and agree to perform and observe all obligations of Landlord herein
during the period it is the holder of the Landlord's interest under this Lease.
31.6.7 The term "herein," "hereof" and "hereunder," and words
of similar import, shall be construed to refer to this Lease as a whole, and not
to any particular Article, section or subsection, unless expressly so stated.
31.6.8 The term "and/or" when applied to two or more matters or
things shall be construed to apply to any one or more or all thereof as the
circumstances warrant at the time in question.
31.6.9 The term "person" shall mean natural person or persons, a
partnership, a corporation and any other form of business or legal association
or entity.
31.7 EFFECT OF EXPIRATION: Upon the expiration or other termination of
this Lease, neither party shall have any further obligation of liability to the
other ??? as otherwise expressly provided in this Lease and except for such
obligations as by their nature or under the circumstances can only be, or by
the provisions of this Lease, may be, performed after such expiration or other
termination; and, in any event, unless otherwise expressly provided in this
Lease, any liability for a payment (including, without limitation, Additional
Rent, herein) or performance of an obligation which shall have accrued to or
with respect to any period ending at the time of expiration or other
termination of this Lease shall survive the expiration or other termination of
this Lease.
31.8 EXCAVATION: If an excavation shall be made upon land adjacent to or
under the Building, or shall be authorized to be made, Tenant shall afford to
the person causing or authorized to cause such excavation, license to enter the
Premises for the purpose of performing such work as said person shall deem
reasonably necessary or desirable to preserve and protect the Building from
injury or damage and to support the same by proper foundations, and without
reducing or otherwise affecting Tenant's obligations under this Lease.
31.9 UNION CONTRACTS: Tenant agrees that the exercise of its rights
pursuant to the provision of Article 13 or of any other provisions of this
Lease or the Exhibits hereto shall not be done in a manner which would violate
Landlord's union contracts affecting the Project, nor create any lawful work
stoppage.
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picketing, labor disruption or dispute or any interference with the business of
Landlord or any tenant or occupant of the Building.
31.10 PRORATIONS: Any appointments or prorations of Base Rent or
Additional Rent to be made under this Lease shall be computed on the basis of a
three hundred sixty (360) day year, with twelve (12) months of thirty (30) days
each.
31.11 GOVERNING LAW: Regardless of the place of execution or performance,
this Lease shall be governed by and construed in accordance with the laws of the
State of Oregon. If any provision of this Lease or the application thereof to
any person or circumstances shall, for any reason and to any extent, be invalid
or unenforceable, the remainder of this Lease and the application of that
provision to other persons or circumstances shall not be affected but rather
shall be enforced to the extent permitted by law. The table of contents,
captions, heading and titles in this Lease are solely for convenience or
reference and shall not affect its interpretation. Each covenant, agreement,
obligation or other provision of this Lease on Tenant's part to be performed,
shall be deemed and construed as a separate and independent Lease on Tenant's
part to be performed, shall be deemed and construed as a separate and
independent covenant of Tenant, not dependent on any other provision of this
Lease. All terms and words used in this Lease, regardless of the number or
gender in which they are used, shall be deemed to include any other number and
any other gender as the context may require. Time is of the essence of this
Lease and all of its provisions.
31.12 LIGHT, AIR AND VIEW: Any diminution or shutting off of light, air or
view by any structure which may be erected on lands adjacent to or near the
Building shall in no way affect this Lease or impose any liability on Landlord.
31.13 TENANT REPRESENTATIONS: If Tenant is an entity other than an
individual, each person executing this Lease on behalf of Tenant does hereby
covenant and warrant that (i) Tenant is duly organized and validly existing
under the laws of its state of formation, and if such entity is existing under
the laws of a jurisdiction other than Oregon, is qualified to transact business
in Oregon; (ii) Tenant has full right and authority to enter into this Lease
and perform all of Tenant's obligations hereunder; and (iii) each person
signing this lease on behalf of Tenant is duly and validly authorized to do so.
31.14 DEFINED TERMS: Words capitalized other than as the first word of a
sentence are defined terms and have the meaning, throughout this Lease, given
to them when they are first used with an initial capital or when used in
quotation marks.
31.15 COUNTERPARTS: This Lease may be executed in one or more
counterparts by separate signature, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument, binding
on all parties hereto, even though all parties are not signatories to the
original or to the same counterpart. Any counterpart of this Lease that has
attached to it separate signature pages, which together contain the signatures
of all parties, shall for all purposes be deemed a fully-executed instrument,
and in making proof of this Lease, it shall not be necessary to produce or
account for more than one such counterpart.
31.16 COSTS AND ATTORNEY FEES:
31.16.1 NO SUIT OR ACTION FILED. If this Lease is placed in the hands
of an attorney due to a default in the payment or performance of any of its
terms, the defaulting party shall pay, immediately upon demand, all of the
other party's costs and expenses associated with enforcing the Lease, including
reasonable attorney fees and collection costs even though no suit or action
is filed thereon, and any other fees or expenses incurred by the nondefaulting
party.
31.16.2 LITIGATION OR ARBITRATION: If legal action is instituted to
enforce or interpret any of the terms of this Lease or if legal action is
instituted in a Bankruptcy Court for a United States District Court to enforce
or interpret any of the terms of this Lease, to seek relief from an automatic
stay, to obtain adequate protection, or to otherwise assert the interest of
Landlord in a bankruptcy proceeding, the party not prevailing shall pay the
prevailing party's costs and disbursements, the fees and expenses of expert
witnesses in determining reasonable attorney fees, and such sums as the court
may determine to be reasonable for the prevailing party's attorney fees
connected with the trial and any appeal and by petition for review thereof.
31.16.3 DEFINITIONS: For purposes of this Lease, the term attorney
fees includes all charges of the prevailing party's attorneys and their staff
(including without limitation legal assistants, paralegals, word processing,
and other support personnel) and any postpetition fees in a bankruptcy court.
For purposes of this Lease, the term fees and expenses includes but is not
limited to long-distance telephone charges; expenses of facsimile transmission;
expenses for postage (including costs of registered or certified mail and
return receipts), express mail, or parcel delivery; mileage and all deposition
charges, including but not limited to court reporters' charges, appearance fees,
and all costs of transcription; costs incurred in searching records.
31.17 EFFECT OF FAILURE TO CONSENT: Except where a different standard is
expressly provided in this Lease, the Landlord may grant or refuse to consent
or approve any item in its reasonable discretion. Where this Lease states that
a consent or approval may not unreasonably be withheld, and a party
unreasonably withholds or conditions such consent, the other party shall not be
entitled to any
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<PAGE> 26
damages or termination of this Lease for such withholding, if being intended
that their sole remedy shall be to obtain an injunction compelling such consent
or approval.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease
Agreement as of the date and year first above written.
LANDLORD TENANT
AmberJack, Ltd. Webridge, Inc., a Delaware corporation
c/o Birtcher Property Services
27611 La Paz Road
Laguna Niguel CA 92607-0009
By: /s/ [SIGNATURE ILLEGIBLE] By: /s/ DAVID L. BRINK
-------------------------------- --------------------------------
Title: Development Manager Title: CFO
----------------------------- -----------------------------
Date: 11-16-99 Date: 11/10/99
------------------------------ ------------------------------
By: /s/ EARLE B. JOHNSON, JR. By: /s/ DAVID L. BRINK
-------------------------------- --------------------------------
Title: VP Title: VP Finance
----------------------------- -----------------------------
Date: 11/16/99 Date: 11/10/99
------------------------------ ------------------------------
23
<PAGE> 27
ADDENDUM TO LEASE AGREEMENT
BY AND BETWEEN AMBERJACK, LTD. ("LANDLORD") AND WEBRIDGE, INC. ("TENANT")
DATED AS OF OCTOBER 14, 1999
ARTICLE 32 RIGHT OF FIRST NEGOTIATION - 1915 BUILDING:
32.1 Tenant shall have a right of first negotiation ("First Negotiation")
to lease space (the "New Building Area") in a building to be known as the 1915
NW Amberglen Parkway Building (the "1915 Building") in accordance with the terms
and conditions set forth herein. The First Negotiation shall be subject to
Landlord's decision to build the 1915 Building, which decision shall be in
Landlord's sole discretion. Upon the earlier of (i) Landlord's notification to
Tenant of its decision to build the 1915 Building or (ii) Tenant's request to
Landlord, Landlord and Tenant shall undergo negotiations for a period of
forty-five (45) days for Landlord's construction of and Tenant's leasing of
space in the 1915 Building (the "Exclusive Negotiation Period"). During the
Exclusive Negotiation Period, Landlord shall not negotiate with any third party
regarding leasing of space in the 1915 Building. Landlord and Tenant shall
respond to each other's communications and inquiries during the Exclusive
Negotiation Period, provided that neither party shall have any obligation
regarding construction or leasing of the 1915 Building except to the extent the
parties agree in writing to the same, in their sole discretion, during the
Exclusive Negotiation Period.
32.2 In addition to the First Negotiation provided above, not earlier
than Landlord's receipt of the first proposal to lease space in the 1915
Building from a prospective tenant (whether on a build-to-suit or other basis),
and not later than Landlord's execution of the first third-party lease for any
part of the 1915 Building, Landlord shall notify Tenant that Landlord is
negotiating a lease for space in the 1915 Building. Tenant acknowledges that,
in the case of a build-to-suit lease, such notification might occur at
substantially the same time as Landlord's notification under Section 32.1.
32.3 The First Negotiation and notice rights granted in this Section 32
may only be exercised if Tenant is not in default hereunder. In the event this
Lease is terminated for any reason, the rights granted to Tenant in this
Section 32 shall also terminate at the same time. In the event Tenant exercises
the First Negotiation as provided herein and subsequently becomes in default
prior to taking occupancy of the New Building Area, Landlord may elect, by
written notice to Tenant, to terminate Tenant's prior exercise of its First
Negotiation, in which event Tenant shall have no rights with respect to the New
Building Area. This First Negotiation is personal to the Tenant named herein
and Permitted Transferees and may only be exercised in the event the Tenant
named herein or Permitted Transferees are in actual occupancy of the entire
Premises at the time the expansion notice is given.
ARTICLE 33 LEASE EXTENSION:
33.1 Provided that at the end of the primary term of this Lease, Tenant
not be in default of any term, condition or covenant contained in this Lease,
Tenant (but not any assignee or subtenant other than Permitted Transferees)
shall have the right and option to extend the base to of this Lease, by written
notice delivered to Landlord no later than August 4, 2006 (as to the first
extension) and August 4, 2011 (as to the second extension), for two (2)
successive additional terms of five (5) years, under the same terms,
conditions, and covenants contained herein, except:
A. Tenant shall have no further extension options unless expressly
granted by Landlord in writing; and
B. The rental for the extension term shall be based on rental rates
for recent leases within the Project and on the then prevailing rental rates
for properties of equivalent quality, size, utility and location, with the
length of the lease term, and credit standing of the Tenant herein, to be taken
into account.
33.2 Upon notification from Tenant of the exercise of this extension
option, Landlord shall within thirty (30) days thereafter notify Tenant in
writing of the proposed rental for the extension term; Tenant shall within
fifteen (15) days following receipt of same notify Landlord in writing of the
acceptance or rejection of the proposed rental. Tenant's failure to timely
provide such notice shall constitute acceptance of the proposed rental. In the
event of rejection by Tenant, the extension rentals shall be determined as
follows:
33.3 Within fifteen (15) days following notification of rejection,
Landlord and Tenant shall each appoint a disinterested and qualified real
estate professional. If these two real estate professionals cannot agree upon
an extension rental within thirty (30) days following their appointment, the
two appointees shall forthwith select a third disinterested and qualified real
estate professional, and the decision of any two appraisers shall be binding.
Notification in writing of this decision shall be made by the appraisers to
Landlord and Tenant within thirty (30) days following the selection of the
third appraiser. Landlord and Tenant shall bear the expense of the appraiser
appointed by each, and the expense of the third appraiser shall be shared
equally by both parties.
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<PAGE> 28
ARTICLE 34 ANTENNA:
Landlord hereby grants Tenant the non-exclusive right to install and
maintain a satellite dish and related facilities and antenna ("SATELLITE DISH")
on the roof of the Building, at Tenant's expense, which Satellite Dish and its
location shall reasonably approved by Landlord, and shall be in compliance with
the Protective Covenants for the Project and the terms of the Antenna License
Agreement attached as Exhibit C, the terms of which are incorporated herein by
this reference. There shall be no additional fee charged to Tenant for use of
the roof for the Satellite Dish.
ARTICLE 35 SIGNAGE:
35.1 Landlord hereby grants Tenant, so long as Tenant is the named
Tenant or any Permitted Assign of the named Tenant, the right to install and
maintain up to two signs on the Building's top floor ("SIGNAGE") in areas which
Tenant and Landlord determine to be the most prominent on the Building, at
Tenant's expense. Such Signage and its location and manner of attachment are
subject to the prior reasonable approval of Landlord, and must be in compliance
with the Protective Covenants for the Project and all applicable laws, rules,
codes and regulations.
35.2 Tenant shall submit to Landlord all plans and specifications for
the installation of the Signage, together with a properly-completed Application
for Architectural Review on Landlord's standard form. Tenant covenants and
agrees to indemnify, defend and hold harmless Landlord against any loss, cost
or expense (including reasonable attorney fees) which may be sustained or
incurred by it, and assume all liability for any property damage or bodily
injuries in any manner related to Tenants installation, maintenance, operation
or removal of the Signage. Tenant agrees to pay all taxes, permit fees,
insurance premiums, and repairs to the area where the Signage has been
installed resulting from the installation of the Signage, and at Landlord's
request to remove such signage upon termination of this Lease and restore the
affected areas to their original condition.
35.3 The installation, maintenance, repair, and operation and removal
shall be completed by Tenant in a good and workmanlike manner an in conformity
with (i) the plans, specifications and location as approved by Landlord, (ii)
all governmental requirements, including any governmental permits and approvals
for the operation of such Signage. Tenant shall be responsible, at Tenant's
expense, for obtaining any necessary governmental permits and approvals for
such Signage. Removal of Signage shall be at Tenant's expense and repair shall
be virtually undetectable.
ARTICLE 36 RECOVERY OF FREE RENT AND REDUCED RENT ON TENANT DEFAULT:
Base Rent for the first six (6) months of the term has been conditionally
abated, and rent for other periods has been partially abated at $13 psf (the
"Rent Abatement"). If this Lease terminates prior to the stated Expiration Date
by reason of Tenant's default, then for the purposes of applying this Section
36, the amount of Base Rent for the entire base term shall be amortized on a
straight-line basis over the entire base term, and the unpaid amount
attributable to the Rent Abatement period will become due and payable from
Tenant to Landlord as Additional Rent.
ARTICLE 37 DELAYED OCCUPANCY AS TO PORTION OF PREMISES:
The parties agree that Tenant shall delay occupancy of the third floor of
the Building, and, subject to Tenant's timely exercise of its Second Floor
Option, the second floor of the Building (the "DELAYED OCCUPANCY PREMISES").
Tenant shall not be obligated to pay Rent for the Delayed Occupancy Premises
until Tenant has taken possession of the Delayed Occupancy Premises, provided
that Tenant shall take possession of the Delayed Occupancy Premises (and Rent
shall commence for the Delayed Occupancy Premises) no later than the
Commencement Dates for the applicable Areas stated in Section 1.1.3 of the
Basic Lease Information. Commencing upon the earlier of (i) Tenant's actual
occupancy of any area of the Delayed Occupancy Premises for the purposes of
conducting business, or (ii) the Commencement Date for that Area of the Delayed
Occupancy Premises ("Delayed Occupancy Premises Commencement"). Tenant shall
pay Rent on the Delayed Occupancy Premises at the following rates:
<TABLE>
<S> <C>
Period Delayed Occupancy Premises Annual Base Rent
------ -------------------------------------------
Amount/PSF
----------
7/01/00-12/31/00 $13.00
1/1/01-6/30/02 $20.00
7/01/02-6/30/04 $24.25
7/01/04-Initial Term Expiration $27.00
</TABLE>
Except as hereinabove provided, all terms and conditions of this Lease,
including without limitation the Allowance, shall apply to the Delayed Occupancy
Premises. Tenant shall be permitted to buildout the
2
<PAGE> 29
Delayed Occupancy Premises at such time as Tenant may elect, subject to the
provisions of Section 6 of Exhibit D.
ARTICLE 38 RIGHT OF FIRST OFFER, 1925 BUILDING:
38.1 Tenant shall have the right to lease additional space in the ground
floor of the 1925 Building on the terms and conditions of this Section 38
("First Offer").
38.2 Tenant's right of First Offer shall only apply during periods when
the named Tenant or its Permitted Assigns are in occupancy of at least 25,000
square feet of the Premises.
38.3 Subject to the terms of this Section 38, should any ground floor
office space in the 1925 Building become Available for Lease (the "Offer
Space"), Landlord shall not, during the term of this Lease, Lease such Offer
Space to another tenant without first offering Tenant the right to lease that
Offer Space as provided below. Office space shall be deemed "Available for
Lease" when the space is vacant and unleased, provided that office space shall
not be deemed Available for Lease under any of the following circumstances:
(a) space that is re-leased by the current tenant of the space by
renewal or new lease;
(b) space that is leased pursuant to an expansion right of another
tenant, or
(c) space that becomes vacant after Landlord terminates the lease for
the space pursuant to a recapture clause, if landlord then enters into a direct
lease with that tenant's prospective assignee or subtenant.
38.4 To the extent required under this Section 38, Landlord shall not
enter into a lease for any Offer Space unless and until Landlord has first
notified Tenant in writing of the terms upon which Tenant may lease the Offer
Space (the "Offer") and until a period of seven (7) days has elapsed from the
date of the Offer without Tenant having notified Landlord in writing of
Tenant's acceptance of the Offer. Tenant must accept the Offer on an
all-or-nothing basis. Except as provided in the Offer, Landlord shall have no
obligation to improve or provide an improvement allowance for the Offer Space,
and Tenant shall accept the same in its then "As Is" condition.
38.5 If Tenant accepts the Offer, Tenant shall, within ten (10) days
after request by Landlord, execute a lease for the Offer Space, which lease
shall include a clause whereby an Event of Default under this Lease shall be an
Event of Default under the Offer Space lease, and vice versa. Failure of Tenant
to execute such Lease shall not affect Tenant's acceptance of the Offer or
Tenant's obligation to lease the Offer Space on the terms of the Offer and the
other provisions of this Section 38. The Offer Space shall be subject to the
same terms and conditions as set forth in this Lease, except (i) the term of
the lease for the Offer Space shall be the longer of five (5) years, or the
then-remaining base term of this Lease, (ii) the relocation provisions of
Article 23 of Landlord's standard lease for Ambergien shall apply if the Offer
Space is 1500 rentable square feet or less; (iii) the provisions of this
Addendum shall not be included in such lease, and (iv) the Base Rent shall be
the higher of the scheduled Base Rent rates for the Premises under Section 1.15
of this Lease (as the schedule is in effect from and after the commencement
date of the lease for the Offer Space) ("Existing Rate"); or the rent rates as
reasonably determined by Landlord as of the date the Final Offer is exercised
("Landlord's Rate"). Landlord's Rate shall be based on rents for comparable
space of comparable size with comparable tenant improvement levels for a
similar term for tenants of similar credit worthiness, by reference to the
first-class office space primarily in the Building and secondarily in other
buildings comparable to the Building in age, quality and location (suburban
Portland office buildings in office/business centers or parks) ("Market Rent").
38.6 Together with its notification of the exercise of this First Offer,
Tenant shall notify Landlord whether Tenant accepts or rejects Landlord's Rate,
and if Tenant rejects Landlord's Rate, shall state Tenant's opinion of Market
Rent ("Tenant's Rate"). Tenant's failure to timely provide such notice shall
constitute acceptance of Landlord's Rate. Tenant shall have no right to dispute
Landlord's Rate unless Tenant has timely accepted the Offer. In the event of
timely rejection of Landlord's Rate by Tenant, then unless the parties reach
written agreement upon Base Rent for the Option Space within fifteen (15) days
after such rejection, the Offer Space Base Rent shall be determined by real
estate professionals (who shall not be appraisers) as follows:
Within thirty (30) days following notification of rejection, Landlord and
Tenant shall each appoint a disinterested and qualified real estate
professional. If these two real estate professionals cannot agree upon an Offer
Space rental within fifteen (15) days following their appointment, the two
appointees shall forthwith select a third disinterested and qualified real
estate professional. If the two parties' appointees have not selected the third
professional within such time, the third professional shall be selected
pursuant to the procedures of the Arbitration Service of Portland, Inc., upon
application of either party. The third professional shall, within fifteen (15)
days after appointment, select either Landlord's Rate or Tenant's Rate as
Market Rate for the Offer Space, provided that in no event shall the Base Rent
be less than the Existing Rate. The decision of the third professional shall be
binding on the parties as to the Offer Space. Notification in writing of this
decision shall be made by the professionals to Landlord and Tenant within
thirty (30) days following the selection of the third professional. Landlord
and Tenant shall bear the
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<PAGE> 30
expense of the professional appointed by each, and the expense of the third
professional shall be shared equally by both parties; provided that if the Base
Rent determined though the foregoing procedures is within ten percent (10%) of
Landlord's Ratio, Tenant shall pay the costs and expenses of all three
professionals. During such process for establishing Base Rent, Tenant shall pay
Base Rent for the Offer Space at the Landlord's Rate, with retroactive
adjustment made if a different rate is established as provided above.
38.7 If Tenant declines or fails timely to exercise the First Offer as
provided above, Landlord shall thereafter be free to enter into a lease for the
Offer Space on any terms and conditions Landlord may choose at its sole
discretion. However, not earlier than Landlord's receipt of a proposal to lease
the Offer Space from a prospective tenant, and not later than Landlord's
execution of a third-party lease for the Offer Space, Landlord shall notify
Tenant that Landlord is negotiating a lease for the Offer Space.
38.8 At Landlord's request, Tenant shall, from time to time, based on
Tenant's reasonable projected space planning needs, reasonably cooperate with
Landlord to identify particular classes of leases (for example, leases not
exceeding a stated term or of not less than a stated amount of space) which
shall be exempt from the First Offer.
38.9 The First Offer granted herein may only be exercised if Tenant is not
in default hereunder. In the event this Lease is terminated for any reason, the
rights granted to Tenant in this Section shall also terminate at the same time.
In the event Tenant exercises the First Offer as provided herein and
subsequently becomes in default prior to taking occupancy of the First Offer
Space, Landlord may elect, by written notice to Tenant, to terminate Tenant's
prior exercise of its First Offer, in which event Tenant shall have no rights
with respect to the First Offer Space. This First Offer is personal to the
Tenant named herein and Permitted Transferees and may only be exercised in the
event the Tenant named herein or Permitted Transferees are in actual occupancy
of the entire Premises at the time the expansion notice is given.
ARTICLE 39 RELOCATION CLAUSE IN TENANT LEASES:
Landlord agrees to use commercially reasonable efforts to include a
provision allowing Landlord to relocate the tenant at any time in all office
leases of the ground floor of the Building.
ARTICLE 40 EARLY ENTRY:
Tenant shall be permitted to enter the Premises prior to the commencement
date for the purpose of installing Tenant's voice data wiring and furniture.
Such early entry shall be subject to all terms and conditions of this Lease,
including the provisions of Section 6 of Exhibit D, except the obligation to pay
rent.
ARTICLE 41 FINANCIAL STATEMENTS:
At the request of Landlord from time to time, but not more frequently than
quarterly, Tenant shall deliver to Landlord accurate financial statements for
Tenant for the preceding three (3) calendar years, prepared in accordance with
generally accepted accounting principals and certified by an independent
certified public accountant, together with Tenant's most recent quarterly
financial statement certified by Tenant's chief financial officer.
LANDLORD TENANT
AmberJack, Ltd, an Arizona Corporation Webridge, Inc., a Delaware Corporation
By: /s/ [Signature Illegible] By: /s/ [Signature Illegible]
----------------------------------- -----------------------------------
Title: Development Manager Title: CFO
-------------------------------- --------------------------------
Date: 11-16-99 Date: 11-10-99
--------------------------------- ---------------------------------
By: /s/ [Signature Illegible] By: /s/ [Signature Illegible]
----------------------------------- -----------------------------------
Title: VP Title: VP Finance
-------------------------------- --------------------------------
Date: 11-16-99 Date: 11-10-99
--------------------------------- ---------------------------------
4
<PAGE> 31
EXHIBIT A
PREMISES FLOOR PLAN AND LOCATION KEY
SECOND FLOOR PLAN
THIRD FLOOR PLAN
FOURTH FLOOR PLAN
<PAGE> 32
EXHIBIT B
AMBERGLEN BUSINESS CENTER COMMON AREAS MAP
24
<PAGE> 33
EXHIBIT C
LEASE AGREEMENT
ANTENNA LICENSE AGREEMENT
ANTENNA LICENSE AGREEMENT
DATED _______________
BY AND BETWEEN
------------------------
AND
------------------------
This Agreement is made and entered into as of this _______ day of
____________, 19__ by and between ______________________ (hereinafter called
"Licensor") and _____________________ (hereinafter called "Licensee").
1. Licensor, for and in consideration of the payments hereinafter set forth
and of the covenants and agreements made by Licensee herein contained, does
hereby grant unto the Licensee a nonexclusive license ("License") to
utilize space in the building located at ________________________,
(hereinafter called the "Building") for the purpose of installing and using
the antenna described in Exhibit "1" attached hereto and made a part hereof
(the "Antenna") to be attached to the roof of the Building for a term
commencing __________________ and ending ___________________, unless
extended or sooner terminated as provided herein.
2. Licensee shall make payments to Licensor, at the office of the Building, or
elsewhere as designated from time to time by notice in writing to Licensee,
in monthly installments as follows: NOT APPLICABLE
3. The size, location and placement, as well as the manner and method of
installation and removal of the Antenna and related equipment, shall be
subject to the prior written approval of Licensor. The Antenna and related
equipment, shall not penetrate the roof membrane. If Licensor elects to
hire structural, mechanical, roofing and/or other engineers or consultants
to review such plans and specifications, Licensee shall reimburse Licensee
for the reasonable costs thereof, whether or not Licensor grants such
approval.
4. In addition to the monthly rental, Licensee shall pay for all utilities
consumed to install, maintain, operate and remove its Antenna and
equipment, as well as the reasonable costs of any engineers or consultants
employed by Licensor to review or monitor same.
5. Prior to the installation of said Antenna and equipment, Licensee shall
secure and shall at all times thereafter maintain all required approvals
and permits of the Federal Communications Commission and all other
governmental bodies having jurisdiction over its business, including its
communications, operations, and facilities. Licensee shall at all times
comply with all laws and ordinances and all rules and regulations of
municipal, state and federal governmental authorities relating to the
installation, maintenance, height, location, use, operation, and removal of
said Antenna and equipment and shall fully indemnify Licensor against any
loss, cost, or expense which may be sustained or incurred by it as a result
of the installation, maintenance, operation, or removal of said Antenna and
equipment. Licensor makes no representation that applicable laws,
ordinances or regulations permit the installation or operation of antennas
on the subject real estate.
6. Licensor hereby grants unto Licensee the right, to be exercised as herein
set forth, to enter upon the roof of the Building for the sole purpose or
gaining access to the Licensee's installation. In addition thereto,
Licensor grants unto Licensee the right, to be exercised as herein set
forth, to install such equipment, conduits, cables and materials
(hereinafter called "the connecting equipment") in shafts, ducts, conduits,
chases, utility closets and other facilities of the Building as designated
by Licensor as is reasonably necessary to connect Licensee's Antenna to
Licensee's other machinery and equipment in other parts of the Building,
subject to the requirements of any permits and the codes, regulations and
rules of any governmental body, agency or authority. Licensor further
grants to Licensee the right of access to the areas where such connecting
equipment is located for the purposes of maintaining, repairing, testing
and replacing the connecting equipment; provided, however, Licensee shall
notify Licensor each time Licensee requires such access, and provided
further that such access and installations do not cause
26
<PAGE> 34
damage to or interfere with the operation or maintenance of any part of
the Building or with any other tenant's operation.
7. Anything herein to the contrary notwithstanding, Licensee shall notify
Licensor each time Licensee desires to enter upon the roof of the
Building or the areas outside Licensee's Premises where Licensee's
related equipment is located, and Licensee shall enter upon the roof only
at such times, in such manner and under such circumstances as shall not
cause damage or endangerment of life or limb. Licensee shall promptly
reimburse Licensor for the costs of repairs of any damage to the Building
directly or indirectly caused by Licensee's installations or the
operation, maintenance or removal thereof.
8. Licensee, at its expense, shall be solely responsible for and shall
maintain its Antenna and related equipment in a safe, structural, sound,
clean and sightly condition and shall indemnify and save harmless
Licensor against all liens and claims of mechanics and materialmen
furnishing labor and materials in the construction and maintenance of
same.
9. Licensee agrees to defend, indemnify and save harmless Licensor and to
assume all liability for death or injury to any persons and all liability
for loss, damage or injury to any property incurred or sustained by
Licensee arising from, growing out of or resulting from Licensee's
installation or its use of the roof of the Building or any other areas in
the Building where Licensee's related equipment is located, including
costs, attorney's fees and other expenses incurred by Licensor in
defending any such claim unless such loss, damage or injury is due to the
gross negligence of Licensor, its employees, agents, or invitees.
10. Licensee hereby waives and releases all claims against Licensor, its
officers, directors, agents, employees and servants, and agrees that they
shall not be liable for injury to person or damage to property sustained
by Licensee or by any occupant of the Building or any other person
occurring in or about the Building resulting directly or indirectly from
any existing or future condition, defect, matter or thing in the Building
or any part of it or from equipment or appurtenance becoming out of
repair, or from any occurrence, act, or from the negligence or omission
of any tenant or occupant of the Building or of any other person; except
for the negligence or omission by Licensor, its officers, directors,
agents, employees and servants.
11. The License hereby granted to Licensee shall not be deemed to give to
Licensee the exclusive right to use the roof or tower of the Building and
shall not preclude Licensor from granting a license or licenses to
others. The rights of other licensees shall be exercised without causing
unreasonable interference with the activities being carried on by
Licensee in accordance with this License. Similarly, the rights of
Licensee hereunder shall be exercised without causing interference with
the activities being carried on by other licensees in accordance with
their respective licenses. Licensee shall not change or materially alter
the Antenna or related equipment agreed to herein without the prior
written consent of Licensor.
12. If any lease by Licensee for any space in the Building shall be
terminated or terminable after the making of this License, because of any
default by Licensee under such lease, such fact shall empower Licensor,
at Licensor's sole option, to terminate this License by notice to
Licensee.
13. No notice or demand related to or required by this Agreement shall be
effective unless same is in writing and is either delivered personally to
the party for whom intended, or to an officer of such party if a
corporation, or sent by United States registered or certified mail return
receipt requested, if to Licensee, at its office in the Building, or if
Licensee is not in possession thereof, then to Licensee's address last
known to Licensor, and if to Licensor, at _________________________
provided that either party may, by notice to the other, from time to time
designate another address in the United States of America to which notices
mailed more than ten (10) days thereafter shall be addressed. Notices
mailed as aforesaid shall be effectively given as of the date of mailing.
14. Licensor shall have the right to terminate this License upon written
notice to Licensee, in the event that: (a) Licensee shall default in the
performance of any of the obligations imposed upon it hereunder and shall
not, after being notified by Licensor of the existence of such default,
immediately take all reasonable steps to cure the same; or (b) it shall
be determined that such installation or use materially interferes with
the operation of machinery and apparatus of the Building, such as the
elevators; or (c) it is found by public authority having jurisdiction
over the Building that such installation and use constitute a nuisance
or hazard to the public or to the occupants of the Building; or (d) the
use of such antenna interferes with the use of any tenant's equipment or
data processing machines in the Building; or (e) Licensee's lease of
space in the Building shall expire or be terminated. Licensor and
Licensee shall each have the right to terminate this Agreement upon
written notice to each other sixty (60) days prior to the desired
termination date.
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15. At the termination of this License by lapse of time or otherwise, the
Antenna and the related equipment installed under the terms of this
License shall be removed by Licensee and the area of the Building where
they were installed shall be restored by Licensee to as good condition as
existed immediately prior to the installation of such Antenna and related
equipment.
16. This Agreement shall be binding upon the successors and assigns of the
parties hereto, provided that Licensee shall not assign or transfer this
License to anyone else without Licensor's prior written consent which may
be withheld at its sole discretion.
LICENSEE: LICENSOR:
______________________________________ ______________________________________
______________________________________ ______________________________________
By:___________________________________ By:___________________________________
Its:__________________________________ Its:__________________________________
Date:_________________________________ Date:_________________________________
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EXHIBIT D
LEASE AGREEMENT
WORK AGREEMENT
SECTION 1. TENANT IMPROVEMENTS PROVIDED BY LANDLORD. Landlord agrees to provide
all tenant improvements as described in the CDP for each Area ("Tenant
Improvements").
SECTION 2. TENANT IMPROVEMENT ALLOWANCE PROVIDED BY LANDLORD.
2.1 ALLOWANCE: Landlord agrees to provide Tenant with an allowance (the
"ALLOWANCE") of ($30.00 per rentable square foot of Premises) to be applied to
the design, permitted and construction of the Tenant Improvements in the
Premises described in Section 1 of this Work Agreement, and including upgrades
to improvements and finishes approved by Landlord, and the reception desk and
building sign, but in any event excluding Tenant's equipment, artwork,
furnishings, furniture, and cabling. Landlord shall not charge a fee in
connection with the Tenant Improvements (provided that Tenant acknowledges
Landlord's contractor shall charge a fee for the Tenant Improvements).
2.2 APPLICATION: All design, permit, purchase and installation costs
incurred by Landlord relating to such Tenant Improvements shall be deducted
from the Allowance. Any amount of the Allowance not used for Tenant
Improvements shall be retained by Landlord. If the total cost for such Tenant
Improvements as reflected in the CDP exceeds the Allowance then Tenant shall
deposit with Landlord the estimated excess amount as soon as it is determined
but prior to commencement of any work. Landlord shall apply this payment first
toward general costs, expenses and construction costs associated with the
Tenant Improvements. If the actual cost of the work is more than this payment
then the deficiency shall be paid by Tenant to Landlord on or before the
Commencement Date for the Area.
SECTION 3. DESIGN OF TENANT IMPROVEMENTS.
3.1 CDP PREPARATION: Landlord's office planner shall prepare a CDP
consisting of a floor plan, a reflected ceiling/lighting plan and Tenant's
supplement specification.
3.1.1 The CDP shall be based upon the schematic space plan and the
construction information provided by Tenant. The schematic space plan for the
fourth floor is attached as Exhibit A.
3.1.2 Tenant shall provide Landlord's office planner with all of the
construction information requested by Landlord's office planner by no later
than the applicable Construction Information Submittal Dates specified in
Section 1.11 of the Basic Lease Information. For Areas other than the fourth
floor, such information shall include, without limitation, signed schematic
plans, and a designation by Tenant of which half of the floor Tenant shall
first occupy. "Tenant's Submittal Package" means all such information, together
with a written statement identifying such package as Tenant's Submittal Package
and that the information is being supplied pursuant to this Section 3.1.2.
3.1.3 Tenant shall be responsible for all delays in occupancy and
additional costs, including limitation design fees, resulting from its failure
to submit such information on time, any Tenant requested changes in the Tenant
Improvements specified in this Lease (herein "CHANGE ITEMS").
3.2 CDP APPROVAL: Tenant shall approve the CDP within five (5) days after
Tenant's receipt of the CDP for each Area (the "CONSTRUCTION DOCUMENT APPROVAL
DATE") subject to any corrections requested to make the CDP consistent with the
construction information submitted to Landlord's office planner, and subject to
any requested deletions. The CDP shall include a statement (the "STATEMENT") of
the estimated costs, if any, for which Tenant will be responsible under the
terms of this Work Agreement. The CDP and the Statement included therein must be
approved by Tenant in writing before the Landlord will proceed to obtain
building permits and commence construction. Upon written request of Tenant
given no later than five (5) days after submission to Tenant of the Statement,
Landlord shall obtain bids for the Tenant Improvements (or specified elements
thereof as requested by Tenant) from contractors and Landlord shall award the
contract to the lowest bidder unless otherwise agreed by Tenant.
3.3 TENANT RESPONSIBILITIES: Tenant shall be responsible for delays and
additional costs, including without limitation design fees, caused by: (i) any
changes made by Tenant to the CDP other than corrections and deletions of the
type described in Section 3.2; (ii) Tenant's failure to approve the CDP and the
Statement by the Construction Document Approval Date specified in Section 3.2;
(iii) by delays in delivery of non-building-standard materials requiring long
lead times; and (iv) any requirement by Tenant that any element of the Tenant
Improvements be bid pursuant to Section 3.2. Tenant shall pay, prior to taking
occupancy of the Premises, all of Landlord's design fees arising out of the
inclusion of non-building-standard materials in the Premises.
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SECTION 4. CONSTRUCTION.
Approval of the CDP for an Area shall constitute written authorization to
complete the Area in accordance with the CDP. Tenant may in such authorization
delete items to reduce its cost, subject to Landlord's approval. Tenant's
failure to timely provide such written authorization shall be a Tenant delay,
and Landlord shall not be obligated to commence work on the Area. Tenant shall
be responsible for any costs due to any resulting delay in completion of the
Premises. Landlord shall commence and pursue to completion the construction of
the Tenant Improvements in an Area as soon as reasonably possible after the
approval to commence construction is given by Tenant. Landlord need not
commence design or improvement work for an Area earlier than delivery of
Tenant's Submittal Package for the Area, the intention being that Landlord may
defray costs until that time. Landlord's contractor shall, subject to Tenant
delays and force majeure, complete the Tenant Improvements by the applicable
Commencement Date for the Area as stated in Section 1.13, and in accordance
with Tenant's approved CDP. Tenant shall have possession of the Premises for
fourteen (14) days prior to the Commencement Date for the Area for the purpose
of installing telecommunication and computer equipment, Tenant's office
equipment, furniture and other fixtures, and general move-in, provided that
Tenant does not interfere with work performed by Landlord or Landlord's
contractor, and that any such possession by Tenant shall be upon all terms and
conditions of the Lease, except for payment of Rent. All Tenant Improvements
shall be constructed in accordance with the CDP, and shall be made in good and
workmanlike manner. Upon substantial completion of the Tenant Improvements,
Landlord and Tenant shall conduct a walk through of the Premises and generate a
punch list of items to be completed by Landlord within thirty (30) days after
the date the punch list is completed and agreed upon by Landlord and Tenant.
SECTION 5. FIELD CHANGE ORDERS.
If Tenant shall request any change in the Tenant approved CDP, Tenant
shall request such change in writing to Landlord, and such request shall be
accompanied by all information necessary to prepare plans and specifications
for such change. If Landlord approves Tenant's requested change, then after
receiving this information, Landlord shall cause its office planner to prepare
such plans and specifications and a proposed field change order ("FCO") as soon
as reasonably possible thereafter. Landlord shall not be obligated to proceed
with any work which would be affected by a proposed FCO until it is effective
or Tenant withdraws the FCO request. Tenant shall be responsible for any and
all delays in construction and occupancy caused by Tenant's FCO requests. The
proposed FCO shall set forth the estimated cost of the changes. The proposed
FCO shall be effective only when signed by both Landlord and Tenant, and Tenant
has deposited the estimated cost of the changes with Landlord. Landlord shall
hold this payment as an additional security deposit. Upon the acceptance of the
Premises by Tenant, this additional security deposit shall be applied to pay
the cost of the work. If the actual cost of the change order is more or less
than this security deposit then the excess or deficiency shall be refunded or
paid at the same time, as the case may be. Even if Tenant fails to approve the
proposed FCO, Tenant shall be responsible for the cost of preparing any plans
and specifications for the proposed FCO. The actual cost, including design and
administrative fees, of any FCO shall be paid by Tenant on or before the date
Tenant first occupies the Premises unless stated otherwise in the FCO.
SECTION 6. IMPROVEMENTS CONSTRUCTED BY TENANT.
If any work is to be performed by Tenant or Tenant's contractor in
connection with Tenant Improvements on the Premises:
6.1 LANDLORD'S APPROVAL: Such work shall not proceed until Landlord's
written approval of each of the following items: (i) Tenant's contractor; (ii)
public liability and property damage insurance carried by Tenant or its
contractor; and (iii) schematic plans and specifications for such work. The
detailed construction plans and specifications shall be prepared by Landlord's
office planner at Tenant's expense based upon the schematic plans and
specifications. All such work shall be done in strict conformity with such
final plans and specifications subject to field change orders prepared and
approved in the manner specified in Section 3.1 above. As built plans shall be
prepared by Landlord's office planner at Tenant's expense after the work is
fully completed and a copy retained by Landlord for its use.
6.2 PERMITS: All work shall be done in conformity with a valid building
permit (obtained at Tenant's expense) when required, a copy of which shall be
furnished to Landlord before such work is commenced, and in any case, all such
work shall be performed in accordance with all applicable governmental
regulations at Tenant's sole expense. Notwithstanding any failure by Landlord
to object to any such work, Landlord shall have no responsibility for Tenant's
failure to meet all applicable regulations.
6.3 COORDINATION: All work by Tenant or Tenant's contractor shall be
scheduled through Landlord. Tenant or Tenant's contractor shall arrange for
necessary utility, hoisting and elevator service with Landlord's contractor and
shall pay such reasonable charges for such services as may be charged by
Landlord's contractor. Tenant shall be responsible for any delay in any delay
in completion of Tenant Improvements resulting from performance of work at the
Premises by Tenant or Tenant's contractor.
6.4 MANNER OF ENTRY: Tenant's entry to an Area for any purpose,
including, without limitation, inspection or performance of Tenant construction
by Tenant's agents, prior to the Lease Commencement Date for an Area as
specified in the Basic Lease Information shall be at such times as are approved
by Landlord and subject to all the terms and conditions of this Lease except
the payment of Rent. Tenant's
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entry shall mean entry by Tenant, its officers, contractors, licensees, agents,
servants, employees, guests, invitees, or visitors.
6.5 FAULTY WORK: Tenant shall promptly reimburse Landlord upon demand for
any extra expense incurred by the Landlord by reason of faulty work done by
Tenant or its contractors or by reason of any delays caused by such work, or by
reason of inadequate cleanup.
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EXHIBIT 10.3
- --------------------------------------------------------------------------------
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
WEBRIDGE, INC.
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
1 ACCOUNTING AND OTHER TERMS ................................................... 4
2 LOAN AND TERMS OF PAYMENT .................................................... 4
2.1 Credit Extensions ..................................................... 4
2.2 Overadvances .......................................................... 5
2.3 Interest Rate, Payments ............................................... 5
2.4 Fees .................................................................. 5
3 CONDITIONS OF LOANS .......................................................... 6
3.1 Conditions Precedent to Initial Credit Extension ...................... 6
3.2 Conditions Precedent to all Credit Extensions ......................... 6
4 CREATION OF SECURITY INTEREST ................................................ 6
4.1 Grant of Security Interest ............................................ 6
5 REPRESENTATIONS AND WARRANTIES ............................................... 6
5.1 Due Organization and Authorization .................................... 6
5.2 Collateral ............................................................ 7
5.3 Litigation ............................................................ 7
5.4 No Material Adverse Change in Financial Statements .................... 7
5.5 Solvency .............................................................. 7
5.6 Regulatory Compliance ................................................. 7
5.7 Subsidiaries .......................................................... 8
5.8 Full Disclosure ....................................................... 8
6 AFFIRMATIVE COVENANTS ........................................................ 8
6.1 Governmental Compliance ............................................... 8
6.2 Financial Statements, Reports, Certification .......................... 8
6.3 Inventory; Returns .................................................... 9
6.4 Taxes ................................................................. 9
6.5 Insurance ............................................................. 9
6.6 Primary Accounts ...................................................... 9
6.7 Financial Covenants ................................................... 10
6.8 Registration of Intellectual Property Rights .......................... 10
6.9 Further Assurances .................................................... 10
7 NEGATIVE COVENANTS ........................................................... 10
7.1 Dispositions .......................................................... 10
7.2 Changes in Business, Ownership, Management or Business Locations ...... 10
7.3 Mergers or Acquisitions ............................................... 10
7.4 Indebtedness .......................................................... 11
7.5 Encumbrances .......................................................... 11
7.6 Distributions; Investments ............................................ 11
7.7 Transactions with Affiliates .......................................... 11
7.8 Subordinated Debt ..................................................... 11
7.9 Compliance ............................................................ 11
8 EVENTS OF DEFAULT ............................................................ 11
8.1 Payment Default ....................................................... 12
8.2 Covenant Default ...................................................... 12
8.3 Material Adverse Change ............................................... 12
</TABLE>
2
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<TABLE>
<S> <C> <C> <C>
8.4 Attachment ........................................................... 12
8.5 Insolvency ........................................................... 12
8.6 Other Agreements ..................................................... 12
8.7 Judgments ............................................................ 12
8.8 Misrepresentations ................................................... 13
9 BANK'S RIGHTS AND REMEDIES .................................................. 13
9.1 Rights and Remedies .................................................. 13
9.2 Power of Attorney .................................................... 13
9.3 Accounts Collection .................................................. 14
9.4 Bank Expenses ........................................................ 14
9.5 Bank's Liability for Collateral ...................................... 14
9.6 Remedies Cumulative .................................................. 14
9.7 Demand Waiver ........................................................ 14
10 NOTICES ..................................................................... 14
11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER .................................. 15
12 GENERAL PROVISIONS .......................................................... 15
12.1 Successors and Assigns ............................................... 15
12.2 Indemnification ...................................................... 15
12.3 Time of Essence ...................................................... 15
12.4 Severability of Provision ............................................ 15
12.5 Amendments in Writing, Integration ................................... 15
12.6 Counterparts ......................................................... 16
12.7 Survival ............................................................. 16
12.8 Confidentiality ...................................................... 16
12.9 Effect of Amendment and Restatement .................................. 16
12.10 Attorneys' Fees, Costs and Expenses .................................. 16
13 DEFINITIONS ................................................................. 16
13.1 Definitions .......................................................... 16
</TABLE>
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This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is dated August
25, 1999, between SILICON VALLEY BANK ("Bank"), whose address is 3003 Tasman
Drive, Santa Clara, California 95054 with a loan production office located at
11000 SW Stratus. Sts. 170, Beaverton, Oregon 97008-7113 and WEBRIDGE, INC.
("Borrower"), whose address is 225 SW Broadway, Suite 600, Portland, Oregon
97205.
RECITALS
A. Bank and Borrower are parties to that certain QuickStart Loan and
Security Agreement (together with all Schedules attached thereto), dated
December 29, 1997, as amended (collectively, the "Original Agreement").
B. Borrower and Bank desire in this Agreement to set forth their
agreement with respect to a working capital and term loan and to amend and
restate in its entirety without novation the Original Agreement in accordance
with the provisions herein.
AGREEMENT
The parties agree as follows:
1 ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement will be construed
following GAAP. Calculations and determinations must be made following GAAP. The
term "financial statements" includes the notes and schedules. The terms
"including" and "includes" always mean "including (or includes) without
limitation," in this or any Loan Document. This Agreement shall be construed to
impart upon Bank a duty to act reasonably at all times.
2 LOAN AND TERMS OF PAYMENT
2.1 Credit Extensions.
Borrower will pay Bank the unpaid principal amount of all Credit
Extensions and interest on the unpaid principal amount of the Credit Extensions.
2.1.1 Revolving Advances.
(a) Bank will make Advances not exceeding (i) the lesser of (A) the
Committed Revolving Line or (B) the Borrowing Base, minus (ii) the amount of
all outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit). Amounts borrowed under this Section may be repaid and reborrowed
during the term of this Agreement.
(b) To obtain an Advance, Borrower must notify Bank by facsimile or
telephone by 3:00 p.m. Pacific time on the Business Day the Advance is to be
made. Borrower must promptly confirm the notification by delivering to Bank the
Payment/Advance Form attached as Exhibit B. Bank will credit Advances to
Borrower's deposit account. Bank may make Advances under this Agreement based on
instructions from a Responsible Officer or his or her designee or without
instructions if the Advances are necessary to meet Obligations which have become
due. Bank may rely on any telephone notice given by a person whom Bank believes
is a Responsible Officer or designee. Borrower will indemnify Bank for any loss
Bank suffers due to such reliance.
(c) The Committed Revolving Line terminates on the Revolving
Maturity Date, when all Advances are immediately payable.
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2.1.2 Letters of Credit.
Bank will issue or have issued Letters of Credit for Borrower's account
not exceeding (i) the lesser of the Committed Revolving Line or the Borrowing
Base minus (ii) the outstanding principal balance of the Advances; however, the
face amount of outstanding Letters of Credit (including drawn but unreimbursed
Letters of Credit) may not exceed $500,000. Each Letter of Credit will have an
expiry date of no later than 180 days after the Revolving Maturity Date, but
Borrower's reimbursement obligation will be secured by cash on terms
acceptable to Bank at any time after the Revolving Maturity Date if the term of
this Agreement is not extended by Bank. Borrower agrees to execute any further
documentation in connection with the Letters of Credit as Bank may reasonably
request.
2.1.3 Term Loan.
(a) Bank had previously made a Term Loan available to Borrower pursuant
to the Original Agreement.
(b) Borrower will continue to pay the remaining 17 equal installments of
principal, plus accrued interest (each, a "Term Loan Payment"). Each Term Loan
Payment is payable on the 28th of each month during the term of the loan, with
the next Term Loan Payment due on July 28, 1999. Borrower's final Term Loan
Payment, due on December 25, 2000, includes all outstanding Term Loan principal
and accrued interest.
2.2 Overadvances.
If Borrower's Obligations under Section 2.1.1 and 2.1.2 exceed the lesser
of either (i) the Committed Revolving Line or (ii) the Borrowing Base, Borrower
must immediately pay Bank the excess.
2.3 Interest Rate, Payments.
(a) Interest Rate. (i) Advances accrue interest on the outstanding
principal balance at a per annum rate of 1 percentage point above the Prime
Rate; and (ii) the Term Loan accrues interest at a per annum rate of 1
percentage point above the Prime Rate. After an Event of Default, Obligations
accrue interest at 5 percent above the rate effective immediately before the
Event of Default. The interest rate increases or decreases when the Prime Rate
changes. Interest is computed on a 360 day year for the actual number of days
elapsed.
(b) Payments. Interest due on the Committed Revolving Line is payable on
the 7th of each month. Bank may debit any of Borrower's deposit accounts
including Account Number 3300067716 for principal and interest payments owing or
any amounts Borrower owes Bank. Bank will promptly notify Borrower when it
debits Borrower's accounts. These debits are not a set-off. Payments received
after 12:00 noon Pacific time are considered received at the opening of business
on the next Business Day. When a payment is due on a day that is not a Business
Day, the payment is due the next Business Day and additional fees or interest
accrue.
2.4 Fees.
Borrower will pay:
(a) Facility Fee. A fully earned, non-refundable Facility Fee of $5,000
for the Committed Revolving Line due on the Closing Date; and a fully-earned,
non-refundable Increase Fee of $1,250 due upon Borrower's availability of the
Increase Amount; and
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(b) Bank Expenses. All Bank Expenses (including reasonable attorneys fees
and reasonable expenses) incurred through and after the date of this Agreement,
are payable when due.
3 CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Credit Extension.
Bank's obligation to make the Initial Credit Extension is subject to the
condition precedent that it receive the agreements, documents and fees it
requires; and
Bank's receipt and satisfactory review of results from the initial audit of
Borrower's Collateral.
Bank's receipt of evidence of Borrower's application provided to the U.S.
Copyright Office listing copyrights to be filed with such office.
3.2 Conditions Precedent to all Credit Extensions.
Bank's obligations to make each Credit Extension, including the Initial
Credit Extension, is subject to the following:
(a) timely receipt of any Payment/Advance Form; and
(b) the representations and warranties in Section 5 must be materially
true on the date of the Payment/Advance Form and on the effective date of each
Credit Extension and no Event of Default may have occurred and be continuing, or
result from the Credit Extension. Each Credit Extension is Borrower's
representation and warranty on that date that the representations and warranties
of Section 5 remain true.
4 CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest.
Borrower grants Bank a continuing security interest in all presently
existing and later acquired Collateral to secure all Obligations and performance
of each of Borrower's duties under the Loan Documents. Except for Permitted
Liens, any security interest will be a first priority security interest in the
Collateral. Bank may place a "hold" on any deposit account pledged as
Collateral. If this Agreement is terminated, Bank's lien and security interest
in the Collateral will continue until Borrower fully satisfies its Obligations.
5 REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization and Authorization.
Borrower and each Subsidiary is duly existing and in good standing in its
state of formation and qualified and licensed to do business in, and in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be qualified, except where the failure to do so could
not reasonably be expected to cause a Material Adverse Change.
The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's formation documents, nor
constitute an event of default under any material agreement by which Borrower is
bound. Borrower is not in default
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under any agreement to which or by which it is bound in which the default could
cause reasonably be expected to cause a Material Adverse Change.
5.2 Collateral.
Borrower has good title to the Collateral, free of Liens except
Permitted Liens. The Accounts are bona fide, existing obligations, and the
service or property has been performed or delivered to the account debtor or
its agent for immediate shipment to and unconditional acceptance by the account
debtor. Borrower has no notice of any actual or imminent Insolvency Proceeding
of any account debtor whose accounts are an Eligible Account in any Borrowing
Base Certificate. All inventory is in all material respects of good and
marketable quality, free from material defects. Borrower is the sole owner of
the Intellectual Property, except for non-exclusive licenses granted to its
customers in the ordinary course of business. Each Patent is valid and
enforceable and no part of the Intellectual Property has been judged invalid or
unenforceable, in whole or in part, and no claim has been made that any of the
Intellectual Property violates the rights of any third party, except to the
extent such claim could not reasonably be expected to cause a Material Adverse
Change.
5.3 Litigation.
Except as shown in the Schedule, there are no actions or proceedings
pending or, to the knowledge of Borrower's Responsible Officers and legal
counsel, threatened by or against Borrower or any Subsidiary in which a likely
adverse decision could reasonably be expected to cause a Material Adverse
Change.
5.4 No Material Adverse Change in Financial Statements.
All consolidated financial statements for Borrower, and any Subsidiary,
delivered to Bank fairly present in all material respects Borrower's
consolidated financial condition and Borrower's consolidated results of
operations. There has not been any material deterioration in Borrower's
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.
5.5 Solvency.
The fair salable value of Borrower's assets (including goodwill minus
disposition costs) exceeds the fair value of its liabilities; the Borrower is
not left with unreasonably small capital after the transactions in this
Agreement; and the Borrower is able to pay its debts (including trade debts) as
they mature.
5.6 Regulatory Compliance.
Borrower is not an "investment company" or a company "controlled" by an
"investment company" under the Investment Company Act. Borrower is not engaged
as one of its important activities in extending credit for margin stock (under
Regulations T and U of the Federal Reserve Board of Governors). Borrower has
complied in all material respects with the Federal Fair Labor Standards Act.
Borrower has not violated any laws, ordinances or rules, the violation of which
could reasonably be expected to cause a Material Adverse Change. None of
Borrower's or any Subsidiary's properties or assets has been used by Borrower
or any Subsidiary or, to the best of Borrower's knowledge, by previous Persons,
in disposing, producing, storing, treating, or transporting any hazardous
substances other than legally. Borrower and each Subsidiary has timely filed
all required tax returns and paid, or made adequate provision to pay, all
material taxes, except those being contested in good faith with adequate
reserves under GAAP. Borrower and each Subsidiary has obtained all consents,
approvals and authorizations of, made all declarations or filings with, and
given all notices to all government authorities that are necessary
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<PAGE> 8
to continue its business as currently conducted, except where the failure to do
so could not reasonably be expected to cause a Material Adverse Change.
5.7 Subsidiaries.
Borrower does not own any stock, partnership interest or other equity
securities except for Permitted Investments.
5.8 Full Disclosure.
No written representation, warranty or other statement of Borrower in
any certificate or written statement given to Bank (taken together with all
such written certificates and written statements to Bank) contains any untrue
statement of a material fact or omits to state a material fact necessary to
make the statements contained in the certificates or statements not misleading,
if being recognized by Bank that the projections and forecasts provided by
Borrower in good faith and based upon reasonable assumptions are not viewed as
facts and that actual results during the period or periods covered by such
projections and forecasts may differ from the projected and forecasted results.
6 AFFIRMATIVE COVENANTS
Borrower will do all of the following:
6.1 Government Compliance.
Borrower will maintain its and all Subsidiaries' legal existence and
good standing in its jurisdiction of formation and maintain qualification in
each jurisdiction in which the failure to so qualify would reasonably be
expected to cause a material adverse effect on Borrower's business or
operations. Borrower will comply, and have each Subsidiary comply, with all
laws, ordinances and regulations to which it is subject, noncompliance with
which could have a material adverse effect on Borrower's business or operations
or would reasonably be expected to cause a Material Adverse Change.
6.2 Financial Statements, Reports, Certificates.
(a) Borrower will deliver to Bank: (i) as soon as available, but no
later than 30 days after the last day of each month, a company prepared
consolidated balance sheet and income statement covering Borrower's
consolidated operations during the period, in a form and certified by a
Responsible Officer acceptable to Bank; (ii) as soon as available, but no later
than 120 days after the last day of Borrower's fiscal year, audited
consolidated financial statements prepared under GAAP, consistently applied,
together with an unqualified opinion on the financial statements from an
independent certified public accounting firm reasonably acceptable to Bank;
(iii) a prompt report of any legal actions pending or threatened against
Borrower or any Subsidiary that could result in damages or costs to Borrower or
any Subsidiary of $100,000 or more;(iv) budgets, sales projections, operating
plans or other financial information Bank requests; and (v) prompt notice of any
material change in the composition of the Intellectual Property, including any
subsequent ownership right of Borrower in or to any Copyright, Patent or
Trademark not shown in any intellectual property security agreement between
Borrower and Bank or knowledge of an event that materially adversely affects
the value of the Intellectual Property.
(b) At such time as there are outstanding Advances and prior to the
initial Advance, within 20 days after the last day of each month, Borrower will
deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in
the form of Exhibit C, with aged listings of accounts receivable and accounts
payable.
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(c) Within 30 days after the last day of each month in which an Advance
was requested, Borrower will deliver to Bank a Compliance Certificate signed by
a Responsible Officer in the form of Exhibit D.
(d) Bank has the right to audit Borrower's Collateral at Borrower's
expense, but the audits will be conducted no more often than every year unless
an Event of Default has occurred and is continuing. Notwithstanding the
foregoing, an initial audit of Borrower's Collateral will be conducted at
Borrower's expense, prior to the initial Credit Extension.
6.3 INVENTORY; RETURNS.
Borrower will keep all inventory in good and marketable condition, free
from material defects. Returns and allowances between Borrower and its account
debtors will follow Borrower's customary practices as they exist at execution
of this Agreement. Borrower must promptly notify Bank of all returns,
recoveries, disputes and claims, that involve more than $50,000.
6.4 TAXES.
Borrower will make, and cause each Subsidiary to make, timely payment of
all material federal, state, and local taxes or assessments and will deliver to
Bank, on demand, appropriate certificates attesting to the payment.
6.5 INSURANCE.
Borrower will keep the business and the Collateral insured for risks and
in amounts, as Bank may reasonably request. Insurance policies will be in a
form, with companies, and in amounts that are satisfactory to Bank. All
property policies will have a lender's loss payable endorsement showing Bank as
an additional loss payee and all liability policies will show the Bank as an
additional insured and provide that the insurer must give Bank at least 20 days
notice before canceling its policy. At Bank's request, Borrower will deliver
certified copies of policies and evidence of all premium payments. Proceeds
payable under any policy will, at Bank's option, be payable to Bank on account
of the Obligations. Statutory notice regarding insurance:
WARNING
Unless you provide us with evidence of the insurance coverage as required
by our contract or loan agreement, we may purchase insurance at your expense to
protect our interest. This insurance may, but need not, also protect your
interest. If the collateral becomes damaged, the coverage we purchase may not
pay any claim you make or any claim made against you. You may later cancel this
coverage by providing evidence that you have obtained property coverage
elsewhere.
You are responsible for the cost of any insurance purchased by us. The
cost of this insurance may be added to your contract or loan balance. If the
cost is added to your contract or loan balance, the interest rate on the
underlying contract or loan will apply to this added amount. The effective date
of coverage may be the date your prior coverage lapsed or the date you failed
to provide proof of coverage.
This coverage we purchased may be considerably more expensive than
insurance you can obtain on your own and may not satisfy any need for property
damage coverage or any mandatory liability insurance requirements imposed by
applicable law.
6.6 PRIMARY ACCOUNTS.
Borrower will maintain its primary depository and operating accounts with
Bank.
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6.7 Financial Covenants.
Borrower will maintain as of the last day of each month:
(i) Quick Ratio (Adjusted). A ratio of Quick Assets to Current
Liabilities minus the current portion of Deferred Maintenance Revenue of at
least 1.50 to 1.00.
(ii) Debt/Tangible Net Worth Ratio. A ratio of Total Liabilities less
Subordinated Debt to Tangible Net Worth plus Subordinated Debt of not more than
2.00 to 1.00.
(iii) Tangible Net Worth. A Tangible Net Worth of at least $2,000,000.
6.8 Registration of Intellectual Property Rights.
Borrower will register with the United States Patent and Trademark Office
or the United States Copyright Office Intellectual Property rights on Exhibits
A, B, C, and D to the Intellectual Property Security Agreement in accordance
with Section 3.1 of this Agreement.
Borrower will (i) protect, defend and maintain the validity and
enforceability of the Intellectual Property and promptly advise Bank in writing
of material infringements and (ii) not allow any Intellectual Property to be
abandoned, forfeited or dedicated to the public without Bank's written consent.
6.9 Further Assurances.
Borrower will execute any further instruments and take further action as
Bank reasonably requests to perfect or continue Bank's security interest in the
Collateral or to effect the purposes of this Agreement.
7 NEGATIVE COVENANTS
Borrower will not do any of the following without Bank's prior written
consent, which will not be unreasonably withheld:
7.1 Dispositions.
Convey, sell, lease, transfer or otherwise dispose of (collectively
"Transfer"), or permit any of its Subsidiaries to Transfer, all or any part of
its business or property, other than Transfers (i) of inventory in the ordinary
course of business; (ii) of non-exclusive licenses and similar arrangements for
the use of the property of Borrower or its Subsidiaries in the ordinary course
of business; or (iii) of worn-out or obsolete Equipment.
7.2 Changes in Business, Ownership, Management or Business Locations.
Engage in or permit any of its Subsidiaries to engage in any business other
than the businesses currently engaged in by Borrower or reasonably related
thereto or have a material change in its ownership (other than the sale of
Borrower's equity securities in a public offering or to venture capital
investors approved by Bank) of greater than 25%. Borrower will not, without at
least 30 days prior written notice, relocate its chief executive office or add
any new offices or business locations.
7.3 Mergers or Acquisitions.
Merge or consolidate, or permit any of its Subsidiaries to merge of
consolidate, with any other Person, or acquire, or permit any of its
Subsidiaries to acquire, all of substantially all of the
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capital stock or promptly of another Person, except where (i) no Event of
Default has occurred and is continuing or would result from such action during
the term of this Agreement and result in a decrease of more than 25% of
Tangible Net Worth. A Subsidiary may merger or consolidate into another
Subsidiary or into Borrower.
7.4 Indebtedness.
Create, incur, assume, or be liable for any indebtedness, or permit any
Subsidiary to do so, other than Permitted Indebtedness.
7.5 Encumbrances.
Create, incur, or allow any Lien on any of its property, or assign or
convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries to do so, except for Permitted Liens, or permit
any Collateral not to be subject to the first priority security interest
granted here, subject to Permitted Liens.
7.6 Distributions; Investments.
Directly or indirectly acquire or own any Person, or make any investment
in any Person, other than Permitted Investments, or permit any of its
Subsidiaries to do so. Pay and dividends or make any distribution or payment or
redeem, retire or purchase any capital stock, except for repurchases of stock
from former employees of Borrower under the terms of applicable repurchase
agreements in an aggregate amount not to exceed $50,000 in any fiscal year,
provided that no Event of Default has occurred, is continuing or would exist
after giving effect to the repurchases.
7.7 Transactions with Affiliates.
Directly or indirectly enter or permit any material transaction with any
Affiliate except transactions that are in the ordinary course of Borrower's
business, on terms less favorable to Borrower than would be obtained in an
arm's length transaction with a non-affiliated Person.
7.8 Subordinated Debt.
Make or permit any payment on any Subordinated Debt, except under the
terms of the Subordinated Debt, or amend any provision in any document relating
to the Subordinated Debt without Bank's prior written consent.
7.9 Compliance.
Become an "investment company" or a company controlled by an "investment
company," under the Investment Company Act of 1940 or undertake as one of its
important activities extending credit to purchase or carry margin stock, or use
the proceeds of any Credit Extension for that purpose: fails to meet the
minimum funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur, fail to comply with the Federal
Fair Labor Standards Act or violate any other law or regulation, if the
violation could reasonably be expected to have a material adverse effect on
Borrower's business or operations or would reasonably be expected to cause a
Material Adverse Change, or permit any of its Subsidiaries to do so.
8 EVENTS OF DEFAULT
Any one of the following is an Event of Default:
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8.1 Payment Default.
If Borrower fails to pay any of the Obligations within 3 days after their
due date. During the additional period the failure to cure the default is not
an Event of Default (but no Credit Extension will be made during the cure
period);
8.2 Covenant Default.
If Borrower does not perform any obligation in Section 6 or violates any
covenant in Section 7 or does not perform or observe any other material term,
condition or covenant in this Agreement, any Loan Documents, or in any
agreement between Borrower and Bank and as to any default under a term,
condition or covenant that can be cured, has not cured the default within 10
days after it occurs, or if the default cannot be cured within 10 days or
cannot be cured after Borrower's attempts within 10 day period, and the default
may be cured within a reasonable time, then Borrower has an additional period
(of not more than 30 days) to attempt to cure the default. During the additional
time, the failure to cure the default is not an Event of Default (but no Credit
Extensions will be made during the cure period);
8.3 Material Adverse Change.
(i) If there occurs a material impairment in the perfection or priority
of the Bank's security interest in the Collateral or in the value of such
Collateral (other than normal depreciation) which is not covered by adequate
insurance or (ii) if the Bank determines, based upon information available to
it and in its reasonable judgment, that there is a reasonable likelihood that
Borrower will fail to comply with one or more of the financial covenants in
Section 6 during the next succeeding financial reporting period.
8.4 Attachment.
If any material portion of Borrower's assets is attached, seized, levied
on, or comes into possession of a trustee or receiver and the attachment,
seizure or levy is not removed in 10 days, or if Borrower is enjoined,
restrained, or prevented by court order from conducting a material part of its
business or if a judgment or other claim becomes a Lien on a material portion
of Borrower's assets, or if a notice of lien, levy, or assessment is filed
against any of Borrower's assets by any government agency and not paid within
10 days after Borrower receives notice. These are not Events of Default if
stayed or if a bond is posted pending contest by Borrower (but no Credit
Extensions will be made during the cure period);
8.5 Insolvency.
If Borrower becomes insolvent or if Borrower begins an insolvency
Proceeding or an Insolvency Proceeding is begun against Borrower and not
dismissed or stayed within 30 days (but no Credit Extensions will be made
before any Insolvency Proceeding is dismissed);
8.6 Other Agreements.
If there is a default in any agreement between Borrower and a third party
that gives the third party the right to accelerate any indebtedness exceeding
$100,000 or that could cause a Material Adverse Change;
8.7 Judgments.
If a money judgment(s) in the aggregate of at least $50,000 is rendered
against Borrower and is unsatisfied and unstayed for 10 days (but no Credit
Extensions will be made before the judgment is stayed or satisfied); or
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8.8 Misrepresentations.
If Borrower or any Person acting for Borrower makes any material
misrepresentation or material misstatement now or later in any warranty or
representation in this Agreement or in any writing delivered to Bank or to
induce Bank to enter this Agreement or any Loan Document.
9. BANK'S RIGHTS AND REMEDIES
9.1 Rights and Remedies.
When an Event of Default occurs and continues Bank may, without notice or
demand, do any or all of the following:
(a) Declare all Obligations immediately due and payable (but if an Event
of Default described in Section 8.5 occurs all Obligations are immediately due
and payable without any action by Bank);
(b) Stop advancing money or extending credit for Borrower's benefit under
this Agreement or under any other agreement between Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account debtors
for amounts, on terms and in any order that Bank considers advisable;
(d) Make any payments and do any acts it considers necessary or
reasonable to protect its security interest in the Collateral. Borrower will
assemble the Collateral if Bank requires and make it available as Bank
designates. Bank may enter premises where the Collateral is located, take and
maintain possession of any part of the Collateral, and pay, purchase, contest,
or compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter
and occupy any of its premises, without charge, to exercise any of Bank's
rights or remedies;
(e) Apply to the Obligations any (i) balances and deposits of Borrower it
holds, or (ii) any amount held by Bank owing to or for the credit or the
account of Borrower;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sale, and sell the Collateral. Bank is granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower's labels, Patents, Copyrights, Mask Works, rights of use of any name,
trade secrets, trade names, Trademarks, service marks, and advertising matter,
or any similar property as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section, Borrower's
rights under all licenses and all franchise agreements inure to Bank's benefit;
and
(g) Dispose of the Collateral according to the Code.
9.2 Power of Attorney.
Effective only when an Event of Default occurs and continues, Borrower
irrevocably appoints Bank as its lawful attorney to: (i) endorse Borrower's
name on any checks or other forms of payment or security; (ii) sign Borrower's
name on any invoice or bill of lading for any Account or drafts against account
debtors, (iii) make, settle, and adjust all claims under Borrower's insurance
policies; (iv) settle and adjust disputes and claims about the Accounts directly
with the account debtors, for amounts and on terms Bank determines reasonable;
and (v) transfer the Collateral into the name of Bank or a third party as the
Code permits. Bank may exercise the power of attorney to sign Borrower's name
on any documents necessary to perfect or continue the perfection of any
security interest regardless of whether an Event of Default has occurred. Bank's
appointment as Borrower's attorney in fact, and all of Bank's rights and powers,
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coupled with an interest, are irrevocable until all Obligations have been fully
repaid and performed and Bank's obligation to provide Credit Extensions
terminates.
9.3 ACCOUNT COLLECTION.
When an Event of Default occurs and continues, Bank may notify any Person
owing Borrower money of Bank's security interest in the funds and verify the
amount of the Account. Borrower must collect all payments in trust for Bank
and, if requested by Bank, immediately deliver the payments to Bank in the form
received from the account debtor, with proper endorsements for deposit.
9.4 BANK EXPENSES.
If Borrower fails to pay any amount or furnish any required proof of
payment to third persons, Bank may make all or part of the payment or obtain
insurance policies required in Section 6.5, and take any action under the
policies Bank deems prudent. Any amounts paid by Bank are Bank Expenses and
immediately due and payable, bearing interest at the then applicable rate and
secured by the Collateral. No payments by Bank are deemed an agreement to make
similar payments in the future or Bank's waiver of any Event of Default.
9.5 BANK'S LIABILITY FOR COLLATERAL.
If Bank complies with reasonable banking practices and Section 9-207 of
the Code, it is not liable for: (a) the safekeeping of the Collateral; (b) any
loss or damage to the Collateral; (c) any diminution in the value of the
Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or
other person. Borrower bears all risk of loss, damage or destruction of the
Collateral.
9.6 REMEDIES CUMULATIVE.
Bank's right and remedies under this Agreement, the Loan Documents, and
all other agreements are cumulative. Bank has all rights and remedies provided
under the Code, by law, or in equity. Bank's exercise of one right or remedy is
not an election, and Bank's waiver of any Event of Default is not a continuing
waiver. Bank's delay is not a waiver, election, or acquiescence. No waiver is
effective unless signed by Bank and then is only effective for the specific
instance and purpose for which it was given.
9.7 DEMAND WAIVER.
Borrower waives demand, notice of default or dishonor, notice of payment
and nonpayment, notice of any default, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.
10 NOTICES.
All notices or demands by any party about this Agreement or any other
related agreement must be in writing and be personally delivered or sent by an
overnight delivery service, by certified mail, postage prepaid, return receipt
requested, or by telefacsimile to the addresses set forth at the beginning of
this Agreement. A party may change its notice address by giving the other party
written notice.
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11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
Oregon law governs the Loan Documents without regard to principles of
conflicts of law. Borrower and Bank each submit to the executive jurisdiction of
the State and Federal courts in Washington County, Oregon.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS.
THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS
AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12 GENERAL PROVISIONS
12.1 SUCCESSORS AND ASSIGNS.
This Agreement binds and is for the benefit of the successors and
permitted assigns of each party. Borrower may not assign this Agreement or any
rights under it without Bank's prior written consent which may be granted or
withheld in Bank's discretion. Bank has the right, without the consent of or
notice to Borrower, to sell, transfer, negotiate, or grant participation in all
or any part of, or any interest in, Bank's obligations, rights and benefits
under this Agreement.
12.2 INDEMNIFICATION.
Borrower will indemnify, defend and hold harmless Bank and its officers,
employees, and agents against (a) all obligations, demands, claims, and
liabilities asserted by any other party in connection with the transactions
contemplated by the Loan Documents; and (b) all losses or Bank Expenses
incurred, or paid by Bank from, following, or consequential to transactions
between Bank and Borrower (including reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 TIME OF ESSENCE.
Time is of the essence for the performance of all obligations in this
Agreement.
12.4 SEVERABILITY OF PROVISION.
Each provision of this Agreement is severable from every other provision
in determining the enforceability of any provision.
12.5 AMENDMENTS IN WRITING, INTEGRATION.
All amendments to this Agreement must be in writing and signed by Borrower
and Bank. This Agreement represents the entire agreement about this subject
matter, and supersedes prior negotiations or agreements. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of this Agreement merge into this Agreement and
the Loan Documents. UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS
MADE BY THE BANK AFTER OCTOBER 3, 1998 CONCERNING LOANS AND OTHER CREDIT
EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED
SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION TO
BE SIGNED BY US TO BE ENFORCEABLE.
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12.6 Counterparts.
This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, are an original, and all taken together, constitute one Agreement.
12.7 Survival.
All covenants, representations and warranties made in this Agreement
continue in full force while any Obligations remain outstanding. The obligations
of Borrower in Section 12.2 to indemnify Bank will survive until all statutes of
limitations for actions that may be brought against Bank have run.
12.8 Confidentiality.
In handling any confidential information, Bank will exercise the same
degree of care that it exercises for its own proprietary information, but
disclosure of information may be made (i) to Bank's subsidiaries or affiliates
in connection with their business with Borrower, (ii) to prospective transferees
or purchasers of any interest in the loans, (iii) as required by law,
regulation, subpoena, or other order, (iv) as required in connection with Bank's
examination or audit and (v) as Bank considers appropriate exercising remedies
under this Agreement. Confidential information does not include information that
either: (a) is in the public domain or in Bank's possession when disclosed to
Bank, or becomes part of the public domain after disclosure to Bank; or (b) is
disclosed to Bank by a third party, if Bank does not know that the third party
is prohibited from disclosing the information.
12.9 Effect of Amendment and Restatement.
This Agreement is intended to and does completely amend and restate
without novation, the Original Agreement. All credit extensions or loans
outstanding under the Original Agreement are and shall continue to be
outstanding under this Agreement. All security interests granted under the
Original Agreement are hereby confirmed and ratified and shall continue to
secure all Obligations under this Agreement.
12.10 Attorneys' Fees, Costs and Expenses.
In any action or proceeding between Borrower and Bank arising out of the
Loan Documents the prevailing party will be entitled to recover its reasonable
attorneys' fees and other reasonable costs and expenses incurred, in addition to
any other relief to which it may be entitled.
13 DEFINITIONS
13.1 Definitions.
In this Agreement:
"Accounts" are all existing and later arising accounts, contract rights,
and other obligations owed Borrower in connection with its sale or lease of
goods (including licensing software and other technology) or provision of
services, all credit insurance, guarantees, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"Advance" or "Advances" is a loan advance (or advances) under the
Committed Revolving Line.
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"Affiliate" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.
"Bank Expenses" are all audit fees and expenses and reasonable costs
and expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).
"Borrower's Books" are all Borrower's books and records including
ledgers, records regarding Borrower's assets or liabilities, the Collateral,
business operations or financial condition and all computer programs or discs
or any equipment containing the information.
"Borrowing Base" is 80% of Eligible Accounts as determined by Bank from
Borrower's most recent Borrowing Base Certificate.
"Business Day" is any day that is not a Saturday, Sunday or a day on
which the Bank is closed.
"Closing Date" is the date of this Agreement.
"Code" is the Oregon Uniform Commercial Code.
"Collateral" is the property described on Exhibit A.
"Committed Revolving Line" is an Advanced of up to $2,000,000 subject to
the Increase Amount.
"Contingent Obligation" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any Interest rate, currency or
commodity swap agreement. Interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
Interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of
the primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.
"Copyrights" are all copyright rights, applications or registrations
and like protection in each work or authorship or derivative work, whether
published or not (whether or not it is a trade secret) now or later existing,
created, acquired or held.
"Credit Extension" is each advance, Letter of Credit. Term Loan, or any
other extension or credit by Bank for Borrower's benefit
"Current Liabilities" are the aggregate amount of Borrower's Total
Liabilities which mature within one (1) year.
"Deferred Maintenance Revenue" is all amounts received in advance of
performance under maintenance contract and not yet recognized as revenue.
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"Eligible Accounts" are Accounts in the ordinary course of Borrower's
business that meet all Borrower's representations and warranties in Section 6;
but Bank may change eligibility standards by giving Borrower notice. Unless
Bank agrees otherwise in writing, Eligible Accounts will not include:
(a) Accounts that the account debtor has not paid within 90 days of
invoice date:
(b) Accounts for an account debtor, 50% or more of whose Accounts have
not been paid within 90 days of invoice date;
(c) Credit balances over 90 days from invoice date;
(d) Accounts for an account debtor, including affiliates, whose total
obligations to Borrower exceed 25% of all Accounts, for this amounts
that exceed that percentage, unless the Bank approves in writing
(except that Accounts from account debtors who have a Standard & Poor's
rating of [illegible] or better shall only be subject to the 25%
concentration for amounts in excess of the first $500,000 in aggregate
advances);
(e) Accounts for which the account debtor does not have its principal
place of business in the United States;
(f) Accounts for which the account debtor is a federal, state or local
government entity or any department, agency, or instrumentally;
(g) Accounts for which Borrower owes the account debtor, but only up
to the amount owed (sometimes called "contra" accounts, accounts
payable, customer deposits or credit accounts);
(h) Accounts for demonstration or promotional equipment, or in which
goods are consigned, sales guaranteed, sale or return, sale on
approval, bill and hold, or other terms if account debtor's payment may
be conditional;
(i) Accounts for which the account debtor is Borrower's Affiliate,
officer, employee, or agent;
(j) Accounts in which the account debtor disputes liability or makes
any claim and Bank believes there may be a basis for dispute (but only
up to the disputed or claimed amount), or if the Account Debtor is
subject to an insolvency Proceeding, or becomes insolvent, or goes out
of business;
(k) Accounts for which Bank reasonably determines collection to be
doubtful.
"Equipment" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"ERISA" is the Employment Retirement Income Security Act of 1974, and
its regulations.
"GAAP" is generally accepted accounting principles.
"Increase Amount" is an increase in the Committed Revolving Line of
$500,000 subject to (i) Borrower a receipt of revenue in an amount not less
than $3,000,000 by September 30, 1999; (ii) Borrower's payment of the Increase
Fee, and (iii) no material adverse change in Borrower's financial condition.
"Increase Fee" is an amount equal to $2,350, due and payable to Bank
upon availability of the increase Amount.
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"Indebtedness" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.
"Insolvency Proceedings" are proceedings by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization
arrangements, or other relief.
"Intellectual Property" is:
(a) Copyrights, Trademarks, Patents and Mask Works including amendments,
renewals, extensions, and all licenses or other rights to use and all license
fees and royalties from the use;
(b) Any trade secrets and any intellectual property rights in computer
software and computer software products now or later existing, created,
acquired or held;
(c) All design rights which may be available to Borrower now or later
created, acquired or held;
(d) Any claims for damages (past, present or future) for infringement of
any of the rights above, with the right, but not the obligation, to sue and
collect damages for use or infringement of the intellectual property rights
above;
All proceeds and products of the foregoing, including all insurance,
indemnity or warranty payments.
"Inventory" is present and future inventory in which Borrower has any
interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody
or possession or in transit and including returns on any accounts or other
proceeds (including insurance proceeds) from the sale or disposition of any of
the foregoing and any documents of title.
"Investment" is any beneficial ownership of (including stock, partnership
interest or other securities) any Person, or any loan, advance or capital
contribution to any Person.
"Letter of Credit" is defined in Section 2.1.2.
"Lien" is a mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
"Loss Documents" are, collectively, this Agreement, any note, or notes or
guaranties executed by Borrower or guarantor, and any other present or future
agreement between Borrower and/or for the benefit of Bank in connection with
this Agreement, all as amended, executed or restated.
"Mask Works" are all mask work or similar rights available for the
protection of semiconductor chips, now owned or later acquired.
"Material Adverse Change" is defined in Section 8.3.
19
<PAGE> 20
"Obligations" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including cash management services,
letters of credit and foreign exchange contracts, if any and including interest
accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank.
"Original Agreement" has the meaning set forth in recital paragraph A.
"Patents" are patents, patent applications and like protections, including
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same.
"Permitted Indebtedness" is:
(a) Borrower's indebtedness to Bank under this Agreement or any other Loan
Document;
(b) Indebtedness existing on the closing Date and shown on the Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary course of
business; and
(e) Indebtedness secured by Permitted Liens.
"Permitted Investments" are:
(a) Investments shown on the Schedule and existing on the Closing Date; and
(b) (i) marketable direct obligations issued or unconditionally guaranteed
by the United States or its agency or any State maturing within 1 year from its
acquisition, (ii) commercial paper maturing no more than 1 year after its
creation and having the highest rating from either Standard & Poor's Corporation
or Moody's Investors Service, Inc., and (iii) Bank's certificate of deposit
issued maturing no more than 1 year after issue.
"Permitted Liens" are:
(a) Liens existing on the Closing Date and shown on the Schedule or
arising under this Agreement or other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on its Books, if they have no priority
over any of Bank's security interests;
(c) Purchase money liens (i) on Equipment or held by Borrower or its
Subsidiaries incurred for financing the acquisition of the Equipment, or (ii)
existing on equipment when acquired, if the Lien is confined to the property
and improvements and the proceeds of the equipment;
(d) Leases or subleases and licenses or sublicenses granted in the
ordinary course of Borrower's business and any interest or title of a lessor,
licensor or under any lease of license, if the leases, subleases, licenses and
sublicenses permit granting Bank a security interest;
(e) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase.
20
<PAGE> 21
"Person" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company association, trust, unincorporated
organization, association, corporation, institution, public benefit
corporation, firm, joint stock company, estate, entity or government agency.
"Prime Rate" is Bank's most recently announced "prime rate," even if it
is not Bank's lowest rate.
"Quick Assets" is on any date, the Borrower's consolidated, unrestricted
cash, cash equivalents, net billed accounts receivable and investments with
maturities of fewer than 12 months determined according to GAAP.
"Responsible Officer" is each of the Chief Executive Officer, the
President, the Chief Financial Officer and the Controller of Borrower.
"Revolving Maturity Date" is August 25, 2000.
"Schedule" is any attached schedule of exceptions.
"Subordinated Debt" is debt incurred by Borrower subordinated to
Borrower's debt to Bank (and identified as subordinated by Borrower and Bank).
"Subsidiary" is for any Person, or any other business entity of which
more than 50% of the voting stock or other equity interests is owned or
controlled, directly or indirectly, by the Person or one or more Affiliates of
the Person.
"Tangible Net Worth" is, on any date, the consolidated total assets of
Borrower and its Subsidiaries minus (i) any amounts attributable to (a)
goodwill, (b) Intangible items such as unamortized debt discount and expense,
Patents, trade and service marks and names, Copyrights and research and
development expenses except prepaid expenses, and (c) reserves not already
deducted from assets, and (ii) Total Liabilities.
"Term Loan" is loan with a current principal balance of $329,201.
"Term Loan Maturity Date" is December 28, 2000.
"Total Liabilities" is on any day, obligations that should, under GAAP,
be classified as liabilities on Borrower's consolidated balance sheet,
including all indebtedness, and current portion Subordinated Debt allowed to be
paid, but excluding all other Subordinated Debt.
"Trademarks" are trademark and servicemark rights, registered or not,
applications to register and registrations and like protections, and the entire
goodwill of the business of Assignor connected with the trademarks.
BORROWER:
WEBRIDGE, INC.
By: /s/ JOSH L. BRINKER
----------------------
Title: CFO
-------------------
21
<PAGE> 22
BANK:
SILICON VALLEY BANK
By: /s/ [SIGNATURE ILLEGIBLE]
---------------------
Title: Vice President
---------------------
22
<PAGE> 23
EXHIBIT A
The Collateral consists of all of Borrower's right, title and interest in
and to the following:
All goods and equipment now owned or hereafter acquired, including, without
limitation, all machinery, fixtures, vehicles (including motor vehicles and
trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
All inventory, now owned or hereafter acquired including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above;
All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties and other security therefor, as well as all
merchandise returned in or reclaimed by Borrower;
All documents, cash, deposit accounts, securities, securities entitlements,
securities accounts, investment property, financial assets, letters of credit,
certificates of deposit, instruments and chattel paper now owned or hereafter
acquired and Borrower's Books relating to the foregoing;
All copyright rights, copyright applications, copyright registrations and
like protections in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; all trade secret
rights, including all rights to unpatented inventions, know-how, operating
manuals, license rights and agreements and confidential information, now owned
or hereafter acquired; all mask work or similar rights available for the
protection of semiconductor chips, now owned or hereafter acquired; all claims
for damages by way of any past, present and future infringement of any of the
foregoing; and
All Borrower's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions
and accessions to and proceeds thereof.
<PAGE> 24
EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE: _______________
FAXS: (408) 496-2428 TIME: _______________
FROM: WEBRIDGE, INC.________________________________________________________
CLIENT NAME (BORROWER)
REQUESTED BY: ______________________________________________________________
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE: ______________________________________________________
PHONE NUMBER: ______________________________________________________________
FROM ACCOUNT # ______________________ TO ACCOUNT # ________________________
REQUESTED TRANSACTION TYPE REQUESTED DOLLAR AMOUNT
PRINCIPAL INCREASE (ADVANCE) $______________________________
PRINCIPAL PAYMENT (ONLY) $______________________________
INTEREST PAYMENT (ONLY) $______________________________
PRINCIPAL AND INTEREST (PAYMENT) $______________________________
OTHER INSTRUCTIONS: ________________________________________________________
____________________________________________________________________________
All Borrower's representations and warranties in the Amended and Restated Loan
and Security Agreement are correct and complete in all material respects on
the date of the telephone request for and Advance confirmed by Borrowing
Certificate; but those representations and warranties expressly referring to
another date shall be true, complete in all material respects as of that date.
BANK USE ONLY
TELEPHONE REQUEST:
The following person is authorized to request the loan payment transfer loan
advance on the advance designated account and is known to me.
________________________ _______________________________
Authorized Requester Phone #
________________________ _______________________________
Received by (Bank) Phone #
____________________________
Authorized Signature (Bank)
<PAGE> 25
EXHIBIT C
BORROWING BASE CERTIFICATE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
BORROWER: WEBRIDGE, INC. Bank: Silicon Valley Bank
3003 T???? Drive
Commitment Amount: $2,000,000 Santa Clara, CA 95054
subject to Increased Amount
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of $
--------- ---------
2. Additions (please explain on reverse) $
---------
3. TOTAL ACCOUNTS RECEIVABLE $
---------
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $
---------
5. Balance of 50% over 90 day accounts $
---------
6. Credit balances over 90 days $
---------
7. Concentration Limits* $
---------
8. Foreign Accounts $
---------
9. Governmental Accounts $
---------
10. Contra Accounts $
11. Promotion or Demo Accounts $
---------
12. Intercompany/Employee Accounts $
---------
13. Other (please explain on reverse) $
---------
14. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $
---------
15. Eligible Accounts (#3 minus #14) $
---------
16. LOAN VALUE OF ACCOUNTS (80% of $16) $
---------
* Accounts from account debtors having a Standard &
Poor's rating of BBB or better, shall only subject
to the 25% concentration for amounts in excess of
the first $500,000 in aggregate Advances.
BALANCES
17. MAXIMUM LOAN AMOUNT $
---------
18. Total Funds Available (Lessor of $17 or $16) $
---------
19. Present balance owing on Line of Credit $
---------
20. Outstanding under Sublimits (LC) $
---------
21. RESERVE POSITION ($18 minus $19 and $20) $
--------
The undersigned represents and warrants that this is true, complete and correct,
and that the information in this Borrowing Base Certificate complies with the
representations and warranties in the Amended and Restated Loan and Security
Agreement between the undersigned and Silicon Valley Bank.
-----------------------
COMMENTS |BANK USE ONLY
|
|Rec'd By:
| ------------
| Auth. Signer
WEBRIDGE, INC. |Date:
| -----------------
|Verified:
By: | -------------
----------------------- | Auth. Signer
Authorized Signer |Date:
| -----------------
|----------------------
|----------------------
</TABLE>
<PAGE> 26
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
3003 Tasman Drive
Santa Clara, CA 95054
FROM: WEBRIDGE, INC.
The undersigned authorized officer of WEBRIDGE, INC. ("Borrower")
certifies that under the terms and conditions of the Amended and Restated Loan
and Security Agreement between Borrower and Bank (the "Agreement"), (i)
Borrower is in complete compliance for the period ending ____________ with all
required covenants except as noted below and (ii) all representations and
warranties in the Agreement are true and correct in all material respects on
this date. Attached are the required documents supporting the certification.
The Officer certifies that these are prepared in accordance with Generally
Accepted Accounting Principles (GAAP) consistently applied from one period to
the next except as explained in an accompanying letter or footnotes. The
Officer acknowledges that no borrowings may be requested at any time or date of
determination that Borrower is not in compliance with any of the terms of the
Agreement, and that compliance is determined not just at the date this
certificate is delivered.
Please indicate compliance status by circling Yes/No under "Complies"
column.
<TABLE>
<CAPTION>
Reporting Covenant Required Complies
------------------ -------- --------
<S> <C> <C>
Monthly financial statements Monthly within 30 days Yes No
Compliance Certificate* Monthly within 30 days Yes No
Annual (Audited) FYE within 120 days Yes No
A/R & A/P Aging (by invoice date)** Monthly within 20 days Yes No
A/R Audit Initial and Annual Yes No
Borrowing Base Certificate Monthly within 20 days Yes No
*In any month that an Advance is requested
**At such time as outstanding Advances exist, or prior to the initial Advance.
Financial Covenant Required Actual Complies
------------------ -------- ------ --------
Maintain on a Monthly Basis:
Minimum Quick Ratio (Adjusted) 1.50:1.00 ____:1.00 Yes No
Minimum Tangible Net Worth $2,000,000 $________ Yes No
Maximum Debt/Tangible Net Worth 2.00:1.00 ____:1.00 Yes No
</TABLE>
Comments Regarding Exceptions: See Attached BANK USE ONLY
Received by:____________________
Sincerely, AUTHORIZED SIGNER
Date:___________________________
WEBRIDGE, INC.
Verified:_______________________
_______________________________ AUTHORIZED SIGNER
SIGNATURE
Date:___________________________
_______________________________
TITLE Compliance Status: Yes No
_______________________________
DATE
<PAGE> 27
INTELLECTUAL PROPERTY SECURITY AGREEMENT
This Intellectual Property Security Agreement is entered into as of August
25, 1999 by and between SILICON VALLEY BANK ("Bank") and WEBRIDGE, INC.
("Grantor").
RECITALS
A. Bank has agreed to make certain advances of money and to extend
certain financial accommodation to Grantor (the "Loans") in the amounts and
manner set forth in that certain Amended and Restated Loan and Security
Agreement by and between Bank and Grantor dated August 25, 1999 (as the same
may be amended, modified or supplemented from time to time, the "Loan
Agreement"; capitalized terms used herein are used as defined in the Loan
Agreement. Bank is willing to make the Loans to Grantor, but only upon the
condition, among others, that Grantor shall grant to Bank a security interest
in certain Copyrights, Trademarks, Patents, and Mask Works to secure the
obligations of Grantor under the Loan Agreement.
B. Pursuant to the terms of the Loan Agreement, Grantor has granted to
Bank a security interest in all of Grantor's right, title and interest, whether
presently existing or hereafter acquired, in, to and under all of the
Collateral.
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, and intending to be legally bound, as collateral security
for the prompt and complete payment when due of its obligations under the Loan
Agreement, Grantor hereby represents, warrants, covenants and agrees as follows:
AGREEMENT
To Secure its obligations under the Loan Agreement, Grantor grants and
pledges to Bank a security interest in all of Grantor's right, title and
interest in, to and under its Intellectual Property Collateral (including
without limitation those Copyrights, Patents, Trademarks and Mask Works listed
on Schedules A, B, C, and D hereto), and including without limitation all
proceeds thereof (such as, by way of example but not by way of limitation,
license royalties and proceeds of infringement suits), the right to sue for
past, present and futures infringements, all rights corresponding thereto
throughout the world and all re-issues, divisions, continuations, renewals,
extensions and continuations-in-part thereof.
This security interest is granted in conjunction with the security
interest granted to Bank under the Loan Agreement. The rights and remedies of
Bank with respect to the security interest granted hereby are in addition to
those set forth in the Loan Agreement and the other Loan Documents, and those
which are now or hereafter available to Bank as a matter of law or equity. Each
right, power and remedy of Bank provided for herein or in the Loan Agreement or
any of the Loan Documents, or now or hereafter existing at law or in equity
shall be cumulative and concurrent and shall be in addition to every right,
power or remedy provided for herein and the exercise by Bank of any one or more
of the rights, powers or remedies provided for in this Intellectual Property
Security Agreement, the Loan Agreement or any of the other Loan Documents, or
now or hereafter existing at law or in equity, shall not preclude the
simultaneous or later exercise by any person, including Bank, of any or all
other rights, powers or remedies.
IN WITNESS WHEREOF, the parties have cause this Intellectual Property
Security Agreement to be duly executed by its officers thereunto duly
authorized as of the first date written above.
<PAGE> 28
GRANTOR:
Address of Grantor: WEBRIDGE, INC.
226 SW Broadway, Suite 500 By: /s/ DAVID L. BRINKER
Portland, OR 97205 ----------------------------
Attn: David Brinker Title: CFO
---------------------------- -------------------------
BANK:
Address of Bank: SILICON VALLEY BANK
11000 SW Stratus, Ste. 170 By: /s/ [SIGNATURE ILLEGIBLE]
Beaverton, OR 97008-7113 ----------------------------
Attn: Title: Vice President
---------------------------- -------------------------
2
<PAGE> 29
EXHIBIT A
COPYRIGHTS
<TABLE>
<CAPTION>
REGISTRATION/ REGISTRATION/
APPLICATION APPLICATION
DESCRIPTION NUMBER DATE
- ----------- ------------- -------------
<S> <C> <C>
</TABLE>
<PAGE> 30
EXHIBIT B
PATENTS
<TABLE>
<CAPTION>
REGISTRATION/ REGISTRATION/
APPLICATION APPLICATION
DESCRIPTION NUMBER DATE
- ----------- ------------- -------------
<S> <C> <C>
</TABLE>
<PAGE> 31
EXHIBIT C
TRADEMARKS
<TABLE>
<CAPTION>
REGISTRATION/ REGISTRATION/
APPLICATION APPLICATION
DESCRIPTION NUMBER DATE
- ----------- ------------- -------------
<S> <C> <C>
"WEBRIDGE" 75/483,709 7/13/99
</TABLE>
<PAGE> 32
EXHIBIT D
MASK WORKS
<TABLE>
<CAPTION>
REGISTRATION/ REGISTRATION/
APPLICATION APPLICATION
DESCRIPTION NUMBER DATE
- ----------- ------------- -------------
<S> <C> <C>
</TABLE>
<PAGE> 33
CORPORATE BORROWING RESOLUTION
Borrower: WEBRIDGE, INC. Bank: Silicon Valley Bank
225 SW Broadway, Suite 600 11000 SW Stratus, Ste. 170
Portland, OR 97208 Beaverton, OR 97006-7113
I, the undersigned Secretary or Assistant Secretary of WEBRIDGE, INC.
("Borrower"), HEREBY CERTIFY that Borrower is a corporation duly organized and
existing under and by virtue of the laws of the State of Delaware.
I FURTHER CERTIFY that at a meeting of the Directors of Borrower (or by other
duly authorized corporate action in lieu of a meeting), duly called and held, at
which a quorum was present and voting, the following resolutions were adopted.
BE IT RESOLVED, that any one (1) of the following named officers, employees, or
agents of Borrower, whose actual signatures are shown below:
<TABLE>
<CAPTION>
NAMES POSITIONS ACTUAL SIGNATURES
----- --------- -----------------
<S> <C> <C>
Gary Fielland Pres/CEO /s/ GARY FIELLAND
Mark Anastas COO /s/ MARK ANASTAS
David Brinker CFO /s/ David Brinker
</TABLE>
acting for and on behalf of Borrower and as its act and deed be, and they
hereby are, authorized and empowered:
BORROW MONEY. To borrow from time to time from Silicon Valley Bank
("Bank"), on such terms as may be agreed upon between the officers of
Borrower and Bank, such sum or sums of money as in their judgment should
be borrowed.
EXECUTE LOAN DOCUMENT. To execute and deliver to Bank the loan documents
of Borrower, on Bank's forms, at such rates of interest and on such terms
as may be agreed upon, evidencing the sums of money so borrowed or any
indebtedness of Borrower to Bank, and also to execute and deliver to Bank
one of more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for one or more of the loan documents, or
any portion of the loan documents.
GRANT SECURITY. To grant a security interest to Bank in any of Borrower's
assets, which security interest shall secure all of Borrower's obligations
to Bank.
NEGOTIATE ITEMS. To draw, endorse, and discount with Bank all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness
payable to or belonging to Borrower or in which Borrower may have an
interest, and either to receive cash for the same or to cause such
proceeds to be credited to the account of Borrower with Bank, or to cause
such other disposition of the proceeds delivered therefrom as they may
deem advisable.
LETTERS OF CREDIT. To execute letter of credit applications and other
related documents pertaining to Bank's issuance of letters of credit.
FOREIGN EXCHANGE CONTRACTS. To execute and deliver foreign exchange
contracts, either spot or forward, from time to time, in such amount as,
in the judgment of the officer or officers herein authorized.
<PAGE> 34
ISSUE WARRANTS. To issue warrants to purchase Borrower's capital stock, for
such class, series and number, and on such terms, as an officer of Borrower
shall deem appropriate.
FURTHER ACTS. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder,
and in all cases, to do and preform such other acts and things, to pay any
and all fees and costs, and to execute and deliver such other documents and
agreements, including agreements waiving the right to a trial by jury, as
they may in their discretion deem reasonably necessary or proper in order
to carry into effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant in these
Resolutions and performed prior to the passage of these resolutions are hereby
ratified and approved, that these Resolutions shall remain in full force and
effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of Borrower's agreements or commitments in effect at the
time notice is given.
I FURTHER CERTIFY that the persons named above are principal officers of the
Borrower and occupy the positions set opposite their respective names; that the
foregoing Resolutions now stand of record on the books of the Borrower; and that
they are in full force and effect and have not been modified or revoked in any
manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on August 25, 1999 and attest
that the signatures set opposite the names listed above are their genuine
signatures.
CERTIFIED TO AND ATTESTED BY:
x /s/ MARK ANASTAS
---------------------------------
*Secretary or Assistant Secretary
x /s/ DAVID BRINKER
---------------------------------
*NOTE: In case the Secretary or other certifying officer is designated by the
foregoing resolutions as one of the signing officers, this resolution should
also be signed by a second Officer or Director of Borrower.
2
<PAGE> 1
EXHIBIT 10.4
MASTER LEASE AGREEMENT
MASTER LEASE AGREEMENT (the "Master Lease") dated September 24, 1999 by and
between COMIDSCO, INC. ("Lessor") and WEBRIDGE.
CONSIDERATION of the mutual agreements described below, the parties agree
as follows (all capitalized terms are defined in Section 14.18):
1. PROPERTY LEASED.
Lessor leases to Lessee all of the Equipment described on each Summary Equipment
Schedule. In the event of a conflict, the term of the applicable Schedule
prevail over this Master Lease.
2. TERM.
On the Commencement Date, Lessee will be deemed to accept the Equipment, will
be bound to its rental obligations for each item of Equipment and the term of a
Summary Equipment Schedule will begin and continue through the Initial Term and
thereafter until terminated by either party upon prior written notice received
during the Notice Period. No termination may be effective prior to the
expiration of the Initial Term.
3. RENT AND PAYMENT.
Rent is due and payable in advance on the first day of each Rent Interval at
the address specified in Lessor's Invoice. Interim Rent is due and payable when
invoiced. If any payment is not made when due, Lessee will pay a Late Charge on
the overdue amount. Upon Lessee's execution of each Schedule, Lessee will pay
Lessor the Advance specified on the Schedule. The Advance will be credited
towards the final Rent payment if Lessee is not then in default. No interest
will be paid on the Advance.
4. SELECTION; WARRANTY AND DISCLAIMER OF WARRANTIES.
4.1 SELECTION. Lessee acknowledges that it has selected the Equipment and
disclaims any reliance upon statements made by the Lessor, other than as set
forth in the Schedule.
4.2 WARRANTY AND DISCLAIMER OF WARRANTIES. Lessor warrants to Lessee that, so
long as Lessee is not in default, Lessor will not disturb Lessee's quiet and
peaceful possession, and unrestricted use of the Equipment. To the extent
permitted by the manufacturer, Lessor assigns to Lessee during the term of the
Summary Equipment Schedule any manufacturer's warranties for the Equipment.
LESSOR MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED AS TO ANY MATTER WHATSOEVER,
INCLUDING, WITHOUT LIMITATION, THE MERCHANTABILITY OF THE EQUIPMENT FOR ITS
FITNESS FOR A PARTICULAR PURPOSE. Lessor is not responsible for any liability,
claim, loss, damage or expense of any kind (including strict liability in tort)
caused by the Equipment except for any loss or damage caused by the willful
misconduct or negligent acts of Lessor. In no event is Lessor responsible for
special, incidental or consequential damages.
5. TITLE; RELOCATION OR SUBLEASE; AND ASSIGNMENT.
5.1 TITLE. Lessee holds the Equipment subject and subordinate to the rights of
the Owner, Lessor, any Assignee and any Secured Party. Lessee authorizes
Lessor, as Lessee's agent, and at lessor's expense, to prepare, execute and
file in Lessee's name precautionary Uniform Commercial Code financing
statements showing the interest of the Owner, Lessor, and any Assignee or
Secured Party in the Equipment and to insert serial numbers in Summary
Equipment Schedules as appropriate. Lessee will, at its expense, keep the
Equipment free and clear from any liens or encumbrances of any kind (except any
caused by Lessor) and will indemnify and hold the Owner, Lessor, any Assignee
and Secured Party harmless from and against any loss caused by Lessee's failure
to do so, except where such is caused by Lessor.
5.2 RELOCATION OR SUBLEASE. Upon prior written notice, Lessee may relocate
Equipment to any location within the continental United States provided (i) the
Equipment will not be used by an entity exempt from federal income tax, and (ii)
all additional costs (including any administrative fees, additional taxes and
insurance coverage) are reconciled and promptly paid by Lessee.
Lessee may sublease the Equipment upon the reasonable consent of the Lessor and
the Secured Party. Such consent to sublease will be granted if: (i) Lessee
meets the relocation requirements set out above, (ii) the sublease is expressly
subject and subordinate to the terms of the Schedule, (iii) Lessee assigns its
rights in the sublease to Lessor and the Secured Party, as additional
collateral and security, (iv) Lessee's obligation to maintain and insure the
Equipment is not altered, (v) all financing statements required to continue the
Secured Party's prior perfected security interest are filed, and (vi) Lessee
executes sublease documents acceptable to Lessor.
No relocation or sublease will relieve Lessee from any of its obligations under
this Master Lease and the Relevant Schedule.
5.3 ASSIGNMENT BY LESSOR. The terms and conditions of each Schedule have been
??d by Lessor in order to permit Lessor to sell and/or assign or transfer its
interest or grant a security interest in each Schedule and/or the Equipment to
a Secured Party or Assignee. In that event, the term Lessor will mean the
Assignee and any Secured Party. However, any assignment, sale, or other transfer
by Lessor will not relieve Lessor of its obligations to Lessee and will not
materially change Lessee's duties or materially increase the burdens or risks
imposed on Lessee. The Lessee consents to and will acknowledge such assignments
in a written notice given to Lessee. Lessee also agrees that:
(a) The Secured Party will be entitled to exercise all of Lessor's rights, but
will not be obligated to perform any of the obligations of Lessor. The Secured
Party will not disturb Lessee's quiet and peaceful possession and unrestricted
use of the Equipment so long as Lessee is not in default and the Secured Party
continues to receive all Rent payable under the Schedule; and
(b) Lessee will pay all Rent and all other amounts payable to the Secured
Party, despite any defense or claim which it has against Lessor. Lessee
reserves its right to have recourse directly against Lessor for any defense or
claim;
(c) Subject to and without impairment of Lessee's leasehold rights in the
Equipment, Lessee holds the Equipment for the Secured Party to the extent of
the Secured Party's rights in that Equipment.
6. NET LEASE; TAXES AND FEES.
6.1 NET LEASE. Each Summary Equipment Schedule constitutes a net lease.
Lessee's obligation to pay Rent and all other amounts due hereunder is absolute
and unconditional and is not subject to any abatement, reduction, set-off,
defense, counterclaim, interruption, deferment or recoupment for any reason
whatsoever.
6.2 TAXES AND FEES. Lessee will pay when due or reimburse Lessor for all taxes,
fees or any other charges (together with any related interest or penalties not
arising from the negligence of Lessor) accrued for or arising during the term
of each Summary Equipment Schedule against Lessor, Lessee or the Equipment by
any governmental authority (except only Federal, state, local and franchise
taxes on the capital or the net income of Lessor). Lessor will file all
personal property tax returns for the Equipment and pay all such property taxes
due. Lessee will reimburse Lessor for property taxes within thirty (30) days of
receipt of an invoice.
7. CARE, USE AND MAINTENANCE; INSPECTION BY LESSOR.
7.1 CARE, USE AND MAINTENANCE. Lessee will maintain the Equipment in good
operating order and appearance, protect the Equipment from deterioration, other
than normal wear and tear, and will not use the Equipment for any purpose other
than that for which it was designed. If commercially available and considered
common business practice for each item of Equipment, Lessee will maintain in
force a standard maintenance contract with the manufacturer of the Equipment,
or another party acceptable to Lessor, and will provide Lessor with a complete
copy of that contract. If Lessee has the Equipment maintained by a party other
than the manufacturer or self maintains, Lessee agrees to pay any costs
necessary for the manufacturer to bring the Equipment to then current release,
revision and engineering change levels, and to re-certify the Equipment as
eligible for manufacturer's maintenance at the expiration of the lease term,
provided re-certification is available and is required by Lessor. The lease
term will continue upon the same terms and conditions until recertification has
been obtained.
7.2 INSPECTION BY LESSOR. Upon reasonable advance notice, Lessee, during
reasonable business hours and subject to Lessee's security requirements, will
make the Equipment and its related log and maintenance records available to
Lessor for inspection.
8. REPRESENTATIONS AND WARRANTIES OF LESSEE. Lessee hereby represents, warrants
and covenants that with respect to the Master Lease and each Schedule executed
hereunder:
(a) The Lessee is a corporation duly organized and validly existing in good
standing under the laws of the jurisdiction of its incorporation, is duly
qualified to do business in each jurisdiction (including the jurisdiction where
the Equipment is, or is to be, located) where its ownership or lease of property
or the conduct of its business requires such qualification, except for where
such lack of qualification would not have a material adverse effect on the
Company's business; and has full corporate power and authority to hold property
under the Master Lease and each Schedule and to enter into and perform its
obligations under the Master Lease and each Schedule.
(b) The execution and delivery by the Lessee of the Master Lease and each
Schedule and its performance thereunder have been duly authorized by all
necessary corporate action on the part of the Lessee, and the Master Lease and
each Schedule are not inconsistent with the Lessee's Articles of Incorporation
or Bylaws, do not
-1-
<PAGE> 2
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 ??? Master Lease and each Schedule constitute legal,
valid and binding agreements of the Lessee, enforceable in accordance with their
terms, subject to the effect of applicable bankruptcy and other similar laws
affecting the rights of creditors generally and rules of law concerning
equitable remedies.
(c) There are no actions, suits, proceedings or patent claims pending or,
to the knowledge of the Lessee, threatened against or affecting the Lessee in
any court or before any governmental commission, board or authority which, if
adversely determined, will have a material adverse effect on the ability of the
Lessee to perform its obligations under the Master Lease and each Schedule.
(d) The Equipment is personal property and when subjected to use by the
Lessee will not be or become fixtures under applicable law.
(e) the Lessee has no material liabilities or obligations, absolute or
contingent (individually or in the aggregate), except the liabilities and
obligations of the Lessee as set forth in the Financial Statements and
liabilities and obligations which have occurred in the ordinary course of
business, and which have not been, in any case or in the aggregate, materially
adverse to Lessee's ongoing business.
(f) To the best of the Lessee's knowledge, the Lessee owns, possesses, has
access to, or can become licensed on reasonable terms under all patents, patent
applications, trademarks, trade names, inventions, franchises, licenses,
permits, computer software and copyrights necessary for the operations of its
business as now conducted, with no known infringement of, or conflict with, the
rights of others.
(g) All material contracts, agreements and instruments to which the Lessee
is a party are in full force and effect in all material respects, and are valid,
binding and enforceable by the Lessee in accordance with their respective terms,
subject to the effect of applicable bankruptcy and other similar laws affecting
the rights of creditors generally, and rules of law concerning equitable
remedies.
9. DELIVERY AND RETURN OF EQUIPMENT.
Lessee hereby assumes the full expense of transportation and in-transit
insurance to Lessee's premises and installation thereof of the Equipment. Upon
termination (by expiration or otherwise) of each Summary Equipment Schedule,
Lessee shall, pursuant to Lessor's instructions and at Lessee's full expense
(including, without limitation, expenses of transportation and in-transit
insurance), return the Equipment to Lessor in the same operating order, repair,
condition and appearance as when received, less normal depreciation and wear
and tear. Lessee shall return the Equipment to Lessor at 6111 North River Road,
Rosemont, Illinois 60018 or at such other address within the continental United
States as directed by Lessor, provided, however, that Lessee's expense shall be
limited to the cost of returning the Equipment to Lessor's address as set forth
herein. During the period subsequent to receipt of a notice under Section 2,
Lessor may demonstrate the Equipment's operation in place and Lessee will
supply any of its personnel as may reasonably be required to assist in the
demonstrations.
10. LABELING.
Upon request, Lessee will mark the Equipment indicating Lessor's interest with
labels provided by Lessor. Lessee will keep all Equipment free from any other
marking or labelling which might be interpreted as a claim of ownership.
11. INDEMNITY.
With regard to bodily injury and property damage liability only, Lessee will
indemnify and hold Lessor, any Assignee and any Secured Party harmless from and
against any and all claims, costs, expenses, damages and liabilities, including
reasonable attorneys' fees, arising out of the ownership (for strict liability
in tort only), selection, possession, leasing, operation, control, use,
maintenance, delivery, return or other disposition of the Equipment during the
term of this Master Lease or until Lessee's obligations under the Master Lease
terminate. However, Lessee is not responsible to a party indemnified hereunder
for any claims, costs, expenses, damages and liabilities occasioned by the
negligent acts of such indemnified party. Lessee agrees to carry bodily injury
and property damage liability insurance during the term of the Master Lease in
amounts and against risks customarily insured against by the Lessee on
equipment owned by it. Any amounts received by Lessor under that insurance will
be credited against Lessee's obligations under this Section.
12. RISK OF LOSS.
Effective upon delivery and until the Equipment is returned, Lessee relieves
Lessor of responsibility for all risk of physical damage to or loss or
destruction of the Equipment. Lessee will carry casualty insurance for each item
of Equipment in an amount not less than the Casualty Value. All policies for
such insurance will name the Lessor and any Secured Party as additional insured
and as loss payee, and will provide for at least thirty (30) days prior written
notice to the Lessor of cancellation or expiration, and will insure Lessor's
interests regardless of any breach or violation by Lessee of any
representation, warranty or condition contained in such policies and will be
primary without right of contribution from any insurance effected by Lessor.
Upon the execution of any Schedule, the Lessee will furnish appropriate
evidence of such insurance acceptable to Lessor.
Lessee will promptly repair any damaged item of Equipment unless such Equipment
has suffered a Casualty Loss. Within fifteen (15) days of a Casualty Loss,
Lessee will provide written notice of that loss to Lessor and Lessee will, at
Lessee's option, either (a) replace the item of Equipment with Like Equipment
and marketable title to the Like Equipment will automatically vest in Lessor or
(b) pay the Casualty Value and after that payment and the payment of all other
amounts due and owing with respect to that item of Equipment, Lessee's
obligation to pay further Rent for the item of Equipment will cease.
13. DEFAULT, REMEDIES AND MITIGATION.
13.1 DEFAULT. The occurrence of any one or more of the following Events of
Default constitutes a default under a Summary Equipment Schedule:
(a) Lessee's failure to pay Rent or other amounts payable by Lessee when due
if that failure continues for five (5) business days after written notice; or
(b) Lessee's failure to perform any other term or condition of the Schedule
or the material inaccuracy of any representation or warranty made by the Lessee
in the Schedule or in any document or certificate furnished to the Lessor
hereunder if that failure or inaccuracy continues for ten (10) business days
after written notice; or
(c) An assignment by Lessee for the benefit of its creditors, the failure
by Lessee to pay its debts when due, the insolvency of Lessee, the filing by
Lessee or the filing against Lessee of any position under any bankruptcy or
insolvency law or for the appointment of a trustee or other officer with
similar powers, the adjudication of Lessee as insolvent, the liquidation of
Lessee, or the taking of any action for the purpose of the foregoing; or
(d) The occurrence of an Event of Default under any Schedule, Summary
Equipment Schedule or other agreement between Lessee and Lessor or its Assignee
or Secured Party.
13.2 REMEDIES. Upon the occurrence of any of the above Events of Default,
Lessor, at its option, may:
(a) enforce Lessee's performance of the provisions of the applicable
Schedule by appropriate court action in law or in equity;
(b) recover from Lessee any damages and or expenses, including Default
Costs;
(c) with notice and demand, recover all sums due and accelerate and recover
the present value of the remaining payment stream of all Rent due under the
defaulted Schedule (discounted at the same rate of interest at which such
defaulted Schedule was discounted with a Secured Party plus any prepayment fees
charged to Lessor by the Secured Party or, if there is no Secured Party, then
discounted at 6%) together with all Rent and other amounts currently due as
liquidated damages and not as a penalty;
(d) with notice and process of law and in compliance with Lessee's security
requirements, Lessor may enter on Lessee's premises to remove and repossess the
Equipment without being liable to Lessee for damages due to the repossession,
except those resulting from Lessor's, its assignees', agents' or
representatives' negligence; and
(e) pursue any other remedy permitted by law or equity.
The above remedies, in Lessor's discretion and to the extent permitted by law,
are cumulative and may be exercised successively or concurrently.
13.3 MITIGATION. Upon return of the Equipment pursuant to the terms of
Section 13.2, Lessor will use its best efforts in accordance with its normal
business procedures (and without obligation to give any priority to such
Equipment) to mitigate Lessor's damages as described below. EXCEPT AS SET FORTH
IN THIS SECTION, LESSEE HEREBY WAIVES ANY RIGHTS NOW OR HEREAFTER CONFERRED BY
STATUTE OR OTHERWISE WHICH MAY REQUIRE LESSOR TO MITIGATE ITS DAMAGES OR MODIFY
ANY OF LESSOR'S RIGHTS OR REMEDIES STATED HEREIN. Lessor may sell, lease or
otherwise dispose of all or any part of the Equipment at a public or private
sale for cash or credit with the privilege of purchasing the Equipment. The
proceeds from any sale, lease or other disposition of the Equipment are defined
as either:
(a) if sold or otherwise disposed of, the cash proceeds less the Fair
Market Value of the Equipment at the expiration of the Initial Term less the
Default Costs; or
- 2 -
<PAGE> 3
(b) if leased, the present value (discounted at 3 percent (3%) over the U.S.
Treasury Notes of comparable maturity to the term of the re-lease) of the
rentals for a term not to exceed the Initial Term, less the Default Costs.
Any proceeds will be applied against liquidated damages and any other sums due
to Lessor from Lessee. However, Lessee is liable to Lessor for, and Lessor may
recover, the amount by which the proceeds are less than the liquidated damages
and other sums due to Lessor from Lessee.
14. ADDITIONAL PROVISIONS.
14.1 BOARD ATTENDANCE. One representative of Lessor will have the right to
attend Lessee's corporate Board of Directors meetings and Lessee will give
Lessor reasonable notice in advance of any special Board of Directors meeting,
which notice will provide an agenda of the subject matter to be discussed at
such board meeting. Lessee will provide Lessor with a certified copy of the
minutes of each Board of Directors meeting within thirty (30) days following the
date of such meeting held during the term of this Master Lease.
14.2 FINANCIAL STATEMENTS. As soon as practicable at the end of each month (and
in any event within thirty (30) days). Lessee will provide to Lessor the same
information which Lessee provides to its Board of Directors, but which will
include not less than a monthly income statement, balance sheet and statement of
cash flows prepared in accordance with generally accepted accounting principles,
consistently applied (the "Financial Statements"). As soon as practicable at
the end of each fiscal year, Lessee will provide to Lessor audited Financial
Statements setting forth in comparative form the corresponding figures for the
fiscal year (and in any event within ninety (90) days), and accompanied by an
audit report and opinion of the independent certified public accountants
selected by Lessee. Lessee will promptly furnish to Lessor any additional
information (including, but not limited to, tax returns, income statements,
balance sheets and names of principal creditors) as Lessor reasonably believes
necessary to evaluate Lessee's continuing ability to meet financial obligations.
After the effective date of the initial registration statement covering a public
offering of Lessee's securities, the term "Financial Statements" will be deemed
to refer to only those statements required by the Securities and Exchange
Commission.
14.3 OBLIGATION TO LEASE ADDITIONAL EQUIPMENT. Upon notice to Lessee, Lessor
will not be obligated to lease any Equipment which would have a Commencement
Date after said notice if: (i) Lessee is in default under this Master Lease or
any Schedule; (ii) Lessee is in default under any loan agreement, the result of
which would allow the lender or any secured party to demand immediate payment of
any material indebtedness; (iii) there is a material adverse change in Lessee's
credit standing; or (iv) Lessor determines (in reasonable good faith) that
Lessee will be unable to perform its obligations under this Master Lease or any
Schedule.
14.4 MERGER AND SALE PROVISIONS. Lessee will notify Lessor of any proposed
Merger at least sixty (60) days prior to the closing date. Lessor may, in its
discretion, either (i) consent to the assignment of the Master Lease and all
relevant Schedules to the successor entity, or (ii) terminate the Lease and all
relevant Schedules. If Lessor elects to consent to the assignment, Lessee and
its successor will sign the assignment documentation provided by Lessor. If
Lessor elects to terminate the Master Lease and all relevant Schedules, then
Lessee will pay Lessor all amounts then due and owing and a termination fee
equal to the present value (discounted at 6%) of the remaining Rent for the
balance of the Initial Term(s) of all Schedules, and will return the Equipment
in accordance with Section 9. Lessor hereby consents to any Merger in which the
surviving entity has a Moody's Bond Rating of BA3 or better or a commercially
acceptable equivalent measure of creditworthiness as reasonably determined by
Lessor.
14.5 ENTIRE AGREEMENT. This Master Lease and associated Schedules and Summary
Equipment Schedules supersede all other oral or written agreements or
understandings between the parties concerning the Equipment including, for
example, purchase orders. ANY AMENDMENT OF THIS MASTER LEASE OR A SCHEDULE, MAY
ONLY BE ACCOMPLISHED BY A WRITING SIGNED BY THE PARTY AGAINST WHOM THE
AMENDMENT IS SOUGHT TO BE ENFORCED.
14.6 NO WAIVER. No action taken by Lessor or Lessee will be deemed to
constitute a waiver of compliance with any representation, warranty or covenant
contained in this Master Lease or a Schedule. The waiver by Lessor or Lessee of
a breach of any provision of this Master Lease or a Schedule will not operate
or be construed as a waiver of any subsequent breach.
14.7 BINDING NATURE. Each Schedule is binding upon, and inures to the benefit
of Lessor and its assigns. LESSEE MAY NOT ASSIGN ITS RIGHTS OR OBLIGATIONS.
14.8 SURVIVAL OF OBLIGATIONS. All agreements, obligations including, but not
limited to those arising under Section 6.2, representations and warranties
contained in this Master Lease, any Schedule, Summary Equipment Schedule or in
any document delivered in connection with those agreements are for the benefit
of Lessor and any Assignee or Secured Party and survive the execution, delivery,
expiration or termination of this Master Lease.
14.9 NOTICES. Any notice, request or other communication to either party by the
other will be given in writing and deemed received upon the earlier of (1)
actual receipt or (2) three days after mailing if mailed postage prepaid by
regular or airmail to Lessor (to the attention of "the Comdisco Venture Group")
or Lessee, at the address set out in the Schedule, (3) one day after it is sent
by courier or (4) on the same day as sent via facsimile transmission, provided
that the original is sent by personal delivery or mail by the sending party.
14.10 APPLICABLE LAW. THIS MASTER LEASE HAS BEEN AND EACH SCHEDULE WILL HAVE
BEEN MADE, EXECUTED AND DELIVERED IN THE STATE OF ILLINOIS AND WILL BE GOVERNED
AND CONSTRUED FOR ALL PURPOSES IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS WITHOUT GIVING EFFECT TO CONFLICT OF LAW PROVISIONS. NO RIGHTS OR
REMEDIES REFERRED TO IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE WILL BE
CONFERRED ON LESSEE UNLESS EXPRESSLY GRANTED IN THIS MASTER LEASE OR A SCHEDULE.
14.11 SEVERABILITY. If any one or more of the provisions of this Master Lease or
any Schedule is for any reason held invalid, illegal or unenforceable, the
remaining provisions of this Master Lease and any such Schedule will be
unimpaired and the invalid, illegal or unenforceable provision replaced by a
mutually acceptable valid, legal and enforceable provision that is closest to
the original intention of the parties.
14.12 COUNTERPARTS. This Master Lease and any Schedule may be executed in any
number of counterparts, each of which will be deemed an original, but all such
counterparts together constitute one and the same instrument. If Lessor grants a
security interest in all or any part of a Schedule, the Equipment or sums
payable thereunder, only that counterpart Schedule marked "Secured Party's
Original" can transfer Lessor's rights and all other counterparts will be marked
"Duplicate."
14.13 LICENSED PRODUCTS. Lessee will obtain no title to Licensed Products which
will at all times remain the property of the owner of the Licensed Products. A
license from the owner may be required and it is Lessee's responsibility to
obtain any required license before the use of the Licensed Products. Lessee
agrees to treat the Licensed Products as confidential information of the owner,
to observe all copyright restrictions, and not to reproduce or sell the Licensed
Products.
14.14 SECRETARY'S CERTIFICATE. Lessee will, upon execution of this Master Lease,
provide Lessor with a secretary's certificate of incumbency and authority. Upon
the execution of each Schedule with a purchase price in excess of $1,000,000,
Lessee will provide Lessor with an opinion from Lessee's counsel in a form
acceptable to Lessor regarding the representations and warranties in Section 8.
14.15 ELECTRONIC COMMUNICATIONS. Each of the parties may communicate with the
other by electronic means under mutually agreeable terms.
14.16 LANDLORD/MORTGAGEE WAIVER. Lessee agrees to provide Lessor with a
Landlord/Mortgagee Waiver with respect to the Equipment. Such waiver shall be in
a form satisfactory to Lessor.
14.17 EQUIPMENT PROCUREMENT CHARGES/PROGRESS PAYMENTS. Lessee hereby agrees that
Lessor shall not, by virtue of its entering into this Master Lease, be required
to remit any payments to any manufacturer or other third party until Lessee
accepts the Equipment subject to this Master Lease.
14.18 DEFINITIONS.
ADVANCE - means the amount due to Lessor by Lessee upon Lessee's execution of
each Schedule.
ASSIGNEE - means an entity to whom Lessor has sold or assigned its rights as
owner and Lessor of Equipment.
CASUALTY LOSS - means the irreparable loss or destruction of Equipment.
CASUALTY VALUE - means the greater of the aggregate Rent remaining to be paid
for the balance of the lease term or the Fair Market Value of the Equipment
immediately prior to the Casualty Loss. However, if a Casualty Value Table is
attached to the relevant Schedule its terms will control.
COMMENCEMENT DATE - is defined in each Schedule.
DEFAULT COSTS - means reasonable attorney's fees and remarketing costs resulting
from a Lessee default or Lessor's enforcement of its remedies.
DELIVERY DATE - means date of delivery of Inventory Equipment to Lessee's
address.
EQUIPMENT - means the property described on a Summary Equipment Schedule and any
replacement for that property required or permitted by this Master Lease or a
Schedule.
EVENT OF DEFAULT - means the events described in Subsection 13.1
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<PAGE> 4
FAIR MARKET VALUE - means the aggregate amount which would be obtainable in an
arms-length transaction between an informed and willing buyer/user and an
informed and willing seller under no compulsion to sell.
INITIAL TERM - means the period of time beginning on the first day of the first
full Rent Interval following the Commencement Date for all items of Equipment
and continuing for the number of Rent Intervals indicated on a Schedule.
INTERIM RENT - means the pro-rata portion of Rent due for the period from the
Commencement Date through but not including the first day of the first full
Rent Interval included in the Initial Term.
LATE CHARGE - means the lesser of five percent (5%) of the payment due or the
maximum amount permitted by the law of the state where the Equipment is located.
LICENSED PRODUCTS - means any software or other licensed products attached to
the Equipment.
LIKE EQUIPMENT - means replacement Equipment which is lien free and of the same
model, type, configuration and manufacture as Equipment.
MERGER - means any consideration or merger of the Lessee with or into any other
corporation or entity, any sale or conveyance of all or substantially all of
the assets or stock of the Lessee by or to any other person or entity in which
Lessee is not the surviving entity.
NOTICE PERIOD - means not less than ninety (90) days nor more than twelve (12)
months prior to the expiration of the lease term.
OWNER - means the owner of Equipment.
RENT - means the rent Lessee will pay for each item of Equipment expressed in
a Summary Equipment Schedule either as a specific amount or an amount equal to
the amount which Lessor pays for an item of Equipment multiplied by a lease
rate factor plus all other amounts due to Lessor under the Master Lease or a
Schedule.
RENT INTERVAL - means a full calendar month or quarter as indicated on a
Schedule.
SCHEDULE - means either an Equipment Schedule or a Licensed Products Schedule
which incorporates all of the terms and conditions of this Master Lease.
SECURED PARTY - means an entity to whom Lessor has granted a security interest
for the purpose of securing a loan.
SUMMARY EQUIPMENT SCHEDULE - means a certificate provided by Lessor summarizing
all of the Equipment for which Lessor has received Lessee approved vendor
invoices, purchase documents and/or evidence of delivery during a calendar
quarter which will incorporate all of the terms and conditions of the related
Schedule and this Master Lease and will constitute a separate lease for the
equipment lease thereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Master Lease on or as
of the day and year first above written.
WEBRIDGE COMDISCO, INC.,
as Lessee as Lessor
By: /s/ DAVID L. BRINKER By: /s/ JAMES LABE
------------------------------- -------------------------------
Title: CFO Title: President,
---------------------------- Comdisco Ventures Division
----------------------------
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<PAGE> 5
EQUIPMENT SCHEDULE VL-1
DATED AS OF SEPTEMBER 24, 1999
TO MASTER LEASE AGREEMENT
DATED AS OF SEPTEMBER 24, 1999 (THE "MASTER LEASE")
<TABLE>
<S> <C>
LESSEE: WEBRIDGE, INC. LESSOR: COMDISCO, INC.
ADMIN. CONTACT/PHONE NO.: ADDRESS FOR ALL NOTICES:
- ------------------------ -----------------------
Contact: Dave Brinker 6111 North River Road
TEL: 503-219-8500 Rosemont, Illinois 60018
FAX: 503-219-9191 Attn.: Venture Group
Address for Notices:
- -------------------
225 SW Broadway, Suite 500
Portland OR 97205
Central Billing Location: Rent Interval: Monthly
- ------------------------ -------------
same as above
Attn.:
Lessee Reference No.:
-------------------
(24 digits maximum)
Location of Equipment: Initial Term: 36 months
- --------------------- ------------
same as above (Number of Rent Intervals)
Attn.: Lease Rate Factor: 3.091%
-----------------
EQUIPMENT (as defined below): Advance: None
-------
</TABLE>
Equipment specifically approved by Lessor, which shall be delivered to and
accepted by Lessee during the period September 24, 1999 through September 24,
2000 ("Equipment Delivery Period"), for which Lessor receives vendor invoices
approved for payment, up to an aggregate purchase price of $425,000 ("Commitment
Amount"); excluding custom use equipment, leasehold improvements, installation
costs and delivery costs, rolling stock, special tooling, "stand-alone"
software, application software bundled into computer hardware, hand held items,
molds and fungible items.
<PAGE> 6
1. EQUIPMENT PURCHASE
This Schedule contemplates Lessor's acquisition of Equipment for lease to
Lessee, either by one of the first three categories listed below or by
providing Lessee with Equipment from the fourth category, in an aggregate value
up to the Commitment Amount referred to on the face of this Schedule. If the
Equipment acquired is of category (i), (ii), (iii) below, the effectiveness of
this Schedule as it relates to those items of Equipment is contingent upon
Lessee's acknowledgement at the time Lessor acquires the Equipment that Lessee
has either received or approved the relevant purchase documentation between
vendor and Lessor for that Equipment.
(i) NEW ON-ORDER EQUIPMENT. Lessor will purchase new Equipment which is
obtained from a vendor by Lessee for its use subject to Lessor's
prior approval of the Equipment.
(ii) SALE-LEASEBACK EQUIPMENT. Any in-place Equipment installed at
Lessee's site and to which Lessee has clear title and ownership may
be considered by Lessor for inclusion under this Lease (the
"Sale-Leaseback Transaction"). Any request for a Sale-Leaseback
Transaction must be submitted to Lessor in writing (along with
accompanying evidence of Lessee's Equipment ownership satisfactory to
Lessor for all Equipment submitted) no later than October 24, 1999*.
Lessor will not perform a Sale-Leaseback Transaction for any request
or accompanying Equipment ownership documents which arrive after the
date marked above by an asterisk (*). Further, any sale-leaseback
Equipment will be placed on lease subject to: (1) Lessor prior
approval of the Equipment; and (2) if approved, at Lessor's actual
net appraised Equipment value pursuant to the schedule below:
ORIGINAL EQUIPMENT INVOICE PERCENT OF ORIGINAL MANUFACTURER'S
DATE NET EQUIPMENT COST PAID BY LESSOR
-------------------------- ---------------------------------
Between 01/01/99-10/24/99 100%
(iii) USED ON-ORDER EQUIPMENT. Lessor will purchase used Equipment which
is obtained from a third party by Lessee for its use subject to
Lessor's prior approval of the Equipment and at Lessor's appraised
value for such used Equipment.
(iv) 800 NUMBER EQUIPMENT. Upon Lessee's use of Comdisco's 1-800 Direct
Service, Lessor will purchase new or used Equipment from a third
party or Lessor will supply new or used Equipment from its inventory
for use by Lessee at rates provided by Lessor.
2. COMMENCEMENT DATE
The Commencement Date for each item of new on-order or used on-order
Equipment will be the install date as confirmed in writing by Lessee as set
forth on the vendor invoice of which a facsimile transmission will constitute an
original document. The Commencement Date for sale-leaseback Equipment shall be
the date Lessor tenders the purchase price. The Commencement Date for 800 Number
Equipment shall be fifteen (15) days from the ship date, such ship date to be
set forth on the vendor invoice or if unavailable on the vendor invoice the ship
date will be determined by Lessor upon other supporting shipping documentation.
Lessor will summarize all approved invoices, purchase documentation and evidence
of delivery, as applicable, received in the same calendar quarter into a Summary
Equipment Schedule in the form attached to this Schedule as Exhibit 1, and the
Initial Term will begin the first day of the calendar quarter thereafter. Each
Summary Equipment Schedule will contain the Equipment location, description,
serial number(s) and cost and will incorporate the terms and conditions of the
Master Lease and this Schedule and will constitute a separate lease.
2
<PAGE> 7
3. OPTION TO EXTEND
So long as no Event of Default has occurred and is continuing hereunder,
and upon written notice no earlier than twelve (12) months and no later than
ninety (90) days prior to the expiration of the Initial Term of a Summary
Equipment Schedule, Lessee will have the right to extend the Initial Term of
such Summary Equipment Schedule for a period of one (1) year. In such event,
the rent to be paid during said extended period shall be mutually agreed upon
and if the parties cannot mutually agree, then the Summary Equipment Schedule
shall continue in full force and effect pursuant to the existing terms and
conditions until terminated in accordance with its terms. The Summary Equipment
Schedule will continue in effect following said extended period until
terminated by either party upon not less than ninety (90) days prior written
notice, which notice shall be effective as of the date of receipt.
4. PURCHASE OPTION
So long as no Event of Default has occurred and is continuing hereunder,
and upon written notice no earlier than twelve (12) months and no later than
ninety (90) days prior to the expiration of the Initial Term or the extended
term of the applicable Summary Equipment Schedule, Lessee will have the option
at the expiration of the Initial Term of the Summary Equipment Schedule to
purchase all, but not less than all, of the Equipment listed therein for a
purchase price not to exceed 15% of Lessor's cost hereunder and upon terms and
conditions to be mutually agreed upon by the parties following Lessee's written
notice, plus any taxes applicable at time of purchase. Said purchase price
shall be paid to Lessor at least thirty (30) days before the expiration date of
the Initial Term or extended term. Title to the Equipment shall automatically
pass to Lessee upon payment in full of the purchase price but, in no event,
earlier than the expiration of the fixed Initial Term or extended term, if
applicable. If the parties are unable to agree on the purchase price or the
terms and conditions with respect to said purchase, then the Summary Equipment
Schedule with respect to this Equipment shall remain in full force and effect.
Notwithstanding the exercise by Lessee of this option and payment of the
purchase price, until all obligations under the applicable Summary Equipment
Schedule have been fulfilled, it is agreed and understood that Lessor shall
retain a purchase money security interest in the Equipment listed therein and
the Summary Equipment Schedule shall constitute a Security Agreement under the
Uniform Commercial Code of the state in which the Equipment is located.
5. TECHNOLOGY EXCHANGE OPTION
If Lessee is not in default, and there is no material adverse change in
Lessee's credit, on or after the expiration of the 12th month of any Summary
Equipment Schedule, Lessee shall have the option to replace any of the
Equipment subject to such summary Equipment Schedule with new technology
equipment ("New Technology Equipment") utilizing the following guidelines:
A. Equipment being replaced with New Technology Equipment shall have an
aggregate original cost equal to or greater than $20,000 and be comprised of
full configurations of equipment.
B. This technology Exchange Option shall be limited to a maximum in the
aggregate of fifty percent (50%) of the original equipment cost and shall not
apply to software or any soft costs financed hereunder including but not
limited to tenant improvements and custom equipment.
C. The cost of the New Technology Equipment must be equal to or greater than
the original equipment cost of the replacement equipment, but in no event shall
exceed 150% of the original equipment cost.
D. The remaining lease payments applicable to the equipment being replaced by
the New Technology Equipment will be discounted to present value at 6%.
The wholesale market value of the equipment being replaced will be established
by Comdisco based upon then current market conditions. Upon the return of the
replaced equipment, the wholesale price will be deducted from the present value
of the remaining rentals and the differential will be added to the cost of the
New Technology Equipment in calculating the new rental. The lease for the New
Technology Equipment will contain terms and conditions substantially similar to
those for the replaced equipment and will have an Initial Term not less than
the balance of the remaining Initial Term for the replaced equipment.
6. EQUITY INVESTMENT
Lease grants Lessor the right to invest up $100,000 in the next round of equity
financing anticipated to be the Series C Preferred Stock financing at the
purchase price determined by the lead investor. Lessee shall deliver a notice
to Lessor by confirmed facsimile transmission, certified mail or a nationally
recognized overnight courier service stating the anticipated closing date for
such equipment.
3
<PAGE> 8
financing, and the price and summary of the terms for the equity financing.
Lessor may exercise its right to invest by giving a written election to Lessee
that is received by Lessee within ten business days after the date of Lessee's
notice. If Lessor's election to invest is not received by Lessee within such
ten day period, this right to invest shall automatically terminate. The right
provided in this Section 6 shall automatically terminate at the earlier of (a)
the consummation of the sale of securities pursuant to a registration statement
filed by the Lessee under the Securities Act of 1933 as amended, in connection
with the firm commitment underwritten offering of its securities to the general
public, (b) the date when Lessee first becomes subject to periodic reporting
requirements of Section 12(g) or 15(d) of the Securities Exchange Act of 1934
as amended, or (c) the consummation of the sale of the Company's next round of
equity financing, anticipated to be Series C Preferred Stock.
7. SPECIAL TERMS
The terms and conditions of the Lease as they pertain to this Schedule
are hereby modified and amended as follows:
Master Lease: This Schedule is issued pursuant to the Lease identified on page
1 of this Schedule. All of the terms and conditions of the Lease are
incorporated in and made a part of this Schedule as if they were expressly set
forth in this Schedule. The parties hereby reaffirm all of the terms and
conditions of the Lease (including, without limitation, the representations and
warranties set forth in Section 8) except as modified herein by this Schedule.
This Schedule may not be amended or rescinded except by a writing signed by
both parties.
WEBRIDGE, INC. COMDISCO, INC.
AS LESSEE AS LESSOR
By: /s/ [SIGNATURE ILLEGIBLE] By: /s/ JAMES L????
---------------------------- -------------------------------
Title: CFO Title: James L????, President,
------------------------- Comdisco Ventures Division
----------------------------
Date: 10/11/99 Date:
-------------------------- -----------------------------
<PAGE> 9
EXHIBIT 1
SUMMARY EQUIPMENT SCHEDULE
This Summary Equipment Schedule dated XXXX is executed pursuant to
Equipment Schedule No. X to the Master Lease Agreement dated XXXX between
Comdisco, Inc. ("Lessor") and XXXX ("Lessee"). All of the terms, conditions,
representations and warranties of the Master Lease Agreement and Equipment
Schedule No. X are incorporated herein and made a part hereof, and this Summary
Equipment Schedule constitutes a Schedule for the Equipment on the attached
invoices.
1. For Period Beginning: And Ending:
2. Initial Term Starts on: Initial Term:
(Number of Rent Intervals)
3. Total Summary Equipment Cost:
4. Lease Rate Factor:
5. Rent:
6. Acceptance Doc Type:
5
<PAGE> 10
EQUIPMENT SCHEDULE VL-2
DATED AS OF SEPTEMBER 24, 1999
TO MASTER LEASE AGREEMENT
DATED AS OF SEPTEMBER 24, 1999 (THE "MASTER LEASE")
LESSEE: WEBRIDGE, INC. LESSOR: COMDISCO, INC.
Admin. Contact/Phone No.: Address for all Notices:
David Brinker 6111 North River Road
Phone: 503-219-8500 Rosemont, Illinois 60018
Fax: 503-219-9191 Attn.: Venture Group
Address for Notices:
225 SW Broadway, Suite 500
Portland, OR 97205
Central Billing Location: Rent Interval: Monthly
same as above
Attn:
Lessee Reference No.: ________
(24 digits maximum)
Location of Equipment: Initial Term: 36 months
same as above (Number of Rent Intervals)
Attn.: Lease Rate Factor: 3.091%
EQUIPMENT (as defined below): Advance: None
Software and tenant improvements specifically approved by Lessor, which shall
be delivered to and accepted by Lessee during the period September 24, 1999
through September 24, 2000 ("Equipment Delivery Period") for which Lessor
receives vendor invoices approved for payment, up to an aggregate purchase
price of $75,000* ("Commitment Amount"); excluding custom use equipment,
installation costs and delivery costs, rolling stock, special tooling, hand
held items, molds and fungible items.
1
<PAGE> 11
1. EQUIPMENT PURCHASE
This Schedule contemplates Lessor's acquisition of Equipment for lease
to Lessee, either by one of the first three categories listed below or by
providing Lessee with Equipment from the fourth category, in an aggregate value
up to the Commitment Amount referred to on the face of this Schedule. If the
Equipment acquired is of category (i), (ii), (iii) below, the effectiveness of
this Schedule as it relates to those items of Equipment is contingent upon
Lessee's acknowledgment at the time Lessor acquires the Equipment that Lessee
has either received or approved the relevant purchase documentation between
vendor and Lessor for that Equipment.
(i) NEW ON-ORDER EQUIPMENT. Lessor will purchase new Equipment which
is obtained from a vendor by Lessee for its use subject to
Lessor's prior approval of the Equipment.
(ii) SALE-LEASEBACK EQUIPMENT. Any in-place Equipment installed at
Lessee's site and to which Lessee has clear title and ownership
may be considered by Lessor for inclusion under this Lease (the
"Sale-Leaseback Transaction"). Any request for a Sale-Leaseback
Transaction must be submitted to Lessor in writing (along with
accompanying evidence of Lessee's Equipment ownership
satisfactory to Lessor for all Equipment submitted) no later
than October 24, 1999*. Lessor will not perform a Sale-Leaseback
Transaction for any request or accompanying Equipment ownership
documents which arrive after the date marked above by an
asterisk (*). Further, any sale-leaseback Equipment will be
placed on lease subject to: (1) Lessor prior approval of the
Equipment; and (2) if approved, at Lessor's actual net appraised
Equipment value pursuant to the schedule below:
<TABLE>
<S> <C>
ORIGINAL EQUIPMENT INVOICE PERCENT OF ORIGINAL MANUFACTURER'S
DATE NET EQUIPMENT COST PAID BY LESSOR
--------------- ---------------------------------
Between 01/01/99-10/24/99 100%
</TABLE>
(iii) USED ON-ORDER EQUIPMENT. Lessor will purchase used Equipment
which is obtained from a third party by Lessee for its use
subject to Lessor's prior approval of the Equipment and at
Lessor's appraised value for such used Equipment.
(iv) 800 NUMBER EQUIPMENT. Upon Lessee's use of Comdisco's 1-800
Direct Service, Lessor will purchase new or used Equipment from
a third party or Lessor will supply new or used Equipment from
its inventory for use by Lessee at rates provided by Lessor.
2. COMMENCEMENT DATE
The Commencement Date for each item of new on-order or used on-order
Equipment will be the install date as confirmed in writing by Lessee as set
forth on the vendor invoice of which a facsimile transmission will constitute
an original document. The Commencement Date for sale-leaseback Equipment shall
be the date Lessor tenders the purchase price. The Commencement Date for 800
Number Equipment shall be fifteen (15) days from the ship date, such ship date
to be set forth on the vendor invoice or if unavailable on the vendor invoice
the ship date will be determined by Lessor upon other supporting shipping
documentation. Lessor will summarize all approved invoices, purchase
documentation and evidence of delivery, as applicable, received in the same
calendar quarter into a Summary Equipment Schedule in the form attached to this
Schedule as Exhibit 1, and the Initial Term will begin the first day of the
calendar quarter thereafter. Each Summary Equipment Schedule will contain the
Equipment location, description, serial number(s) and cost and will incorporate
the terms and conditions of the Master Lease and this Schedule and will
constitute a separate lease.
3. MISCELLANEOUS
In consideration of Lessor financing software and tenant improvements
hereunder, Lessee agrees in addition to its last Monthly Rent Payment to remit
to Lessor an amount equal to 15% of Lessor's aggregate cost of software and
tenant improvements provided hereunder.
4. SPECIAL TERMS
The terms and conditions of the Lease as they pertain to this Schedule
are hereby modified and amended as follows:
2
<PAGE> 12
(a) Section 9, Delivery and Return of Equipment
Delete second, third and fourth sentences in their entirety.
Master Lease: This Schedule is issued pursuant to the Lease identified on page
1 of this Schedule. All of the terms and conditions of the Lease are
incorporated in and made a part of this Schedule as if they were expressly set
forth in this Schedule. The parties hereby reaffirm all of the terms and
conditions of the Lease (including, without limitation, the representations and
warranties set forth in Section 8) except as modified herein by this Schedule.
This Schedule may not be amended or rescinded except by a writing signed by
both parties.
WEBRIDGE, INC. COMDISCO, INC.
as Lessee as Lessor
By: /s/ [Signature Illegible] By: /s/ [Signature Illegible]
-------------------------- --------------------------------
Title: James [Illegible], President
Title: CFO Comdisco Ventures Division
----------------------- ----------------------------
Date: 10/11/99 Date: October 15, 1999
----------------------- ------------------------------
3
<PAGE> 13
EXHIBIT 1
SUMMARY EQUIPMENT SCHEDULE
This Summary Equipment Schedule dated XXXX is executed pursuant to
Equipment Schedule No. X to the Master Lease Agreement dated XXXX between
Comdisco, Inc. ("Lessor") and XXXX ("Lessee"). All of the terms, conditions,
representations and warranties of the Master Lease Agreement and Equipment
Schedule No. X are incorporated herein and made a part hereof, and this Summary
Equipment Schedule constitutes a Schedule for the Equipment on the attached
invoices.
1. For Period Beginning: And Ending:
2. Initial Term Starts on: Initial Term:
(Number of Rent Intervals)
3. Total Summary Equipment Cost:
4. Lease Rate Factor:
5. Rent:
6. Acceptance Doc Type:
4
<PAGE> 1
OFFICE SPACE SUBLEASE
This Sublease is entered into this 11th day of September, 1997 between
CREATIVE MULTIMEDIA CORPORATION, an Oregon corporation ("Sublessor") and
WEBRIDGE, INC., a Delaware corporation as "Sublessee". Sublessor is the Tenant
under a Lease from Commerce Building Limited Partnership and its successors
("Landlord") dated April 7, 1995 (the "Lease"). The Lease covers property in
the building located at 225 SW Broadway, Portland, Oregon. A complete copy of
the Lease is attached hereto as Exhibit A. Sublessee wishes to sublease from
Sublessor, all or a portion of, the Premises covered by the Lease.
NOW, THEREFORE, Sublessor hereby subleases the premises in the attached
Exhibit B the "Premises"), an area of approximately See Addendum, Item #1, and
Sublessee agrees to subleases the Premises from Sublessor on the following
terms.
1. Term. The term of this Sublease shall commence on September 8, 1997,
and shall continue through and including September 30, 2000.
2. Rent. Sublessee shall pay to Sublessor base rent in the sum of $12.50
per square foot per year on the first day of each month of the lease term. Base
rent shall be escalated at the same time and in the same amount per square foot
as the rent paid by Sublessor to the Landlord under any escalation clause or
expense pass-through clause of the Lease. Sublessor shall pay to the Landlord
under the Lease all rent and other charges required to be paid by Sublessor
under the Lease.
3. Security Deposit. Sublessee shall pay the sum of $20,000.00 security
deposit upon execution of this Sublease. Sublessor may apply the Security
Deposit to pay the cost of performing any obligation which Sublessee fails to
perform within the time required by this Sublease, but such application by
Sublessor shall not be the exclusive remedy for Sublessee's default. If
Sublessor applies the Security Deposit, Sublessee shall on demand pay the
sum necessary to replenish the Security Deposit to its original amount. To the
extent not applied by Sublessor to cure defaults by Sublessee and at the
Sublessee's option, the Security Deposit shall be applied against the rent
payable for the last month(s) of the term or refunded to the Sublessee at the
end of the Term.
4. Obligations of Sublease. Sublessee shall perform all of the
obligations of Tenant under the Lease (except the obligation to pay rent and
other obligations inconsistent with this Sublease) as if Sublessee were the
Tenant under the Lease and Sublessor was the Landlord under the Lease. The terms
of the Lease are hereby expressly incorporated as part of this Sublease. In the
event Sublessee fails to comply with such terms, or the terms of this Sublease,
Sublessor shall be entitled to all of the remedies granted to Landlord in the
Lease, together with any other rights Sublessor might otherwise have. All
provisions in the Lease dealing with indemnity and liability shall be applicable
as between Sublessor and Sublessee and the Sublessee and the Landlord under the
Lease. Sublessee shall name both Sublessor and the Landlord and
1
<PAGE> 2
Landlord's managing agent under the Lease as named insured in the insurance
policies it is required to obtain hereunder.
5. Representations of Sublessor. Sublessor represents and warrants that
the Lease is in good standing and that Sublessor has, to the best of its
knowledge, complied with all of its obligations thereunder through the date
hereof. So long as Sublessee is not in default hereunder, Sublessor shall make
all rental and other payments required by the Lease. In the event Sublessor
fails to pay when due rent or any other sums of money required to be paid under
the Lease, Sublessee may pay the same to Landlord and deduct and offset the
amount of such payment from any rent or other sums of money owing to Sublessor
under the terms of the Sublease.
In the event of the termination of the Lease for any reason other than a
default by Sublessee under this Sublease, then this Sublease shall terminate.
(a) If such termination of the Lease results from an act or failure
to act of Sublessor, Sublessor shall be liable to Sublessee for any damages,
costs and expenses of Sublessee arising from the termination of the Sublease.
(b) If such termination of the lease results from an act or failure
to act of any party other than Sublessor or Sublessee, Sublessor shall not be
liable to Sublessee for any damages, costs and expenses of Sublessee arising
from the termination of the Sublease.
6. Condition of Premises. Unless otherwise expressly provided herein,
the Premises are leased as is in the condition now existing with no additional
work to be performed by Sublessor or Landlord.
7. Notices. With respect to notices between Sublessor and Sublessee, the
addresses for notice shall be the addresses stated in this Sublease.
8. Indemnity. Sublessee shall indemnify and hold Sublessor harmless from
any and against all claims by reason of any breach or default on the part of
Sublessee under the Lease.
9. Attorneys' Fees. Sublessor and Sublessee agree that if either party
is involuntarily made a party defendant to any litigation concerning this Lease
or the Premises or by reason of any act or omission or the use of occupancy of
the Premises or operation of the Building, then Sublessor or Sublessee, as the
case may be, shall hold harmless the other party from all liability by reason
thereof, including attorneys' fees incurred by Sublessor or Sublessee in such
litigation and all court costs. If legal action shall be brought by either of
the parties hereto for the unlawful detainer of the Premises, for the recovery
of Rent due under the provisions of this Lease, or because of the breach of any
term, covenant or provision hereof, the party prevailing in said action
(Sublessor or Sublessee as the case may be) shall be entitled to recover from
the party not prevailing costs of the suit and reasonable attorneys' fees.
2
<PAGE> 3
10. Holding Over. Any holding over after the expiration of the term, with
the consent of Sublessee, shall be construed to be a tenancy from month to month
at three hundred percent (300%) of the Rent herein specified (prorated on a
daily basis).
11. Sublessee acknowledges that it has read and is familiar with the
terms and provisions of the Lease.
12. Sublessor shall not be required to extend the term of the Lease or
exercise any expansion options or rights of first opportunities set forth
therein.
13. In connection with the installation and operation of its computers
and network related equipment to create a private local area network for
Sublessee, Sublessee shall take no action which interferes with Sublessor's
network. Sublessee acknowledges that it is familiar with the existing network
of Sublessor and Sublessor shall have no responsibility for any failure to
Sublessee's network to perform properly.
14. Address for Notices and Rent Payments:
Creative Multimedia Corporation
IHS Group
15 Inverness Way East
Englewood, Colorado 80112
15. Consent. This Sublease is a non-binding agreement until the Landlord
and Sublessor have executed the attached consent form.
16. Amendment/Assignment. This Sublease shall not be amended or assigned
without the prior written consent of Sublessee and Sublessor which shall not be
unreasonably withheld.
SUBLESSEE: SUBLESSOR:
WEBRIDGE, INC., CREATIVE MULTIMEDIA CORPORATION,
a Delaware corporation an Oregon corporation
By: /s/ [Signature Illegible] By: /s/ [Signature Illegible]
------------------------------ ----------------------------
Its: Director of Operations Its: VICE PRESIDENT
----------------------------- ---------------------------
Date: Sept. 12, 1997 Date: SEPTEMBER 12, 1997
---------------------------- --------------------------
3
<PAGE> 4
ADDENDUM
TO
SUBLEASE AGREEMENT
This Addendum to Sublease Agreement is entered into this 4th day of
September, 1997 by and between CREATIVE MULTIMEDIA CORPORATION, an Oregon
Corporation ("Sublessor") and WEBRIDGE, INC. ("Sublessee") with regard to the
Commerce Building located at 225 SW Broadway, Portland, Oregon.
1. Sublease Term.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FLOOR SQUARE FEET OCCUPANCY DATE COMMENCEMENT OF RENT
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
4th 8,223 September 11, 1997 October 1, 1997
- --------------------------------------------------------------------------------
5th 8,223 No later than March 1, 1998 When occupied
- --------------------------------------------------------------------------------
6th 8,223 No later than March 1, 1999 When occupied
- --------------------------------------------------------------------------------
</TABLE>
The Sublease will continue through the balance of the Lease that expires
September 30, 2000. Sublessee shall be required to give one hundred twenty (120)
days prior written notice of its intent to take possession of the 6th floor if
earlier than March 1, 1999.
2. Computer Network. Sublessee shall provide all computers and
network-related equipment to create a private local area network for
Sublessee's separate from Sublessor's existing local area network. Sublessee's
subnetwork will utilize the existing office wiring and Sublessee will have
access on an as-needed basis to the 5th floor computer room to configure and
manage the network routers, hubs, wiring closets, etc. In connection with the
installation and operation of its computers and network related equipment to
create a private local area network for Sublessee, Sublessee shall take no
action which interferes with Sublessor's network.
3. Security System. The existing card key security system will be
re-programmed to provide secure access for the Sublessee's employees and
customers to the floors that the Sublessee is leasing. Sublessee shall be
responsible for the costs incurred for reprogramming of the system.
4. Access to the 5th Floor Conference Room. Sublessee shall have the
right to use the large conference room on the 5th floor, prior to taking
possession and paying rent on the 5th floor, with 24-hour notice to Sublessor.
Sublessee shall be liable for any damage to, or personal injury upon, the
Premises during these periods.
<PAGE> 5
APPROVED AND ACCEPTED:
SUBLESSEE: SUBLESSOR:
WEBRIDGE, INC., CREATIVE MULTIMEDIA CORPORATION,
A DELAWARE CORPORATION AN OREGON CORPORATION
By: /s/ [Signature Illegible] By: /s/ [Signature Illegible]
------------------------------ ----------------------------
Its: Director of Operations Its: VICE PRESIDENT
----------------------------- ---------------------------
Date: September 12, 1997 Date: SEPTEMBER 12, 1997
---------------------------- --------------------------
<PAGE> 6
CONSENT
The undersigned Landlord under the Lease hereby consents to the foregoing
Sublease conditioned upon the following to which Sublessor agrees:
1. Sublessee's agreement to perform Sublessor's obligations under the Lease
during the Sublease term is for the benefit of both Sublessor and
Landlord.
2. Sublessee's agreement to perform such obligations shall not relieve
Sublessor of its primary and unconditional liability for payment of
rental and other charges and performance of Sublessor's obligations as
Tenant under the Lease during the full term of the Lease.
3. This consent shall not relieve Tenant of its obligation to obtain consent
for any other sublease or assignments as provided for under the Lease.
4. Sublessor waives any and all claims or causes of action against Landlord
which arises out of the Lease or Sublessor's occupancy of the Premises,
and which have accrued prior to the date of this consent.
5. Sublessor agrees to pay to Landlord as additional rent, the amount if any
that Sublessor receives from Sublessee for base rent (on a per square
foot basis) in excess of the amount Sublessor pays Landlord as base rent
under the Lease (on a per square foot basis).
6. Sublessor waives its option to extend the term of the lease beyond
September 30, 2000.
LANDLORD: SUBLESSOR:
Prima Donna Development Corp. Creative Multimedia Corp.
Chiu 1981 Revocable, Trust & An Oregon Corporation
Jennie C. Chiu Living Trust
By: /s/ [SIGNATURE ILLEGIBLE] By: /s/ [SIGNATURE ILLEGIBLE]
---------------------------------- ----------------------------------
Its: President Its: VICE PRESIDENT
--------------------------------- ---------------------------------
Date: 10/15/97 Date: SEPTEMBER 12, 1997
-------------------------------- --------------------------------
<PAGE> 7
WEBRIDGE, INC. U.S. NATIONAL BANK OF OREGON
9115 SW OLESON RD., SUITE 205 BEAVERTON BRANCH
PORTLAND, OR 97223 BEAVERTON, OR 97075
PH. (503) 766-9484 24-22-1230 9/12/97
PAY TO THE
ORDER OF Creative Multimedia Corporation $**20,000.00
Twenty Thousand and 00/100**************************************** DOLLARS
Creative Multimedia Corporation
IHS Group
15 Inverness Way East
Englewood, CO 80112
MEMO
Deposit on for Webridge, Inc. office spa /s/ Mark S. Amantos
<PAGE> 8
COMMERCE BUILDING
OFFICE LEASE
This Lease, made and entered into at Portland, Oregon this 7th day of April
1995 by and between Commerce Building Limited Partnership, an Oregon limited
partnership ("Landlord") and Creative Multimedia Corporation, an Oregon
corporation ("Tenant").
Landlord hereby leases to Tenant the fifth and sixth floors consisting of
16,446 rentable square feet (the "Premises") in the Commerce Building (the
"Building") located at 225 S.W. Broadway, Portland, Oregon, for a term
commencing June 1, 1995, and continuing through May 31, 2000, at a Base Rental
of $16,446.00 per month commencing June 1, 1995, through and including May 31,
1998 and $17,816.50 per month commencing June 1, 1998, through and including
May 31, 2000 payable in advance on the first day of each month. On the earlier
of May 1, 1996, or ninety (90) days after Tenant notifies Landlord that Tenant
has subleased its leased premises in the Pean Building in Portland, Oregon,
Landlord shall deliver possession of the fourth floor of the Building
consisting of 9,223 rentable square feet to Tenant and Tenant shall thereupon
take occupancy of the fourth floor on such date for a term commencing May 1,
1996, or such earlier date, and continuing through May 31, 2000, at a Base
Rental of $8,223.00 per month commencing May 1, 1996, or such earlier date,
through and including May 31, 1998, and $8,908.25 per month commencing June 1,
1998, through and including May 31, 2000. At such time as Tenant occupies the
fourth floor, the Premises shall be automatically deemed to include the fourth
floor. Upon execution of this Lease, Tenant has paid the Base Rent for the
first full month of the lease term for which rent is payable.
Landlord and Tenant covenant, and agree as follows:
1. Delivery of Possession. Should Landlord be unable to deliver possession
of the Premises on the date fixed for the commencement of the term,
commencement will be deferred and Tenant shall owe no rent until notice from
Landlord tendering possession to Tenant. If possession is not so tendered
within ninety (90) days following commencement of the term, then Tenant may
elect to cancel this Lease by notice to Landlord, within ten (10) days
following expiration of the ninety (90) day period. Landlord shall have no
liability to Tenant to delay in delivering possession, nor shall such delay
extend the term of this Lease in any manner. Any early occupancy of the
Premises shall be subject to each and every term and condition of this Lease
including payment of rent. The Premises shall be delivered built out
substantially in accordance with the specifications set forth in Exhibit B
attached hereto. Tenant shall take possession of the Premises upon delivery
thereof to Tenant, subject to Landlord substantially completing a final
punchlist with a minimum ten (10) day notice of completion to Tenant.
2. Rent Payment. Tenant shall pay the Base Rent for the Premises and any
additional rent provided herein without deduction or offset. Rent for any
partial month during the lease term shall be prorated to reflect the number of
days during the month that Tenant occupies the Premises. Additional rent means
amounts determined under paragraph 23 of this Lease and any other sums payable
by Tenant to Landlord under this Lease. Rent not paid when due shall bear
interest at the rate of one and one-half percent per month until paid. Landlord
may at its option impose a late charge of $0.05 for each $1 of rent for rent
payments made more than ten (10) days late in lieu of interest for the first
month of delinquency, without waving any other remedies available for default.
Failure to impose a late charge shall not be a waiver of Landlord's rights
hereunder. Tenant shall keep the Rent and other terms of this Lease
confidential from other current and prospective occupants of the Building and
any other buildings owned by Landlord except to the extent disclosure is
reasonably necessary in the conduct of Tenant's business. Landlord shall
provide one notice per year to Tenant in the event Tenant is more than ten (10)
days late in its payment of rent or additional rent without penalty to Tenant
providing Tenant cures the default within three (3) business days after receipt
of Landlord's written notice.
3. Security Deposits. Intentionally omitted.
4. Use. Tenant shall use the Premises for general office space and
shipping/receiving activities and for no other purpose without Landlord's
written consent. In connection with its specific use of Premises only, Tenant
shall at its expense promptly comply with all applicable laws, ordinances,
rules and regulations of any public authority and shall not annoy, obstruct, or
interfere with the rights of other tenants of the Building. Tenant shall create
no nuisance nor allow any objectionable fumes, noise, or vibrations to be
emitted from the Premises. Tenant shall not conduct any activities that will
increase Landlord's insurance rates for any portion of the Building or that
will in any manner degrade or damage the reputation of the Building.
5. Equipment. Tenant shall install in the Premises such office equipment as
is customary for general office use and is referenced in Exhibit D attached
hereto and shall not overload the floors or electrical circuits of the Premises
or Building or alter the plumbing or wiring of the Premises or Building.
Landlord must approve in advance the location and manner of installing any
wiring or electrical, heat generating or communication equipment or
exceptionally heavy articles. All telecommunications equipment, conduit, cables
and wiring and any additional air conditioning required because of heat
generating equipment or special lighting installed by Tenant shall be installed
and operated at Tenant's expense.
6. Signs. No signs, awnings, antennas, or other apparatus shall be painted
on or attached to the Building or anything placed on any glass or woodwork of
the Premises or positioned so as to be visible from outside the Premises
without Landlord's written approval as to design, size, location, and color.
All signs installed by Tenant shall comply with Landlord's standards for signs
and all applicable codes and all signs and sign hardware shall be removed upon
termination of this Lease with the sign location restored to its former state
unless Landlord elects to retain all or any portion thereof.
7. Utilities and Services.
a. Landlord will furnish at its expense heat and air conditioning,
water, electricity and elevator service and, during the hours specified in
subparagraph c. below, Landlord shall make available such utilities to Tenant
in addition to foregoing specified normal business hours at no cost to Tenant;
provided, if such use outside of the
1. OFFICE LEASE
<PAGE> 9
specified business hours is excessive in Landlord's sole discretion, Landlord
reserves the right to invoice and charge Tenant for the incremental additional
cost of making such utilities available to Tenant in addition to the foregoing
specified normal business hours. In case of dispute over any such charges,
Landlord and Tenant shall mutually designate a qualified independent engineer
whose decision shall be conclusive on both parties. If the parties cannot agree
on such engineer within fifteen (15) business days after Tenant receives
Landlord's invoice for such charges, either party may have the Multnoman County
Presiding Circuit Court Judge select the same. Janitorial service will be
provided substantially in accordance with the schedule set forth in Exhibit C
attached hereto, which schedule and service may change somewhat from time to
time. Tenant shall comply with all government laws or regulations regarding the
use or reduction of use of utilities on the Premises. Interruption of services
or utilities shall not be deemed an eviction or disturbance of Tenant's use and
possession of the Premises, render Landlord liable to Tenant for damages
(except to the extent the same is caused by Landlord's negligence or willful
misconduct), or relieve Tenant from performance of Tenant's obligations under
this Lease. Landlord shall take all reasonable steps to correct any
interruptions in service. Tenant shall provide its own surge protection for
power furnished to computers.
b. The HVAC system shall be so designed and sized as to satisfy all of
the factors contributing to the respective cooling and heating loads of the
building, and its individual spaces. Special consideration shall be given to
HVAC unit zoning by sectionalizing every area where load variations occur.
Temperature variations in any given zone shall not exceed 5 degrees F total.
c. System Design Parameters: The system shall be designed using the
geographical summer and winter outdoor design conditions and other Energy
Conservation measures as set forth in the Uniform Building Codes, 1988 Edition,
and the State of Oregon 1990 Amendments, Chapter 53. Equipment, duct work,
grilles and registers shall be designed using ASHRAE Handbook to minimize noise,
and to provide for balanced air flows and temperatures throughout the building.
The system shall be capable of maintaining, at design conditions, the following
temperature swings during occupied hours: (1) Heating: 68-75 degrees F; (2)
Cooling: 68-75 degrees F. All HVAC systems shall have a programmable setback
capability with a manual override. The system shall be setback/setup during
unoccupied hours as follows: (1) Heating setback of 10-15 degrees F and shall at
no time allow indoor temperature to drop below 65 degrees F; (2) Cooling setup
shall not allow the interior temperature to rise above 85 degrees F. At the
beginning of the workday, building or the premises must be at the occupied
temperature. Operating hours shall be regular working days (Monday through
Friday), holidays excepted, commencing at 7:00 a.m. and ending at 8:00 p.m. and
Saturdays (except holidays) commencing at 8:00 a.m. and ending at noon. Should
Lessee require service beyond these hours, Lessee may be required to pay for
such extended service. All enclosed rooms, with the exception of janitorial
closets, shall be provided with both a supply and a return air duct. System
shall provide an optimum of 25 CFM but not less than 20 CFM of outside air per
occupant ventilation, and shall be capable of continuous air circulation
throughout the occupied areas. System shall be designed to provide a minimum of
one complete air change every 10 minutes.
d. System Maintenance: Maintenance shall be performed as follows:
Every three (3) months a preventative maintenance check, every six (6) months
complete filter changes, once every two years clean the coils on all units. On
request by Lessee Lessor shall provide Lessee with copies of work orders signed
by the maintenance person who performed the work. The Lessor shall be
responsible for the system maintenance to the standards set forth in Paragraph
10(c) above. Should Lessor fail to maintain the system in accordance with above
standards, and after thirty (30) days prior written notification to the Lessor,
Lessee may contract for necessary labor, equipment and material to bring system
within those standards and may deduct related costs from future rent payments.
e. All electrical work shall comply to the National Electric Code, and
all current codes. Every two workstations shall have one circuit and every two
offices shall have the same circuit. All lighting shall be switched from the
wall.
f. The acoustical absorption in the Premises shall be no more than
NC40.
g. Landlord shall be in default under this Lease if it fails to
perform or observe any of its Lease obligations hereunder after a period of
thirty (30) business days, or the additional time, if any, that is reasonably
necessary to properly and diligently cure the default after receiving written
notice from Tenant of the default. The notice shall give in reasonable detail
the nature and extent of the failure and identify the Lease provision(s)
containing the obligation(s). Landlord shall not be in default if it fails to
perform its Lease obligations hereunder due to extreme outside temperature
conditions or any other cause beyond Landlord's control, except to the extent
of Landlord's negligence of willful misconduct.
8. Extra Usage. If Tenant uses excessive amounts of utilities or services of
any kind because of operation outside of normal Building hours, high demands
from office machinery and equipment, nonstandard lighting, or any other cause,
Landlord may impose a reasonable charge for supplying such extra utilities or
services, which charge shall be payable monthly by Tenant in conjunction with
rent payments. In case of dispute over any extra charge under this paragraph,
Landlord shall designate a qualified independent engineer whose decision shall
be conclusive on both parties. Landlord and Tenant shall each pay one-half of
the cost of such engineer's determination.
9. Maintenance and Repair. Tenant shall, at all times during the term
hereof, at Tenant's sole cost and expense, keep the following items in good
order, condition and repair: (i) floor coverings, (ii) wall coverings, (iii)
paint, (iv) ceiling tiles, and (v) all tenant improvements. Except for Tenant's
maintenance obligations indicated in the foregoing sentence, Landlord shall
maintain the Building, including public and common areas of the Building, such
as the lobbies, stairs, elevators, corridors and rest rooms, the windows in the
Building, the mechanical, plumbing and electrical equipment serving the
Building, and the structure itself, in reasonably good order and condition
except for damage occasioned by acts of Tenant, its employees or invitees,
which damage shall be repaired by Landlord at Tenant's expense. Landlord shall
have no liability for failure to perform required maintenance and repair unless
written notice of the needed maintenance or repair is given by Tenant and
Landlord fails to commence efforts to remedy the problem in a reasonable time
and manner or unless such maintenance and repair is caused by Landlord's
negligence or willful misconduct. Landlord shall have the right to erect
scaffolding and other apparatus necessary for the purpose of making repairs,
and Landlord shall have no liability for interference with Tenant's use because
of repairs and installations. Tenant shall have no claim against Landlord for
any interruption
2. OFFICE LEASE
<PAGE> 10
or reduction of services or interference with Tenant's occupancy, and no such
interruption or reduction shall be construed as a constructive or other
eviction of Tenant.
10. Alterations. Tenant shall not make or suffer to be made any alterations,
additions or improvements to the Premises, change the color of the interior, or
install any wall or floor covering without Landlord's prior written consent. Any
such improvements, alterations, wiring, cables or conduit installed by Tenant
shall at once become part of the Premises and belong to Landlord except for
Tenant's removable machinery and unattached removable trade fixtures and those
trade fixtures that can be removed without material damage to the Building
without compensation to Tenant. Landlord may at its option require that Tenant
remove any improvements, alterations, wiring, cables or conduit installed by
Tenant and restore the Premises to the original condition upon termination of
this Lease. Landlord shall have the right to approve the contractor used by
Tenant for any work in the Premises, to require and approve plans and
specifications for such work and to post notices of nonresponsibility in
connection with any work being performed by Tenant in the Premises.
11. Indemnity. Tenant shall not allow any items to attach to the Building or
Tenant's interest in the Premises as a result of its activities. Tenant shall
indemnify and defend Landlord and its managing agents from any claim,
liability, damage, or loss occurring on the Premises, arising out of any
activity by Tenant, its agents, or invitees or resulting from Tenant's failure
to comply with any term of this Lease. Neither Landlord not its managing agent
shall have any liability to Tenant because of loss or damage to Tenant's
property or for death or bodily injury caused by the acts or omissions of
other Tenants of the Building, or by third parties (including criminal acts).
12. Insurance. Tenant shall, at its expense, carry at all times during the
term of this Lease, public liability insurance in respect of the Premises and
the conduct of operation of the business therein, with lease at not less than
One Million Dollars ($1,000,000.00) combined single limit bodily injury and
property damage which insurance shall have an endorsement naming Landlord and
Landlord's managing agent, if any, as an additional insured and covering
liability insured under paragraph 11 of this Lease and waiving the insurer's
right of subrogation as provided in paragraph 14 of this Lease. Tenant shall
furnish a certificate evidencing such insurance which shall state that the
coverage shall not be cancelled or materially changed without ten (10) days'
advance notice to Landlord and Landlord's managing agent, if any. A renewal
certificate shall be furnished at least thirty (30) days prior to expiration of
any policy. All insurance policies required to be carried by Tenant hereunder
shall be issued by responsible insurance companies authorized to issue
insurance in the State of Oregon rated 8 VII or higher by Best's Insurance
Rating Service.
13. Fire or Casualty. "Major Damage" means damage by fire or other casualty to
the Building or the Premises which causes the Premises or any substantial
portion of the Building to be unusable, or which will cost more than 25% of the
pre-damage value of the Building to repair, or which is not covered by
insurance. In case of Major Damage, Landlord may elect to terminate this Lease
by notice in writing to Tenant within thirty (30) days after such date. If this
Lease is not terminated following Major Damage, or if damage occurs which is not
Major Damage, Landlord shall promptly restore the Premises to the condition
existing just prior to the damage. Tenant shall promptly restore all damage to
tenant improvements or alterations installed by Tenant or pay the cost of such
restoration to Landlord if Landlord elects to do the restoration of such
improvements. Rent shall be reduced from the date of damage until the date
restoration work being performed by Landlord is substantially complete, with the
reduction to be in proportion to the area of the Premises not usable by Tenant.
14. Waiver of Subrogation. Tenant shall be responsible for insuring its
personal property and trade fixtures located on the Premises and any
alterations or tenant improvements it has made to the Premises. Neither
Landlord, its managing agent nor Tenant shall be liable to the other for any
loss or damage caused by water damage, sprinkler leakage, or any of the risks
that are or could by covered by a standard all risk insurance policy with an
extended coverage endorsement, or for any business interruption, and there
shall be no subrogated claim by one party's insurance carrier against the other
party arising out of any such loss.
15. Eminent Domain. If a condemning authority takes title by eminent domain
or by agreement in lieu thereof to more than 25% of the Building then Landlord
may terminate this Lease effective on the date that possession is taken by the
condemning authority. If such a taxing is sufficient to render the Premises
unsuitable for Tenant's use, then either party may elect to terminate this Lease
effective on the date that possession is taken by the condemning authority.
Rent shall be reduced for the remainder of the term in an amount proportionate
to the reduction in area of the Premises caused by the taking. All condemnation
against Landlord or the condemnation award because of the taxing although
Tenant shall have the right to make a separate claim against the condemning
authority to recover the value of its trade fixtures, personal property and
relocation costs.
16. Assignment and Subletting. This Lease shall bind and inure to the benefit
of the parties, their respective heirs, successors, and assigns, provided that
Tenant not assign its interest under this Lease or sublet all or any portion of
the Premises without first obtaining Landlord's consent in writing; provided
Tenant shall have the right, without Landlord's consent, to assign this Lease
or sublet all or any part of the Premises to parent, subsidiary or affiliate of
Tenant or to any person, firm or corporation which shall be controlled by,
under the control of, or under common control with Tenant, or any corporation
into which Tenant may be merged or consolidated or which purchases all or
substantially all of the assets of Tenant, as long as the net worth of the
purchaser or assignee is no less than that of Tenant. Any transfer in violation
of this requirement shall be null and void as to the Landlord. This provision
shall apply to all transfers by operation of law including but not limited to
mergers and changes in control of Tenant. No assignment shall relieve Tenant of
its obligation to pay rent or perform other obligations required by this Lease,
and no consent to one assignment or subletting shall be a consent to any
further assignment or subletting. Landlord shall not unreasonably withhold its
consent to any assignment, or to subletting provided (i) the subrental rate or
effective rental paid by the subtenant or assignee is not less than eighty
percent (80%) of the current scheduled rental rate of the Building for
comparable space, (ii) the proposed subtenant or assignee is compatible with
Landlord's normal standards for the Building, and (iii) Landlord shall have
received any information concerning the financial condition of the proposed
subtenant or assignee which Landlord reasonably requests and Landlord shall
have reasonably approved the same. If Tenant proposes a subletting or
assignment to which Landlord is required to consent under this paragraph,
Landlord shall have the option of terminating the Lease and dealing directly
with the proposed subtenant or assignee, or any third party. If an assignment or
subletting is permitted, any cash profit, or the net value of any other
consideration received by Tenant as a result of such transaction shall be paid
to Landlord promptly following its receipt by Tenant; provided, any money
received by Tenant for equipment,
3. OFFICE LEASE
<PAGE> 11
stock, or other property of Tenant shall belong solely to Tenant. Tenant shall
pay any costs incurred by Landlord in connection with a request for assignment
or subletting, including reasonable attorneys' fees.
17. Default. Any of the following shall constitute a default under this Lease:
a. Tenant's failure to pay rent or any other charge under this
Lease within ten (10) days after written notice from Landlord that such
payment has not been made when due (provided, no such notice shall be
given if Landlord has provided Tenant with the such written notice during
the previous 12 month period), or failure to comply with any other term or
condition within twenty (20) business days following written notice from
Landlord specifying the noncompliance. If such noncompliance cannot be
cured within the twenty (20) day period, this provision shall be
satisfied if Tenant commences correction within such period and
thereafter proceeds in good faith and with reasonable diligence to effect
compliance as soon as possible and within a reasonable time after the
date of said notice of Landlord. Time is of the essence of this Lease.
b. If Tenant or any guarantor of Tenant's obligations shall make
a general assignment for the benefit of creditors, or shall be unable to
pay its debts as they become due, or shall file a petition in bankruptcy,
or shall be adjudicated as bankrupt or insolvent, or shall file a petition
seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future
statute, law or regulation, or shall file an answer admitting or shall
fail timely to contest the material allegations of a petition filed
against it in any such proceeding, or shall seek or consent to or
acquiesce in the appointment of any trustee, receiver or liquidator of
Tenant or any material part of its properties; or
c. If within sixty (60) days after the commencement of any
proceeding against Tenant seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief
under any present or future statute, law or regulation, such proceeding
shall not have been dismissed or if, within sixty (60) days after the
appointment without the consent or acquiescence of Tenant of any trustee,
receiver or liquidator of Tenant or of any material part of its
properties, such appointment shall not have been vacated; or
d. If this Lease or any estate of Tenant hereunder shall be
levied upon under any attachment or execution and such attachment or
execution is not vacated within ten (10) days.
e. Assignment or subletting by Tenant in violation of paragraph
16:
f. (Intentionally deleted).
During any twelve (12) month period, Tenant shall be entitled to
only one (1) notice pursuant to this Section 17 for each type of default.
18. Remedies for Default. In case of default as described in paragraph 17
Landlord shall have the right to the following remedies which are intended to
be cumulative and in addition to any other remedies provided under applicable
law:
a. Landlord may terminate the Lease and retake possession of the
Premises. Following such retaking of possession efforts by Landlord to
relet the Premises shall be sufficient if Landlord follows its usual
procedures for finding tenants for the space at rates not less than the
current rates for other comparable space in the Building. Landlord at
its option may make such physical changes to the Premises as Landlord
considers advisable or necessary in connection with any such reletting or
proposed reletting, without relieving Tenant of any liability under this
Lease or otherwise affecting Tenant's liability. If Landlord has other
vacant space in the Building, prospective tenants may be placed in such
other space without prejudice to Landlord's claim to damages or loss of
rentals from Tenant.
b. Landlord may recover all damages caused by Tenant's default
which shall include an amount equal to (i) rentals lost because of the
default, (ii) lease commissions paid for this lease, (iii) the amortized
cost of the initial Tenant Improvements described in Exhibit B, (iv) all
legal expenses and other related costs incurred by Landlord following
Tenant's default, and (v) all costs incurred by Landlord in reletting the
Premises. To the extent permitted under Oregon Law, Landlord may sue
periodically to recover damages as they occur throughout the lease term,
and no action for accrued damages shall bar a later action for damages
subsequently accruing. Landlord may elect in any one action to recover
accrued damages plus damages attributable to the remaining term of the
Lease. Such damages shall be measured by the difference between the rent
under this Lease (including an estimated amount of Additional Rent as
determined by Landlord) and the reasonable rental value of the Premises
for the remainder of the term, discounted to the time of judgment at the
prevailing interest rate on judgments.
c. Landlord may make any payment or perform any obligation
which Tenant has failed to perform, in which case Landlord shall be
entitled to recover from Tenant upon demand all amounts so expended, plus
interest from the date of the expenditure at the rate of one and one-half
percent per month. Any such payment or performance by Landlord shall not
waive Tenant's default.
d. Cumulative Remedies: The remedies provided for in this Lease
are cumulative and are not intended to be exclusive of any other remedies
to which Landlord may lawfully be entitled at any time, and Landlord may
invoke any remedy allowed at law or in equity, including an action for
specific performance, as if specific remedies were not provided for
herein. In the event of a breach or threatened breach by Tenant of any of
its obligations under this Lease, Landlord shall also have the right to
obtain an injunction and any other appropriate equitable relief.
e. Termination: Even though Tenant has breached this Lease, the
Lease shall continue in effect for so long as Landlord does not agree in
writing to terminate Tenant's continuing contractual liability, and
Landlord may enforce all its rights and remedies under this Lease,
including the right to recover the Landlord's damages resulting from the
breach. Even if the Landlord takes possession
4. OFFICE LEASE
<PAGE> 12
of, and relets, the Premises in order to mitigate its damages. It shall
not constitute a termination of Tenant's contractual liability unless
Landlord releases Tenant from its liability in writing.
19. Surrender. On expiration or early termination of this Lease, Tenant
shall deliver all keys to Landlord and surrender the Premises vacuumed,
swept, and free of debris and in the same condition as at the
commencement of the term subject only to reasonable wear from ordinary
use. Tenant shall remove all of its furnishings and trade fixtures that
remain its property and restore all damage resulting from such removal.
Failure to remove shall be an abandonment of the property, and Landlord
may dispose of it in any manor without liability. If Tenant fails to
vacate the Premises when required, including failure to remove all its
personal property. Landlord may elect either (i) to treat Tenant as a
tenant from month to month, subject to the provisions of this Lease
except that rent shall be one and one-half times the total rent being
charged when the lease term expired; or (ii) to eject Tenant from the
Premises and recover damages caused by wrongful holdover.
20. Regulations. Landlord shall have the right, but shall not be obligated,
to make, revise and enforce regulations or policies consistent with this
Lease for the purpose of promoting safety, health (including regulation
or prohibition of smoking), order, economy, cleanliness, and good service
to all tenants of the Building. All such regulations and policies shall
be complied with as if part of this Lease.
21. Access. During times upon prior notice other than normal Building hours
Tenant's officers and employees or those having business with Tenant may
be required to identify themselves or show passes in order to gain access
to the Building. Landlord shall have no liability for permitting or
refusing to permit access by anyone. Landlord shall have the right to
enter upon the Premises at any time by passkey or otherwise to determine
Tenant's compliance with this Lease, to perform necessary services,
maintenance and repairs or alterations to the Building or the Premises,
or to show the Premises to any prospective tenant or purchasers. Except
in case of emergency, such entry shall be at such times and in such
manner as to minimize interference with the reasonable business use of
the Premises by Tenant.
22. Furniture and Bulky Articles. Tenant shall move furniture and bulky
articles in and out of the Building or make independent use of the
elevators only at times approved by Landlord following at least 24 hours'
written notice to Landlord of the intended move. Landlord shall not
unreasonably withhold its consent under this paragraph.
23. Notices. Any notices, demands, or other communications permitted or
required to be given under this Agreement shall be in writing and
personally delivered or sent by first class mail, or by certified or
registered mail, return receipt requested, postage prepaid, addressed to
the parties at the addresses listed above, or at such other addresses as
the parties may from time to time designate in writing. All notices shall
be deemed received on the date delivered, if personally delivered, or on
the earlier of two (2) days after mailing or the date delivery is
officially recorded on the return receipt if sent by certified or
registered mail.
24. Subordination. This Lease shall be subject to and subordinate to any
mortgages, deeds of trust, ground leases, or land sale contracts
(hereafter collectively referred to as "encumbrances") now existing
against the Building. At Landlord's option this Lease shall be subject
and subordinate to any future encumbrance hereafter placed against the
Building (including the underlying land) or any modifications of existing
encumbrances, and Tenant shall promptly execute such documents as may
reasonably be requested by Landlord or the holder of the encumbrance to
evidence this subordination. If Tenant fails to execute, acknowledge or
deliver any such instruments within ten (10) business days after request
therefor, Tenant hereby irrevocably constitutes and appoints Landlord as
Tenant's attorney-in-fact, coupled with an interest, to execute and
deliver any such instruments for and on behalf of Tenant.
25. Transfer of Building. If the Building is sold or otherwise transferred by
Landlord or any successor, Tenant shall attorn to the purchaser or
transferee and recognize it as the lessor under this Lease, and, provided
the purchaser or transferee assumes all obligations hereunder, the
transferor shall have no further liability hereunder.
26. Es????. Either party will within ten (10) business days after notice from
the other execute, acknowledge and deliver to the other party a
certificate certifying whether or not this Lease has been modified and is
in full force and effect; whether there are any modifications or alleged
breaches by the other party; the dates to which rent has been paid in
advance, and the amount of any security deposit or prepaid rent; and any
other facts that may reasonably be requested. Failure to deliver the
certificate within the specified time shall be conclusive upon the party
of whom the certificate was requested that the Lease is in full force and
effect and has not been modified except as may be represented by the
party requesting the certificate. If requested by the holder of any
encumbrance, including any ground lessor, Tenant will agree to give such
holder or lessor notice of and opportunity to cure any default by
Landlord under this Lease.
27. Attorney's Fees.
(1) No Suit or Action Filed. If this Lease is placed in the
hands of an attorney due to a default in the payment or performance of any of
its terms, the defaulting party shall pay, immediately upon demand, the other
party's reasonable attorney fees, collection costs even though no suit or
action is filed thereon, and any other fees of expenses incurred by the
nondefaulting party.
(2) Arbitration or Mediation: Trial and Appeal. If any
arbitration, mediation, or other proceeding is brought in lieu of litigation,
or if legal action is instituted to enforce or Interpret any of the terms of
this Lease, if legal action is instituted in a Bankruptcy Court for a United
States District Court to enforce or interpret any of the terms of this Lease,
to seek relief from an automatic stay, to obtain adequate protection, or to
otherwise assert the interest of Landlord in a bankruptcy proceeding, the party
not prevailing shall pay the prevailing party's costs and disbursements, the
fees and expenses of expert witnesses in determining reasonable attorney fees
pursuant to ORCP 68, and such sums as the court may determine to be reasonable
for the prevailing party's attorney fees connected with the trial and any
appeal and by petition for review thereof.
(3) Definitions. For purposes of this Lease, the term
attorney fees includes all charges of the prevailing party's attorneys and
their staff (including without limitation legal assistants, paralegals, word
processing, and other support personnel) and any postpetition fees in a
bankruptcy court. For purposes of this Lease, the term
5. OFFICE LEASE
<PAGE> 13
fees and expenses includes But is not limited to long-distance telephone
charges; expenses of facsimile transmission; expenses for postage including
costs of registered or certified mail and return receipts, express mail, or
parcel delivery; mileage and all deposition charges, including but not limited
to court reporters' charges, appearance fees, and all costs of transcription;
costs incurred in searching records.
28. Quiet Enjoyment. Landlord warrants that so long as Tenant complies with
all terms of this Lease shall be entitled to peaceable and undisturbed
possession of the Premises free from any eviction or disturbance by Landlord.
Neither Landlord nor its managing agent shall have any liability to Tenant for
loss or damages arising out of the acts, including criminal acts, of other
tenants of the Building or third parties, nor any liability for any reason which
exceeds the value of its interest in the Building.
29. Additional Rent: Cost-of-Living Adjustment. On each anniversary date of
this lease, the Landlord shall adjust the base rental in the same percentage as
the increase, if any, in the consumer Price Index published by the United
States Department of Labor, Bureau of Labor Statistics. In no event, however,
shall such increase exceed 3% per annum. The change shall be computed by
comparing the schedule entitled "U.S. City Average, All items, All Urban
Consumers, 1982-84 100 for the latest available month proceeding the
month in which the lease term commenced with the same figure for the same month
in the years for which the adjustment is executed. All comparisons shall be
made using index figures derived from the same base period and in no event
shall this provision operate to decrease the monthly rental for the Premises
below the initial stated monthly rental. If the index cited above is revised or
discontinued during the term of this Lease then the index that is designated by
the Portland Metropolitan Association of Building Owners and Managers to
replace is shall be used.
30. Use of Common Areas and Facilities: All common facilities and areas
furnished by Landlord in or near the Building, pedestrian sidewalks and ramps,
landscaped areas, exterior stairways, restrooms and other areas provided by
Landlord for the general use. In common, of tenants, their officers, agents,
employees and customers shall at all times be subject to the exclusive control
and management of Landlord. Without limiting the score of such discretion,
Landlord shall have the full right and authority to employ all personnel and to
establish, modify and enforce reasonable rules and regulations necessary for
the proper operation and maintenance of common areas and facilities. Landlord
shall have the right to do and perform such other acts in and to said areas and
improvements as the Landlord shall reasonably determine to be advisable. If the
common area of this Building includes surface parking areas, then at all times
Tenant's use (including use by Tenant's employees, agents, invitees and
licensees) of such surface parking area shall not exceed the Tenant's
percentage of the Building as specified herein.
31. Environmental Law Compliance and Indemnification: For purposes of this
Section, the term "Hazardous Substances" shall mean and include all hazardous
and toxic substances, waste or materials, any pollutant or containment,
including, without limitation, PCBs, asbestos, asbestos-containing material,
and raw materials that are included under or regulated by any environmental
Laws. For purposes of this Lease, the term "Environmentally Laws" shall mean and
include all federal, state and local statutes, ordinances, regulations and rules
presently in force or hereafter that to the best of its current actual
knowledge, the Building is in compliance with all Environmental Laws respecting
Hazardous Substances, and that Landlord has received no notice of any pending or
threatened lien, action or proceeding respecting any alleged violation of
Environmental Laws respecting Hazardous Substances that has occurred in or about
the Building. Landlord shall use reasonable efforts to recover any expense of
compliance with Environmental Laws from any third party who is liable for the
same and credit any such recovery against operating expenses. Tenant shall
indemnify and hold harmless Landlord, and its partners, directors, officers,
agents and employees; together with all costs, expenses and liabilities incurred
or in connection with each such claim, action, proceeding or appeal, including,
without limitation, all attorneys' fees and expenses. Landlord shall indemnify
and hold harmless Tenant and its partners, directors, officer, agents and
employees from and against any and all claims arising from or in connection with
the violation of Environmental Laws occurring in, at or about the Building due
to the acts or omissions of Landlord or its partners, directors, officers,
agents and employees; together with all costs, expenses and liabilities incurred
or in connection with each such claim, action, proceeding or appeal, including,
without limitation, all attorneys' fees and expenses.
32. Notice of Occurrences. Tenant shall give prompt notice to Landlord of (i)
any occurrence in or about the Premises for which Landlord might be liable; (ii)
any fire or other casualty in the Premises; (iii) any damage to or defect in
the Premises including the fixtures, equipment and appurtenances thereof, for
the repair of which Landlord might be responsible; and (iv) damage to or detect
in any part or appurtenances of the Building's sanitary, electrical, heating,
ventilating, air-conditioning, elevator or other systems located in or passing
through the Premises or any part thereof.
33. Nonrecourse Lease. Tenant shall look only to Landlord's estate and
property in the Building (or the proceeds thereof) for the satisfaction of
Tenant's remedies for the collection of a judgment (or other judicial process
requiring the payment of money by Landlord in the event of any default by
Landlord hereunder, and no other property or assets of Landlord or its partners
or principals, disclosed or undisclosed, shall be subject to levy, execution or
other enforcement procedure for the satisfaction of Tenant's remedies under or
with respect to this Lease, the relationship of landlord and Tenant hereunder
or Tenant's use or occupancy of the Premises.
34. Complete Agreement. This Lease and the attached Exhibits and Schedules,
if any, constitutes the entire agreement of the parties and supersedes all
prior written and oral agreements and representations. Neither Landlord nor
Tenant is relying on any representations other than those expressly set forth
herein.
35. Space Leased As Is; Tenant Maintenance of the Premises. Except as provided
in Exhibit B attached hereto, unless otherwise stated in this Lease, the
Premises are leased as is in the condition now existing with no alterations or
other work to be performed by Landlord.
36. Guaranty. Intentionally deleted.
37. Captions. The titles to the paragraphs of this Lease are descriptive only
and are not intended to change or influence the meaning of any paragraph or to
be part of this Lease.
6. OFFICE LEASE
<PAGE> 14
38. Nonwaiver. Failure by Landlord to promptly enforce any regulation, remedy
or right of any kind under this Lease shall not constitute a waiver of the same
and such right or remedy may be asserted at any time after Landlord becomes
entitled to the benefit thereof notwithstanding delay in enforcement.
39. Counterparts. This Lease may be executed in one or more counterparts by
separate signature, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, binding on all parties
hereto, even though all parties are not signatories to the original or to the
same counterpart. Any counterpart of this Lease that has attached to it
separate signature pages, which together contain the signatures of all parties,
shall for all purposes to be deemed a fully executed instrument, and in making
proof of this Lease, it shall not be necessary to produce or account for more
than one such counterpart.
40. Exhibits. The Exhibits attached hereto are incorporated herein by this
reference and made a part of this Lease.
41. Building and Tenant Improvements. Landlord, at Landlord's expense shall
construct the Premises in accordance with the "Tenant Improvements to Lease
Premises" (the "Tenant Improvements") delineated on the attached Exhibit A
(Floor Plan of the Premises) and Exhibit B (Building Standard Improvements and
Tenant Improvements) and shall remodel the Building at its expense in
accordance with the "Building Standard Improvements" (the "Building
Improvements") delineated on the attached Exhibit B. It is also agreed that
Landlord shall provide ADA compliant restrooms and common areas. Landlord has
provided the space plan and will provide the construction documents for the
Tenant Improvements at its sole cost and expense. Construction documents shall
be approved by Landlord and Tenant prior to commencement of construction. The
design and construction of additional tenant improvements or upgrades thereof
requested by Tenant (including Tenant's built-in furniture and special finishes
and the like) or any change orders in the tenant improvements, shall require
approval of Landlord and be at the sold cost of Tenant. Tenant shall pay for
any such costs, one-half prior to commencement of construction and the other
half when such improvements are substantially completed to Tenant's reasonable
satisfaction.
42. First Option to Expand (Third Floor). Tenant shall have an option to
expand into the adjacent third floor, which contains approximately 8,223 square
feet. Such expansion option must be exercised by giving Landlord written notice
of such intent by no later than October 31, 1995. If Tenant exercises such
option, Tenant shall commence occupancy of the third floor 120 days following
the date that such notice is given to Landlord. The rental rate for this floor
shall be the same ($12 per square foot until June 1, 1998 when the Base Rental
is increased to $13 per square foot) as Tenant is currently paying on the
original premises (before Tenant is required to take occupancy), and the term
shall run concurrently with the original term (June 1, 1995, through May 31,
2000). Landlord shall provide substantially the same level of quality and
finish as the original premises. In consideration for Landlord's agreement to
hold this floor off the marketplace until the end of August, in the event
Tenant elects not to proceed with the expansion, a cash penalty of $14,600.00
shall be paid on September 1, 1995, together with the base rental due for
September of 1995.
43. Right of First Refusal (Second Floor). At any time during the term of
this Lease that Landlord intends to lease the second floor of the Building to a
prospective tenant:
a. Landlord shall give written notice to Tenant of such intention,
together with the name and address of the prospective tenant, and such other
information as Tenant may reasonably require in connection with such
transaction. Landlord shall, by such notice, also furnish Tenant with the terms
and conditions of the proposed lease.
b. Within seven (7) business days after receipt of the notice
described in subparagraph a. above, Tenant shall either approve the transaction
or exercise Tenant's right of first refusal and execute a lease amendment in
accordance with the terms of the notice described in subparagraph a. above.
c. In the event that Tenant declines to exercise its right of first
refusal set forth above, Landlord shall have may enter into a lease agreement
with such prospective tenant in accordance with Landlord's notice to Tenant if
Landlord does not consummate the lease transaction in accordance with the terms
of the lease disclosed to Tenant, Tenant's rights under this Section 43 shall be
reinstituted.
44. Right of First Opportunity. The "Additional Space" is the leasable area on
the third floor in the Building, exclusive of the Premises. At any time during
the Term of this Lease that Landlord quotes or intends to quote to a third party
prospective tenant (other than an existing tenant who is renewing or extending
its lease), on Landlord's initiative or in response to an inquiry from such a
prospective tenant the term and the financial consideration for which Landlord
would be willing to lease all or a portion of the Additional Space, Landlord
shall communicate the same information to Tenant. Tenant specifically
acknowledges that, once a third party may be willing to lease the Additional
Space for a term which is longer than the unexpired balance of the Term hereof
(or as part of a larger space). Landlord may offer the Additional Space or the
applicable portion thereof to Tenant on terms which require Tenant to extend the
balance of the Term hereof to coincide with the length of the term being
considered with respect to a third party as a condition to Landlord's offer and
to Tenant. Tenant shall have seventy-two (72) hours after receipt of such
communication to execute a lease or an addendum hereto with Landlord for the
Additional Space or the applicable portion on the terms set forth herein not
inconsistent with such communication. Should Tenant fail to execute such a lease
or addendum, or otherwise indicate rejection of such communication, Landlord may
negotiate with such third party and execute a lease with the third party on any
terms negotiated, whether similar or dissimilar to those originally communicated
to Tenant, so long as Landlord's communication to Tenant was made in good faith.
Tenant's failure to execute an addendum or a new lease as herein provided shall
not terminate Tenant's rights under this Section if a lease with the third party
is not executed; provided however, if a lease with the third party is signed,
this shall terminate Tenant's rights hereunder as to such of the Additional
Space as is so leased and also to any of the Additional Space not so issued to
the third party but which is then separated from the Premises by the space
leased to the third party. All communications and notices under this Section
shall be hand delivered during business hours to Landlord at 225 S.W. Broadway,
Portland, Oregon 97205 and to Tenant at the Premises. This is not an option nor
a right of first refusal; Tenant shall not have rights such as those of first
refusal. The rights of Tenant under this Section 44 are not assignable and shall
terminate upon any assignment, sublease, or event of default hereunder by
Tenant, or any termination of this Lease or of Tenant's right of possession
hereunder.
45. Option to Extend.
7. OFFICE LEASE
<PAGE> 15
a. Grant of Option. Landlord hereby grants to Tenant the option to
extend this Lease for two additional three-year terms (the "Extension Terms")
commencing on the first day after the expiration date of the initial Term or
the first Extension Term, as the case may be.
b. Exercise. Tenant must exercise the option to renew, if at all, by
giving Landlord written notice of such exercise not more than 180 days nor less
than 120 days prior to the expiration date of the initial Term of the first
Extension Term, as the case may be. Upon the exercise of the option to renew,
the Term of this Lease shall be extended through the expiration date of the
Extension Term on the same terms and conditions as contained herein, except
that (a) there shall be no further right to again renew the Term of this Lease
(after the second Extension Term), and (b) Base Monthly Rent during the
Extension Terms shall be determined pursuant to this Section 45.
c. Rental. Base Monthly Rent for the Extension Term shall be the
greater of (a) the Base Monthly Rent schedule for the final month of the
initial Term, or (b) the fair market rental value of the Premises. As used
herein, the fair market rental value of the Premises is defined as the amount
of base monthly rental (payable on an equal monthly payment basis, including
any appropriate rental escalation that would normally be imposed), which a
willing and fully informed leasee would pay and which a willing and fully
informed lessor would accept for rental of the Premises for a three-year term as
of the first day of the Extension Term, taking into account that all tenant
improvements are owned by Landlord. In determining the fair market rental
value, reference may be made to other recent leases in the Project or
immediately surrounding areas, taking into consideration the interior
improvements of the other spaces and the creditworthiness of the lessees of the
same.
Landlord and Tenant shall attempt, in good faith, to agree upon the
fair market rental value of the Premises. If they are unable to agree within
thirty (30) days of Tenant's exercise of the option to renew, then, within ten
(10) days thereafter, Landlord and Tenant shall jointly appoint an MAI or other
qualified appraiser, who shall deliver, within thirty (*30) days after
appointment, his or her written letter of opinion as to the fair market rental
value of the Premises effective as of the date the rental adjustment is to
occur.
In the event the parties are unable to agree on the appraiser,
either party shall have the right to apply to the Circuit Court of Multnoman
County, Oregon for the appointment of the appraiser. If for any reason, the
fair market rental value of the Premises is not determined prior to the first
day of the Extension Term, this Lease shall nevertheless remain in effect, and
during the interim period until such rental rate is fully determined, Tenant
shall pay, as Base Monthly Rent, an amount equal to the amount which was
scheduled to be paid for the final ??? month of the initial Term. Any accrued
payment shortage, together with the Interest at the rate of twelve percent
(12%) per annum on unpaid amounts from the applicable dates, shall be made
within ten (10) days of the determination of the renewal rate.
46. Option to Terminate. Tenant shall have the right to terminate the entire
lease or any portion of the leased premises any time after the third year of
the Lease. Tenant shall provide nine (9) months' advance written notice or its
intent to exercise this option. It is agreed and understood that the penalty
for such termination shall be the repayment to Landlord of any amortized Tenant
improvements and leasing commissions ?????????????? to the portion or portions
of space to terminated, calculated at an annual rate of 10 percent interest.
47. Right of First Refusal. In the event Landlord intends to make a sale of
the Building during the term of this Lease, as the same may be extended:
a. Landlord shall give written notice ("Landlord's Notice") to
Tenant of such intention, together with the name and address of the intended
purchaser, and such other information as Tenant may reasonably require in
connection with such transaction. Landlord shall, by such notice, also furnish
Tenant with the terms and conditions of the proposed sale. No proposed
transaction shall be deemed bone fide which is not evidenced by a written
contract of sale, subject to the approval and right of first refusal contained
herein, executed by the Landlord and the proposed purchaser and containing all
the terms of the sale proposed to be made.
b. Within ten (10) days after receipt of Landlord's Notice
described in (a) above, Tenant shall either approve the transaction or exercise
Tenant's right of first refusal and execute a contract of sale in accordance
with the terms of Landlord's Notice described in a. above. The purchase price
shall be paid in full at closing.
c. In the event Landlord does not enter into a sale agreement in
accordance with the terms of the sale disclosed to the Tenant in Landlord's
Notice. Tenant's right of first refusal as set forth in this paragraph shall be
reinstituted.
48. Limitation on Options. The rights granted to the Tenant under Sections 42
through 47 ("Tenant's Options") are personal to the Tenant named herein and may
not be assigned as such Tenant, either separately or in connection with an
assignment of this Lease. The rights set forth in Tenant's Options shall only
be available in the event Tenant has not previously assigned the Lease and is
in actual occupancy of the entire Premises at the time Tenant would otherwise
be entitled to the rights set forth in Tenant's Options. The rights granted in
Tenant's Options may be exercised only in the event that Tenant is not in
default of the terms and provisions of this Lease at the time of exercise. In
the event that this Lease or Tenant's right of occupancy is terminated for any
reason whatsoever, either before or after exercise of any of the rights set
forth in Tenant's Options, the rights granted to Tenant in Tenant's Options
shall also terminate at the same time.
49. Card-Key Entry System, Landlord, at Landlord's expense, shall provided a
card-key entry system for the lobby, elevators, and the stairwells of the
Building, and for each floor of the Building Tenant occupies.
50. Signage/Building Name Change. Landlord, at its sole expense, shall provide
Building standard signage for the Tenant on the fourth, fifth, and sixth floors
and the Building lobby directory. At such time as Tenant occupies the sixth,
fifth, and fourth floors of the Building, Landlord shall at Tenant's option
rename the Building as the "Creative Multimedia Building" at Tenant's sole
expense. All action to be taken and expenses incurred in connection therewith
8. OFFICE LEASE
<PAGE> 16
shall be Tenant's sole responsibility. Landlord shall cooperate with Tenant in
renaming the Building but shall not be responsible for accomplishing the same
or payment of any expense incurred in connection therewith, any and all such
signage shall be subject to Section 6 above.
IN WITNESS WHEREOF, the duly authorized representatives of the
parties have executed this Lease as of the day and year first written above.
LANDLORD: COMMERCE BUILDING LIMITED
PARTNERSHIP, an Oregon Limited
Partnership
Address for notices:
112 SW 2 AVE By: McAleese, Inc. an
- ---------------------------
PORTLAND Oregon corporation, general partner
- ---------------------------
97204 By: /s/ D. GERARD MCALEESE
-------------------------------
D. Gerard McAleese
President
TENANT: CREATIVE MULTIMEDIA CORPORATION, an
Oregon corporation
Address for notices:
By: /s/ [Signature Illegible]
- --------------------------- -----------------------------------
Its: President/CEO
- --------------------------- ----------------------------------
- ---------------------------
Exhibit A - Floor Plan
Exhibit B - Building Standard Improvements and Tenant Improvements
Exhibit C - Janitorial Specifications
Exhibit D - Furniture Plan
9. OFFICE LEASE
<PAGE> 17
EXHIBIT A
FLOOR PLAN
<PAGE> 18
CREATIVE MULTIMEDIA
COMMERCE BUILDING
FOURTH FLOOR PLAN
<PAGE> 19
CREATIVE MULTIMEDIA
COMMERCE BUILDING
FIFTH FLOOR PLAN
<PAGE> 20
CREATIVE MULTIMEDIA
COMMERCE BUILDING
SIXTH FLOOR PLAN
<PAGE> 21
EXHIBIT B
BUILDING STANDARD IMPROVEMENTS AND TENANT IMPROVEMENTS
<PAGE> 22
EXHIBIT B
BUILDING STANDARD IMPROVEMENTS AND TENANT IMPROVEMENTS
TO LEASED PREMISES
Building Standard Improvements
Pursuant to Sections 41 and 46 of the Lease, the following construction items
shall be defined as "Building Standard Improvements," and by such definition,
shall be excluded in calculations to determine the "unamortized cost" of tenant
improvements provided to leased premises should Tenant elect to exercise its
termination right under Section 46 of the Lease.
1. ADA compliant washrooms and common areas.
2. Fire Protection: Exit lights, smoke detectors, audio/visual alarms, and
speaks as required by Code. Fully sprinklered in accordance with local
Fire Codes and approval by the building officials.
3. Elevator upgrades.
4. Window Coverings: Building owner to provide Levolor Lorentzan Riviera 1"
metal blinds throughout the premises, or equivalent.
5. Cabling: Landlord to provide main cabling to each floor from basement area
including phone service to each floor so Tenant's phone/data vendor, at
Tenant's expense, can wire their network off of the building service.
6. Heating, Ventilating and Air Conditioning: Landlord to provide a complete
HVAC system that complies with Sections 7b and 7c of the Base Lease
document.
7. Ceiling:
Exposed ceiling.
Approximate ceiling height: 10'-8"
8. Electrical:
a. Lighting
(1) Landlord acknowledges Tenant's selection of Ledaihe Apex 55
suspended Flourescent Light Fixtures (either 2'x6' or 2'x8'
fixtures). Any additional costs, however, above our proposed
2'x4', 3-lamp Octron 35k or equivalent shall be borne by the
Tenant.
<PAGE> 23
Exhibit B
Page 2
(2) Exit Light Fixture
b. Power and Signal
(1) Four-plex Outlets Wall Mounted.
Color: To be selected by Owner.
Height: 18" above finish floor to centerline.
(2) Wall Switch
20 Ampere, 120/277 volts; single pole
Color: To be selected by Owner
Height: 42" above finished floor to centerline
9. Execution
a. Lighting
(1) Lighting density is to meet the current Suite energy code.
(2) Emergency lighting ballasts are to be used as needed in paths of
egress, within tenant spaces.
(3) Common area egress lighting is to be connected to the building
emergency circuits.
b. Power
Convenience branch circuits are not to exceed 4 duplex outlets each.
c. Signal
All signal circuit cables are to be rated class 2.
10. Card Key Entry System:
Landlord, at Landlord's expense, shall provide a card key entry system for
the lobby, elevators, and the stairwells of the building, and for each
floor of the building Tenant occupies.
<PAGE> 24
Exhibit B
Page 3
Tenant Improvements to Leased Premises
1. Partitions
Standard Full-Height Partition
2 1/2", 25 ga. galv. steel studs at 24" o.c.
5/8 gypsum wallboard each side
2. Doors and Relites
Doors
a. Sixth Floor Main Entry Doors
Double wood maple entry doors with clear glass relites in the door.
Relite Dimension 2'-6"w x 5'-0" ht.
b. Standard Entry/Reception Door
3'0" x 7'-0" x 1 3/4" solid plain clear sliced grain white maple
door in metal frame, factory finish, non-rated.
c. Standard Interior Office Door
3'0" x 7'-0" x 1 3/4" solid plain clear sliced grain white maple
door in metal frame, factory finish, non-rated.
d. Standard Closet Door
1'-6" x 7'-0" x 1 3/4" and 3'-0" x 7'-0" x 1 3/4" solid plain clear
sliced grain white maple door in metal frame, factory finish.
Relites
Provide clear glass relites (approximately 2'-6"w x 5'-0" ht unless
otherwise stated) at these locations:
6th Floor 1 door at Corey's office
1 wall in Corey's office
1 door at small conference room
2 doors at large conference room
Approximately 4'x8'x1.4" clear glass curved relite in ACI
metal frame in large conference room
- --------------------------------------------------------------------------------
<PAGE> 25
Exhibit B
Page 4
Approximately 4'x8'x1/4" clear class curved relite in ACI
metal frame and small conference room
5th Floor 2 doors at large conference room
1 door at small conference room
Approximately 4'x8'x1/4" curved clear glass relite in ACI
metal frame in large conference room
Approximately 4'x8'x1/4" curved clear glass relite in ACI
metal frame in small conference room
4th Floor 1 door at small conference room
Approximately 4'8'x1/4" curved clear glass relite in ACI
metal frame in small conference room
Tenant, at Tenant's expense, may select additional relites for office
walls or doors.
3. Hardware.
a. Doors
All hardware to be levered "Schlage" "D" Series (or equivalent)
hardware. Model Name Sports, No. 605 with finish No. 626 (satin
chromium plated). May be available in other finishes if necessary to
match the tenant interiors.
(1) Suite entry/reception door with lockset.
(2) Interior office doors with latchsets.
(3) Interior office doors with locksets.
(4) Pair of closet doors.
(5) Pair of interior doors.
Door Stop: 407 1/2 Ives or equal.
Silencers: #20 or equal
LCN Closer: 4110 or 4010
<PAGE> 26
Exhibit B
Page 5
b. Casework
(1) Cabinets
"European" hinge
96 mill, wire pull
shelf standards
(2) Open Shelving
shelf standards
(3) Closet Shelf and Rod
shelf support
rod and flange at each end
4. Casework
a. Base Cabinet
Polylaminate face, plastic laminate countertop and backsplash,
shelves.
b. Upper Cabinet
Polylaminate face, concealed hinges, wire pulls, shelves.
c. Shelving
Shelves on adjustable standards, melamine or equal.
d. Reception Desk
Owner to provide allowance of $5,000 for construction of new
reception desk.
5. Floor Covering
a. Carpet
30 ounce, 100% nylon looptype-Monterey/No. 6014 Tatami
b. Sheet Vinyl
Tarkett Coordinates, or equivalent; manufacturer's standard colors.
c. Vinyl Composition Tile
12" x 12" Tarkett Expressions or equivalent manufacturer's standard
colors.
<PAGE> 27
Exhibit B
Page 6
d. Ease
4th and 5th floors: 4" rubber base, no cove at carpet, cove at
resilient floor, 6" rubber base at resilient floor at restrooms, 4"
rubber-base at casework Roppe (or equivalent), Roppe or John Sotute.
6th floor: 5" wood base; match the existing.
6. Painting
Rodda or equal. One coat primer, two costs finish paint on all walls,
latex eggshell enamel; one standard color; one accent color in reception
area, conference room and other public space, one ceiling color and
exposed ducting color to match.
Tenant, at Tenant's expense, may select a Zolatone paint for accent
finishes or other areas.
7. Plumbing Fixtures
a. Sink (Lunch Room - 4th Floor; Art Room -4th Floor)
Moen, Stainless Steel, barrier free or equal.
Moen Valves, Chrome, barrier free or equal.
b. Hot Water Heaters
(Lunch Room - 4th Floor; Art Room - 4th Floor; Showers - 6th Floor)
Ruudglas, undercounter, 6 gal. capacity, 120 volt. or equal
(sinks at Lunch Room & Art Room)
Ruudglas, 50 gal. capacity, 120 volt.
(men and women showers at 6th floor)
c. Showers
(Men and Women - 6th Floor)
Fiberglass showers, barrier free.
8. Electrical
a. Lighting
(1) Recessed down light; compact fluorescent reflector oper. down
light: To be selected by Owner.
<PAGE> 28
[NORRIS HEDGES & SIMPSON LOGO]
Exhibit B
Page 7
(2) Recessed wall washer: Compact fluorescent wall wash open
downlight. To be selected by Owner.
b. Power and Signal
Telephone/data outlet - wall mounted single gang mudring with 3/4"
raceway and pullstring. Provide main cabling to each floor from
basement area.
AML/cmw
definiti.aml
<PAGE> 29
EXHIBIT C
JANITORIAL SPECIFICATIONS
11- OFFICE LEASE 11
<PAGE> 30
EXHIBIT D
FURNITURE PLAN
12 - OFFICE LEASE 12
<PAGE> 31
CREATIVE MULTIMEDIA
COMMERCE BUILDING
FURNITURE PLAN
FOURTH FLOOR
[DIAGRAM]
<PAGE> 32
CREATIVE MULTIMEDIA
COMMERCE BUILDING
FURNITURE PLAN
FIFTH FLOOR
[DIAGRAM]
<PAGE> 33
CREATIVE MULTIMEDIA
COMMERCE BUILDING
FURNITURE PLAN
SIXTH FLOOR
[DIAGRAM]
<PAGE> 34
[DIAGRAM]
4TH FLOOR - LUNCHROOM
Note: Field verify all dimensions and conditions.
Contact designer if there are plan/elevation discrepancies or questions.
CREATIVE MULTIMEDIA
Commerce Building
4th Floor - Lunchroom
Cabinet Elevations
1/2" x 1'-0"
8/11/95
Ridder Design Studio
4200 SW Greenhills Wy
Portland, OR 97221
Telephone: 297-1614
FAX: 292-8727
<PAGE> 35
[CREATIVE MULTIMEDIA LETTERHEAD]
Jan 6, 1996
Gerard McAleese
Landlord,
Creative Multimedia Bldg.
Portland, OR
Dear Gerard,
Pursuant to our conversation regarding the security system of our building, I
am proposing that we discount our rent over February and March a total $8,825
per month for a total of $17,651.
As we discussed, the bid from American Security came to $15,631.00, (this did
not include the lock work), and the bid from Honeywell came to $20,671.00
including lock work. We agreed to compromise on the different costs, I have set
the compromise level at $17,651.00.
Thanks for your help in this matter,
Finbarr Bishop
Facilities Manager
CMC
<PAGE> 36
[CREATIVE MULTIMEDIA LETTERHEAD]
Jan 15, 1996
Gerard McAleese
Landlord,
Creative Multimedia Bldg.
Portland, OR
Dear Gerard,
This is a change to our agreement of the 6th.
Of the $17,651.00 which you are paying Honeywell for the installation of the
security system, we have already paid $1,480.00. Therefore we will subtract
that much from February's rent which will leave a balance of $16,171.00 which
you will owe Honeywell.
Thanks Again,
Finbarr Bishop
X /s/ GERARD McALEESE
-----------------------------
<PAGE> 37
FIRST AMENDMENT TO OFFICE LEASE
This First Amendment to Office Lease is entered by and between Commerce
Building Limited Partnership, and Oregon limited partnership ("Landlord"), and
Creative Multimedia Corporation, an Oregon corporation ("Tenant").
RECITALS
A. Landlord and Tenant previously entered into an Office Lease dated
April 7, 1995 (the "Lease"), for the premises (the "Premises") commonly known
as fifth and sixth floors of the Commerce Building located at 225 S.W.
Broadway, Portland, Oregon.
B. Landlord and Tenant desire to amend the Lease in accordance with
the terms and provisions hereof.
AMENDMENT
Now, therefore, in consideration of the premises and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereby agree as follows (unless otherwise indicated,
all capitalized terms used herein shall have the same meanings as in the Lease):
1. PREMISES. Landlord hereby leases to Tenant the fourth, fifth, and sixth
floors of the Building for a term commencing (subject to paragraph 2 below)
October 6, 1995, and continuing through September 30, 2000, at a Base Rental of
$24,669.00 per month ($12 per rentable square foot) commencing (subject to
paragraph 2 below) October 6, 1995 (the first month shall be prorated, if
necessary), through and including September 30, 1998, and $26,724.75 per month
($13 per rentable square foot) commencing October 1, 1998, through and
including September 30, 2000, payable in advance on the first day of each
month. Such Base Rental shall be in addition to the Additional Rent payable
under section 29 of the Lease.
2. DELIVERY OF POSSESSION. Landlord shall deliver possession of the Premises
on or before October 6, 1995. It shall be incumbent upon Tenant to provide a
punch list of any minor items not fully completed pursuant to Lease
specifications and deliver notice of the same to Landlord in writing prior to
occupancy. Notwithstanding the delivery of such punch list, possession of the
Premises shall be deemed to have occurred, the term of the Lease shall
commence, and Tenant shall begin paying the Base Rental under the Lease when
Landlord has built out the Premises substantially in accordance with the
specifications set forth in the Lease. Landlord shall have a reasonable time,
but in no event longer than thirty days, in which to complete these minor
repairs and/or improvements, and the Base Rental shall not be abated or offset
during such time unless such work interferes with the conduct of Tenant's
business. In such case, the Base Rental shall be abated in proportion to the
are which is not fully usable or accessible to Tenant until such repairs are
completed. The foregoing is intended supplement and not replace section 1 of
the Lease.
3. OPTION TO EXPAND (SECOND AND THIRD FLOORS). Sections 42 and 43 of the
Lease are hereby deleted and replaced with the following: "Tenant shall have an
option to expand into the adjacent second and third floors of the Building,
which together contain approximately 16,446 rentable
1 - FIRST AMENDMENT TO OFFICE LEASE
<PAGE> 38
square feet (8,223 rentable square feet per foot). This option to expand must be
exercised by Tenant giving Landlord written notice of such intent no later than
February 1, 1996. Tenant may elect to expand into just the third floor or both
the second and third floors; provided, Tenant may not expand into just the
second floor. If Tenant exercises such option, Tenant shall commence occupancy
of the third floor or the second and third floors, as the case may be, no sooner
than 120 days and no later than 180 days following the date that such notice is
given to Landlord; provided, Tenant may stagger the date upon which it is to
take occupancy of the second and third floors if it decides to expand into both
such floors. The Base Rental rate for the second and third floors shall be
$8,223.00 per month per floor through September 30, 1998, and $8,098.25 per
month per floor commencing October 1, 1998, through September 30, 2000, and the
term shall run concurrently with the original term as amended herein (October 6,
1995, through September 30, 2000). As with the fourth, fifth, and sixth floors,
such Base Rental shall be in addition to the Additional Rent provided for in
section 29 of the Lease. Landlord shall provide substantially the same level of
quality and finish as the fourth, fifth, and sixth floors of the Building. If
Landlord does not receive such notice of intent to expand from Tenant on or
before February 1, 1996, this option to expand shall automatically terminate and
Landlord may rent either or both the second and third floors to a third party
without any further obligation to Tenant.
4. AFFIRMATION. No other modification of the Lease is made or intended to
be made hereby and, as amended herein, the Lease is hereby confirmed and
reaffirmed by Landlord and Tenant and shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this First Amendment to
Office Lease as of the date(s) indicated below.
LANDLORD: TENANT:
Commerce Building Limited Partnership, Creative Multimedia Corporation,
an Oregon limited partnership an Oregon corporation
By: McAleese, Inc., an Oregon By: /s/ LEN K. JORDAN
corporation, general partner ----------------------------------
Len Jordan, President
By: ----------------------------- Date: 9-13 , 1995
D. Gerard McAleese, --------------------------
President
Date: , 1995
--------------------
2 - FIRST AMENDMENT TO OFFICE LEASE
<PAGE> 1
EXHIBIT 10.8
WEBRIDGE, INC.
INDEMNIFICATION AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of October
3, 1997 between Webridge, Inc., a Delaware corporation (the "Company"), and
____________________ ("Indemnitee").
WITNESSETH THAT:
WHEREAS, Indemnitee performs a valuable service for the Company; and
WHEREAS, the Board of Directors of the Company has adopted Bylaws (the
"Bylaws") providing for the indemnification of the officers and directors of the
Company to the maximum extent authorized by Section 145 of the Delaware General
Corporation Law, as amended (the "Law"); and
WHEREAS, the Bylaws and the Law, by their nonexclusive nature, permit
contracts between the Company and the officers or directors of the Company with
respect to indemnification of such officers or directors; and
WHEREAS, in accordance with the authorization as provided by the Law,
the Company may purchase and maintain a policy or policies of directors' and
officers' liability insurance ("D & O Insurance"), covering certain liabilities
which may be incurred by its officers or directors in the performance of their
obligations to the Company; and
WHEREAS, in order to induce Indemnitee to continue to serve as an
officer or director of the Company, the Company has determined and agreed to
enter into this contract with Indemnitee;
NOW, THEREFORE, in consideration of Indemnitee's service as an officer
or director after the date hereof, the parties hereto agree as follows:
1. Indemnity of Indemnitee. The Company hereby agrees to hold harmless
and indemnify Indemnitee to the full extent authorized or permitted by the
provisions of the Law, as such may be amended from time to time, and Article V
of the Bylaws, as such may be amended. In furtherance of the foregoing
indemnification, and without limiting the generality thereof:
(a) Proceedings Other Than Proceedings by or in the Right of the
Company. Indemnitee shall be entitled to the rights of indemnification provided
in this Section l(a) if, by reason of his Corporate Status (as hereinafter
defined), he is, or is threatened to be made, a party to or participant in any
Proceeding (as hereinafter defined) other than a Proceeding by or in the
<PAGE> 2
right of the Company. Pursuant to this Section 1(a), Indemnitee shall be
indemnified against all Expenses (as hereinafter defined), judgments, penalties,
fines and amounts paid in settlement actually and reasonably incurred by him or
on his behalf in connection with such Proceeding or any claim, issue or matter
therein, if he acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the Company and, with respect to any
criminal Proceeding, had no reasonable cause to believe his conduct was
unlawful.
(b) Proceedings by or in the Right of the Company. Indemnitee
shall be entitled to the rights of indemnification provided in this Section 1(b)
if, by reason of his Corporate Status, he is, or is threatened to be made, a
party to or participant in any Proceeding brought by or in the right of the
Company. Pursuant to this Section 1(b), Indemnitee shall be indemnified against
all Expenses actually and reasonably incurred by him or on his behalf in
connection with such Proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company; provided, however, that, if applicable law so provides, no
indemnification against such Expenses shall be made in respect of any claim,
issue or matter in such Proceeding as to which Indemnitee shall have been
adjudged to be liable to the Company unless and to the extent that the Court of
Chancery of the State of Delaware shall determine that such indemnification may
be made.
(c) Indemnification for Expenses of a Party Who is Wholly or
Partly Successful. Notwithstanding any other provision of this Agreement, to the
extent that Indemnitee is, by reason of his Corporate Status, a party to and is
successful, on the merits or otherwise, in any Proceeding, he shall be
indemnified to the maximum extent permitted by law against all Expenses actually
and reasonably incurred by him or on his behalf in connection therewith. If
Indemnitee is not wholly successful in such Proceeding but is successful, on the
merits or otherwise, as to one or more but less than all claims, issues or
matters in such Proceeding, the Company shall indemnify Indemnitee against all
Expenses actually and reasonably incurred by him or on his behalf in connection
with each successfully resolved claim, issue or matter. For purposes of this
Section and without limitation, the termination of any claim, issue or matter in
such a Proceeding by dismissal, with or without prejudice, shall be deemed to be
a successful result as to such claim, issue or matter.
2. Additional Indemnity. In addition to, and without regard to any
limitations on, the indemnification provided for in Section 1, the Company shall
and hereby does indemnify and hold harmless Indemnitee against all Expenses,
judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf if, by reason of his Corporate
Status, he is, or is threatened to be made, a party to or participant in any
Proceeding (including a Proceeding by or in the right of the Company),
including, without limitation, all liability arising out of the negligence or
active or passive wrongdoing of Indemnitee. The only limitation that shall exist
upon the Company's obligations pursuant to this Agreement shall be that the
Company shall not be obligated to make any payment to Indemnitee that is finally
determined (under the procedures, and subject to the presumptions, set forth in
Sections 6 and 7 hereof) to be unlawful under Delaware law.
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<PAGE> 3
3. Contribution in the Event of Joint Liability.
(a) Whether or not the indemnification provided in Sections 1 and
2 hereof is available, in respect of any threatened, pending or completed
action, suit or proceeding in which Company is jointly liable with Indemnitee
(or would be if joined in such action, suit or proceeding), Company shall pay,
in the first instance, the entire amount of any judgment or settlement of such
action, suit or proceeding without requiring Indemnitee to contribute to such
payment and Company hereby waives and relinquishes any right of contribution it
may have against Indemnitee. Company shall not enter into any settlement of any
action, suit or proceeding in which Company is jointly liable with Indemnitee
(or would be if joined in such action, suit or proceeding) unless such
settlement provides for a full and final release of all claims asserted against
Indemnitee.
(b) Without diminishing or impairing the obligations of the
Company set forth in the preceding subparagraph, if, for any reason, Indemnitee
shall elect or be required to pay all or any portion of any judgment or
settlement in any threatened, pending or completed action, suit or proceeding in
which Company is jointly liable with Indemnitee (or would be if joined in such
action, suit or proceeding), Company shall contribute to the amount of expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred and paid or payable by Indemnitee in proportion
to the relative benefits received by the Company and all officers, directors or
employees of the Company other than Indemnitee who are jointly liable with
Indemnitee (or would be if joined in such action, suit or proceeding), on the
one hand, and Indemnitee, on the other hand, from the transaction from which
such action, suit or proceeding arose; provided, however, that the proportion
determined on the basis of relative benefit may, to the extent necessary to
conform to law, be further adjusted by reference to the relative fault of
Company and all officers, directors or employees of the Company other than
Indemnitee who are jointly liable with Indemnitee (or would be if joined in such
action, suit or proceeding), on the one hand, and Indemnitee, on the other hand,
in connection with the events that resulted in such expenses, judgments, fines
or settlement amounts, as well as any other equitable considerations which the
law may require to be considered. The relative fault of Company and all
officers, directors or employees of the Company other than Indemnitee who are
jointly liable with Indemnitee (or would be if joined in such action, suit or
proceeding), on the one hand, and Indemnitee, on the other hand, shall be
determined by reference to, among other things, the degree to which their
actions were motivated by intent to gain personal profit or advantage, the
degree to which their liability is primary or secondary, and the degree to which
their conduct is active or passive.
(c) Company hereby agrees to fully indemnify and hold Indemnitee
harmless from any claims of contribution which may be brought by officers,
directors or employees of the Company other than Indemnitee who may be jointly
liable with Indemnitee.
4. Indemnification for Expenses of a Witness. Notwithstanding any other
provision of this Agreement, to the extent that Indemnitee is, by reason of his
Corporate Status, a witness
3
<PAGE> 4
in any Proceeding to which Indemnitee is not a party, he shall be indemnified
against all Expenses actually and reasonably incurred by him or on his behalf in
connection therewith.
5. Advancement of Expenses. Notwithstanding any other provision of this
Agreement, the Company shall advance all Expenses incurred by or on behalf of
Indemnitee in connection with any Proceeding by reason of Indemnitee's Corporate
Status within ten (10) days after the receipt by the Company of a statement or
statements from Indemnitee requesting such advance or advances from time to
time, whether prior to or after final disposition of such Proceeding. Such
statement or statements shall reasonably evidence the Expenses incurred by
Indemnitee and shall include or be preceded or accompanied by an undertaking by
or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately
be determined that Indemnitee is not entitled to be indemnified against such
Expenses. Any advances and undertakings to repay pursuant to this Section 5
shall be unsecured and interest free. Notwithstanding the foregoing, the
obligation of the Company to advance Expenses pursuant to this Section 5 shall
be subject to the condition that, if, when and to the extent that the Company
determines that Indemnitee would not be permitted to be indemnified under
applicable law, the Company shall be entitled to be reimbursed, within thirty
(30) days of such determination, by Indemnitee (who hereby agrees to reimburse
the Company) for all such amounts theretofore paid; provided, however, that if
Indemnitee has commenced or thereafter commences legal proceedings in a court of
competent jurisdiction to secure a determination that Indemnitee should be
indemnified under applicable law, any determination made by the Company that
Indemnitee would not be permitted to be indemnified under applicable law shall
not be binding and Indemnitee shall not be required to reimburse the Company for
any advance of Expenses until a final judicial determination is made with
respect thereto (as to which all rights of appeal therefrom have been exhausted
or lapsed).
6. Procedures and Presumptions for Determination of Entitlement to
Indemnification. It is the intent of this Agreement to secure for Indemnitee
rights of indemnity that are as favorable as may be permitted under the law and
public policy of the State of Delaware. Accordingly, the parties agree that the
following procedures and presumptions shall apply in the event of any question
as to whether Indemnitee is entitled to indemnification under this Agreement:
(a) To obtain indemnification (including, but not limited to, the
advancement of Expenses and contribution by the Company) under this Agreement,
Indemnitee shall submit to the Company a written request, including therein or
therewith such documentation and information as is reasonably available to
Indemnitee and is reasonably necessary to determine whether and to what extent
Indemnitee is entitled to indemnification. The Secretary of the Company shall,
promptly upon receipt of such a request for indemnification, advise the Board of
Directors in writing that Indemnitee has requested indemnification.
(b) Upon written request by Indemnitee for indemnification
pursuant to the first sentence of Section 6(a) hereof, a determination, if
required by applicable law, with respect to Indemnitee's entitlement thereto
shall be made in the specific case by one of the following three methods, which
shall be at the election of Indemnitee: (1) by a majority vote of the
disinterested
4
<PAGE> 5
directors, even though less than a quorum, or (2) by independent legal counsel
in a written opinion, or (3) by the stockholders.
(c) If the determination of entitlement to indemnification is to
be made by Independent Counsel pursuant to Section 6(b) hereof, the Independent
Counsel shall be selected as provided in this Section 6(c). The Independent
Counsel shall be selected by Indemnitee (unless Indemnitee shall request that
such selection be made by the Board of Directors). Indemnitee or the Company, as
the case may be, may, within 10 days after such written notice of selection
shall have been given, deliver to the Company or to Indemnitee, as the case may
be, a written objection to such selection; provided, however, that such
objection may be asserted only on the ground that the Independent Counsel so
selected does not meet the requirements of "Independent Counsel" as defined in
Section 13 of this Agreement, and the objection shall set forth with
particularity the factual basis of such assertion. Absent a proper and timely
objection, the person so selected shall act as Independent Counsel. If a written
objection is made and substantiated, the Independent Counsel selected may not
serve as Independent Counsel unless and until such objection is withdrawn or a
court has determined that such objection is without merit. If, within 20 days
after submission by Indemnitee of a written request for indemnification pursuant
to Section 6(a) hereof, no Independent Counsel shall have been selected and not
objected to, either the Company or Indemnitee may petition the Court of Chancery
of the State of Delaware or other court of competent jurisdiction for resolution
of any objection which shall have been made by the Company or Indemnitee to the
other's selection of Independent Counsel and/or for the appointment as
Independent Counsel of a person selected by the court or by such other person as
the court shall designate, and the person with respect to whom all objections
are so resolved or the person so appointed shall act as Independent Counsel
under Section 6(b) hereof. The Company shall pay any and all reasonable fees and
expenses of Independent Counsel incurred by such Independent Counsel in
connection with acting pursuant to Section 6(b) hereof, and the Company shall
pay all reasonable fees and expenses incident to the procedures of this Section
6(c), regardless of the manner in which such Independent Counsel was selected or
appointed.
(d) In making a determination with respect to entitlement to
indemnification hereunder, the person or persons or entity making such
determination shall presume that Indemnitee is entitled to indemnification under
this Agreement if Indemnitee has submitted a request for indemnification in
accordance with Section 6(a) of this Agreement. Anyone seeking to overcome this
presumption shall have the burden of proof and the burden of persuasion, by
clear and convincing evidence.
(e) Indemnitee shall be deemed to have acted in good faith if
Indemnitee's action is based on the records or books of account of the
Enterprise, including financial statements, or on information supplied to
Indemnitee by the officers of the Enterprise in the course of their duties, or
on the advice of legal counsel for the Enterprise or on information or records
given or reports made to the Enterprise by an independent certified public
accountant or by an appraiser or other expert selected with reasonable care by
the Enterprise. In addition, the knowledge and/or actions, or failure to act, of
any director, officer, agent or employee of the Enterprise shall not be
5
<PAGE> 6
imputed to Indemnitee for purposes of determining the right to indemnification
under this Agreement. Whether or not the foregoing provisions of this Section
6(e) are satisfied, it shall in any event be presumed that Indemnitee has at all
times acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company. Anyone seeking to overcome this
presumption shall have the burden of proof and the burden of persuasion, by
clear and convincing evidence.
(f) If the person, persons or entity empowered or selected under
Section 6 to determine whether Indemnitee is entitled to indemnification shall
not have made a determination within thirty (30) days after receipt by the
Company of the request therefor, the requisite determination of entitlement to
indemnification shall be deemed to have been made and Indemnitee shall be
entitled to such indemnification, absent (i) a misstatement by Indemnitee of a
material fact, or an omission of a material fact necessary to make Indemnitee's
statement not materially misleading, in connection with the request for
indemnification, or (ii) a prohibition of such indemnification under applicable
law; provided, however, that such 30 day period may be extended for a reasonable
time, not to exceed an additional fifteen (15) days, if the person, persons or
entity making the determination with respect to entitlement to indemnification
in good faith requires such additional time for the obtaining or evaluating
documentation and/or information relating thereto; and provided, further, that
the foregoing provisions of this Section 6(g) shall not apply if the
determination of entitlement to indemnification is to be made by the
stockholders pursuant to Section 6(b) of this Agreement and if (A) within
fifteen (15) days after receipt by the Company of the request for such
determination the Board of Directors or the Disinterested Directors, if
appropriate, resolve to submit such determination to the stockholders for their
consideration at an annual meeting thereof to be held within seventy five (75)
days after such receipt and such determination is made thereat, or (B) a special
meeting of stockholders is called within fifteen (15) days after such receipt
for the purpose of making such determination, such meeting is held for such
purpose within sixty (60) days after having been so called and such
determination is made thereat.
(g) Indemnitee shall cooperate with the person, persons or entity
making such determination with respect to Indemnitee's entitlement to
indemnification, including providing to such person, persons or entity upon
reasonable advance request any documentation or information which is not
privileged or otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
Independent Counsel, member of the Board of Directors, or stockholder of the
Company shall act reasonably and in good faith in making a determination under
the Agreement of the Indemnitee's entitlement to indemnification. Any costs or
expenses (including attorneys' fees and disbursements) incurred by Indemnitee in
so cooperating with the person, persons or entity making such determination
shall be borne by the Company (irrespective of the determination as to
Indemnitee's entitlement to indemnification) and the Company hereby indemnifies
and agrees to hold Indemnitee harmless therefrom.
6
<PAGE> 7
(h) The Company acknowledges that a settlement or other
disposition short of final judgment may be successful if it permits a party to
avoid expense, delay, distraction, disruption and uncertainty. In the event that
any action, claim or proceeding to which Indemnitee is a party is resolved in
any manner other than by adverse judgment against Indemnitee (including, without
limitation, settlement of such action, claim or proceeding with or without
payment of money or other consideration) it shall be presumed that Indemnitee
has been successful on the merits or otherwise in such action, suit or
proceeding. Anyone seeking to overcome this presumption shall have the burden of
proof and the burden of persuasion, by clear and convincing evidence.
7. Remedies of Indemnitee.
(a) In the event that (i) a determination is made pursuant to
Section 6 of this Agreement that Indemnitee is not entitled to indemnification
under this Agreement, (ii) advancement of Expenses is not timely made pursuant
to Section 5 of this Agreement, (iii) no determination of entitlement to
indemnification shall have been made pursuant to Section 6(b) of this Agreement
within 90 days after receipt by the Company of the request for indemnification,
(iv) payment of indemnification is not made pursuant to this Agreement within
ten (10) days after receipt by the Company of a written request therefor, or (v)
payment of indemnification is not made within ten (10) days after a
determination has been made that Indemnitee is entitled to indemnification or
such determination is deemed to have been made pursuant to Section 6 of this
Agreement, Indemnitee shall be entitled to an adjudication in an appropriate
court of the State of Delaware, or in any other court of competent jurisdiction,
of his entitlement to such indemnification. Indemnitee shall commence such
proceeding seeking an adjudication within 180 days following the date on which
Indemnitee first has the right to commence such proceeding pursuant to this
Section 7(a). The Company shall not oppose Indemnitee's right to seek any such
adjudication.
(b) In the event that a determination shall have been made
pursuant to Section 6(b) of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding commenced pursuant to this Section 7
shall be conducted in all respects as a de novo trial, on the merits and
Indemnitee shall not be prejudiced by reason of that adverse determination under
Section 6(b).
(c) If a determination shall have been made pursuant to Section
6(b) of this Agreement that Indemnitee is entitled to indemnification, the
Company shall be bound by such determination in any judicial proceeding
commenced pursuant to this Section 7, absent a prohibition of such
indemnification under applicable law.
(d) In the event that Indemnitee, pursuant to this Section 7,
seeks a judicial adjudication of his rights under, or to recover damages for
breach of, this Agreement, or to recover under any directors' and officers'
liability insurance policies maintained by the Company the Company shall pay on
his behalf, in advance, any and all expenses (of the types described in
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<PAGE> 8
the definition of Expenses in Section 13 of this Agreement) actually and
reasonably incurred by him in such judicial adjudication, regardless of whether
Indemnitee ultimately is determined to be entitled to such indemnification,
advancement of expenses or insurance recovery.
(e) The Company shall be precluded from asserting in any judicial
proceeding commenced pursuant to this Section 7 that the procedures and
presumptions of this Agreement are not valid, binding and enforceable and shall
stipulate in any such court that the Company is bound by all the provisions of
this Agreement.
8. Non-Exclusivity; Survival of Rights; Insurance; Subrogation.
(a) The rights of indemnification as provided by this Agreement
shall not be deemed exclusive of any other rights to which Indemnitee may at any
time be entitled under applicable law, the certificate of incorporation of the
Company, the Bylaws, any agreement, a vote of stockholders or a resolution of
directors, or otherwise. No amendment, alteration or repeal of this Agreement or
of any provision hereof shall limit or restrict any right of Indemnitee under
this Agreement in respect of any action taken or omitted by such Indemnitee in
his Corporate Status prior to such amendment, alteration or repeal. To the
extent that a change in the Law, whether by statute or judicial decision,
permits greater indemnification than would be afforded currently under the
Bylaws and this Agreement, it is the intent of the parties hereto that
Indemnitee shall enjoy by this Agreement the greater benefits so afforded by
such change. No right or remedy herein conferred is intended to be exclusive of
any other right or remedy, and every other right and remedy shall be cumulative
and in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or employment
of any right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other right or remedy.
(b) To the extent that the Company maintains an insurance policy
or policies providing liability insurance for directors, officers, employees, or
agents or fiduciaries of the Company or of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise which such
person serves at the request of the Company, Indemnitee shall be covered by such
policy or policies in accordance with its or their terms to the maximum extent
of the coverage available for any such director, officer, employee or agent
under such policy or policies.
(c) In the event of any payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents as
are necessary to enable the Company to bring suit to enforce such rights.
(d) The Company shall not be liable under this Agreement to make
any payment of amounts otherwise indemnifiable hereunder if and to the extent
that Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.
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<PAGE> 9
9. Exception to Right of Indemnification. Notwithstanding any other
provision of this Agreement, Indemnitee shall not be entitled to indemnification
under this Agreement with respect to any Proceeding brought by Indemnitee, or
any claim therein, unless (a) the bringing of such Proceeding or making of such
claim shall have been approved by the Board of Directors of the Company or (b)
such Proceeding is being brought by the Indemnitee to assert, interpret or
enforce his rights under this Agreement.
10. Duration of Agreement. All agreements and obligations of the Company
contained herein shall continue during the period Indemnitee is an officer or
director of the Company (or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise) and shall continue thereafter so long as
Indemnitee shall be subject to any Proceeding (or any proceeding commenced under
Section 7 hereof) by reason of his Corporate Status, whether or not he is acting
or serving in any such capacity at the time any liability or expense is incurred
for which indemnification can be provided under this Agreement. This Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
parties hereto and their respective successors (including any direct or indirect
successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company), assigns, spouses,
heirs, executors and personal and legal representatives. This Agreement shall
continue in effect regardless of whether Indemnitee continues to serve as an
officer or director of the Company or any other Enterprise at the Company's
request.
11. Security. To the extent requested by the Indemnitee and approved by
the Board of Directors of the Company, the Company may at any time and from time
to time provide security to the Indemnitee for the Company's obligations
hereunder through an irrevocable bank line of credit, funded trust or other
collateral. Any such security, once provided to the Indemnitee, may not be
revoked or released without the prior written consent of the Indemnitee.
12. Enforcement.
(a) The Company expressly confirms and agrees that it has entered
into this Agreement and assumed the obligations imposed on it hereby in order to
induce Indemnitee to serve as an officer or director of the Company, and the
Company acknowledges that Indemnitee is relying upon this Agreement in serving
as an officer or director of the Company.
(b) This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings, oral, written and implied, between the
parties hereto with respect to the subject matter hereof.
13. Definitions. For purposes of this Agreement:
(a) "Corporate Status" describes the status of a person who is or
was a director, officer, employee or agent or fiduciary of the Company or of any
other corporation, partnership,
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<PAGE> 10
joint venture, trust, employee benefit plan or other enterprise which such
person is or was serving at the express written request of the Company.
(b) "Disinterested Director" means a director of the Company who
is not and was not a party to the Proceeding in respect of which indemnification
is sought by Indemnitee.
(c) "Enterprise" shall mean the Company and any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise of which Indemnitee is or was serving at the express written request
of the Company as a director, officer, employee, agent or fiduciary.
(d) "Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other disbursements or expenses of the
types customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, participating, or being or preparing to
be a witness in a Proceeding.
(e) "Independent Counsel" means a law firm, or a member of a law
firm, that is experienced in matters of corporation law and neither presently
is, nor in the past five years has been, retained to represent: (i) the Company
or Indemnitee in any matter material to either such party (other than with
respect to matters concerning the Indemnitee under this Agreement, or of other
indemnitees under similar indemnification agreements), or (ii) any other party
to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the Company
or Indemnitee in an action to determine Indemnitee's rights under this
Agreement. The Company agrees to pay the reasonable fees of the Independent
Counsel referred to above and to fully indemnify such counsel against any and
all Expenses, claims, liabilities and damages arising out of or relating to this
Agreement or its engagement pursuant hereto.
(f) "Proceeding" includes any threatened, pending or completed
action, suit, arbitration, alternate dispute resolution mechanism,
investigation, inquiry, administrative hearing or any other actual, threatened
or completed proceeding, whether brought by or in the right of the Company or
otherwise and whether civil, criminal, administrative or investigative, in which
Indemnitee was, is or will be involved as a party or otherwise, by reason of the
fact that Indemnitee is or was a director of the Company, by reason of any
action taken by him or of any inaction on his part while acting as an officer or
director of the Company, or by reason of the fact that he is or was serving at
the request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other Enterprise; in each case
whether or not he is acting or serving in any such capacity at the time any
liability or expense is incurred for which indemnification can be provided under
this Agreement; including one pending on or
10
<PAGE> 11
before the date of this Agreement; and excluding one initiated by an Indemnitee
pursuant to Section 7 of this Agreement to enforce his rights under this
Agreement.
14. Severability. If any provision or provisions of this Agreement shall
be held by a court of competent jurisdiction to be invalid, void, illegal or
otherwise unenforceable for any reason whatsoever: (a) the validity, legality
and enforceability of the remaining provisions of this Agreement (including
without limitation, each portion of any section of this Agreement containing any
such provision held to be invalid, illegal or unenforceable, that is not itself
invalid, illegal or unenforceable) shall not in any way be affected or impaired
thereby and shall remain enforceable to the fullest extent permitted by law; and
(b) to the fullest extent possible, the provisions of this Agreement (including,
without limitation, each portion of any section of this Agreement containing any
such provision held to be invalid, illegal or unenforceable, that is not itself
invalid, illegal or unenforceable) shall be construed so as to give effect to
the intent manifested thereby.
15. Modification and Waiver. No supplement, modification, termination or
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
16. Notice By Indemnitee. Indemnitee agrees promptly to notify the
Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any Proceeding
or matter which may be subject to indemnification covered hereunder. The failure
to so notify the Company shall not relieve the Company of any obligation which
it may have to the Indemnitee under this Agreement or otherwise unless and only
to the extent that such failure or delay materially prejudices the Company.
17. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid, on the third business day after the date
on which it is so mailed:
(a) If to Indemnitee, to the address set forth below
Indemnitee signature hereto.
(b) If to the Company, to:
Webridge, Inc.
9115 SW Oleson Road, Suite 205
Portland, Oregon 97223
Attention: President
11
<PAGE> 12
or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case may be.
18. Identical Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute one and the same Agreement.
Only one such counterpart signed by the party against whom enforceability is
sought needs to be produced to evidence the existence of this Agreement.
19. Headings. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction thereof.
20. Governing Law. The parties agree that this Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Delaware without application of the conflict of laws principles
thereof.
21. Gender. Use of the masculine pronoun shall be deemed to include
usage of the feminine pronoun where appropriate.
22. Coverage of Certain Investors. If a partnership that is an investor
in the Company ("Investor") is or is threatened to be made a party to or a
participant in a Proceeding and (a) the Indemnitee also is or is threatened to
be made a party to or participant in that same Proceeding, (b) the Indemnitee is
a general partner (or general partner in a general partner) of such Investor,
and (c) Indemnitee is entitled to indemnification under this Agreement, then
such Investor shall be entitled to indemnification hereunder to the same extent
as the Indemnitee.
COMPANY: WEBRIDGE, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
INDEMNITTEE:
------------------------------------
Name:
-------------------------------
Address:
----------------------------
----------------------------
----------------------------
----------------------------
12
<PAGE> 1
EXHIBIT 23.01
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Webridge, Inc.:
We consent to the use of our report included herein dated March 6, 2000 relating
to the balance sheets of Webridge, Inc. as of December 31, 1998 and 1999 and the
related statements of operations, stockholders' equity (deficit) and cash flows
for each of the years in the three-year period ended December 31, 1999, and to
the reference to our firm under the heading "Experts" in the Prospectus.
/s/ KPMG LLP
Portland, Oregon
March 10, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 22,214
<SECURITIES> 958
<RECEIVABLES> 2,935
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 26,825
<PP&E> 1,037
<DEPRECIATION> 462
<TOTAL-ASSETS> 27,400
<CURRENT-LIABILITIES> 4,130
<BONDS> 0
0
17
<COMMON> 13
<OTHER-SE> 23,224
<TOTAL-LIABILITY-AND-EQUITY> 27,400
<SALES> 1,879
<TOTAL-REVENUES> 4,447
<CGS> 0
<TOTAL-COSTS> 11,441
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45
<INCOME-PRETAX> (8,028)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,028)
<EPS-BASIC> (0.94)
<EPS-DILUTED> (0.94)
</TABLE>
