<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 9, 2000
REGISTRATION NO. 333-32358
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
WEBRIDGE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
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>
1925 N.W. AMBERGLEN PARKWAY
BEAVERTON, OREGON 97006
(503) 601-4000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
DAVID L. BRINKER
CHIEF FINANCIAL OFFICER
WEBRIDGE, INC.
1925 N.W. AMBERGLEN PARKWAY
BEAVERTON, OREGON 97006
(503) 601-4000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
ANNETTE M. MULEE RICHARD R. PLUMRIDGE, ESQ.
ROBERT J. MOORMAN JOHN E. HAYES III, ESQ.
STEVEN H. HULL DAVID J. 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
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, 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. [ ]
------------------------
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.
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<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 MAY 9, 2000
[WEBRIDGE LOGO]
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." We anticipate that the initial
public offering price will be between $ and $ per share.
-------------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
-------------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- --------
<S> <C> <C>
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
<PAGE> 3
[INSIDE OF FRONT COVER]
[Graphic depicts a computer monitor with a globe on the screen over which
the following is superimposed: on the top half of the page is the caption
"Commerce -Content -Collaboration - Personalization" under which there is a
picture of two hands shaking with the caption "Customers and Prospects", a
picture of a man holding a large key with the caption "Sales Channel Partners",
a picture of people serving customers at a counter with the caption "Employees",
and a picture of a delivery van with the caption "Suppliers"; on the bottom half
of the page is the Webridge logo over which is the caption "Packaged
Applications for Enterprise Commerce" and under which is a picture of two people
assembling a sphere out of jigsaw pieces with the caption "XML Data Services", a
picture of two people over whom there are word balloons shaped like matching
jigsaw pieces with the caption "Corporate Portals and Marketplaces", a personal
computer, the tower of which is open like a cash drawer showing money inside,
with the caption "B2B - Catalog, Configuration, and Order Management", and a
picture of a man juggling with the caption "Web-based Sales and Marketing
Management". Across the top of the page is the caption "Webridge eBusiness
Express" under which is written "Business-to-Business Enterprise Commerce."
Across the bottom of the page is the caption "XML - HTML - JAVA - COM+ - LDAP"
under which is written "Standards-based Architecture".]
<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.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary..................................................... 3
Risk Factors................................................ 6
Cautionary Note Regarding Forward-Looking Statements; Market
Data...................................................... 16
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.................................................... 32
Management.................................................. 48
Related-party Transactions.................................. 57
Principal Stockholders...................................... 58
Description of Capital Stock................................ 60
Shares Eligible for Future Sale............................. 62
Underwriting................................................ 65
Legal Matters............................................... 67
Experts..................................................... 67
Where You Can Find More Information......................... 67
Index To Financial Statements............................... F-1
</TABLE>
-------------------------
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.
2
<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 packaged application software for Web-based,
business-to-business commerce efforts. These online business-to-business
enterprise commerce initiatives can encompass all constituents of a company's
extended enterprise. 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 the
business customers, partners, suppliers, distributors and employees that are the
constituents of the extended enterprise.
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 software applications 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 on 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 1925 N.W. AmberGlen Parkway, Beaverton, Oregon
97006. Our telephone number is (503) 601-4000. Our corporate Internet address is
www.webridge.com. The information contained on our Web site is not a part of
this prospectus.
3
<PAGE> 6
THE OFFERING
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."
The number of shares outstanding after this offering is based on the shares
of our common stock outstanding as of March 31, 2000 and gives effect to the
automatic conversion of all outstanding shares of our convertible preferred
stock into 17,743,200 shares of common stock upon the completion of this
offering. The number of shares excludes:
- 2,121,067 shares issuable upon exercise of options outstanding as of
March 31, 2000 at a weighted average exercise price of $0.94 per share;
- 364,454 additional shares reserved for issuance under our 1996 stock
incentive plan;
- 120,003 shares subject to warrants outstanding as of March 31, 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 reflects the
expiration of a warrant to purchase 117,647 shares of our convertible preferred
stock that occurred on April 12, 2000, 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 17,743,200 shares of
common stock upon the completion of this offering.
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<PAGE> 7
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 the three months ended March 31, 1999
and 2000 and summary balance sheet data as of March 31, 2000 on an actual basis
and as 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."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------- -------------------
1997 1998 1999 1999 2000
------- ------- ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue........................... $ -- $ 323 $ 4,447 $ 343 $ 2,516
Total cost of revenue................... -- 144 1,332 237 825
------- ------- ------- ------- --------
Gross profit............................ -- 179 3,115 106 1,691
Total operating expenses................ 2,268 6,053 11,441 2,279 5,003
Net loss................................ $(2,197) $(5,815) $(8,028) $(2,085) $ (3,028)
Basic and diluted net loss per share.... $ (1.53) $ (1.08) $ (0.94) $ (0.28) $ (0.29)
Shares used in computing basic and
diluted net loss per share............ 1,433 5,389 8,539 7,403 10,562
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 2000
----------------------
ACTUAL AS ADJUSTED
------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $18,871 $
Working capital............................................. 20,843
Total assets................................................ 26,288
Long-term debt and capital lease obligations, net of current
portion................................................... 75
Total stockholders' equity.................................. 21,693
</TABLE>
5
<PAGE> 8
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. Due to these 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. For a more detailed description of possible
factors that could result in fluctuations in our results of operations, see
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations -- Quarterly Results of Operations".
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 single-purpose products;
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<PAGE> 9
- 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 with ours, which could discourage users from
purchasing our products. Compared to us, many 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 OUR BUSINESS
WILL BE HARMED IF WE ARE UNABLE TO 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, BUT 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,
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<PAGE> 10
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.
IF WE FAIL TO EXPAND OUR DIRECT SALES FORCE AND BUSINESS RELATIONSHIPS, OUR
REVENUE GROWTH AND BUSINESS MAY BE HARMED.
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. 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 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 ARE UNABLE TO TRAIN A SUFFICIENT NUMBER OF THIRD-PARTY INTEGRATION SERVICE
PROVIDERS OR IF OUR PRODUCTS FALL OUT OF FAVOR WITH THESE INTEGRATORS, OUR
BUSINESS COULD BE HARMED.
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 $19.3 MILLION AS OF MARCH 31, 2000, AND WE
EXPECT TO INCUR OPERATING LOSSES FOR THE FORESEEABLE FUTURE.
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 harmed. 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 may never become profitable. The growth rates we have
experienced in recent periods may not continue.
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. Most 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
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<PAGE> 11
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, all of which are beyond
our control. 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.
MICROSOFT IS ENGAGED IN LITIGATION WITH THE UNITED STATES GOVERNMENT AND SUN
MICRO SYSTEMS, AND RULINGS IN EITHER OF THOSE CASES ADVERSE TO MICROSOFT COULD
SERIOUSLY HARM OUR BUSINESS.
The United States government in conjunction with 19 states has sued
Microsoft for alleged violations of anti-trust laws. The trial court has ruled
that Microsoft violated anti-trust laws and, while there has not yet been a
ruling on the remedy, the government has requested that Microsoft be divided
into multiple entities. 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
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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
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 acceptance and wide use of the Internet 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.
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
10
<PAGE> 13
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.
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, WHICH MAY NOT BE POSSIBLE.
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 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,
11
<PAGE> 14
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.
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.
12
<PAGE> 15
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;
- fluctuations in currency exchange rates;
- varying technology standards and capabilities;
- insufficient or unreliable telecommunications infrastructure and Internet
access; 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
13
<PAGE> 16
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 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. Some of our
prospective customers may have adopted or participate in voluntary online
marketing guidelines that discourage use of profiling techniques and personal
information for marketing purposes without the express consent of online users.
Moreover, the 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
limit the use of profiling and sharing of personal data with others 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. In
some cases, those new laws may even require businesses to obtain the express
permission of online users to collect, store and use the profile or personal
data. Recent federal legislation and regulations already impose such limits on
the data obtained from children under the age of 13. Many bills have been
introduced in the United States Congress and state legislatures intended to
impose limits on the use of personal information about all online users. Other
countries and economic trade areas, including the European Union and its member
states, have adopted legal restrictions on the collection, use and processing of
personal data. While similar legal requirements have been adopted in some
states, we do not believe that they will materially harm our business. It is
also possible that similar laws could be adopted in the United States on the
federal level. If these restrictions on the use of personal data become federal
law in the United States or if the privacy concerns of online users are not
adequately addressed, the market for our Webridge eBusiness Express application
products could be harmed.
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<PAGE> 17
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.
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 as well as shares subject to lock-up agreements with Fleet Boston
Robertson Stephens, Inc. prohibiting the sale of the shares for 180 days
following the date of this prospectus. The exercise of these options and
warrants or the early release of shares from the lock-up agreements 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 50 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
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<PAGE> 18
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.
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.
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<PAGE> 19
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, including sales and marketing activities
in the United States, Europe and Asia, product development and support, and
hiring of additional personnel. We have, however, no specific quantifiable plan
for allocation of the proceeds. In addition, although we have no understandings,
commitments or agreements concerning any acquisition or investment, we might use
a portion of the remaining proceeds to acquire or invest in companies,
technology, services or products that complement our business. Before we use the
net proceeds of this offering, we intend to invest them in short-term,
interest-bearing, investment grade securities.
The principal purposes of this offering are to obtain additional capital,
to create a public market for our common stock and to facilitate future access
to public equity markets.
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 March 31, 2000, our cash and cash
equivalents and our capitalization on an actual basis and as adjusted to give
effect to the automatic conversion of all of our outstanding preferred stock
into common stock upon the completion of this offering and 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 75,713 shares issuable on
the exercise of outstanding options at a weighted-average exercise price of
$0.69 as of March 31, 2000, and an outstanding warrant to purchase 2,356 shares
of convertible preferred stock at an exercise price of $4.24 at March 31, 2000.
<TABLE>
<CAPTION>
MARCH 31, 2000
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
<S> <C> <C>
Cash and cash equivalents................................... $ 18,871
======== ========
Long-term debt and capital lease obligations, net of current
portion................................................... $ 75
Stockholders' equity:
Convertible preferred stock, 17,844,000 shares authorized,
17,743,200 issued and outstanding, actual; no shares
issued or outstanding, as adjusted..................... 18 --
Common stock, 50,000,000 shares authorized, 14,554,614
issued and outstanding, actual; shares
issued and outstanding, as adjusted.................... 14
Additional paid-in capital................................ 42,452
Deferred stock-based compensation......................... (1,514)
Accumulated deficit....................................... (19,277)
-------- --------
Total stockholders' equity........................ 21,693
-------- --------
Total capitalization.............................. $ 21,768
======== ========
</TABLE>
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<PAGE> 21
DILUTION
Our pro forma net tangible book value as of March 31, 2000 was $21,693,000,
or $0.67 per share of common stock, after giving effect to the automatic
conversion of all of our outstanding preferred stock into 17,743,200 shares of
common stock upon the completion of this offering. 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 March 31, 2000 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 March 31,
2000...................................................... $0.67
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 March 31, 2000 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.................. 32,297,814 % $39,771,250 % $
New investors
---------- --- ----------- ---
Total........................ 100% $ 100%
========== === =========== ===
</TABLE>
The tables and calculations above assume no exercise of any stock options
and warrants after March 31, 2000. Of the excluded stock options, options to
purchase 75,713 shares were exercisable as of March 31, 2000, at a weighted
average exercise price of $0.69 per share. In addition, as of March 31, 2000,
there was a warrant outstanding to purchase 2,356 shares of preferred stock at
an exercise price of $4.24 per share. To the extent the excluded options and the
warrant are exercised, there will be further dilution to new investors. If all
of these options and the warrant had been exercised as of March 31, 2000, our
pro forma net tangible book value per share as of that date would have been
$ and dilution to new investors would have been $ per
share.
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<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
included elsewhere in this prospectus:
- 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.
The following information has been derived from the unaudited financial
statements included elsewhere in this prospectus:
- Statements of operations data for the three months ended March 31, 1999
and 2000; and
- Balance sheet data as of March 31, 2000.
Results of operations for the three months ended March 31, 2000 are not
necessarily indicative of the results that may be expected for the full fiscal
year or any future period.
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 26, 1996 THREE MONTHS ENDED
(INCEPTION) TO YEARS ENDED DECEMBER 31, MARCH 31,
DECEMBER 31, --------------------------- -------------------
1996 1997 1998 1999 1999 2000
-------------- ------- ------- ------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenue:
Product licenses................... $ -- $ -- $ 175 $ 1,879 $ 243 $ 1,159
Services........................... -- -- 148 2,568 100 1,357
----- ------- ------- ------- ------- -------
Total revenue................... -- -- 323 4,447 343 2,516
----- ------- ------- ------- ------- -------
Cost of Revenue:
Cost of product licenses........... -- -- 9 -- -- 3
Cost of services................... -- -- 135 1,332 237 822
----- ------- ------- ------- ------- -------
Total cost of revenue........... -- -- 144 1,332 237 825
----- ------- ------- ------- ------- -------
Gross profit......................... -- -- 179 3,115 106 1,691
----- ------- ------- ------- ------- -------
Operating expenses:
Research and development........... 163 1,514 3,403 4,809 1,104 1,543
Sales and marketing................ -- 427 1,926 5,240 882 2,552
General and administrative......... 41 327 724 1,304 293 645
Amortization of deferred
stock-based compensation........ -- -- -- 88 -- 263
----- ------- ------- ------- ------- -------
Total operating expenses........ 204 2,268 6,053 11,441 2,279 5,003
----- ------- ------- ------- ------- -------
Loss from operations................. (204) (2,268) (5,874) (8,326) (2,173) (3,312)
Other income (expense), net.......... (5) 71 59 298 88 284
----- ------- ------- ------- ------- -------
Net loss............................. $(209) $(2,197) $(5,815) $(8,028) $(2,085) $(3,028)
===== ======= ======= ======= ======= =======
Basic and diluted net loss per
share.............................. $0.00 $ (1.53) $ (1.08) $ (0.94) $ (0.28) $ (0.29)
===== ======= ======= ======= ======= =======
Shares used in computing basic and
diluted net loss per share......... 0 1,433 5,389 8,539 7,403 10,562
===== ======= ======= ======= ======= =======
</TABLE>
20
<PAGE> 23
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1996 1997 1998 1999 MARCH 31, 2000
----- ------ ------ ------- --------------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents....................... $ 79 $4,995 $5,951 $22,214 $ 18,871
Working capital (deficit)....................... (233) 4,822 7,431 22,695 20,843
Total assets.................................... 108 5,276 8,721 27,400 26,288
Long-term debt and capital lease obligations,
net of current portion........................ -- 38 252 16 75
Total stockholders' equity (deficit)............ (204) 5,025 7,621 23,254 21,693
</TABLE>
21
<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. 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
application to reduce order errors, 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
March 31, 2000, we have licensed Webridge eBusiness Express to 31 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, including
the initial set up fee, is 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
22
<PAGE> 25
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 March 31,
2000, had an accumulated deficit of $19.3 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 March 31, 2000, we had recorded aggregate deferred stock-based
compensation of $1.8 million. Deferred stock-based compensation is amortized as
options become exercisable, generally over a period of four years. We amortized
deferred stock-based compensation of $88,000 in 1999 and $263,000 in the three
months ended March 31, 2000. Amortization of deferred stock-based compensation
recorded as of March 31, 2000 will approximate $529,000 in 2000, $339,000 in
2001, $339,000 in 2002 and $307,000 in 2003. We expect that additional deferred
stock-based compensation will be recorded for options issued during the period
April 1, 2000 through the completion of this offering.
23
<PAGE> 26
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>
THREE MONTHS
YEARS ENDED ENDED
DECEMBER 31, MARCH 31,
-------------- ------------
1998 1999 1999 2000
------ ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Product licenses...................................... 54% 42% 71% 46%
Services.............................................. 46 58 29 54
------ ---- ---- ----
Total revenue...................................... 100 100 100 100
Cost of revenue:
Cost of product licenses.............................. 3 -- -- --
Cost of services...................................... 42 30 69 33
------ ---- ---- ----
Total cost of revenue.............................. 45 30 69 33
------ ---- ---- ----
Gross profit.......................................... 55 70 31 67
------ ---- ---- ----
Operating expenses:
Research and development.............................. 1,054 108 322 61
Sales and marketing................................... 596 118 257 101
General and administrative............................ 224 29 85 26
Amortization of deferred stock-based compensation..... -- 2 -- 10
------ ---- ---- ----
Total operating expenses........................... 1,874 257 664 199
Loss from operations............................... (1,819) (187) (634) (132)
Other income (expense), net............................. 19 6 26 11
------ ---- ---- ----
Net loss........................................... (1,800)% (181)% (608)% (120)%
====== ==== ==== ====
</TABLE>
THREE MONTHS ENDED MARCH 31, 1999 AND 2000
Revenue
Our revenue was $343,000 in the three months ended March 31, 1999 and $2.5
million in the three months ended March 31, 2000, an increase of $2.2 million.
Our product licenses revenue was $243,000 in the three months ended March
31, 1999 and $1.2 million in the three months ended March 31, 2000, an increase
of $1.0 million. Product license fees, on a perpetual and subscription basis,
are the sole source of product licenses revenue. The increase in our product
licenses revenue resulted from the increase in customers over the prior year
period and reorders from existing customers, both resulting from an increase in
the size and productivity of the sales and marketing force and expanded product
offerings.
Our services revenue was $100,000 in the three months ended March 31, 1999
and $1.4 million in the three months ended March 31, 2000, an increase of $1.3
million. Services revenue represented 29% of total revenue in the three months
ended March 31, 1999 and 54% in the three months ended March 31, 2000.
Professional service fees are the predominant source of services revenue. The
increase in services revenue reflects increased Webridge eBusiness Express
project deployments in the three months ended March 31, 2000 as well as revenue
recognized with respect to contracts entered into in 1999. The increase in
services revenue as a percentage of total revenue in the three months ended
March 31, 2000 is due to the increased service component in contracts generating
revenue in 2000. Due to our limited experience selling Webridge eBusiness
Express, we are uncertain how services revenue associated with such sales will
affect our results of operations in the future. In addition, the percentage of
total revenue represented by services
24
<PAGE> 27
revenue in prior fiscal periods may not be indicative of levels to be expected
in future periods, depending in part on our use of third-party integration
service providers versus our own professional services organization.
Cost of Revenue
Cost of Product Licenses Revenue. Cost of product licenses revenue was $0
in the three months ended March 31, 1999 and $3,000 in the three months ended
March 31, 2000.
Cost of Services Revenue. Cost of services revenue was $237,000 in the
three months ended March 31, 1999 and $822,000 in the three months ended March
31, 2000, an increase of $585,000. Cost of services revenue was 238% of services
revenue in the three months ended March 31, 1999 and 61% in the three months
ended March 31, 2000. The increase in cost of services revenue was primarily due
to an increase in professional service deployment personnel and third-party
integration services provider fees to deploy the increased number of Webridge
eBusiness Express solutions. The decrease in the cost of services revenue as a
percentage of services revenue in the three months ended March 31, 2000 was the
result of allocation of deployment services fixed costs over increased services
revenue. Cost of services revenue as a percentage of services revenue may vary
significantly between periods due to the services component in customer
contracts and the mix of services provided by us and third-party integration
service providers.
Operating Expenses
Research and Development. Research and development expenses were $1.1
million in the three months ended March 31, 1999 and $1.5 million in the three
months ended March 31, 2000, an increase of $400,000, or 40%. The increase was
primarily related to the increased use of outside contractors to support our
product development of Webridge eBusiness Express, Site Designer and Entity
Manager. 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 $882,000 in the
three months ended March 31, 1999 and $2.6 million in the three months ended
March 31, 2000, an increase of $1.7 million. The increase primarily reflects
commissions and bonuses on increased sales and our increased investment in our
sales and marketing infrastructure, which included significant personnel-related
costs due to the addition of 12 sales and marketing personnel, trade show
expenses, direct mail expenses, public relations expenses and Web site
development. We expect sales and marketing expenses to increase in the future.
General and Administrative. General and administrative expenses were
$293,000 in the three months ended March 31, 1999 and $645,000 in the three
months ended March 31, 2000, an increase of $352,000. The increase was primarily
the result of adding 10 finance, executive and administrative personnel to
support the growth of our business, the increased use of outside legal and
accounting services, expanded human resources programs, and establishing an
allowance for doubtful accounts related to our increase in revenue. General and
administrative costs represented 85% of total revenue in the three months ended
March 31, 1999 and 26% in the three months ended March 31, 2000. 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 $88,000 in
the three months ended March 31, 1999 and $284,000 in the three months ended
March 31, 2000, an increase of $196,000. The increase reflects the higher cash
and short-term investment base as a result of proceeds we received from the
issuance of Series C convertible preferred stock in December 1999 and January
2000 and the issuance of Series B convertible preferred stock in March 2000.
Interest expense was $8,000 in the three months ended March 31, 1999 and $28,000
in the three months ended March 31, 2000, an increase of $20,000. The increase
was due to short-term bank borrowings and increased capital lease obligations.
25
<PAGE> 28
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 our total revenue from 1998 to 1999 is due
to use of the required accounting methods to allocate revenue among the various
elements of our contracts and to determine timing of recognition of those
elements. Revenue is allocated first to services and then to product licenses
using the residual-method specified under SOP 98-9, resulting in allocation of
all discounts to product licenses. In accordance with SOP 97-2, professional
services revenue is recognized at the time the services are performed and
product licenses revenue is recognized at the time there are no remaining
significant obligations, usually resulting in earlier recognition of
professional services revenue relative to product licenses revenue. Due to our
limited experience selling Webridge eBusiness Express, we are uncertain how
services revenue associated with such sales will affect our results of
operations in the future. In addition, the percentage of total revenue
represented by services revenue in prior fiscal periods may not be indicative of
levels to be expected in future periods, depending in part on our use of
third-party integration service providers versus our own professional services
organization.
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. Cost of services revenue as a percentage of services
revenue may vary significantly between periods due to the services component in
customer contracts and the mix of services provided by us and third-party
integration service providers.
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
26
<PAGE> 29
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 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 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.
27
<PAGE> 30
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth unaudited statement of operations data for
each of the five fiscal quarters ended March 31, 2000, 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.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31
1999 1999 1999 1999 2000
--------- -------- ------------- ------------ ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Product licenses........................ $ 243 $ 280 $ 599 $ 757 $ 1,159
Services................................ 100 249 749 1,470 1,357
------- ------- ------- ------- -------
Total revenue........................ 343 529 1,348 2,227 2,516
Cost of revenue:
Cost of product licenses................ -- -- -- -- 3
Cost of services........................ 237 215 286 594 822
------- ------- ------- ------- -------
Total cost of revenue................ 237 215 286 594 825
------- ------- ------- ------- -------
Gross profit.............................. 106 314 1,062 1,633 1,691
Operating expenses:
Research and development................ 1,104 1,085 1,191 1,427 1,543
Sales and marketing..................... 882 1,089 1,394 1,875 2,552
General and administrative.............. 293 297 292 423 645
Amortization of deferred stock-based
compensation......................... -- -- -- 88 263
------- ------- ------- ------- -------
Total operating expenses............. 2,279 2,471 2,877 3,813 5,003
Loss from operations...................... (2,173) (2,157) (1,815) (2,180) (3,312)
Other income (expense), net............... 88 92 48 69 284
------- ------- ------- ------- -------
Net loss.................................. $(2,085) $(2,065) $(1,767) $(2,111) $(3,028)
======= ======= ======= ======= =======
AS A PERCENTAGE OF TOTAL REVENUE:
Revenue:
Product licenses........................ 70.9% 52.9% 44.4% 34.0% 46.1%
Services................................ 29.1 47.1 55.6 66.0 53.9
------- ------- ------- ------- -------
Total revenue........................ 100.0 100.0 100.0 100.0 100.0
Cost of revenue:
Cost of product licenses................ -- -- -- -- --
Cost of services........................ 69.1 40.6 21.2 26.7 32.7
------- ------- ------- ------- -------
Total cost of revenue................ 69.1 40.6 21.2 26.7 32.7
------- ------- ------- ------- -------
Gross profit.............................. 30.9 59.4 78.8 73.3 67.2
Operating expenses:
Research and development................ 321.9 205.1 88.4 64.1 61.3
Sales and marketing..................... 257.1 205.9 103.4 84.2 101.4
General and administrative.............. 85.4 56.2 21.6 19.0 25.6
Amortization of deferred stock-based
compensation......................... 0.0 0.0 0.0 4.0 10.4
------- ------- ------- ------- -------
Total operating expenses............. 664.4 467.2 213.4 171.2 198.8
Loss from operations...................... (633.5) (407.8) (134.6) (97.9) (131.6)
Other income (expense), net............... 25.6 17.4 3.6 3.1 11.3
------- ------- ------- ------- -------
Net loss.................................. (607.9)% (390.4)% (131.0)% (94.8)% (120.3)%
======= ======= ======= ======= =======
</TABLE>
28
<PAGE> 31
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.
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;
- 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.
In addition, 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.
29
<PAGE> 32
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 March 2000 we raised approximately $36.7 million
from the issuance of convertible preferred stock, $867,000 from the issuance of
common stock, and $2.5 million from the issuance of long-term debt, and we
financed capital acquisitions through leases totaling approximately $234,000.
Our sources of liquidity as of March 31, 2000 consisted principally of cash and
cash equivalents of $18.9 million, investments of $1.8 million and $2.0 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, $8.2 million in 1999 and $2.5 million in the three months ended
March 31, 2000. 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, $412,000 in 1999 and $435,000 in the three months ended March
31, 2000. We have financed the acquisition of property and equipment primarily
through long-term debt and 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. In
the three months ended March 31, 2000, a significant part of our expenditures
was for furniture and fixtures related to our move into new office space. 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, $23.9 million in 1999 and $469,000 in the three months ended March 31,
2000. 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 the issuance of Series C convertible preferred stock,
$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. In the three months ended March 31, 2000, cash provided by financing
activities consisted primarily of $525,000 from the issuance of Series C
convertible preferred stock, $100,000 from the issuance of Series B convertible
preferred stock, $579,000 from the exercise of stock options, offset by the
payment of $750,000 on the line of credit and principal payments on long-term
debt and capital lease obligations.
As of March 31, 2000 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% (9.75% at March 31,
2000). Borrowings are limited to the lesser of 80% of eligible accounts
receivable or $2.0 million and are secured by substantially all of our
non-leased assets. As of March 31, 2000, there was no balance outstanding on the
line. The expiration date of this line of credit is August 28, 2000. Although we
intend to renew the line of credit or obtain a new line of credit when our
existing line expires, there is no assurance that a credit facility will be
available to us. As of March 31, 2000, 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 line 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
30
<PAGE> 33
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. See "Risk
Factors -- To remain competitive, we will need additional financing, which may
not be available on satisfactory terms at all".
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
As of March 31, 2000 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.
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.
In March 2000, FASB issued Interpretation No. 44, Accounting for Certain
Transactions involving Stock Compensation -- an Interpretation of APB Opinion
No. 25,(FIN 44). FIN 44 applies prospectively to new awards, exchanges of awards
in a business combination, modifications to outstanding awards, and changes in
grantee status that occur on or after July 1, 2000, except for the provisions
related to repricings and the definition of an employee, which apply to awards
issued after December 15, 1998. The provisions related to modifications to fixed
stock options awards to add a reload feature are effective for awards modified
after January 12, 2000. We do not expect that this statement will have a
significant impact on our financial condition or results of operations.
31
<PAGE> 34
BUSINESS
OVERVIEW
We provide packaged application software for Web-based,
business-to-business commerce efforts. These online business-to-business
enterprise commerce initiatives can encompass all constituents of a company's
extended enterprise. 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 the
business customers, partners, suppliers, distributors and employees that are the
constituents of the extended enterprise. 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
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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 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
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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;
- 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 system-wide features and
attributes, such as security, 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 and
establish online marketplaces, partner relationship applications to efficiently
manage a full range of online business relationships including sales management,
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
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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, provides enterprise
application integration by easily integrating into our customers' existing
systems, eliminating the need for individual single purpose 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.
Ease of Customization. To complement our packaged applications, we offer
add-on software applications 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 software applications 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 services and technologies from industry leaders and innovators
that we do not offer, such as graphics design, business consulting services and
some specialized software. 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
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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.
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 software
applications 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 business requirements of a corporate
customer are met in an expedited manner using the Webridge Express Framework
architecture, which integrates pre-built application subsystems, which are both
multi-functional and can be tailored to meet individual needs, with custom built
application subsystems. 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
- -----------------------------------------------------------------------------------------------------
<S> <C>
Framework:
- -----------------------------------------------------------------------------------------------------
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 software applications:
- -----------------------------------------------------------------------------------------------------
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
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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 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 SOFTWARE APPLICATIONS
We offer four additional software applications that can be either added to
our packaged applications for additional functions or added to a custom
application built on Webridge Express Framework to reduce implementation time.
Webridge Commerce Manager provides the commerce capability of Webridge
Commerce Express in an independent software application 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 software
application 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 software application 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 software application 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.
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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.
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.]
TECHNOLOGY
We designed a comprehensive architectural approach that provides the
robustness necessary for the extended enterprise, 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
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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.
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 administrative 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 speed and redundant data
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, and logical
directory access protocol, or LDAP. We have invested significant resources in
developing our architecture to comply
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with widely adopted commercial software industry standards for building large
scale Internet applications, including XML and LDAP.
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 random access 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 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
- system performance improvement.
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
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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 business relationships to assist us in marketing, selling and
developing our online business-to-business applications. We have non-contractual
business relationships with the following systems integrators: AGENCY.COM,
Computer Services Corporation, Cotelligent, Inc., Crowe, Chizek and Company,
LLP, CTR Business Systems, Inc., Emerald-Delaware, Inc. (Emerald Solutions),
Proxicom, Inc. and USWeb Corporation. These integrators deploy our products for
our customers and many have recommended our products to potential customers. We
also have non-contractual business relationships with Frank Lynn & Associates,
Inc., Frontline Solutions and Technology Channels Group, business consultants
who both provide services to our customers and recommend our products to
potential customers. We have contractual business relationships with Cohesion,
Inc. and AristaSoft Corporation, application service providers that use our
products as a foundation to provide services to their customers.
In addition, we have non-contractual 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.
- 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 March 31, 2000, we had licensed our products and provided related
services to 31 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.
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As of March 31, 2000, our customers were:
<TABLE>
<S> <C>
TECHNOLOGY AND COMMUNICATIONS FINANCIAL AND INSURANCE SERVICES
Adtran, Inc. Deutsche Bank AG London
AGENCY.COM LTD. BenefitMall.com
AristaSoft Corporation Executone Healthcare Systems
AXENT Technologies, Inc. MANUFACTURING AND SERVICES
CellIt, Inc. Current Inc.
Cohesion Technologies, Inc. Delirium Digital Media
Developer Online Honeywell Inc.
Exabyte Corporation M2R2 Corporation
Executone Information Systems, Inc. Outboard Marine Corporation
Genesys Telecommunications Laboratories, PremiereGroup
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:
- 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.
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<PAGE> 46
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.
Primedia Workplace Learning
Primedia Workplace Learning is a leading supplier of interactive video,
audio and on-line training products to professionals in several industries,
including health care, law enforcement, banking, automotive and industrial
services. Primedia Workplace Learning recently initiated a project to transition
its business from a traditional model to an integrated, Web-based business to
accomplish the following goals:
- increase its market penetration and reach;
- leverage its library of video training assets;
- offer real-time testing and certification online;
- provide self-service ordering of training material; and
- lower transaction costs.
To accomplish its goals, Primedia needed to deploy Web applications that
could provide broad functionality to its business customers and could scale to
accommodate future growth. Primedia selected Webridge because of the
comprehensive applications framework and integrated development environment
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<PAGE> 47
offered by our products. Using Webridge eBusiness Express, Primedia was able to
deliver multiple industry vertical portal sites and Primedia Academy, which
provide:
- rules-driven personalized catalogs for organizations;
- self-administered online testing;
- automatic certification and tracking of individual education records;
- access to more than 800,000 authenticated users, easily expandable;
- delegated publishing and administration; and
- real-time integration with its back-office system.
Honeywell
The globalization of Honeywell's partner base and the increase in the pace
of business necessitated a new approach to communication and collaboration among
Honeywell and its strategic partners. The answer was the Web-based Honeywell
Alliance Partner program. This program is aimed at building an online
marketplace where Honeywell and its key business partners can conduct commercial
activities. The goals of the project are to:
- securely exchange sensitive information, such as strategic plans, with
partners;
- foster relationships among partners via discussion forums;
- improve the quality of support to partners and increase partner loyalty;
- leverage the Honeywell knowledge library on a self-service basis;
- conduct marketing and promotional activities with Alliance Partners; and
- reduce costs.
To achieve these aims, Honeywell needed a business-to-business Web
application that could execute complex content management while being secure,
reliable and highly customizable for efficient and productive use by its
business partners. Webridge eBusiness Express was chosen because of its unique
ability to deliver the full range of capabilities Honeywell required, including:
- secure discussion forums among partners and Honeywell;
- a knowledge management portal;
- secure access to subject matter experts in Honeywell's vertical markets;
- online project management and collaboration securely partitioned for each
user;
- real-time product demonstrations and evaluation downloads; and
- delegation of content management to Honeywell's account managers.
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
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<PAGE> 48
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.
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. We believe our applications provide faster
implementation and lower cost of ownership than in-house development efforts or
independent Web site developers integrating separate application software
products, application development platforms and tools. 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
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<PAGE> 49
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."
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 March 31, 2000, we employed 113 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 located in a leased facility in Beaverton, Oregon,
consisting of approximately 50,000 square feet under a lease expiring in
February 2007. The average monthly rent for this facility is approximately
$47,500. We moved into this facility in April 2000 due to our need for
additional office space.
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> 50
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 Huxley Corp., a start-up
client/server customer relationship management 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. Mr. Brinker was an independent consultant from August 1996 to January
1997. 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
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<PAGE> 51
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). From July 1993 to September 1997, Mr. Dunne served as the Vice
President of Sales of Tektronix' Video and Networking Division. Additionally,
Mr. Dunne began his career with IBM Corporation and held key sales and marketing
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. Mr. Raetz was an independent marketing consultant from January 1994
to July 1995. 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. Since March 1992, Mr. Gibson has been a private investor and
consultant to technology companies. Mr. Gibson currently serves as a Director of
Triquint Semiconductor, Inc., RadiSys Corporation, Inference Corporation,
Integrated Management Systems, Inc., Egghead.com and Emerald-Delaware, 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.
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<PAGE> 52
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, including Vice President and General Manager, Corporate Marketing
from June 1995 to November 1996, and Vice President and General Manager, APAC
Sales and Marketing Operations, in Hong Kong, from June 1989 to June 1995. Mr.
Shrigley is a director of SonicWALL, Inc., a provider of Internet security for
small and 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, Mr. Langeler and Mr Lash, none 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.
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<PAGE> 53
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).
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
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<PAGE> 54
assumed 5% and 10% rates of stock appreciation are based on a value of $1.25 per
share, the deemed fair market value of our common stock as of December 31, 1999.
OPTION GRANTS IN 1999
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
NUMBER OF PERCENT OF RATES OF STOCK PRICE
SHARES TOTAL EXERCISE APPRECIATION FOR OPTION
UNDERLYING OPTIONS PRICE TERM
OPTIONS GRANTED TO PER EXPIRATION ------------------------
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 $ 39,620 $100,406
Mark S. Anastas.......... 300,000(1) 11.5% 0.21 07/09/09 39,620 100,406
David L. Brinker......... 80,000(2) 3.1% 0.21 07/09/09 10,565 26,775
Robert F. Dunne.......... 80,000(3) 3.1% 0.21 07/09/09 10,565 26,775
Jon F. Jackson........... 240,000(1) 9.2% 0.21 07/09/09 31,696 80,325
</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.
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<PAGE> 55
All options were granted under our 1996 stock incentive plan.
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1999 DECEMBER 31, 1999
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME 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 300,000 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 1/36 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.
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 March 31, 2000, options to
purchase a total of 2,121,067 shares of common stock were outstanding under this
plan. These options had a weighted average exercise price of $0.94 per share. As
of March 31, 2000, 364,454 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.
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<PAGE> 56
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
Our 2000 stock incentive plan will be implemented upon 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, cash bonus rights, stock bonuses and performance awards
to all eligible participants in the 2000 plan.
We have reserved a total of 2,000,000 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, 2001, equal to
the lesser of 3,000,000 shares or five percent of the adjusted average number of
shares outstanding used to calculate fully diluted earnings per share for the
preceding fiscal year. No incentive stock options can be granted under the plan
after ten years from the date the plan is implemented.
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. Payment of the
exercise price must be made in cash or, with the approval of the board of
director, in shares of our common stock. 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
54
<PAGE> 57
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 and may exercise discretionary authority to
accelerate the exercisability of such 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. It will be implemented upon the completion of
this offering. A total of 300,000 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, 2001,
equal to the lesser of 500,000 shares or one percent 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, but not more than 27 months, 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 on any one purchase date 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.
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;
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<PAGE> 58
- 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 to the fullest extent permitted by Delaware law, 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, Brinker, Dunne, Jackson, Shrigley and Lash 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.
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<PAGE> 59
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.
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.................................... 1,174,724 127,295 588,977 63,220
Mark S. Anastas..................................... 1,047,357 -- -- --
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. Langeler 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> 60
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 March 31, 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. The percentage of beneficial
ownership prior to the offering is based on 32,297,814 shares of common stock
outstanding as of March 31, 2000, as adjusted to reflect the conversion of all
outstanding shares of preferred stock into common stock upon the completion of
this offering.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED SHARES BENEFICIALLY
PRIOR TO OFFERING OWNED AFTER THE
-------------------------- OFFERING
NAME NUMBER PERCENTAGE(1) PERCENTAGE
---- ---------- ------------- -------------------
<S> <C> <C> <C>
Entities affiliated with Sevin Rosen Funds(2)......... 4,475,128 13.9 --%
13455 Noel Road, Suite 1670
Dallas, TX 75240
Entities affiliated with Olympic Venture
Partners(3)......................................... 3,727,866 11.5 --
2420 Carillon Point
Kirkland, WA 98033
Entities affiliated with Meritech Capital
Partners(4)......................................... 3,353,057 10.4% --
Two Soundview, Suite 302
Greenwich, CT 06830
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 3.2 --
David Brinker(7)...................................... 385,383 1.2 --
Robert Dunne(8)....................................... 175,000 * --
Jon Jackson........................................... 974,575 3.0 --
David Shrigley(9)..................................... 4,475,128 13.9 --
C. Scott Gibson....................................... 412,283 1.3 --
Gerard H. Langeler(10)................................ 3,727,866 11.5 --
James A. Lash(11)..................................... 1,764,706 5.5 --
All directors and executive officers as a group
(11 persons)(12).................................... 15,979,938 49.5% --%
</TABLE>
- -------------------------
* Less than 1% of the outstanding shares of common stock.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. 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
March 31, 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
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<PAGE> 61
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 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.
(3) 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.
(4) 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.
(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) 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.
(7) 248,750 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
168,750 shares will be released from the repurchase right at the rate of
6,250 shares per month beginning on April 1, 2000.
(8) Includes 66,667 shares issuable upon exercise of options exercisable within
60 days of March 31, 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. Langeler 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.
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<PAGE> 62
DESCRIPTION OF CAPITAL STOCK
GENERAL
Upon the completion of this offering, we will be authorized to issue 100
million shares of common stock and 50 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 March 31, 2000, there were 32,297,814 shares of our common stock
outstanding, which were held of record by 140 stockholders, after giving effect
to the conversion of the outstanding shares of preferred stock into common
stock. In addition, as of March 31, 2000, there were 2,356 shares subject to
outstanding warrants and 2,121,067 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 March 31, 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 March 31, 2000, the number of outstanding shares
for each series of our preferred stock was:
- 7,464,134 shares of Series A preferred stock;
- 5,939,816 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 17,745,556 shares of common
stock, which reflects the full exercise of 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 50,000,000
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,
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<PAGE> 63
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.
REGISTRATION RIGHTS
The holders of 28,642,289 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 March 31, 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 expired on April 12, 2000.
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
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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 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 ChaseMellon
Shareholder Services.
LISTING
We have applied for listing on the Nasdaq Stock Market's National Market
System under the symbol "WEBR."
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
March 31, 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.
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<PAGE> 65
The remaining 32,297,814 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 March 31, 2000, there were outstanding options to
purchase 2,121,067 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. FleetBoston
Robertson Stephens Inc. has informed us that it does not have any present
intention or any understanding, tacit or explicit, to release any of the
securities subject to the lock-up agreements prior to the expiration of the 180
day lock-up period. 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.
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
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<PAGE> 66
- 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 March 31, 2000, options to purchase 2,121,067 shares of common stock
were outstanding under our 1996 stock incentive plan and an additional 364,454
remained available for grant under the plan. In addition, 2,000,000 shares of
common stock will be available for grant under our 2000 stock incentive plan
after this offering. 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 to register all shares of common
stock covered by outstanding options or reserved for future issuance under our
1996 stock incentive plan, our 2000 stock incentive plan and our 2000 employee
stock purchase plan. We expect the registration statement will cover a total of
approximately 4,785,521 shares. The registration statement will become effective
upon filing. Accordingly, shares covered by that registration statement will
thereupon be eligible for sale in the public markets, unless such options are
subject to exercisability restrictions or the lock-up agreements noted above.
64
<PAGE> 67
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>
NUMBER OF
NAME 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 WITH
PER OVER-ALLOTMENT OVER-ALLOTMENT
SHARE OPTION 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.
65
<PAGE> 68
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.
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,
66
<PAGE> 69
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 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.
67
<PAGE> 70
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
WEBRIDGE, INC. FINANCIAL STATEMENTS:
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> 71
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 auditing standards generally
accepted in the United States of America. 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 accounting principles generally accepted in the United States of
America.
/s/ KPMG LLP
Portland, Oregon
March 6, 2000
F-2
<PAGE> 72
WEBRIDGE, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------- ----------------------------
1998 1999 2000 2000
------- -------- ----------- -----------
(PRO FORMA)
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 5,951 $ 22,214 18,871
Investments............................................ 1,981 958 1,820
Restricted investment.................................. -- 250 250
Accounts receivable.................................... 347 2,935 3,591
Revenue in excess of billings.......................... -- -- 204
Prepaids and other current assets...................... -- 468 627
------- -------- --------
Total current assets........................... 8,279 26,825 25,363
Furniture and equipment, net............................. 422 575 925
Other assets............................................. 20 -- --
------- -------- --------
Total assets................................... $ 8,721 $ 27,400 26,288
------- -------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit......................................... $ -- $ 750 --
Accounts payable....................................... 124 763 848
Accrued expenses....................................... 347 843 838
Deferred revenue....................................... 113 1,490 2,594
Current portion of long-term debt and capital lease
obligations......................................... 264 284 240
------- -------- --------
Total current liabilities...................... 848 4,130 4,520
Long-term debt and capital lease obligations, net of
current portion........................................ 252 16 75
------- -------- --------
Total liabilities.............................. 1,100 4,146 4,595
------- -------- --------
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-, 4,235 and 4,339
shares at December 31, 1998 and 1999 and March 31,
2000 (unaudited), respectively.................... -- 4 5 --
Series B convertible preferred stock; liquidation
preference $10,064. Authorized 6,038 shares;
issued and outstanding 4,744, 5,920 and 5,940
shares at December 31, 1998 and 1999 and March 31,
2000 (unaudited), respectively.................... 5 6 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 and March 31, 2000 (unaudited)........... 7 7 7 --
Common stock, $.001 par value. Authorized 50,000
shares; issued and outstanding 12,374, 13,074 and
14,555 shares at December 31, 1998, 1999 and March
31, 2000 (unaudited), respectively.................. 12 13 14 32
Additional paid-in capital............................. 15,818 40,432 42,452 42,452
Deferred stock-based compensation...................... -- (959) (1,514) (1,514)
Accumulated deficit.................................... (8,221) (16,249) (19,277) (19,277)
------- -------- -------- --------
Total stockholders' equity..................... 7,621 23,254 21,693 21,693
------- -------- -------- --------
Total liabilities and stockholders' equity..... $ 8,721 $ 27,400 26,288
======= ======== ========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 73
WEBRIDGE, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------- -------------------
1997 1998 1999 1999 2000
------- ------- ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Product licenses...................... $ -- $ 175 $ 1,879 $ 243 $ 1,159
Services.............................. -- 148 2,568 100 1,357
------- ------- ------- ------- --------
Total revenue...................... -- 323 4,447 343 2,516
Cost of revenue:
Cost of product licenses.............. -- 9 -- -- 3
Cost of services...................... -- 135 1,332 237 822
------- ------- ------- ------- --------
Total cost of revenue.............. -- 144 1,332 237 825
------- ------- ------- ------- --------
Gross profit....................... -- 179 3,115 106 1,691
------- ------- ------- ------- --------
Operating expenses:
Research and development.............. 1,514 3,403 4,809 1,104 1,543
Sales and marketing................... 427 1,926 5,240 882 2,552
General and administrative............ 327 724 1,304 293 645
Amortization of deferred stock-based
compensation....................... -- -- 88 -- 263
------- ------- ------- ------- --------
Total operating expenses........... 2,268 6,053 11,441 2,279 5,003
------- ------- ------- ------- --------
Loss from operations............... (2,268) (5,874) (8,326) (2,173) (3,312)
------- ------- ------- ------- --------
Other income (expense):
Interest income....................... 94 134 321 96 312
Interest expense...................... (23) (69) (45) (8) (28)
Other................................. -- (6) 22 -- --
------- ------- ------- ------- --------
Total other income (expense)....... 71 59 298 88 284
------- ------- ------- ------- --------
Net loss before provision for
income taxes..................... (2,197) (5,815) (8,028) (2,085) (3,028)
Provision for income taxes.............. -- -- -- -- --
------- ------- ------- ------- --------
Net loss........................... $(2,197) $(5,815) $(8,028) $(2,085) $ (3,028)
======= ======= ======= ======= ========
Basic and diluted net loss per share.... $ (1.53) $ (1.08) $ (0.94) (0.28) (0.29)
======= ======= ======= ======= ========
Shares used in computing basic and
diluted net loss per share............ 1,433 5,389 8,539 7,403 10,562
======= ======= ======= ======= ========
Pro forma basic and diluted net loss per
share................................. $ (0.11)
========
Shares used in computing pro forma basic
and diluted net loss per share........ 28,274
========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 74
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 ADDITIONAL
--------------- --------------- --------------- --------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
------ ------ ------ ------ ------ ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as of December 31,
1996........................... -- $-- -- $-- -- $-- 5,000 $ 5 $ --
Issuance of common stock......... -- -- -- -- -- -- 6,301 6 78
Exercise of common stock
options........................ -- -- -- -- -- -- 781 1 38
Issuance of Series A preferred
stock.......................... -- -- -- -- 7,464 7 -- -- 6,697
Issuance of common stock options
for services................... -- -- -- -- -- -- -- -- 634
Net loss......................... -- -- -- -- -- -- -- -- --
----- -- ----- -- ----- -- ------ --- -------
Balance as of December 31,
1997........................... -- -- -- -- 7,464 7 12,082 12 7,447
Exercise of common stock
options........................ -- -- -- -- -- -- 292 -- 26
Issuance of Series B preferred
stock.......................... -- -- 4,744 5 -- -- -- -- 8,044
Issuance of common stock options
for services................... -- -- -- -- -- -- -- -- 301
Repayment of common stock
subscription receivable........ -- -- -- -- -- -- -- -- --
Net loss......................... -- -- -- -- -- -- -- -- --
----- -- ----- -- ----- -- ------ --- -------
Balance as of December 31,
1998........................... -- -- 4,744 5 7,464 7 12,374 12 15,818
Exercise of common stock
options........................ -- -- -- -- -- -- 750 1 103
Repurchase of common stock....... -- -- -- -- -- -- (50) -- (4)
Issuance of Series B preferred
stock.......................... -- -- 1,176 1 -- -- -- -- 1,999
Issuance of Series C preferred
stock.......................... 4,235 4 -- -- -- -- -- -- 21,469
Deferred stock-based
compensation................... -- -- -- -- -- -- -- -- 1,047
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 40,432
Exercise of common stock options
(unaudited).................... -- -- -- -- -- -- 1,481 1 578
Issuance of Series B preferred
stock (unaudited).............. -- -- 20 -- -- -- -- -- 100
Issuance of Series C preferred
stock (unaudited).............. 104 1 -- -- -- -- -- -- 524
Deferred stock-based compensation
(unaudited).................... -- -- -- -- -- -- -- -- 818
Amortization of stock-based
compensation (unaudited)....... -- -- -- -- -- -- -- -- --
Net loss (unaudited)............. -- -- -- -- -- -- -- -- --
----- -- ----- -- ----- -- ------ --- -------
Balance as of March 31, 2000
(unaudited).................... 4,339 $5 5,940 $6 7,464 $7 14,555 $14 $42,452
===== == ===== == ===== == ====== === =======
<CAPTION>
COMMON TOTAL
DEFERRED STOCK STOCKHOLDERS'
STOCK-BASED SUBSCRIPTION ACCUMULATED EQUITY
COMPENSATION RECEIVABLE DEFICIT (DEFICIT)
------------ ------------ ----------- -------------
<S> <C> <C> <C> <C>
Balance as of December 31,
1996........................... $ -- $ -- $ (209) $ (204)
Issuance of common stock......... -- -- -- 84
Exercise of common stock
options........................ -- (35) -- 4
Issuance of Series A preferred
stock.......................... -- -- -- 6,704
Issuance of common stock options
for services................... -- -- -- 634
Net loss......................... -- -- (2,197) (2,197)
------- ---- -------- -------
Balance as of December 31,
1997........................... -- (35) (2,406) 5,025
Exercise of common stock
options........................ -- -- -- 26
Issuance of Series B preferred
stock.......................... -- -- -- 8,049
Issuance of common stock options
for services................... -- -- -- 301
Repayment of common stock
subscription receivable........ -- 35 -- 35
Net loss......................... -- -- (5,815) (5,815)
------- ---- -------- -------
Balance as of December 31,
1998........................... -- -- (8,221) 7,621
Exercise of common stock
options........................ -- -- -- 104
Repurchase of common stock....... -- -- -- (4)
Issuance of Series B preferred
stock.......................... -- -- -- 2,000
Issuance of Series C preferred
stock.......................... -- -- -- 21,473
Deferred stock-based
compensation................... (1,047) -- -- --
Amortization of stock-based
compensation................... 88 -- -- 88
Net loss......................... -- -- (8,028) (8,028)
------- ---- -------- -------
Balance as of December 31,
1999........................... (959) -- (16,249) 23,254
Exercise of common stock options
(unaudited).................... -- -- -- 579
Issuance of Series B preferred
stock (unaudited).............. -- -- -- 100
Issuance of Series C preferred
stock (unaudited).............. -- -- -- 525
Deferred stock-based compensation
(unaudited).................... (818) -- -- --
Amortization of stock-based
compensation (unaudited)....... 263 -- -- 263
Net loss (unaudited)............. -- -- (3,028) (3,028)
------- ---- -------- -------
Balance as of March 31, 2000
(unaudited).................... $(1,514) $ -- $(19,277) $21,693
======= ==== ======== =======
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 75
WEBRIDGE, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------- ------------------
1997 1998 1999 1999 2000
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss......................................... $(2,197) $(5,815) $(8,028) $(2,085) $(3,028)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization................. 49 163 256 53 85
(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 -- 263
Change in operating assets and liabilities:
Accounts receivable......................... -- (347) (2,588) (37) (656)
Revenue in excess of billings............... -- -- -- -- (204)
Accounts payable and accrued expenses....... 11 279 1,135 273 80
Deferred revenue............................ -- 113 1,377 97 1,104
Other assets................................ -- -- (448) (102) (159)
------- ------- ------- ------- -------
Net cash used for operating activities... (1,484) (5,291) (8,210) (1,801) (2,515)
------- ------- ------- ------- -------
Cash flows from investing activities:
Proceeds on sale of fixed assets................. -- 6 5 -- --
Purchase of furniture and equipment.............. (211) (282) (412) (95) (435)
Purchase of investments.......................... -- (1,981) (2,198) (2,198) (1,820)
Maturities of investments........................ -- -- 3,221 1,000 958
Deposit on facility lease........................ (24) 4 -- -- --
------- ------- ------- ------- -------
Net cash (used for) provided by investing
activities............................. (235) (2,253) 616 (1,293) (1,297)
------- ------- ------- ------- -------
Cash flows from financing activities:
Proceeds from issuance of preferred stock........ 6,465 6,139 23,473 2,000 625
Repurchase of common stock....................... -- -- (4) -- --
Proceeds from issuance of common stock........... 88 26 104 -- 579
Proceeds from notes payable...................... -- 439 -- -- --
Proceeds from (repayment of) line of credit...... -- -- 750 -- (750)
Proceeds from sale/leaseback..................... -- -- 22 -- 90
Repayments of common stock subscriptions
receivable.................................... -- 35 -- -- --
Principal payments on capital leases............. (7) (39) (19) (7) (20)
Principal payments on notes payable.............. -- -- (219) (55) (55)
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 1,938 469
------- ------- ------- ------- -------
Net increase (decrease) in cash and cash
equivalents............................ 4,916 956 16,263 (1,156) (3,343)
Cash and cash equivalents at beginning of period... 79 4,995 5,951 5,951 22,214
------- ------- ------- ------- -------
Cash and cash equivalents at end of period......... $ 4,995 $ 5,951 $22,214 4,795 18,871
======= ======= ======= ======= =======
Supplemental disclosures:
Cash paid for interest........................... $ 10 $ 57 $ 45 8 26
Non-cash investing activities:
Equipment acquired under capital lease........... 65 57 -- 40 90
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> 76
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. VSOE has been determined
based on objective evidence that is specific to Webridge. Objective evidence is
determined by the separate sale of the element or by the contracted renewal
rate.
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.
Hosting services are sold to customers based on a monthly or quarterly fee.
Revenue for hosting services, including the initial set up fee, 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.
F-7
<PAGE> 77
WEBRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(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.
(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.
F-8
<PAGE> 78
WEBRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(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.
(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 derived from sales in the United States and one
sale in Europe for $265,000. Substantially all assets of Webridge reside in the
United States. Webridge is exposed to concentration of
F-9
<PAGE> 79
WEBRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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.
(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.
F-10
<PAGE> 80
WEBRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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>
THREE MONTHS THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED ENDED
------------------------ MARCH 31, MARCH 31,
1997 1998 1999 2000 2000
------ ------ ------ ------------ ------------
(PRO FORMA)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Shares issuable under stock options........... -- 207 162 76 76
Shares issuable under warrants................ -- -- 95 120 120
Restricted stock.............................. 8,649 6,944 3,990 3,536 3,536
Weighted average shares of common stock
issuable upon conversion of preferred
stock....................................... 2,618 7,555 13,260 17,712 --
------ ------ ------ ------- -----
11,267 14,706 17,507 21,444 3,732
====== ====== ====== ======= =====
</TABLE>
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>
THREE MONTHS THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED ENDED
--------------------------- MARCH 31, MARCH 31,
1997 1998 1999 2000 2000
------- ------- ------- ------------ ------------
(PRO FORMA)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Numerator:
Net loss................................. $(2,197) $(5,815) $(8,028) $(3,028) $(3,028)
======= ======= ======= ======= =======
Denominator:
Weighted average common shares
outstanding........................... 1,433 5,389 8,539 10,562 10,562
------- ------- ------- ------- -------
Denominator for basic and diluted
calculation........................... 1,433 5,389 8,539 10,562 10,562
======= ======= ======= =======
Weighted average effect of pro forma
conversion of securities:
Series A convertible preferred
stock............................... 7,464
Series B convertible preferred
stock............................... 5,922
Series C convertible preferred
stock............................... 4,326
-------
Denominator for pro forma basic and
diluted calculation................... 28,274
=======
</TABLE>
F-11
<PAGE> 81
WEBRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(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.
(t) PRO FORMA SHAREHOLDERS' EQUITY (UNAUDITED)
Upon consummation of Webridge's initial public offering, all of the
convertible preferred stock outstanding as of the closing date will
automatically be converted into an aggregate of 17,743,200 shares of common
stock based on the outstanding shares of convertible preferred stock as of March
31, 2000. Unaudited pro forma shareholders' equity as of March 31, 2000, as
adjusted, reflects the impact of the conversion of the convertible preferred
stock and is disclosed on the balance sheet.
(u) UNAUDITED QUARTERLY INFORMATION
The financial information included herein as of March 31, 2000 and for the
three-month periods ended March 31, 1999 and 2000 is unaudited. Such
information, however, reflects all adjustments, consisting of normal recurring
adjustments, which are, in the opinion of management, necessary for a fair
presentation of the financial position, results of operations and cash flows for
the interim periods. The results of operations for the three-month period ended
March 31, 2000 are not necessarily indicative of the results to be expected for
the full year.
F-12
<PAGE> 82
WEBRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(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.
(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.
F-13
<PAGE> 83
WEBRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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>
Rent expense was $82, $216 and $266 for the years ended December 31, 1997,
1998 and 1999, respectively.
(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.
F-14
<PAGE> 84
WEBRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
- 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.
- 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.
F-15
<PAGE> 85
WEBRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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.
(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-16
<PAGE> 86
WEBRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(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>
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
Granted (unaudited)......................................... 490 3.96
Exercised (unaudited)....................................... 1,481 .41
Canceled (unaudited)........................................ 27 .25
Forfeited (unaudited)....................................... -- --
----- ----
Options outstanding at March 31, 2000 (unaudited)........... 2,121 $.94
===== ====
</TABLE>
F-17
<PAGE> 87
WEBRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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>
(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>
F-18
<PAGE> 88
WEBRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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>
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.
F-19
<PAGE> 89
WEBRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(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.
(10) UNAUDITED SUBSEQUENT EVENT
Webridge sold 20 additional shares of Series B preferred stock in March
2000 for net proceeds of $100.
F-20
<PAGE> 90
[INSIDE BACK COVER]
[Graphic depicts a computer monitor with a globe on the screen over which
the following is superimposed: pictures of a personal computer, the tower of
which is open like a cash drawer showing money inside, and of a man juggling;
next to these pictures is written "Leading Office Equipment Supplier -- Sales
Channel Management" under which is written "This supplier has an aggressive
program to expand sales coverage for the company's diverse product lines. It
needed a web-based sales channel management system to improve resellers'
productivity and to attract new channel partners. Using Webridge eBusiness
Express it was able to: - Build partner loyalty with customized pricing,
promotions, and training and personalized communication - Reduce selling costs
by enabling business managers to craft business rules and publish content
without information technology personnel involvement - Shorten sales cycles
through a comprehensive closed-loop lead management system"; next to this text
is a picture of the supplier's Website: pictures of two people assembling a
sphere out of jigsaw pieces and of two people over whom there are word balloons
shaped like matching jigsaw pieces; next to these pictures is written "Top 5
Global Bank -- FX Trading" under which is written "This bank is the global
leader in foreign exchange trading. The bank needed a highly secure,
Internet-based application to support foreign currency trading and to deliver
rapidly changing financial information to its major customers. Its foreign
currency trading site uses Webridge eBusiness Express to: - Provide global
customers instant online foreign currency trading and order status checking
- - Establish transactional connections to the bank's back office systems
- - Deliver personalized real-time news feeds with instant indexing - Provide
secure access to restricted information"; next to this text is a picture of the
bank's Website: pictures of two people assembling a sphere out of jigsaw pieces
and of two people over whom there are word balloons shaped like matching jigsaw
pieces; next to these pictures is written "Control Systems
Leader -- Business-to-Business Marketplace" under which is written "This
company's partner program is aimed at building deep commercial relationships
between the company and its partners and among the partners themselves. The site
is built using Webridge eBusiness Express and provides the following: - Foster
relationships among partners via discussion forums; - project management and
collaboration - Access to subject matter experts in specialized vertical market
areas - Marketing and promotional activities to partners"; next to this text is
a picture of the company's Website, and: pictures of two people assembling a
sphere out of jigsaw pieces, of two people over whom there are word balloons
shaped like matching jigsaw pieces, and of a personal computer, the tower of
which is open like a cash drawer showing money inside; next to these pictures is
written "Media Conglomerate -- Business-to-Business Commerce" under which is
written "One of this company's businesses is to supply interactive video, audio
and on-line training products to professionals in several industries. Recently
the company initiated a project using Webridge eBusiness Express to transition
its business from a traditional model to an integrated web-based business to
accomplish the following: - Access to more than 800,000 authenticated users
- - Online real-time testing and certification - Self service ordering of training
material - Automatic certification and tracking of individual education records
- - Real-time integration with the back office system"; next to this text is a
picture of the company's Website. Across the top of the page is the caption
"Business-to-Business Enterprise Commerce". Across the bottom of the page is the
caption "Commerce - Content - Collaboration".]
<PAGE> 91
[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> 92
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.......................... 250,000
Printing and mailing expenses............................... 175,000
Miscellaneous............................................... 100,650
----------
Total..................................................... $1,125,000
==========
</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
II-1
<PAGE> 93
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.
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 28, 1997, the Registrant issued 500,000 shares of common stock
to one founder for $5,000 ($0.01 per share).
14. On May 5, 1997, the Registrant issued 100,000 shares of common stock to
one employee for $1,000 ($0.01 per share).
II-2
<PAGE> 94
15. On June 24, 1997, the Registrant issued 500,000 shares of common stock
to one founder for $5,000 ($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. On March 20, 2000, the Registrant issued 19,274 shares of Series B
convertible preferred stock for $5.07 per share to one accredited
investor for $100,001. The purchaser is an equipment lessor with whom
the Registrant has done business since September 1999. This issuance
was pursuant to a commitment made by the Registrant to the purchaser in
September 1999.
27. 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 March 31, 2000................. 489,932 $1.25 to $7.50
</TABLE>
II-3
<PAGE> 95
No underwriters were involved in connection with the sales of securities
referred to in this paragraph 27.
The issuances described in paragraphs 19, 20, 24, 25 and 26 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 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.
II-4
<PAGE> 96
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1** Form of Underwriting Agreement
3.1* Registrant's Amended and Restated Certificate of
Incorporation, as currently in effect
3.2 Form of Registrant's Restated Certificate 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 Article III of Exhibit 3.2 and Article I of Exhibit 3.4
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
10.7 Second Amended and Restated Investors' Rights Agreement,
dated December 22, 1999 between the Registrant and certain
investors, as amended March 8, 2000
10.8* Form of Indemnification Agreement between the Registrant and
Messrs. Anastas, Gibson, Whitney, Raetz, Langeler, Fielland,
Brinker, Dunne, Jackson, Shrigley and Lash
10.9 Registrant's 2000 Stock Incentive Plan
10.10 Registrant's Employee Stock Purchase Plan
10.11 Series B Preferred Stock Purchase Agreement, dated December
24, 1998, between the Registrant and certain investors, as
amended
10.12 Series C Preferred Stock Purchase Agreement, dated December
22, 1999, between the Registrant and certain investors
21.1 Subsidiaries of Registrant
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>
- -------------------------
* previously filed
** to be filed by amendment
II-5
<PAGE> 97
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-6
<PAGE> 98
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment to be signed on its behalf by the
undersigned, thereunto duly authorized, in Portland, Oregon, on this 9th day of
May 2000.
WEBRIDGE, INC.
By: GARY N. FIELLAND
--------------------------------------
Gary N. Fielland,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
has been signed by the following persons in the capacities held on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GARY N. FIELLAND President, Chief Executive Officer and May 9, 2000
- -------------------------------------- Director (Principal Executive Officer)
Gary N. Fielland
/s/ DAVID L. BRINKER* Chief Financial Officer May 9, 2000
- -------------------------------------- (Principal Financial Officer and
David L. Brinker Principal Accounting Officer)
/s/ MARK S. ANASTAS* Chief Operating Officer and Director May 9, 2000
- --------------------------------------
Mark S. Anastas
/s/ C. SCOTT GIBSON* Director May 9, 2000
- --------------------------------------
C. Scott Gibson
/s/ GERARD LANGELER* Director May 9, 2000
- --------------------------------------
Gerard Langeler
/s/ JAMES A. LASH* Director May 9, 2000
- --------------------------------------
James A. Lash
/s/ DAVID A. SHRIGLEY* Director May 9, 2000
- --------------------------------------
David A. Shrigley
*By: /s/ GARY N. FIELLAND
- --------------------------------------
Gary N. Fielland
Attorney-in-fact
</TABLE>
II-7
<PAGE> 99
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1.1** Form of Underwriting Agreement
3.1* Registrant's Amended and Restated Certificate of
Incorporation, as currently in effect
3.2 Form of Registrant's Restated Certificate 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 Article III of Exhibit 3.2 and Article I of Exhibit 3.4
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 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
10.7 Second Amended and Restated Investors' Rights Agreement,
dated December 22, 1999 between the Registrant and certain
investors, as amended March 8, 2000
10.8* Form of Indemnification Agreement between the Registrant and
Messrs. Anastas, Gibson, Whitney, Raetz, Langeler, Fielland,
Brinker, Dunne, Jackson, Shrigley and Lash
10.9 Registrant's 2000 Stock Incentive Plan
10.10 Registrant's Employee Stock Purchase Plan
10.11 Series B Preferred Stock Purchase Agreement, dated December
24, 1998, between the Registrant and certain investors, as
amended
10.12 Series C Preferred Stock Purchase Agreement, dated December
22, 1999, between the Registrant and certain investors
21.1 Subsidiaries of Registrant
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>
- -------------------------
* previously filed
* to be filed by amendment
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
WEBRIDGE, INC.
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 Amended and Restated Certificate of Incorporation were approved by
the Board of Directors of the Corporation at a meeting held on March 17, 2000
and by stockholders of the Corporation in accordance with the provisions of
Sections 242 and 245 of the General Corporation Law at a duly noticed annual
meeting of stockholders held on April 14, 2000:
NOW, THEREFORE, BE IT RESOLVED, that the Amended and Restated
Certificate of Incorporation of the Corporation be amended and restated in its
entirety as follows:
ARTICLE I
The name of the corporation is Webridge, Inc.
ARTICLE II
The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
ARTICLE III
A. The corporation is authorized to issue a total of 150,000,000 shares
of stock in two classes: 100,000,000 shares of common stock, par value $0.001
per share, and 50,000,000 shares of preferred stock, par value $0.001 per share.
B. Holders of common stock are entitled to one vote per share on any
matter submitted to the stockholders. When dividends or other distributions are
declared by the board of directors, after any preferential amount with respect
to the preferred stock has been paid or set aside, the holders of common stock
and the holders of any series of preferred stock entitled to participate in the
dividend or other distribution are entitled to receive the remainder of the
<PAGE> 2
declared dividends or other distributions. On dissolution of the corporation,
after any preferential amount with respect to the preferred stock has been paid
or set aside, the holders of common stock and the holders of any series of
preferred stock entitled to participate in the distribution of assets are
entitled to receive the net assets of the corporation.
C. The board of directors is authorized, subject to limitations
prescribed by the General Corporation Law of Delaware, as amended from time to
time, and by the provisions of this article, to provide for the issuance of
shares of preferred stock in series, to establish from time to time the number
of shares to be included in each series and to determine the designations,
powers, preferences, rights, qualifications, limitations and restrictions of
each series.
ARTICLE IV
No director of the corporation shall be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that this article shall not eliminate the liability
of a director for any act or omission for which such elimination of liability is
not permitted under the General Corporation Law of Delaware. If the General
Corporation Law of Delaware is amended after approval by the stockholders of
this article to authorize corporate action further limiting the personal
liability of directors, the liability of a director of the corporation shall be
limited to the fullest extent permitted by the General Corporation Law of
Delaware as so amended.
Any repeal or modification of the provisions of this article by the
stockholders of the corporation shall not adversely affect any right or
protection of a director of the corporation existing at the time of the repeal
or modification.
ARTICLE V
The corporation shall indemnify to the fullest extent not prohibited by
law any current or former director of the corporation who is made, or threatened
to be made, a party to a threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, investigative or other
(including an action, suit or proceeding by or in the right of the corporation),
by reason of the fact that such person is or was a director, officer, employee
or agent of the corporation or a fiduciary within the meaning of the Employee
Retirement Income Security Act of 1974 with respect to any employee benefit plan
of the corporation, or serves or served at the request of the corporation as a
director, officer, employee or agent, or as a fiduciary of an employee benefit
plan, of another corporation, partnership, joint venture, trust or other
enterprise. The corporation shall pay for or reimburse the reasonable expenses
incurred by any such current or former director in any such proceeding in
advance of the final disposition of the proceeding if the person sets forth in
writing (i) the person's good faith belief that the person is entitled to
indemnification under this article and (ii) the person's agreement to repay all
advances if it is ultimately determined that
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<PAGE> 3
the person is not entitled to indemnification under this article. No amendment
to this article that limits the corporation's obligation to indemnify any person
shall have any effect on such obligation for any act or omission that occurs
prior to the later of the effective date of the amendment or the date notice of
the amendment is given to the person. This article shall not be deemed 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.
ARTICLE VI
The corporation reserves the right to alter, amend or repeal any
provision contained in this certificate of incorporation, in the manner now or
hereafter prescribed by the laws of the State of Delaware. All rights conferred
are granted subject to this reservation.
ARTICLE VII
The directors need not be elected by written ballot unless required by
the bylaws of the corporation.
ARTICLE VIII
In furtherance and not in limitation of the powers conferred by the laws
of the State of Delaware, the board of directors is expressly authorized to
make, amend and repeal the bylaws of the corporation.
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<PAGE> 4
This Amended and Restated Certificate of Incorporation has been signed
by the President of this corporation on April ___, 2000.
_____________________________________
Gary N. Fielland
President and Chief Executive Officer
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<PAGE> 1
EXHIBIT 3.4
RESTATED BYLAWS
OF
WEBRIDGE, INC.
ARTICLE I
STOCKHOLDERS MEETINGS
1.1 ANNUAL MEETING. The annual meeting of the stockholders shall be
held on the third Thursday in May of each year at 9:00 a.m., Pacific time,
unless a different date or time is fixed by the board of directors and stated in
the notice of the meeting.
1.2 SPECIAL MEETINGS. Special meetings of the stockholders, for any
purposes, unless otherwise prescribed by statute, may be called by the board of
directors. The board of directors shall have the sole power to determine the
date and time for any special meeting of stockholders and to set a record date
for the determination of stockholders entitled to vote at the meeting.
1.3 PLACE OF MEETINGS. Meetings of the stockholders shall be held at
any place in or out of Delaware designated by the board of directors.
1.4 NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS.
(a) Annual Meetings of Stockholders.
(1) Nominations of persons for election to the board of directors
of the corporation and the proposal of business to be considered by the
stockholders may be made at an annual meeting of stockholders only (i) pursuant
to the corporation's notice of meeting or any supplement to the corporation's
notice of meeting, (ii) by or at the direction of the board of directors or
(iii) by any stockholder of the corporation who (A) was a stockholder of record
of the corporation when the notice provided for in this section 1.4 is delivered
to the secretary of the corporation, (B) is entitled to vote at the meeting and
(C) complies with the notice procedures set forth in subparagraphs (2) and (3)
of this paragraph (a) in this section 1.4.
(2) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (iii) of paragraph
(a)(1) of this section 1.4, the stockholder must have given timely notice of the
nomination or other business in writing to the secretary of the corporation and
such other business must otherwise be a proper matter for stockholder action as
determined by the board of directors. To be timely, a notice shall be delivered
to the secretary at the principal executive offices of the corporation at least
90 days,
<PAGE> 2
and no earlier than 120 days, before the first anniversary of the date of the
proxy statement for the preceding year's annual meeting (provided, however, that
if the date of the annual meeting is more than 30 days before or more than 70
days after the anniversary date, notice by the stockholder must be delivered no
earlier than 120 days before the annual meeting and no later than the later of
90 days before the annual meeting or 10 days following the day on which public
announcement of the date of the meeting is first made by the corporation). The
public announcement of an adjournment or postponement of an annual meeting of
stockholders shall not commence a new time period (or extend any time period)
for the giving of a stockholder's notice as described above. The stockholder's
notice shall set forth the information required by paragraph (c) of this section
1.4.
(3) Notwithstanding anything in the second sentence of paragraph
(a)(2) of this section 1.4 to the contrary, if the number of directors to be
elected to the board of directors of the corporation at an annual meeting is
increased and there is no public announcement by the corporation naming all of
the nominees for director or specifying the size of the increased board of
directors at least 100 days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this section 1.4 shall
also be considered timely, but only with respect to nominees for any new
positions created by the increase, if it is delivered to the secretary at the
principal executive offices of the corporation not later than 10 days following
the day on which the public announcement is first made by the corporation.
(b) Special Meetings of Stockholders.
(1) The only business that may be conducted at a special meeting
of stockholders is the business described in the corporation's notice of
meeting. If directors are to be elected at a special meeting, nominations of
persons for election to the board of directors may be made at a special meeting
of stockholders only (i) by or at the direction of the board of directors or the
chairman of the board or (ii) by any stockholder of the corporation who (A) is a
stockholder of record at the time the notice provided for in this section 1.4(b)
is delivered to the secretary of the corporation, (B) is entitled to vote at the
special meeting and (C) complies with the notice procedures set forth in
paragraph (b)(2) of this section 1.4. If a special meeting of stockholders is
called to elect one or more directors to the board of directors, any stockholder
entitled to vote in the election of directors may nominate a person or persons
(as the case may be) for election to such position(s) as specified in the
corporation's notice of meeting, if the stockholder's notice containing the
information and as otherwise required by paragraph (b)(2) of this section 1.4 is
delivered to the secretary at the principal executive offices of the corporation
not later than 10 days following the day on which public announcement is first
made of the date of the special meeting and of the nominees proposed by the
board of directors to be elected at the meeting. The public announcement of an
adjournment or postponement of a special meeting shall not commence a new time
period (or extend any time period) for the giving of a stockholder's notice as
described above.
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<PAGE> 3
(2) For nominations to be properly brought before a special
meeting by a stockholder pursuant to clause (ii) of paragraph (b)(1) of this
section 1.4, the stockholder's notice must contain the information required by
paragraph (c) of this section 1.4. For any other business to be properly brought
before a special meeting by a stockholder, the other business must be a proper
matter for stockholder action and the stockholder's demand for the special
meeting pursuant to the General Corporation Law of Delaware must contain the
information required by paragraph (c) of this section 1.4.
(c) Information Required in Stockholder Notice. A stockholder notice
given pursuant to paragraph (a) or (b) of this section 1.4 shall contain the
following information:
(i) As to each person whom the stockholder proposes to nominate
for election or reelection as a director, all information relating to such
person that is required to be disclosed in solicitations of proxies for election
of directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Exchange Act and Rule 14a-11 thereunder
(and be accompanied by such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected);
(ii) as to any other business the stockholder proposes to bring
before the special meeting, a brief description of the business desired to be
brought before the special meeting, the text of the proposal or business
(including the text of any resolutions proposed for consideration and, if the
business includes a proposal to amend the bylaws of the corporation, the
language of the proposed amendment), the reasons for conducting the business at
the special meeting and any material interest in the business of such
stockholder and any beneficial owner on whose behalf the proposal is made; and
(iii) as to the stockholder giving the notice and any beneficial
owner on whose behalf the nomination or proposal is made, (A) the name and
address of the stockholder, as they appear on the corporation's books, and of
the beneficial owner, (B) the class and number of shares of capital stock of the
corporation which are owned beneficially and of record by the stockholder and
the beneficial owner, (C) a representation that the stockholder is a holder of
record of stock of the corporation entitled to vote at the special meeting and
intends to appear in person or by proxy at the special meeting to propose such
business or nomination, and (D) a representation as to whether the stockholder
or the beneficial owner, if any, intends or is part of a group which intends to
(1) deliver a proxy statement and/or form of proxy to holders of at least the
percentage of the corporation's outstanding capital stock required to approve or
adopt the proposal or elect the nominee and/or (2) otherwise solicit proxies
from stockholders in support of such proposal or nomination. The corporation may
require any proposed nominee to furnish any other information it reasonably
requires to determine the eligibility of the proposed nominee to serve as a
director of the corporation
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<PAGE> 4
(d) General.
(1) Only persons nominated in accordance with the procedures set
forth in this section 1.4 shall be eligible to be elected at an annual or
special meeting of stockholders of the corporation to serve as directors and
only such business shall be conducted at a meeting of stockholders as shall have
been brought before the meeting in accordance with the procedures set forth in
this section 1.4. Except as otherwise provided by law, the chairman of the
meeting shall have the power and duty to (i) determine whether a nomination or
any business proposed to be brought before an annual or special meeting was made
or proposed, as the case may be, in accordance with the procedures set forth in
this section 1.4 and (ii) if any proposed nomination or business is not in
compliance with this section 1.4 (including whether the stockholder or any
beneficial owner on whose behalf the nomination or proposal is made solicits (or
is part of a group which solicits), or fails to so solicit (as the case may be),
proxies in support of such stockholder's nominee or proposal in compliance with
such stockholder's representation as required by clause (iii)(D) of section
(a)(2) or clause (iii)(D) of section (b)(2) of this section 1.4), to declare
that such nomination shall be disregarded or that such proposed business shall
not be transacted.
(2) For purposes of this section 1.4, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press, PR Newswire or comparable national news service or in a
document publicly filed by the corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(3) A stockholder shall also comply with all applicable
requirements of the Exchange Act and the rules and regulations under the
Exchange Act with respect to the matters set forth in this section 1.4. Nothing
in this section 1.4 shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the corporation's proxy statement pursuant to
Rule 14a-8 under the Exchange Act.
1.5 CONDUCT OF MEETINGS.
(a) Chairman of the Meeting. Meetings of stockholders shall be
presided over by the president or, in any event, by another chairman designated
by the board of directors. The date and time of the opening and the closing of
the polls for each matter upon which the stockholders will vote at a meeting
shall be determined by the chairman of the meeting and announced at the meeting.
(b) Rules and Regulations. The board of directors may adopt by
resolution any rules and regulations for the conduct of the meeting of
stockholders as it deems appropriate. Except to the extent inconsistent with
rules and regulations as adopted by the board of directors, the chairman of any
meeting of stockholders shall have the exclusive right and authority to
prescribe such rules, regulations and procedures and to do all such acts as, in
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<PAGE> 5
the judgment of the 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 determines; (iv) restrictions on entry to the meeting after the time
fixed for its commencement; and (v) limitations on the time allotted to
questions or comments by participants. Unless and to the extent otherwise
determined by the board of directors or the chairman of the meeting, meetings of
stockholders are not required to be held in accordance with the rules of
parliamentary procedure.
(c) Adjournment. Any annual or special meeting of stockholders may be
adjourned only by the chairman of the meeting from time to time to reconvene at
the same or some other time, date and place, and notice need not be given of any
such adjourned meeting if the time, date and place are announced at the meeting
at which the adjournment occurs. The stockholders present at a meeting shall not
have authority to adjourn the meeting. At the adjourned meeting at which a
quorum is present, the stockholders may transact any business which might have
been transacted at the original meeting. 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.
ARTICLE II
BOARD OF DIRECTORS
2.1 NUMBER , TERM AND VACANCIES. The number of directors who shall
constitute the whole board shall be such number as the board of directors shall
at the time have designated, except that in the absence of any such designation,
such number shall be six (6). Each director shall be elected for a term of one
year and until his or her successor is elected and qualified, except as
otherwise provided in these bylaws or required by law.
Whenever the authorized number of directors is increased between annual
meetings of the stockholders, a majority of the directors then in office shall
have the power to elect such new directors for the balance of a term and until
their successors are elected and qualified. Any decrease in the authorized
number of directors shall not become effective until the expiration of the term
of the directors then in office unless, at the time of such decrease, there
shall be vacancies on the board which are being eliminated by the decrease.
Any vacancy occurring on the board for any cause shall be filled by a
majority of the remaining members of board, although such majority is less than
a quorum.
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<PAGE> 6
2.2 REGULAR MEETINGS. A regular meeting of the board of directors
shall be held without notice other than this bylaw immediately after, and at the
same place as, the annual meeting of stockholders.
2.3 SPECIAL MEETINGS. Special meetings of the board of directors may
be called by the president or any two directors. The person or persons
authorized to call special meetings of the board of directors may fix any place
in or out of Delaware as the place for holding any special meeting of the board
of directors called by them.
2.4 NOTICE. Notice of the date, time and place of any special meeting
of the board of directors shall be given at least 24 hours prior to the meeting
by notice communicated in person, by telephone, telegraph, teletype, fax, other
form of wire or wireless communication, mail or private carrier. If written,
notice shall be effective at the earliest of (a) when received, (b) three days
after its deposit in the United States mail, as evidenced by the postmark, if
mailed postpaid and correctly addressed, or (c) on the date shown on the return
receipt, if sent by registered or certified mail, return receipt requested and
the receipt is signed by or on behalf of the addressee. Notice by all other
means shall be deemed effective when received by or on behalf of the director.
2.5 COMMITTEES. The board 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 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 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, shall have and may exercise all the
powers and authority of the board 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.
Unless the board otherwise provides, each committee designated by the
board 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 conducts its business pursuant to Article II of these
bylaws.
ARTICLE III
OFFICERS
3.1 APPOINTMENT. The board of directors at its first meeting following
its election each year shall appoint a president and a secretary. The board of
directors may
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<PAGE> 7
appoint any other officers, assistant officers and agents. Any two or more
offices may be held by the same person.
3.2 COMPENSATION. The corporation may pay its officers reasonable
compensation for their services as fixed from time to time by the board of
directors.
3.3 TERM. The term of office of all officers commences upon their
appointment and continues until their successors are appointed or until their
resignation or removal.
3.4 REMOVAL. Any officer or agent appointed by the board of directors
or the president may be removed by the board of directors at any time with or
without cause.
3.5 VACANCIES. Any vacancy occurring in any office of the corporation
by death, resignation, removal or otherwise shall be filled by the board of
directors.
3.6 PRESIDENT. Unless otherwise determined by the board of directors,
the president shall be the chief executive officer of the corporation and,
subject to the control of the board of directors, shall be responsible for the
general operation of the corporation. The president shall have any other duties
and responsibilities prescribed by the board of directors. Unless otherwise
determined by the board of directors, the president shall have authority to vote
any shares of stock or other equity interest owned by the corporation and to
delegate this authority to any other officer.
3.7 VICE PRESIDENTS. Each vice president shall perform duties and
responsibilities prescribed by the board of directors or the president. The
board of directors or the president may confer a special title upon a vice
president.
3.8 SECRETARY. The secretary shall record and keep the minutes of all
meetings of the directors and stockholders in one or more books provided for
that purpose and perform any duties prescribed by the board of directors or the
president.
ARTICLE IV
CERTIFICATES FOR SHARES
Certificates representing shares of the corporation shall be signed,
either manually or in facsimile, by two officers of the corporation, one of whom
shall be the chairman of the board, the vice chairman of the board, the
president or a vice president one ofwhom shall be the treasurer, an assistant
treasurer, the secretary or an assistant secretary of the corporation.
ADOPTED BY BOARD OF DIRECTORS: MARCH 17, 2000
7
<PAGE> 1
EXHIBIT 10.6
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
3
<PAGE> 4
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 10.7
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.
2
<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
3
<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.
4
<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.
5
<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
6
<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.
7
<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
8
<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;
9
<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
10
<PAGE> 13
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)
11
<PAGE> 14
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> 55
WEBRIDGE, INC.
AMENDMENT TO
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
This Amendment to the Webridge, Inc. Amended and Restated Investors'
Rights Agreement dated as of December 22, 1999 (the "Investors' Rights
Agreement"), is entered into as of March 20, 2000 among Webridge, Inc. (the
"Company"), Comdisco, Inc. ("Comdisco") and Investors holding at least 60
percent of the Registrable Securities then outstanding, as required under
Section 3.7 of the Investors' Rights Agreement for an amendment. Unless
otherwise defined herein, capitalized terms used herein have the definitions set
forth in the Investors' Rights Agreement.
1. Sale of Series B Preferred Stock. Concurrently with the execution of
this Amendment, the Company is selling to Comdisco, and Comdisco is purchasing,
19,724 shares of the Company's Series B Preferred Stock.
3. Investors' Rights Agreement Amendment. Upon signing this Amendment,
Comdisco shall for all purposes be deemed an "Investor" under the Investors'
Rights Agreement and the shares of Company Common Stock issued upon conversion
of the 19,724 shares of Series B Preferred Stock purchased by Comdisco shall be
deemed "Registrable Securities" under the Investors' Rights Agreement.
IN WITNESS WHEREOF, the parties have executed this Amendment effective
as of the date written above.
THE COMPANY:
WEBRIDGE, INC.
By:
--------------------------------------------
Gary N. Fielland
President and Chief Executive Officer
[Signature pages follow]
<PAGE> 56
INVESTORS:
COMDISCO, INC.
By:
-------------------------------------------
(signature)
Name:
------------------------------------------
Title:
-----------------------------------------
Address for Notices:
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
SIGNATURE PAGE TO WEBRIDGE, INC.
AMENDMENT TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 57
SEVIN ROSEN FUND V L.P.
By: SRB Associates V L.P.
Its General Partner
By:
-------------------------------------------
(signature)
Name:
------------------------------------------
Title:
-----------------------------------------
SEVIN ROSEN V. AFFILIATES FUND L.P.
By: SRB Associates V L.P.
Its General Partner
By:
-------------------------------------------
(signature)
Name:
------------------------------------------
Title:
-----------------------------------------
SEVIN ROSEN BAYLESS MANAGEMENT COMPANY
By:
-------------------------------------------
(signature)
Name:
------------------------------------------
Title:
-----------------------------------------
Address: c/o The Sevin Rosen Funds
13455 Noel Road, Suite1670
Dallas, Texas 75240
SIGNATURE PAGE TO WEBRIDGE, INC.
AMENDMENT TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 58
OLYMPIC VENTURE PARTNERS IV, L.P.
By: OVMIC IV, L.L.C., General Partner
By:
-------------------------------------------
(signature)
Name:
------------------------------------------
Title:
-----------------------------------------
Address: 2420 Carillon Point
Kirkland, Washington
OVP IV ENTREPRENEURS FUND, L.P.
By: OVMC IV, L.L.C., General Partner
By:
-------------------------------------------
(signature)
Name:
------------------------------------------
Title:
-----------------------------------------
Address: 2420 Carillon Point
Kirkland, Washington 98033
SIGNATURE PAGE TO WEBRIDGE, INC.
AMENDMENT TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 59
MANCHESTER BRIDGE PRINCIPAL LLC
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.
AMENDMENT TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 60
-----------------------------------------------
Gary N. Fielland
Address: 11255 NW Ridge Road
Portland, Oregon 97229
SIGNATURE PAGE TO WEBRIDGE, INC.
AMENDMENT TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 1
EXHIBIT 10.9
WEBRIDGE, INC.
2000 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 any affiliate of
the Company and (2) selected nonemployee agents, consultants, advisers and
independent contractors of the Company or any affiliate of the Company.
2. SHARES SUBJECT TO THE PLAN. Subject to adjustment as provided below
and in Section 11, 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 be 200,000 shares, which shall be increased
automatically on the first day of the second month of each fiscal year beginning
on February 1, 2001, by the lesser of 3,000,000 shares of Common Stock or (b)
5.0% of the adjusted average shares of the Common Stock outstanding used to
calculate fully diluted earnings per share as reported in the Company's annual
financial statements for the preceding fiscal year. If an option or performance
unit granted under the Plan expires, terminates or is canceled, the unissued
shares subject to that option or performance unit shall again be available under
the Plan. If shares sold or awarded as a bonus under the Plan are forfeited to
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 as of the first
day the Company's Common Stock is publicly traded on the Nasdaq National Market.
No option or performance unit granted under the Plan shall become exercisable,
however, until the Plan is approved by the affirmative vote of the holders of a
majority of the shares of Common Stock represented at a stockholders meeting at
which a quorum is present or by means of consent resolutions, and any awards
under the Plan before approval shall be conditioned on and subject to that
approval. Subject to this limitation, options 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
the 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 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 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 deems 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 any committee
of the Board of Directors (the "Committee") any or all authority for
administration of the Plan. If authority is delegated to the 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, (ii) that
only the Board of Directors may amend or terminate the Plan as provided in
Sections 3 and 12 and (iii) that if the Committee includes officers of the
Company, the Committee shall not be permitted to grant options to persons who
are officers of the Company.
5. TYPES OF AWARDS; ELIGIBILITY, LIMITATIONS. The Board of Directors may,
from time to time, take the following action, 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
Sections 6(a) and 6(b); (ii) grant options other than Incentive Stock Options
("Non-Statutory Stock Options") as provided in Sections 6(a) and 6(c); (iii)
award stock bonuses as provided in Section 7; (iv) sell shares subject to
restrictions as provided in Section 8; (v) grant cash bonus rights as provided
in Section 9; and (vi) grant performance units as provided in Section 10. Awards
may be made to employees, including employees who are officers or directors, and
to other individuals described in Section 1 selected by the Board of Directors;
provided, however, that only employees of the Company or any affiliate of the
Company are 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.
Subject to adjustment as provided in Section 11, no employee may be granted
options for more than an aggregate of 500,000 shares of Common Stock in
connection with the hiring of the employee or 200,000 shares of Common Stock in
any calendar year otherwise; provided
2
<PAGE> 3
that, to the extent the annual limitation is not fully used in any year for an
employee, any shares not used may be added to the number of shares for which
options may be granted to that employee in any future year.
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
exercise 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
(subject to the provisions of Section 6(b)) 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 Section 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 exercise the optionee is
employed by or in the service of the Company and shall have been so
employed or provided such service continuously since the date the option
was granted. Absence on leave or on account of illness or disability under
rules established by the Board of Directors shall not 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 Sections 6(a)(iv) and 12, options granted
under the Plan may be exercised from time to time over the period stated in
each option in amounts and at times prescribed by the Board of Directors,
provided that options may not be exercised for fractional shares. Unless
otherwise determined by the Board of Directors, if an optionee does not
exercise an option in any one year for the full number of shares to which
the optionee is entitled in that year, the optionee's rights shall be
cumulative and the optionee may purchase those shares in any subsequent
year 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.
3
<PAGE> 4
(iv) TERMINATION OF EMPLOYMENT OR SERVICE.
(A) GENERAL RULE. Unless otherwise determined by the Board
of Directors if an optionee's employment or service with the Company
terminates for any reason other than because of physical disability or
death as provided in Sections 6(a)(iv)(B) and (C), his or her option
may be exercised at any time before the expiration date of the option
or the expiration of 30 days after the date of 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 termination.
(B) TERMINATION BECAUSE OF TOTAL DISABILITY. Unless
otherwise determined by the Board of Directors, if an optionee's
employment or service with the Company terminates because of total
disability, his or her option may be exercised at any time before the
expiration date of the option or the expiration of 12 months after the
date of 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 termination. The term "total disability" means a medically
determinable mental or physical impairment that is expected to result
in death or has lasted or is expected to last for a continuous period
of 12 months or more and that causes the optionee to be unable, in the
opinion of the Company and two independent physicians, to perform his
or her duties as an employee, director, officer or consultant of the
Company and to be engaged in any substantial gainful activity. Total
disability shall be deemed to have occurred on the first day after the
two independent physicians have furnished their opinion of total
disability to the Company and the Company has reached an opinion of
total disability.
(C) TERMINATION BECAUSE OF DEATH. Unless otherwise
determined by the Board of Directors, if an optionee dies while
employed by or providing service to the Company, his or her option may
be exercised at any time before the expiration date of the option or
the expiration of 12 months after the date of death, whichever is the
shorter period, but only if and to the extent the optionee was
entitled to exercise the option at the date of death and only by the
person or persons to whom the 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.
(D) AMENDMENT OF EXERCISE PERIOD APPLICABLE TO TERMINATION.
The Board of Directors, at the time of grant or, with respect to an
option that is not an Incentive Stock Option, at any time thereafter,
may extend the 30-day and 12-month exercise periods any length of time
not longer than the original expiration date of the option, and may
increase the
4
<PAGE> 5
portion of an option that is exercisable, subject to terms and
conditions determined by the Board of Directors.
(E) FAILURE TO EXERCISE OPTION. To the extent that the
option of any deceased optionee or any optionee whose employment or
service terminates is not exercised within the applicable period, all
further rights to purchase shares pursuant to the option shall cease
and terminate.
(v) PURCHASE OF SHARES. Unless the Board of Directors
determines otherwise, shares may be acquired pursuant to an option granted
under the Plan only upon the Company's receipt of written notice from the
optionee of the optionee's intention to exercise, specifying the number of
shares for which the optionee desires to exercise the option and the date
on which the optionee desires to complete the transaction, and, if required
to comply with the Securities Act of 1933, containing a representation that
it is the optionee's intention to acquire the shares for investment and not
with a view to distribution. Unless the Board of Directors determines
otherwise, on or before the date specified for completion of the purchase
of shares pursuant to an option exercise, the optionee must pay the Company
the full purchase price of those shares in cash (including, with the
consent of the Board of Directors, cash that may be the proceeds of a loan
from the Company (provided that, with respect to an Incentive Stock Option,
the loan is approved at the time of 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 the closing or last sale
price of the Common Stock last reported before the time the option is
exercised, if the Common Stock is publicly traded, or another value of the
Common Stock as 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. 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 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.
The Board of Directors may permit an optionee to pay the exercise price
upon the exercise of an option by authorizing a third party to sell shares
(or a sufficient portion of the shares) acquired upon exercise of the
option and remit to the Company a sufficient portion of the sale proceeds
to pay the entire exercise price and any tax withholding resulting from the
exercise. 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 (less the number of any shares surrendered in
payment for the exercise price or withheld to satisfy withholding
requirements).
(b) INCENTIVE STOCK OPTIONS. Incentive Stock Options shall be
subject to the following additional terms and conditions:
(i) LIMITATION ON AMOUNT OF GRANTS. If the aggregate fair
market value of stock (determined as of the date the option is granted) for
which Incentive Stock Options granted under this Plan (and any other stock
incentive plan of the Company or its parent or subsidiary corporations) are
exercisable for the first time by an employee during any calendar year
exceeds $100,000, the portion of the option or options not exceeding
$100,000 will be treated as an Incentive Stock Option and the portion of
the option exceeding $100,000 will be treated as a Non-Statutory Stock
Option. The preceding sentence will be applied by taking options into
account in the order in which they were granted. The Company may designate
stock that is treated as acquired pursuant to exercise of an option that is
in part an Incentive Stock Option and in part a Non-Statutory Stock Option
as Incentive Stock Option stock by issuing a separate certificate for that
stock and identifying the certificate as Incentive Stock Option stock in
its stock records. In the absence of such a designation, each share of
stock issued pursuant to exercise of the option will be treated in part as
Incentive Stock Option stock and in part as Non-Statutory Stock Option
stock.
(ii) DURATION OF OPTIONS. Subject to Sections 6(a)(ii),
6(a)(iv) and 11, 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.
(iii) OPTION PRICE. The option price per share shall be
determined by the Board of Directors at the time of grant. Except as
provided in Section 6(b)(ii), the option price shall not be less than 100
percent of the fair market value of the Common Stock covered by the
Incentive Stock Option at the date the option is granted. The fair market
value shall be the closing or last sale price of the Common Stock last
reported before the time the option is granted, if the stock is publicly
traded, or another value of the Common Stock as specified by the Board of
Directors.
6
<PAGE> 7
(iv) LIMITATION ON TIME OF GRANT. No Incentive Stock
Option shall be granted on or after the 10th 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 Section 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 any other restrictions determined by the
Board of Directors. 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,
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 any consideration (including promissory notes and services) 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 concerning transferability, repurchase by
the Company and forfeiture of the shares issued, together with any other
restrictions determined by the Board of Directors. All Common Stock issued
pursuant to this Section 8 shall be subject to a purchase agreement, which shall
be executed by the Company and the prospective recipient of the shares before
the delivery of certificates representing the 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
7
<PAGE> 8
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. 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 bonuses awarded or previously awarded and (iii) shares sold or
previously sold under the Plan. Cash bonus rights will be subject to any rules,
terms and conditions the Board of Directors determines. 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 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, 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 exercise over the total option price for the
shares by the applicable bonus percentage. The bonus percentage applicable to a
bonus right, including a previously granted bonus right, may be changed from
time to time at the sole discretion of 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 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 Section
8 will entitle the recipient to a cash bonus when the shares are purchased or
restrictions, if any, to which the
8
<PAGE> 9
stock is subject lapse. Any cash bonus right granted in connection with shares
purchased pursuant to Section 8 shall terminate and may not be exercised if 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 this Section 9 the amount necessary to satisfy any applicable
federal, state and local withholding requirements.
10. PERFORMANCE UNITS. 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 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
stockholders' equity, return on invested capital or any other goal the Board of
Directors establishes. If 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. If 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 a
combination of both, and may be made when earned, or vested and deferred, as the
Board of Directors determines. Deferred awards may earn interest on the terms
and at a rate determined by the Board of Directors. 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. 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 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 that number of shares that would
satisfy the withholding amount due or by delivering Common Stock to the Company
to satisfy the withholding amount. 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.
9
<PAGE> 10
11. CHANGES IN CAPITAL STRUCTURE.
(a) STOCK SPLITS; STOCK 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, dividend payable in
shares, recapitalization or reclassification, appropriate adjustment shall be
made by the Board of Directors in the number and kind of shares available for
grants 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, 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,
reorganization or liquidation to which the Company 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 possible under the
structure of the Transaction, select one of the following alternatives for
treating outstanding options under the Plan:
(i) Outstanding options shall remain in effect in accordance
with their terms.
(ii) Outstanding options shall be converted into options to
purchase stock in the corporation that is the surviving or acquiring
corporation in the Transaction. The amount, type of securities subject
thereto and exercise price of the converted options shall be determined by
the Board of Directors of the Company, taking into account the relative
values of the companies involved in the Transaction and the exchange rate,
if any, used in determining shares of the surviving corporation to be
issued to holders of shares of the Company. 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 shall provide a period of up to 30
days before the consummation of the Transaction during which outstanding
options may be exercised to the extent then exercisable, and upon the
expiration of that 30-day period, all unexercised options shall immediately
terminate. The Board of Directors may, in its sole discretion, accelerate
the exercisability of options so that they are exercisable in full during
that 30-day period.
10
<PAGE> 11
(c) DISSOLUTION OF THE COMPANY. In the event of the dissolution of
the Company, options shall be treated in accordance with Section 11(b)(iii).
(d) RIGHTS ISSUED BY ANOTHER CORPORATION. The Board of Directors
may also grant options, performance units, stock bonuses and cash bonuses and
issue restricted stock under the Plan with 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 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.
12. AMENDMENT OF THE PLAN. The Board of Directors may at any time modify
or amend the Plan in any respect. Except as provided in Sections 6(a)(iv),
6(b)(iv), 9 and 10, however, no change in an award already granted shall be made
without the written consent of the holder of the award.
13. APPROVALS. The Company's obligations 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
state or federal securities laws.
14. 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 interfere in any way with the
Company's right to terminate the employee's employment at any time, for any
reason, with or without cause, or to decrease the employee's compensation or
benefits, or (ii) confer upon any person engaged by the Company any right to be
retained or employed by the Company or to the continuation, extension, renewal
or modification of any compensation, contract or arrangement with or by the
Company.
15. RIGHTS AS A STOCKHOLDER. The recipient of any award under the Plan
shall have no rights as a stockholder with respect to any Common Stock until the
date of issue to the recipient of a stock certificate for those 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 before the date such
stock certificate is issued.
Adopted: _______________, 2000
11
<PAGE> 1
EXHIBIT 10.10
WEBRIDGE, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE OF THE PLAN. Webridge, Inc. (the "COMPANY") believes that
ownership of shares of its common stock by employees of the Company and its
Participating Subsidiaries (hereinafter defined) is desirable as an incentive to
better performance and improvement of profits, and as a means by which employees
may share in the rewards of growth and success. The purpose of the Company's
2000 Employee Stock Purchase Plan (the "PLAN") is to provide a convenient means
by which employees of the Company and Participating Subsidiaries may purchase
the Company's shares through payroll deductions and a method by which the
Company may assist and encourage such employees to become share owners.
2. SHARES RESERVED FOR THE PLAN. There are 300,000 shares of the
Company's authorized but unissued or reacquired Common Stock reserved for
purposes of the Plan, which shall be increased automatically on the first day of
the second month of each fiscal year beginning on February 1, 2001, by the
lesser of (a) 500,000 shares of Common Stock or (b) 1.0% of the adjusted average
shares of Common Stock outstanding used to calculate fully diluted earnings per
share as reported in the Company's annual financial statements for the preceding
fiscal year. The number of shares reserved for the Plan is subject to adjustment
in the event of any stock dividend, stock split, combination of shares,
recapitalization or other change in the outstanding Common Stock of the Company.
The determination of whether an adjustment shall be made and the manner of any
such adjustment shall be made by the Board of Directors of the Company, which
determination shall be conclusive.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Board of Directors. The Board of Directors may promulgate rules and regulations
for the operation of the Plan, adopt forms for use in connection with the Plan,
and decide any question of interpretation of the Plan or rights arising
thereunder. The Board of Directors may consult with counsel for the Company on
any matter arising under the Plan. All determinations and decisions of the Board
of Directors shall be conclusive. Notwithstanding the foregoing, the Board of
Directors, if it so desires, may delegate to the Compensation Committee of the
Board the authority for general administration of the Plan.
4. ELIGIBLE EMPLOYEES. Except as indicated below, all full-time
employees of the Company and all full-time employees of each of the Company's
subsidiary corporations which is designated by the Board of Directors of the
Company as a participant in the Plan (such participating subsidiary being
hereinafter called a "PARTICIPATING SUBSIDIARY") are eligible to participate in
the Plan. Any employee who would, after a purchase of shares under the Plan, own
or be deemed (under Section 424(d) of the Internal Revenue Code of 1986, as
amended (the "CODE")) to own stock (including stock subject to any outstanding
options held by the employee) possessing 5 percent or more of the total combined
voting power or value of all classes of stock
<PAGE> 2
of the Company or any parent or subsidiary of the Company, shall be ineligible
to participate in the Plan. A "full-time employee" is one who is in the active
service of the Company or a Participating Subsidiary on the applicable
Subscription Deadline (as defined below) excluding, however, any employee whose
customary employment is 20 hours or less per week or whose customary employment
is for not more than five months per calendar year.
5. OFFERINGS.
(a) OFFERINGS AND PURCHASE PERIODS. The Plan shall be implemented
by (1) an initial offering ("INITIAL OFFERING") beginning on the first day that
the Company's Common Stock is publicly traded on the Nasdaq National Market and
ending on August 10, 2002 and (2) a series of one-year offerings ("SUBSEQUENT
OFFERINGS" and, together with the Initial Offering, the "OFFERINGS"), with a new
Subsequent Offering commencing on August 10 of each year beginning with August
10, 2002 and ending on August 10 of the following year. The first day of each
Offering is the "OFFERING DATE." The Initial Offering shall include four
purchase periods ("PURCHASE PERIODS"), the first of which shall commence on the
first day of the Initial Offering and end on February 10, 2001 and the others of
which shall be consecutive six-month periods thereafter ending on August 10,
2001, February 10, 2002 and August 10, 2002. Each Subsequent Offering shall
include two six-month Purchase Periods ending on August 10 and February 10 of
that Offering. The last day of each Purchase Period is a "PURCHASE DATE" for the
applicable Offering.
(b) GRANTS; LIMITATIONS. On each Offering Date, each eligible
employee shall be granted an option under the Plan to purchase shares of Common
Stock on the Purchase Dates for the Offering for the price determined under
paragraph 7 of the Plan exclusively through payroll deductions authorized under
paragraph 6 of the Plan; provided, however, that (a) no option shall permit the
purchase of more than 2,500 shares, and (b) no option may be granted under the
Plan that would allow an employee's right to purchase shares under all stock
purchase plans of the Company and its parents and subsidiaries to which Section
423 of the Code applies to accrue at a rate that exceeds $25,000 of fair market
value of shares (determined at the date of grant) for each calendar year in
which such option is outstanding.
6. PARTICIPATION IN THE PLAN.
(a) INITIATING PARTICIPATION. An eligible employee may participate in an
Offering under the Plan by filing with the Company a subscription and payroll
deduction authorization on a form furnished by the Company. The subscription and
payroll deduction authorization must be filed no later than 10 days prior to the
Offering Date (the "SUBSCRIPTION DEADLINE"), except that for the Initial
Offering the Subscription Deadline shall be the earlier of (i) the Offering Date
or (ii) four business days before the first payday occurring on or after the
Offering Date. Once filed, a subscription and payroll deduction authorization
shall remain in effect for subsequent Offerings unless amended or terminated.
The payroll deduction authorization will authorize the employing corporation to
make payroll deductions from each of the participant's
2
<PAGE> 3
paychecks during the Offering other than a paycheck issued on the Offering Date.
The amount to be deducted shall be designated by the participant in the payroll
deduction authorization and must be a whole percentage of not less than 2
percent and not more than 15 percent of the gross amount of base pay plus
commissions, if any, payable to the participant for the period covered by each
paycheck. If payroll deductions are made by a Participating Subsidiary, that
corporation will promptly remit the amount of the deductions to the Company.
(b) AMENDING OR TERMINATING PARTICIPATION. After a participant
has begun participating in the Plan by initiating payroll deductions, the
participant may not amend the payroll deduction authorization except for an
amendment effective for the first paycheck of a calendar quarter, but may
terminate participation in the Plan at any time prior to the tenth day before a
Purchase Date by written notice to the Company. A permitted change in payroll
deductions shall be effective for any pay period only if written notice is
received by the Company at least five business days prior to the payday for that
pay period. Participation in the Plan shall also terminate when a participant
ceases to be an eligible employee for any reason, including death or retirement.
A participant may not reinstate participation in the Plan with respect to a
particular Offering after once terminating participation in the Plan with
respect to that Offering. Upon termination of a participant's participation in
the Plan, all amounts deducted from the participant's pay and not previously
used to purchase shares under the Plan shall be either returned to the
participant or, if so elected by a participant who continues to be an eligible
employee, retained in the participant's account and applied to purchase shares
on the next Purchase Date under the Plan.
7. OPTION PRICE. The price at which shares shall be purchased on any
Purchase Date in an Offering shall be the lower of (a) 85% of the fair market
value of a share of Common Stock on the Offering Date of the Offering or (b) 85%
of the fair market value of a share of Common Stock on the Purchase Date. The
fair market value of a share of Common Stock on any date shall be the closing
price on the immediately preceding trading day as reported by the Nasdaq
National Market or, if the Common Stock is not reported on the Nasdaq National
Market, such other reported value of the Common Stock as shall be specified by
the Board of Directors. On the Offering Date for the Initial Offering, the
closing price on the immediately preceding trading day shall be deemed to be the
public offering price set forth in the final prospectus filed with the
Securities and Exchange Commission in connection with the initial public
offering of the Common Stock.
8. SPECIAL RULES FOR NEW EMPLOYEES. Each Purchase Date in an Offering
other than the last Purchase Date of the Offering shall also be an "INTERIM
OFFERING DATE" and the date 10 days prior to an Interim Offering Date shall be a
"SUBSCRIPTION DEADLINE" applicable to that Interim Offering Date. If a person
becomes a full-time employee after the Subscription Deadline for an Offering
under the Plan and before the Subscription Deadline applicable to any Interim
Offering Date, the new employee will be granted an option on that Interim
Offering Date (but not on any subsequent Interim Offering Date) having the same
terms and conditions as the options granted on the Offering Date, except that
for purposes of determining under paragraph 7 the price at which shares shall be
purchased in an Offering by a new employee, "the fair market value of
3
<PAGE> 4
a share of Common Stock on the Offering Date" shall be deemed to be the higher
of the fair market value of a share of Common Stock on the Interim Offering Date
or the fair market value of a share of Common Stock on the initial Offering Date
for such Offering. To participate in the current Offering, a new employee must
submit a subscription and payroll deduction authorization as provided for in
paragraph 6(a) no later than the Subscription Deadline applicable to the Interim
Offering Date.
9. PURCHASE OF SHARES. All amounts withheld from the pay of a
participant shall be credited to his or her account under the Plan by the
Custodian appointed under paragraph 10. No interest will be paid on such
accounts, unless otherwise determined by the Board of Directors. On each
Purchase Date, the amount in the account of each participant will be applied to
the purchase of whole shares by such participant from the Company at the price
determined under paragraph 7. Any cash balance remaining in a participant's
account after a Purchase Date because it was less than the amount required to
purchase a full share shall be retained in the participant's account for the
next Purchase Period. Any other amounts in a participant's account after a
Purchase Date will be repaid to the participant.
10. DELIVERY AND CUSTODY OF SHARES. Shares purchased by participants
pursuant to the Plan will be delivered to and held in the custody of such
investment or financial firm (the "CUSTODIAN") as shall be appointed by the
Board of Directors. The Custodian may hold in nominee or street name
certificates for shares purchased pursuant to the Plan, and may commingle shares
in its custody pursuant to the Plan in a single account without identification
as to individual participants. By appropriate instructions to the Custodian on
forms to be provided for that purpose, a participant may from time to time sell
all or part of the shares held by the Custodian for the participant's account at
the market price at the time the order is executed. By appropriate instructions
to the Custodian on forms to be provided for that purpose, a participant may
obtain (a) transfer into the participant's own name of all or part of the shares
held by the Custodian for the participant's account and delivery of such shares
to the participant, or (b) transfer of all or part of the shares held for the
participant's account by the Custodian to a regular individual brokerage account
in the participant's own name, either with the firm then acting as Custodian or
with another firm; provided, however, that no shares may be transferred under
(a) or (b) until two years after the Offering Date of the Offering (or Interim
Offering Date, if applicable) in which the shares were purchased and one year
after the Purchase Date on which the shares were purchased.
11. RECORDS AND STATEMENTS. The Custodian will maintain the records of
the Plan. As soon as practicable after each Purchase Date each participant will
receive a statement showing the activity of his account since the preceding
Purchase Date and the balance on the Purchase Date as to both cash and shares.
Participants will be furnished such other reports and statements, and at such
intervals, as the Board of Directors shall determine from time to time.
12. EXPENSE OF THE PLAN. The Company will pay all expenses incident to
operation of the Plan, including costs of record keeping, accounting fees, legal
fees, commissions and issue or transfer taxes on purchases pursuant to the Plan
and on delivery of shares to a participant or into
4
<PAGE> 5
his or her brokerage account. The Company will not pay expenses, commissions or
taxes incurred in connection with sales of shares by the Custodian at the
request of a participant. Expenses to be paid by a participant will be deducted
from the proceeds of sale prior to remittance.
13. RIGHTS NOT TRANSFERABLE. The right to purchase shares under this
Plan is not transferable by a participant, and such right is exercisable during
the participant's lifetime only by the participant. Upon the death of a
participant, any cash withheld and not previously applied to purchase shares,
together with any shares held by the Custodian for the participant's account
shall be transferred to the persons entitled thereto under the laws of the state
of domicile of the participant upon a proper showing of authority.
14. DIVIDENDS AND OTHER DISTRIBUTIONS. Cash dividends and other cash
distributions, if any, on shares held by the Custodian will be paid currently to
the participants entitled thereto unless the Company subsequently adopts a
dividend reinvestment plan and the participant directs that his or her cash
dividends be invested in accordance with such plan. Stock dividends and other
distributions in shares of Common Stock of the Company on shares held by the
Custodian shall be issued to the Custodian and held by it for the account of the
respective participants entitled thereto.
15. VOTING AND SHAREHOLDER COMMUNICATIONS. In connection with voting on
any matter submitted to the shareholders of the Company, the Custodian will
furnish to each participant a proxy authorizing the participant to vote the
shares held by the Custodian for his account. Copies of all general
communications to shareholders of the Company will be sent to participants in
the Plan.
16. TAX WITHHOLDING. Each participant who has purchased shares under the
Plan 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 determined by the Company to be required. If the Company
determines that additional withholding is required beyond any amount deposited
at the time of purchase, the participant shall pay such amount to the Company on
demand. 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.
17. RESPONSIBILITY AND INDEMNITY. Neither the Company, its Board of
Directors, the Custodian, any Participating Subsidiary, nor any member, officer,
agent, or employee of any of them, shall be liable to any participant under the
Plan for any mistake of judgment or for any omission or wrongful act unless
resulting from gross negligence, willful misconduct or intentional misfeasance.
The Company will indemnify and save harmless its Board of Directors, the
Custodian and any such member, officer, agent or employee against any claim,
loss, liability or expense arising out of the Plan, except such as may result
from the gross negligence, willful misconduct or intentional misfeasance of such
entity or person.
5
<PAGE> 6
18. CONDITIONS AND APPROVALS. The obligations of the Company under the
Plan shall be subject to compliance with all applicable state and federal laws
and regulations, compliance with the rules of any stock exchange on which the
Company's securities may be listed, and approval of such federal and state
authorities or agencies as may have jurisdiction over the Plan or the Company.
The Company will use its best effort to comply with such laws, regulations and
rules and to obtain such approvals.
19. AMENDMENT OF THE PLAN. The Board of Directors of the Company may
from time to time amend the Plan in any and all respects, except that without
the approval of the shareholders of the Company, the Board of Directors may not
increase the number of shares reserved for the Plan (except for automatic
increases and adjustments authorized in paragraph 2, above) or decrease the
purchase price of shares offered pursuant to the Plan.
20. TERMINATION OF THE PLAN. The Plan shall terminate on the tenth
anniversary of the date of the Initial Offering, provided that the Board of
Directors in its sole discretion may at any time terminate the Plan without any
obligation on account of such termination, except as hereinafter in this
paragraph provided. Upon termination of the Plan, the cash and shares, if any,
held in the account of each participant shall forthwith be distributed to the
participant or to the participant's order, provided that if prior to the
termination of the Plan, the Board of Directors and shareholders of the Company
shall have adopted and approved a substantially similar plan, the Board of
Directors may in its discretion determine that the account of each participant
under this Plan shall be carried forward and continued as the account of such
participant under such other plan, subject to the right of any participant to
request distribution of the cash and shares, if any, held for his account.
6
<PAGE> 1
EXHIBIT 10.11
WEBRIDGE, INC.
SERIES B PREFERRED
STOCK PURCHASE AGREEMENT
DECEMBER 24, 1998
<PAGE> 2
TABLE OF CONTENTS
Page
1. Purchase and Sale of Stock .........................................1
1.1 Sale and Issuance of Series B Preferred Stock .............. 1
1.2 Closing .....................................................1
1.3 Subsequent Sale of Series B Preferred Stock .................1
2. Representations and Warranties of the Company ......................2
2.1 Organization, Good Standing and Qualification ...............2
2.2 Capitalization and Voting Rights ............................2
2.3 Subsidiaries ................................................3
2.4 Authorization ...............................................3
2.5 Valid Issuance of Preferred and Common Stock ................3
2.6 Governmental Consents .......................................3
2.7 Offering ....................................................4
2.8 Litigation ..................................................4
2.9 Proprietary Information and Inventions Agreements ...........4
2.10 Patents and Trademarks ......................................4
2.11 Compliance with Other Instruments ...........................5
2.12 Agreements; Action ..........................................5
2.14 Permits .....................................................6
2.15 Disclosure ..................................................6
2.16 Business Plan ...............................................7
2.17 Registration Rights .........................................7
2.18 Corporate Documents .........................................7
2.19 Title to Property and Assets ................................7
2.20 Section 1202 Compliance .....................................7
2.21 Financial Statements ........................................8
2.22 Changes. ....................................................8
2.23 Insurance ...................................................9
2.24 Employee Benefit Plans ......................................9
2.25 Tax Returns and Payments ...................................10
2.26 Labor Agreements and Actions ...............................10
2.27 Environmental and Safety Laws ..............................10
2.28 Minute Books ...............................................10
2.29 Year 2000 ..................................................10
3. Representations and Warranties of the Investors ...................11
3.1 Authorization ..............................................11
3.2 Purchase Entirely for Own Account ..........................11
3.3 Disclosure of Information ..................................11
3.4 Investment Experience ......................................11
3.5 Accredited Investor ........................................12
i
<PAGE> 3
3.6 Restricted Securities ......................................12
3.7 Further Limitations on Disposition .........................12
3.8 Legends ....................................................12
3.9 Manchester Bridge Principal LP .............................13
4. Conditions of Investor's Obligations at Closing ...................13
4.1 Representations and Warranties .............................13
4.2 Performance ................................................13
4.3 Compliance Certificate .....................................13
4.4 Qualifications .............................................13
4.5 Proceedings and Documents ..................................13
4.6 Bylaws .....................................................14
4.7 Board of Directors .........................................14
4.8 Opinion of Company Counsel .................................14
4.9 Investors' Rights Agreement ................................14
4.10 Co-Sale Agreement ..........................................14
5. Conditions of the Company's Obligations at Closing ................14
5.1 Representations and Warranties .............................14
5.2 Qualifications .............................................14
6. Miscellaneous .....................................................14
6.1 Survival of Warranties .....................................14
6.2 Successors and Assigns .....................................14
6.3 Governing Law ..............................................15
6.4 Counterparts ...............................................15
6.5 Titles and Subtitles .......................................15
6.6 Notices ....................................................15
6.7 Finders' Fees ..............................................15
6.8 Expenses ...................................................15
6.9 Amendments and Waivers .....................................15
6.10 Severability ...............................................16
6.11 Aggregation of Stock .......................................16
6.12 Entire Agreement ...........................................16
SCHEDULE A Schedule of Investors
EXHIBIT A Amended and Restated Certificate of Incorporation
EXHIBIT B Amended and Restated Investors' Rights Agreement
EXHIBIT C Amended and Restated First Refusal and Co-Sale Agreement
EXHIBIT D Opinion of Counsel for the Company
EXHIBIT E List of Stockholders and Optionholders
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STOCK PURCHASE AGREEMENT
THIS SERIES B PREFERRED STOCK PURCHASE AGREEMENT is made as of December 24,
1998 by and among Webridge, Inc., a Delaware corporation (the "Company"), and
the investors listed on Schedule A hereto, each of which is herein referred to
as an "Investor."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
1.1 Sale and Issuance of Series B Preferred Stock.
(a) The Company shall adopt and file with the Secretary of State
of Delaware on or before the Closing (as defined below), the Amended and
Restated Certificate of Incorporation in the form attached hereto as Exhibit A
(the "Restated Certificate").
(b) Subject to the terms and conditions of this Agreement, each
Investor agrees, severally, to purchase at the Closing or pursuant to Section
1.3 and the Company agrees to sell and issue to each Investor at the Closing or
pursuant to Section 1.3, that number of shares of the Company's Series B
Preferred Stock set forth opposite each Investor's name on Schedule A hereto for
the purchase price set forth thereon.
1.2 Closing. The purchase and sale of the Series B Preferred Stock
shall take place at the offices of Stoel Rives LLP, 900 SW Fifth Avenue, Suite
2300, Portland, Oregon, at _________ on December 24, 1998 or at such other time
and place as the Company and Investors acquiring in the aggregate more than half
the shares of Series B Preferred Stock sold pursuant hereto mutually agree upon
orally or in writing (which time and place are designated as the "Closing"). At
the Closing, the Company shall deliver to each Investor a certificate
representing the Series B Preferred Stock that such Investor is purchasing
against payment of the purchase price therefor by check, wire transfer,
cancellation of indebtedness, or any combination thereof.
1.3 Subsequent Sale of Series B Preferred Stock. The Company may sell
up to the balance of the authorized number of shares of Series B Preferred Stock
not sold at the Closing to such purchasers as it shall select, at a price not
less than $1.70 per share, provided the agreement for sale is executed not later
than January 30, 1999, that the sale is consummated as soon as is reasonably
practicable thereafter, and provided further that such sale is unanimously
approved by the Board of Directors of the Company. Any such purchaser shall
become a party to this Agreement, that certain Amended and Restated Investors'
Rights Agreement of even date herewith, by and among the Company, the Investors,
certain other parties and Founders (as defined therein), the form of which is
attached hereto as Exhibit B (the "Investors' Rights Agreement"), and that
certain Amended and Restated First Refusal and Co-Sale Agreement of even date
herewith, by and among the Company, the Investors, certain other parties and the
Founders (as defined therein), the form of which is attached hereto as
<PAGE> 5
Exhibit C (the "Co-Sale Agreement"), and shall have the rights and obligations
hereunder and thereunder, unless such purchaser enters into an acquisition
agreement that provides otherwise.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to each Investor that, except as set forth on a Schedule
of Exceptions (the "Schedule of Exceptions") furnished each Investor:
2.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted in its
Operations Plan 98 Version 1.3 dated September 1998, heretofore furnished to the
Investors ("Business Plan"). The Company is duly qualified to transact business
and is in good standing in each jurisdiction in which the failure to so qualify
would have a material adverse effect on its business or properties.
2.2 Capitalization and Voting Rights. The authorized capital of the
Company CONSISTS of:
(a) Preferred Stock. Seven million four hundred sixty-four
thousand one hundred thirty four (7,464,134) shares of Series A Preferred Stock
(the "Series A Preferred Stock"), all of which are issued and outstanding, and
five million two hundred and ninety-four thousand, one hundred and eighteen
(5,294,118) shares of Series B Preferred Stock (the "Series B Preferred Stock"),
none of which were issued or outstanding immediately prior to the Closing and up
to all of which may be sold pursuant to this Agreement. The rights, privileges
and preferences of the Series A Preferred Stock and the Series B Preferred Stock
are as stated in the Company's Restated Certificate.
(b) Common Stock. Thirty million (30,000,000) shares of Common
Stock ("Common Stock"), of which 12,346,634 shares are issued and outstanding.
(c) The outstanding shares of Common Stock and options to
purchase shares of Common Stock are owned by the stockholders and optionholders
and in the numbers specified in Exhibit E hereto.
(d) The outstanding shares of Common Stock and Series A Preferred
Stock are all duly and validly authorized and issued, fully paid and
nonassessable, and were issued in accordance with the registration or
qualification provisions of the Securities Act of 1933, as amended (the "Act")
and any relevant state securities laws or pursuant to valid exemptions
therefrom.
(e) Except for (A) the conversion privileges of the Series A
Preferred Stock and the conversion privileges of the Series B Preferred Stock to
be issued under this Agreement, (B) the rights provided in Section 2.4 of the
Investors' Rights Agreement, and (C) currently outstanding options to purchase
1,455,331 shares of Common Stock granted to service providers of the Company
pursuant to the Company's 1996 Stock Incentive Plan (the
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<PAGE> 6
"Stock Incentive Plan"), there are not outstanding any options, warrants, rights
(including conversion or preemptive rights) or agreements for the purchase or
acquisition from the Company of any shares of its capital stock. The Company has
reserved 738,169 shares of its Common Stock for purchase upon exercise of
options to be granted in the future under the Stock Incentive Plan. Except for
the Investor's Rights Agreement, the Company is not a party or subject to any
agreement or understanding, and, to the Company's knowledge, there is no
agreement or understanding between any persons and/or entities, which affects or
relates to the voting or giving of written consents with respect to any security
or by a director of the Company.
2.3 Subsidiaries. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity. The Company is not a participant in any joint venture,
partnership, or similar arrangement.
2.4 Authorization. All corporate action on the part of the Company,
its officers, directors and stockholders necessary for the authorization,
execution and delivery of this Agreement, the Investors' Rights Agreement and
the Co-Sale Agreement, the performance of all obligations of the Company
hereunder and thereunder, including approval of the Restated Certificate, and
the authorization, issuance (or reservation for issuance), sale and delivery of
the Series B Preferred Stock being sold hereunder and the Common Stock issuable
upon conversion of the Series B Preferred Stock has been taken or will be taken
prior to the Closing, and this Agreement, the Investors' Rights Agreement and
the Co-Sale Agreement constitute valid and legally binding obligations of the
Company, enforceable in accordance with their respective terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies, and (iii) to the
extent the indemnification provisions contained in the Investors' Rights
Agreement may be limited by applicable federal or state securities laws.
2.5 Valid Issuance of Preferred and Common Stock. The Series B
Preferred Stock that is being purchased by the Investors hereunder, when issued,
sold and delivered in accordance with the terms of this Agreement for the
consideration expressed herein, will be duly and validly issued, fully paid, and
nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and the Investors' Rights
Agreement and under applicable state and federal securities laws. The Common
Stock issuable upon conversion of the Series B Preferred Stock purchased under
this Agreement has been duly and validly reserved for issuance and, upon
issuance in accordance with the terms of the Restated Certificate, will be duly
and validly issued, fully paid, and nonassessable and will be free of
restrictions on transfer other than restrictions on transfer under this
Agreement and the Investors' Rights Agreement and under applicable state and
federal securities laws.
2.6 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the
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<PAGE> 7
consummation of the transactions contemplated by this Agreement except (i) the
filing of the Amended and Restated Certificate of Incorporation with the State
of Delaware and (ii) if required, qualifications or filings under the Securities
Act and applicable Blue Sky laws, which qualifications and filings will be
obtained or made and will be effective within the period required by law.
2.7 Offering. Subject in part to the truth and accuracy of each
Investor's representations set forth in Section 3 of this Agreement, the offer,
sale and issuance of the Series B Preferred Stock as contemplated by this
Agreement are exempt from the registration requirements of the Securities Act of
1933, as amended (the "Act"), and New York State securities laws, and neither
the Company nor any authorized agent acting on its behalf will take any action
hereafter that would cause the loss of such exemptions.
2.8 Litigation. There is no action, suit, proceeding or investigation
pending or, to the knowledge of the Company, currently threatened against the
Company that questions the validity of this Agreement, the Investors' Rights
Agreement or the Co-Sale Agreement, or the right of the Company to enter into
such agreements, or to consummate the transactions contemplated hereby or
thereby, or that might result, either individually or in the aggregate, in any
material adverse changes in the assets, condition, affairs or prospects of the
Company, financially or otherwise, or any change in the current equity ownership
of the Company, nor is the Company aware that there is any basis for the
foregoing. The foregoing includes, without limitation, actions, suits,
proceedings or investigations pending or, to the knowledge of the Company,
threatened (or any basis therefor known to the Company) involving the prior
employment of any of the Company's employees, their use in connection with the
Company's business of any information or techniques allegedly proprietary to any
of their former employers, or their obligations under any agreements with prior
employers. The Company is not a party or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or that the Company intends to initiate.
2.9 Proprietary Information and Inventions Agreements. Each employee,
officer and consultant of the Company has executed an Employment Agreement
relating to proprietary information and inventions in the form made available to
the Investors. The Company, after reasonable investigation, is not aware that
any of its employees, officers or consultants are in violation thereof, and the
Company will use its best efforts to prevent any such violation.
2.10 Patents and Trademarks. To the best of the Company's knowledge,
the Company has sufficient title and ownership of all patents, trademarks,
service marks, trade names, copyrights, trade secrets, information, proprietary
rights and processes, whether or not registered, necessary for its business as
now conducted and as proposed to be conducted as described in the Business Plan
(including with respect to its Mainspan product) without any conflict with or
infringement of the rights of others. There are no outstanding options,
licenses, royalties, or other agreements of any kind relating to the foregoing,
nor is the Company bound by or a party to any options, licenses or agreements of
any kind with respect
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<PAGE> 8
to the patents, trademarks, service marks, trade names, copyrights, trade
secrets, licenses, information, proprietary rights and processes of any other
person or entity. The Company has not received any communications alleging that
the Company has violated or, by conducting its business as proposed, would
violate any of the patents, trademarks, service marks, trade names, copyrights
or trade secrets or other proprietary rights of any other person or entity.
After due investigation, the Company is not aware that any of its employees is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of his or
her best efforts to promote the interests of the Company or that would conflict
with the Company's business as proposed to be conducted. Neither the execution
nor delivery of this Agreement, the Investors' Rights Agreement or the Co-Sale
Agreement, nor the carrying on of the Company's business by the employees of the
Company, nor the conduct of the Company's business as proposed, will, to the
Company's knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated. The
Company does not believe it is or will be necessary to utilize any inventions of
any of its employees (or people it currently intends to hire) made prior to
their employment by the Company.
2.11 Compliance with Other Instruments. The Company is not in
violation or default of any provision of its Restated Certificate or Bylaws, or
of any instrument, judgment, order, writ, decree or contract to which it is a
party or by which it is bound, or, to its knowledge, of any provision of any
federal or state statute, rule or regulation applicable to the Company. The
execution, delivery and performance of this Agreement, the Investors' Rights
Agreement and the Co-Sale Agreement, and the consummation of the transactions
contemplated hereby and thereby will not result in any such violation or be in
conflict with or constitute, with or without the passage of time and giving of
notice, either a default under any such provision, instrument, judgment, order,
writ, decree or contract or an event that results in the creation of any lien,
charge or encumbrance upon any assets of the Company or the suspension,
revocation, impairment, forfeiture, or nonrenewal of any material permit,
license, authorization, or approval applicable to the Company, its business or
operations or any of its assets or properties.
2.12 Agreements; Action.
(a) Except for agreements explicitly contemplated hereby and by
the Investors' Rights Agreement and Co-Sale Agreement, there are no agreements,
understandings or proposed transactions between the Company and any of its
officers, directors, affiliates, or any affiliate thereof.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or by which it is bound that may involve (i) obligations
(contingent or otherwise) of, or payments to the Company in excess of, $5,000,
or (ii) the license of any patent, copyright, trade secret or other proprietary
right to or from the Company (other than the license by the Company of
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<PAGE> 9
its software and products in the ordinary course of business), or (iii)
provisions restricting or affecting the development, manufacture or distribution
of the Company's products or services.
(c) The Company has not (i) declared or paid any dividends or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or any
other liabilities individually in excess of $5,000 or, in the case of
indebtedness and/or liabilities individually less than $5,000, in excess of
$25,000 in the aggregate, (iii) made any loans or advances to any person, other
than ordinary advances for business expenses, or (iv) sold, exchanged or
otherwise disposed of any of its assets or rights, other than the sale of its
inventory in the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
(e) The Company is not a party to and is not bound by any
contract, agreement or instrument, or subject to any restriction under its
Restated Certificate or Bylaws that adversely affects its business as now
conducted or as proposed to be conducted in the Business Plan, its properties or
its financial condition.
(f) The Company has not engaged in the past three (3) months in
any discussion (i) with any representative of any corporation or corporations
regarding the consolidation or merger of the Company with or into any such
corporation or corporations, (ii) with any corporation, partnership, association
or other business entity or any individual regarding the sale, conveyance or
disposition of all or substantially all of the assets of the Company or a
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of the Company is disposed of, or (iii) regarding any
other form of acquisition, liquidation, dissolution or winding up of the
Company.
2.13 Related-Party Transactions. No employee, officer, or director of
the Company or member of his or her immediate family is indebted to the Company,
nor is the Company indebted (or committed to make loans or extend or guarantee
credit) to any of them. To the best of the Company's knowledge, none of such
persons has any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation that competes with the Company. No
member of the immediate family of any officer or director of the Company is
directly or indirectly interested in any material contract with the Company.
2.14 Permits. The Company has all franchises, permits, licenses, and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which would materially and adversely affect the
business, properties, prospects, or financial condition of the Company, and the
Company believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be
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conducted. The Company is not in default in any material respect under any of
such franchises, permits, licenses or other similar authority.
2.15 Disclosure. The Company has fully provided each Investor with all
the information that such Investor has requested for deciding whether to
purchase the Series B Preferred Stock and all information that the Company
believes is reasonably necessary to enable such Investor to make such decision.
Neither this Agreement, the Investors' Rights Agreement or the Co-Sale
Agreement, nor any other written statements or certificates made or delivered in
connection herewith or therewith contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements herein
or therein not misleading.
2.16 Business Plan. The Business Plan previously delivered to each
Investor has been prepared in good faith by the Company and does not contain any
untrue statement of a material fact nor does it omit to state a material fact
necessary to make the statements made therein not misleading, except that with
respect to projections contained in the Business Plan, the Company represents
only that such projections were prepared in good faith and that the Company
reasonably believes there is a reasonable basis for such projections.
2.17 Registration Rights. Except as provided in the Investors' Rights
Agreement, the Company has not granted or agreed to grant any registration
rights, including piggyback rights, to any person or entity.
2.18 Corporate Documents. Except for amendments necessary to satisfy
representations and warranties or conditions contained herein (the form of which
amendments has been approved by the Investors), the Restated Certificate and
Bylaws of the Company are in the form previously made available to the
Investors.
2.19 Title to Property and Assets. The Company owns its property and
assets free and clear of all mortgages, liens, loans and encumbrances, except
such encumbrances and liens that arise in the ordinary course of business and do
not materially impair the Company's ownership or use of such property or assets.
With respect to the property and assets it leases, the Company is in compliance
with such leases and, to its knowledge, holds a valid leasehold interest free of
any liens, claims or encumbrances.
2.20 Section 1202 Compliance.
(a) The Company is a "C" corporation for federal income tax
purposes, is an "eligible corporation" as defined in Section 1202(e)(4) of the
Code and is engaged in a "qualified trade or business" as defined in Section
1202(e)(3) of the Code.
(b) During the one-year period beginning on the date one year
before the date of the Closing, the Company has not made one or more purchases
of its stock with an aggregate value (as of the time of the respective
purchases) exceeding 5% of the aggregate value of all of its stock as of the
beginning of such period.
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(c) At all times during the period that began with the formation
of the Company and ends on the Closing, the aggregate gross assets of the
Company did not exceed $50,000,000. For purposes of this representation, (i) the
amount received by the Company from the sale of its stock as contemplated herein
shall be taken into account, (ii) "aggregate gross assets" shall mean the amount
of (A) cash, (B) the aggregate fair market value of all property contributed to
the Company (or other property with a basis determined in whole or part for
federal income tax purposes by reference to the adjusted basis of property so
contributed) as of the date of such contribution, and (C) the aggregate adjusted
basis for federal income tax purposes of other property held by the Company, and
(iii) the Company shall be deemed to own its ratable share of the assets of its
subsidiaries, if any.
(d) Ten percent or less of the total value of the Company's
assets as of the Closing consists of real property that is not used in the
Company's business.
(e) Ten percent or less of the total value of the Company's
assets (in excess of liabilities) as of the Closing consists of stock or
securities in other corporations that are not subsidiaries of the Company (other
than assets described in Section 1202(e)(6) of the Code).
2.21 Financial Statements. The Company has delivered to each Investor
its unaudited financial statements (balance sheet, income statement and
statement of cash flows), as of December 15, 1998, and for the 349 day period
then ended (the "Financial Statements"). The Financial Statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods indicated and with each other, except
that the unaudited Financial Statements may not contain all footnotes required
by generally accepted accounting principles. The Financial Statements fairly
present the financial condition and operating results of the Company as of the
dates, and for the periods, indicated therein, subject in the case of the
unaudited Financial Statements to normal year-end audit adjustments. Except as
set forth in the Financial Statements, the Company has no material liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to December 15, 1998, and (ii) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under generally accepted accounting principles to be reflected in the
Financial Statements, which, in both cases, individually or in the aggregate,
are not material to the financial condition or operating results of the Company.
2.22 Changes. Since December 15, 1998, there has not been:
(a) any change in the assets, liabilities, financial condition or
operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business that have not
been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition,
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operating results, prospects or business of the Company (as such business is
presently conducted and as it is proposed to be conducted);
(c) any waiver by the Company of a material right or of a
material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and that is not material to the assets, properties, financial
condition, operating results or business of the Company (as such business is
presently conducted and as it is proposed to be conducted);
(e) any material change or amendment to a material contract or
arrangement by which the Company or any of its assets or properties is bound or
subject;
(f) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets other than the licensing of
the Company's products in the ordinary course of business;
(g) any resignation or termination of employment of any key
employee or officer of the Company; and the Company, to the best of its
knowledge, does not know of the impending resignation or termination of
employment of any such key employee or officer;
(h) receipt by an executive officer of the Company of notice that
there has been a loss of, or material order cancellation by, any major customer
of the Company;
(i) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable;
(j) any loans or guarantees made by the Company to or for the
benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(k) any declaration, setting aside or payment of any dividend or
other distribution in respect of any of the Company's capital stock, or any
direct or indirect redemption, purchase or other acquisition of any of such
stock by the Company;
(l) to the best of the Company's knowledge, any other event or
condition of any character that might materially and adversely affect the
assets, properties, financial condition, operating results or business of the
Company (as such business is presently conducted and as it is proposed to be
conducted); or
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(m) any agreement or commitment by the Company to do any of the
things described in this Section 2.22.
2.23 Insurance. The Company has in full force and effect fire,
casualty and liability insurance policies with recognized insurers with such
coverages as are sufficient in amount to allow replacement of the tangible
properties of the Company that might be damaged or destroyed.
2.24 Employee Benefit Plans. Except as set forth in Section 2.24 of
the Webridge, Inc. Schedule of Exceptions hereto, the Company does not have any
Employee Benefit Plan as defined in the Employee Retirement Income Security Act
of 1974 ("ERISA"). To the Company's knowledge, each of the Company's Employee
Benefit Plans is in full compliance with ERISA and the Company has no
liabilities associated with any Employee Benefit Plan other than those
liabilities set forth in the Financial Statements.
2.25 Tax Returns and Payments. The Company has filed all tax returns
and reports as required by law. These returns and reports are true and correct
in all material respects. The Company has paid all taxes and other assessments
when due, except those contested by it in good faith that are listed in the
Schedule of Exceptions. The provision for taxes of the Company as shown in the
Financial Statements is adequate for taxes due or accrued as of the date
thereof. The Company has not elected pursuant to the Internal Revenue Code of
1986, as amended (the "Code"), to be treated as a collapsible corporation
pursuant to Section 341(f) of the Code, nor has it made any other elections
pursuant to the Code (other than elections that relate solely to methods of
accounting, depreciation or amortization) that would have a material adverse
effect on the Company, its financial condition, its business as presently
conducted or proposed to be conducted or any of its properties or material
assets.
2.26 Labor Agreements and Actions. The Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the best knowledge of
the Company, has sought to represent any of the employees, representatives or
agents of the Company. There is no strike or other labor dispute involving the
Company pending, or to the best knowledge of the Company threatened, which could
have a material adverse effect on the assets, properties, financial condition,
operating results, or business of the Company (as such business is presently
conducted and as it is proposed to be conducted), nor is the Company aware of
any labor organization activity involving its employees.
2.27 Environmental and Safety Laws. To the best of the Company's
knowledge, it is not in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety that would have a
material effect on the employees, and to the best of its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation.
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2.28 Minute Books. The copy of the minute books of the Company
provided to the counsel for the Investors contains minutes of all meetings of
directors and stockholders and all actions by written consent without a meeting
by the directors and stockholders since the date of incorporation and reflects
all actions by the directors (and any committee of directors) and stockholders
with respect to all transactions referred to in such minutes accurately in all
material respects.
2.29 Year 2000. Software developed by the Company for sale or license
to its customers (including Mainspan) is Year 2000 compliant. As used in this
Agreement, "Year 2000 compliant" means that the software is designed to be used
prior to, during and after the calendar year 2000, and the software will
accurately receive, provide and process date and time data from, into and
between the 20th and 21st centuries, including the years 1999 and 2000, and
leap-year calculations and will not malfunction, cease to function, or provide
invalid or incorrect results as a result of date and time data, to the extent
that other software used in combination with the Company's software properly
exchanges date and time data with it.
3. Representations and Warranties of the Investors. Each Investor hereby
represents and warrants that:
3.1 Authorization. Such Investor has full power and authority to
enter into this Agreement, the Investors' Rights Agreement and the Co-Sale
Agreement, and each such Agreement constitutes its valid and legally binding
obligation, enforceable in accordance with their respective terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies, and (iii) to the
extent the indemnification provisions contained in the Investors' Rights
Agreement may be limited by applicable federal or state securities laws.
3.2 Purchase Entirely for Own Account. This Agreement is made with
such Investor in reliance upon such Investor's representation to the Company,
which by such Investor's execution of this Agreement such Investor hereby
confirms, that the Series B Preferred Stock to be received by such Investor and
the Common Stock issuable upon conversion thereof (collectively, the
"Securities") will be acquired for investment for such Investor's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and that such Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, such Investor further represents that such Investor does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person,
with respect to any of the Securities.
3.3 Disclosure of Information. Such Investor believes it has received
all the information it considers necessary or appropriate for deciding whether
to purchase the Series B Preferred Stock. Such Investor further represents that
it has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the
11
<PAGE> 15
offering of the Series B Preferred Stock and the business, properties, prospects
and financial condition of the Company. The foregoing, however, does not limit
or modify the representations and warranties of the Company in Section 2 of this
Agreement or the right of the Investors to rely thereon and assumes the accuracy
thereof.
3.4 Investment Experience. Such Investor is an investor in securities
of companies in the development stage and acknowledges that it is able to fend
for itself, can bear the economic risk of its investment, and has such knowledge
and experience in financial or business matters that it is capable of evaluating
the merits and risks of the investment in the Series B Preferred Stock. If other
than an individual, Investor (other than Manchester Bridge Principal LP) also
represents it has not been organized for the purpose of acquiring the Series B
Preferred Stock.
3.5 Accredited Investor. Such Investor is an "accredited investor"
within the meaning of Securities and Exchange Commission ("SEC") Rule 501 of
Regulation D, as presently in effect.
3.6 Restricted Securities. Such Investor understands that the
Securities it is purchasing are characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired from the Company
in a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Act only in certain limited circumstances. In this connection, such Investor
represents that it is familiar with SEC Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the Act.
3.7 Further Limitations on Disposition. Without in any way limiting
the representations set forth above, such Investor further agrees not to make
any disposition of all or any portion of the Securities unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 3 and the Investors' Rights Agreement provided and to the extent
this Section and such agreement are then applicable, and:
(a) There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) (i) Such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, such Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company that
such disposition will not require registration of such shares under the Act. It
is agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except in unusual circumstances.
(c) Notwithstanding the provisions of paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by an
12
<PAGE> 16
Investor that is a partnership to another partnership that is affiliated with
the transferring partnership or to a partner of such transferring partnership or
a retired partner of such partnership who retires after the date hereof, or to
the estate of any such partner or retired partner or the transfer by gift, will
or intestate succession of any partner to his or her spouse or to the siblings,
lineal descendants or ancestors of such partner or his or her spouse, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if he or she were an original Investor hereunder.
3.8 Legends. It is understood that the certificates evidencing the
Securities may bear one or all of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933, as amended. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in effect
with respect to the securities under such Act or under applicable state law or
an opinion of counsel satisfactory to the Company that such registration is not
required or unless sold pursuant to Rule 144 of such Act."
(b) The legends set forth in the Investors' Rights Agreement and
the Co-Sale Agreement.
3.9 Manchester Bridge Principal LP Manchester Bridge Principal LP
represents that it is a limited partnership organized under the laws of the
state of Delaware having at the date hereof not more than nine limited partners
and one general partner, each of which is an "accredited investor." At the date
hereof, Manchester Principal LLC is the sole general partner of Manchester
Bridge Principal LP. Manchester Principal LLC shall act as the limited
partnership's representative, with full power and authority to act on behalf of
Manchester Bridge Principal LP in connection with its dealings with the Company,
including the voting of shares of Series B Preferred Stock. Manchester Bridge
Principal LP will, for as long as it holds any shares of Series B Preferred
Stock, continue to be represented by its general partner for such purposes.
4. Conditions of Investor's Obligations at Closing. The obligations of
each Investor under subsection 1.1(b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against any Investor who does not consent
thereto:
4.1 Representations and Warranties. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
4.2 Performance. The Company shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
13
<PAGE> 17
4.3 Compliance Certificate. The President of the Company shall
deliver to each Investor at the Closing a certificate stating that the
conditions specified in Sections 4.1 and 4.2 have been fulfilled and stating
that there shall have been no material adverse change in the business, affairs,
operations, properties, assets or condition of the Company since December 15,
1998.
4.4 Qualifications. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Securities pursuant to this Agreement shall be duly obtained and effective
as of the Closing.
4.5 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to the
Investors, and they shall have received all such counterpart original and
certified or other copies of such documents as they may reasonably request.
4.6 Bylaws. The Bylaws of the Company shall provide that the Board of
Directors of the Company shall consist of seven (7) persons.
4.7 Board of Directors. The directors of the Company immediately
following the Closing shall be Gary N. Fielland, Mark S. Anastas, Stephen L.
Domenik, Gerard Langeler, Scott Gibson, and James Lash, and there shall be one
vacancy on the Board of Directors.
4.8 Opinion of Company Counsel. Each Investor shall have received
from Stoel Rives LLP, counsel for the Company, an opinion, dated as of the
Closing, in the form attached hereto as Exhibit D.
4.9 Investors' Rights Agreement. The Company and each party thereto
shall have entered into the Investors' Rights Agreement in the form attached
hereto as Exhibit B.
4.10 Co-Sale Agreement. The Company and each party thereto shall have
entered into the Co-Sale Agreement in the form attached hereto as Exhibit C.
5. Conditions of the Company's Obligations at Closing. The obligations of
the Company to each Investor under this Agreement are subject to the fulfillment
on or before the Closing of each of the following conditions by that Investor:
5.1 Representations and Warranties. The representations and
warranties of such Investor contained in Section 3 shall be true on and as of
the Closing with the same effect as though such representations and warranties
had been made on and as of the Closing.
5.2 Qualifications. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required
14
<PAGE> 18
in connection with the lawful issuance and sale of the Securities pursuant to
this Agreement shall be duly obtained and effective as of the Closing.
6. Miscellaneous.
6.1 Survival of Warranties. The warranties, representations and
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investors or the Company.
6.2 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 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.
6.3 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.
6.4 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.
6.5 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.
6.6 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 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.
6.7 Finders' Fees. Each party represents that it neither is nor will
be obligated for any finders' fees or commissions in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of finders'
fees (and the costs and expenses of defending against such liability or asserted
liability) for which such Investor or any of its
15
<PAGE> 19
officers, partners, employees, or representatives is responsible. The Company
agrees to indemnify and hold harmless each Investor from any liability for any
commission or compensation in the nature of a finders' fee (and the costs and
expenses of defending against such liability or asserted liability) for which
the Company or any of its officers, employees or representatives is responsible.
6.8 Expenses. The Company will pay at the Closing the reasonable fees
and expenses, not to exceed $15,000, of special counsel to the Investors. If any
action at law or in equity is necessary to enforce or interpret the terms of
this Agreement, the Investors' Rights Agreement, the Co-Sale Agreement or the
Restated Certificate, 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.
6.9 Amendments and Waivers. Any term of this Agreement other than the
terms of Section 4 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 sixty percent (60%) of the Common Stock issuable or issued
upon conversion of the Series B Preferred Stock. Any amendment or waiver
effected in accordance with this paragraph shall be binding upon each holder of
any securities purchased under this Agreement at the time outstanding (including
securities into which such securities are convertible), each future holder of
all such securities, and the Company.
6.10 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.
6.11 Aggregation of Stock. All shares of the Preferred Stock held or
acquired by affiliated entities or persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.
6.12 Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
16
<PAGE> 20
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 Avenue, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SERIES B STOCK PURCHASE AGREEMENT
<PAGE> 21
INVESTORS:
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.
SERIES B STOCK PURCHASE AGREEMENT
<PAGE> 22
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.
SERIES B STOCK PURCHASE AGREEMENT
<PAGE> 23
OLYMPIC VENTURE PARTNERS IV, L.P.
By: OVMC IV, L.L.C., General Partner
By:
-------------------------------------
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:
-------------------------------------
Name:
-----------------------------------
Title: Member
Address: 2420 Carillon Point
Kirkland, Washington 98033
SIGNATURE PAGE TO WEBRIDGE, INC.
SERIES B STOCK PURCHASE AGREEMENT
<PAGE> 24
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
SIGNATURE PAGE TO WEBRIDGE, INC.
SERIES B STOCK PURCHASE AGREEMENT
<PAGE> 25
KAUFMAN FAMILY LLC
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Address: 660 Madison Avenue, 15th floor
New York, NY 10021
SIGNATURE PAGE TO WEBRIDGE, INC.
SERIES B STOCK PURCHASE AGREEMENT
<PAGE> 26
INDIVIDUAL INVESTOR:
By:
-------------------------------------
Gary N. Fielland
Address: 11255 NW Ridge Road
Portland, Oregon 97229
SIGNATURE PAGE TO WEBRIDGE, INC.
SERIES B STOCK PURCHASE AGREEMENT
<PAGE> 27
INDIVIDUAL INVESTOR:
----------------------------------------
Lary L. Evans
Address: 508 Newhall CV
Austin, Texas 78746
SIGNATURE PAGE TO WEBRIDGE, INC.
SERIES B STOCK PURCHASE AGREEMENT
<PAGE> 28
INDIVIDUAL INVESTOR:
----------------------------------------
Gregory Damohray
Address:
----------------------------------------
----------------------------------------
SIGNATURE PAGE TO WEBRIDGE, INC.
SERIES B STOCK PURCHASE AGREEMENT
<PAGE> 29
INDIVIDUAL INVESTOR:
----------------------------------------
Marcia Hooper
Address:
----------------------------------------
----------------------------------------
SIGNATURE PAGE TO WEBRIDGE, INC.
SERIES B STOCK PURCHASE AGREEMENT
<PAGE> 30
SCHEDULE A
SCHEDULE OF INVESTORS
<PAGE> 31
SCHEDULE A
SCHEDULE OF INVESTORS
<TABLE>
<CAPTION>
NUMBER OF CANCELLATION TOTAL PURCHASE
NAME AND ADDRESS SHARES PURCHASED OF INDEBTEDNESS PRICE OF SHARES
- ---------------- ---------------- --------------- ---------------
<S> <C> <C> <C>
MANCHESTER BRIDGE PRINCIPAL LP 1,764,706 1,500,000 3,000,000
411 Theodore Fremd Avenue
Rye, New York 10580
SEVIN ROSEN FUND V L.P. 754,652 1,282,908.40
13455 Noel Road, Suite 1670
Dallas, Texas 75240
SEVIN ROSEN V AFFILIATES FUND L.P. 32,264 54,848.80
13455 Noel Road, Suite 1670
Dallas, Texas 75240
SEVIN ROSEN BAYLESS MANAGEMENT COMPANY 1,750 2,975
13455 Noel Road, Suite 1670
Dallas, Texas 75240
OLYMPIC VENTURE PARTNERS IV, L.P. 610,986 1,038,676.20
2420 Carillon Point
Kirkland, Washington 98033
OVP IV ENTREPRENEURS FUND, L.P. 45,988 78,179.60
2420 Carillon Point
Kirkland, Washington 98033
WORLDVIEW TECHNOLOGY PARTNERS I, L.P. 178,055 302,693.50
435 Tasso, Suite 120
Palo Alto, California 94301
WORLDVIEW TECHNOLOGY INTERNATIONAL I, L.P. 69,398 117,976.60
435 Tasso, Suite 120
Palo Alto, California 94301
WORLDVIEW STRATEGIC PARTNERS I, L.P. 15,337 26,072.90
435 Tasso, Suite 120
Palo Alto, California 94301
KAUFMAN FAMILY LLC 441,176 750,000
660 Madison Avenue, 15th Floor
New York, NY 10021
</TABLE>
<PAGE> 32
<TABLE>
<CAPTION>
NUMBER OF CANCELLATION TOTAL PURCHASE
NAME AND ADDRESS SHARES PURCHASED OF INDEBTEDNESS PRICE OF SHARES
- ---------------- ---------------- --------------- ---------------
<S> <C> <C> <C>
GARY N. FIELLAND 588,977 101,260.35 1,001,260.35
11255 NW Ridge Road
Portland, Oregon 97229
LARY EVANS 30,279 51,474.90 51,474.90
508 Newhall CV
Austin, Texas 78746
GREGORY DAMOHRAY 180,641 257,089.96 307,089.96
8350 NW Ash
Portland, OR 97229
MARCIA HOOPER 29,412 50,000
4 Claybrook Road
Dover, MA 02030
TOTALS 4,743,621 1,909,825.21 8,014,156.21
</TABLE>
<PAGE> 1
EXHIBIT 10.12
WEBRIDGE, INC.
SERIES C PREFERRED
STOCK PURCHASE AGREEMENT
DECEMBER 22, 1999
<PAGE> 2
TABLE OF CONTENTS
Page
1. Purchase and Sale of Stock.............................................1
1.1 Sale and Issuance of Series B Preferred Stock...................1
1.2 Closing.........................................................1
2. Representations and Warranties of the Company..........................1
2.1 Organization, Good Standing and Qualification...................2
2.2 Capitalization and Voting Rights................................2
2.3 Subsidiaries....................................................3
2.4 Authorization...................................................3
2.5 Valid Issuance of Preferred and Common Stock....................3
2.6 Governmental Consents...........................................3
2.7 Offering........................................................4
2.8 Litigation......................................................4
2.9 Proprietary Information and Inventions Agreements...............4
2.10 Patents and Trademarks..........................................4
2.11 Compliance with Other Instruments...............................5
2.12 Agreements; Action..............................................5
2.14 Permits.........................................................6
2.15 Disclosure......................................................7
2.16 Financial Statements............................................7
2.17 Registration Rights.............................................7
2.18 Corporate Documents.............................................7
2.19 Title to Property and Assets....................................7
2.20 Section 1202 Compliance.........................................7
2.21 Financial Statements............................................8
2.22 Changes.........................................................8
2.23 Insurance......................................................10
2.24 Employee Benefit Plans.........................................10
2.25 Tax Returns and Payments.......................................10
2.26 Labor Agreements and Actions...................................10
2.27 Environmental and Safety Laws..................................10
2.28 Minute Books...................................................11
2.29 Year 2000......................................................11
3. Representations and Warranties of the Investors.......................11
3.1 Authorization..................................................11
3.2 Purchase Entirely for Own Account..............................11
3.3 Disclosure of Information......................................11
3.4 Investment Experience..........................................12
3.5 Accredited Investor............................................12
3.6 Restricted Securities..........................................12
<PAGE> 3
3.7 Further Limitations on Disposition.............................12
3.8 Legends........................................................13
4. Conditions of Investor's Obligations at Closing.......................13
4.1 Representations and Warranties.................................13
4.2 Performance....................................................13
4.3 Compliance Certificate.........................................13
4.4 Qualifications.................................................13
4.5 Proceedings and Documents......................................14
4.6 Bylaws.........................................................14
4.7 Board of Directors.............................................14
4.8 Opinion of Company Counsel.....................................14
4.9 Investors' Rights Agreement....................................14
4.10 Co-Sale Agreement..............................................14
5. Conditions of the Company's Obligations at Closing....................14
5.1 Representations and Warranties.................................14
5.2 Qualifications.................................................14
6. Miscellaneous.........................................................14
6.1 Survival of Warranties.........................................14
6.2 Successors and Assigns.........................................15
6.3 Governing Law..................................................15
6.4 Counterparts...................................................15
6.5 Titles and Subtitles...........................................15
6.6 Notices........................................................15
6.7 Finders' Fees..................................................15
6.8 Expenses.......................................................15
6.9 Amendments and Waivers.........................................16
6.10 Severability...................................................16
6.11 Aggregation of Stock...........................................16
6.12 Entire Agreement...............................................16
<PAGE> 4
SCHEDULE A Schedule of Investors
EXHIBIT A Second Amended and Restated Certificate of Incorporation
EXHIBIT B Second Amended and Restated Investors' Rights Agreement
EXHIBIT C Second Amended and Restated First Refusal and Co-Sale Agreement
EXHIBIT D Opinion of Counsel for the Company
EXHIBIT E List of Stockholders and Optionholders
<PAGE> 5
STOCK PURCHASE AGREEMENT
THIS SERIES C PREFERRED STOCK PURCHASE AGREEMENT is made as of December 22,
1999 by and among Webridge, Inc., a Delaware corporation (the "Company"), and
the investors listed on Schedule A hereto, each of which is herein referred to
as an "Investor."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
1.1 Sale and Issuance of Series C Preferred Stock.
(a) The Company shall adopt and file with the Secretary of State
of Delaware on or before the Closing (as defined below), the Amended and
Restated Certificate of Incorporation in the form attached hereto as Exhibit A
(the "Restated Certificate").
(b) Subject to the terms and conditions of this Agreement, each
Investor agrees, severally, to purchase at the Closing or pursuant to Section
1.3 and the Company agrees to sell and issue to each Investor at the Closing or
pursuant to Section 1.3, that number of shares of the Company's Series C
Preferred Stock set forth opposite each Investor's name on Schedule A hereto for
the purchase price set forth thereon.
1.2 Closing. The purchase and sale of the Series B Preferred Stock
shall take place at the offices of Stoel Rives LLP, 900 SW Fifth Avenue, Suite
2300, Portland, Oregon, at 10:00 a.m. on December 22, 1999 or at such other time
and place as the Company and Investors acquiring in the aggregate more than half
the shares of Series C Preferred Stock sold pursuant hereto mutually agree upon
orally or in writing (which time and place are designated as the "Closing"). At
the Closing, the Company shall deliver to each Investor a certificate
representing the Series C Preferred Stock that such Investor is purchasing
against payment of the purchase price therefor by check, wire transfer,
cancellation of indebtedness, or any combination thereof. Each Investor shall
become a party to this Agreement, that certain Second Amended and Restated
Investors' Rights Agreement of even date herewith, by and among the Company, the
Investors, certain other parties and Founders (as defined therein), the form of
which is attached hereto as Exhibit B (the "Investors' Rights Agreement"), and
that certain Second Amended and Restated First Refusal and Co-Sale Agreement of
even date herewith, by and among the Company, the Investors, certain other
parties and the Founders (as defined therein), the form of which is attached
hereto as Exhibit C (the "Co-Sale Agreement"), and shall have the rights and
obligations hereunder.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to each Investor that, except as set forth on a Schedule
of Exceptions (the "Schedule of Exceptions") furnished each Investor:
<PAGE> 6
2.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. The
Company is duly qualified to transact business and is in good standing in each
jurisdiction in which the failure to so qualify would have a material adverse
effect on its business or properties.
2.2 Capitalization and Voting Rights. The authorized capital of the
Company consists of:
(a) Preferred Stock. Seven million four hundred sixty-four
thousand one hundred thirty four (7,464,134) shares of Series A Preferred Stock
(the "Series A Preferred Stock"), all of which are issued and outstanding, six
million thirty-seven thousand, seven hundred thirty-nine (6,037,739) shares of
Series B Preferred Stock (the "Series B Preferred Stock"), all of which are
issued and outstanding, and Four million three hundred forty-one thousand six
hundred thirty-one (4,341,631) shares of Series C Preferred Stock (the "Series C
Preferred Stock"), none of which were issued or outstanding immediately prior to
the Closing and up to all of which may be sold pursuant to this Agreement. The
rights, privileges and preferences of the Series A Preferred Stock, the Series B
Preferred Stock, and the Series C Preferred Stock are as stated in the Company's
Restated Certificate.
(b) Common Stock. Fifty million (50,000,000) shares of Common
Stock ("Common Stock"), of which 12,726,194 shares are issued and outstanding.
(c) The outstanding shares of Common Stock and options to
purchase shares of Common Stock are owned by the stockholders and optionholders
and in the numbers specified in Exhibit E hereto.
(d) The outstanding shares of Common Stock, the Series A
Preferred and Series B Preferred Stock are all duly and validly authorized and
issued, fully paid and nonassessable, and were issued in accordance with the
registration or qualification provisions of the Securities Act of 1933, as
amended (the "Act") and any relevant state securities laws or pursuant to valid
exemptions therefrom.
(e) Except for (A) the conversion privileges of the Series A
Preferred Stock, the conversion privileges of the Series B Preferred Stock, and
the conversion privileges of the Series C Preferred Stock to be issued under
this Agreement, (B) the rights provided in Section 2.4 of the Investors' Rights
Agreement, (C) currently outstanding options to purchase 3,420,243 shares of
Common Stock granted to service providers of the Company pursuant to the
Company's 1996 Stock Incentive Plan (the "Stock Incentive Plan"), and (D)
currently outstanding warrants to purchase shares of the Company's Series B and
Series C Preferred Stock as set forth in Section 2.2(e) of the Webridge, Inc.
Schedule of Exceptions hereto, there are not outstanding any options, warrants,
rights (including conversion or preemptive rights) or agreements for the
purchase or acquisition from the Company of any shares of its capital stock. The
Company has reserved 893,697 shares of its Common Stock for purchase upon
exercise of
<PAGE> 7
options to be granted in the future under the Stock Incentive Plan. Except for
the Investors' Rights Agreement, the Company is not a party or subject to any
agreement or understanding, and, to the Company's knowledge, there is no
agreement or understanding between any persons and/or entities, which affects or
relates to the voting or giving of written consents with respect to any security
or by a director of the Company.
2.3 Subsidiaries. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity. The Company is not a participant in any joint venture,
partnership, or similar arrangement.
2.4 Authorization. All corporate action on the part of the Company,
its officers, directors and stockholders necessary for the authorization,
execution and delivery of this Agreement, the Investors' Rights Agreement and
the Co-Sale Agreement, the performance of all obligations of the Company
hereunder and thereunder, including approval of the Restated Certificate, and
the authorization, issuance (or reservation for issuance), sale and delivery of
the Series C Preferred Stock being sold hereunder and the Common Stock issuable
upon conversion of the Series C Preferred Stock has been taken or will be taken
prior to the Closing, and this Agreement, the Investors' Rights Agreement and
the Co-Sale Agreement constitute valid and legally binding obligations of the
Company, enforceable in accordance with their respective terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies, and (iii) to the
extent the indemnification provisions contained in the Investors' Rights
Agreement may be limited by applicable federal or state securities laws.
2.5 Valid Issuance of Preferred and Common Stock. The Series C
Preferred Stock that is being purchased by the Investors hereunder, when issued,
sold and delivered in accordance with the terms of this Agreement for the
consideration expressed herein, will be duly and validly issued, fully paid, and
nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and the Investors' Rights
Agreement and under applicable state and federal securities laws. The Common
Stock issuable upon conversion of the Series C Preferred Stock purchased under
this Agreement has been duly and validly reserved for issuance and, upon
issuance in accordance with the terms of the Restated Certificate, will be duly
and validly issued, fully paid, and nonassessable and will be free of
restrictions on transfer other than restrictions on transfer under this
Agreement and the Investors' Rights Agreement and under applicable state and
federal securities laws.
2.6 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement except (i) the filing of the Second Amended and
Restated Certificate of Incorporation with the State of Delaware and (ii) if
required, qualifications or filings under the Securities Act and applicable Blue
Sky laws,
<PAGE> 8
which qualifications and filings will be obtained or made and will be effective
within the period required by law.
2.7 Offering. Subject in part to the truth and accuracy of each
Investor's representations set forth in Section 3 of this Agreement, the offer,
sale and issuance of the Series C Preferred Stock as contemplated by this
Agreement are exempt from the registration requirements of the Act and
applicable state securities laws, and neither the Company nor any authorized
agent acting on its behalf will take any action hereafter that would cause the
loss of such exemptions.
2.8 Litigation. There is no action, suit, proceeding or investigation
pending or, to the knowledge of the Company, currently threatened against the
Company that questions the validity of this Agreement, the Investors' Rights
Agreement or the Co-Sale Agreement, or the right of the Company to enter into
such agreements, or to consummate the transactions contemplated hereby or
thereby, or that might result, either individually or in the aggregate, in any
material adverse changes in the assets, condition, affairs or prospects of the
Company, financially or otherwise, or any change in the current equity ownership
of the Company, nor is the Company aware that there is any basis for the
foregoing. The foregoing includes, without limitation, actions, suits,
proceedings or investigations pending or, to the knowledge of the Company,
threatened (or any basis therefor known to the Company) involving the prior
employment of any of the Company's employees, their use in connection with the
Company's business of any information or techniques allegedly proprietary to any
of their former employers, or their obligations under any agreements with prior
employers. The Company is not a party or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or that the Company intends to initiate.
2.9 Proprietary Information and Inventions Agreements. Each employee,
officer and consultant of the Company has executed an Employment Agreement
relating to proprietary information and inventions in the form made available to
the Investors. The Company, after reasonable investigation, is not aware that
any of its employees, officers or consultants are in violation thereof, and the
Company will use its best efforts to prevent any such violation.
2.10 Patents and Trademarks. To the best of the Company's knowledge,
the Company has sufficient title and ownership of all patents, trademarks,
service marks, trade names, copyrights, trade secrets, information, proprietary
rights and processes, whether or not registered, necessary for its business as
now conducted and as proposed to be conducted (including with respect to its
eBusiness Express product line) without any conflict with or infringement of the
rights of others. There are no outstanding options, licenses, royalties, or
other agreements of any kind relating to the foregoing, nor is the Company bound
by or a party to any options, licenses or agreements of any kind with respect to
the patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information, proprietary rights and processes of any other person or
entity. The Company has not received any communications alleging that the
Company has violated or, by conducting its business as
<PAGE> 9
proposed, would violate any of the patents, trademarks, service marks, trade
names, copyrights or trade secrets or other proprietary rights of any other
person or entity. After due investigation, the Company is not aware that any of
its employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with
the use of his or her best efforts to promote the interests of the Company or
that would conflict with the Company's business as proposed to be conducted.
Neither the execution nor delivery of this Agreement, the Investors' Rights
Agreement or the Co-Sale Agreement, nor the carrying on of the Company's
business by the employees of the Company, nor the conduct of the Company's
business as proposed, will, to the Company's knowledge, conflict with or result
in a breach of the terms, conditions or provisions of, or constitute a default
under, any contract, covenant or instrument under which any of such employees is
now obligated. The Company does not believe it is or will be necessary to
utilize any inventions of any of its employees (or people it currently intends
to hire) made prior to their employment by the Company.
2.11 Compliance with Other Instruments. The Company is not in
violation or default of any provision of its Restated Certificate or Bylaws, or
of any instrument, judgment, order, writ, decree or contract to which it is a
party or by which it is bound, or, to its knowledge, of any provision of any
federal or state statute, rule or regulation applicable to the Company. The
execution, delivery and performance of this Agreement, the Investors' Rights
Agreement and the Co-Sale Agreement, and the consummation of the transactions
contemplated hereby and thereby will not result in any such violation or be in
conflict with or constitute, with or without the passage of time and giving of
notice, either a default under any such provision, instrument, judgment, order,
writ, decree or contract or an event that results in the creation of any lien,
charge or encumbrance upon any assets of the Company or the suspension,
revocation, impairment, forfeiture, or nonrenewal of any material permit,
license, authorization, or approval applicable to the Company, its business or
operations or any of its assets or properties.
2.12 Agreements; Action.
(a) Except for agreements explicitly contemplated hereby and by
the Investors' Rights Agreement and Co-Sale Agreement, there are no agreements,
understandings or proposed transactions between the Company and any of its
officers, directors, affiliates, or any affiliate thereof.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or by which it is bound that may involve (i) obligations
(contingent or otherwise) of, or payments to the Company in excess of, $5,000,
or (ii) the license of any patent, copyright, trade secret or other proprietary
right to or from the Company (other than the license by the Company of its
software and products in the ordinary course of business), or (iii) provisions
restricting or affecting the development, manufacture or distribution of the
Company's products or services.
<PAGE> 10
(c) The Company has not (i) declared or paid any dividends or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or any
other liabilities individually in excess of $5,000 or, in the case of
indebtedness and/or liabilities individually less than $5,000, in excess of
$25,000 in the aggregate, (iii) made any loans or advances to any person, other
than ordinary advances for business expenses, or (iv) sold, exchanged or
otherwise disposed of any of its assets or rights, other than the sale of its
inventory in the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
(e) The Company is not a party to and is not bound by any
contract, agreement or instrument, or subject to any restriction under its
Restated Certificate or Bylaws that adversely affects its business as now
conducted or as proposed to be conducted, its properties or its financial
condition.
(f) The Company has not engaged in the past three (3) months in
any discussion (i) with any representative of any corporation or corporations
regarding the consolidation or merger of the Company with or into any such
corporation or corporations, (ii) with any corporation, partnership, association
or other business entity or any individual regarding the sale, conveyance or
disposition of all or substantially all of the assets of the Company or a
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of the Company is disposed of, or (iii) regarding any
other form of acquisition, liquidation, dissolution or winding up of the
Company.
2.13 Related-Party Transactions. No employee, officer, or director of
the Company or member of his or her immediate family is indebted to the Company,
nor is the Company indebted (or committed to make loans or extend or guarantee
credit) to any of them. To the best of the Company's knowledge, none of such
persons has any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation that competes with the Company. No
member of the immediate family of any officer or director of the Company is
directly or indirectly interested in any material contract with the Company.
2.14 Permits. The Company has all franchises, permits, licenses, and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which would materially and adversely affect the
business, properties, prospects, or financial condition of the Company, and the
Company believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted. The
Company is not in default in any material respect under any of such franchises,
permits, licenses or other similar authority.
<PAGE> 11
2.15 Disclosure. The Company has fully provided each Investor with all
the information that such Investor has requested for deciding whether to
purchase the Series C Preferred Stock and all information that the Company
believes is reasonably necessary to enable such Investor to make such decision.
Neither this Agreement, the Investors' Rights Agreement or the Co-Sale
Agreement, nor any other written statements or certificates made or delivered in
connection herewith or therewith contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements herein
or therein not misleading.
2.16 Financial Projections. The financial projections, sales funnel
projectionsand management presentation previously made available to each
Investor have been prepared in good faith by the Company and does not contain
any untrue statement of a material fact nor does it omit to state a material
fact necessary to make the statements made therein not misleading, except that
with respect to the financial projections and sales funnel projections, the
Company represents only that such projections were prepared in good faith and
that the Company reasonably believes there is a reasonable basis for such
projections.
2.17 Registration Rights. Except as provided in the Investors' Rights
Agreement, the Company has not granted or agreed to grant any registration
rights, including piggyback rights, to any person or entity.
2.18 Corporate Documents. Except for amendments necessary to satisfy
representations and warranties or conditions contained herein (the form of which
amendments has been approved by the Investors), the Restated Certificate and
Bylaws of the Company are in the form previously made available to the
Investors.
2.19 Title to Property and Assets. The Company owns its property and
assets free and clear of all mortgages, liens, loans and encumbrances, except
such encumbrances and liens that arise in the ordinary course of business and do
not materially impair the Company's ownership or use of such property or assets.
With respect to the property and assets it leases, the Company is in compliance
with such leases and, to its knowledge, holds a valid leasehold interest free of
any liens, claims or encumbrances.
2.20 Section 1202 Compliance.
(a) The Company is a "C" corporation for federal income tax
purposes, is an "eligible corporation" as defined in Section 1202(e)(4) of the
Code and is engaged in a "qualified trade or business" as defined in Section
1202(e)(3) of the Code.
(b) During the one-year period beginning on the date one year
before the date of the Closing, the Company has not made one or more purchases
of its stock with an aggregate value (as of the time of the respective
purchases) exceeding 5% of the aggregate value of all of its stock as of the
beginning of such period.
<PAGE> 12
(c) At all times during the period that began with the formation
of the Company and ends on the Closing, the aggregate gross assets of the
Company did not exceed $50,000,000. For purposes of this representation, (i) the
amount received by the Company from the sale of its stock as contemplated herein
shall be taken into account, (ii) "aggregate gross assets" shall mean the amount
of (A) cash, (B) the aggregate fair market value of all property contributed to
the Company (or other property with a basis determined in whole or part for
federal income tax purposes by reference to the adjusted basis of property so
contributed) as of the date of such contribution, and (C) the aggregate adjusted
basis for federal income tax purposes of other property held by the Company, and
(iii) the Company shall be deemed to own its ratable share of the assets of its
subsidiaries, if any.
(d) Ten percent or less of the total value of the Company's
assets as of the Closing consists of real property that is not used in the
Company's business.
(e) Ten percent or less of the total value of the Company's
assets (in excess of liabilities) as of the Closing consists of stock or
securities in other corporations that are not subsidiaries of the Company (other
than assets described in Section 1202(e)(6) of the Code).
2.21 Financial Statements. The Company has delivered to each Investor
its unaudited financial statements (balance sheet, income statement and
statement of cash flows), as of November 30, 1999, and for the 11 month period
then ended (the "Financial Statements"). The Financial Statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods indicated and with each other, except
that the unaudited Financial Statements may not contain all footnotes required
by generally accepted accounting principles. The Financial Statements fairly
present the financial condition and operating results of the Company as of the
dates, and for the periods, indicated therein, subject in the case of the
unaudited Financial Statements to normal year-end audit adjustments. Except as
set forth in the Financial Statements, the Company has no material liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to December __, 1999, and (ii) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under generally accepted accounting principles to be reflected in the
Financial Statements, which, in both cases, individually or in the aggregate,
are not material to the financial condition or operating results of the Company.
2.22 Changes. Since November 30, 1999, there has not been:
(a) any change in the assets, liabilities, financial condition or
operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business that have not
been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition,
<PAGE> 13
operating results, prospects or business of the Company (as such business is
presently conducted and as it is proposed to be conducted);
(c) any waiver by the Company of a material right or of a
material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and that is not material to the assets, properties, financial
condition, operating results or business of the Company (as such business is
presently conducted and as it is proposed to be conducted);
(e) any material change or amendment to a material contract or
arrangement by which the Company or any of its assets or properties is bound or
subject;
(f) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets other than the licensing of
the Company's products in the ordinary course of business;
(g) any resignation or termination of employment of any key
employee or officer of the Company; and the Company, to the best of its
knowledge, does not know of the impending resignation or termination of
employment of any such key employee or officer;
(h) receipt by an executive officer of the Company of notice that
there has been a loss of, or material order cancellation by, any major customer
of the Company;
(i) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable;
(j) any loans or guarantees made by the Company to or for the
benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(k) any declaration, setting aside or payment of any dividend or
other distribution in respect of any of the Company's capital stock, or any
direct or indirect redemption, purchase or other acquisition of any of such
stock by the Company;
(l) to the best of the Company's knowledge, any other event or
condition of any character that might materially and adversely affect the
assets, properties, financial condition, operating results or business of the
Company (as such business is presently conducted and as it is proposed to be
conducted); or
<PAGE> 14
(m) any agreement or commitment by the Company to do any of the
things described in this Section 2.22.
2.23 Insurance. The Company has in full force and effect fire,
casualty and liability insurance policies with recognized insurers with such
coverages as are sufficient in amount to allow replacement of the tangible
properties of the Company that might be damaged or destroyed.
2.24 Employee Benefit Plans. Except as set forth in Section 2.24 of
the Webridge, Inc. Schedule of Exceptions hereto, the Company does not have any
Employee Benefit Plan as defined in the Employee Retirement Income Security Act
of 1974 ("ERISA"). To the Company's knowledge, each of the Company's Employee
Benefit Plans is in full compliance with ERISA and the Company has no
liabilities associated with any Employee Benefit Plan other than those
liabilities set forth in the Financial Statements.
2.25 Tax Returns and Payments. The Company has filed all tax returns
and reports as required by law. These returns and reports are true and correct
in all material respects. The Company has paid all taxes and other assessments
when due, except those contested by it in good faith that are listed in the
Schedule of Exceptions. The provision for taxes of the Company as shown in the
Financial Statements is adequate for taxes due or accrued as of the date
thereof. The Company has not elected pursuant to the Internal Revenue Code of
1986, as amended (the "Code"), to be treated as a collapsible corporation
pursuant to Section 341(f) of the Code, nor has it made any other elections
pursuant to the Code (other than elections that relate solely to methods of
accounting, depreciation or amortization) that would have a material adverse
effect on the Company, its financial condition, its business as presently
conducted or proposed to be conducted or any of its properties or material
assets.
2.26 Labor Agreements and Actions. The Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the best knowledge of
the Company, has sought to represent any of the employees, representatives or
agents of the Company. There is no strike or other labor dispute involving the
Company pending, or to the best knowledge of the Company threatened, which could
have a material adverse effect on the assets, properties, financial condition,
operating results, or business of the Company (as such business is presently
conducted and as it is proposed to be conducted), nor is the Company aware of
any labor organization activity involving its employees.
2.27 Environmental and Safety Laws. To the best of the Company's
knowledge, it is not in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety that would have a
material effect on the employees, and to the best of its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation.
<PAGE> 15
2.28 Minute Books. The copy of the minute books of the Company
provided to the counsel for the Investors contains minutes of all meetings of
directors and stockholders and all actions by written consent without a meeting
by the directors and stockholders since the date of incorporation and reflects
all actions by the directors (and any committee of directors) and stockholders
with respect to all transactions referred to in such minutes accurately in all
material respects.
2.29 Year 2000. Software developed by the Company for sale or license
to its customers (including Mainspan) is Year 2000 compliant. As used in this
Agreement, "Year 2000 compliant" means that the software is designed to be used
prior to, during and after the calendar year 2000, and the software will
accurately receive, provide and process date and time data from, into and
between the 20th and 21st centuries, including the years 1999 and 2000, and
leapyear calculations and will not malfunction, cease to function, or provide
invalid or incorrect results as a result of date and time data, to the extent
that other software used in combination with the Company's software properly
exchanges date and time data with it.
3. Representations and Warranties of the Investors. Each Investor hereby
represents and warrants that:
3.1 Authorization. Such Investor has full power and authority to
enter into this Agreement, the Investors' Rights Agreement and the Co-Sale
Agreement, and each such Agreement constitutes its valid and legally binding
obligation, enforceable in accordance with their respective terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies, and (iii) to the
extent the indemnification provisions contained in the Investors' Rights
Agreement may be limited by applicable federal or state securities laws.
3.2 Purchase Entirely for Own Account. This Agreement is made with
such Investor in reliance upon such Investor's representation to the Company,
which by such Investor's execution of this Agreement such Investor hereby
confirms, that the Series C Preferred Stock to be received by such Investor and
the Common Stock issuable upon conversion thereof (collectively, the
"Securities") will be acquired for investment for such Investor's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and that such Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, such Investor further represents that such Investor does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person,
with respect to any of the Securities.
3.3 Disclosure of Information. Such Investor believes it has received
all the information it considers necessary or appropriate for deciding whether
to purchase the Series C Preferred Stock. Such Investor further represents that
it has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the
<PAGE> 16
offering of the Series C Preferred Stock and the business, properties, prospects
and financial condition of the Company. The foregoing, however, does not limit
or modify the representations and warranties of the Company in Section 2 of this
Agreement or the right of the Investors to rely thereon and assumes the accuracy
thereof.
3.4 Investment Experience. Such Investor is an investor in securities
of companies in the development stage and acknowledges that it is able to fend
for itself, can bear the economic risk of its investment, and has such knowledge
and experience in financial or business matters that it is capable of evaluating
the merits and risks of the investment in the Series C Preferred Stock. If other
than an individual, Investor also represents it has not been organized for the
purpose of acquiring the Series C Preferred Stock.
3.5 Accredited Investor. Such Investor is an "accredited investor"
within the meaning of Securities and Exchange Commission ("SEC") Rule 501 of
Regulation D, as presently in effect.
3.6 Restricted Securities. Such Investor understands that the
Securities it is purchasing are characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired from the Company
in a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Act only in certain limited circumstances. In this connection, such Investor
represents that it is familiar with SEC Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the Act.
3.7 Further Limitations on Disposition. Without in any way limiting
the representations set forth above, such Investor further agrees not to make
any disposition of all or any portion of the Securities unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 3 and the Investors' Rights Agreement provided and to the extent
this Section and such agreement are then applicable, and:
(a) There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) (i) Such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, such Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company that
such disposition will not require registration of such shares under the Act. It
is agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except in unusual circumstances.
(c) Notwithstanding the provisions of paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by an Investor that is a partnership, corporation or limited
liability company to another entity that
<PAGE> 17
controls, is controlled by, or is under common control with the transferring
entity or to a partner or member of such transferring partnership or limited
liability company or a retired partner or member of such partnership or limited
liability company who retires after the date hereof, or to the estate of any
such person or retired person or the transfer by gift, will or intestate
succession of any such person to his or her spouse or to the siblings, lineal
descendants or ancestors of such person or his or her spouse, if the transferee
agrees in writing to be subject to the terms hereof to the same extent as if he
or she were an original Investor hereunder.
3.8 Legends. It is understood that the certificates evidencing the
Securities may bear one or all of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933, as amended. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in effect
with respect to the securities under such Act or under applicable state law or
an opinion of counsel satisfactory to the Company that such registration is not
required or unless sold pursuant to Rule 144 of such Act."
(b) The legends set forth in the Investors' Rights Agreement and
the Co-Sale Agreement.
4. Conditions of Investor's Obligations at Closing. The obligations of
each Investor under subsection 1.1(b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against any Investor who does not consent
thereto:
4.1 Representations and Warranties. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
4.2 Performance. The Company shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
4.3 Compliance Certificate. The President of the Company shall
deliver to each Investor at the Closing a certificate stating that the
conditions specified in Sections 4.1 and 4.2 have been fulfilled and stating
that there shall have been no material adverse change in the business, affairs,
operations, properties, assets or condition of the Company since November 30,
1999.
4.4 Qualifications. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Securities pursuant to this Agreement shall be duly obtained and effective
as of the Closing.
<PAGE> 18
4.5 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to the
Investors, and they shall have received all such counterpart original and
certified or other copies of such documents as they may reasonably request.
4.6 Bylaws. The Bylaws of the Company shall provide that the Board of
Directors of the Company shall consist of seven (7) persons.
4.7 Board of Directors. The directors of the Company immediately
following the Closing shall be Gary N. Fielland, Mark S. Anastas, Stephen L.
Domenik, Gerard Langeler, Scott Gibson, and James Lash, and there shall be one
vacancy on the Board of Directors.
4.8 Opinion of Company Counsel. Each Investor shall have received
from Stoel Rives LLP, counsel for the Company, an opinion, dated as of the
Closing, in the form attached hereto as Exhibit D.
4.9 Investors' Rights Agreement. The Company and each party thereto
shall have entered into the Investors' Rights Agreement in the form attached
hereto as Exhibit B.
4.10 Co-Sale Agreement. The Company and each party thereto shall have
entered into the Co-Sale Agreement in the form attached hereto as Exhibit C.
5. Conditions of the Company's Obligations at Closing. The obligations of
the Company to each Investor under this Agreement are subject to the fulfillment
on or before the Closing of each of the following conditions by that Investor:
5.1 Representations and Warranties. The representations and
warranties of such Investor contained in Section 3 shall be true on and as of
the Closing with the same effect as though such representations and warranties
had been made on and as of the Closing.
5.2 Qualifications. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Securities pursuant to this Agreement shall be duly obtained and effective
as of the Closing.
6. Miscellaneous.
6.1 Survival of Warranties. The warranties, representations and
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investors or the Company.
<PAGE> 19
6.2 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 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.
6.3 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.
6.4 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.
6.5 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.
6.6 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 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.
6.7 Finders' Fees. Each party represents that it neither is nor will
be obligated for any finders' fees or commissions in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of finders'
fees (and the costs and expenses of defending against such liability or asserted
liability) for which such Investor or any of its officers, partners, employees,
or representatives is responsible. The Company agrees to indemnify and hold
harmless each Investor from any liability for any commission or compensation in
the nature of a finders' fee (and the costs and expenses of defending against
such liability or asserted liability) for which the Company or any of its
officers, employees or representatives is responsible.
6.8 Expenses. The Company will pay at the Closing the reasonable fees
and expenses, not to exceed $25,000, of special counsel to the Investors. If any
action at law or in equity is necessary to enforce or interpret the terms of
this Agreement, the Investors' Rights Agreement, the Co-Sale Agreement or the
Restated Certificate, 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.
<PAGE> 20
6.9 Amendments and Waivers. Any term of this Agreement other than the
terms of Section 4 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 sixty percent (60%) of the Common Stock issuable or issued
upon conversion of the Series C Preferred Stock. Any amendment or waiver
effected in accordance with this paragraph shall be binding upon each holder of
any securities purchased under this Agreement at the time outstanding (including
securities into which such securities are convertible), each future holder of
all such securities, and the Company.
6.10 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.
6.11 Aggregation of Stock. All shares of the Preferred Stock held or
acquired by affiliated entities or persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.
6.12 Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
<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 Avenue, Suite 400
Portland, OR 97205
SIGNATURE PAGE TO WEBRIDGE, INC.
SERIES C STOCK PURCHASE 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.
SERIES C STOCK PURCHASE AGREEMENT
<PAGE> 23
INTEL CORPORATION
By:
-------------------------------------
(signature)
Name:
-----------------------------------
Title:
----------------------------------
Address: 2200 Mission College Blvd.
Santa Clara, California 95052
Attn: General Counsel - M/S SC4-203
SIGNATURE PAGE TO WEBRIDGE, INC.
SERIES C STOCK PURCHASE AGREEMENT
<PAGE> 24
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.
SERIES C STOCK PURCHASE AGREEMENT
<PAGE> 25
OLYMPIC VENTURE PARTNERS IV, L.P.
By: OVMC IV, L.L.C., General Partner
By:
-------------------------------------
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:
-------------------------------------
Name:
-----------------------------------
Title: Member
Address: 2420 Carillon Point
Kirkland, Washington 98033
SIGNATURE PAGE TO WEBRIDGE, INC.
SERIES C STOCK PURCHASE AGREEMENT
<PAGE> 26
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
SIGNATURE PAGE TO WEBRIDGE, INC.
SERIES C STOCK PURCHASE AGREEMENT
<PAGE> 27
INDIVIDUAL INVESTOR:
By:
-----------------------------------------------------
Gary N. Fielland
Address: 11255 NW Ridge Road
Portland, Oregon 97229
SIGNATURE PAGE TO WEBRIDGE, INC.
SERIES C STOCK PURCHASE AGREEMENT
<PAGE> 28
INDIVIDUAL INVESTOR:
By:
-----------------------------------------------------
Lary L. Evans
Address: 508 Newhall CV
Austin, Texas 78746
SIGNATURE PAGE TO WEBRIDGE, INC.
SERIES C STOCK PURCHASE AGREEMENT
<PAGE> 29
INDIVIDUAL INVESTOR:
By:
-----------------------------------------------------
Gregory Darmohray
Address: 8350 NW Ash
Portland, Oregon 97229
SIGNATURE PAGE TO WEBRIDGE, INC.
SERIES C STOCK PURCHASE AGREEMENT
<PAGE> 30
INDIVIDUAL INVESTOR:
By:
-----------------------------------------------------
Marcia Hooper
Address: 4 Claybrook Road
Dover, Massachusetts 02030
SIGNATURE PAGE TO WEBRIDGE, INC.
SERIES C STOCK PURCHASE AGREEMENT
<PAGE> 31
INDIVIDUAL INVESTOR:
By:
-----------------------------------------------------
C. Scott Gibson
Address: 1900 Twin Points Road
Lake Oswego, Oregon 97034
SIGNATURE PAGE TO WEBRIDGE, INC.
SERIES C STOCK PURCHASE AGREEMENT
<PAGE> 32
INDIVIDUAL INVESTOR:
By:
--------------------------------------------------
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.
SERIES C STOCK PURCHASE AGREEMENT
<PAGE> 33
SCHEDULE A
SCHEDULE OF INVESTORS
<TABLE>
<CAPTION>
NUMBER OF
SERIES C
PREFERRED SHARES CANCELLATION TOTAL PURCHASE
NAME AND ADDRESS PURCHASED OF INDEBTEDNESS PRICE OF SHARES
- ---------------- ---------------- --------------- ---------------
<S> <C> <C> <C>
MERITECH CAPITAL PARTNERS L.P. 3,299,408 16,727,998.56
90 Middlefield Road, Suite 201
Menlo Park, CA 94025
MERITECH AFFILIATE PARTNERS L.P. 53,649 272,000.43
90 Middlefield Road, Suite 201
Menlo Park, CA 94025
INTEL CORPORATION 103,838 526,458.66
2200 Mission College Blvd.
Santa Clara, California 95052
SEVIN ROSEN FUND V L.P. 348,068 1,764,704.76
13455 Noel Road, Suite 1670
Dallas, Texas 75240
SEVIN ROSEN V AFFILIATES FUND L.P. 14,881 75,446.67
13455 Noel Road, Suite 1670
Dallas, Texas 75240
SEVIN ROSEN BAYLESS MANAGEMENT COMPANY -- --
13455 Noel Road, Suite 1670
Dallas, Texas 75240
OLYMPIC VENTURE PARTNERS IV, L.P. 302,343 1,532,879.01
2420 Carillon Point
Kirkland, Washington 98033
OVP IV ENTREPRENEURS FUND, L.P. -- --
2420 Carillon Point
Kirkland, Washington 98033
WORLDVIEW TECHNOLOGY PARTNERS I, L.P. 81,942 415,444.40
435 Tasso, Suite 120
Palo Alto, California 94301
WORLDVIEW TECHNOLOGY INTERNATIONAL I, L.P. 31,937 161,921.54
435 Tasso, Suite 120
Palo Alto, California 94301
WORLDVIEW STRATEGIC PARTNERS I, L.P. 7,058 35,784.66
435 Tasso, Suite 120
Palo Alto, California 94301
</TABLE>
<PAGE> 34
<TABLE>
<CAPTION>
NUMBER OF
SERIES C
PREFERRED SHARES CANCELLATION TOTAL PURCHASE
NAME AND ADDRESS PURCHASED OF INDEBTEDNESS PRICE OF SHARES
- ---------------- ---------------- --------------- ---------------
<S> <C> <C> <C>
GARY N. FIELLAND 63,220 320,525.40
11255 NW Ridge Road
Portland, Oregon 97229
LARY EVANS 4,693 23,793.51
508 Newhall CV
Austin, Texas 78746
GREGORY DARMOHRAY 15,944 80,836.08
8350 NW Ash
Portland, OR 97229
MARCIA HOOPER 2,167 10,986.69
4 Claybrook Road
Dover, MA 02030
C. SCOTT GIBSON 5,051 25,608.57
1900 Twin Points Road
Lake Oswego, OR 97034
THE WILLIAM AND JUNE LATTIN REVOCABLE LIVING 5,051 25,608.57
TRUST
10911 NW Quarry Road
Portland, OR 97231
TOTALS 4,339,250 $21,999,997.50
</TABLE>
<PAGE> 35
EXHIBIT A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
<PAGE> 36
EXHIBIT B
INVESTORS' RIGHTS AGREEMENT
<PAGE> 37
EXHIBIT C
FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE> 38
EXHIBIT D
OPINION OF COUNSEL FOR THE COMPANY
<PAGE> 39
EXHIBIT E
SHAREHOLDER LIST
<PAGE> 1
EXHIBIT 21.1
LIST OF SUBSIDIARIES
Name Jurisdiction of Incorporation
- ---- -----------------------------
Attribnet Limited United Kingdom
<PAGE> 1
EXHIBIT 23.1
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
May 5, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 18,871
<SECURITIES> 1,820
<RECEIVABLES> 3,621
<ALLOWANCES> 30
<INVENTORY> 0
<CURRENT-ASSETS> 25,363
<PP&E> 1,472
<DEPRECIATION> 547
<TOTAL-ASSETS> 26,288
<CURRENT-LIABILITIES> 4,520
<BONDS> 0
0
17
<COMMON> 15
<OTHER-SE> 21,661
<TOTAL-LIABILITY-AND-EQUITY> 26,288
<SALES> 1,159
<TOTAL-REVENUES> 2,516
<CGS> 3
<TOTAL-COSTS> 4,961
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28
<INCOME-PRETAX> (2,986)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,986)
<EPS-BASIC> (0.28)
<EPS-DILUTED> (0.28)
</TABLE>
