<PAGE>
As filed with the Securities and Exchange Commission on April 2, 1999
Registration No. 333-72935
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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LATITUDE COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in Its Charter)
----------------
Delaware 5045 94-3177392
(State or Other (Primary Standard Industrial (I.R.S. Employer
Jurisdiction of Classification Code Number) Identification Number)
Incorporation or
Organization)
2121 Tasman Drive
Santa Clara, CA 95054
(408) 988-7200
(Address, Including Zip Code, and Telephone Number, Including Area
Code, of Registrant's Principal Executive Offices)
----------------
Emil C.W. Wang
President and Chief Executive Officer
Latitude Communications, Inc.
2121 Tasman Drive
Santa Clara, CA 95054
(408) 988-7200
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
Copies to:
Mark A. Medearis Jeffrey D. Saper
Edward Y. Kim Selim Day
Anita Vasudevan Ava M. Hahn
VENTURE LAW GROUP WILSON SONSINI GOODRICH & ROSATI
A Professional Corporation Professional Corporation
2800 Sand Hill Road 650 Page Mill Road
Menlo Park, CA 94025 Palo Alto, CA 94304
----------------
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, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 2, 1999
Shares
[LOGO]
Latitude Communications, Inc.
Common Stock
--------
Before this offering, there has been no public market for the common stock.
The initial public offering price of the common stock is expected to be
between $ and $ per share. We have made application to list the
common stock on The Nasdaq Stock Market's National Market under the
symbol "LATD."
We have granted the underwriters an option to purchase a maximum of
additional shares to cover over-allotments of shares.
Investing in the common stock involves risks. See "Risk Factors" starting on
page 5.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions Latitude
------------ ------------- ------------
<S> <C> <C> <C>
Per Share.................................. $ $ $
Total...................................... $ $ $
</TABLE>
Delivery of the shares of common stock will be made on or about , 1999,
against payment in immediately available funds.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
Credit Suisse First Boston
Hambrecht & Quist
Dain Rauscher Wessels
a division of
Dain Rauscher
Incorporated
Prospectus dated , 1999
<PAGE>
Description of Graphics for Inside Front Cover Pages of Prospectus
[PHOTO DESCRIPTION: Three people
standing, with their shadows forming
puzzle pieces being placed
together.]
Latitude --
extending
the workplace
<PAGE>
[PHOTO DESCRIPTION: Man with
child in baseball uniform,
with shadows on the wall of
people at a conference
table.]
"Got paged about a production
problem. Used MeetingPlace to
resolve it with suppliers, and
only missed one inning."
THE VIRTUAL MEETING
From voicemail, fax machines and
cellular phones to e-mail,
laptop computers and handheld
devices, business have adopted
communications technologies to
extend the workplace beyond the
physical office. No single,
widely deployable technology,
however, has successfully
emulated the voice and data
collaboration that occurs in a
face-to-face meeting. We believe
that enterprises today need a
cost-effective and easy-to-use
solution that enables
simultaneous real-time voice
communication and secure
document collaboration.
[PHOTO DESCRIPTION:
Photo of a clock.]
[PHOTO DESCRIPTION:
Photo of people walking to
work.]
[PHOTO DESCRIPTION:
A woman working on a laptop
computer at a table, with a
shadow on the wall of the
person working at a personal
computer along with others.]
<PAGE>
<TABLE>
<S> <C>
"I'll listen to the competitive [PHOTO DESCRIPTION: A man standing
analysis presentation later on looking at his watch holding a
MeetingPlace. Can't be late for my briefcase, with a shadow on the wall
anniversary dinner." of the person listening to a
presentation.]
WELCOME TO MEETINGPLACE MeetingPlace AN ENTERPRISE SOLUTION Our objective
is an integrated voice and data is to make MeetingPlace a standard
conferencing solution that enables communications tool within an
virtual meetings among an enterprise. MeetingPlace is a
organization's employees, vendors scalable solution that integrates
and customers, irrespective of their with an enterprise's existing
geographic locations. With telephone and data networks. In
MeetingPlace, participants can addition, MeetingPlace is designed
schedule and attend a meeting, share to integrate seamlessly into widely
and edit documents, and record and deployed enterprise software
access meeting content. MeetingPlace applications, such as web browsers
extends the capabilities of the and certain collaborative software
basic voice conference call through environments such as Microsoft
a broad feature set designed to Outlook. As a result, an enterprise
enhance general conferencing can provide employees with a
capabilities as well as to satisfy powerful productivity tool while
specific business applications. lowering its overall cost of
Moreover, MeetingPlace offers users conferencing.
easy access to data conferencing,
which we believe will become an
important business application of
the Internet.
"Just used MeetingPlace to finalize
the customer presentation with my
field sales team. Wonder if this
hotel has an exercise room."
</TABLE>
<PAGE>
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 5
Use of Proceeds.......................................................... 14
Dividend Policy.......................................................... 14
Certain Information...................................................... 14
Capitalization........................................................... 15
Dilution................................................................. 16
Selected Consolidated Financial Data..................................... 17
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 18
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Business................................................................... 30
Management................................................................. 43
Certain Transactions....................................................... 56
Principal Stockholders..................................................... 57
Description of Capital Stock............................................... 59
Shares Eligible for Future Sale............................................ 62
Additional Information..................................................... 63
Underwriting............................................................... 64
Notice to Canadian Residents............................................... 66
Legal Matters.............................................................. 68
Experts.................................................................... 68
Index to Financial Statements.............................................. F-1
</TABLE>
------------
You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.
------------
Dealer Prospectus Delivery Obligation
Until , 1999 (25 days after the commencement of this offering), all
dealers that effect transactions in these securities, whether or not
participating in this offering, 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 with respect to unsold allotments or subscriptions.
2
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all the information you
should consider before buying shares in this offering. You should read the
entire prospectus carefully.
Latitude Communications, Inc.
---------------
We are a leading provider of integrated voice and data conferencing
solutions for geographically dispersed organizations. We develop, market and
support our MeetingPlace system, which allows companies to conduct virtual
meetings and thereby extend real-time decision making processes irrespective of
the geographic location of participants. With MeetingPlace, participants can
schedule and attend a meeting, share and edit documents, and capture and
retrieve meeting content. MeetingPlace is designed to be an enterprise-wide
resource and to leverage existing technologies such as telephones, cellular
phones and personal computers. Moreover, we expect that the dramatic growth in
web browsers and collaborative software applications will drive data
conferencing as an important business application of the Internet.
MeetingPlace consists of three components: (a) the MeetingPlace conference
server; (b) MeetingPlace software; and (c) system integration options.
MeetingPlace incorporates many easy-to-use features that allow participants to
emulate the voice and data collaboration that occurs in a face-to-face meeting,
such as breakout sessions, roll calls and meeting handouts. MeetingPlace
provides simultaneous voice and data conferencing and the ability to record and
access meeting content while lowering the enterprise's overall conferencing
costs.
Our objective is to make MeetingPlace a standard communications tool within
an enterprise. To achieve this objective, we intend to establish MeetingPlace
as a ubiquitous desktop application by continuing to integrate it seamlessly
with a wide array of enterprise software, including browsers and collaborative
software applications. Furthermore, we expect to continue to provide our
customers with a range of consulting services to promote broad deployment
within their organizations.
We began commercial shipment of MeetingPlace in December 1994 and, as of
December 31, 1998, had over 200 customers. In addition to enterprise-wide
general deployment, customers have purchased and used MeetingPlace for a
variety of specific business applications, including morning brokerage calls,
crisis management, training and education, customer and client services, supply
chain management and merger integration. MeetingPlace has been installed in
some of the world's leading enterprises, including 3Com, Aetna, Cisco, Credit
Suisse First Boston, Hewlett-Packard, Honeywell, Microsoft, Oracle, State Farm
Insurance, Union Pacific Railroad and the U.S. Federal Reserve Bank.
Our address is 2121 Tasman Drive, Santa Clara, California 95054, and our
telephone number is (408) 988-7200. "MeetingPlace" is a registered trademark of
Latitude, and "Latitude," "Latitude Communications," the Latitude logo,
"MeetingNotes" and "MeetingTime" are trademarks of Latitude. This prospectus
also includes trademarks and service marks owned by other companies.
3
<PAGE>
The Offering
<TABLE>
<C> <S>
Common stock offered........................ shares
Common stock to be outstanding after this
offering................................... shares
Use of proceeds............................. For general corporate purposes,
including working capital,
capital expenditures, geographic
expansion and additional sales
and marketing efforts.
Proposed Nasdaq National Market symbol...... LATD
</TABLE>
This table is based on shares outstanding as of December 31, 1998 and excludes
shares that may be issued upon exercise of options or warrants.
Except as otherwise indicated, all information in this prospectus is based
on the following assumptions: (a) a three-for-two split of the common stock
before the effectiveness of this offering; (b) the conversion of each
outstanding share of convertible preferred stock into one share of common stock
immediately before the completion of this offering; (c) no exercise of the
underwriters' over-allotment option; (d) our reincorporation in Delaware before
the effectiveness of this offering; and (e) the filing of our amended and
restated certificate of incorporation upon completion of this offering.
Summary Consolidated Financial Data
(In thousands, except per share data)
<TABLE>
<CAPTION>
Years ended
April 7, 1993 (date December 31,
of inception) to -------------------------
December 31, 1995 1996 1997 1998
------------------- ------- ------- -------
<S> <C> <C> <C> <C>
Consolidated Statement of Opera-
tions Data:
Revenue:
Product ...................... $1,477 $ 5,103 $10,620 $16,506
Service....................... 148 943 2,312 4,545
------ ------- ------- -------
Total revenue............... 1,625 6,046 12,932 21,051
Gross profit.................... 683 3,877 8,969 15,094
Operating income (loss)......... (8,822) (4,390) (2,206) 778
Net income (loss)............... (8,547) (4,252) (2,229) 703
Net income (loss) per share--
basic.......................... $ (2.02) $ (0.78) $ 0.21
Shares used in per share
calculation--basic............. 2,110 2,850 3,279
Net income (loss) per share--
diluted........................ $ (2.02) $ (0.78) $ 0.04
Shares used in per share
calculation--diluted........... 2,110 2,850 16,635
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
-------------------
Actual As Adjusted
------- -----------
<S> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents.................................. $ 3,982 $
Working capital............................................ 4,470
Total assets............................................... 11,870
Long-term obligations...................................... 838
Total stockholders' equity................................. 4,785
</TABLE>
- --------
The as adjusted numbers in the table above are adjusted to give effect to
receipt of the net proceeds from the sale of shares of common stock offered
by us at an assumed offering price of $ per share after deducting the
estimated underwriting discounts and commissions and estimated offering
expenses payable by us. See also "Use of Proceeds," "Capitalization" and
"Underwriting."
4
<PAGE>
RISK FACTORS
You should carefully consider the following risks in addition to the
remainder of this prospectus before purchasing our common stock. The risks and
uncertainties described below are intended to highlight risks that are specific
to us and are not the only ones that we face. Additional risks and
uncertainties, such as those that generally apply to business enterprises in
our industry, also may impair our business operations.
Our future profitability is uncertain due to our limited operating history.
Because we commenced operations in May 1993 and have a limited operating
history, we cannot assure you that we will be profitable. Our prospects must be
considered in light of the risks and uncertainties encountered by companies in
the early stages of development, including:
. our substantial dependence on our MeetingPlace products, which were first
introduced in December 1994 and which have limited market acceptance;
. our need to expand our marketing, sales and support organizations;
. our unproven ability to anticipate and respond to technological and
competitive developments in the emerging market for voice and data
collaboration systems;
. our ability to retain existing customers;
. the degree to which our customers perceive that our products are secure
and reliable;
. the market's acceptance of integrated real-time voice and data
conferencing; and
. our dependence on our current executive officers.
We cannot assure you that our revenue will continue to grow or that we will
maintain profitability in the future. As of December 31, 1998, we had an
accumulated deficit of approximately $14.3 million. We first achieved
profitability during the fourth quarter of 1997. In addition, we are unable to
predict our future product development, sales and marketing, and administrative
expenses. To the extent that these expenses increase, we will need to increase
revenue to sustain profitability. Because our product market is new and
evolving, we cannot accurately predict the future growth rate, if any, or the
ultimate size of our market. Our ability to increase revenue and sustain
profitability also depends on the other risk factors described in this section.
Our operating results may fluctuate significantly.
Our operating results are difficult to predict. Our future quarterly
operating results may fluctuate and may not meet the expectations of securities
analysts or investors. If this occurs, the price of our common stock would
likely decline. The factors that may cause fluctuations of our operating
results include the following:
. changes in the amount and timing of our revenue because of the
lengthiness and unpredictability of our sales cycle;
. delays we may encounter in introducing new versions of MeetingPlace and
new products and services;
. changes in our mix of revenues generated from product sales and services;
. changes by existing customers in their levels of purchases of our
products and services;
. changes in our mix of sales channels through which our products and
services are sold;
5
<PAGE>
. changes in our mix of domestic and international sales; and
. the fixed nature of expenses such as base compensation and rent.
Orders at the beginning of each quarter typically do not equal expected
revenue for that quarter. In addition, a significant portion of our orders are
received in the last month of each fiscal quarter. Accordingly, we are
dependent upon obtaining orders in a quarter for shipment in the same quarter
to achieve our revenue objectives. If we fail to ship products by the end of a
quarter in which the order is received, or if our prospective customers delay
their orders or delivery schedules until the following quarter, we may fail to
meet our revenue objectives, which may adversely impact our operating results.
Our market is highly competitive.
We compete in a market that is highly competitive and rapidly changing. We
expect competition to persist and intensify in the future which could adversely
affect our ability to increase sales, penetrate new markets and maintain
average selling prices. We face competition from a number of different sources.
Currently, our principal competitors include:
. major telecommunications carriers that operate service bureaus for voice
conferencing, such as AT&T Corp., MCI Worldcom, Inc. and Sprint
Corporation;
. private branch exchange, or PBX, vendors that sell systems with voice
conferencing capabilities, such as Lucent Technologies Inc. and Nortel
Networks;
. providers of video conferencing systems such as PictureTel Corporation,
Pinnacle Systems, Inc. and 8x8, Inc.; and
. smaller start-up companies that offer web-based voice and data
conferencing products.
In addition, we anticipate that, in the future, we may experience
competition from potential competitors that include:
. networking companies, such as Cisco Systems, Inc., 3Com Corporation,
Lucent Technologies Inc. and Nortel Networks that are currently focusing
on providing hardware to enable the transmission of voice over the
Internet and that may offer voice and data conferencing functionality at
a cost lower than ours or at no cost; and
. collaborative software providers, such as Microsoft Corporation and Lotus
Development Corporation, that are currently focusing on data conferencing
products and that may in the future incorporate voice conferencing
functionality into their products at little or no incremental charge to
their customers.
Many of these companies have longer operating histories, stronger brand
names and significantly greater financial, technical, marketing and other
resources than we do. These companies also may have existing relationships with
many of our prospective customers. In addition, these companies may be able to
respond more quickly than we can to new or emerging technologies and changes in
customer requirements.
New competitors may emerge and rapidly acquire significant market share.
Competitive pressure, including any reduction in the cost of voice conferencing
services provided by service
6
<PAGE>
bureaus, may make it difficult for us to acquire and retain customers and may
require us to reduce the price of our products and services.
Our market is in an early stage of development, and our products may not be
adopted.
If the market for our integrated voice and data conferencing products fails
to grow or grows more slowly than we anticipate, we may not be able to increase
revenues or remain profitable. The market for integrated real-time voice and
data conferencing is relatively new and rapidly evolving. In contrast, stand-
alone voice conferencing is a well established and widely used communication
tool. Our ability to remain profitable depends in large part on the widespread
adoption by end users of real-time voice and data conferencing.
We will have to devote substantial resources to educate prospective
customers about the uses and benefits of our products. In addition, businesses
that have invested substantial resources in other conferencing products may be
reluctant or slow to adopt our products, which might replace or compete with
their existing systems. Our efforts to educate potential customers may not
result in our products achieving market acceptance.
Rapid technological changes could cause our products to become obsolete or
require us to redesign our products.
The market in which we compete is characterized by rapid technological
change, frequent new product introductions, changes in customer requirements
and emerging industry standards. In particular, we expect that the growth of
the Internet and Internet-based telephony applications, as well as general
technology trends such as migrations to new operating systems, will require us
to adapt our product to remain competitive. This adaptation could be costly and
time-consuming. Our products could become obsolete and unmarketable if products
using new technologies are introduced and new industry standards emerge. For
example, the widespread acceptance of competing technologies such as video
conferencing and the transmission of voice over the Internet, could diminish
demand for our current products. As a result, the life cycle of our products is
difficult to estimate.
To be successful, we will need to develop and introduce new products and
product enhancements that respond to technological changes or evolving industry
standards, such as the transmission of voice over the Internet, in a timely
manner and on a cost effective basis. In addition, our current full care
support agreements with our customers require us to deliver two product
upgrades per year. We cannot assure you that we will successfully develop these
types of products and product enhancements or that our products will achieve
broad market acceptance.
Our sales cycle is lengthy and unpredictable.
Any delay in sales of our products could cause our quarterly revenue and
operating results to fluctuate. The typical sales cycle of our products is
lengthy, generally between six to nine months, unpredictable, and involves
significant investment decisions by prospective customers, as well as our
education of potential customers regarding the use and benefits of our
products. Furthermore, many of our prospective customers have neither budgeted
expenses for voice and data conferencing
7
<PAGE>
systems nor have personnel specifically dedicated to procurement and
implementation of such conferencing systems. As a result, our customers spend a
substantial amount of time before purchasing our products in performing
internal reviews and obtaining capital expenditure approvals. We cannot be
certain that this cycle will not lengthen in the future. The emerging and
evolving nature of the real-time voice and data conferencing market may lead to
confusion in the market, which may cause prospective customers to postpone
their purchase decisions. In addition, general concerns regarding Year 2000
compliance may further delay purchase decisions by prospective customers.
If we fail to expand our sales and distribution channels, our business could
suffer.
If we are unable to expand our sales and distribution channels, we may not
be able to increase revenue or achieve market acceptance of our MeetingPlace
product. We have recently expanded our direct sales force and plan to recruit
additional sales personnel. New sales personnel will require training and take
time to achieve full productivity. There is strong competition for qualified
sales personnel in our business, and we may not be able to attract and retain
sufficient new sales personnel to expand our operations. In addition, we
believe that our future success is dependent upon establishing successful
relationships with a variety of distribution partners. To date, we have entered
into agreements with only a small number of these distribution partners. We
cannot be certain that we will be able to reach agreement with additional
distribution partners on a timely basis or at all, or that these distribution
partners will devote adequate resources to selling our products. Furthermore,
if our distribution partners fail to adequately market or support our products,
the reputation of our products in the market may suffer. In addition, we will
need to manage potential conflicts between our direct sales force and third-
party reselling efforts.
Our ability to expand into international markets is uncertain.
We intend to continue to expand our operations into new international
markets. In addition to general risks associated with international expansion,
such as foreign currency fluctuations and political and economic instability,
we face the following risks and uncertainties:
. the difficulties and costs of localizing products for foreign markets,
including the development of multilingual capabilities in our
MeetingPlace system;
. the need to modify our products to comply with local telecommunications
certification requirements in each country;
. our lack of a direct sales presence in other countries and our need to
establish relationships with distribution partners to sell our products
in these markets; and
. our reliance on the capabilities and performance of these distribution
partners in selling our products in international markets.
Any of these risks could prevent us from selling our products in a
particular country or harm our business operations once we have established
operations in that country.
If we fail to integrate our products with third-party technology, our sales
could suffer.
Our products are designed to integrate with our customers' data and voice
networks, as well as with enterprise applications such as browsers and
collaborative software applications. If we are
8
<PAGE>
unable to integrate our products with these networks and systems, sales of our
products could suffer. Accordingly, the reliability and performance of a
MeetingPlace system at a customer's site are largely dependent on a number of
factors, including:
. the third party software and hardware products used by the customer,
. the customer's voice and data network systems,
. the configurations on end users' personal computers and
. the end users' methods of access such as cellular telephones and laptop
computers.
If we are not able to readily integrate our products with these networks or
enterprise applications, for instance, as a result of technology enhancements
or upgrades of such systems, we could be required to redesign our products to
ensure compatibility. Any redesign of our products could be costly and time-
consuming, and we may not be able to redesign our products or be certain that
any redesign we may develop would achieve market acceptance. In addition, we
will need to continually modify our products as newer versions of the
enterprise applications with which our products integrate are introduced. Our
ability to do so largely depends on our ability to gain access to the advanced
programming interfaces, for such applications, and we cannot assure you that we
will have access to necessary advanced programming interfaces in the future.
We may experience difficulties managing our expected growth.
Our recent growth has strained, and we expect that any future growth will
continue to strain, our management systems and resources, which could hinder
our ability to continue to grow in the future.
We may not be able to install management information and control systems in
an efficient and timely manner, and our current or planned personnel, systems,
procedures and controls may not be adequate to support our future operations.
We may not be able to recruit and retain additional qualified personnel.
Competition for qualified personnel in the San Francisco Bay area, as well as
other markets in which we recruit, is extremely intense and characterized by
rapidly increasing salaries, which may increase our operating expenses or
hinder our ability to recruit qualified candidates.
In the future, we may experience difficulties meeting the demand for our
products and services. The installation and use of our products requires
training. If we are unable to provide training and support for our products,
the implementation process will be longer and customer satisfaction may be
lower.
Our business could suffer if we lose the services of our current management
team.
Our future success depends on the ability of our management to operate
effectively, both individually and as a group. The intense competition for
qualified personnel in our industry and geographic region could hinder our
ability to replace any of these key employees if we were to lose their services
in the future.
In addition, three of our seven executive officers joined us during the past
12 months. Accordingly, our executive officers' ability to function effectively
as a management team remains unproven.
9
<PAGE>
The loss of our right to use technology licensed to us by third parties could
harm our business.
We license technology that is incorporated into our products from third
parties, including digital signal processing algorithms and the MeetingPlace
server's operating system and relational database. Any interruption in the
supply or support of any licensed software could disrupt our operations and
delay our sales, unless and until we can replace the functionality provided by
this licensed software. Because our products incorporate software developed and
maintained by third parties, we depend on such third parties to deliver and
support reliable products, enhance their current products, develop new products
on a timely and cost-effective basis and respond to emerging industry standards
and other technological changes.
Any interruption in supply of components from outside manufacturers and
suppliers could hinder our ability to ship products in a timely manner.
We rely on third parties to obtain most of the components of the
MeetingPlace server and integrate them with other standard components, such as
the central processing unit and disk drives. If these third parties are no
longer able to supply and assemble these components or are unable to do so in a
timely manner, we may experience delays in shipping our products and have to
invest resources in finding an alternative manufacturer or manufacture our
products internally. We also face the following risks associated with our
dependence on third party manufacturing:
. reduced control over delivery schedules;
. quality assurance; and
. the potential lack of adequate capacity if we encounter greater than
expected demand.
In addition, we obtain key hardware components, including the processors and
digital signal processing devices used in the MeetingPlace server, from sole
source suppliers. In the past, we have experienced problems in obtaining some
of these components in a timely manner from these sources, and we cannot be
certain that we will be able to continue to obtain an adequate supply of these
components in a timely manner or, if necessary, from alternative sources. If we
are unable to obtain sufficient quantities of components or to locate
alternative sources of supply, we may experience delays in shipping our
products and incur additional costs to find an alternative manufacturer or
manufacture our products internally.
Our products may suffer from defects, errors or breaches of security.
Software and hardware products as complex as ours are likely to contain
undetected errors or defects, especially when first introduced or when new
versions are released. Any errors or defects that are discovered after
commercial release could result in loss of revenue or delay in market
acceptance, diversion of development resources, damage to our customer
relationships or reputation or increased service and warranty cost. Our
products may not be free from errors or defects after commercial shipments have
begun, and we are aware of instances in which some of our customers have
experienced product failures or errors.
Many of our customers conduct confidential conferences, and transmit
confidential data, using MeetingPlace. Concerns over the security of
information sent over the Internet and the privacy of its users may inhibit the
market acceptance of our products. In addition, unauthorized users in the past
10
<PAGE>
have gained, and in the future may be able to gain, access to our customers'
MeetingPlace systems. Any compromise of security could deter people from using
MeetingPlace and could harm our reputation and business and result in claims
against us.
We may be unable to adequately protect our proprietary rights, and we may be
subject to infringement claims.
We rely primarily on a combination of patents, copyrights, trademarks, trade
secret laws and contractual obligations with employees and third parties to
protect our proprietary rights. Unauthorized parties may copy aspects of our
products and obtain and use information that we regard as proprietary. In
addition, other parties may breach confidentiality agreements or other
protective contracts we have entered into, and we may not be able to enforce
our rights if these breaches occur. Furthermore, the laws of many foreign
countries do not protect our intellectual property rights to the same extent as
the laws of the United States.
We may be subject to legal proceedings and claims for alleged infringement
of third party proprietary rights, such as patents, trademarks or copyrights,
particularly as the number of products and competitors in our industry grow and
functionalities of products overlap. Any claims relating to the infringement of
third party proprietary rights, even if not meritorious, could result in costly
litigation, divert management's attention and resources, or require us to enter
into royalty or license agreements which are not advantageous to us. Parties
making these claims may be able to obtain injunctive or other equitable relief,
which could prevent us from selling our products in the United States or
abroad.
Dell Computer Corporation has registered the "Latitude" mark for computers
in the United States and in other countries. Dell's United States trademark
registration and Canadian application have blocked our ability to register the
"Latitude Communications" and "Latitude" with logo marks in the United States
and the "Latitude Communications" mark in Canada. Since we believe that we have
priority of trade name usage in the United States, we have petitioned to cancel
Dell's United States registration and opposed its Canadian application. The
outcome of these proceedings is uncertain. If Dell's registration for the
"Latitude" mark is not canceled or if we are unable to obtain consent from Dell
for our registration of our marks, we may not be able to register our marks and
would have to rely solely on common law protection for such marks. We cannot
assure you that we will be free from challenges of or obstacles to our use or
registration of our marks.
We are subject to government regulation, and our failure to comply with these
regulations could harm our business.
Because our products are subject to a wide variety of safety, emissions and
compatibility regulations imposed by governmental authorities in the United
States or in other countries in which we sell our products. If we are unable to
obtain necessary approvals or maintain compliance with the regulations of any
particular jurisdiction, we may be prohibited from selling our products in that
territory. In addition, in order to sell our products in many international
markets, we are required to obtain certifications that are specific to the
local telephony infrastructure.
11
<PAGE>
We may be subject to claims related to Year 2000 issues, and Year 2000 concerns
could adversely affect our revenues.
Many currently installed computer systems are not capable of distinguishing
21st century dates from 20th century dates. As a result, beginning on January
1, 2000, computer systems and software used by many companies and organizations
in a wide variety of industries, including technology, transportation,
utilities, finance and telecommunications, will produce erroneous results or
fail unless they have been modified or upgraded to process date information
correctly. Year 2000 compliance efforts may involve significant time and
expense, and uncorrected problems could materially adversely affect our
business, financial condition and operating results. We may face claims based
on Year 2000 issues arising from the integration of multiple products within an
overall system. We may also experience reduced sales of our products as
potential customers reduce their budgets for voice and data conferencing
products due to increased expenditures on their own Year 2000 compliance
efforts. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Year 2000 Readiness Disclosure."
Our stock price may be volatile.
We expect that the market price of our common stock will fluctuate as a
result of variations in our quarterly operating results. These fluctuations may
be exaggerated if the trading volume of our common stock is low. In addition,
due to the technology-intensive and emerging nature of our business, the market
price of our common stock may rise and fall in response to:
. announcements of technological or competitive developments;
. acquisitions or strategic alliances by us or our competitors;
. the gain or loss of significant orders; or
. the gain or loss by us of significant orders.
Certain existing stockholders own a large percentage of our voting stock and
could control the voting power of the common stock.
On completion of this offering, executive officers and directors and their
respective affiliates will beneficially own, in the aggregate, approximately %
of our outstanding common stock. As a result, these stockholders will be able
to exercise control over all matters requiring stockholder approval, including
the election of directors and approval of significant corporate transactions.
This concentration of ownership may delay, deter or prevent transactions that
would result in the change of control, which in turn could reduce the market
price of our common stock.
Future sales of our common stock may depress our stock price.
After this offering, we will have outstanding shares of common stock.
Sales of a substantial number of shares of common stock in the public market
following this offering could materially adversely affect the market price of
our common stock. All the shares sold in this offering will be freely tradable.
Upon the expiration of arrangements between our stockholders and Latitude or
the underwriters in which our stockholders have agreed not to sell or dispose
of their Latitude common stock, all of the remaining 15,574,857 shares of
common stock outstanding after this offering will be eligible for sale in the
public market 180 days following the date of this prospectus. Of these shares,
11,682,572 shares will be subject to volume limitations under federal
securities laws.
12
<PAGE>
If our stockholders sell substantial amounts of common stock, including
shares issued upon the exercise of outstanding options and warrants, in the
public market, the market price of our common stock could fall. See "Shares
Eligible for Future Sale" and "Underwriting."
This prospectus contains forward-looking statements that involve risks and
uncertainties.
We have made forward-looking statements under the sections entitled
"Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business." These statements
involve risks and uncertainties that may cause our business or financial
results to materially differ from those expressed by the forward-looking
statements.
We have identified forward-looking statements by using terms such as "may,"
"will," "should," "expects," "plans," "anticipates," "believes,"
"estimates,""predicts," "potential," or "continue" or the negative of these
terms or other comparable terminology.
We are under no duty to update any of the forward-looking statements after
the date of this prospectus to conform these statements to actual results.
13
<PAGE>
USE OF PROCEEDS
The net proceeds to us from the sale of the shares of common stock
offered by us are estimated to be approximately $ million, or approximately
$ million if the underwriters' over-allotment option is exercised in full,
at an assumed public offering price of $ per share, after deducting the
estimated underwriting discounts and commissions and the estimated offering
expenses.
We intend to use the net proceeds of this offering primarily for general
corporate purposes, including working capital, capital expenditures, geographic
expansion and additional sales and marketing efforts. We also may use a portion
of the net proceeds to acquire additional businesses, products and technologies
or to establish joint ventures that we believe will complement our current or
future business. However, we have no specific plans, agreements or commitments
to do so and are not currently engaged in any negotiations for any acquisition
or joint venture.
The amounts that we actually expend for working capital purposes will vary
significantly depending on a number of factors, including future revenue
growth, if any, and the amount of cash we generate from operations. As a
result, we will retain broad discretion in the allocation and use of the net
proceeds of this offering. Pending the uses described above, we will invest the
net proceeds in short-term, interest-bearing, investment-grade securities.
DIVIDEND POLICY
We have never paid cash dividends on our common stock. We currently intend
to retain any future earnings to fund the development and growth of our
business. Therefore, we do not currently anticipate paying any cash dividends
in the future. In addition, the terms of our current credit facility prohibit
us from paying dividends without our lender's consent.
CERTAIN INFORMATION
We were originally incorporated in California under the name "Convene
Communications, Inc." in April 1993 and changed our name to "Latitude
Communications, Inc." in July 1993. Our web site is located at
"www.latitude.com." Information contained on our web site is not a part of this
prospectus.
14
<PAGE>
CAPITALIZATION
The following table sets forth the following information:
. the actual capitalization of Latitude as of December 31, 1998;
. the pro forma capitalization of Latitude after giving effect to the
conversion of all outstanding shares of convertible preferred stock into
11,836,227 shares of common stock; and
. the pro forma as adjusted capitalization to give effect to the sale of
shares of common stock at an assumed initial public offering price of
$ per share in this offering after deducting the estimated
underwriting discounts and commissions Latitude expects to pay in
connection with this offering and estimated offering expenses payable by
Latitude.
This table should be read in conjunction with the Consolidated Financial
Statements and the Notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
As of December 31, 1998
--------------------------------
Actual Pro Forma As Adjusted
-------- --------- -----------
(In thousands, except share
data)
<S> <C> <C> <C>
Total long term debt........................... $ 838 $ 838 $ 838
Stockholders' equity:
Preferred stock, $.001 par value per share,
12,211,366 shares authorized, 11,836,227
shares issued and outstanding, actual;
5,000,000 shares authorized, none issued or
outstanding, pro forma and as adjusted...... 12 -- --
Common stock, $.001 par value per share,
15,000,000 shares authorized, 3,738,630
shares issued and outstanding, actual;
75,000,000 shares authorized, 15,574,857
shares issued and outstanding, pro forma,
shares issued and outstanding, as adjusted.. 4 16
Additional paid-in capital................... 22,095 22,095
Notes receivable from common stockholders.... (165) (165) (165)
Deferred stock compensation.................. (2,836) (2,836) (2,836)
Accumulated deficit.......................... (14,325) (14,325) (14,325)
-------- -------- --------
Total stockholders' equity................. 4,785 4,785
-------- -------- --------
Total capitalization..................... $ 5,623 $ 5,623 $
======== ======== ========
</TABLE>
- --------
This table is based on shares outstanding as of December 31, 1998. This
table excludes: (a) 1,352,496 shares subject to outstanding options at a
weighted average exercise price of $2.24 as of December 31, 1998, and 233,868
shares of common stock available for future issuance under our 1993 Stock Plan;
(b) 134,386 shares of common stock reserved for issuance on the exercise of
outstanding warrants, at a weighted average price of $1.05 per share as of
December 31, 1998; (c) 2,700,000 shares of common stock available for issuance
under our 1999 Stock Plan; (d) 250,000 shares of common stock available for
issuance under our 1999 Directors' Stock Option Plan; and (e) 500,000 shares of
common stock available for issuance under our 1999 Employee Stock Purchase
Plan.
15
<PAGE>
DILUTION
The pro forma net tangible book value of our common stock on December 31,
1998 was $4.8 million, or approximately $0.31 per share. Pro forma net tangible
book value represents the amount of our total tangible assets less total
liabilities, divided by the number of shares of common stock outstanding.
Dilution in net tangible book value per share represents the difference between
the amount per share paid by purchasers of shares of our common stock in this
offering and the net tangible book value per share of our common stock
immediately following this offering.
After giving effect to our sale of shares of common stock offered by this
prospectus and after deducting the estimated underwriting discounts and
commissions and estimated offering expenses payable by us, our net tangible
book value would have been $ , or approximately $ per share. This
represents an immediate increase in net tangible book value of $ per share
to existing stockholders and an immediate dilution in net tangible book value
of $ per share to new investors.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................... $
Pro forma net tangible book value per share as of December 31,
1998............................................................ $0.31
Increase per share attributable to new investors.................
-----
Pro forma net tangible book value per share after this offering....
----
Dilution in pro forma net tangible book value per share to new in-
vestors........................................................... $
====
</TABLE>
This table excludes 1,352,496 shares subject to outstanding options and
134,386 shares issuable upon exercise of outstanding warrants as of December
31, 1998. See Note 7 of the Notes to Consolidated Financial Statements. The
exercise of outstanding options and warrants having an exercise price less than
the offering price would increase the dilutive effect to new investors.
The following table sets forth, as of December 31, 1998, the differences
between the number of shares of common stock purchased from us, the total price
and average price per share paid by existing investors and by the new
investors, before deducting the estimated underwriting discounts and
commissions and estimated offering expenses payable by us, assuming a public
offering price of $ per share.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
--------------------- ---------------------- Average Price
Number Percentage Amount Percentage Per Share
---------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders... 15,574,857 % $19,009,610 % $1.22
New investors...........
Total................. 100.0% 100.0%
===== =====
</TABLE>
- --------
If the underwriters' over-allotment option is exercised in full, the
following will occur:
. the number of shares of common stock held by existing stockholders will
decrease to approximately % of the total number of shares of our common
stock outstanding after this offering; and
. the number of shares held by new investors will be increased to or
approximately % of the total number of shares of our common stock
outstanding after this offering.
16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The tables that follow present portions of our consolidated financial
statements and are not complete. You should read the following selected
financial data in conjunction with our Consolidated Financial Statements and
related Notes thereto and with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
prospectus. The consolidated statement of operations data for the years ended
December 31, 1996, 1997 and 1998, and the consolidated balance sheet data as of
December 31, 1997 and 1998, are derived from and are qualified in their
entirety by our Consolidated Financial Statements that have been audited by
PricewaterhouseCoopers LLP, independent accountants, which are included
elsewhere in this prospectus. The consolidated statement of operations data for
the years ended December 31, 1994 and 1995 and the consolidated balance sheet
data as of December 31, 1994, 1995 and 1996 are derived from audited
consolidated financial statements that are not included in this prospectus. The
historical results presented below are not necessarily indicative of the
results to be expected for any future fiscal year. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1994 1995 1996 1997 1998
-------- -------- -------- -------- -------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Consolidated Statement of
Operations Data:
Revenue:
Product..................... $ 85 $ 1,393 $ 5,103 $ 10,620 $16,506
Service..................... 17 130 943 2,312 4,545
-------- -------- -------- -------- -------
Total revenue............. 102 1,523 6,046 12,932 21,051
-------- -------- -------- -------- -------
Cost of revenue:
Product..................... 33 454 1,146 2,158 3,182
Service..................... 35 420 1,023 1,805 2,775
-------- -------- -------- -------- -------
Total cost of revenue..... 68 874 2,169 3,963 5,957
-------- -------- -------- -------- -------
Gross profit................. 34 649 3,877 8,969 15,094
Operating expenses:
Research and development... 2,057 2,071 2,466 2,213 2,607
Marketing and sales........ 736 2,160 4,644 7,845 9,744
General and
administrative............ 855 636 1,157 1,115 1,666
Amortization of deferred
stock compensation........ -- -- -- 2 299
-------- -------- -------- -------- -------
Total operating
expenses................ 3,648 4,867 8,267 11,175 14,316
-------- -------- -------- -------- -------
Income (loss) from opera-
tions....................... (3,614) (4,218) (4,390) (2,206) 778
Interest income (expense),
net......................... 117 115 138 (23) (41)
-------- -------- -------- -------- -------
Income (loss) before provi-
sion for income tax......... (3,497) (4,103) (4,252) (2,229) 737
Provision for income tax..... -- -- -- -- (34)
-------- -------- -------- -------- -------
Net income (loss)............ $ (3,497) $ (4,103) $ (4,252) $ (2,229) $ 703
======== ======== ======== ======== =======
Net income (loss) per share--
basic....................... $ (7.63) $ (3.10) $ (2.02) $ (0.78) $ 0.21
======== ======== ======== ======== =======
Shares used in per share cal-
culation--basic............. 459 1,325 2,110 2,850 3,279
======== ======== ======== ======== =======
Net income (loss) per share--
diluted..................... $ (7.63) $ (3.10) $ (2.02) $ (0.78) $ 0.04
======== ======== ======== ======== =======
Shares used in per share cal-
culation--diluted........... 459 1,325 2,110 2,850 16,635
======== ======== ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
December 31,
---------------------------------------
1994 1995 1996 1997 1998
------- ------- ------- ------- -------
(In thousands)
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents............. $ 5,938 $ 1,751 $ 5,664 $ 3,578 $ 3,982
Working capital....................... 5,831 1,574 5,655 3,501 4,470
Total assets.......................... 6,820 3,501 8,680 7,715 11,870
Long-term obligations................. 368 308 760 757 838
Total stockholders' equity............ 6,072 2,040 5,906 3,748 4,785
</TABLE>
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
We are a leading provider of integrated voice and data conferencing
solutions for geographically dispersed organizations. We develop, market and
support our MeetingPlace system, which allows companies to conduct virtual
meetings and thereby extend real-time decision making processes irrespective of
the geographic location of participants. With MeetingPlace, participants can
schedule and attend a meeting, view, share and edit documents, and capture and
retrieve meeting content. MeetingPlace is designed to be an enterprise-wide
resource and to leverage existing technologies such as telephones, cellular
phones and personal computers.
We were incorporated in April 1993. From inception until December 1994, our
operations consisted primarily of basic start-up activities, such as research
and development and recruiting personnel. We first recognized revenue from
product sales in December 1994 and generated revenue of $6.0 million, $12.9
million, and $21.1 million in 1996, 1997 and 1998. In addition, we incurred net
losses of $4.3 million and $2.2 million in 1996 and 1997, respectively, and
generated net income of approximately $703,000 in 1998. As of December 31,
1998, we had an accumulated deficit of $14.3 million. We cannot assure you that
our revenues will continue to grow or that we will maintain profitability in
the future.
We generate revenue from sales of our MeetingPlace products and from
customer support and consulting services. Revenue derived from product sales
constituted 84%, 82% and 78% of our total revenue in 1996, 1997 and 1998.
Product revenue is generally recognized upon shipment. We calculate an
allowance for returns based on historical rates. During 1998, three systems
totaling $386,000 were returned and charged to this allowance. Service revenue
includes revenue from implementation and integration services, system
management services, warranty coverage and customer support. Revenue from
implementation and system integration services is recognized as the services
are performed, while revenue from system management services, warranty coverage
and customer support is recognized ratably over the period of the contract.
We sell our MeetingPlace products primarily through our direct sales force
and, to a lesser extent, through indirect distribution channels. The majority
of our revenue is derived from Fortune 1000 companies, many of which initially
purchase MeetingPlace servers and later expand deployment of our products as
they require additional capacity for voice and data conferencing. In 1997, we
expanded into international markets by opening a sales office in the United
Kingdom and establishing distributor relationships in Hong Kong and Singapore,
and in 1998, we established a distributor relationship in Australia. While we
intend to increase sales through indirect channels and internationally, we
cannot assure you that we will be successful. In 1998, we expanded the breadth
of our support services by establishing a consulting services group to provide
expanded implementation services, system management services and customized
project consulting.
Total cost of revenue consists of component and materials costs, direct
labor costs, warranty costs, royalties and overhead related to manufacturing of
our products, as well as materials, travel and labor costs related to personnel
engaged in our service operations. Product gross margin is
18
<PAGE>
impacted by the proportion of product revenue derived from software sales,
which typically carry higher margins than hardware sales, and from indirect
distribution channels, which typically carry lower margins than direct sales.
Service gross margin is impacted by the mix of services we provide, which have
different levels of profitability, and the efficiency with which we provide
full care support to our customers. We record an allowance for excess and
obsolete inventory by identifying inventory components either considered excess
based on estimates of future usage or obsolete due to changes in our products.
Due primarily to design changes in our products in 1998 and, to a lesser
extent, increases in levels of demonstration inventory at customer locations,
we increased our allowance for excess and obsolete inventory by $149,000. As a
result of technological changes, our products may become obsolete or we could
be required to redesign our products.
19
<PAGE>
Results of Operations
The following table sets forth, for the periods indicated, the percentage of
total revenue of each line item:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
As a Percentage of Total
Revenue:
Revenue:
Product................... 84.4% 82.1% 78.4%
Service................... 15.6 17.9 21.6
-------- -------- --------
Total revenue........... 100.0 100.0 100.0
Cost of revenue:
Product................... 19.0 16.7 15.1
Service................... 16.9 14.0 13.2
-------- -------- --------
Total cost of revenue... 35.9 30.7 28.3
-------- -------- --------
Gross profit............... 64.1 69.3 71.7
Operating expenses:
Research and development.. 40.8 17.1 12.4
Marketing and sales....... 76.8 60.6 46.3
General and
administrative........... 19.1 8.6 7.9
Amortization of deferred
stock compensation....... -- -- 1.4
-------- -------- --------
Total operating
expenses............... 136.7 86.3 68.0
Income (loss) from
operations................ (72.6) (17.0) 3.7
-------- -------- --------
Interest income (expense),
net....................... 2.3 (0.2) (0.2)
-------- -------- --------
Income (loss) before
provision for income tax.. (70.3) (17.2) 3.5
-------- -------- --------
Provision for income tax... -- -- (0.2)
-------- -------- --------
Net income (loss).......... (70.3)% (17.2)% 3.3%
======== ======== ========
</TABLE>
Fiscal Years Ended December 31, 1996, 1997 and 1998
Product Revenue
Product revenue increased 108% from $5.1 million in 1996 to $10.6 million in
1997 and increased 55% to $16.5 million in 1998. The increases in product
revenue were due primarily to increased sales of our MeetingPlace products
domestically to new customers, increased sales of additional products and
features to existing customers, and, to a lesser extent, increased
international sales. International sales represented 4% and 7% of product
revenue in 1997 and 1998.
Service Revenue
Service revenue increased 145% from approximately $943,000 in 1996 to $2.3
million in 1997 and increased 97% to $4.5 million in 1998. The increases in
service revenue were attributable primarily to growth in our customer base
during these periods, which led to increased sales of full care support
services, as well as to the introduction of additional consulting services such
as managed services and expanded implementation and integration services.
20
<PAGE>
Total Cost of Revenue
Total cost of revenue increased 83% from $2.2 million in 1996 to $4.0
million in 1997 and increased 50% to $6.0 million in 1998. The increases in
total cost of revenue were attributable primarily to increased sales of our
MeetingPlace products and related services, as well as the increased size of
our services staff and the costs of providing services to support an
increasingly geographically dispersed customer base. Gross margin increased
from 64% in 1996 to 69% in 1997 and to 72% in 1998. The increases in gross
margins are attributable primarily to increased economies of scale resulting
from increased product and service revenue, as well as to increased sales of
MeetingPlace software and enhanced features to existing customers. On a
forward-looking basis, we anticipate that gross margins may decline somewhat as
the proportions of revenue derived from sales made through distributors and
from services are expected to increase as percentages of total revenue.
Product gross margin in 1996, 1997 and 1998 was 78%, 80% and 81%. The growth
in product gross margin over this period was attributable primarily to
increased economies of scale and the sale of software add-ons to new and
existing customers. We expect product gross margin to decrease over time due in
part to anticipated pricing pressure and an expected increase in the proportion
of revenue derived from indirect distribution channels.
Service gross margin in 1996, 1997 and 1998 was (9)%, 22% and 39%. The
growth in service gross margin was attributable to the creation and development
of our service organization in 1995 and 1996, followed by the subsequent
revenue generated by our service organization. We expect service gross margin
to decline gradually over time as a result of anticipated pricing pressure and
the expected international expansion of our service operation.
Research and Development Expenses
Research and development expenses consist primarily of compensation and
related costs for research and development personnel, facilities expenses for
testing space and equipment and royalty payments. Research and development
expenses decreased 10% from $2.5 million in 1996 to $2.2 million in 1997 and
increased 18% to $2.6 million in 1998. The decrease in 1997 was due principally
to one-time special project consulting costs incurred in 1996, while the
increase in 1998 was attributable primarily to the addition of personnel in our
research and development organization associated with product development.
Research and development expenses represented 41%, 17% and 12% of total revenue
for 1996, 1997 and 1998. The decreases as a percentage of total revenue
resulted primarily from increased total revenue during such periods. We expect
to continue to make substantial investments in research and development and
anticipate that research expenses will continue to increase in absolute
dollars.
Marketing and Sales Expenses
Marketing and sales expenses consist primarily of promotional expenditures
and compensation and related costs for marketing and sales personnel. Marketing
and sales expenses increased 69% from $4.6 million in 1996 to $7.8 million in
1997 and increased 24% to $9.7 million in 1998. The increases in 1997 and 1998
reflected the addition of personnel in our sales and marketing organizations,
as well as costs associated with increased selling efforts to develop market
awareness
21
<PAGE>
of our products and services. Marketing and sales expenses were 77%, 61% and
46% of total revenue for 1996, 1997 and 1998. The decreases in marketing and
sales expenses as a percentage of revenue in 1997 and 1998 are attributable
primarily to increased productivity of our sales personnel and increased total
revenue in such periods.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel expenses,
legal and accounting expenses and other general corporate expenses. General and
administrative expenses decreased slightly from $1.2 million in 1996 to $1.1
million in 1997, due primarily to lower legal fees and facilities costs in
1997. General and administrative expenses increased from $1.1 million in 1997
to $1.7 million in 1998, due primarily to the addition of personnel performing
general and administrative functions. General and administrative expenses were
19%, 9% and 8% of total revenue for 1996, 1997 and 1998. The decreases as a
percentage of total revenue resulted primarily from increased total revenue
during such periods. We expect general and administrative expenses to increase
in absolute dollars as we add personnel and incur additional costs related to
the anticipated growth of our business and operation as a public company.
Amortization of Deferred Stock Compensation
In connection with the completion of our initial public offering, certain
options granted in 1997 and 1998 have been considered to be compensatory. Total
deferred stock compensation associated with such options as of December 31,
1998 amounted to $3.1 million. These amounts are being amortized on a
straightline basis over the 48-month vesting period of such options. Of the
total deferred stock compensation, approximately $299,000 was amortized in
1998. We expect amortization of approximately $783,000 in 1999, $783,000 in
2000, $781,000 in 2001 and $489,000 in 2002 related to these options.
Interest Income (Expense), Net
In 1996, we had net interest income of approximately $138,000, while in 1997
and 1998, we incurred net interest expense of approximately $23,000 and
$41,000. Interest income (expense), net is comprised primarily of interest
earned on cash and cash equivalents, offset by interest expense related to
obligations under capital leases and equipment loans. The increases in net
interest expense in 1997 and 1998 were due primarily to declining balances of
cash and cash equivalents and to declining interest rates during these periods,
as well as to increases in our long-term debt obligations.
Income Taxes
From inception through September 30, 1997, we incurred net losses for
federal and state tax purposes and did not recognize any tax provision or
benefit during this period. For the quarter ended December 31, 1997, the
provision for income tax was immaterial. For the year ended December 31, 1998,
the provision for income tax was approximately $34,000. As of December 31,
1998, we had $6.7 million of federal and $3.6 million of state net operating
loss carryforwards to offset future taxable income. These carryforwards, if not
utilized, expire in 2000 through 2012. As of December 31, 1998, we had
approximately $524,000 of federal and $390,000 of state carryforwards for
research and development and other credits. These carryforwards, if not
utilized, expire in 2010 through 2018.
22
<PAGE>
The Tax Reform Act of 1986 limits the use of net operating loss and tax credit
carryforwards in certain situations where there is an ownership change. Under
the Tax Reform Act of 1986, the determination of whether an ownership change
occurs involves a highly complex calculation; however, an ownership change
generally occurs when over 50% in value of a company's stock is transferred in
transactions involving 5% stockholders during a given period. If we should have
an ownership change, our utilization of these carryforwards could be
restricted.
We have placed a valuation allowance against our deferred tax asset due to
the uncertainty surrounding the realization of these assets. We evaluate on a
quarterly basis the recoverability of the deferred tax asset and the level of
the valuation allowance. At such time as it is determined that it is more
likely than not the deferred tax assets are realizable, the valuation allowance
will be reduced.
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<PAGE>
Quarterly Results of Operations
The following table sets forth unaudited consolidated statement of
operations data for the six quarters ended December 31, 1998, as well as such
data expressed as a percentage of our total revenue for the periods indicated.
This data has been derived from unaudited consolidated financial statements
that, in the opinion of our management, include all adjustments (consisting
only of normal recurring adjustments) necessary for a fair presentation of such
information when read in conjunction with our annual audited consolidated
financial statements and notes thereto. The operating results for any quarter
are not necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
Quarters Ended
----------------------------------------------------------
Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31,
1997 1997 1998 1998 1998 1998
--------- -------- -------- -------- --------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:
Revenue:
Product............... $ 2,897 $ 3,291 $ 3,688 $ 3,867 $ 4,270 $ 4,681
Service............... 612 771 673 1,034 1,282 1,556
------- ------- ------- ------- ------- -------
Total revenue....... 3,509 4,062 4,361 4,901 5,552 6,237
Cost of revenue:
Product............... 590 623 644 631 879 1,028
Service............... 467 522 601 689 747 738
------- ------- ------- ------- ------- -------
Total cost of
revenue............ 1,057 1,145 1,245 1,320 1,626 1,766
------- ------- ------- ------- ------- -------
Gross profit........... 2,452 2,917 3,116 3,581 3,926 4,471
Operating expenses:
Research and
development.......... 499 525 605 600 625 777
Marketing and sales... 2,096 2,099 1,978 2,374 2,564 2,828
General and
administrative....... 231 274 410 401 412 443
Amortization of
deferred stock
compensation......... -- 2 38 61 66 134
------- ------- ------- ------- ------- -------
Total operating
expenses........... 2,826 2,900 3,031 3,436 3,667 4,182
------- ------- ------- ------- ------- -------
Income (loss) from
operations............ (374) 17 85 145 259 289
Interest income
(expense), net........ (19) (16) (11) (10) (13) (7)
------- ------- ------- ------- ------- -------
Income (loss) before
provision for income
tax................... (393) 1 74 135 246 282
Provision for income
tax .................. -- -- (4) (6) (10) (14)
------- ------- ------- ------- ------- -------
Net income (loss)...... $ (393) $ 1 $ 70 $ 129 $ 236 $ 268
======= ======= ======= ======= ======= =======
Net income (loss) per
share--basic(1)....... $ (0.13) $ 0.00 $ 0.02 $ 0.04 $ 0.07 $ 0.08
======= ======= ======= ======= ======= =======
Shares used in per
share calculation--
basic(1).............. 2,918 3,053 3,166 3,243 3,323 3,385
======= ======= ======= ======= ======= =======
Net income (loss) per
share--diluted(1)..... $ (0.13) $ 0.00 $ 0.00 $ 0.01 $ 0.01 $ 0.02
======= ======= ======= ======= ======= =======
Shares used in per
share calculation--
diluted(1)............ 2,918 15,641 15,949 16,145 16,251 17,083
======= ======= ======= ======= ======= =======
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Percentage of Total Revenue
-------------------------------------------------------
Quarters Ended
-------------------------------------------------------
Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31,
1997 1997 1998 1998 1998 1998
--------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:
Revenue:
Product............... 82.6% 81.0% 84.6% 78.9% 76.9% 75.1%
Service............... 17.4 19.0 15.4 21.1 23.1 24.9
----- ----- ----- ----- ----- -----
Total revenue....... 100.0 100.0 100.0 100.0 100.0 100.0
Cost of revenue:
Product............... 16.8 15.3 14.7 12.9 15.8 16.5
Service............... 13.3 12.9 13.8 14.1 13.5 11.8
----- ----- ----- ----- ----- -----
Total cost of
revenue............ 30.1 28.2 28.5 27.0 29.3 28.3
----- ----- ----- ----- ----- -----
Gross profit........... 69.9 71.8 71.5 73.0 70.7 71.7
Operating expenses:
Research and
development.......... 14.3 12.9 13.9 12.2 11.3 12.5
Marketing and sales... 59.7 51.7 45.4 48.4 46.2 45.4
General and
administrative....... 6.6 6.8 9.4 8.2 7.3 7.1
Amortization of
deferred stock
compensation......... -- -- 0.9 1.2 1.2 2.1
----- ----- ----- ----- ----- -----
Total operating
expenses........... 80.6 71.4 69.6 70.0 66.0 67.1
----- ----- ----- ----- ----- -----
Income (loss) from
operations............ (10.7) 0.4 1.9 3.0 4.7 4.6
----- ----- ----- ----- ----- -----
Interest income
(expense), net........ (0.5) (0.4) (0.3) (0.2) (0.2) (0.1)
----- ----- ----- ----- ----- -----
Income (loss) before
provision for income
tax................... (11.2) 0.0 1.6 2.8 4.5 4.5
Provision for income
tax................... -- -- (0.1) (0.1) (0.2) (0.2)
----- ----- ----- ----- ----- -----
Net income (loss)...... (11.2)% 0.0% 1.5% 2.7% 4.3% 4.3%
===== ===== ===== ===== ===== =====
</TABLE>
Quarterly product revenue has increased in each of the quarters shown above
due to increased sales of MeetingPlace products, including increased follow-on
sales of products to existing customers. Quarterly service revenue has
increased in each of the three quarters ended December 31, 1998, both in
absolute dollars and as a percentage of total revenue, due primarily to the
increasing size of our customer base. Gross margins were relatively constant
during the six quarters ended December 31, 1998. The increase in gross margin
in the quarter ended June 30, 1998 was attributable primarily to a higher
proportion of sales from software add-ons during such period, which typically
carry higher margins.
Total operating expenses increased in absolute dollars in each of the
quarters presented above, but generally decreased as a percentage of total
revenue. Research and development expenses generally increased in absolute
dollars during these periods as a result of increased development efforts
related to new products and enhancements of existing products. For the quarter
ended December 31, 1998, research and development expenses increased in both
absolute dollars and as a percentage of total revenue, reflecting the addition
of research and development personnel. Sales and marketing expenses generally
increased in absolute dollars during the quarters presented above as a result
of increased spending for salary and commissions, trade show expenses, public
relations and other promotional expenses. General and administrative expenses
generally increased in absolute dollars during the quarters presented above as
a result of the addition of personnel performing general and administrative
functions.
The amount and timing of our operating expenses generally will vary from
quarter to quarter depending on our level of actual and anticipated business
activities. Research and development
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<PAGE>
expenses will vary as we develop new products and enhance existing products. In
addition, we have a limited backlog of orders, and total revenue for any future
quarter is difficult to predict. Supply, manufacturing or testing constraints
could result in delays in the delivery of our products.
Our revenue and operating results are difficult to forecast and will
fluctuate, and we believe that period-to-period comparisons of its operating
results will not necessarily be meaningful. As a result, you should not rely
upon them as an indication of future performance. It is likely that our future
quarterly operating results from time to time will not meet the expectations of
security analysts or investors. In such event, the price of the common stock
would likely decline.
Liquidity and Capital Resources
Since inception, we have financed our operations primarily through private
sales of convertible preferred stock, which totaled $18.7 million in aggregate
net proceeds through December 31, 1998. We have also financed our operations
through equipment loans, which totaled $1.4 million in principal amount at
December 31, 1998. As of December 31, 1998, we had $4.0 million of cash and
cash equivalents and a $2.0 million line of credit, all of which was available
at December 31, 1998. This line of credit expires in July 1999. At this time,
we do not intend to borrow any amounts under this line of credit.
Net cash used in operating activities was $4.0 million and $1.6 million in
1996 and 1997, respectively, and net cash provided by operating activities was
$1.0 million in 1998. For 1997, cash used by operating activities was
attributable primarily to a net loss of $2.2 million and an increase in trade
accounts receivable of $1.1 million, offset in part by depreciation and
amortization of $619,000 and increases in accrued expenses and deferred revenue
of $471,000 and $506,000. For 1998, cash provided by operating activities was
attributable primarily to net income of approximately $703,000, depreciation
and amortization of approximately $696,000 and increases in accounts payable,
accrued expenses and deferred revenue of approximately $442,000, $629,000 and
$1.9 million. These amounts were offset in part by an increase in trade
accounts receivable of $3.1 million. This increase in trade accounts receivable
was due in part to the shipment of a $1.3 million order to a customer in
December 1998. Our sales cycle is lengthy and unpredictable, and could cause
our quarterly revenue and operating results to fluctuate. Any change in our
sales cycle could adversely affect our cash provided by operating activities.
Net cash used in investing activities was approximately $778,000, $597,000
and $780,000 in 1996, 1997 and 1998. For each of these years, cash used in
investing activities was attributable primarily to purchases of property and
equipment.
Net cash provided by financing activities was $8.5 million, approximately
$287,000 and $143,000 in 1996, 1997 and 1998. For 1996, cash provided by
financing activities was attributable to proceeds for the issuance of preferred
stock and notes payable, offset in part by repayment of notes payable and
capital lease obligations. For 1997 and 1998, cash provided by financing
activities was attributable to proceeds from the issuance of notes payable,
offset in part by repayment of notes payable and capital lease obligations.
As of December 31, 1998, our principal commitments consisted of obligations
outstanding under operating leases and capital equipment leases. Although we
have no material commitments for capital
26
<PAGE>
expenditures, we anticipate a substantial increase in capital expenditures and
lease commitments consistent with our anticipated growth in operations,
infrastructure and personnel. We also may establish additional operations as we
expand globally.
We have reviewed our short-term and long-term liquidity needs. Our liquidity
needs for at least the next eighteen months will be met by the net proceeds
from this offering, together with our current cash and cash equivalents. After
this time, we cannot assure you that cash generated from operations will be
sufficient to satisfy our liquidity requirements, and we may need to raise
additional capital by selling additional equity or debt securities or by
obtaining a credit facility. If additional funds are raised through the
issuance of debt securities, these securities could have rights, preferences
and privileges senior to holders of common stock, and the term of this debt
could impose restrictions on our operations. The sale of additional equity or
convertible debt securities could result in additional dilution to our
stockholders, and we cannot be certain that such additional financing will be
available in amounts or on terms acceptable to us, if at all. If we are unable
to obtain this additional financing, we may be required to reduce the scope of
our planned product development and marketing efforts, which could harm our
business, financial condition and operating results.
Year 2000 Readiness Disclosure
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. As a result, software
that records only the last two digits of the calendar year may not be able to
distinguish between twentieth and twenty-first century dates. This may result
in software failures or the creation of erroneous results.
We have conducted the first phases of a Year 2000 readiness review for the
current versions of our products. The review includes assessment,
implementation (including remediation, upgrading and replacement of product
versions), validation testing, and contingency planning. We continue to respond
to customer questions about prior versions of our products on a case-by-case
basis.
We have largely completed all phases of this plan, except for contingency
planning, for the current versions of our products. As a result, all current
versions of our products are "Year 2000 Compliant," as defined below, when
configured and used in accordance with the related documentation, and provided
that the underlying operating system of the host machine and any other software
used with or in the host machine or our products are also Year 2000 Compliant.
We have not tested our products on all platforms or all versions of operating
systems that we currently support.
We have defined "Year 2000 Compliant" as the ability to:
. correctly handle date information needed for the December 31, 1999 to
January 1, 2000 date change;
. function according to the product documentation provided for this date
change, without changes in operation resulting from the advent of a new
century, assuming correct configuration;
. where appropriate, respond to two-digit date input in a way that resolves
the ambiguity as to century in a disclosed, defined, and predetermined
manner;
27
<PAGE>
. if the date elements in interfaces and data storage specify the century,
store and provide output of date information in ways that are unambiguous
as to century; and
. recognize the year 2000 as a leap year.
We have tested software obtained from third parties, including licensed
software, shareware, and freeware, that is incorporated into our products, and
we are seeking assurances from our vendors that licensed software is Year 2000
Compliant. Despite testing by us and by current and potential clients, and
assurances from developers of products incorporated into our products, our
products may contain undetected errors or defects associated with Year 2000
date functions. Known or unknown errors or defects in our products could result
in delay or loss of revenue, diversion of development resources, damage to our
reputation, or increased service and warranty costs, any of which could
materially adversely affect our business, operating results or financial
condition. Some commentators have predicted significant litigation regarding
Year 2000 compliance issues, and we are aware of such lawsuits against other
software vendors. Because of the unprecedented nature of such litigation, it is
uncertain whether or to what extent we may be affected by it.
Our internal systems include both our information technology, or IT, and
non-IT systems. We have initiated an assessment of our material internal IT
systems, including both our own software products and third-party software and
hardware technology, but we have not initiated an assessment of our non-IT
systems. We expect to complete testing of our IT systems in 1999. To the extent
that we are not able to test the technology provided by third-party vendors, we
are seeking assurances from vendors that their systems are Year 2000 Compliant.
We are not currently aware of any material operational issues or costs
associated with preparing our internal IT and non-IT systems for the Year 2000.
However, we may experience material unanticipated problems and costs caused by
undetected errors or defects in the technology used in our internal IT and non-
IT systems.
We do not currently have any information concerning the Year 2000 compliance
status of our customers. If our current or future customers fail to achieve
Year 2000 compliance or if they divert technology expenditures, especially
technology expenditures that were reserved for conferencing products, to
address Year 2000 compliance problems, our business could suffer.
To date, we have incurred expenses of approximately $50,000 for Year 2000
compliance activities. We will incur additional costs related to the Year 2000
plan for administrative personnel to manage the project, outside contractor
assistance, technical support for our products, product engineering and
customer satisfaction. We estimate that these additional costs will total less
than $100,000. However, we may experience material problems and costs with Year
2000 compliance not currently identified in our Year 2000 plan that could
adversely affect our business, results of operations, and financial condition.
We have not yet fully developed a contingency plan to address situations
that may result if we are unable to achieve Year 2000 readiness of our critical
operations. The cost of developing and implementing such a plan may itself be
material. We intend to develop a contingency plan by the fourth quarter of
1999. Finally, we are also subject to external forces that might generally
affect industry and commerce, such as utility or transportation company Year
2000 compliance failures and related service interruptions.
28
<PAGE>
Impact of Recently Issued Accounting Standards
In December 1998, AcSEC released Statement of Position 98-9, or SOP 98-9,
Modification of SOP 97-2, "Software Revenue Recognition," with Respect to
Certain Transactions. SOP 98-9 amends SOP 97-2 to require that an entity
recognize revenue for multiple element arrangements by means of the "residual
method" when (1) there is vendor-specific objective evidence of the fair values
of all the undelivered elements that are not accounted for by means of long-
term contract accounting, (2) vendor-specific objective evidence of fair value
does not exist for one or more of the delivered elements, and (3) all revenue
recognition criteria of SOP 97-2 (other than the requirement for vendor-
specific objective evidence of the fair value of each delivered element) are
satisfied. The provisions of SOP 98-9 that extend the deferral of certain
paragraphs of SOP 97-2 became effective December 15, 1998. These paragraphs of
SOP 97-2 and SOP 98-9 will be effective for transactions that are entered into
in fiscal years beginning after March 15, 1999. Retroactive application is
prohibited. We are evaluating the requirements of SOP 98-9 and the effects, if
any, on our current revenue recognition policies.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, or SOP 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." This standard requires
companies to capitalize qualifying computer software costs which are incurred
during the application development stage and amortize them over the software's
estimated useful life. SOP 98-1 is effective for fiscal years beginning after
December 15, 1998. We are currently evaluating the impact of SOP 98-1 on our
financial statements and related disclosures.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5, or SOP 98-5, "Reporting on the Costs of Start-Up
Activities." This standard requires companies to expense the costs of start-up
activities and organization costs as incurred. In general, SOP 98-5 is
effective for fiscal years beginning after December 15, 1998. We believe the
adoption of SOP 98-5 will not have a material impact on our results of
operations.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, or SFAS 133, Accounting for Derivative Instruments and Hedging
Activities. SFAS 133 establishes new standards of accounting and reporting for
derivative instruments and hedging activities. SFAS 133 requires that all
derivatives be recognized at fair value in the statement of financial position,
and that the corresponding gains or losses be reported either in the statement
of operations or as a component of comprehensive income, depending on the type
of hedging relationship that exists. SFAS 133 will be effective for fiscal
years beginning after June 15, 1999. We do not currently hold derivative
instruments or engage in hedging activities.
29
<PAGE>
BUSINESS
Overview
We are a leading provider of integrated voice and data conferencing
solutions for geographically dispersed organizations. We develop, market and
support our MeetingPlace system, which allows companies to conduct virtual
meetings and thereby extend real-time decision making processes irrespective of
the geographic location of participants. With MeetingPlace, participants can
schedule and attend a meeting, view, share and edit documents, and capture and
retrieve meeting content. MeetingPlace is designed to be an enterprise-wide
resource and to leverage existing technologies such as telephones, cellular
phones and personal computers. Moreover, we expect that the dramatic growth in
web browsers and collaborative software applications will drive data
conferencing as an important business application of the Internet.
MeetingPlace consists of three components: (a) the MeetingPlace conference
server; (b) MeetingPlace software; and (c) system integration options.
MeetingPlace incorporates many easy-to-use features that allow participants to
emulate the voice and data collaboration that occurs in a face-to-face meeting,
such as breakout sessions, roll calls and meeting handouts. MeetingPlace
provides simultaneous voice and data conferencing and the ability to record and
access meeting content while lowering the enterprise's overall conferencing
costs.
We began commercial shipment of MeetingPlace in December 1994 and, as of
December 31, 1998, had over 200 customers. In addition to enterprise-wide
general deployment, customers have purchased and used MeetingPlace for a
variety of specific business applications, including morning brokerage calls,
crisis management, training and education, customer and client services, supply
chain management and merger integration. Furthermore, over 60% of our customers
have purchased additional products or services after their initial system
installations. MeetingPlace has been installed in some of the world's leading
enterprises, including 3Com, Aetna, Cisco, Credit Suisse First Boston, Hewlett-
Packard, Honeywell, Microsoft, Oracle, State Farm Insurance, Union Pacific
Railroad and the U.S. Federal Reserve Bank.
Industry Background
The proliferation of communications technologies is revolutionizing the way
people conduct business. Today, businesses of all sizes are empowering their
employees with a diverse array of communications tools to facilitate
information flow and improve productivity. From voicemail, fax machines and
cellular phones to e-mail, laptop computers and handheld devices, businesses
have demonstrated their continued willingness to adopt technologies that enable
their employees, vendors and customers to communicate more efficiently across
disparate geographies and time zones.
An enterprise's willingness to adopt a new communications technology depends
largely on the technology's ability to efficiently replace or enhance an
existing business practice. Voicemail is a more convenient and cost effective
substitute for the traditional pad-and-paper answering service. E-mail provides
a similar improvement over traditional inter-office mail. Cellular phones and
laptop computers provide added flexibility for mobile workers over the
traditional telephone and desktop computer. In addition, enterprises have
sought to enhance their competitive advantage by creating a virtual presence
with their customers and vendors through such means as e-commerce and
extranets. Each of these technologies has increased productivity by extending
the workplace beyond the physical office.
30
<PAGE>
An integral part of this workplace extension is the ability to coordinate
communications and decision making among people in different locations. As a
result, companies are expanding their use of existing technologies such as
voice-oriented conferencing and data-oriented collaborative software. According
to Frost & Sullivan, the total market for audio and video conferencing services
and equipment in the United States is projected to grow from $8.5 billion in
1998 to more than $24 billion by 2003. Meanwhile, according to International
Data Corporation, the total installed base of collaborative software clients in
the United States is expected to grow from 47 million in 1998 to more than 114
million by 2002.
We believe that no single, widely deployable technology, however, has been
able to effectively provide the integrated voice and data collaboration that
occurs in a face-to-face meeting in a cost effective manner. In order to have a
meeting today, a business typically must have everyone present in a conference
room or invest in limited and often expensive technologies or services that
allow people to communicate. For example, audio conferencing, although widely
used and available, is relatively expensive and does not enable participants to
share and modify documents. Video conferencing systems enable participants to
see each other but have technical limitations, such as minimum bandwidth
requirements, and are not widely available to users. Collaborative software
applications, such as Microsoft Outlook and Lotus Notes, focus on workflow
improvements rather than sharing documents real-time and allowing users to
speak with other participants.
To address this need for efficient, real-time voice and data communication,
organizations have resorted to using a patchwork of these technologies,
including conferencing, fax, e-mail and collaborative software applications.
While these technologies have been widely implemented, the result has been the
creation of discrete islands of communication within organizations, which fail
to create a virtual meeting experience that promotes information flow and
effective decision making. We believe that the growing geographic dispersion
and mobility of workers further compound this problem.
As a consequence, we believe there is significant demand for an integrated,
cost-effective and easy-to-use product that enables simultaneous real-time
voice communication and secure document collaboration irrespective of
geographic location. Furthermore, we believe that such a product must leverage
the existing voice and data infrastructure within the enterprise to facilitate
widespread deployment and realize significant cost savings. Finally, the system
must provide incremental capabilities to improve the meeting itself.
Accordingly, we believe that there is a need for a solution that enables
virtual meetings to further extend an enterprise's workplace.
The Latitude Solution
We have developed a solution, MeetingPlace, that allows companies to conduct
virtual meetings which extend real-time decision making processes irrespective
of the geographic locations of participants. With MeetingPlace, users can
schedule and attend a meeting, share and edit documents, and record and access
meeting content. Attendees can participate in a meeting using widely available
communications devices such as telephones, cellular phones, laptop computers
and desktop computers. MeetingPlace is designed to be an enterprise-wide
resource and to integrate seamlessly into widely deployed enterprise software
environments, including corporate intranets and collaborative software
environments such as Microsoft Outlook.
31
<PAGE>
[Graphic depicting the Latitude MeetingPlace server and methods of access and
use.]
Key benefits of MeetingPlace include:
. Seamless integration of real-time voice and data
conferencing. MeetingPlace allows participants to easily schedule and
attend meetings that combine voice conferencing with real-time sharing
and editing of data. By leveraging an enterprise's existing voice and
data networks, MeetingPlace provides reliable and robust transport of
toll-quality voice as well as real-time data sharing and editing.
. Time-displaced access to meetings. MeetingPlace provides an integrated
ability to record and archive meeting conversations and materials,
enabling information generated during a meeting to be efficiently passed
on to those unable to attend. In addition, audio or data information can
be made available to participants in advance of the meeting.
. Lower overall cost of conferencing. With a MeetingPlace server installed,
the cost of a conference is limited to the long-distance charge, if any,
for each participant. In contrast, the cost of a conference using a
third-party service bureau typically ranges between $0.30 and $0.55 per
minute per participant within the United States. As such, we believe that
a typical customer can realize significant cost savings relative to
existing voice conferencing services provided by third-party service
bureaus.
. Security and control. MeetingPlace's customer premise-based system
provides an architecture which enables an enterprise to manage data
collaboration securely behind its network security system, referred to in
the software industry as a corporate firewall, consistent with its other
32
<PAGE>
information technology strategies. Additionally, MeetingPlace eliminates
several risks associated with third party conferencing service bureaus,
such as operators giving access to unwelcome participants.
. Ease of use and broad feature set. MeetingPlace allows users to schedule,
attend and review meetings easily from their telephones or familiar
desktop environments such as browsers or Microsoft Outlook. In addition,
MeetingPlace incorporates a large number of features that allow end users
to emulate many aspects of a face-to-face meeting such as breakout
sessions, roll calls and meeting hand-outs.
. Scalability and configurability. MeetingPlace is scalable with an
enterprise's conferencing needs. MeetingPlace servers are designed to be
networked together to coordinate the deployment of servers on a global
basis and to allow for large single meeting sessions of over 1,000
simultaneous participants. Moreover, MeetingPlace can be configured in a
variety of ways in order to satisfy specific business applications, such
as training and supply chain management.
Strategy
Our objective is to make MeetingPlace a standard communications tool within
an enterprise. Underlying this objective is our vision of making integrated
voice and data collaboration through MeetingPlace as widely utilized as e-mail
and voice mail. The key elements of our strategy include:
. Establish MeetingPlace as a ubiquitous desktop application. We intend to
continue to integrate MeetingPlace seamlessly with a wide array of
enterprise software, including browsers, collaborative software and
enterprise resource planning and customer relationship management
applications. For example, MeetingPlace is already available to end users
through browser interfaces as well as Microsoft Outlook. We intend to
leverage the large installed base of such applications to establish
MeetingPlace as a standard desktop productivity tool by deploying
MeetingPlace as an integral element of these applications.
. Aggressively leverage installed customer base to increase market
penetration. We will focus on developing prominent Fortune 1000 reference
accounts to encourage widespread market acceptance of our products. We
intend to apply the expertise that we have gained in penetrating existing
vertical markets, such as financial services and high technology, to
actively pursue new markets such as professional services, manufacturing,
healthcare, transportation, education and government. Additionally, we
will continue to promote increased usage and deployment of our products
by our existing customers through after-market sales and support.
. Leverage technological expertise to address significant market
opportunities. We have gained significant technological expertise in both
voice and data enterprise network environments, as well as in such areas
as digital signal processing and system integration. Furthermore, we are
developing new features and applications to enhance our existing product
offerings and to address significant market opportunities such as voice
over the Internet and Internet video. In addition, our technology
platform is designed to use open standards such as the specification for
data conferencing referred to in the software and networking inudustries
as the T.120
33
<PAGE>
specification and the specification for Internet telephony referred to in
the software and networking industries as the H.323 specification.
. Develop partnerships to expand distribution channels. We continue to
expand our direct selling efforts in domestic markets. We also plan to
increasingly utilize indirect distribution channels such as third party
distributors and system integration partners. We expect to focus such
partnership efforts on expanding our geographic scope to reach customers
in other countries and in regions of the United States we do not
presently serve, and on entering into distribution and co-marketing
arrangements with partners that have expertise in specific vertical
markets.
. Provide value-added consulting services to our customers. In addition to
our full-care support to customers, we offer a wide variety of value-
added consulting services such as installation, training, system
administration, help desk services, and web site and systems integration.
We believe that providing these value-added services to our customers
enhances our ability to achieve broad deployment within their
enterprises.
. Extend MeetingPlace functionality to enable collaborative knowledge
management. Our long-term product development strategy includes the
development of features and applications to enable what we refer to as
collaborative knowledge management. We expect that collaborative
knowledge management will extend the current capabilities of MeetingPlace
for real-time capture, archival and retrieval of meeting content to allow
enterprises to access and manage the information generated in their
meetings. We intend to incorporate technologies such as voice recognition
and search engines, as well as integrate MeetingPlace with handheld
devices.
Products and Services
MeetingPlace Hardware and Software Platform
Our MeetingPlace system enables the enterprise-wide deployment of real-time
voice and data conferencing capabilities. Designed to integrate with an
enterprise's existing telephone and data networks, MeetingPlace facilitates
meetings among people in different locations using phones and network
connected computers. The MeetingPlace system consists of three types of
components:
MeetingPlace Conference Server. At the core of the MeetingPlace system is
the MeetingPlace conference server, an integrated hardware and software
platform. The MeetingPlace server is built around an Intel Pentium processor
and incorporates standard trunk interfaces to many analog and digital phone
systems, an Ethernet interface for local area networks, and a storage system
based on the small computer systems interface, or SCSI, to manage internal
database functions and conference recordings. In addition, the platform
utilizes our advanced high-performance digital signal processing, cards to
manage voice communications. Each MeetingPlace server can scale from 8 to 120
concurrent users in any combination of different sized conferences, enabling
customers to configure the MeetingPlace server on a concurrent user basis. In
addition to the MeetingPlace conference server, an enterprise can increase
scalability and reliability with the following options:
. MeetingPlace Network Server. An integrated hardware and software platform
that enables customers to manage up to eight MeetingPlace conference
servers with centralized scheduling, administration and reporting.
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<PAGE>
. MeetingPlace Shadow Network Server. An integrated hardware and software
platform that provides redundancy in the event of failure of the
MeetingPlace network server.
MeetingPlace Software. The MeetingPlace conference server includes system
software necessary to schedule, conduct and manage real-time voice and data
conferences. Such software includes an operating system and a structured query
language, or SQL, relational database, as well as integrated voice processing,
conference scheduling and conference bridging software. The MeetingPlace system
software also includes an optional simple network management protocol, or SNMP,
agent for centralized network management. Enterprise customers can configure
their MeetingPlace systems by choosing any of the following software options:
. MeetingPlace Data Conferencing. Server-based software that facilitates
real-time data collaboration using either standards-based collaboration
software such as Microsoft NetMeeting or Java-compatible web browsers
such as Microsoft Internet Explorer and Netscape Navigator.
. MeetingNotes. Software that facilitates management of meeting agendas,
roll calls, attached electronic documents, related web hyperlinks, and
conference recordings.
. MeetingPlace Flex Menus. Software that enables customization of telephone
touch-tone menus to access particular meetings and their associated
MeetingNotes information.
. MeetingTime. Windows or Macintosh compatible client software that enables
users to schedule, configure and monitor advanced meeting functions such
as breakout sessions and lecture style, listen-only meetings.
System Integration Options. We also offer several optional modules that
enable the integration of MeetingPlace with other strategic communications
tools used by the enterprise. Currently, these modules include:
. MeetingPlace WebPublisher. Windows NT-based software that integrates
MeetingPlace with an enterprise's web server to provide end users with
browser-based scheduling and management of conferences. WebPublisher also
integrates with RealAudio to provide streaming audio playback of
conference recordings.
. MeetingPlace Outlook Interface. Windows NT-based software that integrates
MeetingPlace with Microsoft Exchange to facilitate conference scheduling
and delivery of notifications through the Microsoft Outlook calendaring
interface from the user's desktop.
. MeetingPlace E-mail Gateway. Windows NT-based software that integrates
MeetingPlace with popular e-mail systems, including Microsoft Exchange
and Lotus Notes, for automated e-mail delivery of conference
notifications and meeting materials.
. MeetingPlace Fax Gateway. Windows NT-based software that integrates
MeetingPlace with a Windows NT-based fax server for automated fax
delivery of conference notifications and meeting materials.
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<PAGE>
Our MeetingPlace system is designed for deployment in enterprise
environments with a wide array of standard and optional features for end users,
help desk employees and system managers, including:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Capability Features
<S> <C>
Meeting Set-Up. . ability to schedule in advance or real-time
Automated
scheduling and . schedule via MeetingTime software, web browser,
notification of telephone or Microsoft Outlook
meetings.
. scheduling of recurring meetings
. password and profile restrictions
. notification through e-mail, Microsoft Outlook, fax or
pager
. automatic dial-out to participants
- ------------------------------------------------------------------------------------
In-Session Capabilities. . roll calls
Management and control . announced and screened entries
of
meeting attendance and . participant exclusion
flow.
. breakout sessions
. lecture style, listen-only conferences
. real-time speaker identification
. interactive question and answer format
. participant muting
. automated dial-out to late participants
- ------------------------------------------------------------------------------------
Attachments. . distribution and notification of meeting materials,
Distribution of including electronic documents, prerecorded voice or
electronic meeting video and Internet hyperlinks
materials.
. access before, during or after meeting
. automatic forwarding by e-mail or fax
. access to materials via the web, by e-mail or by fax
- ------------------------------------------------------------------------------------
Recording. Recording, . on/off control during conference
storage and playback of
conferences.
. automatic posting for playback
. password or profile controlled access
. access through telephone, downloaded audio file or
streaming audio using RealAudio over the web
- ------------------------------------------------------------------------------------
System Administration. . remote administration via Internet protocol-based
Tools for network (e.g., Internet)
management of . help desk monitoring via standard simple network
MeetingPlace by system management protocol, or SNMP, applications
administrators.
. configuration, user profile management, capacity
planning, internal billback and automated backups
through MeetingTime software
. system reporting capability
</TABLE>
We license technology that is incorporated into our products from third
parties, including digital signal processing algorithms and the MeetingPlace
server's operating system and relational database. See "Risk Factors--The loss
of our right to use technology licensed to us by third parties could harm our
business." Software and hardware products as complex as ours are likely to
contain undetected errors or defects. See "Risk Factors--Our products may
suffer from defects, errors or breaches of security."
Consulting and Support Services
In addition to our MeetingPlace hardware and software offerings, we provide
extensive follow-on consulting and support services to our customers to ensure
successful deployment of MeetingPlace in their organizations. We offer
implementation and integration services on an individual engagement basis, and
full care support and managed services on an ongoing recurring basis.
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<PAGE>
. Implementation Services. Implementation services include turnkey project
management, database design, specific business application development,
training and on-site installation. These services target seamless
integration with a wide variety of telephone systems, local area network
configurations, web servers and messaging systems.
. Integration Services. Integration services include customization of web
interfaces to MeetingPlace, custom programming of telephone access menus
through the MeetingPlace Flex Menu Option, custom reporting and billing,
integration of MeetingPlace into non-standard voice or data networking
infrastructures and advanced application support and training. These
services are designed for customers with special application or
integration needs.
. Full Care Support. Full care support is an annual or multi-year service
plan that provides telephone-based technical support to system managers.
In addition, participating customers receive a software subscription
service for new releases, access to a standby conference server and
onsite hardware maintenance.
. Managed Services. Managed services are designed for customers that desire
on-site MeetingPlace systems but wish to outsource MeetingPlace's
administration and management. Managed services include all user profile
management, help desk support, rollout, capacity planning, technical
support and monthly usage reporting.
Technology
MeetingPlace incorporates a wide variety of internally developed and third
party licensed technologies. Key aspects of our technology platform include:
. High-performance digital signal processing engine. To meet the needs of a
highly scalable conferencing system, we designed our own general purpose
digital signal processing card based on a reduced instruction set
computing, or RISC, microprocessor and programmable Texas Instruments
digital signal processing chips. MeetingPlace configurations can contain
up to four digital signal processing cards to deliver up to five billion
instructions per second, of processing power in a single server. Our
software leverages the power of these digital signal processing cards to
provide high quality conference bridging that integrates digital signal
processing algorithms for echo cancellation, automatic gain control,
background noise suppression, voice compression, and speaker and dial
tone detection.
. Conference scheduling engine. A sophisticated conference scheduling
engine efficiently allocates MeetingPlace system resources, including
conference licenses, access ports, recording space and meeting IDs. The
scheduling agent utilizes a structured query language, or SQL, relational
database to manage transactions originating internally or externally from
either the voice or data network. The software allows for sufficient
flexibility to encompass real-world scenarios including early arrivals,
unexpected participants, conference no-shows and meetings that run over
their scheduled times.
. Conference recording and playback. To record and play back conferences,
MeetingPlace enables voice compression and decompression in addition to a
proprietary voice file system. The integration of conference scheduling,
bridging and recording enables MeetingPlace to facilitate impromptu
recording and playback of voice conferences without operator intervention
or external equipment.
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<PAGE>
. Robust server software architecture. MeetingPlace utilizes a robust set
of internally developed application programming interfaces, or APIs, that
are designed to integrate with a variety of external applications,
including web servers, e-mail systems and fax servers.
. Distributed network architecture. MeetingPlace enables the centralized
administration and management of multiple servers distributed over an
enterprise's local or wide area network. The system also incorporates an
internal database replication engine, system-wide redundancy for
MeetingPlace network servers and fault tolerance to network outages.
To be successful, we will need to develop and introduce new products that
respond to technological changes or evolving industry standards, such as voice
over the Internet, in a timely manner and on a cost-effective basis. In
addition, we will need to integrate our products with our customers' networks
and enterprise applications on an ongoing basis. Furthermore, any significant
interruption in the supply or support of any licensed software incorporated in
our products could adversely affect our sales. See "Risk Factors--Rapid
technological changes could cause our products to become obsolete or require us
to redesign our products," "--If we fail to integrate our products with third-
party technology, our sales could suffer" and "--The loss of our right to use
technology licensed to us by third parties could harm our business."
Customers
We began commercial shipment of our products in December 1994 and, as of
December 31, 1998, had over 200 customers. Our typical customers are medium to
large businesses with geographically diverse employees, suppliers, customers
and other constituents. In addition to enterprise-wide general deployment,
customers have purchased and used MeetingPlace for a variety of specific
business applications, including crisis management, training and education,
customer and client services, supply chain management and merger integration.
Furthermore, over 60% of our existing customers have purchased additional
products or services after their initial system installations. The following is
a representative list of our customers that have purchased MeetingPlace:
<TABLE>
<CAPTION>
<S> <C> <C>
High Technology
Software Hardware Networking and
America Online, Inc. Apple Computer, Inc. Telecommunications
Cadence Design Fujitsu Limited 3Com Corporation
Systems, Inc. Hewlett-Packard Aspect Telecommunications
Clarify Inc. Company Corporation
Edify Corporation Honeywell Inc. Bell Atlantic
Enterprise Systems, Hutchinson Corporation
Inc. Technology Ciena Corporation
Great Plains Incorporated Cisco Systems, Inc.
Software, Inc. Natural Microsystems Norstan Inc.
Informix Corporation Corporation Tellabs, Inc.
Microsoft Quantum Corporation
Corporation Rockwell
NetManage, Inc. International
Network Associates, Corporation
Inc. Seagate Technology,
Oracle Corporation Inc.
Qualcomm
Incorporated
</TABLE>
- --------------------------------------------------------------------------------
38
<PAGE>
Financial Services
<TABLE>
<S> <C> <C>
Investment Banking Insurance Other Financial Services
BancBoston Robertson Stephens Inc. Aetna Inc. Brown Brothers Harriman & Co.
Credit Suisse First Boston American International Group, Capital Group Companies, Inc.
Corporation Inc. Conseco, Inc.
J.C. Bradford & Co. CNA Financial Corporation Fidelity Investments
Merrill Lynch & Co. CUNA Mutual Group Franklin Templeton
Morgan Stanley Dean Witter & Co. John Hancock Mutual Life Instinet Corp.
NationsBanc Montgomery Securities Insurance Company Southwest Securities
LLC State Farm Insurance Group, Inc.
Prudential Securities Incorporated The Vanguard Group
SG Cowen Securities Corporation Commercial Banking
UBS AG ABN AMRO Bank NV
BankBoston
Bank of America
Compass Bank
Life Savings Bank
KeyCorp
Northern Trust Bank
STAR Financial Bank
</TABLE>
- -------------------------------------------------------------------------------
Other Industry Sectors
<TABLE>
<S> <C> <C>
Professional Services Transportation Retail
Andersen Consulting Air Canada Best Buy Co., Inc.
Automatic Data Processing, Inc. CSX Corp. Pier 1 Imports, Inc.
A.T. Kearney, Inc. Budget Rent a Car Corporation Rite Aid Corporation
Burlington Northern Santa Fe Weight Watchers International,
The Boston Consulting Group, Inc. Corp. Inc.
Cambridge Technology Partners, Inc. Union Pacific Corp.
Deloitte & Touche, LLP Education
Electronic Data Systems, Corp. Healthcare California State University
Gartner Group, Inc. Kaiser Permanente The Ohio State University
Merck-Medco Managed Care,
International Data Corporation L.L.C. Rio Salado College
META Group, Inc. University of Illinois
University of Texas
Government
U.S. Federal Reserve Bank
NASA
U.S. Court of Appeals
State of Alaska
State of New Mexico
</TABLE>
- --------------------------------------------------------------------------------
No single customer accounted for more than 10% of our total revenues in 1997
or 1998.
The following are specific examples of how customers use MeetingPlace to
solve their collaboration needs:
. Hewlett-Packard installed its first MeetingPlace servers with a total of
240 ports in January 1996 in its Palo Alto, California facilities. Since
its initial installation, Hewlett-Packard has deployed MeetingPlace as a
standard communications tool. Today, Hewlett-Packard has deployed over 23
MeetingPlace servers with a total of 2,300 ports in the United States,
Asia and Latin America, connected through Hewlett-Packard's virtual
private network. According to Hewlett-Packard, it saved approximately
$300,000 per month in 1998 based on its current usage of approximately 6
million minutes per month. Hewlett-Packard continues to adopt new
applications for MeetingPlace and is currently rolling out data
conferencing and web integration system-wide.
39
<PAGE>
. Credit Suisse First Boston's parent company, Credit Suisse, initially
rolled out MeetingPlace in January 1995 as a cost effective conferencing
solution to schedule, record and archive intraday conference calls. This
enabled their worldwide sales force and securities traders to communicate
with each other regarding market conditions and investment opportunities.
Since its initial deployment with Credit Suisse, MeetingPlace has been
adopted within divisions of Credit Suisse First Boston in North America,
Europe and Asia to satisfy their conferencing needs. In addition,
MeetingPlace's technology has resolved such issues as ambient noise from
the trading floor and poor audio quality from telephones from various
countries. Conference leaders have greater control over the calls, long
distance connection delays have been eliminated, and participation has
dramatically increased.
. Budget Rent a Car chose MeetingPlace as a vital component of its distance
learning solution. MeetingPlace creates a virtual classroom between three
training labs in Lisle, Illinois, and 127 remote workstation sites across
the United States. MeetingPlace breakout sessions enable paired role-play
exercises and dialog sessions. Sessions are also recorded so that absent
trainees can call into the MeetingPlace system and listen to them at
their convenience. According to Budget, training costs have dropped from
$2,000 to just $156 per trainee, and training penetration has increased
from 60% to 99%.
Marketing and Sales
Marketing. In order to create awareness, market demand and sales
opportunities for our products, we engage in a number of marketing activities
which include exhibiting products and applications at industry trade shows and
on our web site, direct marketing, advertising in selected publications aimed
at targeted markets, public relations activities with trade and business press
and distribution of sales literature, technical specifications and
documentation. Our marketing efforts focus on educating the significant
influencers within enterprises, targeting IT executives and IT managers to
build a business case and closing on initial deployment applications. In
addition, we cultivate relationships with major network and telecommunications
equipment providers, and we intend to engage in co-marketing activities with
enterprise software providers.
Sales. Our distribution strategy is to sell our products and services to
medium to large businesses with geographically dispersed employees, suppliers,
customers and other constituents. We employ a direct sales force in the United
States as our primary distribution channel to market to these enterprises. As
of January 31, 1999, our direct sales force consisted of 39 sales
representatives located in 15 cities. Latitude uses a consultative sales
approach working closely with customers to understand and define their needs
and determine how they can be addressed by our products and services. This
strategy continues after the initial product implementation, the successful
completion of which is typically a prerequisite to full scale deployment. While
the sales cycle varies from customer to customer, it typically lasts between
six and nine months. See "Risk Factors--Our sales cycle is lengthy and
unpredictable."
In addition to our direct sales force in the United States and the United
Kingdom, we use indirect channels to extend our marketing effort. The indirect
channels consist of resellers that target specific geographic regions and
vertical markets, as well as usage-based resellers who offer access to
MeetingPlace services on a per-minute basis. As of January 31, 1999, we had
eight domestic resellers
40
<PAGE>
and three international resellers. We intend to grow all of our reseller
channels. See "Risk Factors--If we fail to expand our sales and distribution
channels, our business could suffer." and "--Our ability to expand into
international markets is uncertain".
Competition
We compete in a market that is highly competitive and rapidly changing. We
expect competition to persist and intensify in the future. We believe the
principal competitive factors in our market include, or are likely to include,
overall cost of conferencing, product performance and features such as the
ability to integrate voice and data, reliability, ease of use, size of customer
base, quality of service and technical support, sales and distribution
capabilities and strength of brand name. A description of our principal
competitors and the risks associated with the competitive nature of our market
are discussed in greater detail in "Risk Factors--Our market is highly
competitive."
We cannot be certain that we will be able to compete successfully with
existing or new competitors. If we fail to compete successfully against current
or future competitors, our business could suffer.
Patents and Intellectual Property Rights
Our success is heavily dependent upon protecting our proprietary technology.
We rely primarily on a combination of patents, copyright, trademark, trade
secrets, non-disclosure agreements and other contractual provisions to protect
our proprietary rights. As of January 31, 1999, we had four issued U.S. patents
relating to voice processing interfaces, recording and retrieval of audio
conferences, and graphical computer interfaces for teleconference systems. We
cannot be certain that these patents will provide us with any competitive
advantages or will not be challenged, invalidated or circumvented by third
parties or that the patents of others will not have an adverse effect on our
ability to do business. A discussion of risks associated with the protection of
our patents and intellectual property rights and potential infringement by us
of the patents and intellectual property rights of others is presented in "Risk
Factors--We may be unable to adequately protect our proprietary rights, and we
may be subject to infringement claims."
Manufacturing
We currently outsource the manufacturing of all of the subassemblies and
components of the MeetingPlace server to third parties. This strategy allows us
to reduce costly investment in manufacturing capital and to leverage the
expertise of our vendors. Our manufacturing operation consists primarily of
final assembly and testing of fully-configured MeetingPlace servers. Some of
the components and parts used in our products are procured from sole sources,
including the processor and digital signal processing device used in our
MeetingPlace server. We typically obtain components from only one vendor even
where multiple sources are available, to maintain quality control and enhance
the working relationship with suppliers. These purchases are made under
existing contracts or purchase orders. The failure of any sole source suppliers
to deliver on schedule could delay or interrupt our delivery of products and
thereby adversely affect our business. See "Risk Factors--Any interruption in
supply of components from outside manufacturers and suppliers could hinder our
ability to ship products in a timely manner."
41
<PAGE>
Employees
As of January 31, 1999, we had a total of 115 employees, of which 28 were in
research and development, 76 were in sales, marketing and customer support, and
11 were in finance, administration, and operations. Our future performance
depends in significant part upon our ability to attract new personnel and the
continued service of existing personnel in key areas including engineering,
technical support and sales. Competition for such personnel is intense and
there can be no assurance that we will be successful in attracting or retaining
such personnel in the future. None of our employees are subject to a collective
bargaining agreement. We consider our relations with our employees to be good.
See "Risk Factors--We may experience difficulties managing our expected growth"
and "--Our business could suffer if we lose the services of our current
management team."
Facilities
We lease approximately 39,000 square feet for our headquarters facility in
Santa Clara, California, which we expect to expand to approximately 51,000
square feet in the second quarter of 1999. The current lease for the Santa
Clara facility expires in December 2000, at which time we have the option to
extend it for an additional five years. We also lease space at eleven other
locations in the U.S. and three internationally. Each of these other offices is
leased on a month-to-month basis or under a lease with a term of 12 months or
less.
Legal Proceedings
We are not currently a party to any material legal proceedings.
42
<PAGE>
MANAGEMENT
Executive Officers and Directors
The following table sets forth certain information with respect to our
executive officers and directors as of December 31, 1998.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Emil C.W. Wang.......... 47 President, Chief Executive Officer and Director
Glenn A. Eaton.......... 36 Vice President, International
Roberta H. Gray......... 47 Vice President, Marketing
Janet A. Gregory........ 46 Vice President, North American Sales
Christopher D. Harvey... 41 Vice President, Customer Support
Rick M. McConnell....... 33 Chief Financial Officer and Vice President, Finance and Administration
Edward D. Tracy......... 39 Vice President, Product Operations
Thomas H. Bredt......... 58 Director
Robert J. Finocchio,
Jr. ................... 47 Director
F. Gibson Myers, Jr. ... 56 Director
James L. Patterson...... 60 Director
</TABLE>
- --------
Mr. Wang, Latitude's founder, has served as our President and Chief
Executive Officer and as a director since our inception in April 1993. Before
founding Latitude, Mr. Wang served in various management positions with Aspect
Telecommunications Corporation, a provider of call center systems. Before
Aspect, Mr. Wang was employed with ROLM Corporation, a manufacturer of PBX
systems, and was a consultant with Bain & Co., a management consulting firm.
Mr. Wang holds a B.S. degree in civil engineering from Princeton University and
an M.S. degree in structural engineering and an M.B.A. degree from Stanford
University.
Mr. Eaton has served as our Vice President, International since January
1999, and previously served as our Vice President, Business Development, from
December 1997 to January 1999, Vice President, Marketing from October 1994 to
December 1997 and Director of Marketing from May 1993 to October 1994. Before
Latitude, Mr. Eaton served in various management positions with Aspect,
including Director of Product Marketing for the Aspect CallCenter from May 1989
to April 1993. Before Aspect, Mr. Eaton was employed with ROLM for six years.
Mr. Eaton holds an B.S. degree in electrical engineering from the Massachusetts
Institute of Technology.
Ms. Gray has served as our Vice President, Marketing since October 1998.
From September 1997 to October 1998, Ms. Gray was Vice President, Strategy and
Business Development at Intrepid Systems, Inc., a provider of retail management
software. From June 1990 to August 1997, she served in various marketing
management positions with SCO, a provider of network computing software,
including Senior Director of Strategic Marketing from August 1996 to August
1997. Before SCO, Ms. Gray was a Market Development Manager with Sun
Microsystems, Inc. from May 1985 to June 1990 and was Director of Software
Engineering from May 1979 to May 1985. Ms. Gray holds a B.S. degree in
mathematical sciences from Stanford University.
43
<PAGE>
Ms. Gregory has served as our Vice President, North American Sales since
March 1994. From July 1988 to January 1994, Ms. Gregory served in various
management positions with Octel Communications Corporation, a provider of voice
messaging systems, including Director of Marketing for Voice Information
Services, Director of Sales for Voice Information Services and General Manager
for CPE Sales. Before Octel, Ms. Gregory held various sales management
positions with ROLM from 1980 to 1988. Ms. Gregory holds a B.A. degree in
English from Guilford College.
Mr. Harvey has served as our Vice President, Customer Support since April
1998. From January 1997 to March 1998, Mr. Harvey was an independent consultant
in the field of customer support. From May 1992 to January 1997, he served as
Director of Worldwide Technical Support at Auspex Systems, Inc. a manufacturer
of network file servers. Before Auspex, Mr. Harvey held various management
positions in technical support and systems engineering with Minerva Systems,
Inc., a provider of hardware and software for video compression, and Epoch
Systems, Inc., a provider of optical storage devices. Mr. Harvey holds a B.S.
degree in management from the University of San Francisco and an M.B.A. degree
from Golden Gate University.
Mr. McConnell has served as our Chief Financial Officer and Vice President,
Finance and Administration since December 1998. From January 1994 to November
1998, Mr. McConnell was Chief Financial Officer and Vice President, Finance and
Administration of Storm Technology, Inc., a maker of personal scanners, and
served as Director of Finance and Administration of Storm from June 1992 until
January 1994. From July 1987 to June 1990, Mr. McConnell was employed as a
financial engineer by The First Boston Corporation, predecessor to Credit
Suisse First Boston, a financial services firm. Mr. McConnell holds a B.A.
degree in quantitative economics from Stanford University and an M.B.A. degree
from the Stanford Graduate School of Business.
Mr. Tracy has served as our Vice President, Product Operations since March
1998 and previously served as our Vice President, Product Development, from
December 1996 to March 1998 and Director of Engineering from May 1993 to
December 1996. From January 1986 to May 1993, Mr. Tracy served in various
management positions with Aspect, including Director of Engineering from May
1991 to May 1993. Before Aspect, Mr. Tracy worked with DAVID Systems, Inc., a
telecommunications company, as a designer of voice/data switching PBX systems.
Mr. Tracy holds an Sc.B. degree in engineering from Brown University and an
M.S.E.E. degree in electrical engineering from Stanford University.
Mr. Bredt has served as a director of Latitude since April 1993. Since April
1986, Mr. Bredt has been a general partner and managing director of Menlo
Ventures, a venture capital firm. Mr. Bredt is also a director of Clarify Inc.,
a developer and provider of integrated enterprise front office solutions. Mr.
Bredt holds a B.S.E. degree in science engineering from the University of
Michigan, an M.E.E. degree in electrical engineering from New York University
and a Ph.D. degree in computer science from Stanford University.
Mr. Finocchio has served as a director of Latitude since August 1995. Since
July 1997, Mr. Finocchio has served as Chairman, President and Chief Executive
Officer of Informix Corporation, a provider of information management software.
From December 1988 until May 1997, Mr. Finocchio was employed with 3Com
Corporation, a global data networking company, where he held various positions,
most recently serving as President, 3Com Systems. Before his employment
44
<PAGE>
with 3Com, Mr. Finocchio held various executive positions in sales and service
with ROLM, most recently as Vice President of ROLM Systems Marketing. Mr.
Finocchio is also a Regent of Santa Clara University. Mr. Finocchio holds a
B.S. degree in economics from Santa Clara University and an M.B.A. degree from
the Harvard Business School.
Mr. Myers has served as a director of Latitude since June 1997. Since 1970,
Mr. Myers has been a general partner or managing director of various entities
associated with Mayfield Fund, a venture capital firm. Mr. Myers also serves as
a director of Spectralink Corporation, a provider of on-premises wireless
telephone systems. Mr. Myers holds a B.A. degree in engineering from Dartmouth
College and an M.B.A. degree from Stanford University.
Mr. Patterson has been a director of Latitude since July 1993. Mr. Patterson
has been an independent consultant since June 1987. Mr. Patterson also serves
as a director of Aspect Telecommunications Corporation. Mr. Patterson holds a
B.S.E.E. degree in electrical engineering from the University of Colorado.
Executive officers are appointed by the board of directors and serve until
their successors are qualified and appointed. There are no family relationships
among any of our directors or officers. Storm filed for Chapter 7 bankruptcy
protection in November 1998 when Mr. McConnell was Storm's Chief Financial
Officer and Vice President, Finance and Administration.
Board Composition
Our bylaws currently provide for a board of directors consisting of five
members. Commencing at the first annual meeting of stockholders following the
annual meeting of stockholders when Latitude shall have had at least 800
stockholders, the board of directors will be divided into three classes, each
serving staggered three-year terms: Class I, whose term will expire at the
first annual meeting of stockholders following the annual meeting of
stockholders when Latitude shall have had at least 800 stockholders; Class II,
whose term will expire at the second annual meeting of stockholders following
the annual meeting of stockholders when Latitude shall have had at least 800
stockholders; and Class III, whose term will expire at the third annual meeting
of stockholders following the annual meeting of stockholders when Latitude
shall have had at least 800 stockholders. As a result, only one class of
directors will be elected at each annual meeting of stockholders of Latitude,
with the other classes continuing for the remainder of their respective terms.
Messrs. Bredt and Myers have been designated as Class I directors; Messrs.
Patterson and Finocchio have been designated as Class II directors; and Mr.
Wang has been designated as a Class III director. These provisions in our
restated certificate of incorporation may have the effect of delaying or
preventing changes in control or management of Latitude. See "Description of
Capital Stock--Delaware Anti-Takeover Law and Certain Charter Provisions."
Messrs. Bredt and Myers were elected to the board of directors pursuant to a
voting agreement by and among Latitude and certain of its principal
stockholders. This voting agreement will terminate upon completion of this
offering.
45
<PAGE>
Board Compensation
Except for reimbursement for reasonable travel expenses relating to
attendance at board meetings and the grant of stock options, directors are not
compensated for their services as directors. Directors who are employees of
Latitude are eligible to participate in our 1993 and 1999 Stock Plans and will
be eligible to participate in the our 1999 Employee Stock Purchase Plan.
Directors who are not employees of Latitude will be eligible to participate in
our 1999 Stock Plan and 1999 Directors' Stock Option Plan. See "Stock Plans."
Board Committees
The Compensation Committee currently consists of Messrs. Myers and
Patterson. The Compensation Committee reviews and approves the compensation and
benefits for our executive officers, grants stock options under our stock
option plans and makes recommendations to the board of directors regarding such
matters.
The Audit Committee consists of Messrs. Bredt and Finocchio. The Audit
Committee makes recommendations to the board of directors regarding the
selection of independent auditors, reviews the results and scope of the audit
and other services provided by our independent auditors and reviews and
evaluates our audit and control functions.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee of Latitude's board of directors
are currently Messrs. Myers and Patterson. Neither Mr. Myers nor Mr. Patterson
has at any time been an officer or employee of Latitude.
46
<PAGE>
Executive Compensation
Summary Compensation. The following table sets forth the compensation earned
for services rendered to Latitude in all capacities for the year ended December
31, 1998 by our Chief Executive Officer and the four next most highly
compensated executive officers whose total cash compensation exceeded $100,000
during the year ended December 31, 1998.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
-------------------- ------------
Securities
Underlying All Other
Name and Principal Position Salary ($) Bonus ($) Options (#) Compensation($)
--------------------------- ---------- --------- ------------ ---------------
<S> <C> <C> <C> <C>
Emil C.W.Wang................ $152,696 $17,348 151,200 $1,242(1)
President and Chief
Executive Officer
Glenn A. Eaton............... 125,108 8,674 46,200 199(2)
Vice President,
International
Janet A. Gregory............. 98,754 92,061 53,700 156(2)
Vice President, North
American Sales
Edward D. Tracy.............. 118,529 26,090 46,200 192(2)
Vice President, Product
Operations
</TABLE>
- --------
(1) Consists of life insurance premiums paid by Latitude and reimbursement for
tax preparation expenses.
(2) Consists of life insurance premiums paid by Latitude.
Under the terms of a bonus plan adopted by the board of directors, our
executive officers will receive performance bonuses in 1999 based on Latitude's
achievement of quarterly revenue targets set by the board of directors.
Option Grants. The following table sets forth certain information with
respect to stock options granted to each of the executive officers named in the
Summary Compensation Table in the year ended December 31, 1998. In accordance
with the rules of the Securities and Exchange Commission, also shown below is
the potential realizable value over the term of the option (the period from the
grant date to the expiration date) based on assumed rates of stock appreciation
of 5% and 10%, compounded annually. These amounts are based on assumed rates of
appreciation and do not represent our estimate of future stock price. Actual
gains, if any, on stock option exercises will depend on the future performance
of our common stock.
47
<PAGE>
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
% of
Total Potential Realizable Value
Number of Options at Assumed Annual Rates
Securities Granted to of Stock Price Appreciation
Underlying Employees Exercise for Option Term
Options in Fiscal Price Expiration ----------------------------
Name Granted(#) Year ($/share) Date 5%($) 10%($)
---- ---------- ---------- --------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Emil C.W. Wang.......... 151,200 14.1% $1.00 1/16/08 $ 95,155 $ 241,179
Glenn A. Eaton.......... 46,200 4.3 1.00 1/16/08 29,075 73,693
Janet A. Gregory........ 53,700 5.0 1.00 1/16/08 33,795 85,657
Edward D. Tracy......... 46,200 4.3 1.00 1/16/08 29,075 73,693
</TABLE>
These stock options, which were granted under the 1993 Stock Plan, become
exercisable at a rate of 1/4 of the total number of shares of common stock
subject to the option on the first anniversary of the date of grant, and 1/48
of the total number of shares monthly thereafter, as long as the optionee
remains an employee with, consultant to, or director of Latitude. On January 8,
1999, the following executive officers were granted options at an exercise
price of $4.33 per share: Mr. Wang, 20,337 shares; Mr. Eaton, 5,337 shares; Ms.
Gregory, 20,337 shares; and Mr. Tracy, 20,337 shares.
The percentage of total options granted to employees in the fiscal year is
based on an aggregate of 1,074,209 shares subject to options granted by
Latitude during the year ended December 31, 1998 to employees of and
consultants to Latitude, including the executive officers named in the Summary
Compensation Table.
The exercise price per share of each option was equal to the fair market
value of our common stock on the date of grant as determined in good faith by
our board of directors on the grant date based upon such factors as the
purchase price paid by investors for shares of Latitude's preferred stock, the
absence of a trading market for Latitude's securities and Latitude's financial
outlook and results of operations.
The potential realizable value is based on the term of the option at its
time of grant (ten years), and assumes that the fair market value of Latitude's
common stock on the date of grant appreciates at the indicated annual rate
compounded annually for the entire term of the option and that the option is
exercised and sold on the last day of its term for the appreciated stock price.
Aggregate Option Exercises and Option Values. The following table provides
certain summary information concerning the shares of common stock represented
by outstanding stock options held by each of the executive officers named in
the Summary Compensation Table as of December 31, 1998. No options were
exercised by the executive officers named in the Summary Compensation Table
during the year ended December 31, 1998.
48
<PAGE>
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal Year- In-the-Money Options
End(#) at Fiscal Year-End($)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Emil C.W. Wang............. 375 152,235 $1,225 $406,875
Glenn A. Eaton............. 375 47,325 1,225 126,875
Janet A. Gregory........... 375 54,825 1,225 146,875
Edward D. Tracy............ 375 47,325 1,225 126,875
</TABLE>
These values are based on the fair market value as of December 31, 1998, as
determined by the board of directors, minus the exercise price, multiplied by
the number of shares underlying the option.
Stock Plans
1993 Stock Plan. Our 1993 Stock Plan provides for the grant of incentive
stock options to employees and nonstatutory stock options and stock purchase
rights to employees, directors and consultants. The purposes of the 1993 Stock
Plan are to attract and retain the best available personnel, to provide
additional incentives to our employees and consultants and to promote the
success of our business.
The 1993 Stock Plan was originally adopted by our board of directors in June
1993 and approved by our stockholders in September 1993. Unless terminated
earlier by the board of directors, the 1993 Stock Plan shall terminate in June
2003. A total of 3,555,000 shares of common stock have been reserved for
issuance under the 1993 Stock Plan. As of December 31, 1998, options to
purchase 1,352,496 shares of common stock were outstanding at a weighted
average exercise price of $2.24 per share, 1,968,636 shares had been issued
upon exercise of outstanding options or pursuant to restricted stock purchase
agreements, and 233,868 shares remained available for future grant.
The 1993 Stock Plan may be administered by the board of directors or a
committee of the board. The administrator determines the terms of options
granted under the 1993 Stock Plan, including the number of shares subject to
the option, exercise price, term and exercisability. Incentive stock options
granted under the 1993 Stock Plan must have an exercise price equal to at least
100% of the fair market value of the common stock on the date of grant and at
least 110% of the fair market value in the case of options granted to an
employee who holds more than 10% of the total voting power of all classes of
our stock. Nonstatutory stock options granted under the 1993 Stock Plan must
have an exercise price of at least 85% of the fair market value of the common
stock on the date of grant and at least 110% of the fair market value of our
common stock in the case of nonstatutory stock options granted to an optionee
who holds more than 10% of the total voting power of all classes of our stock.
Payment of the exercise price may be made in cash or other forms of
consideration approved by the administrator.
The administrator determines the term of options, which may not exceed 10
years or five years in the case of an option granted to a holder of more than
10% of the total voting power of all classes of our stock. No option may be
transferred by the optionee other than by will or the laws of descent or
distribution. Each option may be exercised during the lifetime of the optionee
only by the optionee.
49
<PAGE>
The administrator determines when options become exercisable. Options
granted under the 1993 Stock Plan generally must be exercised within 60 days
after the termination of the optionee's status as an employee, director or
consultant of Latitude, or within 12 months if the termination is due to the
death or disability of the optionee, but in no event later than the expiration
of the option's term. Options granted under the 1993 Stock Plan generally vest
at the rate of 1/4th of the total number of shares subject to the option 12
months after the date of grant, and 1/48th of the total number of shares
subject to the option each month thereafter.
In addition to stock options, the administrator may issue employees,
directors and consultants stock purchase rights under the 1993 Stock Plan. The
administrator determines the number of shares, price, terms, conditions and
restrictions related to a grant of stock purchase rights. The purchase price of
a stock purchase right granted under the 1993 Stock Plan must be at least 85%
of the fair market value of the shares as of the date of the offer. The period
during which the stock purchase right is held open is determined by the
administrator, but in no case shall the period exceed 30 days. Unless the
administrator determines otherwise, the recipient of a stock purchase right
must execute a restricted stock purchase agreement granting Latitude an option
to repurchase the unvested shares at cost upon termination of such recipient's
relationship with us.
If we merge with or into another corporation, each outstanding option and
stock purchase right may be assumed or an equivalent option or stock purchase
right substituted by the successor corporation. However, if the successor
corporation does not agree to assume or substitute an option or stock purchase
right, then the unvested shares under the option will automatically be
accelerated so that an additional 50% of the total number of unvested shares
will automatically become vested, and any rights of repurchase with respect to
a stock purchase right will automatically terminate with respect to 50% of the
total number of unvested shares. In addition, if the holder of an option or
stock purchase right is an employee and the holder's employment is
involuntarily terminated without cause at any time within 24 months following
our merger with or into another corporation, then, under most circumstances,
the unvested shares under the option will automatically be accelerated so that
an additional 50% of the total number of unvested shares will automatically
become vested, and any rights of repurchase with respect to a stock purchase
right will automatically terminate with respect to 50% of the total number of
unvested shares.
The administrator has the authority to amend or terminate the 1993 Stock
Plan; however, the administrator may not take any action that impairs the
rights of any holder of an outstanding option without the holder's consent. In
addition, stockholder approval is required to increase the number of shares
subject to the 1993 Stock Plan or to change the designation of the class of
persons eligible to be granted options and stock purchase rights.
1999 Stock Plan. Our 1999 Stock Plan was adopted by the board of directors
in February 1999 and will be submitted for approval by our stockholders before
completion of this offering. A total of 2,700,000 shares of common stock has
been reserved for issuance under the 1999 Stock Plan, all of which remain
available for future option grants. The purposes of the 1999 Stock Plan are to
attract and retain the best available personnel to Latitude and to provide
additional incentives to our employees and consultants and to promote the
success of our business.
50
<PAGE>
The 1999 Stock Plan provides for the grant of incentive stock options to
employees, including officers and directors, and nonstatutory stock options and
stock purchase rights to employees and consultants, including nonemployee
directors. If not terminated earlier, the 1999 Stock Plan will terminate in
February 2009.
The 1999 Stock Plan may be administered by the Board of Directors or a
committee of the Board. The 1999 Plan is currently administered by the
Compensation Committee. The administrator determines the terms of options
granted under the 1999 Stock Plan, including the number of shares subject to
the option, exercise price, term and exercisability. In no event, however, may
an individual employee receive option grants or stock purchase rights for more
than 2,700,000 shares under the 1999 Stock Plan in any fiscal year.
The exercise price of all incentive stock options granted under the 1999
Stock Plan must be at least equal to the fair market value of the common stock
on the date of grant. The exercise price of any incentive stock option granted
to an optionee who owns stock representing more than 10% of the total combined
voting power of all classes of outstanding capital stock of Latitude or any
parent or subsidiary corporation of Latitude must equal at least 110% of the
fair market value of the common stock on the date of grant. Generally, the
exercise price of all nonstatutory stock options must equal at least 85% of the
fair market value of the common stock on the date of grant. However, the
exercise price of a nonstatutory stock option granted to an individual who, on
the last day of our most recently completed fiscal year, is our chief executive
officer, or is acting in such capacity, or is one of our four highest
compensated officers, other than our chief executive officer, whose total cash
compensation exceeded $100,000 during the fiscal year, must equal at least 100%
of the fair market value of the common stock on the date of grant. Payment of
the exercise price may be made in cash or other consideration as determined by
the administrator.
The administrator determines the term of options, which may not exceed 10
years or 5 years in the case of an incentive stock option granted to a 10%
stockholder. Generally no option may be transferred by the optionee other than
by will or the laws of descent or distribution. However, the administrator may
in its discretion permit transferability of nonstatutory stock options granted
under the 1999 Stock Plan.
Each option may be exercised during the lifetime of the optionee only by the
optionee or a permitted transferee. The administrator determines when options
become exercisable. Options granted under the 1999 Stock Plan generally become
exercisable at the rate of 1/4th of the total number of shares subject to the
options twelve months after the date of grant, and 1/48th of the total number
of shares subject to the options each month thereafter.
In addition to stock options, the administrator may issue to employees,
directors and consultants stock purchase rights under the 1999 Stock Plan. The
administrator determines the number of shares, price, terms, conditions and
restrictions related to a grant of stock purchase rights. The purchase price of
a stock purchase right granted under the 1999 Stock Plan must be at least 85%
of the fair market value of the shares as of the date of the offer. The period
during which the stock purchase right is held open is determined by the
administrator, but in no case shall this period exceed 30 days. Unless the
administrator determines otherwise, the recipient of a stock purchase right
must execute a restricted stock purchase agreement granting Latitude an option
to repurchase the shares at cost upon termination of the recipient's
relationship with us.
51
<PAGE>
If we sell all or substantially all of our assets or our merger with another
corporation, then each option and stock purchase right may be assumed or an
equivalent option or stock purchase right substituted by the successor
corporation. However, if the successor corporation does not agree to assume or
substitute an option or stock purchase right, then, the unvested shares under
the option will automatically be accelerated so that an additional 50% of the
total number of unvested shares will automatically become vested, and any
rights of repurchase with respect to the stock purchase right will
automatically terminate with respect to 50% of the total number of unvested
shares. In addition, if the holder of an option or stock purchase right is an
employee and the holder's employment is involuntarily terminated without cause
at any time within 24 months following our merger with or into another
corporation, then, under most circumstances, the unvested shares under the
option will automatically be accelerated so that an additional 50% of the total
number of unvested shares will automatically become vested and any rights of
repurchase with respect to the stock purchase right will automatically
terminate with respect to 50% of the total number of unvested shares. The
administrator has the authority to amend or terminate the 1999 Stock Plan as
long as the amendment or termination does not adversely affect any outstanding
option or stock purchase right and provided that stockholder approval shall be
obtained to the extent it is required by applicable law.
1999 Directors' Stock Option Plan. The 1999 Directors' Stock Option Plan was
adopted by the board of directors in February 1999 and will be submitted for
approval by our stockholders before completion of this offering. A total of
250,000 shares of common stock has been reserved for issuance under the 1999
Directors' Stock Option Plan, all of which remain available for future grants.
The 1999 Directors' Stock Option Plan provides for the grant of nonstatutory
stock options to nonemployee directors of Latitude. The 1999 Directors' Stock
Option Plan is designed to work automatically without administration; however,
to the extent administration is necessary, it will be performed by the board of
directors. To the extent they arise, it is expected that conflicts of interest
will be addressed by abstention of any interested director from both
deliberations and voting regarding matters in which the director has a personal
interest.
The 1999 Directors' Stock Option Plan provides that each person who is or
becomes a nonemployee director of Latitude will be granted a nonstatutory stock
option to purchase 20,000 shares of common stock on the later of the date on
which the optionee first becomes a nonemployee director of Latitude or the date
of the closing of this offering. Thereafter, on the date of our annual
stockholders meeting each year, each nonemployee director will be granted an
additional option to purchase 5,000 shares of common stock if, on such date, he
or she has served on our board of directors for at least six months.
The 1999 Directors' Stock Option Plan sets neither a maximum nor a minimum
number of shares for which options may be granted to any one nonemployee
director, but does specify the number of shares that may be included in any
grant and the method of making a grant. No option granted under the 1999
Directors' Stock Option Plan is transferable by the optionee other than by will
or the laws of descent or distribution or pursuant to a qualified domestic
relations order. Each option is exercisable, during the lifetime of the
optionee, only by the optionee.
The 1999 Directors' Stock Option Plan provides that the first option granted
to a director under this plan shall become exercisable in installments as to
25% of the total number of shares subject to the first option on each of the
first, second, third and fourth anniversaries of the date of grant of the
52
<PAGE>
option. Each subsequent option shall become exercisable in installments as to
50% of the total number of shares on each of the first and second anniversaries
of the date of grant of that option. If a nonemployee director ceases to serve
as a director of Latitude for any reason other than death or disability, he or
she may within 90 days after the date he or she ceases to be a director of
Latitude, exercise options granted under the 1999 Directors' Stock Option Plan
to the extent that he or she was entitled to exercise it at the date of
termination. To the extent that he or she was not entitled to exercise any such
option at the date of termination, or if he or she does not exercise the option
within the 90 day period, the option shall terminate. The exercise price of all
stock options granted under the 1999 Directors' Stock Option Plan shall be
equal to the fair market value of a share of our common stock on the date of
grant of the option. Options granted under the 1999 Directors' Stock Option
Plan have a term of ten years.
In the event of the dissolution or liquidation of Latitude, a sale of all or
substantially all of our assets, our merger with or into another corporation or
any other reorganization of Latitude in which more than 50% of the shares of
Latitude entitled to vote are exchanged, each nonemployee director shall have
either (1) a reasonable time within which to exercise the option, including any
part of the option that would not otherwise be exercisable, prior to the
effectiveness of the dissolution, liquidation, sale, merger or reorganization,
at the end of which time the option shall terminate, or (2) the right to
exercise the option, including any part that would not otherwise be
exercisable, or receive a substitute option with comparable terms, as to an
equivalent number of shares of stock of the corporation succeeding Latitude or
acquiring its business by reason of the reorganization. The board of directors
may amend or terminate the 1999 Directors' Stock Option Plan; provided,
however, that no such action may adversely affect any outstanding option, and
shareholder approval shall be obtained for any amendment as required by
applicable law. If not terminated earlier, the 1999 Directors' Stock Option
Plan will have a term of ten years.
1999 Employee Stock Purchase Plan. Our 1999 Employee Stock Purchase Plan was
adopted by the board of directors in February 1999 and will be submitted for
approval by our stockholders before completion of this offering. A total of
500,000 shares of common stock has been reserved for issuance under the 1999
Employee Stock Purchase Plan. The number of shares reserved for issuance under
the 1999 Employee Stock Purchase Plan will automatically increase on the first
day of each of the fiscal years beginning in 2000, 2001, 2002, 2003 and 2004 by
an amount equal to the lesser of 200,000 shares or one percent of the total
shares outstanding on the last day of the immediately preceding fiscal year.
The 1999 Employee Stock Purchase Plan, which is intended to qualify under
Section 423 of the Code, will be implemented by an offering period commencing
on the date of the closing of this offering and ending on October 31, 1999.
Each subsequent offering period will have a duration of six months. Each
offering period after the first offering period will commence on November 1 and
May 1 of each year. The 1999 Employee Stock Purchase Plan will be administered
by the board of directors or by a committee appointed by the board.
Employees, including officers and employee directors, of Latitude or of any
majority-owned subsidiary designated by the board, are eligible to participate
in the 1999 Employee Stock Purchase Plan if they are employed by Latitude or
any subsidiary for at least 20 hours per week and more than five months per
year. The 1999 Employee Stock Purchase Plan permits eligible employees to
purchase common stock through payroll deductions, which may not exceed 15% of
an employee's
53
<PAGE>
compensation, at a price equal to the lower of 85% of the fair market value of
our common stock at the beginning or end of the offering period. The maximum
number of shares an employee may purchase during each offering period is 1,000
shares. Employees may end their participation in the offering at any time
during the offering period, and participation ends automatically on termination
of employment with Latitude. If not terminated earlier, the 1999 Employee Stock
Purchase Plan will have a term of 20 years.
The 1999 Employee Stock Purchase Plan provides that if we merge with or into
another corporation or sell all or substantially all of our assets, each right
to purchase stock under the 1999 Employee Stock Purchase Plan will be assumed
or an equivalent right substituted by the successor corporation. If the
successor corporation refuses to assume or substitute equivalent rights, the
board of directors may shorten the offering period so that employees' rights to
purchase stock under the 1999 Employee Stock Purchase Plan are exercised before
the merger or sale of assets. The board of directors has the power to amend or
terminate the 1999 Employee Stock Purchase Plan as long as such action does not
adversely affect any outstanding rights to purchase stock thereunder. However,
the board of directors may amend or terminate the 1999 Employee Stock Purchase
Plan or an offering period even if it adversely affects outstanding options in
order to avoid our incurring adverse accounting charges.
Limitation of Liability and Indemnification Matters
Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that a director
of a corporation will not be personally liable for monetary damages for breach
of such individual's fiduciary duties as a director except for liability
. for any breach of the director's duty of loyalty to Latitude or to its
stockholders,
. for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law,
. for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General
Corporation Law, or
. for any transaction from which a director derives an improper personal
benefit.
Our bylaws provide that Latitude shall indemnify its directors and executive
officers and may indemnify its officers, employees and other agents to the full
extent permitted by law. We believe that indemnification under our bylaws
covers at least negligence and gross negligence on the part of an indemnified
party. Our 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 party's status or service as a director, officer, employee or other agent
of Latitude upon an undertaking by the indemnified party to repay these
advances if it is ultimately determined that the party is not entitled to
indemnification.
We have entered into separate indemnification agreements with each of our
directors and officers. These agreements require us to indemnify the director
or officer against expenses, including attorney's fees, judgments, fines and
settlements paid by the individual in connection with any action,
54
<PAGE>
suit or proceeding arising out of the individual's status or service as a
director or officer of Latitude. We are not required to indemnify the
individual against liabilities arising from willful misconduct or conduct that
is knowingly fraudulent or deliberately dishonest. In addition, the
indemnification agreements require us to advance expenses incurred by the
individual in connection with any proceeding against the individual with
respect to which he or she may be entitled to indemnification by us. 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. We also maintain directors' and officers' liability insurance.
At present we are not aware of any pending litigation or proceeding
involving any director, officer, employee or agent of Latitude where
indemnification will be required or permitted. Furthermore, we are not aware of
any threatened litigation or proceeding that might result in a claim for such
indemnification.
55
<PAGE>
CERTAIN TRANSACTIONS
Certain stock option grants to directors and executive officers of Latitude
are described herein under the caption "Management--Executive Compensation."
Since our inception, we have issued, shares of preferred stock in private
placement transactions as follows: an aggregate of 4,762,500 shares of Series A
preferred stock at $0.67 per share in April 1993, an aggregate of 4,030,228
shares of Series B preferred stock at $1.83 per share in June 1994, and an
aggregate of 3,043,499 shares of Series C preferred stock at $2.67 per share in
March 1996. The share and per share data set forth herein and in the table
below reflect our reincorporation in Delaware, our three-for-two stock split
and the automatic conversion of our outstanding preferred stock into common
stock upon the completion of this offering. The following table summarizes the
shares of preferred stock purchased by directors and 5% stockholders of
Latitude and persons and entities associated with them in these private
placement transactions:
<TABLE>
<CAPTION>
Series A Series B Series C
Preferred Preferred Preferred
Investor Stock Stock Stock
-------- --------- --------- ---------
<S> <C> <C> <C>
Entities affiliated with Mayfield Fund (F.
Gibson Myers, Jr.)............................. 2,625,000 1,590,909 843,749
Menlo Ventures IV, L.P. (Thomas H. Bredt)....... 1,875,000 1,136,364 1,406,250
James L. Patterson.............................. 109,500 27,000 18,750
Robert J. Finocchio, Jr. ....................... -- 37,500 --
Entities affiliated with Asset Management
Associates..................................... -- 681,819 375,000
Entities affiliated with Canaan Partners........ -- 409,090 375,000
</TABLE>
In the table above, shares held by affiliated persons and entities have been
aggregated. See "Principal Stockholders."
We entered into an Affinity Alliance Agreement with Aspect
Telecommunications Corporation under which we agreed to develop and market
software applications which are compatible with Aspect's products. James L.
Patterson, one of our directors, is a director of Aspect. We also entered into
a co-marketing agreement with Spectralink Corporation under which Spectralink
agreed to market Latitude products. F. Gibson Myers, Jr. is a director of
Spectralink. At this time, these agreements are not expected to represent
material strategic relationships.
We have entered into indemnification agreements with our officers and
directors which are described in "Management--Limitation of Liability and
Indemnification Matters."
56
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table summarizes certain information with respect to
beneficial ownership of our common stock as of December 31, 1998, and as
adjusted to reflect the sale of common stock offered hereby, by (a) each person
(or group of affiliated persons) known by us to own beneficially more than 5%
of our outstanding common stock, (b) each of the executive officers named in
the Summary Compensation Table, (c) each of our directors and (d) all directors
and executive officers of Latitude as a group. As of December 31, 1998, there
were 15,574,857 shares of common stock outstanding. To our knowledge and except
as otherwise indicated, we believe that the beneficial owners of the common
stock listed below, based on information furnished by such owners, have sole
voting power and investment power with respect to such shares, subject to
community property laws where applicable. Except as otherwise noted, the
following executive officers, directors and stockholders can be reached at the
principal offices of Latitude.
<TABLE>
<CAPTION>
Percent
Beneficially
Owned(1)
-----------------
Number of Before After
Name and Address Shares(1) Offering Offering
---------------- ---------- -------- --------
<S> <C> <C> <C>
Entities affiliated with Mayfield Fund(2)........ 5,059,658 32.5% %
2800 Sand Hill Road
Menlo Park, CA 94025
Menlo Ventures IV, L.P........................... 4,417,614 28.4
3000 Sand Hill Road, Bldg. 4, Ste. 100
Menlo Park, CA 94025
Entities affiliated with Asset Management 1,056,819 6.8
Associates(3)...................................
2275 E. Bayshore Road, Ste. 150
Palo Alto, CA 94303
Entities affiliated with Canaan Ventures(4)...... 784,090 5.0
2884 Sand Hill Road, Bldg. 1, Ste. 115
Menlo Park, CA 94025
Emil C.W. Wang(5)................................ 1,098,316 7.0
Glenn A. Eaton(6)................................ 355,192 2.3
Edward D. Tracy(7)............................... 283,942 1.8
Janet A. Gregory(8).............................. 198,379 1.3
F. Gibson Myers(2)............................... 5,059,658 32.5
Thomas H. Bredt(9)............................... 4,417,614 28.4
James L. Patterson(10)........................... 269,299 1.7
Robert J. Finocchio, Jr. ........................ 97,500 <1
All directors and executive officers as a group
(11 persons)(11)................................ 11,779,900 75.2
</TABLE>
- --------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. The number of shares beneficially
owned by a person includes shares of common stock subject to options held
by that person that are currently exercisable or exercisable within 60
days of January 31, 1999. Such shares issuable pursuant to such options
are deemed outstanding for computing the percentage ownership of the
person holding such options but are not deemed outstanding for the
purposes of computing the percentage ownership of each other person.
(2) Includes 4,819,801 shares held by Mayfield VII and 239,857 shares held by
Mayfield Associates Fund II. F. Gibson Myers is a director of Latitude and
a general partner of the Mayfield Fund, the general partner of each of
Mayfield VII and Mayfield Associates Fund II. Mr. Myers disclaims
beneficial ownership of such shares except to the extent of his pecuniary
interest therein.
57
<PAGE>
(3) Includes 681,819 shares held by Asset Management Associates 1989, L.P. and
375,000 shares held by Asset Management Associates 1996, L.P.
(4) Includes 479,863 shares held by Canaan Ventures II Offshore Limited
Partnership and 304,227 shares held by Canaan Ventures II Limited
Partnership.
(5) Includes 1,021,350 shares held by Emil C.W. Wang, 10,800 shares held by
Mr. Wang as Custodian Under UGMA for Kevin E. Wang, 10,800 shares held by
Mr. Wang as Custodian Under UGMA for Brian F. Wang and 10,800 shares held
by Mr. Wang as custodian under UGMA for Katherine E. Wang. Also includes
options to purchase 44,566 shares held by Mr. Wang that are currently
exercisable or exercisable within 60 days of January 31, 1999.
(6) Includes 341,250 shares held by Mr. Eaton and options to purchase 13,942
shares held by Mr. Eaton that are currently exercisable or exercisable
within 60 days of January 31, 1999.
(7) Includes 270,000 shares held by Mr. Tracy and options to purchase 13,942
shares held by Mr. Tracy that are currently exercisable or exercisable
within 60 days from January 31, 1999.
(8) Includes 182,250 shares held by Ms. Gregory and options to purchase 16,129
shares held by Ms. Gregory that are currently exercisable or exercisable
within 60 days of January 31, 1999.
(9) Thomas H. Bredt is a director of Latitude and a General Partner and
Managing Member of Menlo Ventures, the general partner of Menlo Ventures
IV, L.P. Mr. Bredt disclaims beneficial ownership of such shares except to
the extent of his pecuniary interest therein.
(10) Includes 155,250 shares held by the Patterson Family Trust u/d/t August
26, 1998, 75,000 shares held by the Patterson Grandchildren's Trust UDT
1/6/98, James L. Patterson and Pamela L. Patterson Trustees, and 30,300
shares held by Mr. Patterson. Also, includes options to purchase 8,749
shares that are currently exercisable or exercisable within 60 days of
January 31, 1999. Does not include 504,546 shares held by Aspect
Telecommunications Corporation, of which Mr. Patterson is a director.
(11) Includes an aggregate of 11,682,572 shares held by such executive officers
and directors as a group and options to purchase an aggregate of 97,328
shares that are currently exercisable or exercisable within 60 days from
January 31, 1999.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the completion of this offering, we will be authorized to issue
75,000,000 shares of common stock, and 5,000,000 shares of preferred stock. The
following description is intended to be a summary and does not describe all
provisions of our certificate of incorporation or bylaws or Delaware law
applicable to Latitude. For a more thorough understanding of the terms of our
capital stock, you should refer to our certificate of incorporation and bylaws,
which are included as exhibits to the registration statement of which this
prospectus is a part, and to the material provisions of applicable Delaware
law.
Common Stock
As of December 31, 1998, there were 15,574,857 shares of common stock
outstanding that were held of record by approximately 120 stockholders after
giving effect to the conversion of our preferred stock into common stock at a
one-to-one ratio and assuming no exercise or conversion of outstanding
convertible securities after December 31, 1998. After giving effect to the sale
of the shares of common stock in this offering, there will be shares of
common stock outstanding (assuming no exercise of the underwriters' over-
allotment option and no exercise or conversion of outstanding convertible
securities after December 31, 1998).
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, as may be declared from time
to time by the board of directors out of funds legally available for payment of
dividends. See "Dividend Policy." In the event of a liquidation, dissolution or
winding up of Latitude, the holders of common stock are entitled to share
ratably in all assets remaining after payment of liabilities, subject to prior
rights of any preferred stock then outstanding. The common stock has no
preemptive or conversion rights or other subscription rights. There are no
redemption or sinking fund provisions available to the common stock. All
outstanding shares of common stock are fully paid and non-assessable.
Preferred Stock
Effective upon the closing of this offering, Latitude will be authorized to
issue 5,000,000 shares of undesignated preferred stock. The board of directors
will have the authority, without action by the stockholders, to issue the
undesignated preferred stock in one or more series, to fix the number of shares
constituting any series and to designate the rights, preferences and privileges
of such series, any or all of which may be greater than the rights of the
common stock. The issuance of preferred stock may have the effect of delaying,
deferring or preventing a change in control of Latitude without further action
by the stockholders and may adversely affect the voting and other rights of the
holders of common stock. At present, we have no plans to issue any shares of
preferred stock.
Registration Rights of Certain Holders
The holders of 11,970,613 shares of common stock, including 134,386 shares
issuable upon exercise of warrants, or their transferees are entitled to rights
with respect to the registration of these shares under the Securities Act.
These rights are provided under the terms of an agreement between
59
<PAGE>
Latitude and the holders of these registrable securities. Subject to the
limitations described in this agreement, the holders of the registrable
securities may require, on two occasions at any time after six months from the
effective date of this offering, that Latitude use its best efforts to register
the registrable securities for public resale. We are obligated to register
these shares only if the proposed aggregate offering price is at least
$2,000,000. In addition, if we register any of our common stock either for our
own account or for the account of other security holders, the holders of
registrable securities are entitled to include their shares of common stock in
the registration. A holder's right to include shares in an underwritten
registration is subject to the ability of the underwriters to limit the number
of shares included in the offering. All fees, costs and expenses of such
registrations must be borne by Latitude and all selling expenses, including
underwriting discounts, selling commissions and stock transfer taxes, relating
to registrable securities must be borne by the holders of the securities being
registered.
Delaware Anti-Takeover Law and Certain Charter Provisions
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. In general, the statute prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date that the person became
an interested stockholder unless (with certain exceptions) the business
combination or the transaction in which the person became an interested
stockholder is approved in a prescribed manner. Generally, a "business
combination" includes a merger, asset or stock sale or other transaction
resulting in a financial benefit to the stockholder, and an "interested
stockholder" is a person who, together with affiliates and associates, owns, or
did own within the prior three years, 15% or more of the corporation's
outstanding voting stock. This provision may have the effect of delaying,
deferring or preventing a change in control of Latitude without further action
by the stockholders.
In addition, upon completion of this offering, provisions of our charter
documents, including a provision eliminating the ability of stockholders to
take actions by written consent, may have the effect of delaying or preventing
changes in control or management of Latitude, which could have an adverse
effect on the market price of our common stock. Our stock option and purchase
plans generally provide for assumption of these plans or substitution of an
equivalent option of a successor corporation or, alternatively, at the
discretion of the board of directors, exercise of some or all of the optioned
stock, including non-vested shares, or acceleration of vesting of shares issued
pursuant to stock grants, upon a change of control or similar event.
The board of directors has authority to issue up to 5,000,000 shares of
preferred stock and to fix the rights, preferences, privileges and
restrictions, including voting rights, of these shares without any further vote
or action by the stockholders. The rights of the holders of the common stock
will be subject to, and may be adversely affected by, the rights of the holders
of any preferred stock that may be issued in the future. The issuance of
preferred stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire a majority of our
outstanding voting stock, thereby delaying, deferring or preventing a change in
control of Latitude. Furthermore, such preferred stock may have other rights,
including economic rights senior to the common stock, and, as a result, the
issuance of such preferred stock could have a material adverse effect on the
market value of the common stock. We have no present plan to issue shares of
preferred stock.
60
<PAGE>
Commencing at the first annual meeting of stockholders following such time
as Latitude shall have had at least 800 stockholders, the board of directors
will be divided into three classes, each serving staggered three-year terms:
Class I, whose term will expire at the first annual meeting of stockholders
following the annual meeting of stockholders when Latitude shall have had at
least 800 stockholders; Class II, whose term will expire at the second annual
meeting of stockholders following the annual meeting of stockholders when
Latitude shall have had at least 800 stockholders; and Class III, whose term
will expire at the third annual meeting of stockholders following the annual
meeting of stockholders when Latitude shall have had at least 800
stockholders. As a result, only one class of directors will be elected at each
annual meeting of stockholders of Latitude, with the other classes continuing
for the remainder of their respective terms. These provisions in our restated
certificate of incorporation may have the effect of delaying or preventing
changes in control or management of Latitude.
Warrants
As of December 31, 1998, warrants were outstanding to purchase an aggregate
of 134,386 shares of common stock at a weighted average exercise price of
$1.05 per share. Of such warrants, warrants to purchase an aggregate of 90,750
shares of common stock at a weighted average exercise price of $0.67 per share
will automatically expire upon completion of this offering if they are not
exercised before the completion of this offering.
Transfer Agent and Registrar
The Transfer Agent and Registrar for our common stock is U.S. Stock
Transfer Corporation.
Listing
We have applied to list our common stock on the Nasdaq National Market
under the trading symbol "LATD."
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Before this offering, there has been no public market for the common stock.
We cannot provide any assurances that a significant public market for the
common stock will develop or be sustained after this offering. Future sales of
substantial amounts of common stock in the public market, or the possibility of
such sales occurring, could adversely affect prevailing market prices for the
common stock or our future ability to raise capital through an offering of
equity securities.
After this offering, we will have outstanding shares of common stock. Of
these shares, the shares to be sold in this offering, or shares if the
underwriters' over-allotment option is exercised in full, will be freely
tradable in the public market without restriction under the Securities Act,
unless such shares are held by our affiliates. As defined in Rule 144 under the
Securities Act, an affiliate of an issuer is a person who, directly or
indirectly, through one or more intermediaries, controls, is controlled by or
is under common control with the issuer.
The remaining 15,574,857 shares outstanding upon completion of this offering
were issued and sold in private transactions in reliance on exemptions from
registration under the Securities Act. These shares may be sold in the public
market only if they are registered or if they qualify for an exemption from
registration under Rule 144 or Rule 701 under the Securities Act, as summarized
below.
Under agreements between our stockholders and either Latitude or the
underwriters, substantially all of the holders of these shares have agreed not
to offer, sell, contract to sell, grant any option to purchase or otherwise
dispose of any such shares for a period of 180 days from the date of this
prospectus. We also have entered into an agreement with the underwriters that
we will not offer, sell or otherwise dispose of common stock for a period of
180 days from the date of this prospectus. On the date of the expiration of
these agreements, all of these shares will be eligible for immediate sale, of
which 11,682,572 shares held by our affiliates will be subject to volume and
other limitations under Rule 144.
Following the expiration of the 180-day term of these agreements, shares
issued upon exercise of options we granted prior to the date of this prospectus
will also be available for sale in the public market pursuant to Rule 701 under
the Securities Act. Rule 701 permits resales of shares in reliance upon Rule
144 under the Securities Act but without compliance with certain restrictions,
including the holding-period requirement, imposed under Rule 144.
In general, under Rule 144 as in effect at the closing of this offering,
beginning 90 days after the date of this prospectus, a person (or persons whose
shares of Latitude are aggregated) who has beneficially owned these shares for
at least one year, including the holding period of any prior owner who is not
an Affiliate of Latitude, would be entitled to sell, within any three-month
period, a number of shares that does not exceed the greater of (1) 1% of the
then-outstanding shares of common stock or (2) the average weekly trading
volume of the common stock during the four calendar weeks preceding the filing
of a Form 144 with respect to such sale. Sales under Rule 144 are also subject
to manner of sale and notice requirements and to the availability of current
public information about Latitude.
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<PAGE>
Under Rule 144(k), a person who is not deemed to have been an affiliate of
Latitude at any time during the 90 days 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 who is not an affiliate of
Latitude, is entitled to sell such shares without complying with the manner of
sale, public information, volume limitation or notice provisions of Rule 144.
We intend to file, after the effective date of this offering, a registration
statement on Form S-8 to register approximately 5,036,364 shares of common
stock reserved for issuance under the 1993 Stock Plan, the 1999 Stock Plan, the
1999 Directors' Stock Option Plan and the 1999 Employee Stock Purchase Plan.
The registration statement will become effective automatically upon filing.
After the filing of a registration statement on Form S-8, shares issued under
these plans, may be sold in the open market, subject to (1) the Rule 144
limitations applicable to affiliates, (2) vesting restrictions imposed by us
and (3) the agreements described above under which our stockholders have agreed
not to sell or dispose any shares of common stock for a period of 180 days from
the date of this prospectus.
In addition, following this offering, the holders of 11,970,613 shares of
common stock, including 134,386 shares issuable upon exercise of warrants, will
have rights to require us to register their shares for future sale. See
"Description of Capital Stock--Registration Rights."
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement (which term shall include any amendments thereto) on Form S-1 under
the Securities Act with respect to the common stock offered by this prospectus.
This prospectus, which constitutes a part of the registration statement, does
not contain all of the information set forth in the registration statement,
certain items of which are contained in exhibits to the registration statement
as permitted by the rules and regulations of the Commission. For further
information with respect to Latitude and the common stock offered by this
prospectus, reference is made to the registration statement, including the
exhibits to the registration statement, and the financial statements and notes
filed as a part of the registration statement. Statements made in this
prospectus concerning the contents of any document referred to in the
prospectus are not necessarily complete. With respect to each document filed
with the Commission as an exhibit to the Registration Statement, reference is
made to the exhibit for a more complete description of the matter involved. The
registration statement, including exhibits to the registration statement and
the financial statements and notes filed as a part of the registration
statement, as well as such reports and other information filed with the
Commission, may be inspected without charge at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the regional offices of the Commission located at Seven World Trade
Center, 13th Floor, New York, NY 10048, and the Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of all or any
part of these documents may be obtained from the Commission upon payment of
certain fees prescribed by the Commission. Such reports and other information
may also be inspected without charge at a web site maintained by the
Commission. The address of the web site is http://www.sec.gov.
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<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 1999, we have agreed to sell to the underwriters named
below, for whom Credit Suisse First Boston Corporation, Hambrecht & Quist LLC
and Dain Rauscher Wessels, a division of Dain Rauscher Incorporated, are acting
as representatives, the following respective numbers of shares of common stock:
<TABLE>
<CAPTION>
Number of
Underwriter Shares
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation.............................
Hambrecht & Quist LLC..............................................
Dain Rauscher Wessels..............................................
----
Total..........................................................
====
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares from us at the initial public offering
price less the underwriting discounts and commissions. The option may be
exercised only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to dealers may be changed by the
representatives.
The following table summarizes the compensation and estimated expenses we
will pay.
<TABLE>
<CAPTION>
Total
-----------------------------
Without With
Per Share Over-allotment Over-allotment
--------- -------------- --------------
<S> <C> <C> <C>
Underwriting discounts and
commissions payable by us........ $ $ $
Expenses payable by us............ $ $ $
</TABLE>
The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.
We, our officers and directors and our stockholders have agreed that we and
they will not offer, sell, contract to sell, announce an intention to sell,
pledge or otherwise dispose of, directly or indirectly, or file with the
Commission a registration statement under the Securities Act relating to, any
additional shares of common stock or securities convertible into or
exchangeable or exercisable
64
<PAGE>
for any shares of common stock without the prior written consent of Credit
Suisse First Boston Corporation for a period of 180 days after the date of this
prospectus, except in the case of issuances pursuant to the exercise of
employee stock options outstanding on the date of this prospectus.
The underwriters have reserved for sale, at the initial public offering
price up to shares of the common stock for employees, directors and other
persons associated with us who have expressed an interest in purchasing common
stock in the offering. The number of shares available for sale to the general
public in the offering will be reduced to the extent these persons purchase the
reserved shares. Any reserved shares not purchased will be offered by the
underwriters to the general public on the same terms as the other shares.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act or contribute to payments which the underwriters may be required
to make in that respect.
We have applied to list the shares of common stock on The Nasdaq Stock
Market's National Market under the symbol "LATD."
Before this offering, there has been no public market for the common stock.
The initial public offering price will be determined by negotiation between us
and the underwriters. The principal factors to be considered in determining the
public offering price include:
. the information set forth in this prospectus and otherwise available to
the underwriters;
. the history and the prospects for the industry in which we will compete;
. the ability of our management;
. the prospects for our future earnings;
. the present state of our development and our current financial condition;
. the general condition of the securities markets at the time of this
offering;
. and the recent market prices of, and the demand for, publicly traded
common stock of generally comparable companies.
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation
M under the Securities Exchange Act of 1934. Over-allotment involves syndicate
sales in excess of the offering size, which creates a syndicate short position.
Stabilizing transactions permit bids to purchase the underlying security so
long as the stabilizing bids do not exceed a specified maximum. Syndicate
covering transactions involve purchases of the common stock in the open market
after the distribution has been completed in order to cover syndicate short
positions. Penalty bids permit the representatives to reclaim a selling
concession from a syndicate member when the common stock originally sold by
such syndicate member are purchased in a syndicate covering transaction to
cover syndicate short positions. Stabilizing transactions, syndicate covering
transactions and penalty bids may cause the price of the common stock to be
higher than it would otherwise be in the absence of these transactions. These
transactions may be effected on The Nasdaq National Market and, if commenced,
may be discontinued at any time.
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<PAGE>
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common
stock in Canada must be made in accordance with applicable securities laws
which will vary depending on the relevant jurisdiction, and which may require
resales to be made in accordance with available statutory exemptions or
pursuant to a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the common stock.
Representations of Purchasers
Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom the
purchase confirmation is received that (1) the purchaser is entitled under
applicable provincial securities laws to purchase the common stock without the
benefit of a prospectus qualified under these securities laws, (2) where
required by law, that the purchaser is purchasing as principal and not as
agent, and (3) the purchaser has reviewed the text above under "Resale
Restrictions".
Rights of Action (Ontario Purchasers)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or recission of rights of action under
the civil liability provisions of the U.S. federal securities laws.
Enforcement of Legal Rights
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process within Canada
upon the issuer or these persons. All or a substantial portion of the assets of
the issuer and these persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer or these
persons in Canada or to enforce a judgment obtained in Canadian courts against
the issuer or these persons outside of Canada.
Notice to British Columbia Residents
A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that the purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by the purchaser pursuant to this offering. This report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one report must
be filed in respect of common stock acquired on the same date and under the
same prospectus exemption.
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Taxation and Eligibility for Investment
Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.
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<PAGE>
LEGAL MATTERS
The validity of the common stock offered by this prospectus will be passed
upon for Latitude by Venture Law Group, A Professional Corporation, Menlo Park,
California. Mark A. Medearis, a director of Venture Law Group, is the Secretary
of Latitude. Legal matters in connection with this offering will be passed upon
for the underwriters by Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Palo Alto, California. An entity affiliated with Venture Law Group
and directors of Venture Law Group hold an aggregate of 49,398 shares of our
common stock.
EXPERTS
The consolidated balance sheets as of December 31, 1997 and 1998 and the
consolidated statements of operations, stockholders' equity and cash flows for
each of the years ended December 31, 1996, 1997 and 1998 included in this
prospectus and in the related financial statement schedule included elsewhere
in the Registration Statement, have been included herein in reliance on the
report of PricewaterhouseCoopers, LLP, independent accountants, given on the
authority of that firm as experts in accounting and auditing.
68
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants.......................................... F-2
Consolidated Balance Sheets................................................ F-3
Consolidated Statements of Operations...................................... F-4
Consolidated Statements of Stockholders' Equity............................ F-5
Consolidated Statements of Cash Flows...................................... F-6
Notes to Consolidated Financial Statements................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Latitude Communications, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' equity and of cash
flows present fairly, in all material respects, the financial position of
Latitude Communications, Inc. and its subsidiary at December 31, 1997 and 1998,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
San Jose, California
February 24, 1999
To the Board of Directors and
Stockholders of Latitude Communications, Inc.
The financial statements included herein have been adjusted to give effect
to the reincorporation of the Company in Delaware and reflect the three for two
stock split as described more fully in Note 12 to the financial statements. The
above report is in the form that will be signed by PricewaterhouseCoopers LLP
upon effectiveness of such reincorporation and stock split assuming that, from
February 24, 1999, to the effective date of such reincorporation, no other
events shall have occurred that would affect the accompanying financial
statements or notes thereto.
/s/ PricewaterhouseCoopers LLP
San Jose, California
April 2, 1999
F-2
<PAGE>
LATITUDE COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
<TABLE>
<CAPTION>
December 31, Pro Forma
------------------ December31,
1997 1998 1998
-------- -------- -------------
(See Note 11)
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................. $ 3,578 $ 3,982
Trade accounts receivable, net of allowance
for doubtful accounts of $147 in 1997 and
$235 in 1998.............................. 2,519 5,627
Inventory.................................. 475 688
Prepaids and other assets.................. 139 420
-------- --------
Total current assets..................... 6,711 10,717
Property and equipment, net.................. 933 1,017
Deposits and other long-term assets.......... 71 136
-------- --------
Total assets............................. $ 7,715 $ 11,870
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................... $ 363 $ 805
Accrued expenses........................... 1,460 2,089
Deferred revenue........................... 920 2,794
Current portion of long-term debt.......... 467 559
-------- --------
Total current liabilities................ 3,210 6,247
-------- --------
Long-term debt............................... 757 838
-------- --------
Total liabilities........................ 3,967 7,085
-------- --------
Commitments (Note 6)
Preferred stock, $0.001 par value:
Authorized: 12,211 shares
Issued and outstanding: 11,836 shares in
1997 and 1998 and no pro forma shares
(Liquidation value of $18,680 at December
31, 1998) ................................ 12 12
Common stock, $0.001 par value:
Authorized: 15,000 shares
Issued and outstanding: 3,755 shares in
1997, 3,739 shares in 1998 and 15,575 pro
forma shares.............................. 4 4 $ 16
Additional paid-in capital................... 19,021 22,095 22,095
Notes receivable from common stockholders.... (187) (165) (165)
Deferred stock compensation.................. (74) (2,836) (2,836)
Accumulated deficit.......................... (15,028) (14,325) (14,325)
-------- -------- -------
Total stockholders' equity............... 3,748 4,785 $ 4,785
-------- -------- =======
Total liabilities and stockholders'
equity.................................. $ 7,715 $ 11,870
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
LATITUDE COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Years Ended December
31,
-------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Revenue:
Product.......................................... $ 5,103 $10,620 $16,506
Service.......................................... 943 2,312 4,545
------- ------- -------
Total revenue.................................. 6,046 12,932 21,051
Cost of revenue:
Product.......................................... 1,146 2,158 3,182
Service.......................................... 1,023 1,805 2,775
------- ------- -------
Total cost of revenue.......................... 2,169 3,963 5,957
------- ------- -------
Gross profit....................................... 3,877 8,969 15,094
------- ------- -------
Operating expenses:
Research and development......................... 2,466 2,213 2,607
Marketing and sales.............................. 4,644 7,845 9,744
General and administrative....................... 1,157 1,115 1,666
Amortization of deferred stock compensation...... -- 2 299
------- ------- -------
Total operating expenses....................... 8,267 11,175 14,316
------- ------- -------
Income (loss) from operations...................... (4,390) (2,206) 778
Interest income.................................... 276 177 142
Interest expense................................... (138) (200) (183)
------- ------- -------
Income (loss) before provision for income tax...... (4,252) (2,229) 737
Provision for income tax........................... -- -- (34)
------- ------- -------
Net income (loss).................................. $(4,252) $(2,229) $ 703
======= ======= =======
Net income (loss) per share--basic................. $ (2.02) $ (0.78) $ 0.21
======= ======= =======
Shares used in per share calculation--basic........ 2,110 2,850 3,279
======= ======= =======
Net income (loss) per share--diluted............... $ (2.02) $ (0.78) $ 0.04
======= ======= =======
Shares used in per share calculation--diluted...... 2,110 2,850 16,635
======= ======= =======
Pro forma net income per share--basic.............. $ 0.05
=======
Shares used in pro forma per share calculation--
basic............................................. 15,115
=======
Pro forma net income per share--diluted............ $ 0.04
=======
Shares used in pro forma per share calculation--
diluted........................................... 16,635
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
LATITUDE COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for the three years in the period ended December 31, 1998
(in thousands)
<TABLE>
<CAPTION>
Preferred Capital Notes
Stock Common Stock in Excess Receivable Deferred
------------- -------------- of from Common Stock Accumulated
Shares Amount Shares Amount Par Value Shareholders Compensation Deficit Total
------ ------ ------ ------ --------- ------------ ------------ ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31,
1995................... 8,792 $ 9 3,146 $ 3 $10,676 $(103) $ (8,547) $ 2,038
Issuance of Series C
preferred stock, net
of issuance costs of
$7.................... 3,044 3 -- -- 8,104 -- -- 8,107
Issuance of common
stock................. -- -- 547 1 134 (114) -- 21
Repurchase of common
stock................. -- -- (94) -- (16) 8 -- (8)
Net loss............... -- -- -- -- -- -- (4,252) (4,252)
------ ---- ----- ---- ------- ----- ------- -------- -------
Balances, December 31,
1996, as previously
reported............... 11,836 12 3,599 4 18,898 (209) (12,799) 5,906
Issuance of common
stock................. -- -- 308 -- 86 (48) -- 38
Repurchase of common
stock................. -- -- (152) -- (39) 27 -- (12)
Payment of notes
receivable from common
stockholders.......... -- -- -- -- -- 43 -- 43
Deferred stock
compensation related to
grants of stock options
and issuance of common
stock.................. -- -- -- -- 76 -- $ (76) -- --
Amortization of deferred
stock compensation..... -- -- -- -- -- -- 2 -- 2
Net loss............... -- -- -- -- -- -- (2,229) (2,229)
------ ---- ----- ---- ------- ----- ------- -------- -------
Balances, December 31,
1997................... 11,836 12 3,755 4 19,021 (187) (74) (15,028) 3,748
Issuance of common
stock................. -- -- 35 -- 28 (4) -- 24
Repurchase of common
stock................. -- -- (51) -- (15) 9 -- (6)
Payment of notes
receivable from common
stockholders.......... -- -- -- -- -- 17 -- 17
Deferred stock
compensation related to
grants of stock options
and issuance of common
stock.................. -- -- -- -- 3,061 -- (3,061) -- --
Amortization of deferred
stock compensation..... -- -- -- -- -- -- 299 -- 299
Net income............. -- -- -- -- -- -- 703 703
------ ---- ----- ---- ------- ----- ------- -------- -------
Balances, December 31,
1998................... 11,836 $ 12 3,739 $ 4 $22,095 $(165) $(2,836) $(14,325) $ 4,785
====== ==== ===== ==== ======= ===== ======= ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
LATITUDE COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended December
31,
-------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................. $(4,252) $(2,229) $ 703
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization................... 528 619 696
Provision for excess and obsolete inventory..... 55 66 149
Provision for doubtful accounts................. 59 56 88
Amortization of deferred stock compensation..... -- 2 299
Changes in operating assets and liabilities:
Trade accounts receivable..................... (1,038) (1,069) (3,062)
Inventory..................................... (104) (173) (496)
Prepaids and other assets..................... (1) (8) (281)
Accounts payable.............................. (113) 133 442
Accrued expenses.............................. 583 471 629
Deferred revenue.............................. 319 506 1,874
------- ------- -------
Net cash provided by (used in) operating
activities................................. (3,964) (1,626) 1,041
------- ------- -------
Cash flows from investing activities:
Purchases of property and equipment............... (778) (597) (743)
Other............................................. -- -- (37)
------- ------- -------
Net cash used in investing activities....... (778) (597) (780)
------- ------- -------
Cash flows from financing activities:
Deposits and other long-term assets............... 13 (15) (65)
Decrease (increase) in restricted cash............ (150) 150 --
Proceeds from issuance of preferred stock, net of
issuance costs................................... 8,107 -- --
Proceeds from issuance of common stock............ 21 38 24
Proceeds from payment of notes receivable from
common stockholders.............................. -- 43 17
Repurchase of common stock........................ (8) (12) (6)
Proceeds from issuance of notes payable........... 899 527 678
Repayment of notes payable and capital lease
obligations...................................... (377) (444) (505)
------- ------- -------
Net cash provided by financing activities... 8,505 287 143
------- ------- -------
Net increase (decrease) in cash and cash
equivalents........................................ 3,763 (1,936) 404
Cash and cash equivalents, beginning of year........ 1,751 5,514 3,578
------- ------- -------
Cash and cash equivalents, end of year.............. $ 5,514 $ 3,578 $ 3,982
======= ======= =======
Supplemental disclosure of cash flow information:
Cash payments for interest........................ $ 139 $ 193 $ 183
Supplemental disclosure of noncash financing
information:
Issuance of common stock for notes receivable from
stockholder...................................... $ 114 $ 48 $ 4
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
LATITUDE COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--FORMATION AND BUSINESS OF THE COMPANY:
Latitude Communications, Inc. (the "Company"), founded in April 1993, is a
leading provider of enterprise-based conferencing systems for geographically
dispersed organizations. The Company develops, markets and supports its
MeetingPlace system, which allows companies to conduct virtual meetings and
thereby extend decision making processes across the disparate geographic
locations of participants. MeetingPlace is designed to be an enterprise-wide
resource and to leverage existing technologies, such as telephones, cellular
phones and personal computers. The Company has distributed its product through
distributors and a direct sales force to companies across many industries in
the United States, Europe and Asia.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Consolidation
The consolidated financial statements include the accounts of Latitude
Communications, Inc. and its wholly owned subsidiary (the "Company"). All
significant intercompany balances and transactions have been eliminated.
Accounts denominated in foreign currencies have been remeasured into the
U.S. dollar, the functional currency. Foreign currency gains and losses from
remeasurements, which have been insignificant, are included in the consolidated
statement of operations.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
Revenue Recognition
The Company adopted the provisions of Statement of Position 97-2, or SOP 97-
2, Software Revenue Recognition, as amended by Statement of Position 98-4,
Deferral of the Effective Date of Certain Provisions of SOP 97-2, effective
January 1, 1998. SOP 97-2 supersedes Statement of Position 91-1, Software
Revenue Recognition, and delineates the accounting for software product,
products including software that is not incidental to the product, and
maintenance revenues. Under SOP 97-2, the Company recognizes product revenues
upon shipment if a signed contract exists, the fee is fixed and determinable,
collection of resulting receivables is probable and product returns are
reasonably estimable. The Company generally does not allow product returns;
however, in the past, upon request by a customer and approval of management,
certain returns have been allowed. Therefore, provision for estimated product
returns are recorded at the time products are shipped.
For contracts with multiple obligations (e.g., deliverable and undeliverable
products, maintenance, installation and other services), revenue is allocated
to each component of the contract based on objective evidence of its fair
value, which is specific to the Company, or for products not
F-7
<PAGE>
LATITUDE COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
being sold separately, the price established by management. The Company
recognizes revenue allocated to undelivered products when the criteria for
product revenue set forth above are met. The Company recognizes revenue
allocated to maintenance fees, including amounts allocated from product
revenue, for ongoing customer support and product updates ratably over the
period of the maintenance contract. Payments for maintenance fees are generally
made in advance and are non-refundable. For revenue allocated to consulting
services, such as installation and training, the Company recognizes revenues as
the related services are performed.
Prior to the adoption of SOP 97-2, effective January 1, 1998, the Company
recognized revenue from the sale of products upon shipment if remaining
obligations were insignificant and collection of the resulting accounts
receivable was probable. The related estimated cost of product installation and
provisions for estimated product returns were accrued upon shipment. Revenue
from software maintenance contracts, including amounts unbundled from product
sales, were deferred and recognized ratably over the period of the contract.
The Company exchanged two systems and one upgrade for certain services and
licenses which resulted in recognition of $282,000 of revenue in 1997 and
research and development and marketing costs of $109,000 and $173,000,
respectively. The Company exchanged two systems with two customers for certain
marketing services and $81,000 in cash which resulted in the recognition of
$497,000 in revenue in 1998, $95,000 of sales and marketing expense and
$321,000 of prepaid sales and marketing expense. The assets and services were
transferred between parties at their estimated fair value.
Financial Instruments
The Company considers all highly liquid investments with an original or
remaining maturity of three months or less at the date of purchase to be cash
equivalents.
Commercial paper totaling $2,183,000 and $1,846,000 at December 31, 1997 and
1998, respectively, is included in cash equivalents and is classified as
available-for-sale. The commercial paper generally matures in one day and is
carried at cost, which equals fair market value. Realized gains or losses are
determined using the specific identification method. There are no realized
gains or losses on the sale of commercial paper and no unrealized gross holding
gains or losses in 1996, 1997 or 1998. There were no sales of commercial paper
in 1996, 1997 or 1998.
Amounts reported for cash and cash equivalents, accounts receivable,
accounts payable and other accrued liabilities are considered to approximate
fair value primarily due to their short maturities. Based on borrowing rates
currently available to the Company for loans with similar terms, the carrying
value of its notes payable and capital lease obligations approximate fair
value.
Certain Risks and Concentrations
The Company's cash and cash equivalents as of December 31, 1998 are on
deposit with two U.S. financial institutions.
The Company performs ongoing credit evaluations of its customers, and
collateral is not required. The Company maintains allowances for potential
returns and credit losses, and such returns
F-8
<PAGE>
LATITUDE COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
and losses have generally been insignificant. At December 31, 1997 and 1998,
one customer accounted for 14% and another customer accounted for 23% of
accounts receivable, respectively.
MeetingPlace products and related services have accounted for substantially
all of the Company's revenue to date. The market in which the Company competes
is characterized by rapid technological change, frequent new product
introductions, changes in customer requirements and emerging industry
standards. Significant technological change could adversely affect the
Company's operating results and subject the Company to returns of product and
inventory losses. While the Company has ongoing programs to minimize the
adverse effect of such changes and considers technological change in estimating
its allowances, such estimates could change in the future.
The Company licenses technology that is incorporated into its products from
certain third parties, including certain digital signal processing alogorithms
and the MeetingPlace server's operating system and relational databases. Any
significant interruption in the supply or support of any licensed software
could adversely affect the Company's sales, unless and until the Company can
replace the functionality provided by this licensed software. Because the
Company's products incorporate software developed and maintained by third
parties, the Company depends on such third parties to deliver and support
reliable products, enhance their current products, develop new products on a
timely and cost-effective basis and respond to emerging industry standards and
other technological changes. The failure of these third parties to meet these
criteria could harm the Company's business.
The Company relies on third parties to obtain most of the components of the
MeetingPlace server and integrate it with other standard components, such as
the central processing unit and disk drives. If these third parties are no
longer able to supply and assemble these components or are unable to do so in a
timely manner, the Company may experience substantial delays in shipping its
products and have to invest resources in finding an alternative manufacturer or
manufacture our products internally.
In addition, although the Company generally uses standard parts and
components in its products, the Company obtains certain components, including
the processors and digital signal processing devices used in the MeetingPlace
server, from sole source suppliers. In the past, the Company has experienced
problems in obtaining some of these components in a timely manner from these
sources, and it may be unable to continue to obtain an adequate supply of these
components in a timely manner or, if necessary, from alternative sources. If
the Company is unable to obtain sufficient quantities of components or to
locate alternative sources of supply, the Company may experience substantial
delays in shipping its products and incur additional costs to find an
alternative manufacturer or manufacture its products internally.
Inventories
Inventory is stated at the lower of cost or market. Cost is determined on a
standard cost basis which approximates the first in, first out method.
F-9
<PAGE>
LATITUDE COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Property and Equipment
Property and equipment are stated at cost and depreciated on a straight-line
basis over the shorter of the estimated useful life of three years or the
length of the capital lease for assets acquired under capital leases. Gains and
losses from the disposal of property and equipment are taken into income in the
year of disposition. Repairs and maintenance costs are expensed as incurred.
Depreciation expense for 1996, 1997 and 1998 was $293,000, $537,000 and
$607,000, respectively.
Research and Development Costs
Costs related to research, design and development of products are charged to
research and development expenses as incurred. Software development costs are
capitalized beginning when a product's technological feasibility has been
established and ending when a product is available for general release to
customers provided research and development activities for the related hardware
portion of the product have been completed. Generally, the Company's products
include hardware and software components that are developed concurrently. As a
result, the Company has not capitalized any software development costs to date
as such costs have not been significant.
Income Taxes
Deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities using
current tax laws and rates. Valuation allowances are established when necessary
to reduce deferred tax assets to the amounts expected to be realized.
Advertising
The Company expenses advertising costs as they are incurred. Advertising
expense for fiscal year 1996, 1997, and 1998 was $26,000, $19,000 and $115,000,
respectively.
Stock-Based Compensation
The Company accounts for its stock based compensation in accordance with the
provisions of Accounting Principles Board Opinion No. 25 ("APB No. 25"),
"Accounting for Stock Issued to Employees" and presents disclosure required by
Statement of Financial Accounting Standard No. 123 ("SFAS No. 123").
Net Income (Loss) Per Share
Basic net income (loss) per share is computed by dividing net income (loss)
available to common stockholders by the weighted average number of vested
common shares outstanding for the period. Diluted net income (loss) per share
is computed giving effect to all dilutive potential common shares, including
options, warrants and preferred stock. Options, warrants and preferred stock
were not included in the computation of diluted net loss per share in 1996 and
1997 because the effect would be antidilutive.
F-10
<PAGE>
LATITUDE COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
A reconciliation of the numerator and denominator used in the calculation of
historical basic and diluted net (income) loss per share follows (in thousands,
except per share data):
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Historical net loss per share, basic and diluted:
Numerator for net income (loss), basic and
diluted........................................... $(4,252) $(2,229) $703
------- ------- -------
Denominator for basic earnings per share:
Weighted average vested common shares
outstanding...................................... 2,110 2,850 3,279
------- ------- -------
Net income (loss) per share basic.................. $ (2.02) $ (0.78) $ 0.21
======= ======= =======
Denominator for diluted earnings per share:
Weighted average vested common shares
outstanding...................................... 2,110 2,850 3,279
Effect of dilutive securities:
Nonvested common shares......................... 478
Common stock options............................ 940
Warrants........................................ 102
Convertible preferred stock..................... 11,836
------- ------- -------
Weighted average common and common equivalent
shares........................................... 2,110 2,850 16,635
------- ------- -------
Net income (loss) per share diluted................ $ (2.02) $ (0.78) $0.04
======= ======= =======
Antidilutive securities not included in diluted net
income (loss) per share calculation for the entire
year:
Nonvested common shares........................... 1,082 647
Common stock options.............................. 75
Warrants.......................................... 134 134
Convertible preferred stock....................... 11,836 11,836
------- ------- -------
13,052 12,692 --
======= ======= =======
</TABLE>
Comprehensive Income
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("FAS 130"). FAS 130 establishes standards for
reporting and display of comprehensive income and its components in a full set
of general-purpose financial statements. There was no difference between the
Company's net income (loss) and its total comprehensive income (loss) for 1996,
1997 and 1998.
Impact of Recently Issued Accounting Standards
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, or SOP 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." This standard requires
companies to capitalize qualifying computer software costs which are incurred
during the application development stage and amortize them over the software's
estimated useful life. SOP 98-1 is effective for fiscal years beginning after
December 15, 1998. The Company is currently evaluating the impact of SOP 98-1
on its financial statements and related disclosures.
In December 1998, AcSEC released Statement of Position 98-9, or SOP 98-9,
Modification of SOP 97-2, "Software Revenue Recognition," with Respect to
Certain Transactions. SOP 98-9
F-11
<PAGE>
amends SOP 97-2 to require that an entity recognize revenue for multiple
element arrangements by means of the "residual method" when (1) there is
vendor-specific objective evidence ("VSOE") of the fair values of all the
undelivered elements that are not accounted for by means of long-term contract
accounting, (2) VSOE of fair value does not exist for one or more of the
delivered elements, and (3) all revenue recognition criteria of SOP 97-2 (other
than the requirement for VSOE of the fair value of each delivered element) are
satisfied. The provisions of SOP 98-9 that extend the deferral of certain
paragraphs of SOP 97-2 became effective December 15, 1998. These paragraphs of
SOP 97-2 and SOP 98-9 will be effective for transactions that are entered into
in fiscal years beginning after March 15, 1999. Retroactive application is
prohibited. The Company is evaluating the requirements of SOP 98-9 and the
effects, if any, on the Company's current revenue recognition policies.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5, or SOP 98-5, "Reporting on the Costs of Start-Up
Activities." This standard requires companies to expense the costs of start-up
activities and organization costs as incurred. In general, SOP 98-5 is
effective for fiscal years beginning after December 15, 1998. The Company
believes the adoption of SOP 98-5 will not have a material impact on its
results of operations.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, or SFAS 133, Accounting for Derivative Instruments and Hedging
Activities. SFAS 133 establishes new standards of accounting and reporting for
derivative instruments and hedging activities. SFAS 133 requires that all
derivatives be recognized at fair value in the statement of financial position,
and that the corresponding gains or losses be reported either in the statement
of operations or as a component of comprehensive income, depending on the type
of hedging relationship that exists. SFAS 133 will be effective for fiscal
years beginning after June 15, 1999. The Company does not currently hold
derivative instruments or engage in hedging activities.
Reclassifications
Certain amounts in the financial statements have been reclassified to
conform with the current year's presentation. These reclassifications did not
change previously reported stockholders' equity or net loss.
F-12
<PAGE>
LATITUDE COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NOTE 3--BALANCE SHEET ACCOUNTS (IN THOUSANDS):
Inventory:
<TABLE>
<CAPTION>
December 31,
----------------
1997 1998
------- -------
<S> <C> <C>
Raw materials................................................. $ 355 $ 359
Work in process............................................... 3 36
Finished goods................................................ 117 293
------- -------
$ 475 $ 688
======= =======
Property and equipment, net:
<CAPTION>
December 31,
----------------
1997 1998
------- -------
<S> <C> <C>
Leasehold improvements........................................ $ 150 $ 165
Computer equipment............................................ 1,943 2,544
Office equipment.............................................. 508 635
------- -------
2,601 3,344
------- -------
Less accumulated depreciation and amortization................ (1,668) (2,327)
------- -------
$ 933 $ 1,017
======= =======
Accrued expenses:
<CAPTION>
December 31,
----------------
1997 1998
------- -------
<S> <C> <C>
Accrued commission expense.................................... $ 550 $ 544
Accrued sales incentives...................................... 176 143
Accrued vacation.............................................. 136 227
Other......................................................... 598 1,175
------- -------
$ 1,460 $ 2,089
======= =======
</TABLE>
NOTE 4--LONG-TERM DEBT:
The long-term debt consists of notes payable for the purchase of equipment
under a senior loan and security agreement with a leasing company. Under the
terms of the agreement, the notes, which bear interest in the range from 12.18%
to 16.27%, are collateralized by the underlying equipment and are due in
monthly payments of interest and principal through June 2002.
F-13
<PAGE>
LATITUDE COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Future minimum payments under the notes payable are as follows (in
thousands):
<TABLE>
<CAPTION>
Years Ending December 31,
<S> <C>
1999............................................................. $ 720
2000............................................................. 560
2001............................................................. 281
2002............................................................. 110
------
1,671
Less amount representing interest.................................. (274)
------
1,397
Less current portion............................................... (559)
------
$ 838
======
</TABLE>
NOTE 5--LINE OF CREDIT:
The Company has a line of credit of $2,000,000 with a major U.S. financial
institution, which bears interest at the prime rate, expires July 1999 and is
collateralized by substantially all the Company's assets. Borrowings under the
line of credit are limited to 80% of eligible accounts receivables. The line of
credit contains certain financial covenants, which include maintaining a
minimum quick ratio, minimum total net worth and a maximum debt to total net
worth ratio, and prohibits the payment of dividends without the lenders
consent.
At December 31, 1998, the Company was in compliance with these covenants and
no amounts were outstanding under the line of credit.
NOTE 6--COMMITMENTS:
The Company leases office space under a noncancellable operating lease which
provides for an option to extend for an additional five years and expires in
December 2000. Future annual minimum lease payments under the noncancellable
operating lease are as follows (in thousands):
<TABLE>
<S> <C>
1999.................................................................. $470
2000.................................................................. 493
----
$963
====
</TABLE>
Rent expense was $488,000, $639,000 and $759,000 in 1996, 1997, and 1998,
respectively.
At December 31, 1998, the Company has committed to purchase approximately
$701,000 of raw materials inventory under noncancellable purchase orders.
F-14
<PAGE>
LATITUDE COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NOTE 7--STOCKHOLDERS' EQUITY
Convertible Preferred Stock:
The convertible preferred stock comprise the series designated as follows
(in thousands):
<TABLE>
<CAPTION>
Common
Number of Shares
Number of Shares Reserved
Shares Issued and for Liquidation
Authorized Outstanding Conversion Value
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Series A..................... 4,950 4,763 4,763 $ 3,175
Series B..................... 4,074 4,029 4,029 7,389
Series C..................... 3,187 3,044 3,044 8,116
------ ------ ------ -------
12,211 11,836 11,836 $18,680
====== ====== ====== =======
</TABLE>
Each share of Series A, Series B and Series C preferred stock is convertible
into one share of the Company's common stock at the option of the holder at any
time after the date of issuance, subject to adjustments for certain dilutive
issuances of securities, or automatically convertible upon the closing date of
a public offering of the Company's common stock at an aggregate offering price
of not less that $10,000,000 and a price per share of not less than $5.00. The
preferred stockholders also have certain registration rights, the right to one
vote for each share of common stock into which such shares of preferred stock
are convertible and the right, voting as a class, to elect two members of the
Company's Board of Directors.
The Series A, Series B and Series C preferred stock have a liquidation
preference of $0.67, $1.83 and $2.67 per share, respectively, subject to
adjustment for splits or other recapitalizations, plus all declared but unpaid
dividends. If funds are insufficient for full payment of these amounts, the
entire assets and funds of the Company legally available are distributed
ratably among the holders of preferred stock. After the preferred stockholders
have received the full amount to which they are entitled, the remaining assets
shall be distributed ratably to the holders of the common stock.
The holders of Series A, Series B and Series C preferred stock are entitled
to annual noncumulative dividends of $0.07, $0.18 and $0.27, respectively, per
share, when and if declared by the Company's Board of Directors. As of December
31, 1998, no dividends have been declared.
Convertible Preferred Stock Warrants
The Company has issued fully exercisable warrants to purchase 91,000 shares
of Series A preferred stock and 43,000 shares of Series B preferred stock at a
price of $0.67 and $1.83 per share, respectively, which expire in June 2003 and
September 2004, respectively, or with respect to the 91,000 shares of Series A
preferred stock, upon an initial public offering. The Company has reserved
91,000 shares of Series A preferred stock and 44,000 shares of Series B
preferred stock for the exercise of these warrants. The warrants were issued in
conjunction with capital lease obligations and long-term equipment financing
arrangements. The value of the warrants at the date of issuance was not
significant.
F-15
<PAGE>
LATITUDE COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Founders' Common Stock
The Company has sold 1,770,000 shares of its common stock to founders of the
Company under agreements which provide that if the founders desire to sell or
transfer their shares the Company has the right of first refusal at the then
current fair market value. The Company's right of first refusal terminates upon
initial public offering of the Company's common stock.
1993 Stock Plan
In March 1993, the Company's Board of Directors adopted the 1993 Plan (the
"Plan") and through December 31, 1998 authorized 3,555,000 shares of common
stock for issuance under the Plan. The Plan consists of Stock Purchase Rights
and an Option Grant Program.
Stock Purchase Rights provide for issuance of common stock at not less than
85% of the fair market value of the stock to employees and consultants. The
Plan provides that the Administrator of the Plan shall advise the offeree in
writing of the terms, conditions and restrictions related to the offer.
Restricted stock purchases are subject to the company's right of repurchase at
the employee purchase price upon termination of employment. The right to
repurchase generally lapses 25% one year from the date of purchase and 1/48
each month thereafter. In addition, the Company has a right of first refusal
similar to that for the founders' common stock.
The Option Grant Program provides for grants of incentive stock options to
employees and nonstatutory stock options to employees and consultants. The
exercise price of incentive stock options and nonstatutory stock options
granted under the Plan must be at least 100% and 85%, respectively, of the fair
market value of the shares on the date of grant. Options generally expire ten
years from the date of the grant or such shorter term as may be provided in the
option agreement. Options granted under the Plan typically become exercisable
over a four year period at a rate of 25% after the first year and 1/48 each
month thereafter.
Deferred Stock Compensation
During 1997 and 1998, the Company issued stock purchase rights and options
to certain employees under the 1993 Stock Plan with exercise prices below the
deemed fair market value of the Company's common stock at the date of grant. In
accordance with the requirements of APB 25, the Company has recorded deferred
compensation for the difference between the purchase price of stock issued to
employees under stock purchase rights or the exercise price of the stock
options and the fair market value of the Company's stock at the date of grant.
This deferred compensation is amortized to expense over the period during which
the Company's right to repurchase the stock lapses or options become
exercisable, generally four years. At December 31, 1998, the Company had
recorded deferred compensation related to these options in the total amount of
$3,137,000, of which $2,000, and $299,000 had been amortized to expense during
1997 and 1998. Future compensation expense from options granted through
December 31, 1998 is estimated to be $783,000, $783,000, $781,000, and $489,000
for the years ending December 31, 1999, 2000, 2001, and 2002, respectively.
F-16
<PAGE>
LATITUDE COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1993 Stock Plan Activity
The activity for the stock purchase rights and stock options are as follows
(in thousands except per share amounts):
<TABLE>
<CAPTION>
Restricted Stock Plan Stock Option Plan
----------------------- -----------------------
Weighted Weighted
Average Average
Purchase Exercise
Number Price Number Price
Shares of Per of Per
Available Shares Share Amount Shares Share Amount
--------- ------ -------- ------ ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31,
1995................... 904 3,146 $0.05 $153
Shares authorized....... 150 -- -- --
Shares purchased........ (547) 547 $0.25 134
Shares repurchased...... 94 (94) $0.17 (16)
------ ----- ----- ----
Balances, December 31,
1996................... 601 3,599 $0.07 271
Shares purchased........ (308) 308 $0.28 86
Shares repurchased...... 152 (152) $0.26 (39)
Options granted......... (75) -- -- 75 $0.39 $ 29
------ ----- ----- ---- ----- ----- ------
Balances, December 31,
1997................... 370 3,755 $0.09 318 75 $0.39 29
Additional shares
reserved............... 1,125 -- -- -- -- --
Shares purchased........ (35) 35 $0.79 28 -- --
Shares repurchased...... 51 (51) $0.27 (15) -- --
Options granted......... (1,315) -- -- -- 1,315 $2.32 3,050
Options cancelled....... 38 -- -- -- (38) $1.47 (55)
------ ----- ----- ---- ----- ----- ------
Balances, December 31,
1998................... 234 3,739 $0.09 $331 1,352 $2.24 $3,024
====== ===== ===== ==== ===== ===== ======
</TABLE>
At December 31, 1996, 1997 and 1998, 1,082,000, 647,000 and 325,000 shares
of outstanding common stock, respectively, were subject to the Company's right
of repurchase at weighted average purchase prices of $0.17, $0.24, and $0.27,
respectively. No options were exercisable as of December 31, 1997 and 17,000
were exercisable as of December 31, 1998.
ProForma Stock Compensation
The Company has adopted the disclosure-only provisions of SFAS No. 123.
Accordingly, no compensation cost has been recognized for the Company's stock
option plan. Had compensation cost been determined based on the fair value at
the grant date for the awards in 1997 and 1998 consistent with the provisions
of SFAS No. 123, the Company's net income (loss) for 1997 and 1998,
respectively, would have been as follows (in thousands):
<TABLE>
<CAPTION>
1997 1998
------- -----
<S> <C> <C>
Net income (loss)--as reported............................. $(2,229) $ 703
Net income (loss)--pro forma............................... $(2,238) $ 618
Net income (loss) per share--basic as reported............. $ (0.78) $0.21
Net income (loss) per share--basic pro forma............... $ (0.79) $0.19
Net income (loss) per share--diluted as reported........... $ (0.78) $0.05
Net income (loss) per share--diluted pro forma............. $ (0.79) $0.04
</TABLE>
F-17
<PAGE>
LATITUDE COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Such pro forma disclosures may not be representative of future compensation
cost because options vest over several years and additional grants are made
each year.
The weighted-average grant date fair value of stock options granted was,
$2.13 and $6.96 common stock option for 1997 and 1998, respectively.
In accordance with the provisions of SFAS 123, the fair value of each stock
option is estimated using the following assumptions for option grants during
1997 and 1998; dividend yield of 0%, volatility of 0%, risk-free interest rates
of between 4.50% to 7.20% at the date of grant and an expected term of five
years.
During 1997 and 1998, stock purchase rights for 27,000 and 35,000 shares of
the Company's common stock, with weighted-average exercise prices of $0.40 and
$0.79 per share and weighted-average fair values of $1.66 and $3.85 per share,
were granted with exercise prices below the estimated market value at the date
of grant.
During 1997 and 1998, options to purchase 71,000 and 1,315,000 shares of the
Company's common stock, with weighted-average exercise prices of $0.41 and
$2.32 per share and weighted-average fair values of $2.10 and $6.19 per share,
were granted with exercise prices below the estimated market value at the date
of grant.
The following table summarizes information about stock options outstanding
at December 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------- ---------------------
Weighted-
Average Weighted- Weighted-
Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Price Outstanding Life Price Exercisable Price
---------- ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$0.27-0.40 66,000 8.95 $0.39 17,000 $0.30
$1.00-1.40 401,000 9.09 1.02 -- --
$1.83-2.80 316,000 9.37 2.07 -- --
$3.27-3.67 569,000 9.86 3.40 -- --
---------- --------- ---- ----- ------ -----
$0.27-3.67 1,352,000 9.47 $2.23 17,000 $0.30
========== ========= ==== ===== ====== =====
</TABLE>
NOTE 8--INCOME TAXES:
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Current:
Federal, net of benefit of net operating loss
carryforwards of $246,000 in 1998...................... $-- $-- $17
State, net of benefit of net operating loss
carryforwards of $23,000 in 1998....................... -- -- 17
---- ---- ---
$-- $-- $34
==== ==== ===
</TABLE>
F-18
<PAGE>
LATITUDE COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In 1998, income before provision for income taxes consisted of $1,420,000
of income from U.S. operations and $384,000 of loss from foreign operations.
In 1997, loss before provision for income taxes consisted of $1,816,000 of
loss from U.S. operations and $413,000 of loss from foreign operations. In
1996, loss before provision for income tax consisted of $4,252,000 of loss
from U.S. operations.
The Company's effective tax rate differs from the statutory federal income
tax rate as follows:
<TABLE>
<CAPTION>
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Statutory federal income
tax (benefit) rate....... (34.0)% (34.0)% 34.0 %
State taxes net of federal
benefits................. -- -- 4.0
Net operating losses not
benefited................ 34.0 34.0 --
Benefit of net operating
loss carryforwards....... -- -- (39.0)
Alternative minimum tax... -- -- 5.0
Other..................... -- -- 1.0
----- ----- -----
Effective tax rate...... 0.0% 0.0% 5.0%
===== ===== =====
</TABLE>
The significant components of the net deferred tax asset are as follows:
<TABLE>
<CAPTION>
December 31,
----------------
1997 1998
------- -------
(in thousands)
<S> <C> <C>
Net operating loss carryforwards........................ $ 2,702 $ 2,728
Research and development credit......................... 817 781
Property and equipment.................................. 243 279
Capitalized research and development for tax purposes... 2,116 1,366
Other................................................... 419 806
------- -------
6,297 5,960
Less valuation allowance................................ (6,297) (5,960)
------- -------
Net deferred tax asset.................................. $ -- $ --
======= =======
</TABLE>
The valuation allowance increased by $890,000 in 1997 and decreased by
$447,000 in 1998.
The Company has placed a valuation allowance against its deferred tax
assets due to the uncertainty surrounding the realization of such assets.
Management evaluates on a quarterly basis the recoverability of the deferred
tax asset and the level of the valuation allowance. At such time as it is
determined that it is more likely than not that the deferred tax assets are
realizable, the valuation allowances will be reduced.
At December 31, 1998, the Company had federal and state net operating loss
carryforwards of approximately $6,681,000 and $3,632,000, respectively,
available to offset future regular and alternative minimum taxable income. The
Company's federal and state net operating loss carryforwards expire in 2000
through 2012, if not utilized.
At December 31, 1998, the Company had federal and state research and
development and other credits of approximately $524,000 and $390,000,
respectively. The research and development credit carryforwards expire in 2010
through 2018, if not utilized.
F-19
<PAGE>
LATITUDE COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Tax Reform Act of 1986 limits the use of net operating loss and tax
credit carryforwards in certain situations where changes occur in the stock
ownership of a company. If the Company should have an ownership change, as
defined, utilization of the carryforwards could be restricted.
NOTE 9--EMPLOYEE BENEFIT PLANS:
The Company sponsors the Latitude Communications Salary Savings Plan (the
"Plan") which qualifies under Section 401(k) of the Internal Revenue Code. All
employees meeting minimum age requirements are eligible to enroll in the Plan
upon initiating employment. Currently, the Company is not offering an employer
contribution.
NOTE 11--SIGNIFICANT CUSTOMER AND GEOGRAPHIC INFORMATION:
The Company has adopted the Financial Accounting Standards Board's
Statements of Financial Accounting Standards No. 131, or SFAS 131, "Disclosures
about Segments of an Enterprise and Related Information," effective for fiscal
years beginning after December 31, 1997. SFAS 131 supersedes Statement of
Financial Accounting Standards No. 14 or SFAS 14, "Financial Reporting for
Segments of a Business Enterprise." SFAS 131 changes current practice under
SFAS 14 by establishing a new framework on which to base segment reporting and
also requires interim reporting of segment information.
Management uses one measurement of profitability for its business. The
Company markets its products and related services to customers in many
industries in the United States, Europe and Asia.
Revenue and long-lived-asset information by geographic area as of and for
the year ended:
<TABLE>
<CAPTION>
Long-Lived
Revenues Assets
-------- ----------
(in thousands)
<S> <C> <C>
December 31, 1996:
United States........................................ $ 6,046 $ 955
International........................................ -- --
------- ------
Total.............................................. $ 6,046 $ 955
======= ======
December 31, 1997:
United States........................................ $12,493 $ 896
International........................................ 439 37
------- ------
Total.............................................. $12,932 $ 933
======= ======
December 31, 1998:
United States........................................ $19,549 $ 979
International........................................ 1,502 38
------- ------
Total.............................................. $21,051 $1,017
======= ======
</TABLE>
In 1997 and 1998, no customer accounted for more than 10% of total revenue.
In 1996, one customer accounted for 12% of total revenue or $726,000.
F-20
<PAGE>
LATITUDE COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NOTE 12--UNAUDITED PRO FORMA NET INCOME (LOSS) PER SHARE AND PRO FORMA
STOCKHOLDERS' EQUITY (DEFICIT):
Pro forma basic net income per share has been computed as described in Note
2 and also gives effect to common equivalent shares from preferred stock that
will automatically convert upon the closing of the Company's initial public
offering (using the as-if-converted method).
A reconciliation of the numerator and denominator used in the calculation of
pro forma basic and diluted net income per share follow (in thousands except
per share data):
<TABLE>
<CAPTION>
Year Ended
December 31,
1999
------------
<S> <C>
Pro forma net income per share, basic and diluted:
Net income................................................ $ 703
-------
Shares used in computing net income per share, basic...... 3,279
Adjustment to reflect the effect of the assumed conversion
of convertible preferred stock ......................... 11,836
-------
Shares used in computing pro forma net income per share,
basic.................................................... 15,115
-------
Pro forma net income per share, basic..................... $ 0.05
-------
Shares used in computing net income per share, diluted.... 16,635
Adjustment to reflect the effect of the assumed conversion
of convertible preferred stock ......................... --
-------
Shares used in computing pro forma net income per share,
diluted.................................................. 16,635
-------
Pro forma net income per share, diluted................... $ 0.04
=======
</TABLE>
If the offering contemplated by this Prospectus is consummated, all of the
convertible preferred stock outstanding, as of the closing date will
automatically be converted into an aggregate of approximately 11,836,000 shares
of common stock based on the shares of convertible preferred stock outstanding
at December 31, 1998. Unaudited pro forma stockholders' equity at December 31,
1998, as adjusted for the conversion of preferred stock, is disclosed on the
balance sheet.
NOTE 12--SUBSEQUENT EVENTS:
In February 1999, the Company's Board of Directors, subject to shareholder
approval, authorized the outstanding shares of the predecessor California
Corporation's common stock and all classes of its preferred stock to be
converted automatically into shares of the Delaware Corporation's common stock
and its preferred stock on a three-for-two basis. All share and per share
amounts in the consolidated financial statements have been restated to reflect
the stock split which will be effected upon re-incorporation of the Company in
Delaware. In addition, the Board of Directors, subject to stockholder approval,
authorized an increase in the authorized common stock to 75,000,000 shares, par
value $0.001, and 5,000,000 shares of preferred stock, par value $0.001.
In addition, in February 1999, the Company's Board of Directors, subject to
shareholder approval, adopted the 1999 Stock Option Plan (the "1999 Plan"), the
1999 Directors' Stock Option Plan (the "Directors Plan") and the 1999 Employee
Stock Purchase Plan (the "Purchase Plan").
F-21
<PAGE>
LATITUDE COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The 1999 Plan provides for the granting to employees, including officers and
directors, of incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code") and for the granting to
employees and consultants (including nonemployee directors) of nonstatutory
stock options. If not terminated earlier, the 1999 Plan will terminate in
February 2009. A total of 2,700,000 shares of common stock has been reserved
for issuance under the 1999 Plan, all of which remain available for future
option grants.
The Directors' Plan provides that each person who is or becomes a
nonemployee director of Latitude will be granted a nonstatutory stock option to
purchase 20,000 shares of common stock (the "First Option") on the later of the
date on which the optionee first becomes a nonemployee director of Latitude or
the date of the closing of this offering. Thereafter, on the date of the
Company's Annual Stockholders Meeting each year, each nonemployee director will
be granted an additional option to purchase 5,000 shares of common stock (a
"Subsequent Option") if, on such date, he or she has served on the Company's
Board of Directors for at least six months. A total of 250,000 shares of common
stock has been reserved for issuance under the Directors' Plan, all of which
remain available for future grants.
The Purchase Plan permits eligible employees to purchase common stock
through payroll deductions, which may not exceed 15% of an employee's
compensation, at a price equal to the lower of 85% of the fair market value of
the Company's common stock at the beginning or end of the offering period. A
total of 500,000 shares of common stock has been reserved for issuance under
the Purchase Plan.
F-22
<PAGE>
Description of Graphics for Inside Back Cover Pages of Prospectus
<TABLE>
<S> <C>
[Graphic of screen capture showing [Graphic showing photo of MeetingPlace
MeetingPlace scheduling menu on Microsoft server.]
Internet Explorer.]
One or more MeetingPlace servers, in
combination with client software,
provide a complete conferencing solution
for the enterprise.
With MeetingPlace, employees have access to a [Graphic of screen capture showing
virtual meeting through the interface of MeetingTime client software.]
their choice. Simple telephone access for
voice conferencing is available through any
touch tone telephone, while data conferencing
capabilities can be utilized through a
network-connected computer. In addition,
users can schedule and set up meetings on
MeetingPlace through their corporate intranet
site, Latitude's MeetingTime client or their
personal Microsoft Outlook calendar.
[Graphic of screen capture showing
MeetingPlace meeting setup menu.]
</TABLE>
<PAGE>
[LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by Latitude in connection with
the sale of common stock being registered. All amounts are estimates except the
SEC registration fee and the NASD filing fee and the Nasdaq National Market
listing fee.
<TABLE>
<CAPTION>
Amount
to be Paid
----------
<S> <C>
SEC registration fee................................................ $ 11,510
NASD filing fee..................................................... 4,640
Nasdaq National Market listing fee.................................. 95,000
Printing and engraving expenses..................................... 200,000
Legal fees and expenses............................................. 350,000
Accounting fees and expenses........................................ 275,000
Blue Sky qualification fees and expenses............................ 2,000
Transfer Agent and Registrar fees................................... 15,000
Miscellaneous fees and expenses..................................... 46,850
----------
Total............................................................. $1,000,000
==========
</TABLE>
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended (the "Act"). The
Registrant's Amended and Restated Certificate of Incorporation provides for
indemnification of its directors and officers to the maximum extent permitted
by the Delaware General Corporation Law and the Registrant's Bylaws provides
for indemnification of its directors, officers, employees and other agents to
the maximum extent permitted by the Delaware General Corporation Law. In
addition, the Registrant has entered into Indemnification Agreements with its
directors and officers containing provisions which are in some respects broader
than the specific indemnification provisions contained in the Delaware General
Corporation Law. The indemnification agreements may require the Company, among
other things, to indemnify its directors against certain liabilities that may
arise by reason of their status or service as directors (other than liabilities
arising from willful misconduct of culpable nature), to advance their expenses
incurred as a result of any proceeding against them as to which they could be
indemnified, and to obtain directors' insurance if available on reasonable
terms. Reference is also made to Section 7 of the Underwriting Agreement
contained in Exhibit 1.1 hereto, indemnifying officers and directors of the
Company against certain liabilities.
Item 15. Recent Sales of Unregistered Securities
(a) Since January 1, 1996, the Registrant has issued and sold (without
payment of any selling commission to any person) the following unregistered
securities:
II-1
<PAGE>
(1) Prior to the completion of this offering, the Registrant intends
to effect a three-for-two stock split of its outstanding common stock
in which every two outstanding shares of common stock will be split
into three shares of common stock.
(2) In March 1996, the Registrant issued and sold shares of Series C
Preferred Stock convertible into an aggregate of 3,043,500 shares of
common stock to a total of 11 investors for an aggregate purchase price
of $8,116,000.
(3) As of December 31, 1998, 1,968,636 shares of common stock had
been issued upon exercise of options or pursuant to restricted stock
purchase agreements and 1,352,496 shares of common stock were issuable
upon exercise of outstanding options under the Registrant's 1993 Stock
Plan.
(b) There were no underwritten offerings employed in connection with any of
the transactions set forth in Item 15(a).
The issuance described in Item 15(a)(1) was or will be exempt from
registration under Section 2(3) of the Securities Act on the basis that such
transaction did not involve a "sale" of securities. The issuances described in
Items 15(a)(2) were deemed to be exempt from registration under the Securities
Act in reliance upon Section 4(2) thereof as transactions by an issuer not
involving any public offering. The issuances described in Items 15(a)(3) were
deemed to be exempt from registration under the Securities Act in reliance upon
Rule 701 promulgated thereunder in that they were offered and sold either
pursuant to written compensatory benefit plans or pursuant to a written
contract relating to compensation, as provided by Rule 701. In addition, such
issuances were deemed to be exempt from registration under Section 4(2) of the
Securities Act as transactions by an issuer not involving any public offering.
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
where affixed to the securities issued in such transactions. All recipients had
adequate access, through their relationships with the Company, to information
about the Registrant.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement.
3.1* Certificate of Incorporation of the Registrant.
3.2* Form of Amended and Restated Certificate of Incorporation of the
Registrant, to be filed and effective upon completion of this offering.
3.3* Bylaws of the Registrant.
4.1** Form of the Registrant's common stock certificate.
5.1** Opinion of Venture Law Group, a Professional Corporation.
10.1* Form of Indemnification Agreement.
10.2 1993 Stock Plan, as amended, and forms of stock option agreement and
restricted stock purchase agreement.
10.3 1999 Stock Plan and forms of stock option agreement and restricted
stock purchase agreement.
10.4 1999 Employee Stock Purchase Plan and form of subscription agreement.
10.5 1999 Directors' Stock Option Plan and form of stock option agreement.
10.6+ Warrant To Purchase Series B Preferred Stock.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.7* Amended and Restated Registration Rights Agreement dated March 26,
1996.
10.8+ Lease Agreement dated July 31, 1995 between the Registrant and the
Arrillaga Family Trust and Richard T. Peery Separate Property Trust for
offices at 2121 Tasman Drive, Santa Clara, CA and form of amendment
thereto.
10.9* Senior Loan and Security Agreement dated September 15, 1994 between the
Registrant and Phoenix Leasing Incorporated and amendments thereto.
10.10* Master Equipment Lease dated July 2, 1998 between the Registrant and
Norstan Financial Services, Inc.
10.11+ 1999 Executive Incentive Plan between the Registrant and certain
executive officers of the Registrant.
10.12* 1999 Executive Bonus Program
21* Subsidiaries
23.1 Consent of Independent Accountants.
23.2** Consent of Counsel (included in Exhibit 5.1).
24.1* Power of Attorney.
27.1* Financial Data Schedule.
</TABLE>
- --------
*Previously filed.
+Replaces and supersedes prior filed exhibit.
**To be supplied by amendment.
(b) Financial Statement Schedules
Item 17. Undertakings
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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1), or (4),
or 497(h) under the Act shall be deemed to be a part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the 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 this offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Amendment to Registration Statement on Form S-1
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Santa Clara, State of California, on April 2, 1999.
Latitude Communications, Inc.
/s/ Emil C.W. Wang
By: _________________________________
Emil C.W. Wang,
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement on Form S-1 has been signed by the following persons
in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Emil C.W. Wang President, Chief Executive April 2, 1999
______________________________________ Officer and Director
(Emil C.W. Wang) (Principal Executive
Officer)
/s/ Rick M. McConnell Vice President of Finance April 2, 1999
______________________________________ and Administration and
(Rick M. McConnell) Chief Financial Officer
(Principal Financial and
Accounting Officer)
* Director April 2, 1999
______________________________________
(Thomas H. Bredt)
* Director April 2, 1999
______________________________________
(Robert J. Finocchio, Jr.)
* Director April 2, 1999
______________________________________
(F. Gibson Myers, Jr.)
* Director April 2, 1999
______________________________________
(James L. Patterson)
/s/ Rick M. McConnell
*By: _________________________________
Rick M. McConnell
Attorney in fact
</TABLE>
II-4
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Latitude Communications, Inc.:
In connection with our audits of the consolidated financial statements of
Latitude Communications, Inc. and subsidiary as of December 31, 1997 and 1998,
and for each of the three years in the period ended December 31, 1998, which
financial statements are included in the Prospectus, we have also audited the
financial statement schedule listed in Item 16 herein.
In our opinion, the financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly,
in all material respects, the information required to be included therein.
/s/ PricewaterhouseCoopers LLP
San Jose, California
February 24, 1999
S-1
<PAGE>
Schedule II
Latitude Communications, Inc.
Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Additions
Balance at (Reductions) Balance at
Beginning to Costs and End of
of Period Expenses Write-Offs Period
---------- ------------ ---------- ----------
(In thousands)
<S> <C> <C> <C> <C>
Allowance for doubtful
accounts:
Year ended December 31,
1996...................... $ 32 $ 59 $-- $ 91
Year ended December 31,
1997...................... 91 56 -- 147
Year ended December 31,
1998...................... 147 88 -- 235
Allowance for excess and
obsolete inventory:
Year ended December 31,
1996...................... $ 25 $ 55 $-- $ 80
Year ended December 31,
1997...................... 80 66 -- 146
Year ended December 31,
1998...................... 146 149 -- 295
Deferred tax asset valuation
allowance:
Year ended December 31,
1996...................... $3,607 $1,800 $-- $5,407
Year ended December 31,
1997...................... 5,407 890 -- 6,297
Year ended December 31,
1998...................... 6,297 (337) -- 5,960
Allowance for returns:
Year ended December 31,
1996...................... $ 86 $ 127 $ $ 213
Year ended December 31,
1997...................... 213 122 (139) 196
Year ended December 31,
1998...................... 196 515 (386) 325
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement.
3.1* Certificate of Incorporation of the Registrant.
3.2* Form of Amended and Restated Certificate of Incorporation of the
Registrant, to be filed and effective upon completion of this offering.
3.3* Bylaws of the Registrant.
4.1** Form of the Registrant's common stock certificate.
5.1** Opinion of Venture Law Group, a Professional Corporation.
10.1* Form of Indemnification Agreement.
10.2 1993 Stock Plan, as amended, and forms of stock option agreement and
restricted stock purchase agreement.
10.3 1999 Stock Plan and forms of stock option agreement and restricted
stock purchase agreement.
10.4 1999 Employee Stock Purchase Plan and form of subscription agreement.
10.5 1999 Directors' Stock Option Plan and form of stock option agreement.
10.6+ Warrant To Purchase Series B Preferred Stock.
10.7* Amended and Restated Registration Rights Agreement dated March 26,
1996.
10.8+ Lease Agreement dated July 31, 1995 between the Registrant and the
Arrillaga Family Trust and Richard T. Peery Separate Property Trust for
offices at 2121 Tasman Drive, Santa Clara, CA and Form of amendment
thereto.
10.9* Senior Loan and Security Agreement dated September 15, 1994 between the
Registrant and Phoenix Leasing Incorporated and amendments thereto.
10.10* Master Equipment Lease dated July 2, 1998 between the Registrant and
Norstan Financial Services, Inc.
10.11+ 1999 Executive Incentive Plan between the Registrant and certain
executive officers of the Registrant.
10.12* 1999 Executive Bonus Program
21* Subsidiaries
23.1 Consent of Independent Accountants.
23.2** Consent of Counsel (included in Exhibit 5.1).
24.1* Power of Attorney.
27.1* Financial Data Schedule.
</TABLE>
- --------
*Previously filed.
+Replaces and supersedes prior filed exhibit.
**To be supplied by amendment.
<PAGE>
EXHIBIT 10.2
LATITUDE COMMUNICATIONS, INC.
1993 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are to attract and
--------------------
retain the best available personnel for positions of substantial responsibility,
to provide additional incentive to Employees and Consultants of the Company and
its Subsidiaries and to promote the success of the Company's business. Options
granted under the Plan may be incentive stock options (as defined under Section
422 of the Code) or non-statutory stock options, as determined by the
Administrator at the time of grant of an option and subject to the applicable
provisions of Section 422 of the Code, as amended, and the regulations
promulgated thereunder. Stock purchase rights may also be granted under the
Plan.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees appointed
-------------
pursuant to Section 4 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to the
---------------
administration of stock option and restricted stock purchase plans under
applicable U.S. state corporate laws, U.S. federal and applicable state
securities laws, the Code, any Stock Exchange rules or regulations and the
applicable laws of any other country or jurisdiction where Options or Stock
Purchase Rights are granted under the Plan, as such laws, rules, regulations and
requirements shall be in place from time to time.
(c) "Board" means the Board of Directors of the Company.
-----
(d) "Code" means the Internal Revenue Code of 1986, as amended.
----
(e) "Committee" means the Committee appointed by the Board of Directors
---------
in accordance with paragraph (a) of Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
------------
(g) "Company" means Latitude Communications, Inc., a California
-------
corporation.
(h) "Consultant" means any person, including an advisor, who is engaged
----------
by the Company or any Parent or Subsidiary to render services and is compensated
for such services, and any director of the Company whether compensated for such
services or not provided that if and in the event the Company registers any
class of any equity security pursuant to the Exchange Act, the term Consultant
shall thereafter not include directors who are not compensated for their
services or are paid only a director's fee by the Company.
<PAGE>
(i) "Continuous Status as an Employee" means the absence of any
--------------------------------
interruption or termination of the employment relationship by the Company or any
Subsidiary. Continuous Status as an Employee shall not be considered interrupted
in the case of: (i) sick leave; (ii) military leave; (iii) any other leave of
absence approved by the Administrator, provided that such leave is for a period
of not more than ninety (90) days, unless reemployment upon the expiration of
such leave is guaranteed by contract or statute, or unless provided otherwise
pursuant to Company policy adopted from time to time; or (iv) in the case of
transfers between locations of the Company or between the Company, its
Subsidiaries or its successor.
(j) "Employee" means any person, including officers and directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
(l) "Fair Market Value" means, as of any date, the value of Common Stock
-----------------
determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system including without limitation the National Market
System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported, as quoted
on such exchange or system for the last market trading day prior to the time of
determination) as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not on
the National Market System thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
or;
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(m) "Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code.
(n) "Listed Security" means any security of the Company that is listed or
---------------
approved for listing on a national securities exchange or designated or approved
for designation as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc.
(o) "Nonstatutory Stock Option" means an Option not intended to qualify
-------------------------
as an Incentive Stock Option.
(p) "Option" means a stock option granted pursuant to the Plan.
------
-2-
<PAGE>
(q) "Optioned Stock" means the Common Stock subject to an Option or a Stock
--------------
Purchase Right.
(r) "Optionee" means an Employee or Consultant who receives an Option or
--------
Stock Pur chase Right.
(s) "Parent" means a "parent corporation", whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(t) "Plan" means this 1993 Stock Plan.
----
(u) "Restricted Stock" means shares of Common Stock acquired pursuant to a
----------------
grant of a Stock Purchase Right under Section 11 below.
(v) "Share" means a share of the Common Stock, as adjusted in accordance
-----
with Section 13 below.
(w) "Stock Purchase Right" means the right to purchase Common Stock
--------------------
pursuant to Section 11 below.
(x) "Subsidiary" means a "subsidiary corporation", whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of the
-------------------------
Plan, the maximum aggregate number of shares which may be optioned and sold
under the Plan is 3,555,000/1/ shares of Common Stock. The shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan shall have been terminated, become available for future
grant under the Plan.
4. Administration of the Plan.
--------------------------
(a) Procedure.
---------
(i) Administration With Respect to Directors and Officers. With
-----------------------------------------------------
respect to grants of Options or Stock Purchase Rights to Employees who are also
officers or directors of the Company, the Plan shall be administered by (A) the
Board if the Board may administer the Plan so as to permit such Options and
Stock Purchase Rights to qualify for the exemption set forth in Rule 16b-3
promulgated under the Exchange Act or any successor thereto ("Rule 16b-3"), or
(B) a committee designated by the Board to administer the Plan, which committee
shall be constituted in
_____________________
/1/ Adjusted to reflect the proposed three-for-two stock split to be effected
prior to the Company's initial public offering.
-3-
<PAGE>
such a manner as to permit Options and Stock Purchase Rights to qualify for the
exemption set forth in Rule 16b-3. Once appointed, such Committee shall continue
to serve in its designated capacity until otherwise directed by the Board. From
time to time the Board may increase the size of the Committee and appoint
additional members thereof, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies, however caused, and remove
all members of the Committee and thereafter directly administer the Plan, all to
the extent permitted by Rule 16b-3.
(ii) Multiple Administrative Bodies. If permitted by Rule 16b-3,
------------------------------
the Plan may be administered by different bodies with respect to directors, non-
director officers and Employees who are neither directors nor officers.
(iii) Administration With Respect to Consultants and Other Employees.
--------------------------------------------------------------
With respect to grants of Options or Stock Purchase Rights to Employees or
Consultants who are neither directors nor officers of the Company, the Plan
shall be administered by (A) the Board or (B) a committee designated by the
Board, which committee shall be constituted in such a manner as to satisfy the
Applicable Laws. Once appointed, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board. From time to time
the Board may increase the size of the Committee and appoint additional members
thereof, remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies, however caused, and remove all members of
the Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the Plan
---------------------------
and in the case of a Committee, the specific duties delegated by the Board to
such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any stock exchange upon which the Common
Stock is listed, the Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(k) of the Plan;
(ii) to select the Consultants and Employees to whom Options and
Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options and Stock
Purchase Rights or any combination thereof are granted hereunder;
(iv) to determine the number of shares of Common Stock to be covered
by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted hereunder;
-4-
<PAGE>
(vii) to determine whether and under what circumstances an Option may
be settled in cash under subsection 9(f) instead of Common Stock; and
(viii) to determine the terms and restrictions applicable to Stock
Purchase Rights and the Restricted Stock purchased by exercising such Stock
Purchase Rights.
(c) Effect of Administrator's Decision. All decisions, determinations and
----------------------------------
interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options or Stock Purchase Rights.
5. Eligibility.
-----------
(a) Nonstatutory Stock Options and Stock Purchase Rights may be granted to
Employees and Consultants. Incentive Stock Options may be granted only to
Employees. An Employee or Consultant who has been granted an Option or Stock
Purchase Right may, if he is otherwise eligible, be granted additional Options
or Stock Purchase Rights.
(b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall be taken
into account in the order in which they were granted, and the Fair Market Value
of the Shares shall be determined as of the time the Option with respect to such
Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with respect to
continuation of employment or consulting relationship with the Company, nor
shall it interfere in any way with his or her right or the Company's right to
terminate his or her employment or consulting relationship at any time, with or
without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to occur
------------
of its adoption by the Board of Directors or its approval by the shareholders of
the Company as described in Section 19 of the Plan. It shall continue in effect
for a term of ten (10) years unless sooner terminated under Section 15 of the
Plan.
7. Term of Option. The term of each Option shall be the term stated in the
--------------
Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. However, in the case of an Option
granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Option shall
be five (5) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement.
-5-
<PAGE>
8. Option Exercise Price and Consideration.
---------------------------------------
(a) The per share exercise price for the Shares to be issued pursuant to
exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of such
Incentive Stock Option, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(B) granted to any other Employee, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted prior to the date, if any, on which the Common Stock
becomes a Listed Security to a person who, at the time of the grant of such
Option, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the per
Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of the grant.
(B) granted prior to the date, if any, on which the Common Stock
becomes a Listed Security to any other person, the per Share exercise price
shall be no less than 85% of the Fair Market Value per Share on the date of
grant.
(b) The consideration to be paid for the Shares to be issued upon exercise
of an Option, including the method of payment, shall be determined by the
Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option either have been owned by the Optionee for
more than six months on the date of surrender or were not acquired, directly or
indirectly, from the Company, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised, (5) authorization from the Company to retain from the
total number of Shares as to which the Option is exercised that number of Shares
having a Fair Market Value on the date of exercise equal to the exercise price
for the total number of Shares as to which the Option is exercised, (6) delivery
of a properly executed exercise notice together with such other documentation as
the Administrator and the broker, if applicable, shall require to effect an
exercise of the Option and delivery to the Company of the sale or loan proceeds
required to pay the exercise price, (7) by delivering an irrevocable
subscription agreement for the Shares which irrevocably obligates the option
holder to take and pay for the Shares not more than twelve months after the date
of delivery of the subscription agreement, (8) any combination of the foregoing
methods of payment, (9) or such other consideration and method of payment for
the issuance of Shares to the extent permitted under Applicable Laws. In making
its determination as to the type of consideration to accept, the Board
-6-
<PAGE>
shall consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
9. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
-----------------------------------------------
hereunder shall be exercisable at such times and under such conditions as
determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 13 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment. Subject to Section 13(d), in the event of
-------------------------
termination of an Optionee's consulting relationship or Continuous Status as an
Employee with the Company, such Optionee may, but only within such period of
time (not less than thirty (30) days) as determined by the Board, with such
determination in the case of an Incentive Stock Option being made at the time of
grant of the Option and not exceeding three (3) months after the date of such
termination (but in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement), exercise his Option to the extent
that Optionee was entitled to exercise it at the date of such termination.
Subject to Section 13(d), to the extent that Optionee was not entitled to
exercise the Option at the date of such termination, or if Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate.
(c) Disability of Optionee.
----------------------
(i) Notwithstanding the provisions of Section 9(b) above, in the
event of termination of an Optionee's consulting relationship or Continuous
Status as an Employee as a result of his total and permanent disability Optionee
may, but only within twelve (12) months from the date
-7-
<PAGE>
of such termination (but in no event later than the expiration date of the term
of such Option as set forth in the Option Agreement), exercise the Option to the
extent otherwise entitled to exercise it at the date of such termination. To the
extent that Optionee was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
(ii) Notwithstanding the provisions of Section 9(b) above, in the
event of termination of an Optionee's Continuous Status as an Employee or
Consultant as a result of any disability not constituting a total and permanent
disability he may, but only within six (6) months from the date of such
termination (but in no event later than the date of expiration of the term of
such Option as set forth in the Option Agreement), exercise his Option to the
extent he was entitled to exercise it at the date of such termination; provided,
however, that if such Optionee fails to exercise any Incentive Stock Option
within three (3) months from the date of termination of employment, such Option
shall be treated for federal income tax purposes as a Nonstatutory Stock Option.
To the extent that Optionee was not entitled to exercise the Option at the date
of termination, or if Optionee does not exercise such Option (which he was
entitled to exercise) within the time specified herein, the Option shall
terminate.
(d) Death of Optionee. In the event of the death of an Optionee,
-----------------
the Option may be exercised, at any time within twelve (12) months following the
date of death (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), by the Optionee's estate or
by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent the Optionee was entitled to exercise the
Option at the date of death. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(e) Rule 16b-3. Options granted to persons subject to Section 16(b)
----------
of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
(f) Buyout Provisions. The Administrator may at any time offer to
-----------------
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
10. Non-Transferability of Options. An Option or Stock Purchase Right may
------------------------------
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee.
11. Stock Purchase Rights.
---------------------
(a) Rights to Purchase. Stock Purchase Rights may be issued either
------------------
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside
-8-
<PAGE>
of the Plan. After the Administrator determines that it will offer Stock
Purchase Rights under the Plan, it shall advise the offeree in writing of the
terms, conditions and restrictions related to the offer, including the number of
Shares that such person shall be entitled to purchase, the price to be paid, and
the time within which such person must accept such offer, which shall in no
event exceed thirty (30) days from the date upon which the Administrator made
the determination to grant the Stock Purchase Right. In the case of a Stock
Purchase Right granted prior to the date, if any, on which the Common Stock
becomes a Listed Security and if required by the Applicable Laws at that time,
the purchase price of Shares subject to the Stock Purchase Right shall not be
less than 85% of the Fair Market Value of the Shares as of the date of the
offer. If the Applicable Laws do not impose the requirements set forth in the
preceding sentence, then with respect to any Stock Purchase Rights granted after
the date, if any, on which the Common Stock becomes a Listed Security, the
purchase price of Shares subject to Stock Purchase Rights shall be as determined
by the Administrator. The offer shall be accepted by execution of a Restricted
Stock purchase agreement in the form determined by the Administrator. Shares
purchased pursuant to the grant of a Stock Purchase Right shall be referred to
herein as "Restricted Stock."
(b) Repurchase Option. Unless the Administrator determines
-----------------
otherwise, the Restricted Stock purchase agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
Disability), subject to Section 13(d). The purchase price for Shares repurchased
pursuant to the Restricted Stock purchase agreement shall be the original price
paid by the purchaser and may be paid by cash or cancellation of purchase money
indebtedness of the purchaser to the Company. The repurchase option shall lapse
at such rate as the Administrator may determine, provided however that with
respect to a Stock Purchase Right granted prior to the date, if any, on which
the Common Stock becomes a Listed Security to a purchaser who is not an officer,
director or consultant of the Company or any Parent of Subsidiary of the
Company, it shall lapse at a minimum rate of 20% per year if required by the
Applicable Laws.
(c) Other Provisions. The Restricted Stock purchase agreement shall
----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock purchase agreements need not be the
same with respect to each purchaser.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
-----------------------
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
12. Stock Withholding to Satisfy Withholding Tax Obligations. At the
--------------------------------------------------------
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option or Stock Purchase Right, which tax liability is
subject to tax withholding under applicable tax laws, and the Optionee is
obligated to pay the Company an amount required to be withheld under applicable
tax laws, the Optionee may satisfy the withholding tax obligation by electing to
have the Company withhold from the Shares to be
-9-
<PAGE>
issued upon exercise of the Option, or the Shares to be issued in connection
with the Stock Purchase Right, if any, that number of Shares having a Fair
Market Value equal to the amount required to be withheld. The Fair Market Value
of the Shares to be withheld shall be determined on the date that the amount of
tax to be withheld is to be determined (the "Tax Date").
All elections by an Optionee to have Shares withheld for this purpose shall
be made in writing in a form acceptable to the Administrator and shall be
subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, the election shall be irrevocable as to the particular
Shares of the Option or Stock Purchase Right as to which the election is made;
(c) all elections shall be subject to the consent or disapproval of
the Administrator;
(d) if the Optionee is subject to Rule 16b-3, the election must
comply with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
In the event the election to have Shares withheld is made by an Optionee
and the Tax Date is deferred under Section 83 of the Code because no election is
filed under Section 83(b) of the Code, the Optionee shall receive the full
number of Shares with respect to which the Option or Stock Purchase Right is
exercised but such Optionee shall be unconditionally obligated to tender back to
the Company the proper number of Shares on the Tax Date.
13. Adjustments Upon Changes in Capitalization or Merger.
----------------------------------------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
-10-
<PAGE>
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) Merger or Sale of Assets. In the event of a proposed sale of all
------------------------
or substantially all of the Company's assets or a merger of the Company with or
into another corporation where the successor corporation issues its securities
to the Company's stockholders (a "Change of Control"), each outstanding Option
-----------------
or Stock Purchase Right shall be assumed or an equivalent option or right shall
be substituted by such successor corporation or a parent or subsidiary of such
successor corporation. For purposes of this Section 13(c), an Option or a Stock
Purchase Right shall be considered assumed, without limitation, if, at the time
of issuance of the stock or other consideration upon such merger or sale of
assets, each holder of an Option or a Stock Purchase Right would be entitled to
receive upon exercise of the Option or Stock Purchase Right the same number and
kind of shares of stock or the same amount of property, cash or securities as
such holder would have been entitled to receive upon the occurrence of such
transaction if the holder had been, immediately prior to such transaction, the
holder of the number of Shares of Common Stock covered by the Option or the
Stock Purchase Right at such time (after giving effect to any adjustments in the
number of Shares covered by the Option or Stock Purchase Right as provided for
in this Section 13).
In the event that, following a Change of Control, the successor
corporation does not agree to assume the Option or Stock Purchase Right or to
substitute an equivalent option or right, then (x) in the case of an Option, the
unvested shares under such Option shall automatically be accelerated such that
an additional 50% of the total number of unvested shares as of the effective
date of the Change of Control shall automatically become vested, and (y) in the
case of a Stock Purchase Right, any rights of repurchase with respect to such
Stock Purchase Right shall automatically terminate with respect to 50% of the
total number of unvested shares as of the effective date of the Change of
Control, and the Company shall provide written notice to the holder of the
Option or Stock Purchase Right of the termination of such vesting provisions or
rights of repurchase. In the case of an Option, the holder shall be entitled to
exercise such Option for a period of 15 business days following the date that
such notice is given.
(d) Termination Following A Change of Control. If the holder of an
-----------------------------------------
Option or Stock Purchase Right is an employee of the Company and such holder's
employment terminates as a result of Involuntary Termination other than for
Cause (as such terms are defined below) at any time within 24 months following a
Change of Control, then, subject to Subsection (e) below, then (x) in the case
of an Option, the unvested shares under such Option shall automatically be
accelerated such that an additional 50% of the total number of unvested shares
as of the effective date of such Involuntary Termination shall automatically
become vested, and (y) in the case of a Stock Purchase Right, any rights of
repurchase with respect to such Stock Purchase Right shall automatically
terminate with respect to 50% of the total number of unvested shares as of the
effective date of the Involuntary Termination. Notwithstanding the foregoing, no
such vesting acceleration shall occur if such vesting acceleration would cause a
contemplated Change of Control transaction that was intended to be accounted for
as a "pooling-of-interests" transaction to become ineligible for such
-11-
<PAGE>
accounting treatment under generally accepted accounting principles, as
determined by the Company's independent public accountants (the "Accountants")
prior to the Change of Control.
(e) Limitation on Payments. In the event that the vesting
----------------------
acceleration provided for in Subsection (c) above (i) constitutes "parachute
payments" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), and (ii) but for this Subsection (e), would be
subject to the excise tax imposed by Section 4999 of the Code (or any
corresponding provisions of state income tax law), then the vesting acceleration
pursuant to Subsection (c) above shall be either
(i) delivered in full, or
(ii) delivered as to such lesser extent which would result in no
portion of such severance benefits being subject to excise tax under Section
4999 of the Code, whichever of the foregoing amounts, taking into account the
applicable federal, state and local income taxes and the excise tax imposed by
Section 4999, results in the receipt by the holder of an Option or Stock
Purchase Right on an after-tax-basis, of the greater amount of severance
benefits, notwithstanding that all or some portion of such severance benefits
may be taxable under Section 4999 of the Code. Any determination required under
this Subsection (e) shall be made in writing by the Company's independent
accountants, whose determination shall be conclusive and binding on the Company
and all holders of Options and Stock Purchase Rights for all purposes. In the
event that subdivision (i) above applies, then the holder of the Option or Stock
Purchase Rights shall be responsible for any excise taxes imposed with respect
to such severance and other benefits. In the event that subdivision (ii) above
applies, then each benefit provided hereunder shall be proportionately reduced
to the extent necessary to avoid imposition of such excise taxes.
(f) Definition of Terms. The following terms used in Subsections
-------------------
(d) through (e) shall have the following meanings:
(i) Cause. "Cause" shall mean (i) gross negligence or willful
-----
misconduct in the performance of an employee's duties to the Company; (ii)
repeated unexplained or unjustified absence from the Company; (iii) a material
and willful violation of any federal or state law; (iv) refusal or failure to
act in accordance with any specific direction or order of the Company; (v)
commission of any act of fraud with respect to the Company; or (vi) conviction
of or plea of no contest to a felony or a crime involving moral turpitude
causing material harm to the standing and reputation of the Company, in each
case as determined by the Board of Directors of the Company.
(ii) Involuntary Termination. "Involuntary Termination" shall
-----------------------
mean (i) without an employee's express written consent, the significant
reduction of such employee's duties, authority or responsibilities, relative to
the such employee's duties, authority or responsibilities as in effect
immediately prior to such reduction, or the assignment to the employee of such
reduced duties, authority or responsibilities, provided, however, that the
assignment of the employee to a position with the same title as the employee
then holds, or substantially similar title, in a business unit, division or
subsidiary of the Company following a Change of Control or a company into which
the Company is merged in a Change of Control or otherwise acquiring assets or
voting shares of the Company in connection with a Change of Control, or a parent
of such a company, shall
-12-
<PAGE>
not constitute a significant reduction of duties, authority or responsibilities;
(ii) a material reduction by the Company in the base salary of the employee as
in effect immediately prior to such reduction; (iii) a material reduction by the
Company in the kind or level of employee benefits, including bonuses, to which
the employee was entitled immediately prior to such reduction with the result
that the employee's overall benefits package is significantly reduced; (iv) the
relocation of the employee to a facility or a location more than fifty miles
from the employee's then present location, without the employee's express
written consent; or (v) any act or set of facts or circumstances which would,
under California case law or statute, constitute a constructive termination of
the employee.
14. Time of Granting Options and Stock Purchase Rights. The date of
--------------------------------------------------
grant of an Option or Stock Purchase Right shall, for all purposes, be the date
on which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Board. Notice of the
determination shall be given to each Employee or Consultant to whom an Option or
Stock Purchase Right is so granted within a reasonable time after the date of
such grant.
15. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with the Applicable Laws, the
Company shall obtain shareholder approval of any Plan amendment in such a manner
and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
16. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
-13-
<PAGE>
17. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
18. Agreements. Options and Stock Purchase Rights shall be evidenced by
----------
written agreements in such form as the Board shall approve from time to time.
19. Shareholder Approval. If required by the Applicable Laws,
--------------------
continuance of the Plan shall be subject to approval by the shareholders of the
Company within twelve (12) months before or after the date the Plan is adopted.
Such shareholder approval shall be obtained in the degree and manner required
under the Applicable Laws.
20. Information to Optionees and Purchasers. Prior to the date, if any,
---------------------------------------
on which the Common Stock becomes a Listed Security and if required by the
Applicable Laws, the Company shall provide to each Optionee and to each
individual who acquired Shares pursuant to the Plan, during the period such
Optionee or purchaser has one or more Options or Stock Purchase Rights
outstanding, and, in the case of an individual who acquired Shares pursuant to
the Plan, during the period such individual owns such Shares, copies of all
annual reports and other information which are provided to all shareholders of
the Company and at least annually, financial statements of the Company,
including a statement of operations for the most recent fiscal year and a
balance sheet as of the end of such fiscal year.
-14-
<PAGE>
LATITUDE COMMUNICATIONS, INC.
1993 STOCK PLAN
NOTICE OF STOCK OPTION GRANT
Optionee's Name and Address:
((Optionee))
_________________________
_________________________
You have been granted an option to purchase Common Stock of Latitude
Communications, Inc. (the "Company") as follows:
Grant Number ((GrantNo))
Date of Grant ((GrantDate))
Option Price Per Share $((PricePerShar))
Total Number of Shares Granted ((Shares))
Total Price of Shares Granted ((TotalPrice))
Type of Option: _____ Incentive Stock Option
_____ Nonstatutory Stock Option
Term/Expiration Date: ((ExpirationDate))
Vesting Commencement Date: ((VestingStartDate))
Exercise Schedule:
Subject to the terms of the attached Stock Option Agreement, the Option
shall become exercisable cumulatively, to the extent of ____ * of the Shares
subject to the Option on the first anniversary of the Vesting Commencement Date,
and ____ * of the Shares at the end of each month thereafter.
_________________________
* No less than 20% per year.
1
<PAGE>
Termination Period:
The option may be exercised for a period of 60 days after termination of
employment or consulting relationship except as set out in Sections 7 and 8 of
the Stock Option Agreement (but in no event later than the Expiration Date).
By your signature and the signature of the Company's representative below,
you and the Company agree that this option is granted under and governed by the
terms and conditions of the 1993 Stock Plan and the Stock Option Agreement, all
of which are attached and made a part of this document.
((Optionee)): LATITUDE COMMUNICATIONS, INC.
________________________________________ By:___________________________
Signature
________________________________________ Title:________________________
Print Name
2
<PAGE>
LATITUDE COMMUNICATIONS, INC.
1993 STOCK PLAN
STOCK OPTION AGREEMENT
1. Grant of Option. Latitude Communications, Inc., a California
---------------
corporation (the "Company"), hereby grants to the Optionee named in the Notice
of Grant (the "Optionee"), an option (the "Option") to purchase a total number
of shares of Common Stock (the "Shares") set forth in the Notice of Grant, at
the exercise price per share set forth in the Notice of Grant (the "Exercise
Price") subject to the terms, definitions and provisions of the Latitude
Communications, Inc. 1993 Stock Plan (the "Plan") adopted by the Company, which
is incorporated herein by reference. Unless otherwise defined herein, the terms
defined in the Plan shall have the same defined meanings in this Option.
If designated an Incentive Stock Option, this Option is intended to qualify
as an Incentive Stock Option as defined in Section 422 of the Code.
2. Exercise of Option. This Option shall be exercisable during its term
------------------
in accordance with the Exercise Schedule set out in the Notice of Grant and with
the provisions of Section 9 of the Plan as follows:
(i) Right to Exercise.
-----------------
(a) This Option may not be exercised for a fraction of a share.
(b) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed by
Sections 6, 7 and 8 below, subject to the limitation contained in subsection
2(i)(c).
(c) In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in the Notice of Grant.
(ii) Method of Exercise. This Option shall be exercisable by written
------------------
notice (in the form attached as Exhibit A) which shall state the election to
exercise the Option, the number of Shares in respect of which the Option is
being exercised, and such other representations and agreements as to the
holder's investment intent with respect to such shares of Common Stock as may be
required by the Company pursuant to the provisions of the Plan. Such written
notice shall be signed by the Optionee and shall be delivered in person or by
certified mail to the Secretary of the Company. The written notice shall be
accompanied by payment of the Exercise Price. This Option shall be deemed to be
exercised upon receipt by the Company of such written notice accompanied by the
Exercise Price.
1
<PAGE>
No Shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of law and
the requirements of any stock exchange upon which the Shares may then be listed.
Assuming such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.
3. Optionee's Representations. In the event the Shares purchasable
--------------------------
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, concurrently with the exercise of all or any portion of this
Option, make the requisite investment representations set forth in the form
attached hereto as Exhibit A, and shall read the applicable rules of the
Commissioner of Corporations attached to such form.
4. Method of Payment. Payment of the Exercise Price shall be by any of
-----------------
the following, or a combination thereof, at the election of the Optionee:
(i) cash; or
(ii) check; or
(iii) surrender of other shares of Common Stock of the Company which
(A) in the case of Shares acquired pursuant to the exercise of a Company option,
have been owned by the Optionee for more than six (6) months on the date of
surrender, and (B) have a fair market value on the date of surrender equal to
the Exercise Price of the Shares as to which the Option is being exercised; or
(iv) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price.
5. Restrictions on Exercise. This Option may not be exercised (i) until
------------------------
such time as the Plan has been approved by the shareholders of the Company, or
(ii) if the issuance of such Shares upon such exercise or the method of payment
of consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of this
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
6. Termination of Relationship. In the event of termination of Optionee's
---------------------------
consulting relationship or Continuous Status as an Employee, Optionee may, to
the extent otherwise so entitled at the date of such termination (the
"Termination Date"), exercise this Option during the Termination Period set out
in the Notice of Grant. To the extent that Optionee was not entitled to
2
<PAGE>
exercise this Option at the date of such termination, or if Optionee does not
exercise this Option within the time specified herein, the Option shall
terminate.
7. Disability of Optionee.
----------------------
(i) Notwithstanding the provisions of Section 6 above, in the
event of termination of an Optionee's consulting relationship or Continuous
Status as an Employee as a result of his total and permanent disability Optionee
may, but only within twelve (12) months from the date of such termination (but
in no event later than the expiration date of the term of such Option as set
forth in the Option Agreement), exercise the Option to the extent otherwise
entitled to exercise it at the date of such termination. To the extent that
Optionee was not entitled to exercise the Option at the date of termination, or
if Optionee does not exercise such Option to the extent so entitled within the
time specified herein, the Option shall terminate.
(ii) Notwithstanding the provisions of Section 6 above, in the
event of termination of an Optionee's Continuous Status as an Employee or
Consultant as a result of any disability not constituting a total and permanent
disability he may, but only within six (6) months from the date of such
termination (but in no event later than the date of expiration of the term of
such Option as set forth in the Option Agreement), exercise his Option to the
extent he was entitled to exercise it at the date of such termination; provided,
however, that if such Optionee fails to exercise any Incentive Stock Option
within three (3) months from the date of termination of employment, such Option
shall be treated for federal income tax purposes as a Nonstatutory Stock Option.
To the extent that Optionee was not entitled to exercise the Option at the date
of termination, or if Optionee does not exercise such Option (which he was
entitled to exercise) within the time specified herein, the Option shall
terminate.
8. Death of Optionee. In the event of the death of Optionee, the Option
-----------------
may be exercised at any time within six (6) months following the date of death
(but in no event later than the date of expiration of the term of this Option as
set forth in Section 10 below), by Optionee's estate or by a person who acquired
the right to exercise the Option by bequest or inheritance, but only to the
extent the Optionee could exercise the Option at the date of death.
9. Non-Transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by him. The terms of this
Option shall be binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.
10. Term of Option. This Option may be exercised only within the term set
--------------
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option. The limitations set out
in Section 7 of the Plan regarding Options designated as Incentive Stock Options
and Options granted to more than ten percent (10%) shareholders shall apply to
this Option.
3
<PAGE>
11. Taxation Upon Exercise of Option. Optionee understands that, upon
--------------------------------
exercising a nonstatutory Option, he or she will recognize income for tax
purposes in an amount equal to the excess of the then fair market value of the
Shares over the exercise price. However, the timing of this income recognition
may be deferred for up to six months if Optionee is subject to Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). If the
Optionee is an employee, the Company will be required to withhold from
Optionee's compensation, or collect from Optionee and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income.
Additionally, the Optionee may at some point be required to satisfy tax
withholding obligations with respect to the disqualifying disposition of an
Incentive Stock Option. The Optionee shall satisfy his or her tax withholding
obligation arising upon the exercise of this Option by one or some combination
of the following methods: (i) by cash payment, or (ii) out of Optionee's current
compensation, or (iii) if permitted by the Administrator, in its discretion, by
surrendering to the Company Shares which (a) in the case of Shares previously
acquired from the Company, have been owned by the Optionee for more than six
months on the date of surrender, and (b) have a fair market value on the date of
surrender equal to or less than Optionee's marginal tax rate times the ordinary
income recognized, (iv) by electing to have the Company withhold from the Shares
to be issued upon exercise of the Option that number of Shares having a fair
market value equal to the amount required to be withheld. For this purpose, the
fair market value of the Shares to be withheld shall be determined on the date
that the amount of tax to be withheld is to be determined (the "Tax Date").
If the Optionee is subject to Section 16 of the Exchange Act (an
"Insider"), any surrender of previously owned Shares to satisfy tax withholding
obligations arising upon exercise of this Option must comply with the applicable
provisions of Rule 16b-3 promulgated under the Exchange Act ("Rule 16b-3") and
shall be subject to such additional conditions or restrictions as may be
required thereunder to qualify for the maximum exemption from Section 16 of the
Exchange Act with respect to Plan transactions.
All elections by an Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(i) the election must be made on or prior to the applicable Tax
Date;
(ii) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made;
(iii) all elections shall be subject to the consent or disapproval of
the Administrator;
(iv) if the Optionee is an Insider, the election must comply with the
applicable provisions of Rule 16b-3 and shall be subject to such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
4
<PAGE>
12. Tax Consequences. Set forth below is a brief summary as of the date of
----------------
this Option of some of the federal and California tax consequences of exercise
of this Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE
SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE
SHARES.
(i) Exercise of ISO. If this Option qualifies as an ISO, there will
---------------
be no regular federal income tax liability or California income tax liability
upon the exercise of the Option, although the excess, if any, of the fair market
value of the Shares on the date of exercise over the Exercise Price will be
treated as an adjustment to the alternative minimum tax for federal tax purposes
and may subject the Optionee to the alternative minimum tax in the year of
exercise.
(ii) Exercise of Nonstatutory Stock Option. If this Option does not
-------------------------------------
qualify as an ISO, there may be a regular federal income tax liability and a
California income tax liability upon the exercise of the Option. The Optionee
will be treated as having received compensation income (taxable at ordinary
income tax rates) equal to the excess, if any, of the fair market value of the
Shares on the date of exercise over the Exercise Price. If Optionee is an
employee, the Company will be required to withhold from Optionee's compensation
or collect from Optionee and pay to the applicable taxing authorities an amount
equal to a percentage of this compensation income at the time of exercise.
(iii) Disposition of Shares. In the case of an NSO, if Shares are held
---------------------
for at least one year, any gain realized on disposition of the Shares will be
treated as long-term capital gain for federal and California income tax
purposes. In the case of an ISO, if Shares transferred pursuant to the Option
are held for at least one year after exercise and are disposed of at least two
years after the Date of Grant, any gain realized on disposition of the Shares
will also be treated as long-term capital gain for federal and California income
tax purposes. If Shares purchased under an ISO are disposed of within such one-
year period or within two years after the Date of Grant, any gain realized on
such disposition will be treated as compensation income (taxable at ordinary
income rates) to the extent of the excess, if any, of the fair market value of
the Shares on the date of exercise over the Exercise Price.
(iv) Notice of Disqualifying Disposition of ISO Shares. If the Option
-------------------------------------------------
granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee from the early disposition by payment in cash or out
of the current earnings paid to the Optionee.
Latitude Communications, Inc.,
a California corporation
5
<PAGE>
By: _____________________________
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL
OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR
ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT
NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK PLAN WHICH IS INCORPORATED
HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO
CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL IT INTERFERE
IN ANY WAY WITH HIS OR HER RIGHT OR THE COMPANY'S RIGHT TO TERMINATE HIS OR HER
EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that he
or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Dated: _______________ ______________________________
Optionee
6
<PAGE>
EXHIBIT A
---------
1993 STOCK PLAN
EXERCISE NOTICE
Latitude Communications, Inc.
_________________________
_________________________
Attention: Chief Financial Officer
1. Exercise of Option. Effective as of today, ___________, 19__, the
------------------
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "Shares") of Latitude Communications,
Inc. (the "Company") under and pursuant to the Company's 1993 Stock Plan, as
amended (the "Plan") and the [ ] Incentive [ ] Nonstatutory Stock Option
Agreement dated ________ (the "Option Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee has
---------------------------
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions. Optionee represents that
Optionee is purchasing the Shares for Optionee's own account for investment and
not with a view to, or for sale in connection with, a distribution of any of
such Shares.
3. Compliance with Securities Laws. Optionee understands and acknowledges
-------------------------------
that the Shares may not have been registered under the Securities Act of 1933,
as amended (the "1933 Act"), and, not standing any other provision of the Option
Agreement to the contrary, the exercise of any rights to purchase any Shares is
expressly conditioned upon compliance with the 1933 Act, all applicable state
securities laws and all applicable requirements of any stock exchange or over
the counter market on which the Company's Common Stock may be listed or traded
at the time of exercise and transfer. Optionee agrees to cooperate with the
Company to ensure compliance with such laws.
4. Federal Restrictions on Transfer. Optionee understands that the Shares
--------------------------------
may not have been registered under the 1933 Act and, in such event, cannot be
resold and must be held indefinitely unless they are registered under the 1933
Act or unless an exemption from such registration is available and that the
certificate(s) representing the Shares may bear a legend to that effect.
Optionee understands that the Company is under no obligation to register the
Shares and that an exemption may not be available or may not permit Optionee to
transfer Shares in the amounts or at the times proposed by Optionee. Optionee is
familiar with the provisions of Rule 701 and Rule 144, each promulgated under
the 1933 Act, which, in substance, permit limited public resale of "restricted
securities" acquired, directly or indirectly from the issuer thereof, in a non-
public offering subject to the satisfaction of certain conditions. Rule 701
provides that if the issuer qualifies under Rule 701 at the time of the Closing,
such issuance will be exempt from
1
<PAGE>
registration under the 1933 Act. In the event the Company becomes subject to the
reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, ninety (90) days thereafter the securities exempt under Rule 701 may be
resold, subject to the satisfaction of certain of the conditions specified by
Rule 144, including among other things: (1) the sale being made through a broker
in an unsolicited "broker's transaction" or in transactions directly with a
market maker (as said term is defined under the Securities Exchange Act of
1934); and, in the case of an affiliate, (2) the availability of certain public
information about the Company, and the amount of securities being sold during
any three month period not exceeding the limitations specified in Rule 144(e),
if applicable.
In the event that the Company does not qualify under Rule 701 at the time
of the Closing, then securities may be resold in certain limited circumstances
subject to the provisions of Rule 144, which requires among other things: (1)
the resale occurring not less than two years after the party has purchased, and
made full payment for, within the meaning of Rule 144, the securities to be
sold; and, in the case of an affiliate, or of a non-affiliate who has held the
securities less than three years, (2) the availability of certain public
information about the Company, (3) the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934), and
(4) the amount of securities being sold during any three month period not
exceeding the specified limitations stated therein, if applicable.
Optionee further understands that in the event all of the applicable
requirements of Rule 701 or 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required. Purchaser understands that no assurances can be
given that any such other registration exemption will be available in such
event.
5. Rights as Shareholder. Until the stock certificate evidencing such
---------------------
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a shareholder shall exist with
respect to the optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 12 of the Plan.
Optionee shall enjoy rights as a shareholder until such time as Optionee
disposes of the Shares or the Company and/or its assignee(s) exercises the Right
of First Refusal hereunder. Upon such exercise, Optionee shall have no further
rights as a holder of the Shares so purchased except the right to receive
payment for the Shares so purchased in accordance with the provisions of this
Agreement, and Optionee shall forthwith cause the certificate(s) evidencing the
Shares so purchased to be surrendered to the Company for transfer or
cancellation.
6. Company's Right of First Refusal. Before any Shares held by Optionee
--------------------------------
or any transferee (either being sometimes referred to herein as the "Holder")
may be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall
2
<PAGE>
have a right of first refusal, subject to the provisions of Section 6(g) below,
to purchase the Shares on the terms and conditions set forth in this Section
(the "Right of First Refusal").
(a) Notice of Proposed Transfer. The Holder of the Shares shall
---------------------------
deliver to the Company a written notice (the "Notice") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer such Shares; (ii) the name of
each proposed purchaser or other transferee ("Proposed Transferee"); (iii) the
number of Shares to be transferred to each Proposed Transferee; and (iv) the
bona fide cash price or other consideration for which the Holder pro poses to
transfer the Shares (the "Offered Price"), and the Holder shall offer the Shares
at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty
----------------------------------
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection (c)
below.
(c) Purchase Price. The purchase price ("Purchase Price") for the
--------------
Shares purchased by the Company or its assignee(s) under this Section shall be
the Offered Price. If the Offered Price includes consideration other than cash,
the cash equivalent value of the non cash consideration shall be determined by
the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the
-------
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding purchase money indebtedness of the Holder to
the Company for the purchase price of the Shares or a portion thereof or by any
combination thereof within 30 days after receipt of the Notice or in the manner
and at the times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed in the
--------------------------
Notice to be transferred to a given Proposed Trans feree are not purchased by
the Company and/or its assignee(s) as provided in this Section, then the Holder
may sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer
is consummated within 120 days after the date of the Notice and provided further
that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are
not transferred to the Proposed Transferee within such period, a new Notice
shall be given to the Company, and the Company and/or its assignees shall again
be offered the Right of First Refusal before any Shares held by the Holder may
be sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary
contained in this Section notwithstanding, the trans fer of any or all of the
Shares during the Optionee's lifetime or on the Optionee's death by will or
intestacy to the Optionee's immediate family or a trust for the benefit of the
Optionee's immediate family shall be exempt from the provisions of this Section.
"Immediate Family" as used herein shall mean spouse, lineal
3
<PAGE>
descendant or antecedent, father, mother, brother or sister. In such case, the
transferee or other recipient shall receive and hold the Shares so transferred
subject to the provisions of this Section, and there shall be no further
transfer of such Shares except in accordance with the terms of this Section.
(g) Termination of Right of First Refusal. The Right of First Refusal
-------------------------------------
shall terminate at such time as a public market exists for the Company's capital
stock (or any other stock issued to purchasers in exchange for the Shares
purchased under this Agreement). For the purpose of this Agreement, a "Public
Market" shall be deemed to exist if (i) such stock is listed on a national
securities exchange (as that term is used in the Securities Exchange Act of
1934) or (ii) such stock is traded on the over-the-counter market and prices are
published daily on business days in a recognized financial journal.
7. Tax Consultation. Optionee understands that Optionee may suffer
----------------
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or dis-
position of the Shares and that Optionee is not relying on the Company for any
tax advice.
8. Restrictive Legends and Stop Transfer Orders.
--------------------------------------------
(a) Legends. Optionee understands and agrees that the Company shall
-------
cause the legends set forth below or legends subtially equivalent thereto, to
the extent the Company determines such legends to be applicable, to be placed
upon any certificate(s) evidencing ownership of the Shares together with any
other legends that may be required by state or federal securities laws:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT
OR AN OPINION OF COUNSEL FOR THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF
THE COMMISSIONER OF
4
<PAGE>
CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED
IN THE COMMISSIONER'S RULES.
Optionee understands that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the California Corporations Commissioner, a
copy of which is attached hereto.
(b) Stop Transfer Notices. Optionee agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
9. Market Standoff Agreement. Optionee hereby agrees that if so requested
-------------------------
by the Company or any representative of the under writers in connection with any
registration of the offering of any securities of the Company under the 1933
Act, Optionee shall not sell or otherwise transfer any Shares or other
securities of the Company during the 180 day period following the effective date
of a registration statement of the Company filed under the 1933 Act; provided,
however, that such restriction shall only apply to the first registration
statement of the Company to become effective under the 1933 Act which include
securities to be sold on behalf of the Company to the public in an underwritten
public offering under the 1933 Act. The Company may impose stop transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such 180 day period.
10. Successors and Assigns. The Company may assign any of its rights under
----------------------
this Agreement to single or multiple assignees, and this Agreement shall inure
to the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer herein set forth, this Agreement shall be binding upon
Optionee and his or her heirs, executors, administrators, successors and
assigns.
11. Interpretation. Any dispute regarding the interpretation of this
--------------
Agreement shall be submitted by Optionee or by the Company forthwith to the
Company's Board of Directors or the committee thereof that administers the Plan,
which shall review such dispute at its next regular meeting. The resolution of
such a dispute by the Board or committee shall be final and binding on the
Company and on Optionee.
12. Governing Law; Severability. This Agreement shall be governed by and
---------------------------
construed in accordance with the laws of the State of California excluding that
body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
5
<PAGE>
13. Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.
14. Further Instruments. The parties agree to execute such further
-------------------
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
15. Delivery of Payment. Optionee herewith delivers to the Company the
-------------------
full Exercise Price for the Shares.
16. Entire Agreement. The Plan and Notice of Grant/Option Agreement are
----------------
incorporated herein by reference. This Agreement, the Plan and the Notice of
Grant/Option Agreement constitute the entire agreement of the parties and
supersede in their entirety all prior undertakings and agreements of the Company
and Optionee with respect to the subject matter hereof, and is governed by
California law except for that body of law pertaining to conflict of laws.
Submitted By: Accepted By:
OPTIONEE: LATITUDE COMMUNICATIONS, INC.
____________________________________ By: ___________________________
Signature
Its: ___________________________
Address: Address:
- ------- _______________________ ------- ___________________
_______________________ ___________________
6
<PAGE>
RESTRICTION ON TRANSFER
-----------------------
Rule 260.141.11 of the Rules of the California Commissioner:
260.141.11: RESTRICTION ON TRANSFER
-----------------------
(a) The issuer of any security upon which a restriction on transfer has been
imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534 shall cause a copy
of this section to be delivered to each issuee or transferee of such security at
the time the certificate evidencing the security is delivered to the issuee or
transferee.
(b) It is unlawful for the holder of any such security to consummate a sale or
transfer of such security, or any interest therein, without the prior written
consent of the Commissioner (until this condition is removed pursuant to Section
260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of the
Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or any custodian
or trustee for the account of the transferor or the transferor's ancestors,
descendants, or spouse; or to a transferee by a trustee or custodian for the
account of the transferee or the transferee's ancestors, descendants or spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code (either acting
as such or as a finder) to a resident of a foreign state, territory or country
who is neither domiciled in this state to the knowledge of the broker-dealer,
nor actually present in this state if the sale of such securities is not in
violation of any securities law of the foreign state, territory or country
concerned;
(8) to a broker-dealer licensed under the Code in a principal transaction,
or as an underwriter or member of an underwriting syndicate or selling group;
(9) if the interest sold or transferred is a pledge or other lien given by
the purchaser to the seller upon a sale of the security for which the
Commissioner's written consent is obtained or under this rule not required;
(10) by way of a sale qualified under Sections 25111, 25112, 25113, or
25121 of the Code, of the securities to be transferred, provided that no order
under Section 25140 or sub division (a) of Section 25143 is in effect with
respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such corporation, or
by a wholly owned subsidiary of a corporation to such corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or 25113 of
the Code, provided that no order under Section 25140 or subdivision (a) of
Section 25143 is in effect with respect to such qualification;
(13) between residents of foreign states, territories or countries who are
neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law or to
the administrator of the unclaimed property law of another state; or
(15) by the State Controller pursuant to the Unclaimed Property Law or by
the adminis trator of the unclaimed property law of another state if, in either
such case, such person (i) discloses to potential purchasers at the sale that
transfer of the securities is restricted under this rule, (ii) delivers to each
purchaser a copy of this rule, and (iii) advises the Commissioner of the name of
each purchaser;
(16) by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an issuer
transaction that is subject to the qualification requirement of Section 25110 of
the Code but exempt from that qualification requirement by subdivision (f) of
Section 25102; provided that any such transfer is on the condition that any
certificate evidencing the security issued to such transferee shall contain the
legend required by this section.
(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
<PAGE>
EXHIBIT 10.2
LATITUDE COMMUNICATIONS, INC.
COMMON STOCK PURCHASE AGREEMENT
This Common Stock Purchase Agreement ("Agreement") is made as of
_______________, ((Year)) by and between LATITUDE COMMUNICATIONS, INC., a
California corporation (the "Company"), and ((Purchaser)) ("Purchaser"),
pursuant to the Latitude Communications, Inc. 1993 Stock Plan.
1. Sale of Stock. Subject to the terms and conditions hereof, on the
-------------
Closing Date the Company will issue and sell to Purchaser, and Purchaser agrees
to purchase from the Company, ((NoOfShares)) shares of the Company's Common
Stock (the "Shares") at a purchase price of $((PricePerShare)) per Share for a
total purchase price of $((TotalPrice)). The term "Shares" refers to the
purchased Shares and all securities received in replacement of Shares or as
stock dividends or splits, all securities received in replacement of the Shares
in a recapitalization, merger, reorganization, exchange or the like, and all
new, substituted or additional securities or other properties to which Purchaser
is entitled by reason of Purchaser's ownership of the Shares.
2. Closing; Security Interest.
--------------------------
(a) The closing of the purchase and sale of the Shares hereunder (the
"Closing") shall be held at the principal office of the Company simultaneously
with the execution of this Agreement by the parties or on such other date as to
which they may agree (the "Closing Date").
(b) At the Closing, the Company will deliver to Purchaser a
certificate representing the Shares to be purchased by him (which shall be
issued in Purchaser's name) against payment of the purchase price therefor. The
purchase price for the Shares shall be paid to the Company by check rendered to
the Company in the amount of $((CheckAmt)) or by delivery to the Company of
Purchaser's full recourse promissory note (the "Note") for the balance of the
purchase price, if any, in the form attached hereto as Attachment B.
(c) With respect to the Note, the parties agree to the following:
(1) The Note shall become payable in full upon the earlier to
occur of (i) the voluntary or involuntary termination or cessation of
Purchaser's status as an employee of or consultant with the Company, for any
reason, with or without cause (including death or disability), or (ii) the
expiration of the Company's repurchase option as set forth in paragraph 3(a)
hereof.
(2) Purchaser shall deliver to the Secretary of the Company
(hereinafter referred to as the "Pledge Holder") all certificates representing
the Shares and two executed blank stock assignments for use in transferring all
or a portion of such Shares to the Company if, as and when required under this
paragraph 2(c) or under any other provision of this Agreement, including,
without limitation, paragraph 3 hereof.
<PAGE>
(3) As security for the payment of the Note and any renewal,
extension or modification thereof, Purchaser hereby grants to the Company a
security interest in, and pledges with and delivers to the Company, Purchaser's
Shares (sometimes referred to herein as the "Collateral").
In the event that Purchaser prepays all or a portion of the
Note, in accordance with the provisions thereof, Purchaser intends, unless
written notice to the contrary is delivered to the Pledge Holder, that the
Shares represented by the portion of the Note so repaid, including annual
interest thereon, shall continue to be so held by the Pledge Holder, to serve as
independent collateral for the outstanding portion of the Note for the purpose
of commencing the holding period set forth in Rule 144(d) promulgated under the
Securities Act of 1933, as amended (the "Securities Act").
(4) In the event of any foreclosure of the security interest,
the Company may sell the Shares at a private sale or may repurchase the Shares
itself. The parties agree that, prior to the establishment of a public market
for the Shares of the Company, the securities laws affecting sale of the Shares
make a public sale of the Shares commercially unreasonable. The parties further
agree that the repurchase of the Shares by the Company, or by any person to whom
the Company may have assigned its rights hereunder, is commercially reasonable
if made at a price determined by the Board of Directors in its discretion,
fairly exercised, representing what would be the fair market value of the Shares
reduced by any limitation on transferability, whether due to the size of the
block of Shares or the restrictions of applicable securities laws.
(5) In the event of default in payment when due of any
indebtedness under the Note, the Company may elect then, or at any time
thereafter, to exercise all rights available to a Secured Party under the
California Commercial Code, including the right to sell the Collateral at a
private or public sale, and the right to repurchase the Shares as provided
above. The proceeds of any sale shall be applied in the following order:
(i) To the extent necessary, proceeds shall be used to
pay all reasonable expenses of the Company in
enforcing this Agreement, including, without
limitation, reasonable attorney's fees and legal
expenses incurred by the Company.
(ii) To the extent necessary, proceeds shall be used to
satisfy any remaining indebtedness under Purchaser's
Note.
(iii) Any remaining proceeds shall be delivered to
Purchaser.
(6) Upon full payment by Purchaser of all amounts due on the
Note, Pledge Holder shall deliver to Purchaser all Shares in Pledge Holder's
possession belonging to Purchaser, and Pledge Holder shall thereupon be
discharged of all further obligations hereunder; provided, however, that Pledge
Holder shall nevertheless retain such Shares as escrow agent if, at the time of
full payment by Purchaser, such Shares are still subject to restrictions under
paragraph 3 hereof.
-2-
<PAGE>
3. Limitations on Transfer. In addition to any other limitation on
-----------------------
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares while the Shares are subject
to the Company's repurchase option, except as provided in Section 3(h) below.
After any Shares have been released from such repurchase option, Purchaser shall
not assign, encumber or dispose of any interest in such Shares except in
compliance with Sections 3(b) and 3(c) below and applicable securities laws.
(a) Repurchase Option.
-----------------
(1) In the event of the voluntary or involuntary termination of
the employment of Purchaser by the Company, any partnership of which the Company
is a partner or any subsidiary thereof, for any reason, with or without cause
(including death or disability), the Company shall, upon the date of such
termination, have an irrevocable, exclusive option for a period of 60 days from
such date to repurchase the Shares held by Purchaser as of such date that have
not yet been released from the Company's repurchase option at the original
purchase price per Share specified in paragraph 1. The option shall be exercised
by the Company by written notice to Purchaser or his executor and, at the
Company's option, (i) by delivery to the Purchaser or his executor with such
notice of a check in the amount of the purchase price for the Shares being
purchased, or (ii) in the event the Purchaser is indebted to the Company for the
purchase price of the Shares or a portion thereof, by cancellation by the
Company of an amount of such purchase money indebtedness equal to the purchase
price for the Shares being repurchased, or (iii) by a combination of (i) and
(ii) so that the combined payment and cancellation of purchase money
indebtedness equals such purchase price. Upon delivery of such notice and
payment of the purchase price in any of the ways described above, the Company
shall become the legal and beneficial owner of the Shares being repurchased and
all rights and interest therein or related thereto, and the Company shall have
the right to transfer to its own name the number of Shares being repurchased by
the Company, without further action by Purchaser. One hundred percent (100%) of
the Shares purchased by Purchaser shall initially be subject to the Company's
repurchase option as set forth above. Thereafter, such Shares held by Purchaser
shall be released from the Company's repurchase option under this paragraph 3(a)
as follows (provided in each case that Purchaser's status as an employee of or
consultant with the Company has not been terminated prior to the date of any
such release): 1/4 of the Shares shall be released from the repurchase option on
the first anniversary of ((VestingDate)), and 1/48th of the Shares shall be
released from the repurchase option at the end of each month thereafter, until
all Shares are released from the repurchase option. Fractional shares shall be
rounded to the nearest whole share.
(2) Notwithstanding the foregoing, in the event that the Company
reasonably determines that exercise of the repurchase option within the 60-day
period described in paragraph (1) above could result in "qualified small
business stock" (as defined by Section 1202(c) of the Internal Revenue Code of
1986) issued by the Company to any shareholder other than Purchaser to no longer
meet the requirements of that section, then the Company shall give written
notice of its intention to repurchase all or any portion of the Shares within
such time period, but the actual repurchase of such Shares shall be deferred for
such period of time (up to one year following
-3-
<PAGE>
the termination date) as the Company reasonably determines is necessary to avoid
such disqualification. In such event, the purchase price for the Shares shall be
delivered to Purchaser and title to the Shares shall pass to the Company only
upon the expiration of such period, and the Purchaser shall retain all rights of
ownership of the Shares until that time.
(b) Right of First Refusal. In the event, at any time after the date
----------------------
of this Agreement, the Purchaser or his transferee desires to sell or transfer
in any manner the Shares as to which the option provided in paragraph 3(a) above
is not applicable or has expired unexercised, he shall first offer such Shares
for sale to the Company at the same price, and upon the same terms (or terms as
similar as reasonably possible) upon which he is proposing or is to dispose of
said Shares. Said right of first refusal shall be provided to the Company for a
period of thirty (30) days following receipt by the Company of written notice by
the Purchaser of the terms and conditions of said proposed sale or transfer and
the name, address and phone number of each proposed buyer or transferee. If the
Company desires to exercise such right of first refusal, it shall notify
Purchaser in writing within such thirty day period. In the event the Shares are
not disposed of on such terms within 120 days following lapse of the period of
the right of first refusal provided to the Company or if the Purchaser proposes
to change the price or other terms to make them more favorable to the buyer,
they shall once again be subject to the right of first refusal herein provided.
(c) Involuntary Transfer. In the event, at any time after the date of
--------------------
this Agreement, of any transfer by operation of law or other involuntary
transfer (including death or divorce) of all or a portion of the Shares by the
record holder thereof, the Company shall have an option to purchase all of the
Shares transferred. Upon such a transfer, the person acquiring the Shares shall
promptly notify the Secretary of the Company of such transfer. The right to
purchase such Shares shall be provided to the Company for a period of thirty
(30) days following receipt by the Company of written notice by the person
acquiring the Shares.
(d) Price for Involuntary Transfer. With respect to any stock to be
------------------------------
transferred pursuant to paragraph 3(c), the price per Share shall be a price set
by the Board of Directors of the Company that will reflect the current value of
the stock in terms of present earnings and future prospects of the Company. The
Company shall notify Purchaser or his executor of the price so determined within
thirty (30) days after receipt by it of written notice of the transfer or
proposed transfer of Shares. The decision of the Board of Directors as to the
purchase price shall be final.
(e) Assignment. The rights of the Company to purchase any part of the
----------
Shares under this paragraph 3 may be assigned in whole or in part to any
shareholder or shareholders of the Company or other persons or organizations.
(f) Restrictions Binding on Transferees. All transferees of Shares or
-----------------------------------
any interest therein will receive and hold such Shares or interest subject to
the provisions of this Agreement, including, insofar as applicable, the
Company's option to repurchase under paragraph 3. Any sale or transfer of the
Company's Shares shall be void unless the provisions of this Agreement are met.
-4-
<PAGE>
(g) Termination of Refusal Right. The right of first refusal granted
----------------------------
the Company by paragraph 3(b) above and the rights with respect to involuntary
transfers granted by paragraph 3(c) above shall terminate at such time as a
public market exists for the Company's capital stock (or any other stock issued
to purchasers in exchange for the Shares purchased under this Agreement). For
the purpose of this Agreement, a "Public Market" shall be deemed to exist if (i)
such stock is listed on a national securities exchange (as that term is used in
the Securities Exchange Act of 1934) or (ii) such stock is traded on the over-
the-counter market and prices are published daily on business days in a
recognized financial journal.
Upon termination of the right of first refusal and the rights
with respect to involuntary transfers imposed by this Agreement and the
expiration or exercise of the Company's repurchase option described in paragraph
3(a) above, a new certificate or certificates representing the Shares not
repurchased shall be issued, on request, without the legend referred to in
paragraph 6(b) herein and delivered to Purchaser.
(h) Exempt Transfers. The restrictions on transfer of this paragraph
----------------
3 shall not apply to a transfer to Purchaser's ancestors or descendants or
spouse or to a trustee for their benefit, provided that such transferee shall
agree in writing to take such Shares subject to all the terms of this Agreement,
including restrictions on further transfer.
(i) Market Standoff Agreement. Notwithstanding the foregoing,
-------------------------
Purchaser hereby agrees that if so requested by the Company or any
representative of the underwriters in connection with any registration of the
offering of any securities of the Company under the Securities Act, Purchaser
shall not sell or otherwise transfer any Shares or other securities of the
Company during the 180-day period following the effective date of a registration
statement of the Company filed under the Securities Act; provided, however, that
such restriction shall only apply to the first registration statement of the
Company to become effective under the Securities Act of 1933, as amended (the
"Securities Act"), which includes securities to be sold on behalf of the Company
to the public in an underwritten public offering under the Securities Act. The
Company may impose stop-transfer instructions with respect to securities subject
to the foregoing restrictions until the end of such 180-day period.
4. Escrow. For purposes of facilitating the enforcement of the provisions
------
of paragraph 3 above, Purchaser agrees, immediately upon receipt of
the certificate(s) for his Shares, to deliver such certificate(s), together with
an Assignment Separate from Certificate in the form attached to this Agreement
as Attachment C executed by Purchaser and by Purchaser's spouse (if required for
transfer), in blank, to the Secretary of the Company to hold said certificate(s)
and Assignment Separate from Certificate in escrow and to take all such actions
and to effectuate all such transfers and/or releases as are in accordance with
the terms hereof. Purchaser hereby acknowledges that the Secretary of the
Company is so appointed as the escrow holder with the foregoing authorities as a
material inducement to make this Agreement and that said appointment is coupled
with an interest and is accordingly irrevocable. Purchaser agrees that said
escrow holder shall not be liable to any party hereof (or to any other party)
for any actions or omissions unless such escrow holder is grossly negligent
relative thereto. The escrow holder may rely upon any letter, notice or other
document
-5-
<PAGE>
executed by any signature purported to be genuine and may resign at any time.
Purchaser agrees that if the Secretary of the Company resigns as escrow holder
for any or no reason, the Board of Directors of the Company shall have the power
to appoint a successor to serve as escrow holder pursuant to the terms of this
Agreement.
5. Investment Representations. In connection with the purchase of the
--------------------------
Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the securities.
Purchaser has a preexisting personal or business relationship with the Company
and its officers and directors, and sufficient business or financial experience
so that Purchaser has the capacity to protect his or her own interests in
connection with Purchaser's purchase of Shares hereunder. Purchaser is
purchasing these securities for investment for his own account only and not with
a view to, or for resale in connection with, any "distribution" thereof within
the meaning of the Securities Act.
(b) Purchaser understands that the securities have not been
registered under the Securities Act by reason of a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of
Purchaser's investment intent as expressed herein.
(c) Purchaser further acknowledges and understands that the
securities must be held indefinitely unless they are subsequently registered
under the Securities Act or an exemption from such registration is available.
Purchaser further acknowledges and understands that the Company is under no
obligation to register the securities. Purchaser understands that the
certificate evidencing the securities will be imprinted with a legend which
prohibits the transfer of the securities unless they are registered or such
registration is not required in the opinion of counsel for the Company.
(d) Purchaser is familiar with the provisions of Rule 701 and Rule
144, each promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the time of the Closing, such issuance will be
exempt from registration under the Securities Act. In the event the Company
later becomes subject to the reporting requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, ninety (90) days thereafter the securities
exempt under Rule 701 may be resold, subject to the satisfaction of certain of
the conditions specified by Rule 144, including among other things: (1) the
sale being made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the
availability of certain public information about the Company, and the amount of
securities being sold during any three month period not exceeding the
limitations specified in Rule 144(e), if applicable.
-6-
<PAGE>
In the event that the Company does not qualify under Rule 701 at the time
of the Closing, then the securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires among other
things: (1) the resale occurring not less than one year after the party has
purchased, and made full payment for, within the meaning of Rule 144, the
securities to be sold; and, in the case of an affiliate, or of a non-affiliate
who has held the securities less than two years, (2) the availability of certain
public information about the Company, (3) the sale being made through a broker
in an unsolicited "broker's transaction" or in transactions directly with a
market maker (as said term is defined under the Securities Exchange Act of
1934), and (4) the amount of securities being sold during any three month period
not exceeding the specified limitations stated therein, if applicable.
(e) Purchaser further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required. Purchaser understands that no assurances can be
given that any such other registration exemption will be available in such
event.
6. Legends. The certificate or certificates representing the Shares shall
-------
bear the following legends (as well as any legends required by applicable state
and federal corporate and securities laws):
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED."
(b) "THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY."
7. No Employment Rights. Nothing in this Agreement shall affect in any
--------------------
manner whatsoever the right or power of the Company, or a parent or subsidiary
of the Company, to terminate Purchaser's employment or association with the
Company, for any reason, with or without cause.
8. Section 83(b) Election. Purchaser understands that Section 83(a) of
----------------------
the Internal Revenue Code of 1986 (the "Code") taxes as ordinary income the
difference between the amount paid for the Shares and the fair market value of
the Shares as of the date any restrictions on the Shares lapse. In this context,
"restriction" means the right of the Company to buy back the Shares pursuant to
the repurchase option set forth in paragraph 3(a) of this Agreement. Purchaser
understands that Purchaser may elect to be taxed at the time the Shares are
purchased, rather than when and as the repurchase option expires, by filing an
election under Section 83(b) of the Code
-7-
<PAGE>
with the Internal Revenue Service within 30 days from the date of purchase. Even
if the fair market value of the Shares at the time of the execution of this
Agreement equals the amount paid for the Shares, the election must be made to
avoid tax treatment under Section 83(a) in the future. The form for making
Purchaser's election is attached hereto. Purchaser understands that the failure
to file such an election in a timely manner may result in adverse tax
consequences for Purchaser. Purchaser further understands that an additional
copy of such election form should be filed with his federal income tax return
for the calendar year in which the date of this Agreement falls.
9. Miscellaneous.
-------------
(a) This Agreement may be amended by written agreement between the
Company and Purchaser.
(b) Any notice, demand or request required or permitted to be given
under this Agreement shall be in writing and shall be deemed sufficient when
delivered personally or sent by telegram or forty-eight (48) hours after being
deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, and addressed, if to the Company, at its principal place of business,
attention the President, and if to Purchaser, at Purchaser's address as shown on
the stock records of the Company.
(c) The rights and benefits of this Agreement shall inure to the
benefit of, and be enforceable by the Company's successors and assigns. The
rights and obligations of Purchaser under this Agreement may only be assigned
with the prior written consent of the Company.
(d) Both parties agree to execute any additional documents necessary
to carry out the purposes of this Agreement.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first set forth above.
LATITUDE COMMUNICATIONS, INC.
By: ___________________________
Title: __________________________
PURCHASER: ((Purchaser))
_______________________________
(Signature)
Address: ((StreetAddress))
((CityState))
-9-
<PAGE>
ATTACHMENT A
------------
CONSENT OF SPOUSE
I, ((SpouseName)) spouse of ((Purchaser)), have read and hereby approve the
foregoing Agreement. In consideration of the Company's granting my spouse the
right to purchase the Shares as set forth in the Agreement, I hereby agree to be
irrevocably bound by the Agreement and further agree that any community property
or other such interest shall be similarly bound by the Agreement. I hereby
appoint my spouse as my attorney-in-fact with respect to any amendment or
exercise of any rights under the Agreement.
_______________________________
((SpouseName))
<PAGE>
ATTACHMENT B
------------
FULL RECOURSE
PROMISSORY NOTE
$((NoteAmt)) _______________, California
____________________,
At the times hereinafter stated, for value received, the undersigned
promises to pay to Latitude Communications, Inc., a California corporation (the
"Company"), or order, at its principal office, the principal sum of $NoteAmt~
with interest from the date hereof at a rate of ______% per annum, compounded
semiannually, on the unpaid balance of such principal sum. Such principal and
interest shall be due and payable on ___________, 200___.
Upon any termination of the employment between the undersigned and the
Company or its subsidiary, this Note shall be immediately due and payable.
Principal and interest are payable in lawful money of the United States of
America. AT ANY TIME, THE PRIVILEGE IS RESERVED TO PAY MORE THAN THE SUM DUE.
Should the interest not be so paid, it shall be added to the principal and
thereafter bear interest at the rate payable on the principal hereof, but such
unpaid interest so compounded shall not exceed an amount equal to simple
interest on the unpaid principal at the maximum rate permitted by law. Should
default be made in the payment of any installment of principal or interest when
due, then the whole sum of principal and interest shall become immediately due
and payable at the option of the holder of this Note. Should suit be commenced
to collect this Note or any portion thereof, such sum as the Court may deem
reasonable shall be added hereto as attorneys' fees. The makers and endorsers
have severally waived presentment for payment, protest, notice of protest, and
notice of non-payment of this Note.
This Note, which is full recourse, is secured by a pledge of certain shares
of Common Stock of the Company and is subject to the terms of a Purchaser's
Common Stock Purchase Agreement of even date herewith between the maker and the
Company.
_____________________________
((Purchaser))
<PAGE>
ATTACHMENT C
------------
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Common Stock Purchase
Agreement between the undersigned ("Purchaser") and LATITUDE COMMUNICATIONS,
INC. dated ______________________, (the "Agreement"), Purchaser hereby sells,
assigns and transfers unto _______________________________________________
(________) shares of the Common Stock of LATITUDE COMMUNICATIONS, INC. standing
in Purchaser's name on the books of said corporation represented by Certificate
No. ____________ herewith and does hereby irrevocably constitute and appoint
__________________________________ to transfer said stock on the books of the
within-named corporation with full power of substitution in the premises.
THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND THE
ATTACHMENTS THERETO.
Dated: ____________________.
Signature:
_______________________________
((Purchaser))
Instruction: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
repurchase option set forth in the Agreement without requiring additional
signatures on the part of Purchaser.
<PAGE>
ACKNOWLEDGEMENT BY PURCHASER
----------------------------
The undersigned, a purchaser of Common Stock of Latitude Communications,
Inc. (the "Company"), hereby acknowledges that he/she has had the opportunity to
review and discuss with officers of the Company the following documents
concerning such purchase of Common Stock:
(a) Form of Common Stock Purchase Agreement to be signed in connection
with such purchase.
(b) Form of stock certificate assignment in blank to be signed as required
by the Common Stock Purchase Agreement.
(c) Form of election pursuant to Section 83(b) of the Internal Revenue
Code concerning such purchase of shares.
(d) Letter from legal counsel of the Company explaining such tax election.
The undersigned further acknowledges that he/she has a preexisting business
relationship with the officers of the Company.
Dated: _______________, 19___
_____________________________
((Purchaser))
((StreetAddress))
((CityState))
_____________________________
Spouse (if any)
<PAGE>
ELECTION UNDER SECTION 83(b)
----------------------------
OF THE INTERNAL REVENUE CODE OF 1986
------------------------------------
The undersigned taxpayer hereby elects, pursuant to the Internal Revenue Code,
to include in his gross income for the current taxable year, the amount of any
compensation taxable to him in connection with his receipt of the property
described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME OF TAXPAYER: ((Purchaser))
NAME OF SPOUSE: ((SpouseName))
ADDRESS: ((StreetAddress))
((CityState))
IDENTIFICATION NO. OF TAXPAYER: ((PurchaserSSN))
IDENTIFICATION NO. OF SPOUSE: ((SpouseSSN))
TAXABLE YEAR: ((Year))
2. The property with respect to which the election is made is described as
follows:
((NoOfShares)) shares of the Common Stock (the "Shares"), par value $.001
per share, of LATITUDE COMMUNICATIONS, INC., a California corporation.
3. The date on which the property was transferred is: ____________________,
((Year)).
4. The property is subject to the following restrictions:
Repurchase option at cost in favor of LATITUDE COMMUNICATIONS, INC. upon
termination of taxpayer's employment, consulting, officer or director
relationship.
5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is: $((TotalPrice))
6. The amount (if any) paid for such property: $((TotalPrice))
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
- --------------------------------------------------------------------------
except with the consent of the Commissioner.
- --------------------------------------------
Dated: __________________, 19__ __________________________________
((Purchaser))
The undersigned spouse of taxpayer joins in this election.
Dated: __________________, 19__ __________________________________
Spouse (if any)
<PAGE>
EXHIBIT 10.3
LATITUDE COMMUNICATIONS, INC.
1999 STOCK PLAN
---------------
1. PURPOSES OF THE PLAN. The purposes of this Stock Plan are to attract
--------------------
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and Consultants
of the Company and to promote the success of the Company's business. Options
granted under the Plan may be either Incentive Stock Options (as defined under
Section 422 of the Code) or Nonstatutory Stock Options, as determined by the
Administrator at the time of grant of an Option and subject to the applicable
provisions of Section 422 of the Code and the regulations promulgated
thereunder. Stock Purchase Rights may also be granted under the Plan.
2. DEFINITIONS. As used herein, the following definitions shall apply:
-----------
(a) "ADMINISTRATOR" means the Board or its Committee appointed
-------------
pursuant to Section 4 of the Plan.
(b) "AFFILIATE" means an entity other than a Subsidiary (as defined
---------
below) in which the Company owns an equity interest or which, together with the
Company, is under common control of a third person or entity.
(c) "APPLICABLE LAWS" means the legal requirements relating to the
---------------
administration of stock option and restricted stock purchase plans under
applicable U.S. state corporate laws, U.S. federal and applicable state
securities laws, the Code, any Stock Exchange rules or regulations and the
applicable laws of any other country or jurisdiction where Options or Stock
Purchase Rights are granted under the Plan, as such laws, rules, regulations and
requirements shall be in place from time to time.
(d) "BOARD" means the Board of Directors of the Company.
-----
(e) "CHANGE OF CONTROL" means a sale of all or substantially all of
-----------------
the Company's assets, or any merger or consolidation of the Company with or into
another corporation other than a merger or consolidation in which the holders of
more than 50% of the shares of capital stock of the Company outstanding
immediately prior to such transaction continue to hold (either by the voting
securities remaining outstanding or by their being converted into voting
securities of the surviving entity) more than 50% of the total voting power
represented by the voting securities of the Company, or such surviving entity,
outstanding immediately after such transaction.
(f) "CODE" means the Internal Revenue Code of 1986, as amended.
----
(g) "COMMITTEE" means one or more committees or subcommittees of the
---------
Board appointed by the Board to administer the Plan in accordance with Section 4
below.
<PAGE>
(h) "COMMON STOCK" means the Common Stock of the Company.
------------
(i) "COMPANY" means Latitude Communications, Inc., a Delaware
-------
corporation.
(j) "CONSULTANT" means any person, including an advisor, who renders
----------
services to the Company or any Parent, Subsidiary or Affiliate and is
compensated for such services, and any Director of the Company whether
compensated for such services or not.
(k) "CONTINUOUS SERVICE STATUS" means the absence of any interruption
-------------------------
or termination of service as an Employee or Consultant to the Company or a
Parent, Subsidiary or Affiliate. Continuous Service Status shall not be
considered interrupted in the case of (i) sick leave; (ii) military leave; (iii)
any other leave of absence approved by the Administrator, provided that such
leave is for a period of not more than 90 days, unless reemployment upon the
expiration of such leave is guaranteed by contract or statute, or unless
provided otherwise pursuant to Company policy adopted from time to time; or (iv)
in the case of transfers between locations of the Company or between the
Company, its Parent(s), Subsidiaries, Affiliates or their respective successors.
Unless otherwise determined by the Administrator or the Company, a change in
status from an Employee to a Consultant or from a Consultant to an Employee will
not constitute a termination of Continuous Service Status.
(l) "CORPORATE TRANSACTION" means a sale of all or substantially all
---------------------
of the Company's assets, or a merger, consolidation or other capital
reorganization of the Company with or into another corporation.
(m) "DIRECTOR" means a member of the Board.
--------
(n) "EMPLOYEE" means any person (including, if appropriate, any Named
--------
Executive, Officer or Director) employed by the Company or any Parent,
Subsidiary or Affiliate of the Company. The payment by the Company of a
director's fee to a Director shall not be sufficient to constitute "employment"
of such Director by the Company.
(o) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
------------
amended.
(p) "FAIR MARKET VALUE" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system including without limitation the National Market of
the National Association of Securities Dealers, Inc. Automated Quotation
("Nasdaq") System, its Fair Market Value shall be the closing sales price for
------
such stock (or the closing bid, if no sales were reported) as quoted on such
system or exchange on the date of determination (or if no trading or bids
occurred on the date of determination, on the last trading day prior to the date
of determination), as reported in The Wall Street Journal or such other source
as the Administrator deems reliable;
-2-
<PAGE>
(ii) If the Common Stock is quoted on the Nasdaq System (but not
on the National Market thereof) or regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be the
mean between the high bid and low asked prices for the Common Stock for the date
of determination (or if no bids occurred on the date of determination, on the
last trading day prior to the date of determination); or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(q) "INCENTIVE STOCK OPTION" means an Option intended to qualify as
----------------------
an incentive stock option within the meaning of Section 422 of the Code, as
designated in the applicable Option Agreement.
(r) "LISTED SECURITY" means any security of the Company that is
---------------
listed or approved for listing on a national securities exchange or designated
or approved for designation as a national market system security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc.
(s) "NAMED EXECUTIVE" means any individual who, on the last day of
---------------
the Company's fiscal year, is the chief executive officer of the Company (or is
acting in such capacity) or among the four most highly compensated officers of
the Company (other than the chief executive officer). Such officer status shall
be determined pursuant to the executive compensation disclosure rules under the
Exchange Act.
(t) "NONSTATUTORY STOCK OPTION" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option, as designated in the applicable Option
Agreement.
(u) "OFFICER" means a person who is an officer of the Company within
-------
the meaning of Section 16(a) of the Exchange Act and the rules and regulations
promulgated thereunder.
(v) "OPTION" means a stock option granted pursuant to the Plan.
------
(w) "OPTION AGREEMENT" means a written document, the form(s) of which
----------------
shall be approved from time to time by the Administrator, reflecting the terms
of an Option granted under the Plan and includes any documents attached to or
incorporated into such Option Agreement, including, but not limited to, a notice
of stock option grant and a form of exercise notice.
(x) "OPTION EXCHANGE PROGRAM" means a program approved by the
-----------------------
Administrator whereby outstanding Options are exchanged for Options with a lower
exercise price.
(y) "OPTIONED STOCK" means the Common Stock subject to an Option.
--------------
(z) "OPTIONEE" means an Employee or Consultant who receives an
--------
Option.
-3-
<PAGE>
(aa) "PARENT" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(bb) "PARTICIPANT" means any holder of one or more Options or Stock
-----------
Purchase Rights, or the Shares issuable or issued upon exercise of such awards,
under the Plan.
(cc) "PLAN" means this 1999 Stock Plan.
----
(dd) "REPORTING PERSON" means an Officer, Director or greater than 10%
----------------
stockholder of the Company within the meaning of Rule 16a-2 of the Exchange Act,
who is required to file reports pursuant to Rule 16a-3 of the Exchange Act.
(ee) "RESTRICTED STOCK" means shares of Common Stock acquired pursuant
----------------
to a grant of a Stock Purchase Right under Section 11 below.
(ff) "RESTRICTED STOCK PURCHASE AGREEMENT" means a written document,
-----------------------------------
the form(s) of which shall be approved from time to time by the Administrator,
reflecting the terms of a Stock Purchase Right granted under the Plan and
includes any documents attached to such agreement.
(gg) "RULE 16B-3" means Rule 16b-3 promulgated under the Exchange Act,
----------
as amended from time to time, or any successor provision.
(hh) "SHARE" means a share of the Common Stock, as adjusted in
-----
accordance with Section 14 of the Plan.
(ii) "STOCK EXCHANGE" means any stock exchange or consolidated stock
--------------
price reporting system on which prices for the Common Stock are quoted at any
given time.
(jj) "STOCK PURCHASE RIGHT" means the right to purchase Common Stock
--------------------
pursuant to Section 11 below.
(kk) "SUBSIDIARY" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
(ll) "TEN PERCENT HOLDER" means a person who owns stock representing
------------------
more than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 14 of
-------------------------
the Plan, the maximum aggregate number of shares that may be sold under the Plan
is 2,700,000/1/ Shares of Common Stock. The Shares may be authorized, but
unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable for any reason without having
been exercised in full, or is surrendered pursuant to an Option Exchange
Program, the unpurchased
________________
/1/ Adjusted to reflect the three-for-two stock split to be effected prior to
the Company's initial public offering.
-4-
<PAGE>
Shares that were subject thereto shall, unless the Plan has been terminated,
become available for future grant under the Plan. In addition, any Shares of
Common Stock that are retained by the Company upon exercise of an Option or
Stock Purchase Right in order to satisfy the exercise or purchase price for such
Option or Stock Purchase Right or any withholding taxes due with respect to such
exercise or purchase shall be treated as not issued and shall continue to be
available under the Plan. Shares issued under the Plan and later repurchased by
the Company pursuant to any repurchase right that the Company may have shall not
be available for future grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
--------------------------
(a) GENERAL. The Plan shall be administered by the Board or a
-------
Committee, or a combination thereof, as determined by the Board. The Plan may
be administered by different administrative bodies with respect to different
classes of Participants and, if permitted by the Applicable Laws, the Board may
authorize one or more officers (who may (but need not) be Officers) to grant
Options or Stock Purchase Rights to Employees and Consultants.
(b) ADMINISTRATION WITH RESPECT TO REPORTING PERSONS. With respect to
------------------------------------------------
Options granted to Reporting Persons and Named Executives, the Plan may (but
need not) be administered so as to permit such Options to qualify for the
exemption set forth in Rule 16b-3 and to qualify as performance-based
compensation under Section 162(m) of the Code.
(c) COMMITTEE COMPOSITION. If a Committee has been appointed pursuant
---------------------
to this Section 4, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of any Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies (however caused) and remove all members of a Committee
and thereafter directly administer the Plan, all to the extent permitted by the
Applicable Laws and, in the case of a Committee administering the Plan pursuant
to Section 4(b) above, to the extent permitted or required by Rule 16b-3 and
Section 162(m) of the Code.
(d) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the
---------------------------
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(p) of the Plan;
(ii) to select the Employees and Consultants to whom Options and
Stock Purchase Rights or any combination thereof may from time to time be
granted;
(iii) to determine whether and to what extent Options and Stock
Purchase Rights or any combination thereof are granted;
(iv) to determine the number of Shares of Common Stock to be
covered by each such award granted;
-5-
<PAGE>
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder, which terms and
conditions include but are not limited to the exercise or purchase price, the
time or times when Options or Stock Purchase Rights may be exercised (which may
be based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any Option,
Optioned Stock, Stock Purchase Right or Restricted Stock, based in each case on
such factors as the Administrator, in its sole discretion, shall determine;
(vii) to determine whether and under what circumstances an
Option may be settled in cash under Section 10(f) instead of Common Stock;
(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted and to
make any other amendments or adjustments to any Option that the Administrator
determines, in its discretion and under the authority granted to it under the
Plan, to be necessary or advisable, provided however that no amendment or
adjustment to an Option that would materially and adversely affect the rights of
any Optionee shall be made without the prior written consent of the Optionee;
(ix) to determine the terms and restrictions applicable to
Stock Purchase Rights and the Restricted Stock purchased by exercising such
Stock Purchase Rights;
(x) to initiate an Option Exchange Program;
(xi) to construe and interpret the terms of the Plan and awards
granted under the Plan; and
(xii) in order to fulfill the purposes of the Plan and without
amending the Plan, to modify grants of Options or Stock Purchase Rights to
Participants who are foreign nationals or employed outside of the United States
in order to recognize differences in local law, tax policies or customs.
(e) EFFECT OF ADMINISTRATOR'S DECISION. All decisions, determinations
----------------------------------
and interpretations of the Administrator shall be final and binding on all
Participants.
5. ELIGIBILITY.
-----------
(a) RECIPIENTS OF GRANTS. Nonstatutory Stock Options and Stock
--------------------
Purchase Rights may be granted to Employees and Consultants. Incentive Stock
Options may be granted only to Employees, provided however that Employees of
Affiliates shall not be eligible to receive Incentive Stock Options. An
Employee or Consultant who has been granted an Option or Stock Option Right may,
if he or she is otherwise eligible, be granted additional Options or Stock
Purchase Rights.
-6-
<PAGE>
(b) TYPE OF OPTION. Each Option shall be designated in the Option
--------------
Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of Shares with respect to which Options are exercisable for
the first time by an Optionee during any calendar year (under all plans of the
Company or any Parent or Subsidiary) exceeds $100,000, such excess Options shall
be treated as Nonstatutory Stock Options. For purposes of this Section 5(b),
Incentive Stock Options shall be taken into account in the order in which they
were granted, and the Fair Market Value of the Shares shall be determined as of
the date of grant of such Option.
(c) NO EMPLOYMENT RIGHTS. The Plan shall not confer upon any
--------------------
Participant any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with his or her
right or the Company's right to terminate his or her employment or consulting
relationship at any time, with or without cause.
6. TERM OF PLAN. The Plan shall become effective upon its adoption by the
------------
Board. It shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 16 of the Plan.
7. TERM OF OPTION. The term of each Option shall be the term stated in
--------------
the Option Agreement; provided however that the term shall be no more than ten
(10) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement and provided further that, in the case of an
Incentive Stock Option granted to a person who at the time of such grant is a
Ten Percent Holder, the term of such Incentive Stock Option shall be five (5)
years from the date of grant thereof or such shorter term as may be provided in
the Option Agreement.
8. LIMITATION ON GRANTS TO EMPLOYEES. Subject to adjustment as provided
---------------------------------
in Section 13 below, the maximum number of Shares which may be subject to
Options and Stock Purchase Rights granted to any one Employee under this Plan
for any fiscal year of the Company shall be 2,700,000 Shares.
9. OPTION EXERCISE PRICE AND CONSIDERATION.
---------------------------------------
(a) EXERCISE PRICE. The per Share exercise price for the Shares to be
--------------
issued pursuant to exercise of an Option shall be such price as is determined by
the Administrator and set forth in the Option Agreement, but shall be subject to
the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who at the time of grant is a
Ten Percent Holder, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant; or
(B) granted to any other Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
-7-
<PAGE>
(ii) In the case of a Nonstatutory Stock Option
(A) granted prior to the date, if any, on which the Common
Stock becomes a Listed Security to a person who is at the time of grant is a Ten
Percent Holder, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant if required by the Applicable
Laws and, if not so required, shall be such price as is determined by the
Administrator;
(B) granted to a person who, at the time of the grant of
such Option, is a Named Executive of the Company, the per share Exercise Price
shall be no less than 100% of the Fair Market Value on the date of grant if such
Option is intended to qualify as performance-based compensation under Section
162(m) of the Code; or
(C) granted prior to the date, if any, on which the Common
Stock becomes a Listed Security to any person other than a Named Executive or a
Ten Percent Holder, the per Share exercise price shall be no less than 85% of
the Fair Market Value per Share on the date of grant if required by Applicable
Law and, if not so required, shall be such price as is determined by the
Administrator.
(iii) Notwithstanding the foregoing, Options may be granted with
a per Share exercise price other than as required above pursuant to a merger or
other corporate transaction.
(b) PERMISSIBLE CONSIDERATION. The consideration to be paid for the
-------------------------
Shares to be issued upon exercise of an Option, including the method of payment,
shall be determined by the Administrator (and, in the case of an Incentive Stock
Option, shall be determined at the time of grant) and may consist entirely of
(1) cash; (2) check; (3) delivery of Optionee's promissory note with such
recourse, interest, security and redemption provisions as the Administrator
determines to be appropriate (subject to the provisions of Section 153 of the
Delaware General Corporation Law); (4) cancellation of indebtedness; (5) other
Shares that (x) in the case of Shares acquired upon exercise of an Option either
have been owned by the Optionee for more than six months on the date of
surrender (or such other period as may be required to avoid a charge to the
Company's earnings) or were not acquired, directly or indirectly, from the
Company, and (y) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which the Option is exercised; (6)
authorization from the Company to retain from the total number of Shares as to
which the Option is exercised that number of Shares having a Fair Market Value
on the date of exercise equal to the exercise price for the total number of
Shares as to which the Option is exercised; (7) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
the broker, if applicable, shall require to effect exercise of the Option and
prompt delivery to the Company of the sale or loan proceeds required to pay the
exercise price and any applicable withholding taxes; (8) any combination of the
foregoing methods of payment; or (9) such other consideration and method of
payment for the issuance of Shares to the extent permitted under the Applicable
Laws. In making its determination as to the type of consideration to accept,
the Administrator shall consider if acceptance of such consideration may be
reasonably expected to
-8-
<PAGE>
benefit the Company and the Administrator may refuse to accept a particular form
of consideration at the time of any Option exercise if, in its sole discretion,
acceptance of such form of consideration is not in the best interests of the
Company at such time.
10. EXERCISE OF OPTION.
------------------
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, consistent with the terms of the Plan, and
reflected in the Option Agreement, including vesting requirements and/or
performance criteria with respect to the Company and/or the Optionee; provided
however that, if required by the Applicable Laws, any Option granted prior to
the date, if any, upon which the Common Stock becomes a Listed Security shall
become exercisable at a rate of at least 20% per year over five years from the
date the Option is granted. In the event that any of the Shares issued upon
exercise of an Option (which exercise occurs prior to the date, if any, upon
which the Common Stock becomes a Listed Security) should be subject to a right
of repurchase in the Company's favor, such repurchase right shall, if required
by the Applicable Laws, lapse at the rate of at least 20% per year over five
years from the date the Option is granted. Notwithstanding the above, in the
case of an Option granted to an officer (including but not limited to Officers),
Director or Consultant, the Option may become exercisable, or a repurchase
right, if any, in favor of the Company shall lapse, at any time or during any
period established by the Administrator. The Administrator shall have the
discretion to determine whether and to what extent the vesting of Options shall
be tolled during any unpaid leave of absence; provided however that in the
absence of such determination, vesting of Options shall be tolled during any
such leave.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and the Company has
received full payment for the Shares. Full payment may, as authorized by the
Administrator, consist of any consideration and method of payment allowable
under Section 9(b) of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such stock certificate promptly
upon exercise of the Option. No adjustment will be made for a dividend or other
right for which the record date is prior to the date the stock certificate is
issued, except as provided in Section 14 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares that thereafter may be available, both for purposes of the Plan
and for sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) TERMINATION OF STATUS AS AN EMPLOYEE OR CONSULTANT. Subject to
--------------------------------------------------
Section 14(d), in the event of termination of an Optionee's Continuous Service
Status, such
-9-
<PAGE>
Optionee may, but only within three (3) months (or such other period of time,
not less than thirty (30) days, as is determined by the Administrator, with such
determination in the case of an Incentive Stock Option being made at the time of
grant of the Option) after the date of such termination (but in no event later
than the date of expiration of the term of such Option as set forth in the
Option Agreement), exercise his or her Option to the extent that he or she was
entitled to exercise it at the date of such termination. Subject to Section
14(d), to the extent that the Optionee was not entitled to exercise the Option
at the date of such termination, or if the Optionee does not exercise the Option
to the extent so entitled within the time specified above, the Option shall
terminate and the Optioned Stock underlying the unexercised portion of the
Option shall revert to the Plan. Unless otherwise determined by the
Administrator or the Company, no termination shall be deemed to occur and this
Section 10(b) shall not apply if (i) the Optionee is a Consultant who becomes an
Employee, or (ii) the Optionee is an Employee who becomes a Consultant.
(c) DISABILITY OF OPTIONEE. Notwithstanding Section 10(b) above, in
----------------------
the event of termination of an Optionee's Continuous Service Status as a result
of his or her total and permanent disability (as defined in Section 22(e)(3) of
the Code), such Optionee may, but only within twelve (12) months (or such other
period of time as is determined by the Administrator, with such determination in
the case of an Incentive Stock Option made at the time of grant of the Option)
from the date of such termination (but in no event later than the date of
expiration of the term of such Option as set forth in the Option Agreement),
exercise the Option to the extent he or she was entitled to exercise it at the
date of such termination. To the extent that the Optionee was not entitled to
exercise the Option at the date of termination, or if the Optionee does not
exercise the Option to the extent so entitled within the time specified above,
the Option shall terminate and the Optioned Stock underlying the unexercised
portion of the Option shall revert to the Plan.
(d) DEATH OF OPTIONEE. In the event of the death of an Optionee
-----------------
during the period of Continuous Service Status since the date of grant of the
Option, or within 30 days following termination of the Optionee's Continuous
Service Status, the Option may be exercised at any time within twelve (12)
months following the date of death (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement) by such
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right to exercise that
had accrued at the date of death or, if earlier, the date of termination of the
Optionee's Continuous Service Status. To the extent that the Optionee was not
entitled to exercise the Option at the date of death or termination, as the case
may be, or if the Optionee does not exercise such Option to the extent so
entitled within the time specified above, the Option shall terminate and the
Optioned Stock underlying the unexercised portion of the Option shall revert to
the Plan.
(e) EXTENSION OF EXERCISE PERIOD. The Administrator shall have full
----------------------------
power and authority to extend the period of time for which an Option is to
remain exercisable following termination of an Optionee's Continuous Service
Status from the periods set forth in Sections 10(b), 10(c) and 10(d) above or in
the Option Agreement to such greater time as the
-10-
<PAGE>
Board shall deem appropriate, provided that in no event shall such Option be
exercisable later than the date of expiration of the term of such Option as set
forth in the Option Agreement.
(f) BUY-OUT PROVISIONS. The Administrator may at any time offer to
------------------
buy out for a payment in cash or Shares an Option previously granted under the
Plan based on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time such offer is made.
11. STOCK PURCHASE RIGHTS.
---------------------
(a) RIGHTS TO PURCHASE. Stock Purchase Rights may be issued either
------------------
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing of the terms, conditions and restrictions related to the
offer, including the number of Shares that such person shall be entitled to
purchase, the price to be paid, and the time within which such person must
accept such offer, which shall in no event exceed 30 days from the date upon
which the Administrator made the determination to grant the Stock Purchase
Right. In the case of a Stock Purchase Right granted prior to the date, if any,
on which the Common Stock becomes a Listed Security and if required by the
Applicable Laws at such time, the purchase price of Shares subject to such Stock
Purchase Rights shall not be less than 85% of the Fair Market Value of the
Shares as of the date of the offer, or, in the case of a person owning stock
representing more than 10% of the total combined voting power of all classes of
stock of the Company or any Parent or Subsidiary, the price shall not be less
than 100% of the Fair Market Value of the Shares as of the date of the offer. If
the Applicable Laws do not impose the requirements set forth in the preceding
sentence and with respect to any Stock Purchase Rights granted after the date,
if any, on which the Common Stock becomes a Listed Security, the purchase price
of Shares subject to Stock Purchase Rights shall be as determined by the
Administrator. The offer to purchase Shares subject to Stock Purchase Rights
shall be accepted by execution of a Restricted Stock Purchase Agreement in the
form determined by the Administrator.
(b) REPURCHASE OPTION. Unless the Administrator determines otherwise,
-----------------
the Restricted Stock Purchase Agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's employment with the Company for any reason (including death or
disability), subject to Section 14(d). The purchase price for Shares repurchased
pursuant to the Restricted Stock Purchase Agreement shall be the original
purchase price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. Subject to Section 14(d), the
repurchase option shall lapse at such rate as the Administrator may determine;
provided however that with respect to a Stock Purchase Right granted prior to
the date, if any, on which the Common Stock becomes a Listed Security to a
purchaser who is not an officer (including an Officer), Director or Consultant
of the Company or of any Parent or Subsidiary of the Company, it shall lapse at
a minimum rate of 20% per year if required by the Applicable Laws.
-11-
<PAGE>
(c) OTHER PROVISIONS. The Restricted Stock Purchase Agreement shall
----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock Purchase Agreements need not be the
same with respect to each purchaser.
(d) RIGHTS AS A STOCKHOLDER. Once the Stock Purchase Right is
-----------------------
exercised, the purchaser shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 14
of the Plan.
12. TAXES.
-----
(a) As a condition of the exercise of an Option or Stock Purchase
Right granted under the Plan, the Participant (or in the case of the
Participant's death, the person exercising the Option or Stock Purchase Right)
shall make such arrangements as the Administrator may require for the
satisfaction of any applicable federal, state, local or foreign withholding tax
obligations that may arise in connection with the exercise of Option or Stock
Purchase Right and the issuance of Shares. The Company shall not be required to
issue any Shares under the Plan until such obligations are satisfied.
(b) In the case of an Employee and in the absence of any other
arrangement, the Employee shall be deemed to have directed the Company to
withhold or collect from his or her compensation an amount sufficient to satisfy
such tax obligations from the next payroll payment otherwise payable after the
date of an exercise of the Option or Stock Purchase Right.
(c) This Section 12(c) shall apply only after the date, if any, upon
which the Common Stock becomes a Listed Security. In the case of Participant
other than an Employee (or in the case of an Employee where the next payroll
payment is not sufficient to satisfy such tax obligations, with respect to any
remaining tax obligations), in the absence of any other arrangement and to the
extent permitted under the Applicable Laws, the Participant shall be deemed to
have elected to have the Company withhold from the Shares to be issued upon
exercise of the Option or Stock Purchase Right that number of Shares having a
Fair Market Value determined as of the applicable Tax Date (as defined below)
equal to the amount required to be withheld. For purposes of this Section 12,
the Fair Market Value of the Shares to be withheld shall be determined on the
date that the amount of tax to be withheld is to be determined under the
Applicable Laws (the "Tax Date").
--------
(d) If permitted by the Administrator, in its discretion, a
Participant may satisfy his or her tax withholding obligations upon exercise of
an Option or Stock Purchase Right by surrendering to the Company Shares that (i)
in the case of Shares previously acquired from the Company, have been owned by
the Participant for more than six (6) months on the date of surrender, and (ii)
have a Fair Market Value determined as of the applicable Tax Date equal to the
amount required to be withheld.
-12-
<PAGE>
(e) Any election or deemed election by a Participant to have Shares
withheld to satisfy tax withholding obligations under Section 12(c) or (d) above
shall be irrevocable as to the particular Shares as to which the election is
made and shall be subject to the consent or disapproval of the Administrator.
Any election by a Participant under Section 12(d) above must be made on or prior
to the applicable Tax Date.
(f) In the event an election to have Shares withheld is made by a
Participant and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Participant shall receive
the full number of Shares with respect to which the Option or Stock Purchase
Right is exercised but such Participant shall be unconditionally obligated to
tender back to the Company the proper number of Shares on the applicable Tax
Date.
13. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. Options and
--------------------------------------------------------
Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or by the laws of
descent or distribution; provided that, after the date, if any, upon which the
Common Stock becomes a Listed Security, the Administrator may in its discretion
grant transferable Nonstatutory Stock Options pursuant to Option Agreements
specifying (i) the manner in which such Nonstatutory Stock Options are
transferable and (ii) that any such transfer shall be subject to the Applicable
Laws. The designation of a beneficiary by an Optionee will not constitute a
transfer. An Option or Stock Purchase Right may be exercised, during the
lifetime of the holder of Option or Stock Purchase Right, only by such holder or
a transferee permitted by this Section 13.
14. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, CORPORATE TRANSACTIONS AND
----------------------------------------------------------------------
CERTAIN OTHER TRANSACTIONS.
- --------------------------
(a) CHANGES IN CAPITALIZATION. Subject to any required action by the
-------------------------
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, the number of Shares set forth
in Sections 3(a)(i) and 8 above, and the number of shares of Common Stock that
have been authorized for issuance under the Plan but as to which no Options or
Stock Purchase Rights have yet been granted or that have been returned to the
Plan upon cancellation or expiration of an Option or Stock Purchase Right, as
well as the price per Share of Common Stock covered by each such outstanding
Option or Stock Purchase Right, shall be proportionately adjusted for any
increase or decrease in the number of issued Shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination,
recapitalization or reclassification of the Common Stock (including any change
in the number of Shares of Common Stock effected in connection with a change of
domicile of the Company), or any other increase or decrease in the number of
issued Shares of Common Stock effected without receipt of consideration by the
Company; provided however that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Administrator, whose
determination in that respect shall be final, binding and conclusive. Except as
expressly provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by
-13-
<PAGE>
reason thereof shall be made with respect to, the number or price of Shares of
Common Stock subject to an Option or Stock Purchase Right.
(b) DISSOLUTION OR LIQUIDATION. In the event of the dissolution or
--------------------------
liquidation of the Company, each outstanding Option or Stock Purchase Right
shall terminate immediately prior to the consummation of the transaction, unless
otherwise provided by the Administrator.
(c) CHANGE OF CONTROL. In the event of a Change of Control or
-----------------
Corporate Transaction, each outstanding Option or Stock Purchase Right shall be
assumed or an equivalent option or right shall be substituted by the successor
corporation or a parent or subsidiary of such successor corporation. For
purposes of this Section 14(c), an Option or a Stock Purchase Right shall be
considered assumed, without limitation, if, at the time of issuance of the stock
or other consideration upon such Change of Control, each holder of an Option or
a Stock Purchase Right would be entitled to receive upon exercise of the Option
or Stock Purchase Right the same number and kind of shares of stock or the same
amount of property, cash or securities as such holder would have been entitled
to receive upon the occurrence of such Change of Control if the holder had been,
immediately prior to such Change of Control, the holder of the number of Shares
of Common Stock covered by the Option or the Stock Purchase Right at such time
(after giving effect to any adjustments in the number of Shares covered by the
Option or Stock Purchase Right as provided for in this Section 14).
In the event that, following a Change of Control, the successor
corporation does not agree to assume the Option or Stock Purchase Right or to
substitute an equivalent option or right, then (x) in the case of an Option, the
unvested shares under such Option shall automatically be accelerated such that
an additional 50% of the total number of unvested shares as of the effective
date of the Change of Control shall automatically become vested, and (y) in the
case of a Stock Purchase Right, any rights of repurchase with respect to such
Stock Purchase Right shall automatically terminate with respect to 50% of the
total number of unvested shares as of the effective date of the Change of
Control, and the Company shall provide written notice to the holder of the
Option or Stock Purchase Right of the termination of such vesting provisions or
rights of repurchase. In the case of an Option, the holder shall be entitled to
exercise such Option for a period of 15 business days following the date that
such notice is given.
(d) TERMINATION FOLLOWING A CHANGE OF CONTROL. If the holder of an
-----------------------------------------
Option or Stock Purchase Right is an Employee and such holder's employment
terminates as a result of Involuntary Termination other than for Cause (as such
terms are defined below) at any time within 24 months following a Change of
Control, then, subject to Subsection (e) below, then (x) in the case of an
Option, the unvested shares under such Option shall automatically be accelerated
such that an additional 50% of the total number of unvested shares as of the
effective date of such Involuntary Termination shall automatically become
vested, and (y) in the case of a Stock Purchase Right, any rights of repurchase
with respect to such Stock Purchase Right shall automatically terminate with
respect to 50% of the total number of unvested shares as of the effective date
of the Involuntary Termination.Notwithstanding the foregoing, no such vesting
acceleration shall occur if such vesting acceleration would cause a contemplated
Change of Control transaction that was intended to be accounted for as a
"pooling-of-interests" transaction
-14-
<PAGE>
to become ineligible for such accounting treatment under generally accepted
accounting principles, as determined by the Company's independent public
accountants (the "Accountants") prior to the Change of Control.
(e) LIMITATION ON PAYMENTS. In the event that the vesting
----------------------
acceleration provided for in Subsection (c) above (i) constitutes "parachute
payments" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), and (ii) but for this Subsection (e), would be
subject to the excise tax imposed by Section 4999 of the Code (or any
corresponding provisions of state income tax law), then the vesting acceleration
pursuant to Subsection (c) above shall be either
(i) delivered in full, or
(ii) delivered as to such lesser extent which would result in no
portion of such severance benefits being subject to excise tax under Section
4999 of the Code, whichever of the foregoing amounts, taking into account the
applicable federal, state and local income taxes and the excise tax imposed by
Section 4999, results in the receipt by the holder of an Option or Stock
Purchase Right on an after-tax-basis, of the greater amount of severance
benefits, notwithstanding that all or some portion of such severance benefits
may be taxable under Section 4999 of the Code. Any determination required under
this Subsection (e) shall be made in writing by the Company's independent
accountants, whose determination shall be conclusive and binding on the Company
and all holders of Options and Stock Purchase Rights for all purposes. In the
event that subdivision (i) above applies, then the holder of the Option or Stock
Purchase Rights shall be responsible for any excise taxes imposed with respect
to such severance and other benefits. In the event that subdivision (ii) above
applies, then each benefit provided hereunder shall be proportionately reduced
to the extent necessary to avoid imposition of such excise taxes.
(f) DEFINITION OF TERMS. The following terms used in Subsections (c)
-------------------
through (d) shall have the following meanings:
(i) CAUSE. "Cause" shall mean (i) gross negligence or willful
-----
misconduct in the performance of an employee's duties to the Company; (ii)
repeated unexplained or unjustified absence from the Company; (iii) a material
and willful violation of any federal or state law; (iv) refusal or failure to
act in accordance with any specific direction or order of the Company; (v)
commission of any act of fraud with respect to the Company; or (vi) conviction
of or plea of no contest to a felony or a crime involving moral turpitude
causing material harm to the standing and reputation of the Company, in each
case as determined by the Board of Directors of the Company.
(ii) INVOLUNTARY TERMINATION. "Involuntary Termination" shall
-----------------------
mean (i) without an employee's express written consent, the significant
reduction of such employee's duties, authority or responsibilities, relative to
the such employee's duties, authority or responsibilities as in effect
immediately prior to such reduction, or the assignment to the employee of such
reduced duties, authority or responsibilities, provided, however, that the
assignment of the employee to a position with the same title as the employee
then holds, or substantially similar title, in a business unit, division or
subsidiary of the Company following a
-15-
<PAGE>
Change of Control or a company into which the Company is merged in a Change of
Control or otherwise acquiring assets or voting shares of the Company in
connection with a Change of Control, or a parent of such a company, shall not
constitute a significant reduction of duties, authority or responsibilities;
(ii) a material reduction by the Company in the base salary of the employee as
in effect immediately prior to such reduction; (iii) a material reduction by the
Company in the kind or level of employee benefits, including bonuses, to which
the employee was entitled immediately prior to such reduction with the result
that the employee's overall benefits package is significantly reduced; (iv) the
relocation of the employee to a facility or a location more than fifty miles
from the employee's then present location, without the employee's express
written consent; or (v) any act or set of facts or circumstances which would,
under California case law or statute, constitute a constructive termination of
the employee.
(g) CERTAIN DISTRIBUTIONS. In the event of any distribution to the
---------------------
Company's stockholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per Share of Common Stock covered by each
outstanding Option or Stock Purchase Right to reflect the effect of such
distribution.
15. TIME OF GRANTING OPTIONS AND STOCK PURCHASE RIGHTS. The date of grant
--------------------------------------------------
of an Option or Stock Purchase Right shall, for all purposes, be the date on
which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Administrator;
provided however that in the case of an Incentive Stock Option, the grant date
shall be the later of the date on which the Administrator makes the
determination granting such Incentive Stock Option or the date of commencement
of the Optionee's employment relationship with the Company. Notice of the
determination shall be given to each Employee or Consultant to whom an Option or
Stock Purchase Right is so granted within a reasonable time after the date of
such grant.
16. AMENDMENT AND TERMINATION OF THE PLAN.
-------------------------------------
(a) AMENDMENT AND TERMINATION. The Board may at any time amend,
-------------------------
alter, suspend, discontinue or terminate the Plan, but no amendment, alteration,
suspension, discontinuance or termination (other than an adjustment made
pursuant to Section 14 above) shall be made that would materially and adversely
affect the rights of any Optionee or holder of Stock Purchase Rights under any
outstanding grant, without his or her consent. In addition, to the extent
necessary and desirable to comply with the Applicable Laws, the Company shall
obtain stockholder approval of any Plan amendment in such a manner and to such
as degree as required.
(b) EFFECT OF AMENDMENT OR TERMINATION. No amendment or termination
----------------------------------
of the Plan shall materially and adversely affect Options or Stock Purchase
Rights already granted, unless mutually agreed otherwise between the Optionee or
holder of the Stock Purchase Rights and the Administrator, which agreement must
be in writing and signed by such Optionee or holder and the Company.
-16-
<PAGE>
17. CONDITIONS UPON ISSUANCE OF SHARES. Notwithstanding any other
----------------------------------
provision of the Plan or any agreement entered into by the Company pursuant to
the Plan, the Company shall not be obligated, and shall have no liability for
failure, to issue or deliver any Shares under the Plan unless such issuance or
delivery would comply with the Applicable Laws, with such compliance determined
by the Company in consultation with its legal counsel.
As a condition to the exercise of an Option or Stock Purchase Right, the
Company may require the person exercising such Option or Stock Purchase Right to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required by law.
18. RESERVATION OF SHARES. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
19. AGREEMENTS. Options and Stock Purchase Rights shall be evidenced by
----------
Option Agreements and Restricted Stock Purchase Agreements, respectively, in
such form(s) as the Administrator shall from time to time approve.
20. STOCKHOLDER APPROVAL. If required by the Applicable Laws, continuance
--------------------
of the Plan shall be subject to approval by the stockholders of the Company
within twelve (12) months before or after the date the Plan is adopted. Such
stockholder approval shall be obtained in the manner and to the degree required
under the Applicable Laws.
21. INFORMATION AND DOCUMENTS TO OPTIONEES AND PURCHASERS. Prior to the
-----------------------------------------------------
date, if any, upon which the Common Stock becomes a Listed Security and if
required by the Applicable Laws, the Company shall provide financial statements
at least annually to each Optionee and to each individual who acquired Shares
pursuant to the Plan, during the period such Optionee or purchaser has one or
more Options or Stock Purchase Rights outstanding, and in the case of an
individual who acquired Shares pursuant to the Plan, during the period such
individual owns such Shares. The Company shall not be required to provide such
information if the issuance of Options or Stock Purchase Rights under the Plan
is limited to key employees whose duties in connection with the Company assure
their access to equivalent information.
-17-
<PAGE>
LATITUDE COMMUNICATIONS, INC.
1999 STOCK PLAN
NOTICE OF STOCK OPTION GRANT
----------------------------
Optionee's Name and Address:
((Optionee))-
((OptioneeAddress1))
((OptioneeAddress2))
You have been granted an option to purchase Common Stock of Latitude
Communications, Inc., (the "Company") as follows:
Board Approval Date: _________________________
Date of Grant (Later of Board
Approval Date or
Commencement of
Employment/Consulting): ((GrantDate))
Exercise Price Per Share: ((ExercisePrice))
Total Number of Shares Granted: ((SharesGranted))
Total Price of Shares Granted: ((TotalExercisePrice))
Type of Option: ((NoSharesISO)) Shares Incentive Stock
Option
((NoSharesNSO)) Shares Nonstatutory
Stock Option
Term/Expiration Date: ((Term))/((ExpirDate))
Vesting Commencement Date: ((VestingStartDate))
Vesting Schedule: ((VestingSchedule))
Termination Period: Option may be exercised for a period of
ninety (90) days after termination of
employment or consulting relationship
except as set out in Sections 7 and 8 of
the Stock Option Agreement (but in no
event later than the Expiration Date).
<PAGE>
By your signature and the signature of the Company's representative below,
you and the Company agree that this option is granted under and governed by the
terms and conditions of the Latitude Communications, Inc. 1999 Stock Plan and
the Stock Option Agreement, all of which are attached and made a part of this
document.
OPTIONEE: LATITUDE COMMUNICATIONS, INC.
______________________________ By:______________________________
Signature
______________________________ Title:___________________________
Print Name
<PAGE>
LATITUDE COMMUNICATIONS, INC.
STOCK OPTION AGREEMENT
----------------------
1. GRANT OF OPTION. Latitude Communications, Inc., a Delaware
---------------
corporation (the "Company"), hereby grants to the Optionee named in the Notice
-------
of Stock Option Grant attached to this Agreement ("Optionee"), an option (the
--------
"Option") to purchase the total number of shares of Common Stock (the "Shares")
------ ------
set forth in the Notice of Stock Option Grant, at the exercise price per share
set forth in the Notice of Stock Option Grant (the "Exercise Price") subject to
the terms, definitions and provisions of the 1999 Stock Plan (the "Plan")
----
adopted by the Company, which is incorporated in this Agreement by reference. In
the event of a conflict between the terms of the Plan and the terms of this
Agreement, the terms of the Plan shall govern. Unless otherwise defined in this
Agreement, the terms used in this Agreement shall have the meanings defined in
the Plan.
To the extent designated an Incentive Stock Option in the Notice of
Stock Option Grant, this Option is intended to qualify as an Incentive Stock
Option as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") and, to the extent not so designated, this Option is
----
intended to be a Nonstatutory Stock Option.
2. EXERCISE OF OPTION. This Option shall be exercisable during its term
------------------
in accordance with the Vesting Schedule set out in the Notice of Stock Option
Grant and with the provisions of Sections 9 and 10 of the Plan as follows:
(a) RIGHT TO EXERCISE.
-----------------
(i) This Option may not be exercised for a fraction of a share.
(ii) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed by
Sections 6, 7 and 8 below, subject to the limitations contained in paragraphs
(iii) and (iv) below.
(iii) In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in the Notice of Stock Option
Grant.
(iv) If designated an Incentive Stock Option in the Notice of
Stock Option Grant, in the event that the Shares subject to this Option (and all
other Incentive Stock Options granted to Optionee by the Company or any Parent
or Subsidiary) that vest in any calendar year have an aggregate fair market
value (determined for each Share as of the Date of Grant of the option covering
such Share) in excess of $100,000, the Shares in excess of $100,000 shall be
treated as subject to a Nonstatutory Stock Option, in accordance with Section 5
of the Plan.
<PAGE>
(b) METHOD OF EXERCISE.
------------------
(i) This Option shall be exercisable by delivering to the
Company a written notice of exercise (in the form attached as Exhibit A) which
---------
shall state the election to exercise the Option, the number of Shares in respect
of which the Option is being exercised, and such other representations and
agreements as to the holder's investment intent with respect to such Shares of
Common Stock as may be required by the Company pursuant to the provisions of the
Plan. Such written notice shall be signed by Optionee and shall be delivered in
person or by certified mail to the Secretary of the Company. The written notice
shall be accompanied by payment of the Exercise Price. This Option shall be
deemed to be exercised upon receipt by the Company of such written notice
accompanied by the Exercise Price.
(ii) As a condition to the exercise of this Option, Optionee
agrees to make adequate provision for federal, state or other tax withholding
obligations, if any, which arise upon the exercise of the Option or disposition
of Shares, whether by withholding, direct payment to the Company, or otherwise.
(iii) No Shares will be issued pursuant to the exercise of an
Option unless such issuance and such exercise shall comply with all relevant
provisions of law and the requirements of any stock exchange upon which the
Shares may then be listed. Assuming such compliance, for income tax purposes the
Shares shall be considered transferred to Optionee on the date on which the
Option is exercised with respect to such Shares.
3. OPTIONEE'S REPRESENTATIONS. In the event the Shares purchasable
--------------------------
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), at the time this
--------------
Option is exercised, Optionee shall, if required by the Company, concurrently
with the exercise of all or any portion of this Option, deliver to the Company
an investment representation statement in customary form, a copy of which is
available for Optionee's review from the Company upon request.
4. METHOD OF PAYMENT. Payment of the Exercise Price shall be by any of
-----------------
the following, or a combination of the following, at the election of Optionee:
(a) cash; (b) check; (c) surrender of other Shares of Common Stock of the
Company that (i) either have been owned by Optionee for more than six (6) months
on the date of surrender or were not acquired, directly or indirectly, from the
Company, and (ii) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option shall be
exercised; (d) authorization from the Company to retain from the total number of
Shares as to which the Option is exercised that number of Shares having a Fair
Market value on the date of exercise equal to the exercise price for the total
number of Shares as to which the Option is exercised; or (e) if there is a
public market for the Shares and they are registered under the Securities Act,
delivery of a properly executed exercise notice together with irrevocable
instructions to a broker to deliver promptly to the Company the amount of sale
or loan proceeds required to pay the exercise price.
5. RESTRICTIONS ON EXERCISE. This Option may not be exercised until such
------------------------
time as the Plan has been approved by the stockholders of the Company, or if the
issuance of such Shares
-2-
<PAGE>
upon such exercise or the method of payment of consideration for such shares
would constitute a violation of any applicable federal or state securities or
other law or regulation, including any rule under Part 207 of Title 12 of the
Code of Federal Regulations ("Regulation G") as promulgated by the Federal
------------
Reserve Board. As a condition to the exercise of this Option, the Company may
require Optionee to make any representation and warranty to the Company as may
be required by any applicable law or regulation.
6. TERMINATION OF RELATIONSHIP. In the event of termination of
---------------------------
Optionee's Continuous Status as an Employee or Consultant, Optionee may, to the
extent otherwise so entitled at the date of such termination (the "Termination
-----------
Date"), exercise this Option during the Termination Period set out in the Notice
- ----
of Stock Option Grant. To the extent that Optionee was not entitled to exercise
this Option at the date of such termination, or if Optionee does not exercise
this Option within the time specified in the Notice of Stock Option Grant, the
Option shall terminate.
7. DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section 6
----------------------
above, in the event of termination of Optionee's Continuous Status as an
Employee or Consultant as a result of total and permanent disability (as defined
in Section 22(e)(3) of the Code), Optionee may, but only within twelve (12)
months from the date of termination of employment (but in no event later than
the date of expiration of the term of this Option as set forth in Section 10
below), exercise the Option to the extent otherwise so entitled at the date of
such termination. To the extent that Optionee was not entitled to exercise the
Option at the date of termination, or if Optionee does not exercise such Option
(to the extent otherwise so entitled) within the time specified in this
Agreement, the Option shall terminate.
8. DEATH OF OPTIONEE. In the event of the death of Optionee:
-----------------
(a) during the term of this Option and while an Employee of the
Company and having been in Continuous Status as an Employee or Consultant since
the date of grant of the Option, the Option may be exercised, at any time within
twelve (12) months following the date of death (but in no event later than the
date of expiration of the term of this Option as set forth in Section 10 below),
by Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent of the right to
exercise that would have accrued at the date of death; or
(b) within thirty (30) days after the termination of Optionee's
Continuous Status as an Employee or Consultant, the Option may be exercised, at
any time within twelve (12) months following the date of death (but in no event
later than the date of expiration of the term of this Option as set forth in
Section 10 below), by Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that had accrued at the date of termination.
9. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution.
The designation of a beneficiary does not constitute a transfer. An Option may
be exercised during the lifetime of
-3-
<PAGE>
Optionee only by Optionee or a transferee permitted by this section. The terms
of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of Optionee.
10. TERM OF OPTION. This Option may be exercised only within the term set
--------------
out in the Notice of Stock Option Grant, and may be exercised during such term
only in accordance with the Plan and the terms of this Option.
11. NO ADDITIONAL EMPLOYMENT RIGHTS. Optionee understands and agrees that
-------------------------------
the vesting of Shares pursuant to the Vesting Schedule is earned only by
continuing as an Employee or Consultant at the will of the Company (not through
the act of being hired, being granted this Option or acquiring Shares under this
Agreement). Optionee further acknowledges and agrees that nothing in this
Agreement, nor in the Plan which is incorporated in this Agreement by reference,
shall confer upon Optionee any right with respect to continuation as an Employee
or Consultant with the Company, nor shall it interfere in any way with his or
her right or the Company's right to terminate his or her employment or
consulting relationship at any time, with or without cause.
12. TAX CONSEQUENCES. Optionee acknowledges that he or she has read the
----------------
brief summary set forth below of certain federal tax consequences of exercise of
this Option and disposition of the Shares under the law in effect as of the date
of grant. OPTIONEE UNDERSTANDS THAT THIS SUMMARY IS NECESSARILY INCOMPLETE, AND
THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT HIS
OR HER OWN TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) EXERCISE OF INCENTIVE STOCK OPTION. If this Option is an
----------------------------------
Incentive Stock Option, there will be no regular federal income tax liability
upon the exercise of the Option, although the excess, if any, of the fair market
value of the Shares on the date of exercise over the Exercise Price will be
treated as an item of alternative minimum taxable income for federal tax
purposes and may subject Optionee to the alternative minimum tax in the year of
exercise.
(b) EXERCISE OF NONSTATUTORY STOCK OPTION. If this Option does not
-------------------------------------
qualify as an Incentive Stock Option, Optionee may incur regular federal income
tax liability upon the exercise of the Option. Optionee will be treated as
having received compensation income (taxable at ordinary income tax rates) equal
to the excess, if any, of the fair market value of the Shares on the date of
exercise over the Exercise Price. In addition, if Optionee is an employee of
the Company, the Company will be required to withhold from Optionee's
compensation or collect from Optionee and pay to the applicable taxing
authorities an amount equal to a percentage of this compensation income at the
time of exercise.
(c) DISPOSITION OF SHARES. If this Option is an Incentive Stock
---------------------
Option and if Shares transferred pursuant to the Option are held for more than
one year after exercise and more than two years after the Date of Grant, any
gain realized on disposition of the Shares will be treated as long-term capital
gain for federal income tax purposes. If Shares purchased under an Incentive
Stock Option are disposed of before the end of either of such two holding
periods, then any gain realized on such disposition will be treated as
compensation income (taxable at ordinary
-4-
<PAGE>
income rates) to the extent of the excess, if any, of the lesser of (i) the fair
market value of the Shares on the date of exercise, or (ii) the sales proceeds,
over the Exercise Price. If this Option is a Nonstatutory Stock Option, then
gain realized on the disposition of Shares will be treated as long-term or
short-term capital gain depending on whether or not the disposition occurs more
than one year after the exercise date. The tax rate on long-term capital gains
under current federal tax laws is capped at 20% for shares held more than one
year.
(d) NOTICE OF DISQUALIFYING DISPOSITION. If the Option granted to
-----------------------------------
Optionee in this Agreement is an Incentive Stock Option, and if Optionee sells
or otherwise disposes of any of the Shares acquired pursuant to the Incentive
Stock Option on or before the later of (i) the date two years after the Date of
Grant, or (ii) the date one year after transfer of such Shares to Optionee upon
exercise of the Incentive Stock Option, Optionee shall notify the Company in
writing within thirty (30) days after the date of any such disposition.
Optionee agrees that Optionee may be subject to income tax withholding by the
Company on the compensation income recognized by Optionee from the early
disposition by payment in cash or out of the current earnings paid to Optionee.
13. SIGNATURE. This Stock Option Agreement shall be deemed executed by
---------
the Company and Optionee upon execution by such parties of the Notice of Stock
Option Grant attached to this Stock Option Agreement.
[Remainder of page left intentionally blank]
-5-
<PAGE>
EXHIBIT A
---------
NOTICE OF EXERCISE
------------------
To: Latitude Communications, Inc.
Attn: Stock Option Administrator
Subject: Notice of Intention to Exercise Stock Option
--------------------------------------------
This is official notice that the undersigned ("Optionee") intends to
--------
exercise Optionee's option to purchase __________ shares of Latitude
Communications, Inc. Common Stock, under and pursuant to the Company's 1999
Stock Plan and the Stock Option Agreement dated ___________, as follows:
Grant Number: ________________________________
Date of Purchase: ________________________________
Number of Shares: ________________________________
Purchase Price: ________________________________
Method of Payment
of Purchase Price: ________________________________
Social Security No.: ________________________________
The shares should be issued as follows:
Name: __________________________
Address: __________________________
__________________________
__________________________
Signed: __________________________
Date: __________________________
<PAGE>
LATITUDE COMMUNICATIONS, INC.
RESTRICTED STOCK PURCHASE AGREEMENT
-----------------------------------
1999 STOCK PLAN
---------------
This Restricted Stock Purchase Agreement (the "Agreement") is made as of
---------
__________________, ______, by and between Latitude Communications, Inc., a
Delaware corporation (the "Company"), and ____________________ ("Purchaser")
------- ---------
pursuant to the Company's 1999 Stock Plan.
1. Sale of Stock. Subject to the terms and conditions of this Agreement,
-------------
on the Purchase Date (as defined below) the Company will issue and sell to
Purchaser, and Purchaser agrees to purchase from the Company, _______________
shares of the Company's Common Stock (the "Shares") at a purchase price of
------
$_____ per Share for a total purchase price of $_________________. The term
"Shares" refers to the purchased Shares and all securities received in
replacement of or in connection with the Shares pursuant to stock dividends or
splits, all securities received in replacement of the Shares in a
recapitalization, merger, reorganization, exchange or the like, and all new,
substituted or additional securities or other properties to which Purchaser is
entitled by reason of Purchaser's ownership of the Shares.
2. Purchase. The purchase and sale of the Shares under this Agreement
--------
shall occur at the principal office of the Company simultaneously with the
execution of this Agreement by the parties or on such other date as the Company
and Purchaser shall agree (the "Purchase Date"). On the Purchase Date, the
-------------
Company will deliver to Purchaser a certificate representing the Shares to be
purchased by Purchaser (which shall be issued in Purchaser's name) against
payment of the purchase price therefor by Purchaser by check made payable to the
Company.
3. Limitations on Transfer. In addition to any other limitation on
-----------------------
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares while the Shares are subject
to the Company's Repurchase Option (as defined below). After any Shares have
been released from the Repurchase Option, Purchaser shall not assign, encumber
or dispose of any interest in such Shares except in compliance with the
provisions below and applicable securities laws.
(a) Repurchase Option.
-----------------
(i) In the event of the voluntary or involuntary termination of
Purchaser's employment or consulting relationship with the Company for any
reason (including death or disability), with or without cause, the Company shall
upon the date of such termination (the "Termination Date") have an irrevocable,
----------------
exclusive option (the "Repurchase Option") for a period of 60 days from such
-----------------
date to repurchase all or any portion of the Shares held by Purchaser as of the
Termination Date which have not yet been released from the Company's Repurchase
Option at the original purchase price per Share specified in Section 1 (adjusted
for any stock splits, stock dividends and the like).
<PAGE>
(ii) The Repurchase Option shall be exercised by the Company by
written notice to Purchaser or Purchaser's executor and, at the Company's
option, (A) by delivery to Purchaser or Purchaser's executor with such notice of
a check in the amount of the purchase price for the Shares being purchased, or
(B) in the event Purchaser is indebted to the Company, by cancellation by the
Company of an amount of such indebtedness equal to the purchase price for the
Shares being repurchased, or (C) by a combination of (A) and (B) so that the
combined payment and cancellation of indebtedness equals such purchase price.
Upon delivery of such notice and payment of the purchase price in any of the
ways described above, the Company shall become the legal and beneficial owner of
the Shares being repurchased and all rights and interest therein or related
thereto, and the Company shall have the right to transfer to its own name the
number of Shares being repurchased by the Company, without further action by
Purchaser.
(iii) One hundred percent (100%) of the Shares shall be subject
to the Repurchase Option upon grant. Thereafter, the Shares held by Purchaser
shall be released from the Repurchase Option under this Section 3(a) as follows
(provided in each case that Purchaser's employment has not been terminated prior
to the date of any such release): __ of the total number of Shares shall be
released from the Repurchase Option on the __-month anniversary of the Vesting
Commencement Date (as set forth on the signature page of this Agreement), and an
additional __ of the total number of Shares shall be released from the
Repurchase Option each month thereafter on the Monthly Vesting Date (as set
forth on the signature page of this Agreement), until all Shares are released
from the Repurchase Option. Fractional shares shall be rounded to the nearest
whole share.
(b) Restrictions Binding on Transferees. All transferees of Shares or
-----------------------------------
any interest therein will receive and hold such Shares or interest subject to
the provisions of this Agreement, including insofar as applicable the Company's
Repurchase Option. Any sale or transfer of the Shares shall be void unless the
provisions of this Agreement are satisfied.
(c) Termination of Rights. Upon the expiration or exercise of the
---------------------
Repurchase Option, a new certificate or certificates representing the Shares not
repurchased shall be issued, on request, without the legend referred to in
Section 5(a) below and delivered to Purchaser.
4. Escrow of Unvested Shares. For purposes of facilitating the
-------------------------
enforcement of the provisions of Section 3 above, Purchaser agrees, immediately
upon receipt of the certificate(s) for the Shares subject to the Repurchase
Option, to deliver such certificate(s), together with an Assignment Separate
from Certificate in the form attached to this Agreement as Exhibit A executed by
---------
Purchaser and by Purchaser's spouse (if required for transfer), in blank, to the
Secretary of the Company, or the Secretary's designee, to hold such
certificate(s) and Assignment Separate from Certificate in escrow and to take
all such actions and to effectuate all such transfers and/or releases as are in
accordance with the terms of this Agreement. Purchaser hereby acknowledges that
the Secretary of the Company, or the Secretary's designee, is so appointed as
the escrow holder with the foregoing authorities as a material inducement to
make this Agreement and that said appointment is coupled with an interest and is
accordingly
-2-
<PAGE>
irrevocable. Purchaser agrees that said escrow holder shall not be
liable to any party hereof (or to any other party). The escrow holder may rely
upon any letter, notice or other document executed by any signature purported to
be genuine and may resign at any time. Purchaser agrees that if the Secretary
of the Company, or the Secretary's designee, resigns as escrow holder for any or
no reason, the Board of Directors of the Company shall have the power to appoint
a successor to serve as escrow holder pursuant to the terms of this Agreement.
5. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. The certificate or certificates representing the Shares
-------
shall bear the following legend (as well as any legends required by applicable
state and federal corporate and securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
6. No Employment Rights. Nothing in this Agreement shall affect in any
--------------------
manner whatsoever the right or power of the Company, or a parent or subsidiary
of the Company, to terminate Purchaser's employment or consulting relationship,
for any reason, with or without cause.
7. Section 83(b) Election. Purchaser understands that Section 83(a) of
----------------------
the Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary
----
income the difference between the amount paid for the Shares and the fair market
value of the Shares as of the date any restrictions on the Shares lapse. In
this context, "restriction" means the right of the Company to buy back the
-----------
Shares pursuant to the Repurchase Option set forth in Section 3(a) of this
Agreement. Purchaser understands that Purchaser may elect to be taxed at the
time the Shares are purchased, rather than when and as the Repurchase Option
expires, by filing an election under Section 83(b) (an "83(b) Election") of the
--------------
Code with the Internal Revenue Service within 30 days from the date of purchase.
-------
Even if the fair market value of the Shares at the time of the execution of this
Agreement equals the amount paid for the Shares, the election must be made to
-3-
<PAGE>
avoid income under Section 83(a) in the future. Purchaser understands that
failure to file such an election in a timely manner may result in adverse tax
consequences for Purchaser. Purchaser further understands that an additional
copy of such election form should be filed with his or her federal income tax
return for the calendar year in which the date of this Agreement falls.
Purchaser acknowledges that the foregoing is only a summary of the effect of
United States federal income taxation with respect to purchase of the Shares
hereunder, and does not purport to be complete. Purchaser further acknowledges
that the Company has directed Purchaser to seek independent advice regarding the
applicable provisions of the Code, the income tax laws of any municipality,
state or foreign country in which Purchaser may reside, the tax consequences of
Purchaser's death and the decision as to whether or not to file an 83(b)
Election in connection with the acquisition of the Shares.
Purchaser agrees that he will execute and deliver to the Company with this
executed Agreement a copy of the Acknowledgment and Statement of Decision
Regarding Section 83(b) Election (the "Acknowledgment"), attached hereto as
--------------
Exhibit B. Purchaser further agrees that Purchaser will execute and submit with
- ---------
the Acknowledgment a copy of the 83(b) Election, attached hereto as Exhibit C,
---------
if Purchaser has indicated in the Acknowledgment his or her decision to make
such an election.
8. Miscellaneous.
-------------
(a) Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Delaware, without giving effect to principles of conflicts of law.
(b) Entire Agreement; Enforcement of Rights. This Agreement sets
---------------------------------------
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of this
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of this Agreement shall be enforceable in accordance with its terms.
(d) Construction. This Agreement is the result of negotiations
------------
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
-4-
<PAGE>
(e) Notices. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be deemed sufficient when delivered personally or sent
by telegram or fax or 48 hours after being deposited in the U.S. mail, as
certified or registered mail, with postage prepaid, and addressed to the party
to be notified at such party's address or fax number as set forth below or as
subsequently modified by written notice.
(f) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(g) Successors and Assigns. The rights and benefits of this Agreement
----------------------
shall inure to the benefit of, and be enforceable by the Company's successors
and assigns. The rights and obligations of Purchaser under this Agreement may
only be assigned with the prior written consent of the Company.
[Signature Page Follows]
-5-
<PAGE>
The parties have executed this Agreement as of the date first set forth
above.
LATITUDE COMMUNICATIONS, INC.
BY:_______________________________
TITLE:____________________________
ADDRESS:
__________________________________
__________________________________
PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
SECTION 3 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR
CONSULTANT AT THE WILL OF THE COMPANY. PURCHASER FURTHER ACKNOWLEDGES AND
AGREES THAT NOTHING IN THIS AGREEMENT SHALL CONFER UPON PURCHASER ANY RIGHT WITH
RESPECT TO CONTINUATION OF SUCH EMPLOYMENT OR CONSULTING RELATIONSHIP WITH THE
COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH PURCHASER'S RIGHT OR THE
COMPANY'S RIGHT TO TERMINATE PURCHASER'S EMPLOYMENT OR CONSULTING RELATIONSHIP
AT ANY TIME, WITH OR WITHOUT CAUSE.
PURCHASER:
[PURCHASER NAME]
__________________________________
(SIGNATURE)
ADDRESS:
__________________________________
__________________________________
Vesting Commencement
Date: ____________________
I, ________________________________, spouse of [Purchaser], have read and hereby
approve the foregoing Agreement. In consideration of the Company's granting my
spouse the right to purchase the Shares as set forth in the Agreement, I hereby
agree to be irrevocably bound by the Agreement and further agree that any
community property or similar interest that I may have in the Shares shall be
similarly bound by the Agreement. I hereby appoint my spouse as my attorney-in-
fact with respect to any amendment or exercise of any rights under the
Agreement.
_______________________________
Spouse of [Purchaser]
-6-
<PAGE>
EXHIBIT A
---------
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED and pursuant to that certain Restricted Stock Purchase
Agreement between the undersigned ("Purchaser") and Latitude Communications,
---------
Inc. (the "Company") dated _______________ (the "Agreement"), Purchaser hereby
------- ---------
sells, assigns and transfers unto the Company _________________________________
(________) shares of the Common Stock of the Company standing in Purchaser's
name on the Company's books and represented by Certificate No. _____, and does
hereby irrevocably constitute and appoint ______________________ to transfer
said stock on the books of the Company with full power of substitution in the
premises. THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND
THE EXHIBITS THERETO.
Dated: ______________________
Signature:
_____________________________________
[Purchaser]
_____________________________________
Spouse of [Purchaser] (if applicable)
Instruction: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
repurchase option set forth in the Agreement without requiring additional
signatures on the part of Purchaser.
<PAGE>
EXHIBIT B
---------
ACKNOWLEDGMENT AND STATEMENT OF DECISION
-----------------------------------------
REGARDING SECTION 83(b) ELECTION
--------------------------------
The undersigned has entered a stock purchase agreement with Latitude
Communications, Inc., a Delaware corporation (the "Company"), pursuant to which
-------
the undersigned is purchasing ______________ shares of Common Stock of the
Company (the "Shares"). In connection with the purchase of the Shares, the
------
undersigned hereby represents as follows:
1. The undersigned has carefully reviewed the stock purchase agreement
pursuant to which the undersigned is purchasing the Shares.
2. The undersigned either [check and complete as applicable]:
(a) ____ has consulted, and has been fully advised by, the undersigned's
own tax advisor, __________________________, whose business address is
_____________________________, regarding the federal, state and local
tax consequences of purchasing the Shares, and particularly regarding
the advisability of making elections pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended (the "Code") and pursuant to
----
the corresponding provisions, if any, of applicable state law; or
(b) ____ has knowingly chosen not to consult such a tax advisor.
3. The undersigned hereby states that the undersigned has decided [check
as applicable]:
(a) ____ to make an election pursuant to Section 83(b) of the Code, and is
submitting to the Company, together with the undersigned's executed
Restricted Stock Purchase Agreement, an executed form entitled
"Election Under Section 83(b) of the Internal Revenue Code of 1986";
or
(b) ____ not to make an election pursuant to Section 83(b) of the Code.
<PAGE>
4. Neither the Company nor any subsidiary or representative of the Company
has made any warranty or representation to the undersigned with respect to the
tax consequences of the undersigned's purchase of the Shares or of the making or
failure to make an election pursuant to Section 83(b) of the Code or the
corresponding provisions, if any, of applicable state law.
Date:___________________ ___________________________
[Purchaser]
Date:___________________ ___________________________
Spouse of [Purchaser]
-2-
<PAGE>
EXHIBIT C
---------
ELECTION UNDER SECTION 83(b)
----------------------------
OF THE INTERNAL REVENUE CODE OF 1986
------------------------------------
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code, to include in taxpayer's gross income for the current
taxable year, the amount of any compensation taxable to taxpayer in connection
with taxpayer's receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME OF TAXPAYER: [Purchaser]
NAME OF SPOUSE:
ADDRESS:_______________________
_______________________
IDENTIFICATION NO. OF TAXPAYER:
IDENTIFICATION NO. OF SPOUSE:
TAXABLE YEAR:
2. The property with respect to which the election is made is described as
follows:
______________ shares of the Common Stock $_______ par value, of Latitude
Communications, Inc., a Delaware corporation (the "Company").
3. The date on which the property was transferred is: __________________
4. The property is subject to the following restrictions:
Repurchase option at cost in favor of the Company upon termination of
taxpayer's employment or consulting relationship.
5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is: $_____________.
6. The amount (if any) paid for such property: $______________
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
- --------------------------------------------------------------------------
except with the consent of the Commissioner.
- -------------------------------------------
Dated: ______________________ ______________________________________
Taxpayer
Dated: ______________________ ______________________________________
Spouse of Taxpayer
<PAGE>
RECEIPT
-------
Latitude Communications, Inc. hereby acknowledges receipt of a check
in the amount of $__________ given by [Purchaser] as consideration for
Certificate No. ___________ for ____________ shares of Common Stock of Latitude
Communications, Inc..
Dated: ________________
Latitude Communications, Inc.
By:_________________________________
Title:______________________________
<PAGE>
RECEIPT AND CONSENT
-------------------
The undersigned hereby acknowledges receipt of a photocopy of Certificate
No. ______ for _____________ shares of Common Stock of Latitude Communications,
Inc. (the "Company").
-------
The undersigned further acknowledges that the Secretary of the Company, or
his or her designee, is acting as escrow holder pursuant to the Restricted Stock
Purchase Agreement Purchaser has previously entered into with the Company. As
escrow holder, the Secretary of the Company, or his or her designee, holds the
original of the aforementioned certificate issued in the undersigned's name.
Dated: _________________________
________________________________
[Purchaser]
<PAGE>
EXHIBIT 10.4
LATITUDE COMMUNICATIONS, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
---------------------------------
The following constitute the provisions of the 1999 Employee Stock Purchase
Plan of Latitude Communications, Inc.
1. PURPOSE. The purpose of the Plan is to provide employees of the
-------
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company. It is the intention of the Company to have the Plan
qualify as an "Employee Stock Purchase Plan" under Section 423 of the Code. The
provisions of the Plan shall, accordingly, be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. DEFINITIONS.
-----------
(a) "BOARD" means the Board of Directors of the Company.
-----
(b) "CODE" means the Internal Revenue Code of 1986, as amended.
----
(c) "COMMON STOCK" means the Common Stock of the Company.
------------
(d) "COMPANY" means Latitude Communications, Inc., a Delaware
-------
corporation.
(e) "COMPENSATION" means all regular straight time gross earnings and
------------
shall not include commissions or payments for overtime, shift premium, incentive
compensation, incentive payments, bonuses and other compensation.
(f) "CONTINUOUS STATUS AS AN EMPLOYEE" means the absence of any
--------------------------------
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of (i) sick leave; (ii)
military leave; (iii) any other leave of absence approved by the Administrator,
provided that such leave is for a period of not more than 90 days, unless
reemployment upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise pursuant to Company policy adopted from
time to time; or (iv) in the case of transfers between locations of the Company
or between the Company and its Designated Subsidiaries.
(g) "CONTRIBUTIONS" means all amounts credited to the account of a
-------------
participant pursuant to the Plan.
(h) "CORPORATE TRANSACTION" means a sale of all or substantially all
---------------------
of the Company's assets, or a merger, consolidation or other capital
reorganization of the Company with or into another corporation.
(i) "DESIGNATED SUBSIDIARIES" means the Subsidiaries which have been
-----------------------
designated by the Board from time to time in its sole discretion as eligible to
participate in the
<PAGE>
Plan; provided however that the Board shall only have the discretion to
designate Subsidiaries if the issuance of options to such Subsidiary's Employees
pursuant to the Plan would not cause the Company to incur adverse accounting
charges.
(j) "EMPLOYEE" means any person, including an Officer, who is
--------
customarily employed for at least twenty (20) hours per week and more than five
(5) months in a calendar year by the Company or one of its Designated
Subsidiaries.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
------------
amended.
(l) "OFFERING DATE" means the first business day of each Offering
-------------
Period of the Plan.
(m) "OFFERING PERIOD" means a period of six (6) months commencing on
---------------
May 1 and November 1 of each year, except for the first Offering Period as set
forth in Section 4(a).
(n) "OFFICER" means a person who is an officer of the Company within
-------
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(o) "PLAN" means this Employee Stock Purchase Plan.
----
(p) "PURCHASE DATE" means the last day of each Offering Period of the
-------------
Plan.
(q) "PURCHASE PRICE" means with respect to an Offering Period an
--------------
amount equal to 85% of the Fair Market Value (as defined in Section 7(b) below)
of a Share of Common Stock on the Offering Date or on the Purchase Date,
whichever is lower.
(r) "SHARE" means a share of Common Stock, as adjusted in accordance
-----
with Section 18 of the Plan.
(s) "SUBSIDIARY" means a corporation, domestic or foreign, of which
----------
not less than 50% of the voting shares are held by the Company or a Subsidiary,
whether or not such corporation now exists or is hereafter organized or acquired
by the Company or a Subsidiary.
3. ELIGIBILITY.
-----------
(a) Any person who is an Employee as of the Offering Date of a given
Offering Period shall be eligible to participate in such Offering Period under
the Plan, subject to the requirements of Section 5(a) and the limitations
imposed by Section 423(b) of the Code.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, immediately after the
grant, such Employee (or any other person whose stock would be attributed to
such Employee pursuant to Section 424(d) of the Code) would own capital stock of
the Company and/or hold outstanding options to purchase stock possessing five
percent (5%) or more of the total combined voting power or value
-2-
<PAGE>
of all classes of stock of the Company or of any subsidiary of the Company, or
(ii) if such option would permit his or her rights to purchase stock under all
employee stock purchase plans (described in Section 423 of the Code) of the
Company and its Subsidiaries to accrue at a rate which exceeds Twenty-Five
Thousand Dollars ($25,000) of the Fair Market Value (as defined in Section 7(b)
below) of such stock (determined at the time such option is granted) for each
calendar year in which such option is outstanding at any time.
4. OFFERING PERIODS. The Plan shall be implemented by a series of Offering
----------------
Periods of six (6) months' duration, with new Offering Periods commencing on or
about May 1 and November 1 of each year (or at such other time or times as may
be determined by the Board of Directors). The first Offering Period shall
commence on the effective date of the Registration Statement on Form S-1 for the
initial public offering of the Company's Common Stock (the "IPO Date") and
--------
continue until October 31, 1999. The Plan shall continue until terminated in
accordance with Section 19 hereof. The Board of Directors of the Company shall
have the power to change the duration and/or the frequency of Offering Periods
with respect to future offerings without stockholder approval if such change is
announced at least five (5) days prior to the scheduled beginning of the first
Offering Period to be affected.
5. PARTICIPATION.
-------------
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement on the form provided by the Company and
filing it with the Company's payroll office prior to the applicable Offering
Date, unless a later time for filing the subscription agreement is set by the
Board for all eligible Employees with respect to a given Offering Period. The
subscription agreement shall set forth the percentage of the participant's
Compensation (subject to Section 6(a) below) to be paid as Contributions
pursuant to the Plan.
(b) Payroll deductions shall commence on the first payroll following
the Offering Date and shall end on the last payroll paid on or prior to the
Purchase Date of the Offering Period to which the subscription agreement is
applicable, unless sooner terminated by the participant as provided in Section
10.
6. METHOD OF PAYMENT OF CONTRIBUTIONS.
----------------------------------
(a) A participant shall elect to have payroll deductions made on each
payday during the Offering Period in an amount not less than one percent (1%)
and not more than fifteen percent (15%) of such participant's compensation on
each payday during the Offering Period. All payroll deductions made by a
participant shall be credited to his or her account under the Plan. A
participant may not make any additional payments into such account.
(b) A participant may discontinue his or her participation in the Plan
as provided in Section 10, or, on one occasion only during the Offering Period
may increase and on one occasion only during the Offering Period may decrease
the rate of his or her Contributions with respect to the Offering Period by
completing and filing with the Company a new subscription agreement authorizing
a change in the payroll deduction rate. The change in rate shall be effective
as of the beginning of the next calendar month following the date of filing of
-3-
<PAGE>
the new subscription agreement, if the agreement is filed at least ten (10)
business days prior to such date and, if not, as of the beginning of the next
succeeding calendar month.
(c) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) herein, a participant's
payroll deductions may be decreased during any Offering Period scheduled to end
during the current calendar year to 0%. Payroll deductions shall re-commence at
the rate provided in such participant's subscription agreement at the beginning
of the first Offering Period which is scheduled to end in the following calendar
year, unless terminated by the participant as provided in Section 10.
7. GRANT OF OPTION.
---------------
(a) On the Offering Date of each Offering Period, each eligible
Employee participating in such Offering Period shall be granted an option to
purchase on each Purchase Date a number of Shares of the Company's Common Stock
determined by dividing such Employee's Contributions accumulated prior to such
Purchase Date and retained in the participant's account as of the Purchase Date
by the applicable Purchase Price; provided however that the maximum number of
Shares an Employee may purchase during each Offering Period shall be 1,000
shares (subject to any adjustment pursuant to section 19 below,) and provided
further that such purchase shall be subject to the limitations set forth in
Sections 3(b) and 13.
(b) The fair market value of the Company's Common Stock on a given
date (the "Fair Market Value") shall be determined by the Board in its
-----------------
discretion based on the closing sales price of the Common Stock for such date
(or, in the event that the Common Stock is not traded on such date, on the
immediately preceding trading date), as reported by the National Association of
Securities Dealers Automated Quotation (Nasdaq) National Market or, if such
price is not reported, the mean of the bid and asked prices per share of the
Common Stock as reported by Nasdaq or, in the event the Common Stock is listed
on a stock exchange, the Fair Market Value per share shall be the closing sales
price on such exchange on such date (or, in the event that the Common Stock is
not traded on such date, on the immediately preceding trading date), as reported
in The Wall Street Journal. For purposes of the Offering Date under the first
-----------------------
Offering Period under the Plan, the Fair Market Value of a share of the Common
Stock of the Company shall be the Price to Public as set forth in the final
prospectus filed with the Securities and Exchange Commission pursuant to Rule
424 under the Securities Act of 1933, as amended.
8. EXERCISE OF OPTION. Unless a participant withdraws from the Plan as
------------------
provided in Section 10, his or her option for the purchase of Shares will be
exercised automatically on the Purchase Date of an Offering Period, and the
maximum number of full Shares subject to the option will be purchased at the
applicable Purchase Price with the accumulated Contributions in his or her
account. No fractional Shares shall be issued. The Shares purchased upon
exercise of an option hereunder shall be deemed to be transferred to the
participant on the Purchase Date. During his or her lifetime, a participant's
option to purchase Shares hereunder is exercisable only by him or her.
9. DELIVERY. As promptly as practicable after the Purchase Date of each
--------
Offering Period, the Company shall arrange the delivery to each participant, as
appropriate, of a certificate
-4-
<PAGE>
representing the Shares purchased upon exercise of his or her option. Any
payroll deductions accumulated in a participant's account which are not
sufficient to purchase a full Share shall be retained in the participant's
account for the subsequent Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 below. Any other amounts left over in a
participant's account after a Purchase Date shall be returned to the
participant.
10. WITHDRAWAL; TERMINATION OF EMPLOYMENT.
-------------------------------------
(a) A participant may withdraw all but not less than all the
Contributions credited to his or her account under the Plan at any time prior to
the Purchase Date by giving written notice to the Company. All of the
participant's Contributions credited to his or her account will be paid to him
or her promptly after receipt of his or her notice of withdrawal and his or her
option for the current period will be automatically terminated, and no further
Contributions for the purchase of Shares will be made during the Offering
Period.
(b) Upon termination of the participant's Continuous Status as an
Employee prior to the Purchase Date of an Offering Period for any reason,
including retirement or death, the Contributions credited to his or her account
will be returned to him or her or, in the case of his or her death, to the
person or persons entitled thereto under Section 14, and his or her option will
be automatically terminated.
(c) In the event an Employee fails to remain in Continuous Status as
an Employee of the Company for at least twenty (20) hours per week during the
Offering Period in which the employee is a participant, he or she will be deemed
to have elected to withdraw from the Plan and the Contributions credited to his
or her account will be returned to him or her and his or her option terminated.
(d) A participant's withdrawal from an offering will not have any
effect upon his or her eligibility to participate in a succeeding offering or in
any similar plan which may hereafter be adopted by the Company.
11. INTEREST. No interest shall accrue on the Contributions of a
--------
participant in the Plan.
12. STOCK.
-----
(a) Subject to adjustment as provided in Section 19, the maximum
number of Shares which shall be made available for sale under the Plan shall be
500,000 Shares, plus an annual increase on the first day of each of the
Company's fiscal years beginning in 2000, 2001, 2002, 2003 and 2004 equal to the
lesser of (i) 200,000 Shares, (ii) one percent (1.00%) of the Shares outstanding
on the last day of the immediately preceding fiscal year, or (iii) such lesser
number of Shares as is determined by the Board. If the Board determines that,
on a given Purchase Date, the number of shares with respect to which options are
to be exercised may exceed (i) the number of shares of Common Stock that were
available for sale under the Plan on the Offering Date of the applicable
Offering Period, or (ii) the number of shares available for sale under the Plan
on such Purchase Date, the Board may in its sole discretion provide (x) that the
-5-
<PAGE>
Company shall make a pro rata allocation of the Shares of Common Stock available
for purchase on such Offering Date or Purchase Date, as applicable, in as
uniform a manner as shall be practicable and as it shall determine in its sole
discretion to be equitable among all participants exercising options to purchase
Common Stock on such Purchase Date, and continue all Offering Periods then in
effect, or (y) that the Company shall make a pro rata allocation of the shares
available for purchase on such Offering Date or Purchase Date, as applicable, in
as uniform a manner as shall be practicable and as it shall determine in its
sole discretion to be equitable among all participants exercising options to
purchase Common Stock on such Purchase Date, and terminate any or all Offering
Periods then in effect pursuant to Section 19 below. The Company may make pro
rata allocation of the Shares available on the Offering Date of any applicable
Offering Period pursuant to the preceding sentence, notwithstanding any
authorization of additional Shares for issuance under the Plan by the Company's
stockholders subsequent to such Offering Date.
(b) The participant shall have no interest or voting right in Shares
covered by his or her option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant and
his or her spouse.
13. ADMINISTRATION. The Board, or a committee named by the Board, shall
--------------
supervise and administer the Plan and shall have full power to adopt, amend and
rescind any rules deemed desirable and appropriate for the administration of the
Plan and not inconsistent with the Plan, to construe and interpret the Plan, and
to make all other determinations necessary or advisable for the administration
of the Plan. The composition of the committee shall be in accordance with the
requirements to obtain or retain any available exemption from the operation of
Section 16(b) of the Exchange Act pursuant to Rule 16b-3 promulgated thereunder.
14. DESIGNATION OF BENEFICIARY.
--------------------------
(a) A participant may file a written designation of a beneficiary who
is to receive any Shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to the end of an
Offering Period but prior to delivery to him or her of such Shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death prior to the Purchase Date of an Offering Period.
If a participant is married and the designated beneficiary is not the spouse,
spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant
(and his or her spouse, if any) at any time by written notice. In the event of
the death of a participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such participant's death,
the Company shall deliver such Shares and/or cash to the executor or
administrator of the estate of the participant, or if no such executor or
administrator has been appointed (to the knowledge of the Company), the Company,
in its discretion, may deliver such Shares and/or cash to the spouse or to any
one or more dependents or relatives of the participant,
-6-
<PAGE>
or if no spouse, dependent or relative is known to the Company, then to such
other person as the Company may designate.
15. TRANSFERABILITY. Neither Contributions credited to a participant's
---------------
account nor any rights with regard to the exercise of an option or to receive
Shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in Section 14) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds in accordance with Section 10.
16. USE OF FUNDS. All Contributions received or held by the Company under
------------
the Plan may be used by the Company for any corporate purpose, and the Company
shall not be obligated to segregate such Contributions.
17. REPORTS. Individual accounts will be maintained for each participant
-------
in the Plan. Statements of account will be given to participating Employees at
least annually, which statements will set forth the amounts of Contributions,
the per Share Purchase Price, the number of Shares purchased and the remaining
cash balance, if any.
18. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS.
------------------------------------------------------------------
(a) ADJUSTMENT. Subject to any required action by the stockholders of
----------
the Company, the number of Shares covered by each option under the Plan which
has not yet been exercised and the number of Shares which have been authorized
for issuance under the Plan but have not yet been placed under option
(collectively, the "Reserves"), the maximum number of shares of Common Stock
--------
which may be purchased by a participant in an Offering Period, the number of
shares of Common Stock set forth in Section 12(a) above, and the price per Share
of Common Stock covered by each option under the Plan which has not yet been
exercised, shall be proportionately adjusted for any increase or decrease in the
number of issued Shares resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock (including any
such change in the number of Shares of Common Stock effected in connection with
a change in domicile of the Company), or any other increase or decrease in the
number of Shares effected without receipt of consideration by the Company;
provided however that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no
issue by the Company of shares of stock of any class, or securities convertible
into shares of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of Shares subject to
an option.
(b) CORPORATE TRANSACTIONS. In the event of a dissolution or
----------------------
liquidation of the Company, the Offering Period then in progress will terminate
immediately prior to the consummation of such action, unless otherwise provided
by the Board. In the event of a Corporate Transaction, each option outstanding
under the Plan shall be assumed or an equivalent option shall be substituted by
the successor corporation or a parent or Subsidiary of such successor
corporation, unless the Board determines, in the exercise of its sole discretion
-7-
<PAGE>
and in lieu of such assumption or substitution, to shorten the Offering Period
then in progress by setting a new Purchase Date (the "New Purchase Date"). If
-------------------
the Board shortens the Offering Period then in progress in lieu of assumption or
substitution in the event of a Corporate Transaction, the Board will notify each
participant in writing, at least ten (10) days prior to the New Purchase Date,
that the Purchase Date for his or her option has been changed to the New
Purchase Date and that his or her option will be exercised automatically on the
New Purchase Date, unless prior to such date he or she has withdrawn from the
Offering Period as provided in Section 10. For purposes of this Section 18, an
option granted under the Plan shall be deemed to be assumed, without limitation,
if, at the time of issuance of the stock or other consideration upon a Corporate
Transaction, each holder of an option under the Plan would be entitled to
receive upon exercise of the option the same number and kind of shares of stock
or the same amount of property, cash or securities as such holder would have
been entitled to receive upon the occurrence of the transaction if the holder
had been, immediately prior to the transaction, the holder of the number of
Shares of Common Stock covered by the option at such time (after giving effect
to any adjustments in the number of Shares covered by the option as provided for
in this Section 18); provided however that if the consideration received in the
transaction is not solely common stock of the successor corporation or its
parent (as defined in Section 424(e) of the Code), the Board may, with the
consent of the successor corporation, provide for the consideration to be
received upon exercise of the option to be solely common stock of the successor
corporation or its parent equal in Fair Market Value to the per Share
consideration received by holders of Common Stock in the transaction.
The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the Reserves, as well as the price per Share
of Common Stock covered by each outstanding option, in the event that the
Company effects one or more reorganizations, recapitalizations, rights offerings
or other increases or reductions of Shares of its outstanding Common Stock, and
in the event of the Company's being consolidated with or merged into any other
corporation.
19. AMENDMENT OR TERMINATION.
------------------------
(a) The Board may at any time and for any reason terminate or amend
the Plan. Except as provided in Section 18, no such termination of the Plan may
affect options previously granted, nor may an amendment to the Plan make any
change in any option previously granted which adversely affects the rights of
any participant, provided that the Plan or an Offering Period may be terminated
or amended by the Board by the Board's setting a new Purchase Date with respect
to an Offering Period then in progress if the Board determines that termination
or amendment of the Plan and/or the Offering Period is in the best interests of
the Company and the stockholders or if continuation of the Plan and/or the
Offering Period would cause the Company to incur adverse accounting charges as a
result of a change after the effective date of the Plan in the generally
accepted accounting rules applicable to the Plan. In addition, to the extent
necessary to comply with Rule 16b-3 under the Exchange Act, or under Section 423
of the Code (or any successor rule or provision or any applicable law or
regulation), the Company shall obtain stockholder approval in such a manner and
to such a degree as so required.
-8-
<PAGE>
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been adversely affected, the Board
(or its committee) shall be entitled to change the Offering Periods, limit the
frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
20. NOTICES. All notices or other communications by a participant to the
-------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
----------------------------------
respect to an option unless the exercise of such option and the issuance and
delivery of such Shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, applicable state securities laws and the requirements of
any stock exchange upon which the Shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
22. TERM OF PLAN; EFFECTIVE DATE. The Plan shall become effective upon
----------------------------
the IPO Date. It shall continue in effect for a term of twenty (20) years
unless sooner terminated under Section 19.
23. ADDITIONAL RESTRICTIONS OF RULE 16B-3. The terms and conditions of
-------------------------------------
options granted hereunder to, and the purchase of Shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and the Shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
-9-
<PAGE>
LATITUDE COMMUNICATIONS, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
----------------------
New Election ______
Change of Election ______
1. I, ________________________, hereby elect to participate in the
Latitude Communications, Inc. 1999 Employee Stock Purchase Plan (the "Plan") for
----
the Offering Period ______________, ____ to _______________, ____, and subscribe
to purchase shares of the Company's Common Stock in accordance with this
Subscription Agreement and the Plan.
2. I elect to have Contributions in the amount of ____% of my
Compensation, as those terms are defined in the Plan, applied to this purchase.
I understand that this amount must not be less than 1% and not more than 15% of
my Compensation during the Offering Period. (Please note that no fractional
percentages are permitted).
3. I hereby authorize payroll deductions from each paycheck during the
Offering Period at the rate stated in Item 2 of this Subscription Agreement. I
understand that all payroll deductions made by me shall be credited to my
account under the Plan and that I may not make any additional payments into such
account. I understand that all payments made by me shall be accumulated for the
purchase of shares of Common Stock at the applicable purchase price determined
in accordance with the Plan. I further understand that, except as otherwise set
forth in the Plan, shares will be purchased for me automatically on the Purchase
Date of each Offering Period unless I otherwise withdraw from the Plan by giving
written notice to the Company for such purpose.
4. I understand that I may discontinue at any time prior to the Purchase
Date my participation in the Plan as provided in Section 10 of the Plan. I also
understand that I can increase or decrease the rate of my Contributions on one
occasion only with respect to any increase and one occasion only with respect to
any decrease during an Offering Period by completing and filing a new
Subscription Agreement with such increase or decrease taking effect as of the
beginning of the calendar month following the date of filing of the new
Subscription Agreement, if filed at least ten (10) business days prior to the
beginning of such month. Further, I may change the rate of deductions for future
Offering Periods by filing a new Subscription Agreement, and any such change
will be effective as of the beginning of the next Offering Period. In addition,
I acknowledge that, unless I discontinue my participation in the Plan as
provided in Section 10 of the Plan, my election will continue to be effective
for each successive Offering Period.
<PAGE>
5. I have received a copy of the Company's most recent description of the
Plan and a copy of the complete "Latitude Communications, Inc. 1999 Employee
Stock Purchase Plan." I understand that my participation in the Plan is in all
respects subject to the terms of the Plan.
6. Shares purchased for me under the Plan should be issued in the name(s)
of (name of employee or employee and spouse only):
____________________________________
____________________________________
7. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due to me under the Plan:
NAME: (Please print) _____________________________________
(First) (Middle) (Last)
_____________________ _____________________________________
(Relationship) (Address)
_____________________________________
8. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Offering Date (the first day of the Offering
Period during which I purchased such shares) or within 1 year after the Purchase
Date, I will be treated for federal income tax purposes as having received
ordinary compensation income at the time of such disposition in an amount equal
to the excess of the fair market value of the shares on the Purchase Date over
the price which I paid for the shares, regardless of whether I disposed of the
shares at a price less than their fair market value at the Purchase Date. The
remainder of the gain or loss, if any, recognized on such disposition will be
treated as capital gain or loss.
I hereby agree to notify the Company in writing within 30 days after the
------------------------------------------------------------------------
date of any such disposition, and I will make adequate provision for federal,
- -----------------------------------------------------------------------------
state or other tax withholding obligations, if any, which arise upon the
- ------------------------------------------------------------------------
disposition of the Common Stock. The Company may, but will not be obligated to,
- -------------------------------
withhold from my compensation the amount necessary to meet any applicable
withholding obligation including any withholding necessary to make available to
the Company any tax deductions or benefits attributable to the sale or early
disposition of Common Stock by me.
9. If I dispose of such shares at any time after expiration of the 2-year
and 1-year holding periods, I understand that I will be treated for federal
income tax purposes as having received compensation income only to the extent of
an amount equal to the lesser of (1) the excess of the fair market value of the
shares at the time of such disposition over the purchase price which I paid for
the shares under the option, or (2) 15% of the fair market value of the
-2-
<PAGE>
shares on the Offering Date. The remainder of the gain or loss, if any,
recognized on such disposition will be treated as capital gain or loss.
I understand that this tax summary is only a summary and is subject to
----------------------------------------------------------------------
change. I further understand that I should consult a tax advisor concerning the
- ------
tax implications of the purchase and sale of stock under the Plan.
10. I hereby agree to be bound by the terms of the Plan. The effectiveness
of this Subscription Agreement is dependent upon my eligibility to participate
in the Plan.
SIGNATURE:_________________________________
SOCIAL SECURITY #:_________________________
DATE:______________________________________
SPOUSE'S SIGNATURE (necessary
if beneficiary is not spouse):
___________________________________________
(Signature)
___________________________________________
(Print name)
-3-
<PAGE>
LATITUDE COMMUNICATIONS, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
--------------------
I, __________________________, hereby elect to withdraw my participation in
the Latitude Communications, Inc. 1999 Employee Stock Purchase Plan (the "Plan")
----
for the Offering Period that began on _________ ___, _____. This withdrawal
covers all Contributions credited to my account and is effective on the date
designated below.
I understand that all Contributions credited to my account will be paid to
me within ten (10) business days of receipt by the Company of this Notice of
Withdrawal and that my option for the current period will automatically
terminate, and that no further Contributions for the purchase of shares can be
made by me during the Offering Period.
The undersigned further understands and agrees that he or she shall be
eligible to participate in succeeding offering periods only by delivering to the
Company a new Subscription Agreement.
Dated:___________________ ________________________________
Signature of Employee
________________________________
Social Security Number
<PAGE>
EXHIBIT 10.5
LATITUDE COMMUNICATIONS, INC.
1999 DIRECTORS' STOCK OPTION PLAN
---------------------------------
1. PURPOSES OF THE PLAN. The purposes of this Directors' Stock Option
--------------------
Plan are to attract and retain the best available personnel for service as
Directors of the Company, to provide additional incentive to the Outside
Directors of the Company to serve as Directors, and to encourage their continued
service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. DEFINITIONS. As used herein, the following definitions shall apply:
-----------
(a) "BOARD" means the Board of Directors of the Company.
-----
(b) "CHANGE OF CONTROL" means a sale of all or substantially all of
-----------------
the Company's assets, or any merger or consolidation of the Company with or into
another corporation other than a merger or consolidation in which the holders of
more than 50% of the shares of capital stock of the Company outstanding
immediately prior to such transaction continue to hold (either by the voting
securities remaining outstanding or by their being converted into voting
securities of the surviving entity) more than 50% of the total voting power
represented by the voting securities of the Company, or such surviving entity,
outstanding immediately after such transaction.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
----
(d) "COMMON STOCK" means the Common Stock of the Company.
------------
(e) "COMPANY" means Latitude Communications, Inc., a Delaware
-------
corporation.
(f) "CONTINUOUS STATUS AS A DIRECTOR" means the absence of any
-------------------------------
interruption or termination of service as a Director.
(g) "CORPORATE TRANSACTION" means a dissolution or liquidation of the
---------------------
Company, a sale of all or substantially all of the Company's assets, or a
merger, consolidation or other capital reorganization of the Company with or
into another corporation.
(h) "DIRECTOR" means a member of the Board.
--------
(i) "EMPLOYEE" means any person, including any officer or Director,
--------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient in and of itself to
constitute "employment" by the Company.
<PAGE>
(j) "EFFECTIVE DATE" means the later of the date the Board approves
--------------
this Plan or the effective date of the Registration Statement on Form S-1 for
the initial public offering of the Company's Common Stock.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
------------
amended.
(l) "OPTION" means a stock option granted pursuant to the Plan. All
------
options shall be nonstatutory stock options (i.e., options that are not intended
to qualify as incentive stock options under Section 422 of the Code).
(m) "OPTIONED STOCK" means the Common Stock subject to an Option.
--------------
(n) "OPTIONEE" means an Outside Director who receives an Option.
--------
(o) "OUTSIDE DIRECTOR" means a Director who is not an Employee.
----------------
(p) "PARENT" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(q) "PLAN" means this 1999 Directors' Stock Option Plan.
----
(r) "SHARE" means a share of the Common Stock, as adjusted in
-----
accordance with Section 11 of the Plan.
(s) "SUBSIDIARY" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 250,000 Shares of Common Stock (the "Pool"). The Shares may
----
be authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan has been terminated, become available for future grant
under the Plan. In addition, any Shares of Common Stock that are retained by
the Company upon exercise of an Option in order to satisfy the exercise price
for such Option, or any withholding taxes due with respect to such exercise,
shall be treated as not issued and shall continue to be available under the
Plan. If Shares that were acquired upon exercise of an Option are subsequently
repurchased by the Company, such Shares shall not in any event be returned to
the Plan and shall not become available for future grant under the Plan.
4. ADMINISTRATION OF AND GRANTS OF OPTIONS UNDER THE PLAN.
------------------------------------------------------
(a) ADMINISTRATOR. Except as otherwise required herein, the Plan
-------------
shall be administered by the Board.
2
<PAGE>
(b) PROCEDURE FOR GRANTS. All grants of Options hereunder shall be
--------------------
automatic and nondiscretionary and shall be made strictly in accordance with the
following provisions:
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options granted to Outside Directors.
(ii) Each Outside Director shall be automatically granted an
Option to purchase 20,000 Shares (the "First Option") on the later of (1) the
------------
date on which such person first becomes an Outside Director, whether through
election by the stockholders of the Company or appointment by the Board to fill
a vacancy or (2) the Effective Date.
(iii) Each Outside Director shall thereafter be automatically
granted an Option to purchase 5,000 Shares (a "Subsequent Option") on the date
-----------------
of each Annual Meeting of the Company's stockholders immediately following which
such Outside Director is serving on the Board, provided that, on such date, he
or she shall have served on the Board for at least six (6) months prior to the
date of such Annual Meeting.
(iv) Notwithstanding the provisions of subsections (ii) and
(iii) hereof, in the event that a grant would cause the number of Shares subject
to outstanding Options plus the number of Shares previously purchased upon
exercise of Options to exceed the Pool, then each such automatic grant shall be
for that number of Shares determined by dividing the total number of Shares
remaining available for grant by the number of Outside Directors receiving an
Option on the automatic grant date. Any further grants shall then be deferred
until such time, if any, as additional Shares become available for grant under
the Plan through action of the stockholders to increase the number of Shares
which may be issued under the Plan or through cancellation or expiration of
Options previously granted hereunder.
(v) Notwithstanding the provisions of subsections (ii) and
(iii) hereof, any grant of an Option made before the Company has obtained
stockholder approval of the Plan in accordance with Section 17 hereof shall be
conditioned upon obtaining such stockholder approval of the Plan in accordance
with Section 17 hereof.
(vi) The terms of each First Option granted hereunder shall be
as follows:
(1) the First Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Section 9 below;
(2) the exercise price per Share shall be 100% of the fair
market value per Share on the date of grant of the First Option, determined in
accordance with Section 8 hereof; and
(3) the First Option shall become exercisable in
installments cumulatively as to 25% of the Shares subject to the First Option on
each of the first, second, third and fourth anniversaries of the date of grant
of the Option.
3
<PAGE>
(vii) The terms of each Subsequent Option granted hereunder
shall be as follows:
(1) the Subsequent Option shall be exercisable only while
the Outside Director remains a Director of the Company, except as set forth in
Section 9 below;
(2) the exercise price per Share shall be 100% of the fair
market value per Share on the date of grant of the Subsequent Option, determined
in accordance with Section 8 hereof; and
(3) the Subsequent Option shall become exercisable in
installments of fifty percent (50%) of the Shares subject to the Subsequent
Option on the day before each of the first and second anniversaries of the date
of grant of the Subsequent Option.
(c) POWERS OF THE BOARD. Subject to the provisions and restrictions
-------------------
of the Plan, the Board shall have the authority, in its discretion: (i) to
determine, upon review of relevant information and in accordance with Section
8(b) of the Plan, the fair market value of the Common Stock; (ii) to determine
the exercise price per Share of Options to be granted, which exercise price
shall be determined in accordance with Section 8 of the Plan; (iii) to interpret
the Plan; (iv) to prescribe, amend and rescind rules and regulations relating to
the Plan; (v) to authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option previously granted
hereunder; and (vi) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(d) EFFECT OF BOARD'S DECISION. All decisions, determinations and
--------------------------
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.
(e) SUSPENSION OR TERMINATION OF OPTION. If the Chief Executive
-----------------------------------
Officer or his or her designee reasonably believes that an Optionee has
committed an act of misconduct, such officer may suspend the Optionee's right to
exercise any option pending a determination by the Board (excluding the Outside
Director accused of such misconduct). If the Board (excluding the Outside
Director accused of such misconduct) determines an Optionee has committed an act
of embezzlement, fraud, dishonesty, nonpayment of an obligation owed to the
Company, breach of fiduciary duty or deliberate disregard of the Company rules
resulting in loss, damage or injury to the Company, or if an Optionee makes an
unauthorized disclosure of any Company trade secret or confidential information,
engages in any conduct constituting unfair competition, induces any Company
customer to breach a contract with the Company or induces any principal for whom
the Company acts as agent to terminate such agency relationship, neither the
Optionee nor his or her estate shall be entitled to exercise any Option
whatsoever. In making such determination, the Board of Directors (excluding the
Outside Director accused of such misconduct) shall act fairly and shall give the
Optionee an opportunity to appear and present evidence on Optionee's behalf at a
hearing before the Board or a committee of the Board.
5. ELIGIBILITY. Options may be granted only to Outside Directors. All
-----------
Options shall be automatically granted in accordance with the terms set forth in
Section 4(b) above. An Outside
4
<PAGE>
Director who has been granted an Option may, if he or she is otherwise eligible,
be granted an additional Option or Options in accordance with such provisions.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate his or her directorship at any time.
6. EFFECTIVE DATE; TERM OF PLAN; The Plan shall become effective on the
-----------------------------
Effective Date and shall continue in effect for a term of ten (10) years unless
sooner terminated under Section 13 of the Plan.
7. TERM OF OPTIONS. The term of each Option shall be ten (10) years from
---------------
the date of grant thereof unless an Option terminates sooner pursuant to Section
9 below.
8. EXERCISE PRICE AND CONSIDERATION.
--------------------------------
(a) EXERCISE PRICE. The per Share exercise price for the Shares to be
--------------
issued pursuant to exercise of an Option shall be 100% of the fair market value
per Share on the date of grant of the Option.
(b) FAIR MARKET VALUE. The fair market value shall be determined by
-----------------
the Board; provided however that in the event the Common Stock is traded on the
Nasdaq National Market or listed on a stock exchange, the fair market value per
Share shall be the closing sales price on such system or exchange on the date of
grant of the Option (or, in the event that the Common Stock is not traded on
such date, on the immediately preceding trading date), as reported in The Wall
--------
Street Journal, or if there is a public market for the Common Stock but the
- --------------
Common Stock is not traded on the Nasdaq National Market or listed on a stock
exchange, the fair market value per Share shall be the mean of the bid and asked
prices of the Common Stock in the over-the-counter market on the date of grant,
as reported in The Wall Street Journal (or, if not so reported, as otherwise
------------------------
reported by the National Association of Securities Dealers Automated Quotation
("Nasdaq") System).
(c) FORM OF CONSIDERATION. The consideration to be paid for the
---------------------
Shares to be issued upon exercise of an Option shall consist entirely of cash,
check, other Shares of Common Stock having a fair market value on the date of
surrender equal to the aggregate exercise price of the Shares as to which the
Option shall be exercised (which, if acquired from the Company, shall have been
held for at least six months), or any combination of such methods of payment
and/or any other consideration or method of payment as shall be permitted under
applicable corporate law.
9. EXERCISE OF OPTION.
------------------
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times as are set forth in Section
4(b) above; provided however that no Options shall be exercisable prior to
stockholder approval of the Plan in accordance with Section 17 below has been
obtained.
5
<PAGE>
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 8(c) of the Plan. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such Shares,
no right to vote or receive dividends or any other rights as a stockholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. A share certificate for the number of Shares so acquired shall be issued
to the Optionee as soon as practicable after exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) TERMINATION OF CONTINUOUS STATUS AS A DIRECTOR. If an Outside
----------------------------------------------
Director ceases to serve as a Director, he or she may, but only within ninety
(90) days after the date he or she ceases to be a Director of the Company,
exercise his or her Option to the extent that he or she was entitled to exercise
it at the date of such termination. Notwithstanding the foregoing, in no event
may the Option be exercised after its term set forth in Section 7 has expired.
To the extent that such Outside Director was not entitled to exercise an Option
at the date of such termination, or does not exercise such Option (to the extent
he or she was entitled to exercise) within the time specified above, the Option
shall terminate and the Shares underlying the unexercised portion of the Option
shall revert to the Plan.
(c) DISABILITY OF OPTIONEE. Notwithstanding Section 9(b) above, in
----------------------
the event a Director is unable to continue his or her service as a Director with
the Company as a result of his or her total and permanent disability (as defined
in Section 22(e)(3) of the Code), he or she may, but only within twelve (12)
months from the date of such termination, exercise his or her Option to the
extent he or she was entitled to exercise it at the date of such termination.
Notwithstanding the foregoing, in no event may the Option be exercised after its
term set forth in Section 7 has expired. To the extent that he or she was not
entitled to exercise the Option at the date of termination, or if he or she does
not exercise such Option (to the extent he or she was entitled to exercise)
within the time specified above, the Option shall terminate and the Shares
underlying the unexercised portion of the Option shall revert to the Plan.
(d) DEATH OF OPTIONEE. In the event of the death of an Optionee: (A)
-----------------
During the term of the Option who is, at the time of his or her death, a
Director of the Company and who shall have been in Continuous Status as a
Director since the date of grant of the Option, or (B) three (3) months after
the termination of Continuous Status as a Director, the Option may be exercised,
at any time within twelve (12) months following the date of death, by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but
6
<PAGE>
only to the extent of the right to exercise that had accrued at the date of
death or the date of termination, as applicable. Notwithstanding the foregoing,
in no event may the Option be exercised after its term set forth in Section 7
has expired. To the extent that an Optionee was not entitled to exercise the
Option at the date of death or termination or if he or she does not exercise
such Option (to the extent he or she was entitled to exercise) within the time
specified above, the Option shall terminate and the Shares underlying the
unexercised portion of the Option shall revert to the Plan.
10. NONTRANSFERABILITY OF OPTIONS. The Option may not be sold, pledged,
-----------------------------
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent or distribution or pursuant to a qualified
domestic relations order (as defined by the Code or the rules thereunder). The
designation of a beneficiary by an Optionee does not constitute a transfer. An
Option may be exercised during the lifetime of an Optionee only by the Optionee
or a transferee permitted by this Section.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS.
------------------------------------------------------------------
(a) ADJUSTMENT. Subject to any required action by the stockholders of
----------
the Company, the number of shares of Common Stock covered by each outstanding
Option, the number of Shares of Common Stock set forth in Sections 4(b)(ii) and
(iii) above, and the number of Shares of Common Stock which have been authorized
for issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per Share of Common Stock covered by each such
outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued Shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock (including any such change in the number of Shares of Common
Stock effected in connection with a change in domicile of the Company) or any
other increase or decrease in the number of issued Shares of Common Stock
effected without receipt of consideration by the Company; provided however that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to an
Option.
(b) CORPORATE TRANSACTIONS; CHANGE OF CONTROL. In the event of a
-----------------------------------------
Corporate Transaction, each outstanding Option shall be assumed or an equivalent
option shall be substituted by the successor corporation or a Parent or
Subsidiary of such successor corporation, unless the successor corporation does
not agree to assume the outstanding Options or to substitute equivalent options,
in which case the Options shall terminate upon the consummation of the
transaction; provided however that in the event of a Change of Control, each
Optionee shall have the right to exercise his or her Option as to all of the
Optioned Stock, including Shares as to which the Option would not otherwise be
exercisable, immediately prior to the consummation of such transaction.
7
<PAGE>
For purposes of this Section 11(b), an Option shall be considered
assumed, without limitation, if, at the time of issuance of the stock or other
consideration upon such Corporate Transaction or Change of Control, each
Optionee would be entitled to receive upon exercise of an Option the same number
and kind of shares of stock or the same amount of property, cash or securities
as the Optionee would have been entitled to receive upon the occurrence of such
transaction if the Optionee had been, immediately prior to such transaction, the
holder of the number of Shares of Common Stock covered by the Option at such
time (after giving effect to any adjustments in the number of Shares covered by
the Option as provided for in this Section 11); provided however that if such
consideration received in the transaction was not solely common stock of the
successor corporation or its Parent, the Administrator may, with the consent of
the successor corporation, provide for the consideration to be received upon
exercise of the Option to be solely common stock of the successor corporation or
its Parent equal to the Fair Market Value of the per Share consideration
received by holders of Common Stock in the transaction.
(c) CERTAIN DISTRIBUTIONS. In the event of any distribution to the
---------------------
Company's stockholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per Share of Common Stock covered by each
outstanding Option to reflect the effect of such distribution.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
------------------------
all purposes, be the date determined in accordance with Section 4(b) hereof.
Notice of the determination shall be given to each Outside Director to whom an
Option is so granted within a reasonable time after the date of such grant.
13. AMENDMENT AND TERMINATION OF THE PLAN.
-------------------------------------
(a) AMENDMENT AND TERMINATION. The Board may amend or terminate the
-------------------------
Plan from time to time in such respects as the Board may deem advisable;
provided that, to the extent necessary and desirable to comply with the legal
requirements relating to the administration of stock option plans under
applicable U.S. state corporate laws, U.S. federal and applicable state
securities laws, the Code, any stock exchange or Nasdaq rules or regulations to
which the Company may be subject and the applicable laws of any other country or
jurisdiction where Options are granted under the Plan, as such laws, rules,
regulations and requirements shall be in place from time to time (the
"Applicable Laws"). The Company shall obtain approval of the stockholders of
- ----------------
the Company to Plan amendments to the extent and in the manner required by such
law or regulation.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
----------------------------------
termination of the Plan that would impair the rights of any Optionee shall not
affect Options already granted to such Optionee and such Options shall remain in
full force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.
14. CONDITIONS UPON ISSUANCE OF SHARES. Notwithstanding any other
----------------------------------
provision of the Plan or any agreement entered into by the Company pursuant to
the Plan, the Company shall not
8
<PAGE>
be obligated, and shall have no liability for failure, to issue or deliver any
Shares under the Plan unless such issuance or delivery would comply with the
Applicable Laws. Such compliance shall be determined by the Company in
consultation with its legal counsel.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by law.
15. RESERVATION OF SHARES. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
16. OPTION AGREEMENT. Options shall be evidenced by written option
----------------
agreements in such form as the Board shall approve.
17. STOCKHOLDER APPROVAL. If required by the Applicable Laws, continuance
--------------------
of the Plan shall be subject to approval by the stockholders of the Company.
Such stockholder approval shall be obtained in the manner and to the degree
required under the Applicable Laws.
9
<PAGE>
LATITUDE COMMUNICATIONS, INC.
1999 DIRECTORS' STOCK OPTION PLAN
NOTICE OF STOCK OPTION GRANT
----------------------------
((Optionee))
((OptioneeAddress1))
((OptioneeAddress2))
You have been granted an option to purchase Common Stock of Latitude
Communications, Inc. (the "Company") as follows:
-------
Date of Grant ((GrantDate))
Vesting Commencement Date ((VestingStartDate))
Exercise Price per Share ((ExercisePrice))
Total Number of Shares Granted ((SharesGranted))
Total Exercise Price ((TotalExercisePrice))
Expiration Date ((ExpirDate))
Vesting Schedule This Option may be exercised,
in whole or in part, in
accordance with the following
schedule: ((VestingSchedule))
Termination Period This Option may be exercised
for 90 days after termination
of Optionee's Continuous Status
as a Director, or such longer
period as may be applicable
upon death or Disability of
Optionee as provided in the
Plan, but in no event later
than the Expiration Date as
provided above.
<PAGE>
By your signature and the signature of the Company's representative below,
you and the Company agree that this option is granted under and governed by the
terms and conditions of the 1999 Directors' Stock Option Plan and the
Nonstatutory Stock Option Agreement, all of which are attached and made a part
of this document.
OPTIONEE: LATITUDE COMMUNICATIONS, INC.
By:__________________________
_____________________________
Signature
Title:_______________________
_____________________________
Print Name
-2-
<PAGE>
LATITUDE COMMUNICATIONS, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
-----------------------------------
1. GRANT OF OPTION. The Board of Directors of the Company hereby grants
---------------
to the Optionee named in the Notice of Stock Option Grant attached as Part I of
this Agreement (the "Optionee"), an option (the "Option") to purchase a number
-------- ------
of Shares, as set forth in the Notice of Stock Option Grant, at the exercise
price per share set forth in the Notice of Stock Option Grant (the "Exercise
--------
Price"'), subject to the terms and conditions of the 1999 Directors' Stock
- -----
Option Plan (the "Plan"), which is incorporated herein by reference.
----
(Capitalized terms not defined herein shall have the meanings ascribed to such
terms in the Plan.) In the event of a conflict between the terms and conditions
of the Plan and the terms and conditions of this Nonstatutory Stock Option
Agreement, the terms and conditions of the Plan shall prevail.
2. EXERCISE OF OPTION.
------------------
(a) RIGHT TO EXERCISE. This Option is exercisable during its term in
-----------------
accordance with the Vesting Schedule set out in the Notice of Stock Option Grant
and the applicable provisions of the Plan and this Nonstatutory Stock Option
Agreement. In the event of Optionee's death, disability or other termination of
Optionee's employment or consulting relationship, the exercisability of the
Option is governed by the applicable provisions of the Plan and this
Nonstatutory Stock Option Agreement.
(b) METHOD OF EXERCISE. This Option is exercisable by delivery of an
------------------
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
--------- ---------------
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
----------------
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be signed by
the Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company. The Exercise Notice shall be accompanied by payment
of the aggregate Exercise Price as to all Exercised Shares. This Option shall
be deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with all relevant provisions of law
and the requirements of any stock exchange or quotation service upon which the
Shares are then listed. Assuming such compliance, for income tax purposes the
Exercised Shares shall be considered transferred to the Optionee on the date the
Option is exercised with respect to such Exercised Shares.
3. METHOD OF PAYMENT. Payment of the aggregate Exercise Price shall be by
-----------------
any of the following, or a combination thereof, at the election of the Optionee:
(a) cash;
-3-
<PAGE>
(b) check;
(c) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price; or
(d) surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
4. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution or
pursuant to a domestic relations order (as defined by the Code or the rules
thereunder) and may be exercised during the lifetime of Optionee only by the
Optionee or a transferee permitted by Section 10 of the Plan. The terms of the
Plan and this Nonstatutory Stock Option Agreement shall be binding upon the
executors, administrators, heirs, successors and assigns of the Optionee.
5. TERM OF OPTION. This Option may be exercised only within the term set
--------------
out in the Notice of Stock Option Grant, and may be exercised during such term
only in accordance with the Plan and the terms of this Nonstatutory Stock Option
Agreement.
6. TAX CONSEQUENCES. Set forth below is a brief summary of certain
----------------
federal and California tax consequences relating to this Option under the law in
effect as of the date of grant. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE
TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT HIS OR
HER OWN TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) EXERCISING THE OPTION. Since this Option does not qualify as an
---------------------
incentive stock option under Section 422 of the Code, the Optionee may incur
regular federal and California income tax liability upon exercise. The Optionee
will be treated as having received compensation income (taxable at ordinary
income tax rates) equal to the excess, if any, of the fair market value of the
Exercised Shares on the date of exercise over their aggregate Exercise Price.
(b) DISPOSITION OF SHARES. If the Optionee holds the Option Shares
---------------------
for more than one year, gain realized on disposition of the Shares will be
treated as long-term capital gain for federal and California income tax
purposes. The long-term capital gain will be taxed for federal income tax and
alternative minimum tax purposes as a maximum rate of 28% if the Shares are held
more than one year but less than 18 months after exercise and at 20% if the
Shares are held more than 18 months after exercise.
-4-
<PAGE>
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Nonstatutory Stock Option Agreement.
Optionee has reviewed the Plan and this Nonstatutory Stock Option Agreement in
their entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Nonstatutory Stock Option Agreement and fully understands all
provisions of the Plan and Nonstatutory Stock Option Agreement. Optionee hereby
agrees to accept as binding, conclusive and final all decisions or
interpretations of the Administrator upon any questions relating to the Plan and
Nonstatutory Stock Option Agreement.
LATITUDE COMMUNICATIONS, INC
________________________________ By:_____________________________
((Optionee))
Title:__________________________
-5-
<PAGE>
CONSENT OF SPOUSE
-----------------
The undersigned spouse of Optionee has read and hereby approves the terms
and conditions of the Plan and this Nonstatutory Stock Option Agreement. In
consideration of the Company's granting his or her spouse the right to purchase
Shares as set forth in the Plan and this Nonstatutory Stock Option Agreement,
the undersigned hereby agrees to be irrevocably bound by the terms and
conditions of the Plan and this Nonstatutory Stock Option Agreement and further
agrees that any community property interest shall be similarly bound. The
undersigned hereby appoints the undersigned's spouse as attorney-in-fact for the
undersigned with respect to any amendment or exercise of rights under the Plan
or this Nonstatutory Stock Option Agreement.
______________________________________
Spouse of Optionee
<PAGE>
EXHIBIT A
---------
NOTICE OF EXERCISE
------------------
To: Latitude Communications, Inc.
Attn: Stock Option Administrator
Subject: Notice of Intention to Exercise Stock Option
--------------------------------------------
This is official notice that the undersigned ("Optionee") intends to
--------
exercise Optionee's option to purchase __________ shares of Latitude
Communications, Inc. Common Stock, under and pursuant to the Company's 1999
Directors' Stock Option Plan and the Nonstatutory Stock Option Agreement dated
_______________, as follows:
Grant Number: ________________________________
Date of Purchase: ________________________________
Number of Shares: ________________________________
Purchase Price: ________________________________
Method of Payment of
Purchase Price: ________________________________
Social Security No.: ________________________________
The shares should be issued as follows:
Name: _________________________________
Address: _________________________________
_________________________________
_________________________________
Signed: _________________________________
Date: _________________________________
<PAGE>
EXHIBIT 10.6
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE OR DISPOSITION OF SUCH
SECURITIES MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT
RELATING THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED, (iii)
RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION,
OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF ARTICLE III OF THIS
WARRANT.
WARRANT
TO PURCHASE SHARES OF SERIES B PREFERRED STOCK
AS HEREIN DESCRIBED
Dated September 15, 1994
This certifies that for value received:
PHOENIX LEASING INCORPORATED
or registered assigns, is entitled, subject to the terms set forth herein, to
purchase from Latitude Communications, Inc., a California corporation (the
"Company"), up to Twenty-Nine Thousand Ninety-One (29,091) fully paid and non-
- --------
assessable shares of the Company's Series B Preferred Stock, at the price of Two
Dollars and Seventy-Five Cents ($2.75) per share. The initial purchase price of
Two Dollars and Seventy-Five Cents ($2.75) per share, and the number of shares
purchasable hereunder, are subject to adjustment in certain events, all as more
fully set forth under Article IV herein.
ARTICLE I
DEFINITIONS
-----------
"Acquisition of the Company" means the Company's consolidation or merger
--------------------------
with or into another corporation in which the Company is not the surviving
entity, or a reverse triangular merger in which the Company is the surviving
entity but the shares of the Company's capital stock outstanding immediately
prior to the merger are converted, by virtue of the merger, into other property,
whether in the form of securities, cash or otherwise, or the sale or transfer of
the Company's property as an entirety or substantially as an entirety.
"Articles of Incorporation" means the Amended and Restated Articles of
-------------------------
Incorporation of the Company, as filed with the California Secretary of State on
May 27, 1994.
"Closing Date" means September 15, 1994.
------------
<PAGE>
"Commission" means the Securities and Exchange Commission, or any other
----------
federal agency then administering the Exchange Act or the Securities Act, as
defined herein.
"Common Stock" means the Company's Common Stock, any stock into which such
------------
stock shall have been changed or any stock resulting from any reclassification
of such stock, and any other capital stock of the Company of any class or series
now or hereafter authorized having the right to share in distributions either of
earnings or assets of the Company without limit as to amount or percentage.
"Company" means Latitude Communications, Inc., a California corporation,
-------
and any successor corporation.
"Conversion Price" means the Conversion Price for Series B Preferred Stock,
----------------
as determined in accordance with the Articles of Incorporation.
"Convertible Securities" means evidences of indebtedness, shares of stock
----------------------
or other securities which are convertible into or exchangeable for, with or
without payment of additional consideration, shares of Common Stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event or both.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
------------
any successor federal statute, and the rules and regulations of the Securities
and Exchange Commission promulgated thereunder, all as the same shall be in
effect from time to time.
"Exercise Period" means the period commencing on the Closing Date and
---------------
terminating at the earlier to occur of: (i) 5:00 p.m., Pacific Time on the tenth
(10th) anniversary of the Closing Date, or (ii) 5:00 p.m., Pacific Time on the
fifth (5th) anniversary of the closing of the Company's initial sale and
issuance of shares of Common Stock in an underwritten public offering, pursuant
to a Registration.
"Exercise Price" means the price per share of Series B Preferred Stock set
--------------
forth in the Preamble to this Warrant, as such price may be adjusted pursuant to
Article IV hereof.
"Fair Market Value" means
-----------------
(i) If shares of Series B Preferred Stock or Common Stock, as the
case may be, are being sold pursuant to a Registration and Fair Market Value
is being determined as of the closing of the public offering, the "price to
public" specified for such shares in the final prospectus for such public
offering;
(ii) If shares of Series B Preferred Stock or Common Stock, as the
case may be, are then listed or admitted to trading on any national securities
exchange or traded on any national market system and Fair Market Value is not
being determined as of the date described in clause (i) of this definition, the
average of the daily closing prices for the thirty (30) trading days before such
date, excluding any trades which are not bona fide, arm's length transactions.
The closing price for each day shall be the last sale price on such date or, if
no such sale takes place
-2-
<PAGE>
on such date, the average of the closing bid and asked prices on such date, in
each case as officially reported on the principal national securities exchange
or national market system on which such shares are then listed, admitted to
trading or traded;
(iii) If no shares of Series B Preferred Stock or Common Stock, as
the case may be, are then listed or admitted to trading on any national
securities exchange or traded on any national market system or being offered to
the public pursuant to a Registration, the average of the reported closing bid
and asked prices thereof on such date in the over-the-counter market as shown by
the National Association of Securities Dealers automated quotation system or, if
such shares are not then quoted in such system, as published by the National
Quotation Bureau, Incorporated or any similar successor organization, and in
either case as reported by any member firm of the New York Stock Exchange
selected by the Holder; or
(iv) If no shares of Series B Preferred Stock or Common Stock, as the
case may be, are then listed or admitted to trading on any national exchange or
traded on any national market system, if no closing bid and asked prices thereof
are then so quoted or published in the over-the-counter market and if no such
shares are being offered to the public pursuant to a Registration, the Fair
Market Value of a share of Series B Preferred Stock or Common Stock, as the case
may be, shall be determined by the Board of Directors of the Company; provided,
--------
however, that if the Holders of a majority in interest under the Warrant give
- -------
the Company written notice of objection to such value determination within
twenty (20) days of receipt of notice of such determination, then the Company
and such Holders shall, within five (5) days from the date of the Company's
receipt of the Holders' objection, jointly retain a valuation firm satisfactory
to each of them. If the Company and such Holders are unable to agree on the
selection of such a firm within such five (5) day period, the Company and such
Holders shall, within twenty (20) days after expiration of such five day period,
each retain a separate independent valuation firm. If either the Company or
such Holders fail to retain such a valuation firm during such twenty (20) day
period, then the valuation firm retained by such Holders or the Company, as the
case may be, shall alone take the actions described below. Such firms shall
determine within thirty (30) days of being retained the Fair Market Value of a
share of Series B Preferred Stock or Common Stock, as the case may be, and
deliver their opinion in writing to the Company and to such Holders as to the
fair value. If such firms cannot jointly agree upon the Fair Market Value,
then, unless otherwise directed in writing by both the Company and such Holders,
such firms, in their sole discretion, shall choose another firm independent of
the Company and such Holders, which firm shall make such determination and
render such an opinion as promptly as practicable. In either case, the
determination so made shall be conclusive and binding on the Company and the
Holders. The fees and expenses for such determination made by such firms shall
be shared equally by the Company and such Holders. In the determination of the
Fair Market Value of a share of Series B Preferred Stock or Common Stock, as the
case may be, there shall not be taken into consideration any premium for shares
representing control of the Company or any discount related to shares
representing a minority interest therein or related to any illiquidity or lack
of marketability of shares arising from restrictions on transfer under federal
and applicable state securities laws or otherwise.
"Fiscal Year" means the fiscal year of the Company.
-----------
-3-
<PAGE>
"Holder" and "Holders" means the Person or Persons, as applicable, in whose
------ -------
name this Warrant is registered on the books of the Company maintained for such
purpose.
"Option" means any right, warrant or option to subscribe for or purchase
------
shares of Common Stock or Convertible Securities.
"Person" means and includes natural persons, corporations, limited
------
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts, government entities and authorities and other organizations, whether or
not legal entities.
"Preferred Stock" means the Preferred Stock of the Company, as defined in
---------------
the Articles of Incorporation.
"Principal Executive Office" means the Company's office at 4001 Burton
--------------------------
Drive, Santa Clara, California 95054, or such other office as designated in
writing to the Holder by the Company.
"Public Merger" means an Acquisition of the Company in which the Common
-------------
Stock shareholders of the Company receive securities which are listed or
admitted to trading on any national securities exchange or traded on any
national market system or approved for quotation in the National Association of
Securities Dealers, Inc. automated quotation system or any similar system of
automated dissemination of quotations of securities prices.
"Register," "Registered" and "Registration" refer to a registration
-------- ---------- ------------
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of the effectiveness of such
registration statement.
"Rights Agreement" means the Amended and Restated Registration Rights
----------------
Agreement, dated as of June 1, 1994, by and among the Company and the
shareholders of the Company named therein, attached hereto as Exhibit "E".
----------
"Rule 144" means Rule 144 as promulgated by the Commission under the
--------
Securities Act, as such Rule may be amended from time to time, or any similar
successor rule that the Commission may promulgate.
"Securities Act" means the Securities Act of 1933, as amended, or any
--------------
successor federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.
"Series B Preferred Stock" means the Series B Preferred Stock of the
------------------------
Company, as defined in the Articles of Incorporation.
"Series B Purchase Agreement" means the Series B Preferred Stock Purchase
---------------------------
Agreement, dated as of June 1, 1994, by and among the Company and the
shareholders of the Company named therein, attached hereto as Exhibit "G".
-----------
-4-
<PAGE>
"Shareholder" means a holder of one or more Warrant Shares or shares of
-----------
Common Stock acquired upon conversion of Warrant Shares.
"Warrant" means the warrant dated as of Closing Date issued to Holder and
-------
all warrants issued upon the partial exercise, transfer or division of or in
substitution for any Warrant.
"Warrant Shares" means the shares of Series B Preferred Stock issuable upon
--------------
the exercise of this Warrant provided that under the terms hereof there shall be
a change such that the securities purchasable hereunder shall be issued by an
entity other than the Company or there shall be a change in the type or class of
securities purchasable hereunder, then the term shall mean the securities
issuable upon the exercise of the rights granted hereunder.
ARTICLE II
EXERCISE
--------
2.1 Exercise Right; Manner of Exercise. The purchase rights represented
----------------------------------
by this Warrant may be exercised by the Holder, in whole or in part, at any time
and from time to time during the Exercise Period upon (i) surrender of this
Warrant, together with an executed Notice of Exercise, substantially in the form
of Exhibit "A" attached hereto, at the Principal Executive Office, and (ii)
-----------
payment to the Company of the aggregate Exercise Price for the number of Warrant
Shares specified in the Notice of Exercise (such aggregate Exercise Price, the
"Total Exercise Price"). The Total Exercise Price shall be paid by check;
- ---------------------
provided, however, that if the Warrant Shares are acquired in conjunction with a
- -------- -------
Registration of such Warrant Shares or the Common Stock acquirable upon
conversions of such Warrant Shares, then Holder may arrange for the aggregate
Exercise Price for such Warrant Shares to be paid to the company from the
proceeds of the sale of such Warrant Shares or the Common Stock acquirable upon
conversion of such Warrant Shares pursuant to such Registration. The Person or
Person(s) in whose name(s) any certificate(s) representing the Warrant Shares
which are issuable upon exercise of this Warrant shall be deemed to become the
holder(s) of, and shall be treated for all purposes as the record holder(s) of,
such Warrant Shares, and such Warrant Shares shall be deemed to have been
issued, immediately prior to the close of business on the date on which this
Warrant and Notice of Exercise are presented and payment made for such Warrant
Shares, notwithstanding that the stock transfer books of the Company shall then
be closed or that certificates representing such Warrant Shares shall not then
be actually delivered to such Person or Person(s). Certificates for the Warrant
Shares so purchased shall be delivered to the Holder within a reasonable time,
not exceeding fifteen (15) days after this Warrant is exercised. If this
Warrant is exercised in part only, the Company shall, upon surrender of this
Warrant for cancellation, deliver a new Warrant evidencing the rights of the
Holder to purchase the balance of the Warrant Shares which Holder is entitled to
purchase hereunder. The issuance of Warrant Shares upon exercise of this
Warrant shall be made without charge to the Holder for any issuance tax with
respect thereto or any other cost incurred by the Company in connection with the
exercise of this Warrant and the related issuance of Warrant Shares.
-5-
<PAGE>
2.2 Conversion of Warrant.
---------------------
(a) Right to Convert. In addition to, and without limiting, the other
----------------
rights of the Holder hereunder, the Holder hall have the right (the "Conversion
----------
Right") to convert this Warrant or any part hereof into Warrant Shares at any
- -----
time and from time to time during the term hereof. Upon exercise of the
Conversion Right with respect to a particular number of Warrant Shares (the
"Converted Warrant Shares"), the Company shall deliver to the Holder, without
- -------------------------
payment by the Holder of any Exercise Price or any cash or other consideration,
that number of Warrant Shares computed using the following formula:
X= B-A
---
Y
Where: X= The number of Warrant Shares to be issued to the Holder
Y= The Fair Market Value of one Warrant Share as of the Conversion
Date
B= The Aggregate Fair Market Value (i.e., Fair Market Value x
----
Converted Warrant Shares)
A= The Aggregate Exercise Price (i.e., Exercise Price x Converted
----
Warrant Shares)
(b) Method of Exercise. The Conversion Right may be exercised by the
------------------
Holder by the surrender of this Warrant at the Principal Executive Office,
together with a written statement the "Conversion Statement") specifying that
--------------------
the Holder intends to exercise the Conversion Right and indicating the number of
Warrant Shares to be acquired upon exercise of the Conversion Right. Such
conversion shall be effective upon the Company's receipt of this Warrant,
together with the Conversion Statement, or on such later date as is specified in
the Conversion Statement (the "Conversion Date") and, at the Holder's election,
---------------
may be made contingent upon the closing of the consummation of the sale of
Common Stock pursuant to a Registration. Certificates for the Warrant Shares so
acquired shall be delivered to the Holder within a reasonable time, not
exceeding fifteen (15) days after the Conversion Date. If applicable, the
Company shall, upon surrender of this Warrant for cancellation, deliver a new
Warrant evidencing the rights of the Holder to purchase the balance of the
Warrant Shares which Holder is entitled to purchase hereunder. The issuance of
Warrant Shares upon exercise of this Warrant shall be made without charge to the
Holder for any issuance tax with respect thereto or any other cost incurred by
the Company in connection with the conversion of this Warrant and the related
issuance of Warrant Shares.
2.3 Company's Option to Acquire Warrant.
-----------------------------------
(a) Acquisition of the Company. In the event of any Acquisition of
--------------------------
the Company, other than a Public Merger, the Company shall have the option to
purchase this Warrant on the closing date of such event for cash in an amount
per Warrant Share equal to the greater of (x) three (3) times the Exercise
Price, less the Exercise Price, or (y) the excess (if any)
-6-
<PAGE>
of the Market Value of a Warrant Share over the Exercise Price; provided,
--------
however, that such option shall not be exercisable to the extent that the
- -------
Holder exercises this Warrant in connection with such Acquisition of the
Company; provided further, however, that such option shall not be exercisable
---------------- -------
if in connection with such Acquisition of the Company all other warrants to
acquire securities of the Company will not expire and/or terminate, whether by
their terms, complete exercise by the holders thereof or the exercise of
purchase rights by the Company. The Market Value of each Warrant Share shall
be determined by dividing the total consideration to be received by the
Company or its shareholders in connection with such event by the number of
shares of Common Stock then outstanding (assuming that all convertible
securities of the Company have been converted into Common Stock). Any
securities to be delivered to the Company or its shareholders shall be valued
as follows:
(A) If then listed or admitted to trading on any national securities
exchange or traded on any national market system, the value of
the securities shall be the average of the daily closing prices
for the thirty (30) trading days ending five (5) business days
before the closing of the transaction, excluding any trades which
are not bona fide, arm's length transactions. The closing price
for each day shall be the last sale price on such date or, if no
such sale takes place on such date, the average of the closing
bid and asked prices on such date, in each case as officially
reported on the principal national securities exchange or
national market system on which such shares are then listed,
admitted to trading or traded;
(B) If traded over-the-counter, the value of the securities shall be
the average of the closing bid and ask prices thereof over the
thirty (30) day period ending five (5) business days prior to the
closing of the transaction, as shown by the National Association
of Securities Dealers automated quotation system or, if such
securities are not then quoted in such system, as published by
the National Quotation Bureau, Incorporated or any similar
successor organization, and in either case as reported by any
member firm of the New York Stock Exchange selected by the
Holder; and
(C) If there is no public market, the value shall be the fair market
value thereof as determined by mutual agreement of the Company
and the Holders of a majority in interest under the Warrant;
provided, however, that if the Company and such Holders are
-------- -------
unable to mutually agree upon the value, and the value asserted
by the Holder is not greater than one hundred ten percent (110%)
of the value asserted by the Company, then the value of the
securities shall be the sum of (1) the value asserted by the
Company and (2) fifty percent (50%) of the difference between the
value asserted by the Company and the value asserted by such
Holders; provided further, however, that if the Company and such
---------------- -------
Holders are unable to mutually agree upon the value of the
securities and the immediately preceding proviso is not
operative, the value shall be determined by a valuation firm
-7-
<PAGE>
or valuation firms in accordance with the procedures of the
proviso of clause (iv) of the definition of Fair Market Value
set forth above, which is set forth in this clause (C) by this
reference, mutatis mutandis.
(b) Registration. If the Company is selling Common Stock pursuant to
------------
a Registration, then the Company shall have the option to purchase this Warrant
on the closing date of such Registration for cash in an amount per Warrant Share
equal to the greater of (x) three (3) times the Exercise Price, less the
Exercise Price, or (y) the excess, if any, of the Fair Market Value of a Warrant
Share over the Exercise Price; provided, however, that such option shall not be
-------- -------
exercisable to the extent that the Holder exercises this Warrant in connection
with such Registration; provided further, however, that such option shall not be
exercisable if in connection with such Registration all other warrants to
acquire securities of the Company will not expire and/or terminate, whether by
their terms, complete exercise by the holders thereof or the exercise of
purchase rights by the Company.
2.4 Termination of Warrant. This Warrant shall terminate upon the closing
----------------------
of a Public Merger.
2.5 Fractional Shares. The Company shall not issue fractional shares of
-----------------
Series B Preferred Stock or Common Stock or scrip representing fractional shares
of Series B Preferred Stock or Common Stock upon any exercise or conversion of
this Warrant. As to any fractional share of Series B Preferred Stock or Common
Stock which the Holder would otherwise be entitled to purchase from the Company
upon such exercise or conversion, the Company shall purchase from the Holder
such fractional share at a price equal to an amount calculated by multiplying
such fractional share (calculated to the nearest 1/100th of a share) by the fair
market value of a share of Series B Preferred Stock or Common Stock, as
applicable, on the date of the Notice of Exercise or the Conversion Date, as
applicable, as determined in good faith by the Company's Board of Directors.
Payment of such amount shall be made in cash or by check payable to the order of
the Holder at the time of delivery of any certificate or certificates arising
upon such exercise or conversion.
2.6 Continued Validity. A Shareholder shall be entitled to all rights to
------------------
which a Holder of this Warrant is entitled pursuant to the provisions of this
Warrant, except rights which by their terms apply only to a Warrant. The
Company shall, at the time of the exercise of this Warrant, in whole or in part,
upon the request of a Shareholder, acknowledge in writing, in form reasonably
satisfactory to the Shareholder, its continuing obligation to afford to the
Shareholder all rights to which the Shareholder is entitled in accordance with
the provisions of this Warrant; provided, however, that if the Shareholder fails
-------- -------
to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to the Shareholder all such rights.
ARTICLE III
REGISTRATION, TRANSFER, EXCHANGE AND REPLACEMENT
------------------------------------------------
3.1 Maintenance of Registration Books. The Company shall keep at the
---------------------------------
Principal Executive Office a register in which, subject to such reasonable
regulations as it may prescribe, it
-8-
<PAGE>
shall provide for the registration, transfer and exchange of this Warrant. The
Company and any Company agent may treat the Person in whose name this Warrant
is registered as the owner of this Warrant for all purposes whatsoever and
neither the Company nor any Company agent shall be affected by any notice to
the contrary.
3.2 Restrictions on Transfers.
-------------------------
(a) Compliance with Securities Act. The Holder, by acceptance hereof,
------------------------------
agrees that this Warrant, the Series B Preferred Stock to be issued upon
exercise hereof and the shares of Common Stock to be issued upon conversion of
such shares of Series B Preferred Stock are being acquired for investment,
solely for the Holder's own account and not as a nominee for any other Person,
and that the Holder will not offer, sell or otherwise dispose of this Warrant,
any such shares of Series B Preferred Stock or any such shares of Common Stock
except under circumstances which will not result in a violation of the
Securities Act. Upon exercise of this Warrant, the Holder shall confirm in
writing, by executing the form attached as Exhibit "B" hereto, that the shares
-----------
of Series B Preferred Stock or Common Stock purchased thereby are being acquired
for investment, solely for the Holder's own account and not as a nominee for any
other Person, and not with a view toward distribution or resale.
(b) Certificate Legends. This Warrant, all shares of Series B
-------------------
Preferred Stock issued upon exercise of this Warrant (unless Registered under
the Securities Act) , and all shares of Common Stock issued upon conversion of
such shares of Series B Preferred Stock (unless Registered under the Securities
Act) shall be stamped or imprinted with a legend in substantially the following
form (in addition to any legends required by applicable state securities laws)
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE OR DISPOSITION OF SUCH
SECURITIES MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT
RELATING THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED, (iii)
RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION,
OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF ARTICLE III OF THE
WARRANT UNDER WHICH THIS SECURITY WAS ISSUED.
(c) Disposition of Warrant or Shares. With respect to any offer, sale
--------------------------------
or other disposition of this Warrant, any shares of Series B Preferred Stock
issued upon exercise of this Warrant or shares of Common Stock acquired pursuant
to conversion of such shares of Series B Preferred Stock prior to Registration
of such shares, the Holder or the Shareholder, as the case may be, agrees to
give written notice to the Company prior thereto, describing briefly the manner
thereof, together with a written opinion of the Holder's or Shareholder's
counsel, if reasonably requested by Company, to the effect that such offer, sale
or other disposition may be effected without Registration under the securities
Act or qualification under any applicable state securities laws of this Warrant
or such shares, as the case may be, and indicating whether or not under the
-9-
<PAGE>
Securities Act certificates for this Warrant or such shares, as the case may be
to be sold or otherwise disposed of require any restrictive legend as to
applicable restrictions on transferability in order to insure compliance with
the Securities Act. Promptly upon receiving such written notice and reasonably
satisfactory opinion, if so requested, the Company, as promptly as practicable,
shall notify the Holder or the Shareholder, as the case may be, that it may sell
or otherwise dispose of this Warrant or such shares, as the case may be, all In
accordance with the terms of the notice delivered to the Company. If a
determination has been made pursuant to this subsection (c) that the opinion of
counsel for the Holder or the Shareholder, as the case may be, is not reasonably
satisfactory to the Company, the Company shall so notify the Holder or the
Shareholder, as the case may be, promptly after such determination has been made
and shall specify the legal analysis supporting any such conclusion.
Notwithstanding the foregoing, this Warrant or such shares, as the case may be,
may be offered, sold or otherwise disposed of in accordance with Rule 144,
provided that the Company shall have been furnished with such information as the
Company may reasonable request to provide reasonable assurance that the
provisions of Rule 144 have been satisfied. Each certificate representing this
Warrant or the shares thus transferred (except a transfer pursuant to Rule 144)
shall bear a legend as to the applicable restrictions on transferability in
order to insure compliance with the Securities Act, unless in the aforesaid
reasonably satisfactory opinion of counsel for the Holder or the Shareholder, as
the case may be, such legend is not necessary in order to insure compliance with
the Securities Act. The Company may issue stop transfer instructions to its
transfer agent in connection with such restrictions. In the event of any
conflict between the provisions of this Section 3.2 and the provisions of
Exhibit "A" or Exhibit "C" hereto, the provisions of this Section 3.2 shall
control.
(d) Warrant Transfer Procedure. Transfer of this Warrant to a third
--------------------------
party, following compliance with the preceding subsections of this Section 3.2,
shall be effected by execution of the Assignment Form attached hereto as Exhibit
-------
"C", and surrender for registration of transfer of this Warrant at the Principal
- ---
Executive Office, together with funds sufficient to pay any applicable transfer
tax. Upon receipt of the duly executed Assignment Form and the necessary
transfer tax funds, if any, and compliance with this Section 3.2, the Company,
at its expense, shall execute and deliver, in the name of the designated
transferee or transferees, one or more new Warrants representing the right to
purchase a like aggregate number of shares of Series B Preferred Stock.
(e) Termination of Restrictions. The restrictions imposed under this
---------------------------
Section 3.2 upon the transferability of the Warrant, the shares of Series B
Preferred Stock acquired upon the exercise of this Warrant and the shares of
Common Stock issuable upon conversion of such shares of Series B Preferred Stock
shall cease when (i) a registration statement covering all shares of Common
Stock issued or issuable upon conversion of the Series B Preferred Stock becomes
effective under the Securities Act, (ii) the Company is presented with an
opinion of counsel reasonably satisfactory to the Company that such restrictions
are no longer required in order to insure compliance with the Securities Act or
with a Commission "no-action" letter that future transfers of such securities by
the transferor or the contemplated transferee would be exempt from registration
under the Securities Act, or (iii) such securities may be transferred in
accordance with Rule 144(k). When such restrictions terminate,
-10-
<PAGE>
the Company shall, or shall instruct its transfer agent to, promptly, and
without expense to the Holder or the Shareholder, as the case may be, issue
new securities in the name of the Holder and/or the Shareholder, as the case
may be, not bearing the legends required under subsection (b) of this Section
3.2. In addition, new securities shall be issued without such legends if such
legends may be properly removed under the terms of Rule 144(k).
3.3 Exchange. At the Holder's option, this Warrant may be exchanged for
--------
other Warrants representing the right to purchase a like aggregate number of
shares of Series B Preferred Stock upon surrender of this Warrant at the
Principal Executive Office. Whenever this Warrant is so surrendered to the
Company at the Principal Executive Office for exchange, the Company shall
execute and deliver the Warrants which the Holder is entitled to receive. All
Warrants issued upon any registration of transfer or exchange of Warrants shall
be the valid obligations of the Company, evidencing the same rights; and
entitled to the same benefits, as the Warrants surrendered upon such
registration of transfer or exchange. No service charge shall be made for any
exchange of this Warrant.
3.4 Replacement. Upon receipt of evidence reasonably satisfactory to the
-----------
Company of the loss, theft, destruction or mutilation of this Warrant and (i) in
the case of any such loss theft or destruction, upon delivery of indemnity
reasonably satisfactory to the Company in form and amount, or (ii) in the case
of any such mutilation, upon surrender of such Warrant for cancellation at the
Principal Executive Office, the Company, at its expense, shall execute and
deliver, in lieu thereof, a new Warrant.
ARTICLE IV
ANTIDILUTION PROVISIONS
-----------------------
4.1 Conversion of Series B Preferred Stock. If all of the Series B
--------------------------------------
Preferred Stock is converted into shares of Common Stock in connection with a
Registration, then this Warrant shall automatically become exercisable for that
number of shares of Common Stock equal to the number of shares of Common Stock
that would have been received if this Warrant had been exercised in full and the
shares of Series B Preferred Stock received thereupon had been simultaneously
converted into shares of Common Stock immediately prior to such event, and the
Exercise Price shall be automatically adjusted to equal the amount obtained by
dividing (i) the aggregate Exercise Price of the shares of Series B Preferred
Stock for which this Warrant was exercisable immediately prior to such
conversion, by (ii) the number of shares of Common Stock for which this Warrant
is exercisable immediately after such conversion.
4.2 Reorganization, Reclassification or Recapitalization of the Company.
--------------------------------------------------------------------
In case of (1) a capital reorganization, reclassification or recapitalization of
the Company's capital stock (other than in the cases referred to in of Section
4.4 hereof), (2) the Company's consolidation or merger with or into another
corporation in which the Company is not the surviving entity, or a reverse
triangular merger in which the Company is the surviving entity but the shares of
the Company's capital stock outstanding immediately prior to the merger are
converted, by virtue of the merger, into other property, whether in the form of
securities, cash or otherwise, or (3) the
-11-
<PAGE>
sale or transfer of the Company's property as an entirety or substantially as
an entirety, then, as part of such reorganization, reclassification,
recapitalization, merger, consolidation, sale or transfer, lawful provision
shall be made so that there shall thereafter be deliverable upon the exercise
of this Warrant or any portion thereof (in lieu of or in addition to the
number of shares of Series B Preferred Stock theretofore deliverable, as
appropriate), and without payment of any additional consideration, the number
of shares of stock or other securities or property to which the holder of the
number of shares of Series B Preferred Stock which would otherwise have been
deliverable upon the exercise of this Warrant or any portion thereof at the
time of such reorganization, reclassification, recapitalization,
consolidation, merger, sale or transfer would have been entitled to receive in
such reorganization, reclassification, recapitalization, consolidation,
merger, sale or transfer. This Section 4.2 shall apply to successive
reorganizations, reclassifications, recapitalizations, consolidations,
mergers, sales and transfers and to the stock or securities of any other
corporation that are at the time receivable upon the exercise of this Warrant.
If the per-share consideration payable to the Holder for shares of Series B
Preferred Stock in connection with any transaction described in this Section
4.2 is in a form other than cash or marketable securities, then the value of
such consideration shall be determined in good faith by the Company's Board of
Directors.
4.3 Splits and Combinations. If the Company at any time subdivides any of
-----------------------
its outstanding shares of Series B Preferred Stock into a greater number of
shares, the Exercise Price in effect immediately prior to such subdivision shall
be proportionately reduced, and, conversely if the outstanding shares of Series
B Preferred Stock are combined into a smaller number of shares, the Exercise
Price in effect immediately prior to such combination shall be proportionately
increased. Upon any adjustment of the Exercise Price under this Section 4.3,
the number of shares of Series B Preferred Stock issuable upon exercise of this
Warrant shall equal the number of shares determined by dividing (i) the
aggregate Exercise Price payable for the purchase of all shares issuable upon
exercise of this Warrant Immediately prior to such adjustment by (ii) the
Exercise Price per share in effect immediately after such adjustment.
4.4 Reclassifications. If the Company changes any of the securities as to
-----------------
which purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
counties that were subject to the purchase rights under this Warrant immediately
prior to such reclassification or other change and the Exercise Price therefor
shall be appropriately adjusted. No adjustment shall be made pursuant to this
Section 4.4 upon any conversion described in Section 4.1 hereof.
4.5 Dividends and Distributions. If the Company declares a dividend or
---------------------------
other distribution on the Series B Preferred Stock or if a dividend or other
distribution on the Series B Preferred Stock occurs pursuant to the Articles of
Incorporation (other than a cash dividend or distribution), then, as part of
such dividend or distribution, lawful provision shall be made so that there
shall thereafter be deliverable upon the exercise of this Warrant or any portion
thereof, in addition to the number of shares of Series B Preferred Stock
receivable thereupon and without payment of any additional consideration, the
amount of the dividend or other distribution to
-12-
<PAGE>
which the holder of the number of shares of Series B Preferred Stock obtained
upon exercise hereof would have been entitled to receive had the exercise
occurred as of the record date for such dividend or distribution.
4.6 Liquidation; Dissolution. If the Company shall dissolve, liquidate or
------------------------
wind up its affairs, the Holder shall the right, but not the obligation, to
exercise this Warrant effective as of the date of such dissolution, liquidation
or winding up. If any such dissolution, liquidation or winding up results in
any cash distribution to the Holder in excess of the aggregate Exercise Price
for the shares of Series B Preferred Stock for which this Warrant is exercised,
then the Holder may, at its option, exercise this Warrant without making payment
of such aggregate Exercise Price and, in such case, the Company shall, upon
distribution to the Holder, consider such aggregate Exercise Price to have been
paid in full, and in making such settlement to the Holder, shall deduct an
amount equal to such Aggregate Exercise Price from the amount payable to the
Holder.
4.7 Maximum Exercise Price. At no time shall the Exercise Price exceed
----------------------
the amount set forth in the Preamble to this Warrant, unless the Exercise Price
is adjusted pursuant to section 4.3 hereof.
4.8 Other Dilutive Events. If any event occurs as to which the other
---------------------
provisions of this Article IV are not strictly applicable but the failure to
make any adjustment would not fairly protect the purchase rights represented by
this Warrant in accordance with the essential intent and principles hereof,
then, in each such case, the Board of Directors of the Company shall determine
in good faith the adjustments, if any, on a basis consistent with the essential
intent and principles established in this Article IV, necessary to preserve,
without dilution, the purchase rights represented by this Warrant. Upon such
determination, the Company shall promptly make such adjustments and notify the
Holder thereof.
4.9 Amendment of Articles of Incorporation. So long as the Warrant is
--------------------------------------
outstanding and no shares of Series B Preferred Stock are issued and outstanding
and the Series B Preferred Stock has not been converted into Common Stock in
connection with a Registration, the Company shall not amend, or otherwise take
any action that would affect, Article III, Section (d) of the Articles of
Incorporation, without the prior written consent of the Holders of majority in
interest under this Warrant, given in their sole discretion. If the Articles of
Incorporation are amended in violation of this Section 4.9, then the provisions
of this Article IV shall be adjusted so that the Holder shall receive with
respect to the shares of Common Stock received upon conversion of the shares of
Series B Preferred Stock obtained upon exercise of this Warrant thereafter, what
would have been received had the Articles of Incorporation not been so amended,
open payment of the same amount as would have been required had the Articles of
Incorporation not been so amended.
4.10 Certificates and Notices.
------------------------
(a) Adjustment Certificates. Upon any adjustment of the Exercise
-----------------------
Price and/or the number of shares of Series B Preferred Stock purchasable upon
exercise of this
-13-
<PAGE>
Warrant, a certificate, signed by (i) the Company's President or Chief
Financial Officer, or (ii) any independent firm of certified public
accountants of recognized national standing the Company selects at its own
expense, setting forth in reasonable detail the events requiring the
adjustment and the method by which such adjustment was calculated, shall be
mailed to the Holder and shall specify the adjusted Exercise Price and the
number of shares of Series B Preferred Stock purchasable upon exercise of the
Warrant after giving effect to the adjustment.
(b) Extraordinary Corporate Events. If the Company, after the date
------------------------------
hereof, proposes to effect (i) any transaction described in Sections 4.2 or 4.4
hereof, (ii) a liquidation, dissolution or winding up of the Company described
in Section 4.6 hereof, or (iii) any payment of a dividend or distribution with
respect to Series B Preferred Stock or Common Stock, then, in each such case,
the Company shall mail to the Holder a notice describing such proposed action
and specifying the date on which the Company's books shall close, or a record
shall be taken, for determining the holders of Series B Preferred Stock or
Common Stock, as appropriate, entitled to participate in such action, or the
date on which such reorganization, reclassification, consolidation, merger,
sale, transfer, Liquidation, dissolution or winding up shall take place or
commence, as the case may be, and the date as of which it is expected that
holders of Series B Preferred Stock and Common Stock of record shall be entitled
to receive securities and/or other property deliverable upon such action, if any
such date is to be fixed. Such notice shall be mailed to the Holder at least
fifteen (15) days prior to the record date for such action in the case of any
action described in clause (i) or clause (iii) above, and in the case of any
action described in clause (ii) above, at least fifteen (15) days prior to the
date on which the action described is to take place and at least fifteen (15)
days prior to the record date for determining holders of Series B Preferred
Stock or Common Stock, as appropriate, entitled to receive securities and/or
other property in connection with such action.
4.11 No Impairment. The Company shall not, by amendment of the Articles
-------------
of Incorporation or through any reorganization, recapitalization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Company, but shall
at all times in good faith assist in the carrying out of all the provisions of
this Article IV and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder against impairment.
4.12 Application. Except as otherwise provided herein, all sections of
-----------
this Article IV are intended to operate independently of one another. If an
event occurs that requires the application of more than one section, all
applicable sections shall be given independent effect.
ARTICLE V
REGISTRATION RIGHTS
-------------------
Concurrently with the execution and delivery of this Warrant, the Company
shall cause the Holder to become a party to the Rights Agreement and the Holder
shall be deemed a "Holder" as defined in the Rights Agreement, for purposes of
the Rights Agreement and shall be
-14-
<PAGE>
entitled to all the rights, and be subject to all the obligations, of a Holder
under the Rights Agreement and the Common Stock issuable upon conversion of
the Warrant Shares shall be deemed "Registrable Stock," as defined in the
Rights Agreement, for purposes of the Rights Agreement. Such actions shall be
effected by the Company executing and delivering the Holder a fully-executed
Amendment to Rights Agreement substantially in the form of Exhibit "F" hereto.
-----------
ARTICLE VI
INFORMATION
-----------
6.1 Financial Information. Until such time that the Company has a class
---------------------
of its equity securities registered under the Exchange Act and is required to
file reports thereunder pursuant to Sections 13 or 15(d) of the Exchange Act,
the Company shall deliver to the Holder, concurrently with its delivery to
Purchasers described in Section 5 of the Series B Purchase Agreement, the
financial information described in Section 5.2(a), Section 5.2(b), and Section
5.2(c) of the Series B Purchase Agreement, as such sections are in effect from
time to time during the term hereof. If the Series B Purchase Agreement is
terminated for any reason, and for so long as the Company does not have a class
of its equity securities registered under the Exchange Act and is not required
to file reports thereunder pursuant to Sections 13 or 15(d) of the Exchange Act,
the Company shall deliver to the Holder all information that was required to be
delivered to the Purchasers described in Section 5 of the Series B Purchase
Agreement, pursuant to Section 5.2(a), Section 5.2(b), and Section 5.2(c) of the
Series B Purchase Agreement, as such sections are now in effect.
6.2 Inspection. The Company shall permit the Holder, at the Holder'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
Holder.
ARTICLE VII
REPRESENTATIONS, WARRANTIES AND COVENANTS OF COMPANY
----------------------------------------------------
7.1 Representations and Warranties. The Company represents and warrants
------------------------------
that:
(a) Legal Status; Qualification. The Company is a corporation duly
---------------------------
organized, validly existing and in good standing under the laws of the State of
California and is qualified or licensed to do business in all other countries,
states and provinces in which the laws thereof require the Company to qualify
and/or be licensed, except where failure to qualify or be licensed would not
have a material adverse effect on the business or assets of the Company taken as
a whole;
(b) Capitalization. The Company's authorized capital stock consists
--------------
of: (i) Six Million (6,000,000) shares of Preferred Stock, of which (A) Three
Million Three Hundred Thousand (3,300,000) shares are designated as Series A
Preferred Stock, of which series Three
-15-
<PAGE>
Million One Hundred Seventy-Five Thousand (3,175,000) shares are issued and
outstanding, and (B) Two Million Seven Hundred Thousand (2,700,000) shares are
designated as Series B Preferred Stock, of which series Two Million Six
Hundred Sixty-One Thousand Eight Hundred Twenty (2,661,320) shares are issued
and outstanding; and (ii) Ten Million (10,000,000) shares of Common Stock, of
which One Million Seven Hundred Seventy-Eight Thousand (1,773,000) shares are
issued and outstanding;
(c) Options. Except as described in Exhibit "D" hereto there are no
------- -----------
options, warrants or similar rights to acquire from the Company, or agreements
or other obligations by the Company, absolute or contingent, to issue or sell
Common Stock, whether on conversion or exchange of Convertible Securities or
otherwise;
(d) Preemptive Rights. Except as described in Exhibit "D", no
----------------- -----------
shareholder of the Company has any preemptive rights to subscribe for shares of
Common Stock;
(e) Authority. The Company has the right and power, and is duly
---------
authorized and empowered, to enter into, execute, deliver and perform this
Warrant;
(f) Binding Effect. This Warrant has been duly authorized, executed
--------------
and delivered and constitutes a valid and binding obligation of the Company
enforceable in accordance with its terms;
(g) No Conflict. The execution, delivery and/or performance by the
-----------
Company of this Warrant shall not, by the lapse of time, the giving of notice or
otherwise, constitute a violation of any applicable law or a breach of any
provision contained in the Company's Articles of Incorporation or By-laws or
contained in any agreement, instrument, or document to which the Company is a
Party or by which it is bound;
(h) Consents. No consent, approval, authorization or other order of
--------
any court, regulatory body, administrative agency or other governmental body is
required for the valid issuance of the Warrant or for the performance of any of
the Company's obligations hereunder, except for the filing pursuant to Section
25102(f) of the California Corporate Securities Law of 1968, as amended, and the
rules promulgated thereunder, which filing will be effected in accordance with
such section and rules;
(i) Offering. Neither the Company nor any agent acting on its behalf
--------
has, either directly or indirectly, sold, offered for sale or disposed of, or
attempted or offered to dispose of, this Warrant or any part hereof, or any
similar obligation of the Company, to, or has solicited any offers to buy any
thereof from, any person or persons other than the Holder. Neither the Company
nor any agent acting on its behalf will sell or offer for sale or dispose of, or
attempt or offer to dispose of, this Warrant or any part thereof to, or solicit
any offers to buy any warrant of like tenor from, or otherwise approach or in
respect thereof, with, any Person or Persons so as thereby to bring the issuance
of this Warrant within the provisions of Section 5 of the Securities Act;
-16-
<PAGE>
(j) Registration. It is not necessary in connection with the issuance
------------
and sale of this Warrant to the Holder to Register this Warrant under the
Securities Act; and
7.2 Covenants. The Company covenants that:
---------
(a) Authorized Shares. The Company will at all times have authorized,
-----------------
and reserved for the purpose of issue or transfer upon exercise of the rights
evidenced by this Warrant, a sufficient number of shares of Series B Preferred
Stock to provide for the exercise of the rights represented by this Warrant (for
purposes of determining compliance with this covenant, the shares of Series B
Preferred Stock issuable upon exercise of all other options and warrants shall
be deemed issued and outstanding), and a sufficient number of shares of Common
Stock to provide for the conversion into Common Stock of all the shares of
Series B Preferred Stock issued and issuable upon the exercise of this Warrant
but theretofore unconverted (for purposes of determining compliance with this
covenant, the shares of Common Stock issuable upon exercise of all options and
warrants to acquire Common Stock and upon conversion of all instruments
convertible into Common Stock shall be deemed issued and outstanding);
(b) Proper Issuance. The Company, at its expense, will take all such
---------------
action as may be necessary to assure that the Series B Preferred Stock issuable
upon the exercise of this Warrant, and the Common Stock issuable upon the
conversion of such Series B Preferred Stock, may be so issued without violation
of any applicable law or regulation, or of any requirements of any domestic
securities exchange upon which any capital stock of the Company may be listed.
Such action may include, but not be limited to, causing such shares to be duly
registered or approved or listed on relevant domestic securities exchanges; and
(c) Fully Paid Shares. The Company will take all actions necessary or
-----------------
appropriate to validly and legally issue (i) fully paid and non-assessable
shares of Series B Preferred Stock upon exercise of this Warrant and (ii) fully
paid and non-assessable shares of Common Stock upon conversion of such shares of
Series B Preferred Stock. All such shares will be free from all taxes, liens
and charges with respect to the issuance thereof, other than any stock transfer
taxes in respect to any transfer occurring contemporaneously with such issuance.
ARTICLE VIII
MISCELLANEOUS
-------------
8.1 Certain Expenses. The Company shall pay all expenses in connection
----------------
with, and all taxes (other than stock transfer taxes) and other governmental
charges that may be imposed in respect of, the issuance, sale and delivery of
the Warrant, the Warrant Shares and the shares of Common Stock issuable upon
conversion of the Warrant Shares.
8.2 Holder Not a Shareholder. Prior to the exercise of this Warrant as
------------------------
herein before provided, the Holder shall not be entitled to any of the rights of
a shareholder of the Company including, without limitation, the right as a
shareholder (i) to vote on or consent to any proposed action of the Company or
(ii) except as provided herein, to receive (a) dividends or any other
distributions made to shareholders, (b) notice of or attend any meetings of
shareholders of the
-17-
<PAGE>
Company, or (c) notice of any other proceedings of the Company.
Notwithstanding the foregoing, the Company shall provide to the Holder the
information delivered to shareholders as required pursuant to Section 6.1
hereof.
8.3 Like Tenor. All Warrants shall at all times be substantially
----------
identical except as to the Preamble.
8.4 Remedies. The Company stipulates that the remedies at law of the
--------
Holder in the event of any default or threatened default by the Company in the
performance of or compliance with any of the terms of this Warrant are not and
will not be adequate to the fullest extent permitted by law, and that such terms
may be specifically enforced by a decree for the specific performance of any
agreement contained herein or by an injunction against a violation of any of the
terms hereof or otherwise.
8.5 Enforcement Costs. If any party to, or beneficiary of, this Warrant
-----------------
seeks to enforce its rights hereunder by legal proceedings or otherwise, then
the non-prevailing party shall pay all reasonable costs and expenses incurred by
the prevailing party, including, without limitation, all reasonable attorneys'
fees.
8.6 Nonwaiver; Cumulative Remedies. No course of dealing or any delay or
------------------------------
failure to exercise any right hereunder on the part of the Holder and/or any
Shareholder shall operate as a waiver of such right or otherwise prejudice the
rights, powers or remedies of the Holder or such Shareholder. No single or
partial waiver by the Holder and/or any Shareholder of any provision of this
Warrant or of any breach or default hereunder or of any right or remedy shall
operate as a waiver of any other provision, breach, default right or remedy or
of the same provision, breach, default, right or remedy on a future occasion.
The rights and remedies provided in this Warrant are cumulative and are in
addition to all rights and remedies which the Holder and each Shareholder may
have in law or in equity or by statute or otherwise.
8.7 Notices. Any notice, demand or delivery to be made pursuant to this
-------
Warrant will be sufficiently given or made if personally delivered or sent by
first class mail, postage prepaid, addressed to (a) the Holder and the
Shareholders at their last known addresses appearing on the books of the Company
maintained for such purpose or (b) the Company at its Principal Executive
Office. The Holder, the Shareholders and the Company may each designate a
different address by notice to the other pursuant to this Section 8.7. A notice
shall be deemed effective upon the earlier of (i) receipt or (ii) the third day
after mailing in accordance with the terms of this Section 8.7.
8.8 Successors and Assigns. This Warrant shall be binding upon the
----------------------
Company and any Person succeeding the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets, and all of the
obligations of the Company with respect to the shares of Series B Preferred
Stock issuable upon exercise of this Warrant and the shares of Common Stock
issuable upon the conversion of such shares of Series B Preferred Stock, shall
survive the exercise, expiration or termination of this Warrant and all of the
covenants and agreements of the Company shall inure to the benefit of the
Holder, each Shareholder and their
-18-
<PAGE>
respective successors and assigns. The company shall, at the time of exercise
of this Warrant, in whole or in part, upon request of the Holder or any
Shareholder but at the Company's expense, acknowledge in writing its
continuing obligations hereunder with respect to rights of the Holder or such
Shareholder to which it shall continue to be entitled after such exercise in
accordance with the terms hereof; provided that the failure of the Holder or
any Shareholder to make any such request shall not affect the continuing
obligation of the Company to the Holder or such Shareholder in respect of such
rights.
8.9 Modification; Severability.
--------------------------
(a) If, in any action before any court or agency legally empowered to
enforce any term, any term is found to be unenforceable, then such term shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency.
(b) If any term is not curable as set forth in subsection (a) above,
the unenforceability of such term shall not affect the other provisions of this
Warrant but this Warrant shall be construed as if such unenforceable term had
never been contained herein.
8.10 Integration. This Warrant replaces all prior and contemporaneous
-----------
agreements and supersedes all prior and contemporaneous negotiations between the
parties with respect to the transactions contemplated herein and constitutes the
entire agreement of the parties with respect to the transactions contemplated
herein.
8.11 Survival of Representations and Warranties. The representations and
------------------------------------------
warranties of the Company in this Warrant shall survive the execution and
delivery of this Warrant and the consummation of the transactions contemplated
hereby, notwithstanding any investigation by the Holder or its agents.
8.12 Amendment. This Warrant may not be modified or amended except by
---------
written agreement of the Company and Holders and Shareholders holding or
entitled to acquire a majority of the Warrant Shares then outstanding or
issuable upon exercise of this Warrant.
8.13 Headings. The headings of the Articles and Sections of this Warrant
--------
are for the convenience of reference only and shall not, for any purpose, be
deemed a part of this Warrant.
8.14 Meanings. Whenever used in this Warrant, any noun or pronoun shall
--------
be deemed to include both the singular and plural and to cover all genders; and
the words "herein," "hereof" and "hereunder" and words of similar import shall
refer to this instrument as a whole, including any amendments hereto.
8.15 Governing Law. This Warrant shall be governed by, and construed in
-------------
accordance with, the laws of the State of California applicable to contracts
entered into and to be performed wholly within California by California
residents.
-19-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officer as of September 15, 1994.
LATITUDE COMMUNICATIONS, INC.
/s/ Emil Wang
By:______________________________________
President & CEO
Title:___________________________________
-20-
<PAGE>
EXHIBIT "A"
-----------
NOTICE OF EXERCISE FORM
-----------------------
(To be executed only upon partial or full
exercise of the within Warrant)
The undersigned registered Holder of the within Warrant hereby irrevocably
exercises the within Warrant for and purchases shares of Series B Preferred
Stock of Latitude Communications, Inc. and herewith makes payment therefor in
the amount; of $_____, all at the price and on the terms and conditions
specified in the within Warrant and requests that a certificate (or ___________
certificates in denominations of shares) for the shares of Series B Preferred
Stock of Latitude Communications, Inc. hereby purchased be issued in the name of
and delivered to (choose one) (a) the undersigned or (b) [NAME], whose address
is _________________________________________________________________________
and, if such shares of Series B Preferred Stock shall not include all the shares
of Series B Preferred Stock issuable as provided in the within Warrant, that a
new Warrant of like tenor for the number of shares of Series B Preferred Stock
of Latitude Communications, Inc. not being purchased hereunder be issued in the
name of and delivered to (choose one) (a) the undersigned or (b) [NAME], whose
address is ______________________________________________________.
Dated: ____________________________________________, 199__
Signature Guaranteed
________________________________________
________________________________________
By:_____________________________________
(Signature of Registered Holder)
Title:__________________________________
NOTICE: The signature to this Notice of Exercise must correspond with the name
as written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatever.
The signature to this Notice of Exercise must be guaranteed by a
commercial bank or trust company in the United States or a member
firm of the New York Stock Exchange.
<PAGE>
EXHIBIT "B"
-----------
INVESTMENT REPRESENTATION CERTIFICATE
-------------------------------------
Purchaser:
Company: Latitude Communications, Inc.
Security: Series B Preferred Stock
Amount:
Date:
In connection with the purchase of the above-listed securities (the
"Securities"), the undersigned (the "Purchaser") represents to the Company as
- ----------- ---------
follows:
(a) The Purchaser is aware of the Company's business affairs and financial
condition, and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. The Purchaser is
purchasing the Securities for its own account for investment purposes only and
not with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Securities Act of 1933, as amended (the "Securities
----------
Act");
- ---
(b) The Purchaser understands that the Securities have not been registered
under the Securities Act in reliance upon a specific exemption therefor, which
exemption depends upon, among other things, the bona fide nature of the
Purchaser's investment intent as expressed herein. In this connection, the
Purchaser understands that, In the view of the Securities and Exchange
Commission ("SEC"), the statutory basis for such exemption may be unavailable if
---
the Purchaser's representation was predicated solely upon a present intention to
hold these Securities for the minimum capital gains period specified under tax
statutes, for a deterred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future;
(c) The Purchaser further understands that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. Moreover, the Purchaser
understands that the Company is under no obligation to register the Securities.
In addition, the Purchaser understands that the certificate evidencing the
Securities will be imprinted with the legend referred to in the Warrant under
which the Securities are being purchased;
(d) The Purchaser is aware of the provisions of Rule 144, promulgated under
the Securities Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, if applicable, including, among other
things: (i) the availability of certain public information about the Company;
(ii) the
<PAGE>
resale occurring not less than two (2) years after the party has purchased and
paid for the securities to be sold; (iii) the sale being made through a broker
in an unsolicited "broker's transaction" or in transactions directly with a
market maker (as said term is defined under the Securities Exchange Act of
1934) and the amount of securities being sold during any three-month period
not exceeding the specified limitations stated therein;
(e) The Purchaser further understands that at the time it wishes to sell
the Securities there may be no public market upon which to make such a sale, and
that, even if such a public market upon which to make such a sale then exists,
the Company may not be satisfying the current public information requirements of
Rule 144, and that, in such event, the Purchaser may be precluded from selling
the Securities under Rule 144 even if the two-year minimum holding period had
been satisfied;
(f) The Purchaser further understands that in the event all of the
requirements of Rule 144 are not satisfied, registration under the Securities
Act, compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding; the fact that Rule 144 is not exclusive,
the staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk; and
(g) The Purchaser is an "accredited investor" as defined in Regulation D as
promulgated by the SEC.
Date: _________________________, 199___
PURCHASER:
______________________________________
<PAGE>
EXHIBIT "C"
-----------
ASSIGNMENT FORM
---------------
(To be executed only upon the
assignment of the within Warrant)
FOR VALUE RECEIVED, the undersigned registered Folder of the within Warrant
hereby sells, assigns and transfers unto _______ whose address is ___________
________ all of the rights of the undersigned under the within Warrant, with
respect to ____________________ shares of Series B Preferred Stock of Latitude
Communications, Inc. and, if such shares of Series B Preferred Stock shall not
include all the shares of Series B Preferred Stock issuable as provided in the
within Warrant, that a new Warrant of like tenor for the number of shares of
Series B Preferred Stock of Latitude Communications, Inc. not being transferred
hereunder be issued in the name of and delivered to the undersigned, and does
hereby irrevocably constitute and appoint ______________________________________
attorney to register such transfer on the books of Latitude Communications, Inc.
maintained for the purpose, with full power of substitution in the premises.
Dated: ____________________________________________, 199__
Signature Guaranteed
________________________________________
________________________________________
By:_____________________________________
(Signature of Registered Holder)
Title:__________________________________
NOTICE: The signature to this Assignment must correspond with the name upon
the face of the within Warrant in every particular, without
alteration or enlargement or any change whatever.
The signature to this Notice of Assignment must be
guaranteed by a commercial bank or trust company in the United States
or a member firm of the New York Stock Exchange.
<PAGE>
EXHIBIT "D"
-----------
OUTSTANDING OPTIONS AND PREEMPTIVE RIGHTS
-----------------------------------------
(Sections 7.1(c) and 7.1(d))
[Exhibit not provided]
<PAGE>
EXHIBIT "E"
-----------
RIGHTS AGREEMENT
----------------
(Article I)
<PAGE>
LATITUDE COMMUNICATIONS, INC.
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
June 1, 1994
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Termination of Prior Rights............................................ 1
2. Registration........................................................... 2
2.1 Definitions.................................................... 2
2.2 Required Registration.......................................... 3
2.3 Registration Procedures........................................ 3
2.4 Limitations on Required Registrations.......................... 4
2.5 Incidental Registration........................................ 5
2.6 Limitations on Incidental Registration......................... 5
2.7 Designation of Underwriter..................................... 6
2.8 Form S-3....................................................... 6
2.9 Cooperation by Prospective Sellers............................. 7
2.10 Expenses of Registration...................................... 7
2.11 Indemnification............................................... 8
2.12 Rights Which May Be Granted to Subsequent Investors........... 10
2.13 Transfer of Registration Rights............................... 11
2.14 "Stand-off" Agreement......................................... 11
3. Miscellaneous.......................................................... 12
3.1 Notices........................................................ 12
3.2 Modification; Waiver........................................... 12
3.3 Entire Agreement............................................... 13
3.4 Successors and Assigns......................................... 13
3.5 Enforcement.................................................... 13
3.6 Execution and Counterparts..................................... 14
3.7 Governing Law and Severability................................. 14
3.8 Headings....................................................... 14
</TABLE>
<PAGE>
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (the "Agreement")
is made as of June 1, 1994, by and between Latitude Communications, Inc., a
California corporation (the "Company"), and the investors listed on Schedule A
attached hereto, each of which is herein referred to as an "Investor."
RECITALS
--------
The Company and certain of the Investors have entered into a Series A
Preferred Stock Purchase Agreement dated April 22, 1993 (the "First Series A
Purchase Agreement") and the Company and another Investor have entered into a
Series A Preferred Stock Purchase Agreement dated September 13, 1993 (the
"Second Series A Purchase Agreement"), pursuant to both of which certain
Investors (the "Series A Investors") acquired shares of the Company's Series A
Preferred Stock (the "Series A Shares").
The Company and certain other Investors (the "Warrant Investors") have
entered into an Equipment Lease Agreement dated as of June 30, 1993. In
connection with the Equipment Lease Agreement, the Company has issued warrants
(the "Warrants") to the Warrant Investors to purchase an aggregate of 60,500
shares of the Company's Series A Preferred Stock (the "Warrant Shares").
The Company and certain of the Investors (the "Series B Investors") are
entering into a Series B Preferred Stock Purchase Agreement dated June 1, 1994
(the "Series B Purchase Agreement"), pursuant to which the Series B Investors
are acquiring shares of the Company's Series B Preferred Stock (the "Series B
Shares").
The Company, the Series A Investors and the Warrant Investors have entered
into the First Amended and Restated Registration Rights Agreement dated July 19,
1993 (the "Prior Rights Agreement"), and wish to amend the Prior Rights
Agreement to grant the Series B Investors the registration rights provided
herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties agree as follows:
1. Termination of Prior Rights. Effective upon the execution of this
---------------------------
Agreement by the Company and by the holders of at least 66 2/3% of the aggregate
of the Series A Shares and the Warrant Shares, the Prior Rights Agreement is
hereby amended and restated to read in its entirety as set forth herein.
<PAGE>
2. Registration.
------------
2.1 Definitions. As used herein, the following terms, have the
-----------
following meanings:
(a) "Forms S-1," "S-2" and "S-3:" The forms so designated,
promulgated by the Commission for registration of securities under the
Securities Act of 1933, as amended (the "Securities Act"), and any forms
succeeding to the functions of such forms, whether or not bearing the same
designation.
(b) "Commission:" The Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
(c) "Holder:" A holder of Registrable Stock, provided that
anyone who acquires any Registrable Stock in a distribution pursuant to a
registration statement filed by the Company under the Securities Act shall not
thereby be deemed to be a "Holder."
(d) "Register," "registered" and "registration" refer to a
registration effected by filing a registration statement in compliance with the
Securities Act, and the declaration or ordering by the Commission of
effectiveness of such registration statement.
(e) "Registrable Stock:"
(i) the shares of Common Stock issuable or issued upon
conversion of the Series A Shares,
(ii) The shares of Common Stock issuable or issued upon
conversion of the Series B Shares,
(iii) the shares of Common Stock issuable or issued upon
conversion of the Warrant Shares (the shares of Common Stock referred to in
clauses (i), (ii), (iii) and (iv) hereof are collectively referred to hereafter
as the "Stock"), and
(iv) any other shares of Common Stock of the Company issued
as (or issuable upon the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution with respect to,
or in exchange for or in replacement of, the Stock, excluding in all cases,
however, any Registrable Securities sold by a person in a transaction in which
his or her rights under this Agreement are not assigned;
provided, however, that Common Stock or other securities shall only be treated
- -------- -------
as Registrable Stock if and so long as they have not been (A) sold to or through
a broker or dealer or underwriter in a public distribution or a public
securities transaction, or (B) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(1) thereof so that all transfer restrictions, and restrictive legends
with respect thereto, if any, are removed upon the consummation of such sale.
-2-
<PAGE>
2.2 Required Registration.
---------------------
(a) If the Holder or Holders of an aggregate of at least fifty
percent (50%) of the Registrable Stock propose to dispose of their Registrable
Stock (such Holder or Holders being herein called the "Initiating Holders"), the
Initiating Holders may request the Company in writing to effect such
registration, stating the number of shares of Registrable Stock to be disposed
of by such Initiating Holders and the intended method of disposition, including,
but not limited to, registration on Form S-1. Upon receipt of such request, the
Company shall give prompt written notice thereof to all other Holders, whereupon
such other Holders shall give written notice to the Company within 20 days after
the date of the Company's notice (the "Notice Period") if they propose to
dispose of any shares of Registrable Stock pursuant to such registration,
stating the number of shares of Registrable Stock to be disposed of by such
Holder or Holders and the intended method of disposition.
(b) The Company will use its best efforts to effect promptly
after the Notice Period the registration under the Securities Act of all shares
of Registrable Stock specified in the requests of the Initiating Holders and the
requests of the other Holders subject, however, to the limitations set forth in
Section 2.4.
2.3 Registration Procedures. Whenever the Company is required by
-----------------------
the provisions of this Section 2 to use its best efforts to effect promptly the
registration of shares of Registrable Stock, the Company will:
(a) prepare and file with the Commission a registration
statement with respect to such shares and use its best efforts to cause such
registration statement to become and remain effective as provided herein;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
current and to comply with the provisions of the Securities Act with respect to
the disposition of all shares covered by such registration statement, including
such amendments and supplements as may be necessary to reflect the intended
method of disposition from time to time of the prospective seller or sellers of
such shares, but for no longer than one hundred twenty (120) days subsequent to
the effective date of such registration in the case of a registration statement
on Form S-1 or S-2 and for no longer than ninety (90) days in the case of a
registration statement on Form S-3;
(c) furnish to each prospective seller such number of copies of
a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as such seller may
reasonably request in order to facilitate the public sale or other disposition
of the shares owned by such seller;
(d) use its best efforts to register or qualify the shares
covered by such registration statement under such other securities or blue sky
or other applicable laws of such jurisdiction within the United States as each
prospective seller shall reasonably request, to enable such seller to consummate
the public sale or other disposition in such jurisdictions of the shares
-3-
<PAGE>
owned by such seller; provided, however, that in no event shall the Company be
obligated to qualify to do business in any jurisdiction where it is not at the
time so qualified or to take any action which would subject it to service of
process in suits other than those arising out of the offer or sale of the
Registrable Stock covered by such registration statement in any jurisdiction
where it is not at the time so subject; and
(e) furnish to each prospective seller, to the extent requested
by such seller, a signed counterpart, addressed to the prospective sellers, of
(i) an opinion of counsel for the Company, dated the closing date of the sale of
the applicable Registrable Stock, and (ii) a "comfort" letter signed by the
independent public accountants who have certified the Company's financial
statements included in the registration statement, covering substantially the
same matters with respect to the registration statement (and the prospectus
included therein) and (in the case of the "comfort" letter) with respect to
events subsequent to the date of the financial statements, as are customarily
covered in opinions of issuer's counsel and in "comfort" letters delivered to
the underwriters in underwritten public offerings of securities.
2.4 Limitations on Required Registrations.
-------------------------------------
(a) The Company shall not be required to effect more than two
registrations pursuant to Section 2.2. The Company shall not be required to
effect any registration unless the anticipated aggregate offering price, net of
underwriting discounts and commissions, would exceed $2,000,000.
(b) The Company shall not be required to cause a registration
requested pursuant to Section 2.2 to become effective prior to the earlier of
(i) four years after the date of the first closing under the First Series A
Purchase Agreement or (ii) six (6) months after the Company's initial
registration with the Commission (other than a registration effected solely to
implement an employee benefit plan or a transaction to which Rule 145 of the
Commission is applicable).
(c) The Company shall not register securities for sale for its
own account or for the account of holders of securities other than Registrable
Stock in any registration requested pursuant to Section 2.2 without the written
consent of Initiating Holders who hold at least 51% of the Registrable Stock as
to which registration has been requested, unless such securities are entitled to
be included in such registration only to the extent that the inclusion of such
securities will not diminish the amount of Registrable Stock included in such
registration or otherwise materially and adversely affect the right of the
Initiating Holders to have their Registrable Securities registered. The Company
may not cause any other registration of securities for sale for its own account
(other than a transaction to which Rule 145 of the Commission is applicable or a
registration effected solely to implement an employee benefit plan) to be
initiated after a registration requested pursuant to Section 2.2 and to become
effective less than 90 days after the effective date of any registration
requested pursuant to Section 2.2.
(d) Whenever a requested registration is for an underwritten
offering, only shares which are to be included in the underwriting may be
included in the registration. Notwithstanding the provisions of Sections 2.2(b)
and 2.4(c), if the underwriter determines that
-4-
<PAGE>
(i) marketing factors require a limitation of the total number of shares to be
underwritten, or (ii) the offering price per share would be reduced by the
inclusion of the shares of the Company or others, then the number of shares to
be included in the registration and underwriting shall first be allocated among
all Holders who indicated to the Company their decision to distribute any of
their Registrable Stock through such underwriting, in proportion, as nearly as
practicable, to the respective numbers of shares of Registrable Stock owned by
such Holders at the time of filing the registration statement, then, if any, to
the Company and others. No stock excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such registration. If
the Company disapproves of any such underwriting, the Company may elect to
withdraw therefrom by written notice to the Initiating Holders and the
underwriter. The securities so withdrawn from such underwriting shall also be
withdrawn from such registration.
(e) If at the time of any request to register Registrable Stock
pursuant to Section 2.2 hereof, the Company is engaged, or has fixed plans to
engage within 90 days of the time of the request, in a registered public
offering as to which the Holders may include Registrable Stock pursuant to
Section 2.5 hereof or the Company is engaged in any other activity which, in the
good faith determination of the Board, would be adversely affected by the
requested registration to the material detriment of the Company, then the
Company may at its option direct that such request be delayed for a period not
in excess of 120 days from the effective date of such offering, or the date of
commencement of such other material activity, as the case may be, such right to
delay a request to be exercised by the Company not more than once in any 12-
month period while the rights set forth in Section 2.2 are in effect.
2.5 Incidental Registration. If the Company at any time proposes
-----------------------
to register any of its Common Stock under the Securities Act (other than a
registration effected solely to implement an employee benefit plan or a
transaction to which Rule 145 of the Commission is applicable), it will each
such time give written notice to all Holders of its intention so to do. Upon the
written request of a Holder or Holders given within 20 days after receipt of any
such notice (stating the number of shares of Registrable Stock to be disposed of
by such Holder or Holders and the intended method of disposition), the Company
will use its best efforts to cause all such shares intended to be disposed of,
which the Holders shall have requested registration thereof, to be registered
under the Securities Act so as to permit the disposition (in accordance with the
methods in said request) by such Holder or Holders of the shares so registered,
subject, however, to the limitations set forth in Section 2.6.
2.6 Limitations on Incidental Registration. If the registration
--------------------------------------
of which the Company gives notice pursuant to Section 2.5 is for an underwritten
offering, only securities which are to be included in the underwriting may be
included in the registration. Notwithstanding any provision of Section 2.5, if
the underwriter determines that marketing factors require a limitation of the
number of shares to be underwritten, the underwriter may exclude or otherwise
limit the number of shares, including Registrable Stock, requested to be
included in the registration and underwriting to a number of shares not less
than twenty percent (20%) of the aggregate number of shares to be disposed of in
the registration and underwriting, unless the registration is for an initial
public offering (in which case the percentage may be less). The Company shall so
advise all Holders of any limitation (except those Holders who have not
indicated to the
-5-
<PAGE>
Company their decision to distribute any of their Registrable Stock through such
underwriting), and the number of shares, including Registrable Stock, that may
be included in the registration and underwriting shall be allocated among the
selling shareholders in proportion, as nearly as practicable, to the respective
amounts of securities, including Registrable Stock, owned by such Holders and
other selling shareholders entitled to be included therein at the time of filing
the registration statement, in accordance with Section 2.12(a). No Registrable
Stock excluded from the underwriting by reason of the underwriter's marketing
limitation shall be included in such registration. If any Holder disapproves of
any such underwriting, such person may elect to withdraw therefrom by written
notice to the Company and the underwriter. The Registrable Stock and/or other
securities so withdrawn from such underwriting shall also be withdrawn from such
registration.
The registration rights granted under Sections 2.2, 2.5 and 2.8
shall terminate as to any Holder or permissible transferee or assignee of such
rights if such person (a) holds one percent (1%) or less of the outstanding
shares of Common Stock of the Company (on an as-converted basis) and (b) is
permitted to sell all of the Registrable Stock held by him or her in a single
transaction to the public pursuant to Rule 144.
2.7 Designation of Underwriter.
--------------------------
(a) In the case of any registration effected pursuant to Section
2.2 or Section 2.8, a majority in interest of the requesting Holders shall have
the right to designate the managing underwriter in any underwritten offering,
which underwriter shall be reasonably acceptable to the Company.
(b) In the case of any registration initiated by the Company,
the Company shall have the right to designate the managing underwriter in any
underwritten offering.
2.8 Form S-3. The Company shall register its Common Stock under
--------
the Securities Exchange Act of 1934, as amended, as promptly as reasonably
practicable following the effective date of the first registration of any
securities of the Company on Form S-1 and the Company shall thereafter effect
all qualifications and compliances as would permit or facilitate the sale and
distribution of its stock on Form S-3, to the extent available. After the
Company has qualified for the use of Form S-3, the Holders shall have the right
to request an unlimited number of registrations on Form S-3 (such requests shall
be in writing and shall state the number of shares of Registrable Stock to be
disposed of and the intended method of disposition) except that the Company (a)
shall not be required to effect more than one registration pursuant to this
Section 2.8 in any six-month period, and (b) shall not be required to effect a
registration pursuant to this Section 2.8 unless the Holder or Holders
requesting registration hold an aggregate of at least thirty percent (30%) of
the Registrable Stock then outstanding and propose to dispose of shares of
Registrable Stock having an aggregate expected public offering price (before
deduction of underwriting discounts and expenses of sale) of at least $500,000.
The Company shall give notice to all Holders of the receipt of a
request for registration pursuant to this Section 2.8 and shall provide a
reasonable opportunity for other
-6-
<PAGE>
Holders to participate in the registration, provided that if the registration is
for an underwritten offering, the terms of Section 2.4(d) shall apply to all
participants in such offering. Subject to the foregoing, the Company will use
its best efforts to effect promptly the registration of all shares of
Registrable Stock on Form S-3 to the extent requested by the Holder or Holders
thereof.
2.9 Cooperation by Prospective Sellers.
----------------------------------
(a) Each prospective seller of Registrable Stock, and each
underwriter designated by each such seller, will furnish to the Company such
information as the Company may reasonably require from such seller or
underwriter in connection with the registration statement (and the prospectus
included therein).
(b) Failure of a prospective seller of Registrable Stock to
furnish the information and agreements described in this Section 2 shall not
affect the obligations of the Company under this Section 2 to the remaining
sellers who furnish such information and agreements unless, in the reasonable
opinion of counsel to the Company or the underwriters, such failure impairs or
may impair the viability of the offering or the legality of the registration
statement or the underlying offering.
(c) The Holders holding shares included in the registration
statement will not (until further notice) effect sales thereof after receipt of
telegraphic or written notice from the Company to suspend sales to permit the
Company to correct or update a registration statement or prospectus but the
obligations of the Company with respect to maintaining any registration
statement current and effective shall be extended by a period of days equal to
the period such suspension is in effect unless (i) such extension would result
in the Company's inability to use the financial statements in the registration
statement initially filed pursuant to the Holder or Holders' request and (ii)
such correction or update did not result from the Company's acts or failures to
act.
At the end of the period during which the Company is obligated to
keep the registration statement current and effective as described in Section
2.3(b) (and any extensions thereof required by the preceding sentence), the
Holders holding shares included in the registration statement shall discontinue
sales of shares pursuant to such registration statement upon receipt of notice
from the Company of its intention to remove from registration the shares covered
by such registration statement which remain unsold, and such Holders shall
notify the Company of the number of shares registered which remain unsold
immediately upon receipt of such notice from the Company.
2.10 Expenses of Registration. All expenses incurred in effecting
------------------------
any registration pursuant to this Section 2 including, without limitation, all
registration and filing fees, printing expenses, expenses of compliance with
blue sky laws, fees and disbursements of counsel for the Company and expenses of
any audits incidental to or required by any such registration, shall be borne by
the Company, except that (a) all expenses, fees and disbursements of any counsel
retained by the Holders and all underwriting discounts and commissions shall be
borne by the Holders holding the securities registered pursuant to such
registration, according to the quantity of the securities so registered; (b) the
Company shall not be required to pay for any
-7-
<PAGE>
expenses of any registration proceeding begun pursuant to Section 2.2 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 2.2, provided however, that if
immediately prior to the time of such withdrawal, the Holders have learned of a
materially adverse change in the condition, business or prospects of the Company
from that known to the Holders at the time of their request, then the Holders
shall not be required to pay any of such expenses and shall retain their rights
pursuant to Section 2.2; and (c) the Company shall not be required to pay any
expenses associated with any registration of Registrable Stock requested by
Holders pursuant to Section 2.8.
2.11 Indemnification.
---------------
(a) To the extent permitted by law, the Company will indemnify
each Holder requesting or joining in a registration, each agent, officer and
director of such Holders, each person controlling such Holder and each
underwriter and selling broker of the securities so registered (collectively,
"Indemnitees") against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular or other document incident to any registration, qualification or
compliance (or in any related registration statement, notification or the like)
or any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
in the light of the circumstances in which they were made, or any violation by
the Company of any rule or regulation promulgated under the Securities Act
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification or compliance,
and will reimburse each such Indemnitee, promptly and on a current basis from
time to time, for any legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, provided, however, that the Company will not be liable in
-------- -------
any such case to the extent that any such claim, loss, damage or liability is
caused by any untrue statement or omission so made in strict conformity with
written information furnished to the Company by an instrument duly executed by
such Indemnitees and stated to be specifically for use therein and except that
the foregoing indemnity agreement is subject to the condition that, insofar as
it relates to any such untrue statement (or alleged untrue statement) or
omission (or alleged omission) made in the preliminary prospectus but eliminated
or remedied in the amended prospectus on file with the Commission at the time
the registration statement becomes effective or in the amended prospectus filed
with the Commission pursuant to Rule 424(b) (the "Final Prospectus"), such
indemnity agreement shall not inure to the benefit of any underwriter, or any
Indemnitee if there is no underwriter, if a copy of the Final Prospectus was not
furnished to the person or entity asserting the loss, liability, claim or damage
at or prior to the time such furnishing is required by the Securities Act;
provided, further, that this indemnity shall not be deemed to relieve any
underwriter of any of its due diligence obligations; provided, further, that the
indemnity agreement contained in this Section 2.11(a) shall not apply to amounts
paid in settlement of any
-8-
<PAGE>
such claim, loss, damage, liability or action if such settlement is effected
without the consent of the Company, which consent shall not be unreasonably
withheld.
(b) To the extent permitted by law, each Holder requesting or
joining in a registration and each underwriter of the securities so registered
will indemnify the Company and its officers and directors and each other Holder
and each person, if any, who controls any thereof within the meaning of Section
15 of the Securities Act and their respective successors against all claims,
losses, damages and liabilities or actions in respect thereof arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular or other document incident to any
registration, qualification or compliance (or in any related registration
statement, notification or the like) or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances in which
they were made and will reimburse, promptly and on a current basis from time to
time, the Company and each other person indemnified pursuant to this Section
2.11(b) for any legal and any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, provided, however, that this Section 2.11(b) shall apply only if (and
-------- -------
only to the extent that) such statement or omission was made in reliance upon
and in strict conformity with written information (including, without
limitation, written negative responses to inquiries) furnished to the Company by
an instrument duly executed by such Holder or underwriter and stated to be
specifically for use in such prospectus, offering circular or other document (or
related registration statement, notification or the like) or any amendment or
supplement thereto and except that the foregoing indemnity agreement is subject
to the condition that, insofar as it relates to any such untrue statement (or
alleged untrue statement) or omission (or alleged omission) made in the
preliminary prospectus but eliminated or remedied in the amended Prospectus on
file with the Commission at the time the registration statement becomes
effective or in the Final Prospectus, such indemnity agreement by a Holder other
than an underwriter shall not inure to the benefit of (i) the Company and (ii)
any underwriter or any Holder, if there is no underwriter, if a copy of the
Final Prospectus was not furnished to the person or entity asserting the loss,
liability, claim or damage at or prior to the time such furnishing is required
by the Securities Act; provided, further, that this indemnity shall not be
-------- -------
deemed to relieve any underwriter of any of its due diligence obligations;
provided, further, that the indemnity agreement contained in this Section
- -------- -------
2.11(b) shall not apply to amounts paid in settlement of any such claim, loss,
damage, liability or action if such settlement is effected without the consent
of the Holder or underwriter, as the case may be, which consent shall not be
unreasonably withheld, and provided, further, that the obligations of such
-------- -------
Holders shall be limited to an amount equal to the proceeds to each such Holder
from the sale of Registrable Stock as contemplated herein, unless such claim,
loss, damage, liability or action resulted from such Holder's fraudulent
misconduct.
-9-
<PAGE>
(c) Each party entitled to indemnification hereunder (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party (at its expense) to assume the defense of any
claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be satisfactory to the Indemnified Party, and the Indemnified Party may
participate in such defense at such party's expense, and provided, further, that
-------- -------
the omission by any Indemnified Party to give notice as provided herein shall
not relieve the Indemnifying Party of its obligations under this Section 2.11
except to the extent that the omission results in a failure of actual notice to
the Indemnifying Party and such Indemnifying Party is damaged solely as a result
of the failure to give notice. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect to such
claim or litigation.
(d) The reimbursement required by this Section 2.11 shall be
made by periodic payments during the course of the investigation or defense, as
and when bills are received or expenses incurred.
(e) The obligations under this Section 2.11 shall survive the
redemption and conversion, if any, of the Series A Preferred Stock or Series B
Preferred Stock, the completion of any offering of Registrable Stock in a
registration statement under this Section 2, or otherwise.
2.12 Rights Which May Be Granted to Subsequent Investors.
---------------------------------------------------
(a) Within the limitations prescribed by this Section 2.12(a),
but not otherwise, the Company may grant to subsequent investors in the Company
rights of incidental registration (such as those provided in Section 2.5). Such
rights may only pertain to shares of Common Stock, including shares of Common
Stock into which any other securities may be converted. Such rights may be
granted with respect to (i) registrations actually requested by Initiating
Holders pursuant to Section 2.2, but only in respect of that portion of any such
registration as remains after inclusion of all Registrable Stock requested by
Holders and (ii) registrations initiated by the Company, but only in respect of
that portion of such registration as is available under the limitations set
forth in Section 2.6 (which limitations shall apply to all Holders) and such
rights shall be limited in all cases to sharing in the available portion of the
registration in question with Holders, such sharing to be based on the number of
shares of Common Stock held by the respective Holders and held by such other
investors, plus the number of shares of Common Stock into which other securities
held by the Holders and such other investors are convertible, which are entitled
to registration rights. With respect to registrations which are for underwritten
public offerings, "available portion" shall mean the portion of the underwritten
shares which is available as specified in clauses (i) and (ii) of the third
sentence of this Section 2.12(a). Shares not included in such underwriting shall
not be registered.
-10-
<PAGE>
(b) The Company may not grant to subsequent investors in the Company
rights of registration upon request (such as those provided in Section 2.2)
unless (i) such rights are limited to shares of Common Stock, (ii) all Holders
are given enforceable contractual rights to participate in registrations
requested by such subsequent investors (the right of priority of registration
being pro rata as between subsequent investors and Holders), where such
participation is on a pro rata basis between subsequent investors and Holders,
(iii) subject to the limitations described in the final three sentences of
Section 2.12(a), such rights shall not become effective prior to 90 days after
the effective date of the first registration by the Company pursuant to Section
2.2 and (iv) such rights shall not be more favorable than those granted to the
Holders.
2.13 Transfer of Registration Rights. The registration rights
-------------------------------
granted to each Investor under this Section 2 may be transferred only:
(a) to a transferee who shall acquire not less than 50,000
shares of Series A Preferred Stock, Series B Preferred Stock or Registrable
Stock (as adjusted for Recapitalization Events); or
(b) in connection with the distribution by an Investor of Series
A Preferred Stock, Series B Preferred Stock or Registrable Stock to the
beneficial owners (including, without limitation, to partners of a general or
limited partnership, shareholders of a corporation and beneficiaries of a trust)
of securities of the Investor.
The registration rights may only be transferred if 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; and only if
immediately following such transfer the further disposition of the applicable
securities by the transferee or assignee is restricted under the Securities Act.
Notwithstanding any provision of this Section 2.13, the registration rights
granted to each Investor under this Section 2 may not be assigned to any person
or entity which, in the Company's reasonable judgment, is a competitor of the
Company.
2.14 "Stand-off" Agreement. In consideration for the Company
---------------------
performing its obligations under this Section 2 each Investor agrees for a
period of time (not to exceed 180 days) from the effective date of any
registration of securities of the Company (upon request of the Company or of the
underwriters managing any underwritten offering of the Company's securities) not
to sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Registrable Stock, other than shares of Registrable
Stock included in the registration, without the prior written consent of the
Company or such underwriters, as the case may be, provided, however, that all
-------- -------
officers and directors of the Company and each holder of more than 5% of the
outstanding Common Stock shall have entered into similar agreements.
-11-
<PAGE>
3. Miscellaneous.
-------------
3.1 Notices. All notices, requests, consents and other
-------
communications herein (except as stated in the last sentence of this Section
3.1) shall be in writing and shall be mailed by first-class or certified mail,
postage prepaid, or personally delivered, as follows:
(a) If to the Company:
Latitude Communications, Inc.
4001 Burton Drive
Santa Clara, CA 95054
with a copy to:
Mr. Mark A. Medearis
Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
(b) If to the Investors:
at their respective addresses set forth
on Schedule A hereto
----------
with a copy to:
Mr. Allen L. Morgan
Wilson, Sonsini, Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, CA 94304-1050
or such other addresses as each of the parties hereto may provide from time to
time in writing to the other parties. For purposes of computing the time
periods set forth herein, the date of mailing shall be deemed to be the delivery
date.
3.2 Modification; Waiver. Neither this Agreement nor any provision
--------------------
hereof may be changed, waived, discharged or terminated orally or in writing,
except that any provision of this Agreement may be amended and the observance of
any such provision may be waived (either generally or in a particular instance
and either retroactively or prospectively) with (but only with) the written
consent of (a) the Company, and (b) the Holders of at least 66-2/3% of the
Registrable Stock (assuming the exercise and/or conversion of all exercisable or
convertible securities). Any amendment or waiver effected in accordance with
this paragraph shall be binding upon each Holder of Registrable Securities, and
the Company. In the event that an underwriting agreement is entered into
between the Company and any Holder, and such
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<PAGE>
underwriting agreement contains terms differing from this Agreement, as to any
such Holder the terms of such underwriting agreement shall govern.
3.3 Entire Agreement. This Agreement contains the entire agreement
----------------
between the parties with respect to the transactions contemplated hereby, and
supersedes all negotiations, agreements, representations, warranties,
commitments, whether in writing or oral, prior to the date hereof.
3.4 Successors and Assigns. Subject to Section 2.13, all of the
----------------------
terms of this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the respective successors and assigns of the parties hereto.
3.5 Enforcement.
-----------
(a) Remedies at Law or in Equity. If the Company shall default in
----------------------------
any of its obligations under this Agreement or if any representation or warranty
made by or on behalf of the Company in this Agreement or in any certificate,
report or other instrument delivered under or pursuant to any term hereof shall
be untrue or misleading in any material respect as of the date of this Agreement
or as of the date it was made, furnished or delivered, each Investor may proceed
to protect and enforce its rights by suit in equity or action at law, whether
for the specific performance of any term contained in this Agreement, the
Company's Articles or for an injunction against the breach of any such term or
in furtherance of the exercise of any power granted in this Agreement or the
Company's Articles, or to enforce any other legal or equitable right of such
Investor or to take any one or more of such actions. In the event any Investor
brings such an action against the Company, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement or the Company's Articles, including without limitation such
reasonable fees and expenses of attorneys and accountants, which shall include,
without limitation, all reasonable fees, costs and expenses of appeals.
(b) Remedies Cumulative; Waiver. No remedy referred to herein is
---------------------------
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to each Investor at law or
in equity. No express or implied waiver by any Investor of any default shall be
a waiver of any future or subsequent default. The failure or delay of each
Investor in exercising any rights granted it hereunder shall not constitute a
waiver of any such right and any single or partial exercise of any particular
right by any Investor shall not exhaust the same or constitute a waiver of any
other right provided herein.
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<PAGE>
3.6 Execution and Counterparts. This Agreement may be executed in
--------------------------
any number of counterparts, each of which when so executed and delivered shall
be deemed an original, and such counterparts together shall constitute one
instrument. Each party shall receive a duplicate original of the counterpart
copy or copies executed by it and by the Company.
3.7 Governing Law and Severability. This Agreement shall be
------------------------------
governed by the laws of the State of California as applied to agreements entered
into and to be performed entirely within California. In the event any provision
of this Agreement or the application of any such provision to any part shall be
held by a court of competent jurisdiction to be contrary to law, the remaining
provisions of this Agreement shall remain in full force and effect.
3.8 Headings. The descriptive headings of the Sections hereof are
--------
inserted for convenience only and do not constitute a part of this Agreement.
-14-
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LATITUDE COMMUNICATIONS, INC.
By: /s/ Emil Wang
----------------------------
Title: PRESIDENT & CEO
----------------------------
"INVESTOR"
___________________________________
By: ____________________________
Title: _____________________________
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<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LATITUDE COMMUNICATIONS, INC.
By: _____________________________
Title: _____________________________
"INVESTOR"
MAYFEILD ASSOCIATES FUND II
MAYFIELD VII
-----------------------------------
By: /s/ Kevin A. Fong
-----------------------------
Title: _____________________________
-15-
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LATITUDE COMMUNICATIONS, INC.
By:
_____________________________
Title: _____________________________
"INVESTOR"
MENLO VENTURES IV, L.P.
By: MV Management IV, L.P
its General Partner
------------------------------------
By: /s/ Thomas H. Bredt
-----------------------------
Title: General Partner
-----------------------------
-15-
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LATITUDE COMMUNICATIONS, INC.
By: _____________________________
Title: _____________________________
"INVESTOR"
Aspect Telecommunications Corporation
------------------------------------
By: /s/ William R. Hahn
-----------------------------
Title: CEO
-----------------------------
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<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LATITUDE COMMUNICATIONS, INC.
By: _____________________________
Title: _____________________________
"INVESTOR"
VLG Investments
-----------------------------------
By: /s/ Mark A. Medearis
-----------------------------
Title: Partner
-----------------------------
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<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LATITUDE COMMUNICATIONS, INC.
By: _____________________________
Title: _____________________________
"INVESTOR"
/s/ Craig W. Johnson
------------------------------------
By: /s/ Mark A. Medearis
-----------------------------
Title: Attorney-in-Fact
-----------------------------
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<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LATITUDE COMMUNICATIONS, INC.
By: _____________________________
Title: _____________________________
"INVESTOR"
MARK A. MEDEARIS AND KATHRYN
H.MEDEARIS, TRUSTEES OF THE MEDEARIS
FAMILY TRUST U/D/T DATED MARCH 18,
1992
------------------------------------
By: /s/ Mark A. Medearis
-----------------------------
Title: _____________________________
-15-
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LATITUDE COMMUNICATIONS, INC.
By: _____________________________
Title: _____________________________
"INVESTOR"
/s/ James L. Patterson
------------------------------------
By: /s/ JAMES L. PATTERSON
-----------------------------
Title: _____________________________
-15-
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LATITUDE COMMUNICATIONS, INC.
By: _____________________________
Title: _____________________________
"INVESTOR"
CANAAN VENTURES II
LIMITED PARTNERSHIP
By: Canaan Venture Partners II L.P
By: /s/ [SIGNATURE]
----------------------------------
General Partner
-15-
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LATITUDE COMMUNICATIONS, INC.
By: _____________________________
Title: _____________________________
"INVESTOR"
CANAAN VENTURES II
OFFSHORE C.V.
By: Canaan Venture Partners II L.P.
By: /s/ [SIGNATURE]
-----------------------------
General Partner
-15-
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LATITUDE COMMUNICATIONS, INC.
By: _____________________________
Title: _____________________________
"INVESTOR"
___________________________________
By: /s/ W. Ferrell Sanders
-----------------------------
GENERAL PARTNER OF
Title: AMC PARTNERS 89 L.P. THE
-----------------------------
GENERAL PARTNER OF : ASSET MANAGEMENT
ASSOCIATES 1989, L.P.
-15-
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LATITUDE COMMUNICATIONS, INC.
By: _____________________________
Title: _____________________________
"INVESTOR"
Stanford University
-----------------------------------
By: /s/ Carol Glimer
-----------------------------
CAROL GLIMER
ASSISTANT SECRETARY
Title: -----------------------------
THE BOARD OF TRUSTEES OF THE
STANFORD JUNIOR UNIVERSITY
-15-
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Number of Shares Number of Shares Number of Shares of
of Series A Preferred of
Series A Preferred Stock Subject to Series B Preferred
Name and Address Stock Warrants Stock
- ---------------------------- ------------------ ------------------- ------------------
<S> <C> <C> <C>
Mayfield VII 1,671,250 1,007,576
2200 Sand Hill Road
Menlo Park, CA 94025
Attn: Kevin A. Fong
Mayfield Associates Fund II 78,750 53,030
2200 Sand Hill Road
Menlo Park, CA 94025
Attn: Kevin A. Fong
Menlo Ventures IV, L.P. 1,250,000 757,576
3000 Sand Hill Road
Building 4, Suite 100
Menlo Park, CA 94025
Attn: Thomas H. Bredt
Aspect Telecommunications 50,000 36,364
Corporation
1730 Fox Drive
San Jose, CA 95131
Attn: James R. Carreker
Robert R. Maxfield, Trustee 25,000
Under Agreement Dated
12/14/87, As Amended
12930 Saratoga Avenue
Suite B-3
Saratoga, CA 95070
VLG Investments 1993 20,000 4,365
2800 Sand Hill Road
Menlo Park, CA 94025
Attn: Mark A. Medearis
Mark A. Medearis and 2,500 545
Kathryn H. Medearis,
Trustees of the Medearis
Family Trust U/D/T dated
March 18, 1992
527 Tennyson
Palo Alto, CA 94301
Craig W. Johnson 2,500 545
c/o Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
William E. Kirsch 10,450
444 Castro Street, Suite 431
Mountain View, CA 94041
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Number of Shares Number of Shares of
of Series A Preferred of
Series A Preferred Stock Subject to Series B Preferred
Name and Address Stock Warrants Stock
- ---------------------------- ------------------ ------------------- -------------------
<S> <C> <C> <C>
Glen Laughlin 44,000
444 Castro Street, Suite 431
Mountain View, CA 94041
Steven M. Costella, Trustee 6,050
of The Steven M. Costella
Trust, dated May 8, 1989
444 Castro Street, Suite 431
Mountain View, CA 94041
James Patterson 75,000 20,000
115 Glen Ridge Road
Los Gatos, CA 95030
Canaan Ventures II Limited 105,818
Partnership
2884 Sand Hill Road
Building 1, Suite 115
Menlo Park, CA 94025
Attention: Deepak Kamra
Canaan Ventures II Offshore 166,909
Limited Partnership
2884 Sand Hill Road
Building 1, Suite 115
Menlo Park, CA 94025
Attention: Deepak Kamra
Asset Management Associates 454,546
1989, L.P.
2275 East Bayshore Road,
Suite 150
Palo Alto, CA 94303
Attention: W. Ferrell
Sanders
Stanford University 54,546
c/o Stanford Management
Attn: Carol Gilmer
2770 Sand Hill Road
Menlo Park, CA 94025
</TABLE>
<PAGE>
EXHIBIT "F"
-----------
AMENDMENT TO RIGHTS AGREEMENT
-----------------------------
(Article V)
<PAGE>
FIRST AMENDMENT TO AMENDED AND RESTATED REGISTRATION RIGHTS
-----------------------------------------------------------
AGREEMENT
---------
THIS FIRST AMENDMENT TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
(the "Amendment"), dated as of September 15, 1994, is entered into by and among
---------
LATITUDE COMMUNICATIONS, INC., a California corporation (the "Company"), the
-------
shareholders of the Company named herein (the "Shareholders") and PHOENIX
------------
LEASING INCORPORATED, a California corporation ("Phoenix"), and is entered into
-------
with respect to the Amended and Restated Registration Rights Agreement, dated as
of June 1, 1994, by and among the Company and the shareholders of the Company
named therein (the "Agreement").
---------
RECITALS
--------
WHEREAS, Phoenix proposes to extend a credit facility (the "Credit
-------
Facility") to the Company pursuant to the Senior Loan and Security Agreement,
dated as of the date hereof, by and between Phoenix and the Company (the "Loan
----
Agreement");
- ---------
WHEREAS, the Company proposes to issue a Warrant (the "Warrant") to Phoenix
-------
to acquire shares of the Company's Series B Preferred Stock (such shares
hereinafter, the "Warrant Shares"), in connection with the Credit Facility;
--------------
WHEREAS, under the terms of the Warrant, the Company must grant to Phoenix
with respect to the Warrant Shares the same registration rights as granted to
the Shareholders under the Agreement by making Phoenix a party to the Agreement;
WHEREAS, under Section 3.2 of the Agreement, the Company may amend the
Agreement to make Phoenix a party to the Agreement with such registration rights
with respect to the Warrant Shares as are granted thereunder to the Shareholders
only with the written consent of the Holders, as defined in the Agreement, of at
least 66-2/3% of the Registrable Stock (assuming the exercise and/or conversion
of all exercisable or convertible securities), as defined in the Agreement;
WHEREAS, Section 2.12 of the Agreement restricts the Company's ability to
grant registration rights to Phoenix which are equivalent to the Shareholder's
registration rights;
WHEREAS, under Section 3.2 of the Agreement, the restrictions under Section
2.12 of the Agreement may be waived by the Holders of at least 66-2/3% of the
Registrable Stock waive compliance with this section; and
WHEREAS, in order the grant Phoenix the rights required under the Warrant,
the parties hereto desire to enter into this Amendment pursuant to Section 3.2
of the Agreement;
<PAGE>
NOW, THEREFORE, IT IS AGREED, THAT:
1. Definitions. All capitalized terms used herein without definition
-----------
shall have the meanings ascribed to them in the Agreement.
2. Waiver. The Shareholders, by execution and delivery of this Amendment,
------
waive application of Section 2.12 of the Agreement to the registration rights
granted to Phoenix pursuant to this Amendment.
3. Amendments. The Agreement is hereby amended as follows:
----------
(a) The definition of "Investors" set forth in the introductory
paragraph of the Agreement is amended to include Phoenix Leasing Incorporated.
(b) Section 2.1(d) is redesignated as Section 2.1(f).
(c) Section 2.1(e) is redesignated as Section 2.1(g) and clause (iii)
of Section 2.1(e) is amended to read as follows:
(iii) the shares of Common Stock issuable or issued upon
conversion of the Warrant Shares or the Phoenix Warrant Shares (the shares of
Common Stock referred to in clauses (i), (ii), (iii) and (iv) hereof are
collectively referred to hereafter as the "Stock"), and
(d) A new Section 2.1(d) is added to read in its entirety as follows:
(d) Phoenix Warrant:" the Warrant, dated as of September 15,
1994, issued by the Company to Phoenix Leasing Incorporated.
(e) A new Section 2.1(e) is added to read in its entirety as follows:
(e) "Phoenix Warrant Shares:" the shares of the Company's
Series B Preferred Stock issuable upon exercise of the Phoenix Warrant.
(f) The first sentence of Section 2.13 is amended to read as follows:
The registration fights granted to each Investor under this Section 2
may be transferred only:
(a) to a transferee who shall acquire not less than 50,000
shares of Series A Preferred Stock, Series B Preferred Stock or Registrable
Stock (as adjusted for Recapitalization Events);
<PAGE>
(b) in connection with the distribution by an Investor of
Series A Preferred Stock, Series B Stock or Registrable Stock to the beneficial
owners (including, without limitation, to partners of a general or limited
partnership, shareholders of a corporation and beneficiaries of a trust) of
securities of the Investor; or
(c) in the case of the Phoenix Warrant and the Series B Stock
and Registrable Stock acquirable thereby, to an affiliate of Phoenix.
4. Phoenix. Upon the effectiveness of this Amendment, as provided in
--------
Section 5 hereof, Phoenix agrees to be bound by all of the terms and conditions
of the Agreement applicable to Holders.
5. Effectiveness. This Amendment shall become effective upon the
-------------
execution hereof by (a) the Company and (b) the Holders of at least 66-2/3% of
the Registrable Stock.
6. Effect of Amendment. Except as amended as set forth above, the
-------------------
Agreement shall continue in full force and effect.
<PAGE>
7. Counterparts. This Amendment may be signed in one or more
--------------
counterparts, each of which shall be deemed an original and all of which, taken
together, shall be deemed one and the same document.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first indicated above.
LATITUDE COMMUNICATIONS, INC.
By: /s/ Emil Wang
-------------------------------
Title: President & CEO
----------------------------
MAYFIELD VII
By: /s/ Kevin A. Fong
-------------------------------
Title: General Partner
----------------------------
MAYFIELD ASSOCIATES FUND II
By: /s/ Kevin A. Fong
-------------------------------
Title: General Partner
----------------------------
MENLO VENTURES IV, L.P.
By: MV Management IV., L.P.,
its General Partner
By: /s/ Thomas H. Bredt
-------------------------------
Title: General Partner
----------------------------
ASPECT TELECOMMUNICATIONS CORPORATION
By: /s/ William R. Hahn
-------------------------------
Title: Chief Financial Officer
----------------------------
<PAGE>
ROBERT R. MAXFIELD, TRUSTEE UNDER
AGREEMENT DATED 12/14/87, AS
AMENDED
By: /s/ Robert R. Maxfield
----------------------------
Title: TTEE
-------------------------
VLG INVESTMENTS 1993
By: /s/ Mark A. Medearis
----------------------------
Title: Partner
-------------------------
MARK A. MEDEARIS AND KATHRYN H.
MEDEARIS, TRUSTEES OF THE
MEDEARIS FAMILY TRUST U/D/T DATED
MARCH 18, 1992
By: /s/ Mark A. Medearis
----------------------------
Title: Partner
-------------------------
/s/ Craig W. Johnson
--------------------------------
CRAIG W. JOHNSON
/s/ William E. Kirsch
--------------------------------
WILLIAM E. KIRSCH
/s/ Glen McLaughlin
--------------------------------
GLEN MCLAUGHLIN
STEVEN M. COSTELLA, TRUSTEE OF
THE STEVEN M. COSTELLA TRUST,
DATED MAY 8, 1989
By:_____________________________
Title:__________________________
<PAGE>
/s/ James Patterson
-----------------------------------------------
JAMES PATTERSON
CANAAN VENTURES II LIMITED PARTNERSHIP
By:____________________________________________
Title:_________________________________________
CANAAN VENTURES II OFFSHORE LIMITED PARTNERSHIP
By:____________________________________________
Title:_________________________________________
ASSET MANAGEMENT ASSOCIATES 1989, L.P.
By: /s/ W. Ferrell Sanders
-------------------------------------------
Title: General Partner of AMC Partners 89, L.P.
The General Partner of Asset Management
Associates 1989, L.P.
STANFORD UNIVERSITY
By: /s/ Carol Gilmer
-------------------------------------------
Title:
----------------------------------------
PHOENIX LEASING INCORPORATED
By: /s/ Gary Martinez
-------------------------------------------
Title: Senior Vice President
----------------------------------------
<PAGE>
EXHIBIT "G"
-----------
SERIES B PURCHASE AGREEMENT
---------------------------
(Article I)
<PAGE>
LATITUDE COMMUNICATIONS, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
JUNE 1 , 1994
---
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Purchase and Sale................................................... 1
1.1 Authorization................................................ 1
1.2 Sale of Shares............................................... 1
2. Closing of Purchase and Sale........................................ 1
2.1 Closing Date................................................. 1
2.2 Transactions at the Closing.................................. 1
3. Representations and Warranties of the Company....................... 2
3.1 Organization, Standing and Qualification..................... 2
3.2 Capitalization............................................... 2
3.3 Validity of Stock............................................ 2
3.4 Subsidiaries................................................. 2
3.5 Authorization; Approvals..................................... 2
3.6 Compliance with Other Instruments............................ 3
3.7 Agreements; Action........................................... 3
3.8 Litigation................................................... 4
3.9 Proprietary Information Agreements........................... 4
3.10 Patents and Trademarks....................................... 4
3.11 Environmental and Safety Laws................................ 5
3.12 Manufacturing and Marketing Rights........................... 5
3.13 Related-Party Transactions................................... 5
3.14 Business Plan................................................ 6
3.15 Real Property Holding Company................................ 6
3.16 Title to Property and Assets................................. 6
3.17 Labor Agreements and Actions................................. 6
3.18 Financial Statements......................................... 6
3.19 Changes...................................................... 7
3.20 Employee Benefit Plans....................................... 7
3.21 Tax Returns, Payments and Elections.......................... 7
3.22 Insurance.................................................... 8
3.23 Full Disclosure.............................................. 8
4. Representations, Warranties and Covenants of the Purchasers......... 8
4.1 Authorization................................................ 8
4.2 Investment Representations................................... 8
4.3 Investment Experience; Access to Information................. 8
4.4 Absence of Registration...................................... 9
4.5 Restrictions on Transfer..................................... 9
4.6 Transfer Instructions........................................ 10
</TABLE>
<PAGE>
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
4.7 Economic Risk................................................ 10
5. Covenants........................................................... 10
5.1 Inspection................................................... 10
5.2 Financial Statements......................................... 10
5.3 Termination of Covenants..................................... 11
5.4 Public Information........................................... 11
5.5 Confidentiality.............................................. 12
5.6 Nondisclosure................................................ 12
5.7 Right of First Offer......................................... 12
5.8 Vesting Schedule............................................. 13
5.9 Offer, Sale or Grant of Securities........................... 13
5.10 Aggregation of Stock......................................... 14
6. Survival of Agreements.............................................. 14
7. Notices............................................................. 14
8. Modifications; Waiver............................................... 15
9. Entire Agreement.................................................... 15
10. Successors and Assigns............................................. 15
11. Enforcement........................................................ 15
12. Execution and Counterparts......................................... 16
13. Governing Law and Severability..................................... 16
14. Headings........................................................... 16
15. Waiver of Right of First Refusal................................... 16
16. Expenses........................................................... 16
</TABLE>
-ii-
<PAGE>
Schedule 1 - Schedule of Purchasers
Exhibit A - Amended and Restated Articles of Incorporation
Exhibit B - Amended and Restated Co-Sale Agreement
Exhibit C - Schedule of Exceptions to Representations and Warranties
Exhibit D - List of Shareholders
Exhibit E - Form of Proprietary Information and Inventions Agreement
Exhibit F - Amended and Restated Registration Rights Agreement
iii
<PAGE>
LATITUDE COMMUNICATIONS, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
This Series B Preferred Stock Purchase Agreement is made as of June 1,
1994 by and among Latitude Communications, Inc., a California corporation (the
"Company"), with offices at 4001 Burton Drive, Santa Clara, California 95054,
and the purchasers identified on Schedule 1 hereto (hereinafter referred to
individually as a "Purchaser" and collectively as "Purchasers").
NOW, THEREFORE, the parties agree as follows:
1. Purchase and Sale.
-----------------
1.1 Authorization. The Company has authorized the sale and
-------------
issuance of up to 2,700,000 shares of its Series B Preferred Stock, having the
rights, privileges and preferences as set forth in the Amended and Restated
Articles of Incorporation (the "Articles") in the form attached hereto as
Exhibit A.
1.2 Sale of Shares. Subject to the provisions of this Agreement,
--------------
on the Closing Date (as hereinafter defined) the Company will sell to each of
the Purchasers, severally and not jointly, and each of the Purchasers, severally
and not jointly, will purchase from the Company, the number of shares of the
Company's Series B Preferred Stock (the "Shares") set forth opposite each such
Purchaser's name in Schedule 1 annexed hereto at a price per share of Two
Dollars and Seventy-Five Cents ($2.75).
2. Closing of Purchase and Sale.
----------------------------
2.1 Closing Date. The purchase and sale of the Shares pursuant to
------------
Section 1 (the "Closing"), shall take place at the offices of Venture Law Group,
2800 Sand Hill Road, Menlo Park, California 94025, or at such other place as
may be agreed upon by the Company and the Purchasers. The Closing shall take
place at 2:00 p.m. local time on June __, 1994 or at such other time as may be
agreed upon by the Company and the Purchasers (the "Closing Date").
2.2 Transactions at the Closing. At the Closing, the Company shall
---------------------------
deliver to the Purchasers a certificate or certificates for the shares of Series
B Preferred Stock to be issued and sold to such Purchasers at the Closing, duly
registered in each such Purchaser's name or in such other name as any of such
Purchasers shall have specified in writing to the Company at least five days
prior to the Closing Date, as the case may be, against payment in full by such
Purchaser of the aggregate purchase price set forth opposite such Purchaser's
name in Schedule 1 by delivery of a check drawn or a wire transfer of funds made
to the order of "Latitude Communications, Inc." in the amount of such aggregate
purchase price. At or prior to the closing, the Company, the Purchasers and Emil
Wang shall enter into an Amended and Restated Co-Sale Agreement in the form
attached hereto as Exhibit B (the "Co-Sale Agreement") and the Company and the
Purchasers shall enter into an Amended and Restated Registration Rights
Agreement in the form attached hereto as Exhibit F (the "Rights Agreement"). In
addition, the fees of counsel to the Purchasers (but only up to a maximum amount
of $7,500) shall be paid by
<PAGE>
the Company at the Closing. Out of pocket costs and disbursements by counsel
shall be invoiced separately as soon after the closing as practicable and also
paid by the Company.
3. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to the Purchasers that, as of the Closing, except as set forth on
the Schedule of Exceptions attached hereto as Exhibit C:
3.1 Organization, Standing and Qualification. The Company is a
----------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of California, and has all requisite corporate power and authority
to own its property and assets and to carry on its business as it is presently
being conducted and as it is proposed to be conducted, as disclosed to the
Purchasers. The nature of the Company's business and the ownership of its
property do not require it currently to become qualified to do business as a
foreign corporation in any state or jurisdiction.
3.2 Capitalization. The authorized capital stock of the Company,
--------------
as of the Closing Date, will consist of 6,000,000 shares of Preferred Stock, par
value $.001 per share, 3,300,000 shares of which have been designated Series A
Preferred Stock, of which 3,175,000 shares are issued and outstanding, and
2,700,000 shares of which have been designated Series B Preferred Stock, of
which no shares are issued and outstanding immediately prior to the Closing, and
10,000,000 shares of Common Stock, par value $.001 per share, of which 1,778,000
shares are issued and outstanding immediately prior to the Closing. A true and
correct list of the shareholders of the Company is attached hereto as Exhibit D.
Such outstanding shares of Series A Preferred Stock and of Common Stock are duly
authorized and validly issued in accordance with applicable law, fully paid and
non-assessable. Except for the transactions contemplated by this Agreement,
there are (i) no outstanding warrants, options or rights (including preemptive
rights) to subscribe for or purchase any capital stock or other securities from
the Company, (ii) no voting trusts or voting agreements among, or irrevocable
proxies executed by, shareholders of the Company, and (iii) no existing rights
of shareholders to require the Company to register any securities of the Company
or to participate with the Company in any registration by the Company of its
securities. All securities of the Company have been issued in full compliance
with applicable state and federal securities laws.
3.3 Validity of Stock. The Series B Preferred Stock, when issued,
-----------------
sold, and delivered in accordance with the terms of this Agreement, will be duly
and validly issued, fully paid and non-assessable. The Common Stock issuable
upon conversion of the Series B Preferred Stock when issued, sold, and delivered
in accordance with the terms of this Agreement, will be duly and validly issued,
fully paid and non-assessable.
3.4 Subsidiaries. The Company does not own or control, directly or
------------
indirectly, any other corporation, partnership, association or business entity.
3.5 Authorization; Approvals. All corporate action on the part of
------------------------
the Company and its shareholders necessary for the authorization, execution,
delivery, and performance of all its obligations under this Agreement and the
Rights Agreement and for the authorization, issuance, and delivery of the Series
B Preferred Stock being sold under this
-2-
<PAGE>
Agreement and of the Common Stock issuable upon conversion of the Series B
Preferred Stock has been (or will be) taken prior to the Closing Date. This
Agreement and the Rights Agreement, when executed and delivered by or on behalf
of the Company, shall constitute valid and legally binding obligations of the
Company, legally enforceable against the Company in accordance with their terms,
subject as to enforcement to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors' rights, to
general equity principles and as to the indemnification provisions contained in
Section 2.11 of the Rights Agreement, as limited by applicable law. Assuming the
accuracy of the representations of the Purchasers under this Agreement, the
Company has obtained or will obtain prior to the Closing Date all necessary
consents, authorizations, approvals and orders, and has made all registrations,
qualifications, designations, declarations or filings with all federal, state,
or other relevant governmental authorities required on the part of the Company
in connection with the consummation of the transactions contemplated by this
Agreement (the "Approvals and Filings"), unless the Approvals and Filings are
not required prior to the consummation of such transactions, in which case the
Company covenants to obtain the Approvals and Filings immediately after the
Closing Date.
3.6 Compliance with Other Instruments. The Company is not in
---------------------------------
violation or default of any provisions of the Articles, as amended, or the
Company's Bylaws or of any instrument, judgment, order, writ, decree or contract
to which it is a party or by which it is bound, or of any provision of any
federal or state statute, rule or regulation applicable to the Company, the
violation or default of which might result in a material adverse change in the
assets, condition or affairs of the Company. The execution, delivery and
performance of this Agreement and the Rights 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 which 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.
3.7 Agreements; Action.
------------------
(a) Except for agreements explicitly contemplated hereby, 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 which may involve (i) obligations
(contingent or otherwise) of, or payments to the Company in excess of, $25,000;
or (ii) the license of any patent, copyright, trade secret or other proprietary
right to or from the Company.
(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
-3-
<PAGE>
excess of $25,000 or, in the case of indebtedness and/or liabilities
individually less than $25,000, in excess of $25,000 in the aggregate; (iii)
made any loans or advances to any persons, other than ordinary advances for
travel 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 purposes 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 instruments, or subject to any restriction under the
Articles which materially adversely affects its business as now conducted or as
proposed to be conducted in the Business Plan dated April 19, 1994 (the
"Business Plan"), its assets, properties or financial condition.
3.8 Litigation. There is no action, suit, proceeding or, to the best
----------
of the Company's knowledge, investigation pending or currently threatened
against the Company which questions the validity of this Agreement or the Rights
Agreement or the right of the Company to enter into either, or to consummate the
transactions contemplated hereby or thereby, or which 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. To the best of the
Company's knowledge, there are no such actions pending or threatened 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 which the Company intends to
initiate.
3.9 Proprietary Information Agreements.
----------------------------------
(a) Each employee and officer of the Company has executed a
Proprietary Information and Inventions Agreement in the form attached hereto as
Exhibit E. The Company, after reasonable investigation, is not aware that any of
its employees or officers are in violation thereof, and the Company will use its
best efforts to prevent any such violation.
(b) All agreements between the Company and its consultants are
listed on the Schedule of Exceptions and a copy of each such agreement has been
provided to counsel for the Purchasers. The Company, after reasonable
investigation, is not aware that any of its consultants are in violation
thereof, and the Company will use its best efforts to prevent any such
violation.
3.10 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
-4-
<PAGE>
names, copyrights, trade secrets, information, proprietary rights and processes
necessary for its business as now conducted and as proposed to be conducted as
described in the Business Plan without any conflict with or infringement of the
rights of others. There are no outstanding options, licenses, or 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 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. 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/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 nor the Rights
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
best of 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
occurrence of which might result in a material adverse change in the assets,
condition or affairs of the Company.
3.11 Environmental and Safety Laws. To the best of the Company's
-----------------------------
knowledge, the Company is not in violation of any applicable statute, law, or
regulation relating to the environment, storage of hazardous substances or
occupational health and safety, the violation of which might result in a
material adverse change in the assets, conditions or affairs of the Company, 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.
3.12 Manufacturing and Marketing Rights. The Company has not
----------------------------------
granted rights to manufacture, produce, assemble, license, market, or sell its
products to any other person, and the Company is not bound by any agreement that
affects the Company's exclusive right to develop, manufacture, assemble,
distribute, market, or sell its products. No supplier of components to the
Company is a sole source of such components, except for those components that
can be obtained from another supplier at substantially the same cost and
quantities in a similar time frame.
3.13 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, except that employees, officers, or directors of the Company and
members of their immediate families may own less than 1% of the stock in
publicly traded companies that may
-5-
<PAGE>
compete 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.
3.14 Business Plan. The Business Plan has been prepared in good
-------------
faith by the Company and the Business Plan and the representations and
warranties contained in this Agreement, taken together, do not contain any
untrue statement of a material fact nor do they omit to state a material fact
necessary to make the statements made therein not misleading in view of the
circumstances under which they were made, except that with respect to the
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.
3.15 Real Property Holding Company. The Company is not a real
-----------------------------
property holding company within the meaning of Internal Revenue Code Section
897.
3.16 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 which 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 the best of its knowledge, holds a valid
leasehold interest free of any liens, claims or encumbrances.
3.17 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 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 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 in presently
conducted and as it is proposed to be conducted), nor is the Company aware of
any labor organization activity involving its employees. The Company is not
aware that any officer or key employee, or that any group of key employees,
intends to terminate his, her or its employment with the Company, nor does the
Company have a present intention to terminate the employment of any of the
foregoing. Subject to general principles related to wrongful termination of
employees, the employment of each officer and employee of the Company is
terminable at the will of the Company.
3.18 Financial Statements. The Company has delivered to each
--------------------
Purchaser its audited financial statements (balance sheet and profit and loss
statement, statement of shareholders' equity and statement of cashflow) at
December 31, 1993 and for the fiscal year then ended and its unaudited financial
statements (balance sheet and profit and loss statement) at March 31, 1994 and
for the fiscal quarter then ended (the "Financial Statements"). The Financial
Statements are complete and correct in all material respects and 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
-6-
<PAGE>
Statements do not contain notes. The Financial Statements accurately set out and
describe the financial condition and operating results of the Company as of the
dates, and for the periods, indicated therein, subject to normal year-end audit
adjustments, which are not in the aggregate material. Except as set forth in the
Financial Statements, the Company has no liabilities, contingent or otherwise,
other than (i) liabilities incurred in the ordinary course of business
subsequent to March 31, 1994 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. The
Company maintains and will continue to maintain a standard system of accounting
established and administered in accordance with generally accepted accounting
principles.
3.19 Changes. Since the date of the most recent Financial
-------
Statements, 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 which 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, operating results or business of the Company;
(c) any waiver by the Company of a valuable 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 which is not material to the assets, properties,
financial condition, operating results or business of the Company;
(e) any 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 material change in any compensation arrangement or
agreement with any employee; or
(g) to the Company's knowledge, any other event or condition
of any character which might materially and adversely affect the assets,
properties, financial condition, operating results or business of the Company.
3.20 Employee Benefit Plans. The Company does not have any Employee
----------------------
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.
3.21 Tax Returns, Payments and Elections. The Company has filed all
-----------------------------------
tax returns as required by law. The Company has not elected pursuant to the
Internal Revenue Code
-7-
<PAGE>
of 1986, as amended ("Code"), to be treated as a Subchapter S corporation or a
collapsible corporation pursuant to Section 341(f) or Section 1362(a) of the
Code, nor has it made any other elections pursuant to the Code (other than
elections which relate solely to methods of accounting, depreciation or
amortization) which would have a material 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.
3.22 Insurance. The Company has in full force and effect fire and
---------
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed. The Company has in full force and effect
products liability and errors and omissions insurance in amounts customary for
companies similarly situated.
3.23 Full Disclosure. There is no material fact known to the Company
---------------
relating to the business, prospects, condition, affairs, operations or assets of
the Company which may reasonably be expected to have a material adverse effect
on the Company and has not been disclosed to the Purchasers in writing by the
Company.
4. Representations, Warranties and Covenants of the Purchasers. Each
-----------------------------------------------------------
Purchaser severally represents and warrants that:
4.1 Authorization. The execution and delivery of this Agreement and
-------------
the Rights Agreement have been duly authorized by the Purchaser and this
Agreement and the Rights Agreement constitute its valid and legally binding
obligations, legally enforceable against such Purchaser in accordance with their
terms, subject as to enforcement to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting creditors' rights,
to general equity principles and as to the indemnification provisions contained
in Section 2.11 of the Rights Agreement, as limited by applicable law. Its
principal residence or place of business is located in the state indicated on
Schedule 1.
4.2 Investment Representations. It is acquiring the Series B
--------------------------
Preferred Stock purchased by it (and any Common Stock into which it may be
converted) for Purchaser's own account, for investment and not with a view to,
or for sale in connection with, any distribution of such Stock or any part
thereof.
4.3 Investment Experience; Access to Information. It is (a) an
--------------------------------------------
"accredited investor" as that term is defined in Rule 501(a) promulgated under
the Securities Act of 1933, as amended (the "Securities Act"), (b) an investor
experienced in the evaluation of high technology businesses similar to the
Company, (c) is able to fend for itself in the transactions contemplated by this
Agreement, (d) has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of this investment,
(e) has the ability to bear the economic risks of this investment, (f) has been
furnished with or has had access to such information as is specified in
subparagraph (b)(2) of Rule 502 promulgated under the Securities Act, (g) was
not organized or reorganized for the specific purpose of acquiring the Series B
Preferred Stock purchased by it (and any Common Stock into which such Series B
Preferred Stock may be converted) and (h) has been afforded prior to the Closing
Date the opportunity to
-8-
<PAGE>
ask questions of, and to receive answers from, the Company and to obtain any
additional information, to the extent the Company has such information or could
have acquired it without unreasonable effort or expense, necessary for each of
the Purchasers to make an informed investment decision with respect to the
purchase of the Series B Preferred Stock.
4.4 Absence of Registration. Each Purchaser understands that:
-----------------------
(a) The Series B Preferred Stock to be sold and issued
hereunder (and the Common Stock into which it may be converted) has not been
registered under the Securities Act on the ground that no distribution or public
offering of the Preferred Stock (or the Common Stock into which it may be
converted) is to be effected, and that in connection therewith the Company is
relying in part on the representations of the Purchasers set forth in this
Section 4. Further, the Series B Preferred Stock (and the Common Stock into
which it may be converted) is required to be held indefinitely unless it is
subsequently registered under the Securities Act, or an exemption from such
registration is available.
(b) Except as provided in the Rights Agreement, the Company is
under no obligation to file a registration statement with the Securities and
Exchange Commission (the "Commission") with respect to the Series B Preferred
Stock or the Common Stock into which the Series B Preferred Stock may be
converted.
(c) Rule 144 promulgated under the Securities Act ("Rule
144"), which provides for certain limited sales of unregistered securities, is
not presently available with respect to the Series B Preferred Stock (or the
Common Stock into which it may be converted), and the Company is under no
obligation to make or assist in making Rule 144 available except as otherwise
provided in Section 5.4.
4.5 Restrictions on Transfer. Each Purchaser agrees that (a) it
------------------------
will not offer, sell, pledge, hypothecate or otherwise dispose of the Series B
Preferred Stock (or the Common Stock into which it may be converted) unless such
offer, sale, pledge, hypothecation or other disposition is (i) registered under
the Securities Act, or (ii) in compliance with an opinion of counsel to the
Purchasers, delivered to the Company and reasonably acceptable to it, to the
effect that such offer, sale, pledge, hypothecation or other disposition is
exempt from registration under the Securities Act, and (b) the certificate(s)
representing the Series B Preferred Stock (and any Common Stock into which it
may be converted) shall bear a legend stating in substance:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT OR,
IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY
TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION DOES NOT VIOLATE THE
PROVISIONS OF SAID ACT.
-9-
<PAGE>
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
Upon request of a holder of Series B Preferred Stock (or the Common
Stock into which it has been converted), the Company shall remove the legend set
forth above from the certificates evidencing such Series B Preferred or Common
Stock or issue to such holder new certificates therefor free of such legend, if
with such request the Company shall have received an opinion of counsel selected
by the holder and reasonably satisfactory to the Company, in form and substance
reasonably satisfactory to the Company, to the effect that a transfer by said
holder of such Series B Preferred Stock or Common Stock will not violate the
Securities Act.
4.6 Transfer Instructions. Each Purchaser agrees that the Company
---------------------
may provide for appropriate stop transfer instructions to implement the
provisions of Section 4.5 hereof.
4.7 Economic Risk. Each Purchaser understands that it must bear the
-------------
economic risk of the investment represented by the purchase of Series B
Preferred Stock (and any Common Stock into which it may be converted) for an
indefinite period.
5. Covenants.
---------
5.1 Inspection. The Company covenants and agrees that, for so long
----------
as any Purchaser holds at least 250,000 shares of Series B Preferred Stock (or
Common Stock into which it has been converted), as adjusted for stock splits,
stock dividends, recapitalizations, reclassifications and similar events
(together herein called "Recapitalization Events") (a "Major Purchaser") or for
so long as a beneficial owner of any Purchaser (including, without limitation,
partners of a general or limited partnership, shareholders of a corporation and
beneficiaries of a trust) holds at least 250,000 shares of Series B Preferred
Stock or Registrable Stock (as defined in the Rights Agreement) which has been
distributed to it, as adjusted for Recapitalization Events (a "Substantial
Beneficial Owner"), the Company will permit any authorized representatives of
such Purchaser or Substantial Beneficial Owner, at its expense, to visit and
inspect the Company's properties, to examine its books of accounts 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 such Purchaser or
Substantial Beneficial Owner; provided, that the Company shall not be required
by this Section 5.1 to provide access to any information which it reasonably
considers to be a trade secret or similar confidential information.
5.2 Financial Statements. The Company will deliver:
--------------------
(a) to each Purchaser holding at least 250,000 shares of
Series B Preferred Stock (or shares of Common Stock into which such Series B
Preferred Stock has been converted) within 30 days after the end of each month
following the Closing, a balance sheet of the Company as of the end of each such
month and a statement of operations for such month and
-10-
<PAGE>
for the period from the beginning of the current fiscal year to the end of such
month, setting forth in each case in comparative form the figures for the
corresponding periods of the previous fiscal year;
(b) to each purchaser holding more than 250,000 shares of
Series B Preferred Stock (or shares of Common Stock into which such Series B
Preferred Stock has been converted), within 45 days after the end of each of the
first three quarters in each fiscal year of the Company, a balance sheet of the
Company as of the end of each such quarter and statements of operations and of
cash flows of the Company for each quarter and, in the case of the first, second
and third quarterly periods, for the period from the beginning of the current
fiscal year to the end of such quarter, setting forth in each case in
comparative form the figures for the corresponding period of the previous fiscal
year, all in reasonable detail and certified, subject to changes resulting from
year-end audit adjustments, by the chief financial officer of the Company
("CFO") to the effect that such financial statements were prepared in accordance
with generally accepted accounting principles applied on a basis consistent
(except as otherwise disclosed therein and consented to by a majority of the
Board, including the approval of the representatives on the Board elected by the
holders of the Preferred Stock) with that of preceding periods, and except as
otherwise stated therein, present fairly the financial position of the Company
as of their date; and
(c) to each Purchaser within 90 days after the end of each
fiscal year of the Company, a balance sheet of the Company as of the end of such
year and statements of operations and of cash flows of the Company for such
year, setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail and accompanied by the opinion
thereon of independent public accountants of recognized national standing which
opinion shall state that such financial statements have been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with that of the preceding fiscal year (except as otherwise approved
by a majority of the Board), and present fairly and accurately the financial
position of the Company as of their date, and that the audit by such accountants
in connection with such financial statements has been made in accordance with
generally accepted auditing standards.
5.3 Termination of Covenants. The covenants set forth in Sections
------------------------
5.1, 5.2, 5.6, 5.7 and 5.8 shall terminate and be of no further force or effect
immediately upon consummation of the first firm commitment underwritten public
offering of securities of the Company pursuant to a registration statement filed
by the Company under the Securities Act, where the aggregate sales price of such
securities (before deduction of underwriting discounts and expenses of sale) is
not less than $10,000,000 and the price per share is not less than Seven Dollars
Fifty Cents ($7.50), as adjusted for Recapitalization Events (a "Qualified
Public Offering").
5.4 Public Information. At any time and from time to time after the
------------------
earlier of the close of business on such date as (i) a registration statement
filed by the Company under the Securities Act becomes effective, (ii) the
Company registers a class of securities under Section 12 of the Securities
Exchange Act of 1934, as amended, or any federal statute or code
-11-
<PAGE>
which is a successor thereto (the "Exchange Act"), or (iii) the Company issues
an offering circular meeting the requirements of Regulation A under the
Securities Act, the Company shall undertake to make available to the public and
the Holders (as hereinafter defined), pursuant to Rule 144, such information as
is necessary to enable the Holders to make sales of Registrable Stock pursuant
to that Rule. The Company shall comply with the current public information
requirements of Rule 144 and shall furnish thereafter to any Holder, upon
request, a written statement executed by the Company as to the steps the Company
has taken to so comply.
5.5 Confidentiality. Any information provided pursuant to Sections
---------------
5.1 and 5.2 shall be used by the Purchasers or any Substantial Beneficial Owner
solely in furtherance of its interests as an investor in the Company, and each
Purchaser or any Substantial Beneficial Owner shall (except as otherwise
required by law) use its best efforts to maintain the confidentiality of all
nonpublic information of the Company obtained under said sections, provided the
Company makes an appropriate designation of any such confidential information,
and provided further, that the Company shall not be obligated to disclose any
information, the disclosure of which it believes in good faith would be
detrimental to the Company and its shareholders.
5.6 Nondisclosure. All employees, consultants and others at the
-------------
Company with access to proprietary information shall sign confidentiality
agreements in a form satisfactory to the Board of Directors.
5.7 Right of First Offer. Subject to the terms and conditions set
--------------------
forth in this Section 5.7, the Company hereby grants to each Purchaser the right
of first offer to purchase, pro rata, all or any part of New Securities (as
defined in this Section 5.7) which the Company may, from time to time, propose
to sell and issue. A pro rata share, for purposes of this right of first offer,
is the ratio that the sum of the number of shares of Common Stock issuable upon
conversion of the Series B Preferred Stock then held by such Purchaser bears to
the sum of the total number of shares of Common Stock then outstanding plus the
number of shares of Common Stock issuable upon conversion of the then
outstanding Preferred Stock.
(a) Definition of "New Securities." Except as set forth below,
-----------------------------
"New Securities" shall mean any shares of capital stock of the Company including
Common Stock and Preferred Stock, whether now authorized or not, and rights,
options or warrants to purchase said shares of Common Stock or Preferred Stock,
and securities of any type whatsoever that are, or may become, convertible into
said shares of Common Stock or Preferred Stock. Notwithstanding the foregoing,
"New Securities" does not include (i) the Series B Preferred Stock purchased
under this Agreement, (ii) the Common Stock issuable upon conversion of the
Series B Preferred Stock, (iii) shares of the Company's Common Stock or related
options exercisable for such Common Stock issued pursuant to any arrangement
approved by the Board of Directors to employees, officers and directors of, or
consultants, advisors, customers or vendors to, or other persons performing
services for, the Company, and (iv) shares, warrants, or options issued to
equipment lessors or financial institutions solely in connection with extensions
of credit to the Company on terms approved by the Board of Directors, or (v)
securities issued in connection
-12-
<PAGE>
with a bona fide business acquisition of or by the Company, whether by merger,
consolidation, sale of assets, sale or exchange of stock or otherwise.
(b) Notice. If the Company proposes to undertake or
------
undertakes an issuance of New Securities, it shall provide each Purchaser an
opportunity to purchase a pro rata share of New Securities by giving notice
prior to the issuance of New Securities, as provided in Section 5.7(b)(i) or
after the issuance of New Securities, as provided in Section 5.7(b)(ii).
(i) Prior to the issuance of New Securities, the Company
shall give each Purchaser written notice describing the type of New Securities,
and the price and terms upon which the Company proposes to issue the same. Each
Purchaser shall then have thirty (30) days from the date of deemed receipt of
any such notice to agree to purchase up to its pro rata share of such New
Securities for the price and upon the terms specified in the notice by giving
written notice to the Company and stating therein the quantity of New Securities
it thereby irrevocably commits to purchase. If the Purchasers fail to exercise
the right of first offer within said thirty (30) day period, the Company shall
have ninety (90) days thereafter to sell or enter into an agreement (pursuant to
which the sale of New Securities covered thereby shall be closed, if at all,
within sixty (60) days from the date of said agreement) to sell the New
Securities not elected to be purchased by Purchasers at a price and upon terms
no more favorable to the purchasers of such securities than specified in the
Company's notice. In the event the Company has not sold the New Securities or
entered into an agreement to sell the New Securities within said ninety (90) day
period (or sold and issued New Securities in accordance with the foregoing
within sixty (60) days from the date of said agreement), the Company shall not
thereafter issue or sell any New Securities, without first offering such
securities to each Purchaser in the manner provided in this paragraph (i).
(ii) If the Company has not given notice to the
Purchasers prior to the issuance of New Securities as provided in Section
5.7(b)(i), then the Company shall give notice to the Purchasers within fifteen
(15) days after the issuance of New Securities. Such notice shall describe the
type, price and terms of the New Securities. Each Purchaser shall have thirty
(30) days from the date of deemed receipt of such notice to elect to purchase
from the Company its pro rata share of the New Securities. (The pro rata shares
shall be calculated giving effect to the sale of New Securities to the
Purchaser). The closing of such sale shall occur within thirty (30) days of the
date of notice to the Purchaser.
(c) Assignment of Right. The right of first offer hereunder
-------------------
is not assignable except by any Purchaser which is a corporation or partnership
to any wholly-owned subsidiary or constituent partner or limited partner of such
Purchaser.
(d) Termination of Right. The right of first offer hereunder
--------------------
shall terminate upon the closing of a Qualified Public Offering.
5.8 Vesting Schedule. The Company covenants that any and all shares
----------------
of the Company's Common Stock or related options exercisable for such Common
Stock issued employees, officers and directors of, or consultants, advisors,
customers or vendors to, or other persons performing services for, the Company
shall vest over a period of four years, vesting to
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<PAGE>
begin one year from the date of grant and equally on a monthly basis during the
following three years; provided, however, that a different vesting schedule may
be effected if such different vesting schedule is approved by the Board of
Directors.
5.9 Offer, Sale or Grant of Securities. The Company shall not, at
----------------------------------
any time or from time to time, offer, sell or grant any security, whether or not
pursuant to any employee equity incentive plan, without the approval of the
Board of Directors.
5.10 Aggregation of Stock.. All Shares (or Common Stock into which
--------------------
Shares have been converted) held or acquired by affiliated entities or persons
shall be aggregated together for the purpose of determining the availability of
any rights under this Section 5.
6. Survival of Agreements. All agreements, representations and
----------------------
warranties contained herein or made in writing in connection with the
transactions contemplated hereby shall survive the execution and delivery of
this Agreement (despite any investigation at any time made by the Purchasers or
on their behalf) and any disposition of the Series B Preferred Stock or of the
Common Stock issued upon conversion thereof. All statements contained in any
certificate or other instrument executed and delivered by the Company or its
duly authorized officers or representatives pursuant hereto in connection with
the transactions contemplated hereby shall be deemed representations by the
Company hereunder.
7. Notices. All notices, requests, consents and other communications
-------
herein (except as stated in the last sentence of this Section 7) shall be in
writing and shall be mailed by first-class or certified mail, postage prepaid,
or personally delivered, as follows:
(a) If to the Company:
Latitude Communications, Inc.
4001 Burton Drive
Santa Clara, CA 95054
with a copy to:
Mark A. Medearis
Venture Law Group
2800 Sand Hill Road
Menlo Park, California 94025
(b) If to the Purchasers:
at their respective addresses set forth on Schedule 1
----------
hereto
with a copy to:
Allen L. Morgan
Wilson, Sonsini, Goodrich & Rosati
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<PAGE>
Professional Corporation
650 Page Mill Road
Palo Alto, CA 94304-1050
or such other addresses as each of the parties hereto may provide from time to
time in writing to the other parties. For purposes of computing the time periods
set forth in Section 5, the date of mailing shall be deemed to be the delivery
date. The financial statements and other reports required by Section 5 may be
mailed by first-class regular mail.
8. Modifications; Waiver. Neither this Agreement nor any provision
---------------------
hereof may be changed, waived, discharged or terminated orally or in writing,
except that any provision of this Agreement may be amended and the observance of
any such provision may be waived (either generally or in a particular instance
and either retroactively or prospectively) with (but only with) the written
consent of (a) the Company and (b) the holders of at least 66 2/3% of the Shares
and any and all Common Stock issued upon conversion of the Shares.
9. Entire Agreement. This Agreement contains the entire agreement between
----------------
the parties with respect to the transactions contemplated hereby, and supersedes
all negotiations, agreements, representations, warranties, commitments, whether
in writing or oral, prior to the date hereof.
10. Successors and Assigns. All of the terms of this Agreement shall be
----------------------
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto, except that the rights set forth
in Sections 5.1 and 5.2 hereof may be assigned but only
(a) to an assignee who shall acquire not less than 50,000 shares (as
adjusted for Recapitalization Events) of Shares or Common Stock issued upon
conversion thereof; or
(b) in connection with the distribution by a Purchaser of Series B
Preferred Stock or Common Stock issued upon conversion thereof to a Substantial
Beneficial Owner.
11. Enforcement.
-----------
(a) Remedies at Law or in Equity. If the Company shall default
----------------------------
in any of its obligations under this Agreement or if any representation or
warranty made by or on behalf of the Company in this Agreement or in any
certificate, report or other instrument delivered under or pursuant to any term
hereof shall be untrue or misleading in any material respect as of the date of
this Agreement or of the Closing Date or as of the date it was made, furnished
or delivered, each Purchaser may proceed to protect and enforce its rights by
suit in equity or action at law, whether for the specific performance of any
term contained in this Agreement, the Company's Articles or for an injunction
against the breach of any such term or in furtherance of the exercise of any
power granted in this Agreement or the Company's Articles, or to enforce any
other legal or equitable right of such Purchaser or to take any one or more of
such actions. In the event any Purchaser brings such an action against the
Company, the prevailing party in such dispute shall be entitled to recover from
the losing party all fees, costs and expenses of enforcing
-15-
<PAGE>
any right of such prevailing party under or with respect to this Agreement or
the Company's Articles, including without limitation such reasonable fees and
expenses of attorneys and accountants, which shall include, without limitation,
all reasonable fees, costs and expenses of appeals.
(b) Remedies Cumulative; Waiver. No remedy referred to herein
---------------------------
is intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to each Purchaser at law
or in equity. No express or implied waiver by any Purchaser of any default shall
be a waiver of any future or subsequent default. The failure or delay of each
Purchaser in exercising any rights granted it hereunder shall not constitute a
waiver of any such right and any single or partial exercise of any particular
right by any Purchaser shall not exhaust the same or constitute a waiver of any
other right provided herein.
12. Execution and Counterparts. This Agreement may be executed in any
--------------------------
number of counterparts, each of which when so executed and delivered shall be
deemed an original, and such counterparts together shall constitute one
instrument. Each party shall receive a duplicate original of the counterpart
copy or copies executed by it and by the Company.
13. Governing Law and Severability. This Agreement shall be governed by
------------------------------
the laws of the State of California as applied to agreements entered into and to
be performed entirely within California. In the event any provision of this
Agreement or the application of any such provision to any party shall be held by
a court of competent jurisdiction to be contrary to law, the remaining
provisions of this Agreement shall remain in full force and effect.
14. Headings. The descriptive headings of the Sections hereof and the
--------
Schedule and Exhibits hereto are inserted for convenience only and do not
constitute a part of this Agreement.
15. Waiver of Right of First Refusal. By execution of this Agreement, the
--------------------------------
Company and those Purchasers who were "Purchasers" under the Series A Preferred
Stock Purchase Agreement dated April 22, 1993 (the "Series A Purchase
Agreement") hereby waive, pursuant to Section 9 of the Series A Purchase
Agreement, individually and collectively on behalf of all Purchasers (as defined
therein), the rights of first offer set forth in Section 5.7 of the Series A
Purchase Agreement as they pertain to the Shares and the Common Stock issuable
upon conversion thereof.
16. Expenses. The Company will pay (i) the reasonable fees of counsel for
--------
the Purchasers in an amount not to exceed $7,500 and (ii) such counsel's
reasonable expenses, in connection with all transactions leading up to and
including the Closing.
-16-
<PAGE>
SERIES B STOCK PURCHASE AGREEMENT
This Agreement is hereby executed as of the date first above written.
LATITUDE COMMUNICATIONS, INC.
By: /s/ Emil Wang
------------------------------
Title: PRESIDENT
--------------------------
"PURCHASER"
_________________________________
By: _____________________________
Title: __________________________
<PAGE>
SERIES B STOCK PURCHASE AGREEMENT
This Agreement is hereby executed as of the date first above written.
LATITUDE COMMUNICATIONS, INC.
By:______________________________
Title: __________________________
"PURCHASER"
MAYFIELD ASSOCIATES FUND II
MAYFIELD VII
---------------------------------
By: /s/ Kevin A. Fong
-----------------------------
Title: __________________________
<PAGE>
SERIES B STOCK PURCHASE AGREEMENT
This Agreement is hereby executed as of the date first above written.
LATITUDE COMMUNICATIONS, INC.
By:______________________________
Title: __________________________
"PURCHASER"
MENLO VENTURES IV, L.P.
By: MV Management IV, L.P.,
its General Partner
---------------------------------
By: /s/ Thomas H. Bredt
-----------------------------
Title: General Partner
--------------------------
<PAGE>
SERIES B STOCK PURCHASE AGREEMENT
This Agreement is hereby executed as of the date first above written.
LATITUDE COMMUNICATIONS, INC.
By:______________________________
Title: __________________________
"PURCHASER"
ASPECT TELECOMMUNICATIONS
CORPORATION
_________________________________
By: /s/ William R. Hahn
-----------------------------
Title: CFO
---------------------------
<PAGE>
SERIES B STOCK PURCHASE AGREEMENT
This Agreement is hereby executed as of the date first above written.
LATITUDE COMMUNICATIONS, INC.
By: /s/ Emil Wang
-------------------------
Title: PRESIDENT & CEO
----------------------
"PURCHASER"
VLG Investments
-----------------------------
By: /s/ Mark A. Medearis
----------------------------
Title: Partner
----------------------
<PAGE>
SERIES B STOCK PURCHASE AGREEMENT
This Agreement is hereby executed as of the date first above written.
LATITUDE COMMUNICATIONS, INC.
By:______________________________
Title: __________________________
"PURCHASER"
/s/ Craig W. Johnson
---------------------------------
By: /s/ Mark A. Medearis
-----------------------------
Title: Attorney-in-Fact
--------------------------
<PAGE>
SERIES B STOCK PURCHASE AGREEMENT
This Agreement is hereby executed as of the date first above written.
LATITUDE COMMUNICATIONS, INC.
By:______________________________
Title: __________________________
"PURCHASER"
MARK A. MEDEARIS AND KATHRYN H. MEDEARIS,
TRUSTEES OF THE MEDEARIS FAMILY TRUST
U/D/T DATED MARCH 18, 1992
_________________________________
By: /s/ Mark A. Medearis
-----------------------------
Title: Trustee
--------------------------
<PAGE>
SERIES B STOCK PURCHASE AGREEMENT
This Agreement is hereby executed as of the date first above written.
LATITUDE COMMUNICATIONS, INC.
By:______________________________
Title: __________________________
"PURCHASER"
_________________________________
By: /s/ James L. Patterson
-----------------------------
Title: __________________________
<PAGE>
SERIES B STOCK PURCHASE AGREEMENT
This Agreement is hereby executed as of the date first above written.
LATITUDE COMMUNICATIONS, INC.
By:________________________________
Title: ____________________________
"PURCHASER"
CANAAN VENTURES II
LIMITED PARTNERSHIP
By: CANAAN VENTURE PARTNERS II L.P.
By: /s/ [SIGNATURE]
-------------------------------
GENERAL PARTNER
<PAGE>
SERIES B STOCK PURCHASE AGREEMENT
This Agreement is hereby executed as of the date first above written.
LATITUDE COMMUNICATIONS, INC.
By:________________________________
Title: ____________________________
"PURCHASER"
CANAAN VENTURES II
OFFSHORE C.V.
By: CANAAN VENTURE PARTNERS II L.P.
By: /s/ [SIGNATURE]
------------------------------
GENERAL PARTNER
<PAGE>
SERIES B STOCK PURCHASE AGREEMENT
This Agreement is hereby executed as of the date first above written.
LATITUDE COMMUNICATIONS, INC.
By:________________________________
Title: ____________________________
"PURCHASER"
___________________________________
By: /s/ W. Ferrel Sanders
-------------------------------
GENERAL PARTNER
Title: PARTNERS 89, LP. THE GENERAL PARTNER
OF ASSET MANAGEMENT ASSOCIATES 1989,
LP.
<PAGE>
SERIES B STOCK PURCHASE AGREEMENT
This Agreement is hereby executed as of the date first above written.
LATITUDE COMMUNICATIONS, INC.
By:________________________________
Title: ____________________________
"PURCHASER"
STANFORD UNIVERSITY
-----------------------------------
By: /s/ Carol Gilmer
-------------------------------
Title: CAROL GILMER
----------------------------
ASSISTANT SECRETARY
THE BOARD OF TRUSTEES
LELAND STANFORD JUNIOR UNIVERSITY
<PAGE>
SCHEDULE 1
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
Number of Shares of Purchase Price for
Name and Address Series B Preferred Stock Shares Purchased
- ------------------------------------------- ------------------------- -------------------
<S> <C> <C>
Mayfield VII 1,007,576 $2,770,834.00
2200 Sand Hill Road
Menlo Park, CA 94025
Attn: Kevin A. Fong
Mayfield Associates Fund II 53,030 $ 145,832.50
2200 Sand Hill Road
Menlo Park, CA 94025
Attn: Kevin A. Fong
Menlo Ventures IV, L.P. 757,576 $2,083,334.00
3000 Sand Hill Road
Building 4, Suite 100
Menlo Park, CA 94025
Attn: Thomas H. Bredt
Aspect Telecommunications Corporation 36,364 $ 100,001.00
1730 Fox Drive
San Jose, CA 95131
Attn: James R. Carreker
VLG Investments 4,365 $ 12,003.75
2800 Sand Hill Road
Menlo Park, CA 94025
Attn: Mark A. Medearis
Craig W. Johnson 545 $ 1,498.75
c/o Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
Mark A. Medearis and Kathryn H. Medearis, 545 $ 1,498.75
Trustees of the Medearis
Family Trust U/D/T dated March 18, 1992
527 Tennyson
Palo Alto, CA 94301
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
James Patterson 20,000 $ 55,000.00
115 Glen Ridge Road
Los Gatos, CA 95030
Canaan Ventures II Limited Partnership 105,818 $ 290,999.50
2884 Sand Hill Road
Building 1, Suite 115
Menlo Park, CA 94025
Attention: Deepak Kamra
Canaan Ventures II Offshore Limited 166,909 $ 458,999.75
Partnership
2884 Sand Hill Road
Building 1, Suite 115
Menlo Park, CA 94025
Attention: Deepak Kamra
Asset Management Associates 1989, L.P. 454,546 $1,250,001.50
2275 East Bayshore Road,
Suite 150
Palo Alto, CA 94303
Attention: W. Ferrell Sanders
Stanford University 54,546 $ 150,001.50
c/o Stanford Management
Attn: Carol Gilmer
2770 Sand Hill Road
Menlo Park, CA 94025
------------ -------------
Total 2,661,820 $7,320,005.00
</TABLE>
<PAGE>
Exhibit A
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
LATITUDE COMMUNICATIONS, INC.
Emil C. W. Wang and Mark A. Medearis hereby certify that:
1. They are the President and Secretary, respectively, of Latitude
Communications, Inc., a California corporation.
2. The Articles of Incorporation of the corporation are hereby amended and
restated in their entirety as follows:
I
The name of this corporation is Latitude Communications, Inc.
II
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III
(a) Authorized Shares. The corporation is authorized to issue two classes
-----------------
of shares designated "Common Stock" and "Preferred Stock" respectively. The
total number of shares that the corporation is authorized to issue is sixteen
million (16,000,000) shares. Ten million (10,000,000) shares shall be Common
Stock, par value $.001 per share, and six million (6,000,000) shares shall be
Preferred Stock, par value $.001 per share. The Preferred Stock shall be issued
in two series. The first series of Preferred Stock shall be designated Series A
Preferred Stock and shall consist of three million three hundred thousand
(3,300,000) shares. The second series of Preferred Stock shall be designated
Series B Preferred Stock and shall consist of two million seven hundred thousand
(2,700,000) shares. Upon the Amendment and Restatement of the Articles of
Incorporation of this corporation as set forth herein, each outstanding share of
the class of shares previously designated Series A Preferred Stock is converted
into and reconstituted as one share of the series of shares designated Series A
Preferred Stock. The Liquidation Amount for the Series A Preferred Stock is one
dollar ($1.00) per share and the Liquidation Amount for the Series B Preferred
Stock is two dollars and seventy-five cents ($2.75) per share, in each case
subject to proportional and equitable adjustment for stock splits, reverse
splits and similar recapitalizations.
<PAGE>
(b) Liquidation.
-----------
(1) Upon the voluntary or involuntary liquidation, winding up or
dissolution of the corporation, out of the assets available for distribution to
shareholders, the holders of Series A Preferred Stock shall be entitled to
receive, in preference to any payment to the holders of Common Stock, the
Liquidation Amount for the Series A Preferred Stock for each share of Series A
Preferred Stock then held by them plus any dividends previously declared and
unpaid on such Series A Preferred Stock and the holders of Series B Preferred
Stock shall be entitled to receive, in preference to any payment to the holders
of Common Stock, the Liquidation Amount for the Series B Preferred Stock for
each share of Series B Preferred Stock then held by them plus any dividends
previously declared and unpaid on such Series B Preferred Stock. In the event
the assets of the corporation are insufficient to pay the entirety of such
amount required to be paid to the holders of Series A Preferred Stock and to the
holders of Series B Preferred Stock under this paragraph (1), the entire
remaining assets shall be paid ratably to the holders of Series A Preferred
Stock and to the holders of Series B Preferred Stock (so that each shall receive
the same percentage of the applicable preferential amount) and the Common Stock
shall receive nothing.
(2) After the entirety of the amount required under paragraph (1) has
been paid to the holders of Series A Preferred Stock and to the holders of
Series B Preferred Stock, the remaining assets shall be paid ratably to the
holders of Common Stock.
(3) For the purposes of this subdivision (b), a liquidation, winding
up or dissolution is deemed to include the acquisition of the corporation by
another entity, whether by merger, transfer of all or substantially all the
assets or otherwise, or a transaction or series of related transactions in which
more than 50% of the voting power of the corporation is transferred.
(4) Whenever the distribution provided for in this subdivision (b)
shall be payable in securities or property other than cash, the value of such
distribution shall be the fair market value of such securities or other property
as determined in good faith by the Board of Directors.
(5) Each holder of an outstanding share of Preferred Stock shall be
deemed to have consented, for purposes of Sections 502, 503 and 506 of the
General Corporation Law of California, to distributions made by the corporation
in connection with the repurchase at cost of shares of Common Stock issued to or
held by officers, directors, employees or consultants upon termination of their
employment or services pursuant to agreements providing for the right of said
repurchase between the corporation and such persons, provided that the terms of
such repurchase shall have been approved by the Board.
(c) Voting Rights.
-------------
(1) Each holder of Common Stock is entitled to one vote per share of
Common Stock and each holder of Preferred Stock is entitled to a number of votes
equal to the number of shares of Common Stock into which the holder's Preferred
Stock is then convertible; for such purpose, any and all fractional shares
otherwise issuable to each holder of Preferred Stock shall be aggregated and any
resulting fractional shall be rounded off to the nearest whole number of shares
(with one-half being rounded up). Except as provided by law or by paragraph
-2-
<PAGE>
(2) following, the Common Stock and Preferred Stock shall vote together as a
single class on all matters to come before the shareholders for approval.
(2) In addition to any class or series voting rights under applicable
law, without the approval of at least two-thirds of the outstanding shares of
Preferred Stock voting as a separate class, the corporation shall not:
(i) amend the articles of incorporation or the bylaws;
(ii) redeem or otherwise acquire any Common Stock, either
directly or through a subsidiary, other than pursuant to redemption or
repurchase provisions approved by the Board of Directors;
(iii) redeem or otherwise acquire any Preferred Stock, either
directly or through a subsidiary;
(iv) authorize or issue another class or series of equity
securities or any securities convertible into, or exchangeable for, equity
securities having rights, preferences or privileges greater than, senior to or
on a parity with either the Series A Preferred Stock or the Series B Preferred
Stock;
(v) merge or consolidate with or into any other corporation
(directly or indirectly through one or more subsidiaries), sell all or
substantially all its assets, or engage in any reorganization or
recapitalization of the Company or change of control transaction or any
reclassification or other similar change of, or with respect to, any stock; or
(vi) voluntarily elect to wind up and dissolve.
(d) Conversion.
----------
(1) Subject to paragraph (2) below, the Preferred Stock shall be
convertible into Common Stock at any time at the option of the respective
holders of Preferred Stock.
(2) The Preferred Stock shall automatically be converted into Common
Stock immediately upon the closing of a firm commitment underwritten public
offering of Common Stock pursuant to an effective registration statement on Form
S-1 under the Securities Act of 1933 covering the offer and sale of Common Stock
by the corporation to the public at an aggregate offering price of at least
$10,000,000 and a per share offering price to the public at least equal to seven
dollars and fifty cents ($7.50).
(3) For the purposes of any conversion under either paragraph (1) or
paragraph (2) above, the number of shares of Common Stock issuable with respect
to shares of a series of Preferred Stock upon conversion shall be determined by
dividing the aggregate dollar equivalent Liquidation Amount of all shares of
such series of Preferred Stock at any one time surrendered for conversion by any
one holder thereof by the applicable conversion price for such series in effect
at the date of conversion. The initial conversion price per share for each
series of the Preferred Stock shall be the Liquidation Amount for such series
per share, and such
-3-
<PAGE>
conversion price shall be subject to adjustment from time to time as provided in
paragraph (5) of this subdivision (d). Upon conversion, no fractional shares
shall be issued and the corporation shall in lieu thereof pay in cash the value
of any remaining fraction, taking the conversion price in effect at the time as
the value of a whole share of Common Stock; for such purpose, any and all
fractional shares otherwise issuable to each holder of shares of a series of
Preferred Stock shall be aggregated and any resulting fractional share shall be
paid in cash as provided earlier in this sentence. The corporation shall reserve
and keep reserved out of its authorized but unissued shares of Common Stock
sufficient shares to effect the conversion of all shares of Preferred Stock
outstanding from time to time.
(4) A holder of Preferred Stock desiring to convert shall deliver the
share certificate to the corporation at its principal executive office,
accompanied by a written request to convert, specifying the number of shares to
be converted. The endorsement of the share certificate and the request to
convert shall be in form reasonably satisfactory to the corporation. At the
close of business on the date of such delivery, the conversion shall be deemed
to have occurred and the person entitled to receive share certificates for
Common Stock to which he is entitled upon the conversion. Upon the automatic
conversion of Preferred Stock pursuant to paragraph (2) above, the holder of
Preferred Stock shall similarly deliver the share certificate to the corporation
and the Preferred Stock shall not be deemed to have been converted to Common
Stock until immediately prior to the closing of a sale of securities as
described in paragraph (2).
(5) If at any time or from time to time the corporation shall declare
or pay, without consideration, any dividend on the Common Stock payable in
Common Stock or in any right to acquire Common Stock for no consideration, or
shall subdivide its outstanding shares of Common Stock into a greater number of
shares, the conversion price in effect immediately prior to such subdivision
shall be proportionately and equitably reduced and conversely, in case the
outstanding shares of Common Stock of the corporation shall be combined into a
smaller number of shares, the conversion price in effect immediately prior to
such combination shall be proportionately and equitably increased.
(6) If at any time or from time to time the corporation alters its
capital structure so as to change the rights, privileges and preferences of the
Common Stock or changes the Common Stock into the same or a different number of
shares of any other class or classes of stock, whether by capital
reorganization, reclassification or otherwise (except pursuant to a transaction
constituting a liquidation pursuant to paragraph (b)(3) above), then each series
of Preferred Stock shall be convertible into such number and type of other
securities as the holders of such series of Preferred Stock would have received
if they had converted the shares of such series of Preferred Stock held by them
immediately prior to such reorganization or recapitalization.
(7) Promptly after any change in the conversion price for a series of
Preferred Stock, the corporation shall cause to be prepared a written statement
setting forth in detail the facts and the revised conversion ratio. The
statement shall be signed by the chief executive officer and by the chief
financial officer and filed with the secretary of the corporation. A copy of
the statement shall be promptly mailed to each holder of such series of
Preferred Stock at its last known address on the stock records of the
corporation.
-4-
<PAGE>
(e) Dividends.
---------
(1) The holders of Series A Preferred Stock and the holders of Series
B Preferred Stock are entitled to receive, out of funds legally available
therefor, if, when and as declared by the board of directors, an annual per
share, non-cumulative dividend equal to ten percent (10%) of the Liquidation
Amount for their respective series of Preferred Stock prior and in preference to
any dividends (whether in cash or other property, and whether or not any such
property consists of securities of any third party) payable on account of the
Common Stock.
(2) No dividends shall be paid on any share of Common Stock unless a
dividend is paid with respect to all outstanding shares of Series A Preferred
Stock and all outstanding shares of Series B Preferred Stock in amounts equal to
or greater than (on an as-converted basis) the amount paid on the Common Stock.
(3) No dividend shall be payable without the approval of the Board of
Directors.
(f) Board of Directors.
------------------
(1) The Board of Directors of the corporation shall consist of five
members. Two members shall be elected by (and may only be removed by) the
holders of the Preferred Stock, voting as a separate class. One member shall be
elected by (and may only be removed by) the holders of Common Stock, voting as a
separate class. Two members shall be elected only by (and may only be removed
by) the holders of the Preferred Stock and Common Stock, voting together as a
single class.
(2) If the office of any director becomes vacant, such director's
replacement shall be elected by the class (or classes, as applicable) of shares
of which such director is the representative.
(g) No Impairment. The corporation will not, through any reorganization,
-------------
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action not permitted hereunder, avoid or seek
to avoid the observance or performance of any of the terms to be observed or
performed under this Article III and in the taking of all such action as may be
necessary or appropriate in order to protect the rights, privileges and
preferences of the holders of the Preferred Stock against impairment.
(h) Notices of Record Date. In the event of the establishment by the
----------------------
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the corporation
shall mail to each holder of Preferred Stock at least twenty (20) days prior to
the date specified therein a notice specifying the date on which any such record
is to be taken for the purpose of such dividend, distribution or rights, and the
amount and character of such dividend, distribution and right.
-5-
<PAGE>
IV
(a) The liability of the directors of this corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
(b) This corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) through bylaw
provisions, agreements with agents, vote of shareholders or disinterested
directors or otherwise, in excess of the indemnification otherwise permitted by
Section 317 of the California Corporations Code, subject only to the applicable
limits set forth in Section 204 of the California Corporations Code with respect
to actions for breach of duty to the corporation and its shareholders.
(c) Any repeal of modifications of the foregoing provisions of this Article
shall not adversely affect any right of indemnification or limitation of
liability of an agent of this corporation relating to acts or omissions
occurring prior to such repeal or modification."
3. The amended and restated Articles of Incorporation have been duly
approved by the Board of Directors of the corporation.
4. The foregoing amendment was approved by the required vote of
shareholders in accordance with Section 902 of the California General
Corporation Law. The total number of outstanding shares of Common Stock of the
corporation is 1,778,000, the total number of outstanding shares of Series A
Preferred Stock of the corporation is 3,175,000, and the corporation has no
other class of securities outstanding. The number of shares voting in favor of
the amendment equaled or exceeded the vote required. The percentage vote
required was more than 50% of the Common Stock and at least 66-2/3% of the
Series A Preferred Stock, each voting separately as a class.
-6-
<PAGE>
The undersigned declare under penalty of perjury under the laws of the
State of California that the matters set forth in this certificate are true and
correct of their own knowledge.
Date: May 27, 1994
/s/ Emil C.W. Wang
--------------------------------------
Emil C.W. Wang, President
/s/ Mark A. Medearis
--------------------------------------
Mark A. Medearis, Secretary
-7-
<PAGE>
EXHIBIT B
AMENDED AND RESTATED
CO-SALE AGREEMENT
This Amended and Restated Co-Sale Agreement (the "Agreement") is made as of
June 1, 1994, by and among Latitude Communications, Inc., a California
corporation (the "Company"), the purchasers of the Company's Series A Preferred
Stock (the "Series A Purchasers"), the Purchasers of the Company's Series B
Preferred Stock (the "Series B Purchasers" and, collectively with the Series A
Purchasers, the "Purchasers") and Emil Wang (the "Founder").
Whereas, the Company and the Series B Purchasers are entering into a Series
B Preferred Stock Purchase Agreement of the same date as this Agreement (the
"Purchase Agreement");
Whereas, the Company, the Series A Purchasers and the Founder have entered
into a Co-Sale Agreement dated April 22, 1993 (the "Prior Co-Sale Agreement");
and
Whereas, in order to induce the Company and the Purchasers to enter into
the Purchase Agreement, the Company, the Purchasers and the Founder desire to
enter into this Agreement to amend and restate the Prior Co-Sale Agreement;
Now, therefore, in consideration of the mutual promises and covenants
hereinafter set forth, the Company, the Purchasers, and Founder hereby amend and
restate the Prior Co-Sale Agreement to read in its entirety, and hereby agree,
as follows:
SECTION 1
RIGHT OF CO-SALE
----------------
1.1 Sales by Founder. In the event that the Founder proposes to sell,
----------------
assign, transfer or otherwise convey shares of Common Stock or securities
convertible into, exchangeable for or exercisable for Common Stock ("Co-Sale
Securities"), then the Founder shall offer in writing to each Purchaser the
right to participate in such sale on the same terms and conditions available to
such Founder.
Upon written notice to the Founder within fifteen (15) business days
of receipt by each Purchaser of notification from Founder of the proposed sale,
a Purchaser may sell that number of shares of Co-Sale Securities equal to the
total number of shares to be sold in the transaction multiplied by a fraction,
the numerator of which is the number of shares of Co-Sale Securities held by
such Purchaser and the denominator of which is the number of shares of Co-Sale
Securities held by all selling Purchasers plus the Founder.
1.2 Limitations on Right of Co-Sale. Section 1.1 of this Agreement shall
-------------------------------
not apply where the sale, assignment, transfer or other conveyance of Co-Sale
Securities by the Founder is:
<PAGE>
(a) to the Founder's spouse, parents, or children or other members of
the Founder's family (including relatives by marriage), or to a custodian,
trustee or other fiduciary for the account of the Founder or members of his
family in connection with a bona fide estate planning transaction;
---- ----
(b) by way of bequest or inheritance upon death;
(c) to the Company;
(d) by way of a bona fide gift;
---- ----
(e) by way of any pledge of Co-Sale Securities made by a Founder
pursuant to a bona fide loan transaction that creates a mere security interest;
---- ----
provided, however, that any transferees pursuant to this Section 1.2 shall
- -------- -------
receive and hold such shares subject in all respects to the provisions of this
Co-Sale Agreement, and that there shall be no further transfer of such shares
except in accordance herewith.
1.3 Termination of Co-Sale Right. The co-sale right set forth in this
----------------------------
Agreement shall terminate and be of no further force and effect immediately upon
the closing of
(a) the initial firm commitment underwritten public offering of the
Company's Common Stock pursuant to an effective registration statement on Form
S-1 under the Securities Act of 1933 covering the offer and sale of Common Stock
by the Company to the public at an aggregate offering price of at least
$10,000,000 and a per share offering price to the public at least equal to seven
dollars and fifty cents ($7.50) (appropriately adjusted to reflect any stock
split, stock dividend or recapitalization of the Company from the date of this
Agreement),
(b) the acquisition of all or substantially all the assets or stock
of the Company or the merger of the Company with or into any other entity, if
and to the extent that any such transaction is approved by the Board of
Directors of the Company including the two representatives of the Preferred
Stock (if at the time of such approval the holders of the Preferred Stock are
entitled to have two such representatives on the Board of Directors).
SECTION 2
PROHIBITED TRANSFERS
--------------------
2.1 Treatment of Prohibited Transfers. In the event the Founder sells any
---------------------------------
Co-Sale Securities of the Company in contravention of the participation rights
of the Purchasers under this Agreement (a "Prohibited Transfer"), the
Purchasers, in addition to such other remedies as may be available at law, in
equity or hereunder, shall have the put option provided in Section 2.2 below,
and the Founder shall be bound by the applicable provisions of such put option.
2.2 Put Option. In the event of a Prohibited Transfer, each Purchaser
----------
shall have the right to sell to the Founder, and, if such right is exercised,
the Founder shall have the obligation to purchase from the Purchasers, a number
of shares of Common Stock of the Company (either
-2-
<PAGE>
directly or through delivery of convertible Preferred Stock) equal to the number
of shares each Purchaser would have been entitled to transfer to the purchaser
in the Prohibited Transfer pursuant to the terms hereof. Such sale shall be made
on the following terms and conditions:
(a) The price per share at which the shares are to be sold to the
Founder shall be equal to the price per share paid by the purchaser to the
Founder in the Prohibited Transfer. The Founder shall also reimburse each
Purchaser for any and all fees and expenses, including legal fees and expenses,
promptly following demand therefor, incurred pursuant to the exercise or the
attempted exercise of the Purchaser's rights under this Section 2.
(b) Within 20 days after the later of the dates on which the
Purchasers (i) received notice from the Founder of the Prohibited Transfer or
(ii) otherwise become aware of the Prohibited Transfer, each Purchaser shall, if
exercising the put option created hereby, deliver to Founder the certificate or
certificates representing shares to be sold, each certificate to be properly
endorsed for transfer.
(c) The Founder shall, upon receipt of the certificate or
certificates for the shares to be sold by a Purchaser, pursuant to Section
2.2(b), immediately pay the aggregate purchase price therefor and the amount of
reimbursable fees and expenses, as specified in Section 2.2(a), by certified
check or bank draft made payable to the order of such Purchaser.
(d) NOTWITHSTANDING THE FOREGOING, ANY ATTEMPT TO TRANSFER SHARES OF
----------------------------------------------------------------
THE COMPANY IN VIOLATION OF SECTION 1 HEREOF SHALL BE VOID AND THE COMPANY
- --------------------------------------------------------------------------
AGREES IT WILL NOT EFFECT SUCH A TRANSFER NOR WILL IT TREAT ANY ALLEGED
- -----------------------------------------------------------------------
TRANSFEREE AS THE HOLDER OF SUCH SHARES WITHOUT THE WRITTEN CONSENT OF THE
- --------------------------------------------------------------------------
PURCHASERS. THE COMPANY AND THE FOUNDER AGREE THAT ANY AND ALL CERTIFICATES
- ----------------------------------------------------------------------------
REPRESENTING ANY SHARES OR OTHER SECURITIES OF THE COMPANY HELD FROM TIME TO
- ----------------------------------------------------------------------------
TIME DURING THE TERM OF THIS AGREEMENT SHALL BEAR A LEGEND REFERRING TO THE
- ---------------------------------------------------------------------------
RESTRICTIONS IMPOSED BY THIS AGREEMENT.
- --------------------------------------
SECTION 3
MISCELLANEOUS
-------------
3.1 Governing Law. This Agreement shall be governed in all respects by
-------------
and construed in all respects in accordance with the laws of the State of
California.
3.2 Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, transferees, executors and administrators
of the parties hereto. 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-
<PAGE>
3.3 Entire Agreement. This Agreement constitutes the full and entire
----------------
understanding and agreement between the parties with regard to co-sale rights.
3.4 Amendment and Waiver. This Agreement, or any provision hereof, may be
--------------------
amended or waived only in writing signed by the Company, the Founder and the
holders of a majority of the Common Stock (including securities convertible
into, exchangeable for or exercisable for Common Stock) then held by the
Purchasers, and any amendment or waiver so approved shall be binding upon all
the Purchasers (including any transferee of a Purchaser).
3.5 Notices, etc. All notices and other communications required or
------------
permitted under this Agreement shall be in writing and shall be mailed by
registered or certified mail, postage prepaid, or otherwise delivered by hand or
by messenger, addressed (a) if to a Purchaser, at such Purchaser's address set
forth on the stock purchase agreement for such Purchaser's Preferred Stock, or
(b) if to a Founder or to the Company, at the address of the Company's principal
executive offices.
3.6 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 to excluded and shall be enforceable in accordance with its
terms.
3.7 Titles and Subtitles. The titles of the sections and subsections of
--------------------
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
3.8 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
-4-
<PAGE>
AMENDED AND RESTATED CO-SALE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year written above.
"COMPANY"
LATITUDE COMMUNICATIONS, INC.
By: /s/ Emil Wang
----------------------------
Title: President
"FOUNDER"
/s/ Emil Wang
-------------------------------
Emil Wang
"PURCHASERS"
_______________________________
(Print Name)
By:____________________________
Title: ________________________
-5-
<PAGE>
AMENDED AND RESTATED CO-SALE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year written above.
"COMPANY"
LATITUDE COMMUNICATIONS, INC.
By:____________________________
Title: President
"FOUNDER"
_______________________________
Emil Wang
"PURCHASERS"
MAYFIELD ASSOCIATES; FUND II
MAYFIELD VII
-------------------------------
(Print Name)
By: /s/ Kevin A. Fong
----------------------------
Title: ________________________
-5-
<PAGE>
AMENDED AND RESTATED CO-SALE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year written above.
"COMPANY"
LATITUDE COMMUNICATIONS, INC.
By: ___________________________
Title: President
"FOUNDER"
_______________________________
Emil Wang
"PURCHASERS"
MENLO VENTURES IV, L.P.
By: MV Management IV, L.P.,
its General Partner
-------------------------------
(Print Name)
By: /s/ Thomas H. Bredt
----------------------------
Title: General Partner
-------------------------
-5-
<PAGE>
AMENDED AND RESTATED CO-SALE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year written above.
"COMPANY"
LATITUDE COMMUNICATIONS, INC.
By:__________________________________
Title: President
"FOUNDER"
_____________________________________
Emil Wang
"PURCHASERS"
Aspect Telecommunications Corporation
-------------------------------------
(Print Name)
By: /s/ William R. Hahn
----------------------------------
Title: CFO
-------------------------------
-5-
<PAGE>
AMENDED AND RESTATED CO-SALE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year written above.
"COMPANY"
LATITUDE COMMUNICATIONS, INC.
By: ___________________________
Title: President
"FOUNDER"
_______________________________
Emil Wang
"PURCHASERS"
VLG Investments
-------------------------------
(Print Name)
By: /s/ Mark A Medearis
----------------------------
Title: Partner
-------------------------
-5-
<PAGE>
AMENDED AND RESTATED CO-SALE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year written above.
"COMPANY"
LATITUDE COMMUNICATIONS, INC.
By: ___________________________
Title: President
"FOUNDER"
_______________________________
Emil Wang
"PURCHASERS"
Graig W. Johnson
-------------------------------
(Print Name)
By: /s/ Mark A Medearis
----------------------------
Title: Attorney-in-Fact
-------------------------
-5-
<PAGE>
AMENDED AND RESTATED CO-SALE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year written above.
"COMPANY"
LATITUDE COMMUNICATIONS, INC.
By: ___________________________________
Title: President
"FOUNDER"
_______________________________________
Emil Wang
"PURCHASERS"
Mark A. Medearis and Kathryn H Medearis
Trustee of the Medearis Family Trust
U/D/T dated March 18, 1992
---------------------------------------
(Print Name)
By: /s/ Mark A Medearis
------------------------------------
Title: ________________________________
-5-
<PAGE>
AMENDED AND RESTATED CO-SALE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year written above.
"COMPANY"
LATITUDE COMMUNICATIONS, INC.
By: ___________________________
Title: President
"FOUNDER"
_______________________________
Emil Wang
"PURCHASERS"
JAMES L. PATTERSON
-------------------------------
(Print Name)
By: /s/ James L Patterson
----------------------------
Title: ________________________
-5-
<PAGE>
AMENDED AND RESTATED CO-SALE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year written above.
"COMPANY"
LATITUDE COMMUNICATIONS, INC.
By: __________________________________
Title: President
"FOUNDER"
______________________________________
Emil Wang
"PURCHASERS"
CANAAN VENTURES II
LIMITED PARTNERSHIP
By: /s/ Canaan Venture Partners II LP.
By: /s/ [SIGNATURE]
----------------------------------
General Partner
-5-
<PAGE>
AMENDED AND RESTATED CO-SALE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year written above.
"COMPANY"
LATITUDE COMMUNICATIONS, INC.
By: _______________________________
Title: President
"FOUNDER"
___________________________________
Emil Wang
"PURCHASERS"
CANAAN VENTURES II
OFFSHORE C.V.
By: Canaan Venture Partners II L.P.
By: /s/ [SIGNATURE]
-------------------------------
General Partner
-5-
<PAGE>
AMENDED AND RESTATED CO-SALE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year written above.
"COMPANY"
LATITUDE COMMUNICATIONS, INC.
By: _______________________________
Title: President
"FOUNDER"
___________________________________
Emil Wang
"PURCHASERS"
___________________________________
(Print Name)
By: /s/ W. Ferrell Sanders
--------------------------------
Title: GENERAL PARTNER OF
PARTNERS 89 L.P. THE GENERAL
PARTNER OF ASSET MANAGEMENT
ASSOCIATES 1989, L.P.
----------------------------
-5-
<PAGE>
AMENDED AND RESTATED CO-SALE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year written above.
"COMPANY"
LATITUDE COMMUNICATIONS, INC.
By: ____________________________________
Title: President
"FOUNDER"
________________________________________
Emil Wang
"PURCHASERS"
STANFORD UNIVERSITY
----------------------------------------
(Print Name)
By: /s/ Carol Glimer
-------------------------------------
Title: CAROL GILMER
ASSISTANT SECRETARY
THE BOARD OF TRUSTEES OF THE
LELAND STANFORD JUNIOR UNIVERSITY
---------------------------------
-5-
<PAGE>
EXHIBIT C
SCHEDULE OF EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
Set forth below are exceptions to the representations and warranties of the
Company made in Section 3 of the Series B Preferred Stock Purchase Agreement
(the "Agreement") dated June __, 1994. All disclosures and exceptions are
intended to modify all of the Company's representations and warranties, and the
Section headings used below are for convenience only.
1. Section 3.2. The Company has issued warrants to purchase an aggregate
-----------
of 60,500 shares of Series A Preferred Stock at an exercise price of $1.00 per
share to certain persons and entities associated with Costella Kirsch, Inc.
(collectively, "CKI") in connection with equipment lease lines.
2. Section 3.7.
-----------
(a) The Company has entered into indemnification agreements with its
officers and directors. The Company has entered into stock purchase agreements
with certain of its officers, directors and affiliates in connection with the
issuance of outstanding stock.
(b) The Company has entered into a sublease dated July 21, 1993 with
Viewlogic Systems, Inc. for the Company's facility at 4001 Burton Drive, at a
current monthly rent of approximately $9,600 and a term ending on June 30, 1995.
The Company has entered into a Binary Product Distribution
Agreement with Lynx Real Time Systems Inc. ("Lynx") dated February 9, 1994,
pursuant to which the Company licenses the operating system used in its product
in exchange for a per-copy royalty.
The Company has entered into a License of Technological Rights
and Research and Development Agreement with Telinnovation Corporation
("Telinnovation") dated November 16, 1993, pursuant to which Telinnovation is
developing certain echo cancellation software for the Company's product and
licensing such software to the Company, in exchange for the payment of certain
development costs and a royalty based on the number of voice channel ends for
which the software is used.
The Company has entered into a Product Development Agreement (the
"D2 Agreement") with D2 Technologies ("D2") dated December 16, 1993, pursuant to
which both D2 and the Company are developing certain digital signal processor
algorithms and software. The D2 Agreement provides for ownership of certain
algorithms and software by D2 and for ownership of others by the Company, and
for certain cross-licenses of such algorithms and software. The D2 Agreement
requires the Company to pay certain NRE charges, hourly wages, and license fees.
In connection with the D2 Agreement, D2 purchased 12,000 shares of the Company's
Common Stock, subject to vesting.
<PAGE>
The Company is using source code to certain database software
from Raima Corporation to develop certain of its software pursuant to a shrink-
wrap license.
The Company licenses certain code used in its product from
Highland Software, Inc. ("Highland") pursuant to the FLEXIm Software License
Agreement for Software Vendors dated October 28, 1993, in exchange for a license
fee.
The Company has entered into a Beta Evaluation Agreement dated
May 19, 1994 with SynOptics Communications, Inc. ("SynOptics"), which grants
SynOptics a license to use the Company's product in connection with an
evaluation of the product.
(c) The Company has a $400,000 equipment lease line of credit with
CKI, approximately all of which was used. The Company has obtained a commitment
from CKI for an additional equipment lease line of credit of $150,000.
The Company has an equipment lease with AT&T Capital Services
Corporation covering equipment with a purchase price of approximately $23,000.
The Company has entered into loans in connection with purchases
of its Common Stock.
3. Section 3.9. The Company has entered into the following consulting
-----------
agreements, a copy of each of which has been delivered to counsel for the
Purchasers:
(1) Consulting Agreement with Paul Allan dated February 17, 1994
(2) Consulting Agreement with Glen Chew dated March 19, 1994
(3) Consulting Agreement with Mike Chack dated January 25, 1994
(4) Consulting Services Agreement with Alan Mandler dated October 18,
1993
(5) Consulting Agreement with Eric Johnson dated January 25, 1994
(6) Consulting Agreement with Dolores Freund dated October 20, 1993
(7) Professional Service Contract with IT Transfer International dated
December 21, 1993
(8) Product Development Agreement with D2 Technologies dated December
16, 1993
The Company has also entered into common stock purchase
agreements with certain of these consultants.
4. Section 3.10. See disclosure with respect to licenses for Section
------------
3.7.
5. Section 3.12. Certain of the software licensed by the Company,
------------
including the operating system, and certain integrated circuits, that are used
in the Company's products are only available from single sources, and switching
to other software or integrated circuits would involve substantial engineering
effort.
<PAGE>
6. Section 3.13. The Company has made loans to officers and employees in
------------
connection with purchases of its Common Stock.
7. Section 3.20. The Company has a 401(k) plan.
------------
8. Section 3.21. The Company has filed an extension for the 1993 tax
------------
year.
<PAGE>
Exhibit D
Page 1
Latitude Communications, Inc.
COMMON SHAREHOLDER LIST
(Alphabetic Listing)
<TABLE>
<CAPTION>
Total
Cert. Cert. Number of Acquired Rule Form of Rule 144 Vesting Reg Shares
Full Name & Address No. Date Shares Pursuant To 701 Consideration Start Date Start Date Rights Legends Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Paul Alan 26 1,000 Stock Y Check 1/21/94 N 1,2 1,000
315 North Abbott Avenue Purchase
Milpitas, CA 95035 Agreement
Dave Bieselin 18 12/23/93 25,000 Stock Y Check 10/21/93 10/21/03 N 1,2 25,000
1860 Oak Knoll Lane Purchase
Menlo Park, CA 94025 Agreement
Andrew W. Bohannon 31 5/1/94 13,000 Stock Y Check 5/1/94 3/18/94 N 1,2 13,000
1728 Kimberley Drive Purchase
Sunnyvale, CA 94087 Agreement
Peter A. Bonee 23 11/11/93 160,000 Stock Y Note 9/7/93 N 1,2 160,000
305 Elan Village Lane, Purchase
#218 Agreement
San Jose, CA 95134
Mike Chack 28 1,000 Stock Y Check 3/25/94 1/21/94 N 1,2 1,000
1263 Glenwood Avenue Purchase
San Jose, CA 95125 Agreement
D2 Technologies 29 5/1/94 12,000 Stock Y Check 5/1/94 10/21/93 N 1,2 12,000
3078 Lucinda Lane Purchase
Santa Barbara, CA 93105 Agreement
</TABLE>
<PAGE>
Page 2
Latitude Communications, Inc.
COMMONSHAREHOLDER LIST
(Alphabetic Listing)
<TABLE>
<CAPTION>
Total
Cert. Cert. Number of Acquired Rule Form of Rule 144 Vesting Reg Shares
Full Name & Address No. Date Shares Pursuant To 701 Consideration Start Date Start Date Rights Legends Held
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Glenn A. Eaton 8 8/18/93 180,000 Stock Y Check 4/9/93 4/9/93 N 1,2 180,000
951 Willow Leaf Drive Purchase
#1405 Agreement
San Jose, CA 95128
Wayne Fenton 20 12/23/03 23,000 Stock Y Note 10/21/93 N 1,2 23,000
2833 Tramanto Dr. Purchase
San Carlos, CA 94070 Agreement
Reinaldo L. Sepulveda-Garese 17 12/23/93 25,000 Stock Y Check/Note 10/21/93 N 1,2 25,000
4367 Fellows Street Purchase
Union City, CA 94587 Agreement
Janet Gregory 25 5/1/94 120,000 Stock Y Check/Note 5/1/94 2/28/94 N 1,2 120,000
32809 Regents Blvd. Purchase
Union City, CA 94587 Agreement
Alan Yiping Guo 19 2/23/93 25,000 Stock Y Check 10/21/93 0/21/93 N 1,2 25,000
39997 Cedar Blvd., #246 Purchase
Newark, CA 94560 Agreement
Glenn A. Hahn 15 9/17/93 25,000 Stock Y Check 9/17/93 9/14/93 N 1,2 25,000
231 Oakhurst Place Purchase
Menlo Park, CA 94025 Agreement
</TABLE>
<PAGE>
Page 3
Latitude Communications, Inc
COMMON SHAREHOLDER LIST
(Alphabetic Listing)
<TABLE>
<CAPTION>
Total
Cert. Cert. Number of Acquired Rule Form of Rule 144 Vesting Reg Shares
Full Name & Address No. Date Shares Pursuant To 701 Consideration Start Date Start Date Rights Legends Held
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TOTAL SHARES OUTSTANDING $3,175,000
</TABLE>
[CAPTION]
<PAGE>
Page 4
Latitude Communications, Inc.
COMMON SHAREHOLDER LIST
(Alphabetic Listing)
<TABLE>
<CAPTION>
Total
Cert. Cert. Number of Acquired Rule Form of Rule 144 Vesting Reg Share
Full Name & Address No. Date Shares Pursuant To 701 Consideration Start Date Start Date Rights Legends Held
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Glenn T. Inn 14 9/23/93 20,000 Stock Y Note 8/9/93 N 1,2 20,000
722 Sequoia Avenue Purchase
San Mateo, CA 94403 Agreement
Eric Johnson 27 1,000 Stock Y Check 3/22/94 1/21/94 N 1,2 1,000
1544 Redwood Drive Purchase
Los Altos, CA 94024 Agreement
Wyatt Jones 32 2,000 Stock Y Check 4/19/94 4/19/94 N 1,2 2,000
1115 Delna Manor Lane #3 Purchase
San Jose, CA 95128 Agreement
Kent H. Kawahara 30 5/1/94 17,500 Stock Y Check/Note 5/1/94 2/16/94 N 1,2 7,500
3088 San Luis Rey Purchase
San Jose, CA 95118 Agreement
Alan Mandler 21 12/23/93 5,000 Stock Y Check 10/21/93 10/21/93 N 1,2 5,000
1801 Jones Street Purchase
San Francisco, CA 94109 Agreement
Joseph A. McFadden 11 8/18/93 65,000 Stock Y Check 4/9/93 4/9/93 N 1,2 65,000
980 Alice Lane #4 Purchase
Menlo Park. CA 94025 Agreement
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page 5
Latitude Communications, Inc.
COMMON SHAREHOLDER LIST
(Alphabetic Listing)
Total
Cert. Cert. Number of Acquired Rule Form of Rule 144 Vesting Reg Shares
Full Name & Address No. Date Shares Pursuant To 701 Consideration Start Date Start Date Rights Legends Held
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Patterson Family Trust 16 10/1/93 75,000 Stock Y Cash 10/1/93 10/1/93 N 1,2 75,000
u/d/t Purchase
August 26, 1988 Agreement
115 Glenridge Avenue
Los Gatos, CA 95030
Graham Stuart Payne 24 11191q3 20,000 Stock Y Note N 1,2 20,000
1676 Yale Drive Purchase
Mountain View, CA 94040 Agreement
Sue Scholpp 22 12/23/93 2,500 Stock Y Note 10/21/93 N 1,2 2,500
6378-B Buena Vista Drive Purchase
Newark, CA 94560 Agreement
</TABLE>
<PAGE>
Page 6
Latitude Communications, Inc.
COMMON SHAREHOLDER LIST
(Alphabetic Listing)
<TABLE>
<CAPTION>
Total
Cert. Cert. Number of Acquired Rule Form of Rule 144 Vesting Reg Shares
Full Name & Address No. Date Shares Pursuant To 701 Consideration Start Date Start Date Rights Legends Held
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stuart A.Taylor 10 8/18/93 90,000 Stock Y Check 4/9/93 4/9/93 N 1,2 90,000
1407 Greenwood Drive Purchase
Menlo Park, CA 94025 Agreement
Edward D. Tracy 9 8/18/93 145,000 Stock Y Check 4/9/93 4/9/93 N 1,2 145,000
321 Louis Road Purchase
Palo Alto, CA 94303 Agreement
Emil C.W. Wang 7 8/18/93 700,000 Stock Y Check 4/9/93 4/9/93 N 1,2,3 700,000
Latitude Communications, Inc. Purchase
4001 Burton Drive Agreement
Santa Clara, CA 95054
[BP] (408) 988-7200
[BF] (408) 988-6520
</TABLE>
<PAGE>
Page 7
Latitude Communications, Inc.
COMMON SHAREHOLDER LIST
(Alphabetic Listing)
<TABLE>
<CAPTION>
Total
Cert. Cert. Number of Acquired Rule Form of Rule 144 Vesting Reg Shares
Full Name & Address No. Date Shares Pursuant To 701 Consideration Start Date Start Date Rights Legends Held
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
John C. Yontz 13 9/17/93 25,000 Stock Purchase Y Note 7/23/93 N 1,2 25,000
1043 Warren Avenue Agreement
San Jose, CA 95125
TOTAL SHARES OUTSTANDING: 1,778,000
</TABLE>
<PAGE>
Latitutde Communications, Inc. Page 1
COMMON SHAREHOLDER LIST
(Alphabetic Listing)
<TABLE>
<CAPTION>
Total
Cert. Cert. Number Acquired Rule Form of Rule 144 Vesting Reg Shares
Full Name & Address No. Date Shares Pursuant To 701 Consideration Start Date Start Date Rights Legends Held
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aspect Telecommunications PA-10 8/18/93 50,000 Name Change N Cash 4/22/93 Y 4,5 50,000
Corporation
Latitude Communications, Inc.
1730 Fox Drive
San Jose, CA 95131
Attn: James R. Carreker
Craig W. Johnson PA, 13 8/18/93 2,500 Name Change N Cash 4/22/93 Y 4,5 2,500
c/o Venture l.aw Group
2800 Sand Hill Road
Menlo Park, CA 94025
[BP] 415/854-4488
[BF] 415/854-1121
Robert R. Maxfield, Trustee PA-II 8/18/93 25,000 Name Change N Cash 4/22/93 Y 4,5 25,000
Under Agreement
Dated 12/14/87,
As Amended
12930 Saratoga Avenue,
Suite B-3
Saratoga, CA 95070
Mayfield VII PA-16 12/2/93 1,671,250 Transfer N Cash 4/22/93 Y 4,5 1,671,250
Mayfield VII
2800 Sand Hill Road
Menlo Park, CA 94025
Attn: Kevin A. Fong
Mayfield Associates Fund II PA-17 12/2/93 78,750 Transfer N Cash 4/22/93 Y 4,5 78,750
Mayfield Associates Fund II
2800 Sand Hill Road
Menlo Park, CA 94025
Attn: Kevin A. Fong
</TABLE>
<PAGE>
Latitude Communications, Inc. Page 2
COMMON SHAREHOLDER LIST
(Alphabetic Listing)
<TABLE>
<CAPTION>
Total
Cert. Cert. Number Acquired Rule Form of Rule 144 Vesting Reg Shares
Full Name & Address No. Date Shares Pursuant To 701 Consideration Start Date Start Date Rights Legends Held
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mark A. and Kathryn H. PA-14 8/18/93 2,500 Name Change N Cash 4/22/93 Y 4,5 2,500
Medearis, Trustees of the
Medearis Family Trust
U/D/T Dated March 18, 1992
c/o Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
[BP] 415/854-4488
[BF] 415/854-1121
Menlo Ventures IV, L.P. PA,9 8/18/93 1,250,000 Name Change N Cash 4/22/93 Y 4,5 1,250,000
Menlo Ventures IV, L.P.
3000 Sand Flill Road
Bldg. 4, Suite 100
Menlo Park, CA 94025
Attn: Thomas H. Bredt
Patterson Family Trustu/d/t PA-15 9/13/93 75,000 Stock N Cash 9/13/93 Y 4,5 75,000
August Purchase
26, 1988 Agreement
115 Glenridge Avenue
Los Gatos, CA 95030
VLG Investments 1993 PA-12 8/18/93 20,000 Stock N Cash 4/22/93 Y 4,5 20,000
Venture Law Group Purchase
2800 Sand Hill Road Agreement
Menlo Park, CA 94025
[BP] 415-854-4488
[BF] 415-854-1121
</TABLE>
<PAGE>
EXHIBIT E
FORM OF PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
LATITUDE COMMUNICATIONS, INC.
EMPLOYEE AGREEMENT
In exchange for my becoming employed (or my employment being continued) by
Convene Communications, Inc., or its subsidiaries, affiliates, or successors
(hereinafter referred to collectively as the "Company"), I hereby agree as
follows:
1. I will perform for the Company such duties as may be designated by the
Company from time to time. During my period of employment by the Company, I will
devote my best efforts to the interests of the Company and will not engage in
other employment or in any activities detrimental to the best interests of the
Company without the prior written consent of the Company.
2. As used in this Agreement, the term "Inventions" means designs,
trademarks, discoveries, formulae, processes, manufacturing techniques, trade
secrets, inventions, improvements, ideas or copyrightable works, including all
rights to obtain, register, perfect and enforce these proprietary interests.
3. As used in this Agreement, the term "Confidential Information" means
information pertaining to any aspects of the Company's business which is either
information not known by actual or potential competitors of the Company or is
proprietary information of the Company or its customers or suppliers, whether of
a technical nature or otherwise.
4. Without further compensation, I hereby agree promptly to disclose to
the Company, and I hereby assign and agree to assign to the Company or its
designee, my entire right, title, and interest in and to all Inventions which I
may solely or jointly develop or reduce to practice during the period of my
employment with the Company (a) which pertain to any line of business activity
of the Company (b) which are aided by the use of time, material or facilities
of the Company, whether or not during working hours, or (c) which relate to any
of my work during the period of my employment with the Company, whether or not
during normal working hours. No rights are hereby conveyed in Inventions, if
any, made by me prior to my employment with the Company which are identified in
a sheet attached to and made a part of this Agreement, if any (which attachment
contains no confidential information).
5. I agree to perform, during and after my employment, all acts deemed
necessary or desirable by the Company to permit and assist it, at its expense,
in obtaining and enforcing the full benefits, enjoyment, rights and title
throughout the world in the Inventions hereby assigned to the Company as set
forth in paragraph 4 above. Such acts may include, but are not limited to,
execution of documents and assistance or cooperation in legal proceedings.
-1-
<PAGE>
6. I agree to hold in confidence and not directly or indirectly to use or
disclose, either during or after termination of my employment with the Company,
any Confidential Information I obtain or create during the period of my
employment, whether or not during working hours, except to the extent authorized
by the Company, until such Confidential Information becomes generally known. I
agree not to make copies of such Confidential Information except as authorized
by the Company. Upon termination of my employment or upon an earlier request of
the Company I will return or deliver to the Company all tangible forms of such
Confidential Information in my possession or control, including but not limited
to drawings, specifications, documents, records, devices, models or any other
material and copies or reproductions thereof.
7. I represent that my performance of all the terms of this Agreement and
as an employee of the Company does not and will not breach any agreement to keep
in confidence proprietary information, knowledge or data acquired by me in
confidence or in trust prior to my employment with the Company, and I will not
disclose to the Company, or induce the Company to use, any confidential or
proprietary information or material belonging to any previous employer or
others. I agree not to enter into any agreement either written or oral in
conflict with the provisions of this Agreement.
8. This Agreement (a) shall survive my employment by the Company, (b) does
not in any way restrict my right or the right of the Company to terminate my
employment, with or without a cause, (c) inures to the benefit of successors and
assigns of the Company, and (d) is binding upon my heirs and legal
representatives.
9. This Agreement does not apply to an Invention which qualifies fully
under the provisions of Section 2870 of the Labor Code, a copy of which is
attached hereto as Exhibit A. I agree to disclose all Inventions made by me in
confidence to the Company to permit a determination as to whether or not the
Inventions should be the property of the Company.
10. I certify that, to the best of my information and belief, I am not a
party to any other agreement which will interfere with my full compliance with
this Agreement.
11. I certify and acknowledge that I have carefully read all of the
provisions of this Agreement and that I understand and will fully and faithfully
comply with such provisions.
CONVENE COMMUNICATIONS, INC. EMPLOYEE
By:_________________________ ____________________________
Emil C.W. Wang, President (Signature)
____________________________
Dated:______________, 199__ (Print Name)
-2-
<PAGE>
ATTACHMENT
----------
List of Inventions
------------------
<PAGE>
EXHIBIT A TO EMPLOYMENT AGREEMENT
---------------------------------
Section 2870 of the California Labor Code is as follows:
(a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the Company's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:
(1) Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrable anticipated
research or development of the employer.
(2) Result from any work performed by the employee for the employer.
(b) To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provisions is against the
public policy of this state and is unenforceable.
<PAGE>
EXHIBIT F
LATITUDE COMMUNICATIONS, INC.
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
June 1, 1994
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Termination of Prior Rights.......................................... 1
2. Registration......................................................... 2
2.1 Definitions................................................. 2
2.2 Required Registration....................................... 3
2.3 Registration Procedures..................................... 3
2.4 Limitations on Required Registrations....................... 4
2.5 Incidental Registration..................................... 5
2.6 Limitations on Incidental Registration...................... 5
2.7 Designation of Underwriter.................................. 6
2.8 Form S-3.................................................... 6
2.9 Cooperation by Prospective Sellers.......................... 7
2.10 Expenses of Registration.................................... 7
2.11 Indemnification............................................. 8
2.12 Rights Which May Be Granted to Subsequent Investors......... 10
2.13 Transfer of Registration Rights............................. 11
2.14 "Stand-off" Agreement....................................... 11
3. Miscellaneous........................................................ 12
3.1 Notices..................................................... 12
3.2 Modification; Waiver........................................ 12
3.3 Entire Agreement............................................ 13
3.4 Successors and Assigns...................................... 13
3.5 Enforcement................................................. 13
3.6 Execution and Counterparts.................................. 14
3.7 Governing Law and Severability.............................. 14
3.8 Headings.................................................... 14
</TABLE>
<PAGE>
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (the "Agreement")
is made as of June 1, 1994, by and between Latitude Communications, Inc., a
California corporation (the "Company"), and the investors listed on Schedule A
attached hereto, each of which is herein referred to as an "Investor."
RECITALS
--------
The Company and certain of the Investors have entered into a Series A
Preferred Stock Purchase Agreement dated April 22, 1993 (the "First Series A
Purchase Agreement") and the Company and another Investor have entered into a
Series A Preferred Stock Purchase Agreement dated September 13, 1993 (the
"Second Series A Purchase Agreement"), pursuant to both of which certain
Investors (the "Series A Investors") acquired shares of the Company's Series A
Preferred Stock (the "Series A Shares").
The Company and certain other Investors (the "Warrant Investors") have
entered into an Equipment Lease Agreement dated as of June 30, 1993. In
connection with the Equipment Lease Agreement, the Company has issued warrants
(the "Warrants") to the Warrant Investors to purchase an aggregate of 60,500
shares of the Company's Series A Preferred Stock (the "Warrant Shares").
The Company and certain of the Investors (the "Series B Investors") are
entering into a Series B Preferred Stock Purchase Agreement dated June 1, 1994
(the "Series B Purchase Agreement"), pursuant to which the Series B Investors
are acquiring shares of the Company's Series B Preferred Stock (the "Series B
Shares").
The Company, the Series A Investors and the Warrant Investors have entered
into the First Amended and Restated Registration Rights Agreement dated July 19,
1993 (the "Prior Rights Agreement"), and wish to amend the Prior Rights
Agreement to grant the Series B Investors the registration rights provided
herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties agree as follows:
1. Termination of Prior Rights. Effective upon the execution of this
---------------------------
Agreement by the Company and by the holders of at least 66 2/3% of the aggregate
of the Series A Shares and the Warrant Shares, the Prior Rights Agreement is
hereby amended and restated to read in its entirety as set forth herein.
<PAGE>
2. Registration.
------------
2.1 Definitions. As used herein, the following terms, have the
-----------
following meanings:
(a) "Forms S-1," "S-2" and "S-3:" The forms so designated,
promulgated by the Commission for registration of securities under the
Securities Act of 1933, as amended (the "Securities Act"), and any forms
succeeding to the functions of such forms, whether or not bearing the same
designation.
(b) "Commission:" The Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
(c) "Holder:" A holder of Registrable Stock, provided that
anyone who acquires any Registrable Stock in a distribution pursuant to a
registration statement filed by the Company under the Securities Act shall not
thereby be deemed to be a "Holder."
(d) "Register," "registered" and "registration" refer to a
registration effected by filing a registration statement in compliance with the
Securities Act, and the declaration or ordering by the Commission of
effectiveness of such registration statement.
(e) "Registrable Stock:"
(i) the shares of Common Stock issuable or issued upon
conversion of the Series A Shares,
(ii) The shares of Common Stock issuable or issued upon
conversion of the Series B Shares,
(iii) the shares of Common Stock issuable or issued upon
conversion of the Warrant Shares (the shares of Common Stock referred to in
clauses (i), (ii), (iii) and (iv) hereof are collectively referred to hereafter
as the "Stock"), and
(iv) any other shares of Common Stock of the Company
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, the Stock, excluding in all cases,
however, any Registrable Securities sold by a person in a transaction in which
his or her rights under this Agreement are not assigned;
provided, however, that Common Stock or other securities shall only be treated
- -------- -------
as Registrable Stock if and so long as they have not been (A) sold to or through
a broker or dealer or underwriter in a public distribution or a public
securities transaction, or (B) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(1) thereof so that all transfer restrictions, and restrictive legends
with respect thereto, if any, are removed upon the consummation of such sale.
-2-
<PAGE>
2.2 Required Registration.
---------------------
(a) If the Holder or Holders of an aggregate of at least fifty
percent (50%) of the Registrable Stock propose to dispose of their Registrable
Stock (such Holder or Holders being herein called the "Initiating Holders"), the
Initiating Holders may request the Company in writing to effect such
registration, stating the number of shares of Registrable Stock to be disposed
of by such Initiating Holders and the intended method of disposition, including,
but not limited to, registration on Form S-1. Upon receipt of such request, the
Company shall give prompt written notice thereof to all other Holders, whereupon
such other Holders shall give written notice to the Company within 20 days after
the date of the Company's notice (the "Notice Period") if they propose to
dispose of any shares of Registrable Stock pursuant to such registration,
stating the number of shares of Registrable Stock to be disposed of by such
Holder or Holders and the intended method of disposition.
(b) The Company will use its best efforts to effect promptly
after the Notice Period the registration under the Securities Act of all shares
of Registrable Stock specified in the requests of the Initiating Holders and the
requests of the other Holders subject, however, to the limitations set forth in
Section 2.4.
2.3 Registration Procedures. Whenever the Company is required by the
-----------------------
provisions of this Section 2 to use its best efforts to effect promptly the
registration of shares of Registrable Stock, the Company will:
(a) prepare and file with the Commission a registration
statement with respect to such shares and use its best efforts to cause such
registration statement to become and remain effective as provided herein;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
current and to comply with the provisions of the Securities Act with respect to
the disposition of all shares covered by such registration statement, including
such amendments and supplements as may be necessary to reflect the intended
method of disposition from time to time of the prospective seller or sellers of
such shares, but for no longer than one hundred twenty (120) days subsequent to
the effective date of such registration in the case of a registration statement
on Form S-1 or S-2 and for no longer than ninety (90) days in the case of a
registration statement on Form S-3;
(c) furnish to each prospective seller such number of copies of
a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as such seller may
reasonably request in order to facilitate the public sale or other disposition
of the shares owned by such seller;
(d) use its best efforts to register or qualify the shares
covered by such registration statement under such other securities or blue sky
or other applicable laws of such jurisdiction within the United States as each
prospective seller shall reasonably request, to enable such seller to consummate
the public sale or other disposition in such jurisdictions of the shares
-3-
<PAGE>
owned by such seller; provided, however, that in no event shall the Company be
obligated to qualify to do business in any jurisdiction where it is not at the
time so qualified or to take any action which would subject it to service of
process in suits other than those arising out of the offer or sale of the
Registrable Stock covered by such registration statement in any jurisdiction
where it is not at the time so subject; and
(e) furnish to each prospective seller, to the extent requested
by such seller, a signed counterpart, addressed to the prospective sellers, of
(i) an opinion of counsel for the Company, dated the closing date of the sale of
the applicable Registrable Stock, and (ii) a "comfort" letter signed by the
independent public accountants who have certified the Company's financial
statements included in the registration statement, covering substantially the
same matters with respect to the registration statement (and the prospectus
included therein) and (in the case of the "comfort" letter) with respect to
events subsequent to the date of the financial statements, as are customarily
covered in opinions of issuer's counsel and in "comfort" letters delivered to
the underwriters in underwritten public offerings of securities.
2.4 Limitations on Required Registrations.
-------------------------------------
(a) The Company shall not be required to effect more than two
registrations pursuant to Section 2.2. The Company shall not be required to
effect any registration unless the anticipated aggregate offering price, net of
underwriting discounts and commissions, would exceed $2,000,000.
(b) The Company shall not be required to cause a registration
requested pursuant to Section 2.2 to become effective prior to the earlier of
(i) four years after the date of the first closing under the First Series A
Purchase Agreement or (ii) six (6) months after the Company's initial
registration with the Commission (other than a registration effected solely to
implement an employee benefit plan or a transaction to which Rule 145 of the
Commission is applicable).
(c) The Company shall not register securities for sale for its
own account or for the account of holders of securities other than Registrable
Stock in any registration requested pursuant to Section 2.2 without the written
consent of Initiating Holders who hold at least 51% of the Registrable Stock as
to which registration has been requested, unless such securities are entitled to
be included in such registration only to the extent that the inclusion of such
securities will not diminish the amount of Registrable Stock included in such
registration or otherwise materially and adversely affect the right of the
Initiating Holders to have their Registrable Securities registered. The Company
may not cause any other registration of securities for sale for its own account
(other than a transaction to which Rule 145 of the Commission is applicable or a
registration effected solely to implement an employee benefit plan) to be
initiated after a registration requested pursuant to Section 2.2 and to become
effective less than 90 days after the effective date of any registration
requested pursuant to Section 2.2.
(d) Whenever a requested registration is for an underwritten
offering, only shares which are to be included in the underwriting may be
included in the registration. Notwithstanding the provisions of Sections 2.2(b)
and 2.4(c), if the underwriter determines that
-4-
<PAGE>
(i) marketing factors require a limitation of the total number of shares to be
underwritten, or (ii) the offering price per share would be reduced by the
inclusion of the shares of the Company or others, then the number of shares to
be included in the registration and underwriting shall first be allocated among
all Holders who indicated to the Company their decision to distribute any of
their Registrable Stock through such underwriting, in proportion, as nearly as
practicable, to the respective numbers of shares of Registrable Stock owned by
such Holders at the time of filing the registration statement, then, if any, to
the Company and others. No stock excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such registration. If
the Company disapproves of any such underwriting, the Company may elect to
withdraw therefrom by written notice to the Initiating Holders and the
underwriter. The securities so withdrawn from such underwriting shall also be
withdrawn from such registration.
(e) If at the time of any request to register Registrable Stock
pursuant to Section 2.2 hereof, the Company is engaged, or has fixed plans to
engage within 90 days of the time of the request, in a registered public
offering as to which the Holders may include Registrable Stock pursuant to
Section 2.5 hereof or the Company is engaged in any other activity which, in the
good faith determination of the Board, would be adversely affected by the
requested registration to the material detriment of the Company, then the
Company may at its option direct that such request be delayed for a period not
in excess of 120 days from the effective date of such offering, or the date of
commencement of such other material activity, as the case may be, such right to
delay a request to be exercised by the Company not more than once in any 12-
month period while the rights set forth in Section 2.2 are in effect.
2.5 Incidental Registration. If the Company at any time proposes to
-----------------------
register any of its Common Stock under the Securities Act (other than a
registration effected solely to implement an employee benefit plan or a
transaction to which Rule 145 of the Commission is applicable), it will each
such time give written notice to all Holders of its intention so to do. Upon the
written request of a Holder or Holders given within 20 days after receipt of any
such notice (stating the number of shares of Registrable Stock to be disposed of
by such Holder or Holders and the intended method of disposition), the Company
will use its best efforts to cause all such shares intended to be disposed of,
which the Holders shall have requested registration thereof, to be registered
under the Securities Act so as to permit the disposition (in accordance with the
methods in said request) by such Holder or Holders of the shares so registered,
subject, however, to the limitations set forth in Section 2.6.
2.6 Limitations on Incidental Registration. If the registration of
--------------------------------------
which the Company gives notice pursuant to Section 2.5 is for an underwritten
offering, only securities which are to be included in the underwriting may be
included in the registration. Notwithstanding any provision of Section 2.5, if
the underwriter determines that marketing factors require a limitation of the
number of shares to be underwritten, the underwriter may exclude or otherwise
limit the number of shares, including Registrable Stock, requested to be
included in the registration and underwriting to a number of shares not less
than twenty percent (20%) of the aggregate number of shares to be disposed of in
the registration and underwriting, unless the registration is for an initial
public offering (in which case the percentage may be less). The Company shall so
advise all Holders of any limitation (except those Holders who have not
indicated to the
-5-
<PAGE>
Company their decision to distribute any of their Registrable Stock through such
underwriting), and the number of shares, including Registrable Stock, that may
be included in the registration and underwriting shall be allocated among the
selling shareholders in proportion, as nearly as practicable, to the respective
amounts of securities, including Registrable Stock, owned by such Holders and
other selling shareholders entitled to be included therein at the time of filing
the registration statement, in accordance with Section 2.12(a). No Registrable
Stock excluded from the underwriting by reason of the underwriter's marketing
limitation shall be included in such registration. If any Holder disapproves of
any such underwriting, such person may elect to withdraw therefrom by written
notice to the Company and the underwriter. The Registrable Stock and/or other
securities so withdrawn from such underwriting shall also be withdrawn from such
registration.
The registration rights granted under Sections 2.2, 2.5 and 2.8
shall terminate as to any Holder or permissible transferee or assignee of such
rights if such person (a) holds one percent (1%) or less of the outstanding
shares of Common Stock of the Company (on an as-converted basis) and (b) is
permitted to sell all of the Registrable Stock held by him or her in a single
transaction to the public pursuant to Rule 144.
2.7 Designation of Underwriter.
--------------------------
(a) In the case of any registration effected pursuant to Section
2.2 or Section 2.8, a majority in interest of the requesting Holders shall have
the right to designate the managing underwriter in any underwritten offering,
which underwriter shall be reasonably acceptable to the Company.
(b) In the case of any registration initiated by the Company,
the Company shall have the right to designate the managing underwriter in any
underwritten offering.
2.8 Form S-3. The Company shall register its Common Stock under the
--------
Securities Exchange Act of 1934, as amended, as promptly as reasonably
practicable following the effective date of the first registration of any
securities of the Company on Form S-1 and the Company shall thereafter effect
all qualifications and compliances as would permit or facilitate the sale and
distribution of its stock on Form S-3, to the extent available. After the
Company has qualified for the use of Form S-3, the Holders shall have the right
to request an unlimited number of registrations on Form S-3 (such requests shall
be in writing and shall state the number of shares of Registrable Stock to be
disposed of and the intended method of disposition) except that the Company (a)
shall not be required to effect more than one registration pursuant to this
Section 2.8 in any six-month period, and (b) shall not be required to effect a
registration pursuant to this Section 2.8 unless the Holder or Holders
requesting registration hold an aggregate of at least thirty percent (30%) of
the Registrable Stock then outstanding and propose to dispose of shares of
Registrable Stock having an aggregate expected public offering price (before
deduction of underwriting discounts and expenses of sale) of at least $500,000.
The Company shall give notice to all Holders of the receipt of a
request for registration pursuant to this Section 2.8 and shall provide a
reasonable opportunity for other
-6-
<PAGE>
Holders to participate in the registration, provided that if the registration is
for an underwritten offering, the terms of Section 2.4(d) shall apply to all
participants in such offering. Subject to the foregoing, the Company will use
its best efforts to effect promptly the registration of all shares of
Registrable Stock on Form S-3 to the extent requested by the Holder or Holders
thereof.
2.9 Cooperation by Prospective Sellers.
----------------------------------
(a) Each prospective seller of Registrable Stock, and each
underwriter designated by each such seller, will furnish to the Company such
information as the Company may reasonably require from such seller or
underwriter in connection with the registration statement (and the prospectus
included therein).
(b) Failure of a prospective seller of Registrable Stock to
furnish the information and agreements described in this Section 2 shall not
affect the obligations of the Company under this Section 2 to the remaining
sellers who furnish such information and agreements unless, in the reasonable
opinion of counsel to the Company or the underwriters, such failure impairs or
may impair the viability of the offering or the legality of the registration
statement or the underlying offering.
(c) The Holders holding shares included in the registration
statement will not (until further notice) effect sales thereof after receipt of
telegraphic or written notice from the Company to suspend sales to permit the
Company to correct or update a registration statement or prospectus but the
obligations of the Company with respect to maintaining any registration
statement current and effective shall be extended by a period of days equal to
the period such suspension is in effect unless (i) such extension would result
in the Company's inability to use the financial statements in the registration
statement initially filed pursuant to the Holder or Holders' request and (ii)
such correction or update did not result from the Company's acts or failures to
act.
At the end of the period during which the Company is obligated to
keep the registration statement current and effective as described in Section
2.3(b) (and any extensions thereof required by the preceding sentence), the
Holders holding shares included in the registration statement shall discontinue
sales of shares pursuant to such registration statement upon receipt of notice
from the Company of its intention to remove from registration the shares covered
by such registration statement which remain unsold, and such Holders shall
notify the Company of the number of shares registered which remain unsold
immediately upon receipt of such notice from the Company.
2.10 Expenses of Registration. All expenses incurred in effecting any
------------------------
registration pursuant to this Section 2 including, without limitation, all
registration and filing fees, printing expenses, expenses of compliance with
blue sky laws, fees and disbursements of counsel for the Company and expenses of
any audits incidental to or required by any such registration, shall be borne by
the Company, except that (a) all expenses, fees and disbursements of any counsel
retained by the Holders and all underwriting discounts and commissions shall be
borne by the Holders holding the securities registered pursuant to such
registration, according to the quantity of the securities so registered; (b) the
Company shall not be required to pay for any
-7-
<PAGE>
expenses of any registration proceeding begun pursuant to Section 2.2 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 2.2, provided however, that if
immediately prior to the time of such withdrawal, the Holders have learned of a
materially adverse change in the condition, business or prospects of the Company
from that known to the Holders at the time of their request, then the Holders
shall not be required to pay any of such expenses and shall retain their rights
pursuant to Section 2.2; and (c) the Company shall not be required to pay any
expenses associated with any registration of Registrable Stock requested by
Holders pursuant to Section 2.8.
2.11 Indemnification.
---------------
(a) To the extent permitted by law, the Company will indemnify
each Holder requesting or joining in a registration, each agent, officer and
director of such Holders, each person controlling such Holder and each
underwriter and selling broker of the securities so registered (collectively,
"Indemnitees") against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular or other document incident to any registration, qualification or
compliance (or in any related registration statement, notification or the like)
or any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
in the light of the circumstances in which they were made, or any violation by
the Company of any rule or regulation promulgated under the Securities Act
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification or compliance,
and will reimburse each such Indemnitee, promptly and on a current basis from
time to time, for any legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, provided, however, that the Company will not be liable in
-------- -------
any such case to the extent that any such claim, loss, damage or liability is
caused by any untrue statement or omission so made in strict conformity with
written information furnished to the Company by an instrument duly executed by
such Indemnitees and stated to be specifically for use therein and except that
the foregoing indemnity agreement is subject to the condition that, insofar as
it relates to any such untrue statement (or alleged untrue statement) or
omission (or alleged omission) made in the preliminary prospectus but eliminated
or remedied in the amended prospectus on file with the Commission at the time
the registration statement becomes effective or in the amended prospectus filed
with the Commission pursuant to Rule 424(b) (the "Final Prospectus"), such
indemnity agreement shall not inure to the benefit of any underwriter, or any
Indemnitee if there is no underwriter, if a copy of the Final Prospectus was not
furnished to the person or entity asserting the loss, liability, claim or damage
at or prior to the time such furnishing is required by the Securities Act;
provided, further, that this indemnity shall not be deemed to relieve any
underwriter of any of its due diligence obligations; provided, further, that the
indemnity agreement contained in this Section 2.11(a) shall not apply to amounts
paid in settlement of any
-8-
<PAGE>
such claim, loss, damage, liability or action if such settlement is effected
without the consent of the Company, which consent shall not be unreasonably
withheld.
(b) To the extent permitted by law, each Holder requesting or
joining in a registration and each underwriter of the securities so registered
will indemnify the Company and its officers and directors and each other Holder
and each person, if any, who controls any thereof within the meaning of Section
15 of the Securities Act and their respective successors against all claims,
losses, damages and liabilities or actions in respect thereof arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular or other document incident to any
registration, qualification or compliance (or in any related registration
statement, notification or the like) or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances in which
they were made and will reimburse, promptly and on a current basis from time to
time, the Company and each other person indemnified pursuant to this Section
2.11(b) for any legal and any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, provided, however, that this Section 2.11(b) shall apply only if (and
-------- -------
only to the extent that) such statement or omission was made in reliance upon
and in strict conformity with written information (including, without
limitation, written negative responses to inquiries) furnished to the Company by
an instrument duly executed by such Holder or underwriter and stated to be
specifically for use in such prospectus, offering circular or other document (or
related registration statement, notification or the like) or any amendment or
supplement thereto and except that the foregoing indemnity agreement is subject
to the condition that, insofar as it relates to any such untrue statement (or
alleged untrue statement) or omission (or alleged omission) made in the
preliminary prospectus but eliminated or remedied in the amended Prospectus on
file with the Commission at the time the registration statement becomes
effective or in the Final Prospectus, such indemnity agreement by a Holder other
than an underwriter shall not inure to the benefit of (i) the Company and (ii)
any underwriter or any Holder, if there is no underwriter, if a copy of the
Final Prospectus was not furnished to the person or entity asserting the loss,
liability, claim or damage at or prior to the time such furnishing is required
by the Securities Act; provided, further, that this indemnity shall not be
-------- -------
deemed to relieve any underwriter of any of its due diligence obligations;
provided, further, that the indemnity agreement contained in this Section
- -------- -------
2.11(b) shall not apply to amounts paid in settlement of any such claim, loss,
damage, liability or action if such settlement is effected without the consent
of the Holder or underwriter, as the case may be, which consent shall not be
unreasonably withheld, and provided, further, that the obligations of such
-------- -------
Holders shall be limited to an amount equal to the proceeds to each such Holder
from the sale of Registrable Stock as contemplated herein, unless such claim,
loss, damage, liability or action resulted from such Holder's fraudulent
misconduct.
-9-
<PAGE>
(c) Each party entitled to indemnification hereunder (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party (at its expense) to assume the defense of any
claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be satisfactory to the Indemnified Party, and the Indemnified Party may
participate in such defense at such party's expense, and provided, further, that
-------- -------
the omission by any Indemnified Party to give notice as provided herein shall
not relieve the Indemnifying Party of its obligations under this Section 2.11
except to the extent that the omission results in a failure of actual notice to
the Indemnifying Party and such Indemnifying Party is damaged solely as a result
of the failure to give notice. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect to such
claim or litigation.
(d) The reimbursement required by this Section 2.11 shall be
made by periodic payments during the course of the investigation or defense, as
and when bills are received or expenses incurred.
(e) The obligations under this Section 2.11 shall survive the
redemption and conversion, if any, of the Series A Preferred Stock or Series B
Preferred Stock, the completion of any offering of Registrable Stock in a
registration statement under this Section 2, or otherwise.
2.12 Rights Which May Be Granted to Subsequent Investors.
---------------------------------------------------
(a) Within the limitations prescribed by this Section 2.12(a),
but not otherwise, the Company may grant to subsequent investors in the Company
rights of incidental registration (such as those provided in Section 2.5). Such
rights may only pertain to shares of Common Stock, including shares of Common
Stock into which any other securities may be converted. Such rights may be
granted with respect to (i) registrations actually requested by Initiating
Holders pursuant to Section 2.2, but only in respect of that portion of any such
registration as remains after inclusion of all Registrable Stock requested by
Holders and (ii) registrations initiated by the Company, but only in respect of
that portion of such registration as is available under the limitations set
forth in Section 2.6 (which limitations shall apply to all Holders) and such
rights shall be limited in all cases to sharing in the available portion of the
registration in question with Holders, such sharing to be based on the number of
shares of Common Stock held by the respective Holders and held by such other
investors, plus the number of shares of Common Stock into which other securities
held by the Holders and such other investors are convertible, which are entitled
to registration rights. With respect to registrations which are for underwritten
public offerings, "available portion" shall mean the portion of the underwritten
shares which is available as specified in clauses (i) and (ii) of the third
sentence of this Section 2.12(a). Shares not included in such underwriting shall
not be registered.
-10-
<PAGE>
(b) The Company may not grant to subsequent investors in the
Company rights of registration upon request (such as those provided in Section
2.2) unless (i) such rights are limited to shares of Common Stock, (ii) all
Holders are given enforceable contractual rights to participate in registrations
requested by such subsequent investors (the right of priority of registration
being pro rata as between subsequent investors and Holders), where such
participation is on a pro rata basis between subsequent investors and Holders,
(iii) subject to the limitations described in the final three sentences of
Section 2.12(a), such rights shall not become effective prior to 90 days after
the effective date of the first registration by the Company pursuant to Section
2.2 and (iv) such rights shall not be more favorable than those granted to the
Holders.
2.13 Transfer of Registration Rights. The registration rights granted
-------------------------------
to each Investor under this Section 2 may be transferred only:
(a) to a transferee who shall acquire not less than 50,000
shares of Series A Preferred Stock, Series B Preferred Stock or Registrable
Stock (as adjusted for Recapitalization Events); or
(b) in connection with the distribution by an Investor of
Series A Preferred Stock, Series B Preferred Stock or Registrable Stock to the
beneficial owners (including, without limitation, to partners of a general or
limited partnership, shareholders of a corporation and beneficiaries of a trust)
of securities of the Investor.
The registration rights may only be transferred if 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; and only if
immediately following such transfer the further disposition of the applicable
securities by the transferee or assignee is restricted under the Securities Act.
Notwithstanding any provision of this Section 2.13, the registration rights
granted to each Investor under this Section 2 may not be assigned to any person
or entity which, in the Company's reasonable judgment, is a competitor of the
Company.
2.14 "Stand-off" Agreement. In consideration for the Company
---------------------
performing its obligations under this Section 2 each Investor agrees for a
period of time (not to exceed 180 days) from the effective date of any
registration of securities of the Company (upon request of the Company or of the
underwriters managing any underwritten offering of the Company's securities) not
to sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Registrable Stock, other than shares of Registrable
Stock included in the registration, without the prior written consent of the
Company or such underwriters, as the case may be, provided, however, that all
-------- -------
officers and directors of the Company and each holder of more than 5% of the
outstanding Common Stock shall have entered into similar agreements.
-11-
<PAGE>
3. Miscellaneous.
-------------
3.1 Notices. All notices, requests, consents and other communications
-------
herein (except as stated in the last sentence of this Section 3.1) shall be in
writing and shall be mailed by first-class or certified mail, postage prepaid,
or personally delivered, as follows:
(a) If to the Company:
Latitude Communications, Inc.
4001 Burton Drive
Santa Clara, CA 95054
with a copy to:
Mr. Mark A. Medearis
Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
(b) If to the Investors:
at their respective addresses set forth
on Schedule A hereto
----------
with a copy to:
Mr. Allen L. Morgan
Wilson, Sonsini, Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, CA 94304-1050
or such other addresses as each of the parties hereto may provide from time to
time in writing to the other parties. For purposes of computing the time
periods set forth herein, the date of mailing shall be deemed to be the delivery
date.
3.2 Modification; Waiver. Neither this Agreement nor any provision
--------------------
hereof may be changed, waived, discharged or terminated orally or in writing,
except that any provision of this Agreement may be amended and the observance of
any such provision may be waived (either generally or in a particular instance
and either retroactively or prospectively) with (but only with) the written
consent of (a) the Company, and (b) the Holders of at least 66-2/3% of the
Registrable Stock (assuming the exercise and/or conversion of all exercisable or
convertible securities). Any amendment or waiver effected in accordance with
this paragraph shall be binding upon each Holder of Registrable Securities, and
the Company. In the event that an underwriting agreement is entered into between
the Company and any Holder, and such
-12-
<PAGE>
underwriting agreement contains terms differing from this Agreement, as to any
such Holder the terms of such underwriting agreement shall govern.
3.3 Entire Agreement. This Agreement contains the entire agreement
----------------
between the parties with respect to the transactions contemplated hereby, and
supersedes all negotiations, agreements, representations, warranties,
commitments, whether in writing or oral, prior to the date hereof.
3.4 Successors and Assigns. Subject to Section 2.13, all of the terms
----------------------
of this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the respective successors and assigns of the parties hereto.
3.5 Enforcement.
-----------
(a) Remedies at Law or in Equity. If the Company shall default
----------------------------
in any of its obligations under this Agreement or if any representation or
warranty made by or on behalf of the Company in this Agreement or in any
certificate, report or other instrument delivered under or pursuant to any term
hereof shall be untrue or misleading in any material respect as of the date of
this Agreement or as of the date it was made, furnished or delivered, each
Investor may proceed to protect and enforce its rights by suit in equity or
action at law, whether for the specific performance of any term contained in
this Agreement, the Company's Articles or for an injunction against the breach
of any such term or in furtherance of the exercise of any power granted in this
Agreement or the Company's Articles, or to enforce any other legal or equitable
right of such Investor or to take any one or more of such actions. In the event
any Investor brings such an action against the Company, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement or the Company's Articles, including without
limitation such reasonable fees and expenses of attorneys and accountants, which
shall include, without limitation, all reasonable fees, costs and expenses of
appeals.
(b) Remedies Cumulative; Waiver. No remedy referred to herein
---------------------------
is intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to each Investor at law or
in equity. No express or implied waiver by any Investor of any default shall be
a waiver of any future or subsequent default. The failure or delay of each
Investor in exercising any rights granted it hereunder shall not constitute a
waiver of any such right and any single or partial exercise of any particular
right by any Investor shall not exhaust the same or constitute a waiver of any
other right provided herein.
-13-
<PAGE>
3.6 Execution and Counterparts. This Agreement may be executed in
--------------------------
any number of counterparts, each of which when so executed and delivered shall
be deemed an original, and such counterparts together shall constitute one
instrument. Each party shall receive a duplicate original of the counterpart
copy or copies executed by it and by the Company.
3.7 Governing Law and Severability. This Agreement shall be
------------------------------
governed by the laws of the State of California as applied to agreements entered
into and to be performed entirely within California. In the event any provision
of this Agreement or the application of any such provision to any part shall be
held by a court of competent jurisdiction to be contrary to law, the remaining
provisions of this Agreement shall remain in full force and effect.
3.8 Headings. The descriptive headings of the Sections hereof are
--------
inserted for convenience only and do not constitute a part of this Agreement.
-14-
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LATITUDE COMMUNICATIONS, INC.
By: /s/ Emil Wang
-------------------------------
Title: PRESIDENT & CEO
-------------------------------
"INVESTOR"
______________________________________
By: _________________________________
Title: ______________________________
-15-
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LATITUDE COMMUNICATIONS, INC.
By: ______________________________
Title: ______________________________
"INVESTOR"
MAYFIELD ASSOCIATES FUND II
MAYFIELD VII
-------------------------------------
By: /s/ Kevin A. Fong
----------------------------------
Title: ______________________________
-15-
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LATITUDE COMMUNICATIONS, INC.
By: ______________________________
Title: ______________________________
"INVESTOR"
MENLO VENTURES IV, L.P.
By: MV Management IV, L.P.
its General Partner
-------------------------------------
By: /s/ Thomas H. Bredt
----------------------------------
Title: General Partner
-------------------------------
-15-
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LATITUDE COMMUNICATIONS, INC.
By: ______________________________
Title: ______________________________
"INVESTOR"
Aspect Telecommunications Corporation
-------------------------------------
By: /s/ William R. Hahn
----------------------------------
Title: CFO
------------------------------
-15-
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LATITUDE COMMUNICATIONS, INC.
By: ______________________________
Title: ______________________________
"INVESTOR"
VLG Investments
-------------------------------------
By: /s/ Mark A. Medearis
----------------------------------
Title: Partner
------------------------------
-15-
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LATITUDE COMMUNICATIONS, INC.
By: ______________________________
Title: ______________________________
"INVESTOR"
Craig W. Johnson
-------------------------------------
By: /s/ Mark A. Medearis
----------------------------------
Title: Attorney-in-Fact
------------------------------
-15-
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LATITUDE COMMUNICATIONS, INC.
By: ______________________________
Title: ______________________________
"INVESTOR"
MARK A. MEDEARIS AND KATHRYN H. MEDEARIS,
TRUSTEES OF THE MEDEARIS FAMILY TRUST
U/D/T DATED MARCH 18, 1992
-----------------------------------------
By: /s/ Mark A. Medearis
-------------------------------------
Title: _________________________________
-15-
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LATITUDE COMMUNICATIONS, INC.
By: ______________________________
Title: ______________________________
"INVESTOR"
James L. Patterson
-------------------------------------
By: /s/ James L. Patterson
----------------------------------
Title: ______________________________
-15-
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LATITUDE COMMUNICATIONS, INC.
By: ______________________________
Title: ______________________________
"INVESTOR"
CANAAN VENTURES II
LIMITED PARTNERSHIP
By: CANAAN VENTURE PARTNERS II L.P.
By: /s/ [SIGNATURE]
--------------------------------
General Partner
-15-
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LATITUDE COMMUNICATIONS, INC.
By: ______________________________
Title: ______________________________
"INVESTOR"
CANAAN VENTURES II
OFFSHORE C.V.
By: CANAAN VENTURE PARTNERS II L.P.
By: /s/ [SIGNATURE]
--------------------------------
General Partner
-15-
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LATITUDE COMMUNICATIONS, INC.
By: ______________________________
Title: ______________________________
"INVESTOR"
_____________________________________
By: /s/ W. Ferrell Sanders
----------------------------------
Title: GENERAL PARTNER OF
AMC PARTNERS 89 LP THE GENERAL
PARTNER OF ASSET MANAGEMENT
ASSOCIATES 1939, L.P.
------------------------------
-15-
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LATITUDE COMMUNICATIONS, INC.
By: _________________________________
Title: _________________________________
"INVESTOR"
Stanford University
----------------------------------------
By: /s/ Carol Gilmer
-------------------------------------
TITLE: ASSISTANT SECRETARY
----------------------------------
THE BOARD OF TRUSTEES OF THE
LELAND STANFORD JUNIOR UNIVERSITY
-15-
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Number of Shares
Number of of Series A Number of
Shares of Preferred Stock Shares of
Series A Subject to Series B
Name and Address Preferred Stock Warrants Preferred Stock
- ---------------------------- ------------------ -------------------- ------------------
<S> <C> <C> <C>
Mayfield VII 1,671,250 1,007,576
2200 Sand Hill Road
Menlo Park, CA 94025
Attn: Kevin A. Fong
Mayfield Associates Fund II 78,750 53,030
2200 Sand Hill Road
Menlo Park, CA 94025
Attn: Kevin A. Fong
Menlo Ventures IV, L.P. 1,250,000 757,576
3000 Sand Hill Road
Building 4, Suite 100
Menlo Park, CA 94025
Attn: Thomas H. Bredt
Aspect Telecommunications 50,000 36,364
Corporation
1730 Fox Drive
San Jose, CA 95131
Attn: James R. Carreker
Robert R. Maxfield, Trustee 25,000
Under Agreement Dated
12/14/87, As Amended
12930 Saratoga Avenue
Suite B-3
Saratoga, CA 95070
VLG Investments 1993 20,000 4,365
2800 Sand Hill Road
Menlo Park, CA 94025
Attn: Mark A. Medearis
Mark A. Medearis and Kathryn H. 2,500 545
Medearis, Trustees of the Medearis
Family Trust U/D/T dated
March 18, 1992
527 Tennyson
Palo Alto, CA 94301
Craig W. Johnson 2,500 545
c/o Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
William E. Kirsch 10,450
444 Castro Street, Suite 431
Mountain View, CA 94041
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number of Shares
Number of of Series A Number of
Shares of Preferred Stock Shares of
Series A Subject to Series B
Name and Address Preferred Stock Warrants Preferred Stock
- --------------------------- ------------------ -------------------- ------------------
<S> <C> <C> <C>
44,000
Glen McLaughlin
444 Castro Street, Suite 431
Mountain View, CA 94041
6,050
Steven M. Costella, Trustee
of The Steven M. Costella
Trust, dated May 8, 1989
444 Castro Street, Suite 431
Mountain View, CA 94041
James Patterson 75,000 20,000
115 Glen Ridge Road
Los Gatos, CA 95030
Canaan Ventures II Limited 105,818
Partnership
2884 Sand Hill Road
Building 1, Suite 115
Menlo Park, CA 94025
Attention: Deepak Kamra
Canaan Ventures II Offshore Limited 166,909
Partnership
2884 Sand Hill Road
Building 1, Suite 115
Menlo Park, CA 94025
Attention: Deepak Kamra
Asset Management Associates 1989, L.P. 454,546
2275 East Bayshore Road,
Suite 150
Palo Alto, CA 94303
Attention: W. Ferrell Sanders
Stanford University 54,546
c/o Stanford Management
Attn: Carol Gilmer
2770 Sand Hill Road
Menlo Park, CA 94025
</TABLE>
<PAGE>
EXHIBIT 10.8
LEASE AGREEMENT
THIS LEASE, made this 31st day of July , 1995 between JOHN ARRILLAGA,
Trustee, or his Successor Trustee, UTA dated 7/20/77 (ARRILLAGA FAMILY TRUST) as
amended, and RICHARD T. PEERY, Trustee, or his Successor Trustee, UTA dated
7/20/77 (RICHARD T. PEERY SEPARATE PROPERTY TRUST) as amended , hereinafter
called Landlord, and LATITUDE COMMUNICATIONS a California corporation,
hereinafter called Tenant.
WITNESSETH:
Landlord hereby leases to Tenant and Tenant hereby hires and takes from
Landlord those certain premises (the "Premises") outlined in red on Exhibit
"A", attached hereto and incorporated herein by this reference thereto more
particularly described as follows:
A portion of that certain 51,200+ square foot, two-story building located at
2121 Tasman Drive, Santa Clara,. California 95054, consisting of approximately
39,157+ square feet of space. Said Premises is more particularly shown within
the area outlined in Red on Exhibit A. The entire parcel, of which the Premises
----------
is a part, is shown within the area outlined in Green on Exhibit A attached
---------
hereto. The Premises is leased on an "as-is" basis, and in the improved
configuration as shown in Red on Exhibit B to be attached hereto.
---------
As used herein the Complex shall mean and include all of the land outlined in
Green and described in Exhibit "A", attached hereto, and all of the buildings,
improvements, fixtures and equipment now or hereafter situated on said land.
Said letting and hiring is upon and subject to the terms, covenants and
conditions hereinafter set forth and Tenant covenants as a material part of the
consideration for this Lease to perform and observe each and all of said terms,
covenants and conditions. This Lease is made upon the conditions of such
performance and observance.
1. USE Tenant shall use the Premises only in conformance with applicable
governmental laws, regulations, rules and ordinances for the purpose of general
office, light manufacturing, research and development, and storage and other
uses necessary for Tenant to conduct Tenant's business, provided that such uses
shall be in accordance with all applicable governmental laws and ordinances and
for no other purpose. Tenant shall not do or permit to be done in or about the
Premises or the Complex nor bring or keep or permit to be brought or kept in or
about the Premises or the Complex anything which is prohibited by or will in any
way increase the existing rate of (or otherwise affect) fire or any insurance
coveting the Complex or any part thereof, or any of its contents, or will cause
a cancellation of any insurance covering the Complex or any part thereof, or any
of its contents. Tenant shall not do or permit to be done anything in, on or
about the' Premises or the Complex which will in any way obstruct or interfere
with the rights of other tenants or occupants of the Complex or injure or annoy
them, or use or allow the Premises to be used for any improper, immoral,
unlawful or objectionable purpose, nor shall Tenant cause, maintain or permit
any nuisance in, on or about the Premises or the Complex. No sale by auction
shall be permitted on the Premises. Tenant shall not place any loads upon the
floors, walls, or ceiling, which endanger the structure, or place any harmful
fluids or other materials in the drainage system of the building, or overload
existing electrical or other mechanical systems. No waste materials or refuse
shall be dumped upon or permitted to remain upon any part of the Premises or
outside of the building in which the Premises are a part, except in trash
containers placed inside exterior enclosures designated by Landlord for that
purpose or inside of the building proper where designated by Landlord. No
materials, supplies, equipment, finished products or semi-finished products, raw
materials or articles of any nature shall be stored upon or permitted to remain
outside the Premises or on any portion of common area of the Complex. No
loudspeaker or other device, system or apparatus which can be heard outside the
Premises shall be used in or at the Premises without the prior written consent
of Landlord. Tenant shall not commit or suffer to be committed any waste in or
upon the Premises. Tenant shall indemnify, defend and hold Landlord harmless
against any loss. expense, damage, attorneys' fees, or liability arising out of
failure of Tenant to comply with any applicable law. Tenant shall comply with
any covenant, condition, or restriction ("CC&R's") affecting the Premises. The
provisions of this paragraph are for the benefit of Landlord only and shall not
be construed to be for the benefit of any tenant or occupant of the Complex.
2. TERM *
A. The term of this Lease shall be for a period of FIVE (5) years (unless
sooner terminated as hereinafter provided) and, subject to Paragraphs 2(B) and
3, shall commence on the 1st day of January , 1996 and end on the 31st day
December, of 2000.
B. Possession of the Premises shall be deemed tendered and the term of this
Lease shall commence when the first of the following occurs:
(a) One day after a Certificate of Occupancy is granted by the proper
governmental agency, or, if the governmental agency having jurisdiction over the
area in which the Premises are situated does not issue certificates of
occupancy, then the same number of days after certification by Landlord's
architect or contractor that Landlord's construction work has been completed; or
(b) Upon the occupancy of the Premises by any of Tenant's operating
personnel; or
(c) When the Tenant Improvements have been substantially completed for
Tenant's use and occupancy, in accordance and compliance with Exhibit B of this
Lease Agreement; Notwithstanding anything to the contrary herein, it is agreed
by the parties hereto, that said Lease shall not commence prior to January 1,
1996 unless any of Tenant's operating personnel occupy any part of the Premises
prior to January 1, 1996; or
(d) As otherwise agreed in writing.
3. POSSESSION If Landlord, for any reason whatsoever, cannot deliver possession
of said premises to Tenant at the commencement of the said term, as hereinbefore
specified, this Lease shall not be void or voidable; no obligation of Tenant
shall be affected thereby nor shall Landlord or Landlord's agents be liable to
Tenant for any loss or damage resulting therefrom; but in that event the
commencement and termination dates of the Lease, and all other dates affected
thereby shall be revised to conform to the date of Landlord's delivery of
possession, as specified in Paragraph 2 (b), above. The above is, however,
subject to the provision that the period of delay, of delivery of the premises
shall not exceed 60 days from the commencement date herein (except those delays
caused by Acts of God, strikes, war, utilities, governmental bodies, weather,
unavailable materials, and delays beyond Landlord's control shall be excluded in
calculating such period) in which instance Tenant, at its option, may, by
written notice to Landlord, terminate this Lease.
* It is agreed in the event said Lease commences on a date other than the first
day of the month the term of the Lease will be extended to account for the
number of days in the partial month. The Basic Rent during the resulting partial
month will be pro-rated (for the number of days in the partial month) at the
Basic Rent scheduled for the projected commencement date as shown in Paragraph
43.
page 1 of 8
<PAGE>
4. RENT
A. Basic Rent. Tenant agrees to pay to Landlord at such place as Landlord may
designate without deduction, offset, prior notice, or demand, and Landlord
agrees to accept as Basic Rent for the leased Premises the total sum of TWO
MILLION TWO HUNDRED THIRTY ONE THOUSAND NINE HUNDRED FORTY NINE AND NO/100
($2,231,949.00) Dollars in lawful money of the United States of America, payable
as follows:
See Paragraph 43 for Basic Rent Schedule.
B. Time for Payment. In the event that the term of this Lease commences on a
date other than the first day of a calendar month, on the date of commencement
of the term hereof Tenant shall pay to Landlord as rent for the period from such
date of commencement to the first day of the next succeeding calendar month that
proportion of the monthly rent hereunder which the number of days between such
date of commencement and the first day of the next succeeding calendar month
bears to thirty (30). In the event that the term of this Lease for any reason
ends on a date other than the last day of a calendar month, on the first day of
the last calendar month of the term hereof Tenant shall pay to Landlord as rent
for the period from said first day of said last calendar month to and including
the last day of the term hereof that proportion of the monthly rent hereunder
which the number of days between said first day of said last calendar month and
the last day of the term hereof bears to thirty (30).
C. Late Charge. Notwithstanding any other provision of this Lease, if Tenant
is in default in the payment of rental as set forth in this Paragraph 4 when
due, or any part thereof, Tenant agrees to pay Landlord, in addition to the
delinquent rental due, a late charge for each rental payment in default ten (10)
days. Said late charge shall equal ten (10%) percent of each rental payment so
in default.
D. Additional Rent. Beginning with the commencement date of the term of this
Lease, Tenant shall pay to Landlord in addition to the Basic Rent and as
Additional Rent following:
(a) Tenant's proportionate share of all Taxes relating to the Complex as set
forth in Paragraph 12, and
(b) Tenant's proportionate share of all insurance premiums relating to the
Complex, as set forth in Paragraph 15, and
(c) Tenant's proportionate share of expenses for the operation, management,
maintenance and repair of the Building (including common areas of the
Building) and common Areas of the Complex in which the Premises are located
as set forth in Paragraph 7, and
(d) All charges, costs and expenses, which Tenant is required to pay hereunder,
together with all interest and penalties, costs and expenses including
attorneys' fees and legal expenses, that may accrue thereto in the event of
Tenant's failure to pay such amounts, and all damages, reasonable costs and
expenses which Landlord may incur by reason of default of Tenant or failure
on Tenant's part to comply with the terms of this Lease. In the event of
nonpayment by Tenant of Additional Rent, Landlord shall have all the rights
and remedies with respect thereto as Landlord has for nonpayment of rent.
The Additional Rent due hereunder shall be paid to Landlord or Landlord's agent
(i) within five days for taxes and insurance and within thirty (30) days for all
other Additional Rent items after presentation of invoice from Landlord or
Landlord's agent setting forth such Additional Rent and/or (ii) at the option of
Landlord, Tenant shall pay to Landlord monthly, in advance, Tenant's prorata
share of an amount estimated by Landlord to be Landlord's approximate average
monthly expenditure for such Additional Rent items, which estimated amount shall
be reconciled within 120 days of the end of each calendar year or more
frequently if Landlord so elects to do so at Landlord's sole and absolute
discretion, as compared to Landlord's actual expenditure for said Additional
Rent items, with Tenant paying to Landlord, upon demand, any amount of actual
expenses expended by Landlord in excess of said estimated amount, or Landlord
refunding to Tenant (providing Tenant is not in default in the performance of
any of the terms, covenants and conditions of this Lease) any amount of
estimated payments made by Tenant in excess of Landlord's actual expenditures
for said Additional Rent items.
The respective obligations of Landlord and Tenant under this paragraph shall
survive the expiration or other termination of the term of this Lease, and if
the term hereof shall expire or shall otherwise terminate on a day other than
the last day of a calendar year, the actual Additional Rent incurred for the
calendar year in which the term hereof expires or otherwise terminates shall be
determined and settled on the basis of the statement of actual Additional Rent
for such calendar year and shall be prorated in the proportion which the number
of days in such calendar year preceding such expiration or termination bears to
365. Within thirty (30) days after receipt of Landlord's reconciliation, Tenant
shall have the right, at Tenant's sole expense, to audit, at a mutually
convenient time at Landlord's office, Landlord's records relating to the
foregoing expenses. Such audit must be conducted by Tenant or an independent
nationally recognized accounting firm that is not being compensated by Tenant or
other third party on a contingency fee basis. If such audit reveals that
Landlord has overcharged Tenant, the amount overcharged shall be credited to
Tenant's account within thirty (30) days after the audit is concluded.
E. Place of Payment of Rent and Additional Rent. All Basic Rent hereunder and
all payments hereunder for Additional Rent shall be paid to Landlord at the
office of Landlord at Peery/Arrillaga, File 1504, Box 60000: San Francisco, CA
94160 or to such other person or to such other place as Landlord may from time
to time designate in writing.
* F. Security Deposit. Subject to Paragraph 50, concurrently with Tenant's
execution of this Lease, Tenant shall deposit with Landlord the sum of EIGHTY
TWO THOUSAND TWO HUNDRED TWENTY NINE AND 70/100 ($82,229.70) Dollars. Said sum
shall be held by Landlord as a Security Deposit for the faithful performance by
Tenant of all of the terms, covenants, and conditions of this Lease to be kept
and performed by Tenant during the term hereof. If Tenant defaults with respect
to any provision of this Lease, including, but not limited to, the provisions
relating to the payment of rent and any of the monetary sums due herewith.
Landlord may (but shall not be required to) use, apply or retain all or any part
of this Security Deposit for thc payment of any other amount which Landlord may
spend by reason of Tenant's default or to compensate Landlord for any other loss
or damage which Landlord may suffer by reason of Tenant's default. If any
portion of said Deposit is so used or applied, Tenant shall, within ten (10)
days after written demand therefor, deposit cash with Landlord in the amount
sufficient to restore the Security Deposit to its original amount. Tenant's
failure to do so shall be a material breach of this Lease. Landlord shall not be
required to keep this Security Deposit separate from its general funds, and
Tenant shall not be entitled to interest on such Deposit. If Tenant fully and
faithfully performs every provision of this Lease to be performed by it. the
Security Deposit or any balance thereof shall be returned to Tenant (or at
Landlord's option, to the last assignee of Tenant's interest hereunder) at the
expiration of the Lease term and after Tenant has vacated the Premises. In the
event of termination of Landlord's interest in this Lease. Landlord shall
transfer said Deposit to Landlord's successor in interest whereupon Tenant
agrees to release Landlord from liability for the return of such Deposit or the
accounting therefor.
5. RULES AND REGULATIONS AND COMMON AREA Subject to the terms and conditions
of this Lease and such Rules and Regulations as Landlord may from time to time
prescribe, Tenant and Tenant's employees, invitees and customers shall, in
common with other occupants of the Complex in which the Premises are located,
and their respective employees, invitees and customers, and others entitled to
the use thereof, have the non-exclusive right to use the access roads, parking
areas, and facilities provided and designated by Landlord for the general use
and convenience of the occupants of the Complex in which the Premises are
located, which areas and facilities are referred to herein as "Common Area".
This right shall terminate upon the termination of this Lease. Landlord reserves
the right from time to time to make changes in the shape, size, location, amount
and extent of Common Area. Landlord further reserves the right to promulgate
such reasonable rules and regulations relating to the use of the Common Area,
and any part or parts thereof, as Landlord may deem appropriate for the best
interests of the occupants of the Complex. The Rules and Regulations shall be
binding upon Tenant upon delivery of a copy of them to Tenant, and Tenant shall
abide by them and cooperate in their observance. Such Rules and Regulations may
be amended by Landlord from time to time, with or without advance notice, and
all amendments shall be effective upon delivery of a copy to Tenant. Landlord
shall not be responsible to Tenant for the non-performance by any other tenant
or occupant of the Complex of any of said Rules and Regulations.
Landlord shall operate, manage and maintain the Common Area. The manner in
which the Common Area shall be maintained and the expenditures for such
maintenance shall be at the discretion of Landlord.
* $41,114.85 due upon Lease execution.
$41,114.85 Promissory Note due January 1, 1997.
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6. PARKING Tenant shall have the right to use with other tenants or occupants of
the Complex 144 parking spaces in the common parking areas of the Complex.
Tenant agrees, that Tenant, Tenant's employees, agents, representatives and/or
invitees shall not use parking spaces in excess of said 144 spaces allocated to
Tenant hereunder. Landlord shall have the right, at Landlord's sole discretion,
to specifically designate the location of Tenant's parking spaces within the
common parking areas of the Complex in the event of a dispute among the tenants
occupying the building and/or Complex referred to herein, in which event Tenant
agrees that Tenant, Tenant's employees, agents, representatives and/or invitees
shall not use any parking spaces other than those parking spaces specifically
designated by Landlord for Tenant's use. Said parking spaces, if specifically
designated by Landlord to Tenant, may be relocated by Landlord at any time, and
from time to time. Landlord reserves the right, at Landlord's sole discretion,
to rescind any specific designation of parking spaces, thereby returning
Tenant's parking spaces to the common parking area. Landlord shall give Tenant
written notice of any change in Tenant's parking spaces. Tenant shall not, at
any time, park, or permit to be parked, any trucks or vehicles adjacent to the
loading areas so as to interfere in any way with the use of such areas, nor
shall Tenant at any time park. or permit the parking of Tenant's trucks or other
vehicles or the trucks and vehicles of Tenant's suppliers or others, in any
portion of the common area not designated by Landlord for such use by Tenant.
Tenant shall not park nor permit to be parked, any inoperative vehicles or
equipment on any portion of the common parking area or other common areas of the
Complex. Tenant agrees to assume responsibility for compliance by its employees
with the parking provision contained herein. If Tenant or its employees park in
other than such designated parking areas, then Landlord may charge Tenant, as an
additional charge, and Tenant agrees to pay, ten ($10.00) Dollars per day for
each day or partial day each such vehicle is parked in any area other than that
designated. Tenant hereby authorizes Landlord at Tenant's sole expense to tow
away from the Complex any vehicle belonging to Tenant or Tenant's employees
parked in violation of these provisions, or to attach violation stickers or
notices to such vehicles. Tenant shall use the parking areas for vehicle parking
only, and shall not use the parking areas for storage.
7. EXPENSES OF OPERATION, MANAGEMENT, AND MAINTENANCE OF THE COMMON AREAS OF THE
COMPLEX AND BUILDING IN WHICH THE PREMISES ARE LOCATED As Additional Rent and in
accordance with Paragraph 4 D of this Lease, Tenant shall pay to Landlord
Tenant's proportionate share (calculated on a square footage or other equitable
basis as calculated by Landlord) of all expenses of operation, management,
maintenance and repair of the Common Areas of the Complex including, but not
limited to, license, permit, and inspection fees; security: utility charges
associated with exterior landscaping and lighting (including water and sewer
charges): all charges incurred in the maintenance of landscaped areas, lakes,
parking lots. sidewalks, driveways: maintenance, repair and replacement of all
fixtures and electrical, mechanical, and plumbing systems: structural elements
and exterior surfaces of the buildings; salaries and employee benefits of
personnel and payroll taxes applicable thereto; supplies, materials, equipment
and tools; the cost of capital expenditures which have the effect of reducing
operating expenses, provided, however, that in the event Landlord makes such
capital improvements, Landlord shall amortize its investment in said
improvements (together with interest at the rate of fifteen (15%) percent per
annum on the unamortized balance) as an operating expense in accordance with
standard accounting practices, provided, that such amortization is not at a rate
greater than the anticipated savings in the operating expenses.
"Additional Rent" as used herein shall not include Landlord's debt repayments;
interest on charges: expenses directly or indirectly incurred by Landlord for
the benefit of any other tenant; cost for the installation of partitioning or
any other tenant improvements; cost of attracting tenants; depreciation;
interest, or executive salaries.
As Additional Rent and in accordance with paragraph 4 D of this Lease. Tenant
shall pay its proportionate share (calculated on a square footage or other
equitable basis as calculated by Landlord) of the cost of operation (including
common utilities), management, maintenance, and repair of the building
(including common areas such as lobbies, restrooms, janitor's closets, hallways,
elevators, mechanical and telephone rooms, stairwells, entrances, spaces above
the ceilings and janitorization of said common areas) in which the Premises are
located. The maintenance items herein referred to include, but are not limited
to, all windows, window frames, plate glass, glazing, truck doors, main plumbing
systems of the building (such as water and drain lines, sinks, toilets, faucets,
drains, showers and water, fountains), main electrical systems (such as panels
and conduits), heating and airconditioning systems (such as compressors, fans,
air handlers, ducts, boilers, heaters), store fronts, roofs. downspouts,
building common area interiors (such as wall coverings, window coverings, floor
coverings and partitioning), ceilings, building exterior doors, skylights (if
any), automatic fire extinguishing systems, and elevators: license, permit, and
inspection fees; security; salaries and employee benefits of personnel and
payroll taxes applicable thereto; supplies, materials, equipment and tools: the
cost of capital expenditures which have the effect of reducing operating
expenses, provided, however, that in the event Landlord makes such capital
improvements, Landlord shall amortize its investment in said improvements
(together with interest at the rate of fifteen (15%) percent per annum on the
unamortized balance) as an operating expense in accordance with standard
accounting practices, provided, that such amortization is not at a rate greater
than the anticipated savings in the operating expenses. Tenant hereby waives all
rights under, and benefits of, subsection 1 of Section 1932 and Sections 1941
and 1942 of the California Civil Code and under any similar law, statute or
ordinance now or hereafter in effect.
8. ACCEPTANCE AND SURRENDER OF PREMISES By entry hereunder, Tenant accepts the
Premises as being in good and sanitary order, condition and repair and accepts
the building and improvements included in the Premises in their present
condition and without representation or warranty by Landlord as to the condition
of such building or as to the use or occupancy which may be made thereof. Any
exceptions to the foregoing must be by written agreement executed by Landlord
and Tenant. Tenant agrees on the last day of the Lease term, or on the sooner
termination of this Lease, to surrender the Premises promptly and peaceably to
Landlord in good condition and repair (damage by Acts of God, fire, normal wear
and tear excepted), with all interior walls painted, or cleaned so that they
appear freshly painted, and repaired and replaced, if damaged; all floors
cleaned and waxed; all carpets cleaned and shampooed; the airconditioning and
heating equipment serviced by a reputable and licensed service firm and in good
operating condition (provided the maintenance of such equipment has been
Tenant's responsibility during the term of this Lease) together with all
alterations, additions, and improvements which may have been made in, to, or on
the Premises (except movable trade fixtures installed at the expense of Tenant)
except that Tenant shall ascertain from Landlord within thirty (30) days before
the end of the term of this Lease whether Landlord desires to have the Premises
or any part or parts thereof restored to their condition and configuration as
when the Premises were delivered to Tenant and if Landlord shall so desire, then
Tenant shall restore said Premises or such part or parts thereof before the end
of this Lease at Tenant's sole cost and expense. Tenant, on or before the end of
the term or sooner termination of this Lease, shall remove all of Tenant's
personal property and trade fixtures from the Premises, and all property not so
removed on or before the end of the term or sooner termination of this Lease
shall be deemed abandoned by Tenant and title to same shall thereupon pass to
Landlord without compensation to Tenant. Landlord may, upon termination of this
Lease, remove all moveable furniture and equipment so abandoned by Tenant, at
Tenant's sole cost, and repair any damage caused by such removal at Tenant's
sole cost. If the Premises be not surrendered at the end of the term or sooner
termination of this Lease. Tenant shall indemnify Landlord against loss or
liability resulting from the delay by Tenant in so surrendering the Premises
including, without limitation, any claims made by any succeeding tenant founded
on such delay. Nothing contained herein shall be construed as an extension of
the term hereof or as a consent of Landlord to any holding over by Tenant. The
voluntary or other surrender of this Lease or the Premises by Tenant or a mutual
cancellation of this Lease shall not work as a merger and. at the option of
Landlord, shall either terminate all or any existing subleases or subtenancies
or operate as an assignment to Landlord of all or any such subleases or
subtenancies.
9. ALTERATIONS AND ADDITIONS Tenant shall not make, or suffer to be made, any
alteration or addition to the Premises, or any part thereof, without the written
consent of Landlord first had and obtained by Tenant, but at the cost of Tenant,
and any addition to, or alteration of, the Premises, except moveable furniture
and trade fixtures, shall at once become a part of the Premises and belong to
Landlord, Landlord reserves the right to approve all contractors and mechanics
proposed by Tenant to make such alterations and additions. Tenant shall retain
title to all moveable furniture and trade fixtures placed in the Premises. All
heating, lighting, electrical, airconditioning, floor-to-ceiling partitioning,
drapery, carpeting, and floor installations made by Tenant, together with all
property that has become an integral part of the Premises, shall not be deemed
trade fixtures. Non-floor-to-ceiling cubicles shall be considered trade
fixtures. Tenant agrees that it will not proceed to make such alteration or
additions, without having obtained consent from Landlord to do so, and until
five (5) days from the receipt of such consent, in order that Landlord may post
appropriate notices to avoid any liability to contractors or material suppliers
for payment for Tenant's improvements. Tenant will at all times permit such
notices to be posted and to remain posted until the completion of work. Tenant
shall, if required by Landlord. secure at Tenant's own cost and expense, a
completion and lien indemnity bond, satisfactory to Landlord, for such work.
Tenant further covenants and agrees that any mechanic's lien filed against the
Premises or against the Complex for work claimed to have been done for, or
materials claimed to have been furnished to Tenant, will be discharged by
Tenant, by bond or otherwise, within ten (l0) days after the filing thereof, at
the cost and expense of Tenant. Any exceptions to the foregoing must he made in
writing and executed by both Landlord and Tenant.
10. TENANT MAINTENANCE. Subject to paragraphs 54 and 55 Tenant shall, at its
sole cost and expense, keep and maintain the Premises (including appurtenances)
and every part thereof in a high standard of maintenance and repair, and in good
and sanitary condition. Tenant's maintenance and repair responsibilities herein
referred to include, but are not limited to, janitorization, plumbing systems
within the non-common areas of the Premises (such as water and drain lines,
sinks), electrical systems within the non-common areas of the Premises (such as
outlets, lighting fixtures, lamps, bulbs, tubes, ballasts), heating and
airconditioning controls within the non-common areas of the Premises (such as
mixing boxes, thermostats, time clocks, supply and return grills), all interior
improvements within the premises including but not limited to: wall coverings,
window coverings, acoustical ceilings, vinyl tile, carpeting, partitioning,
doors (both interior and exterior, including closing mechanisms, latches,
locks), and all other interior improvements of any nature whatsoever. Tenant
agrees to provide carpet shields under all rolling chairs or to otherwise be
responsible for wear and tear of the carpet caused by such rolling chairs if
such wear and tear exceeds that caused by normal foot traffic in surrounding
areas. Areas of excessive wear shall be replaced at Tenant's sole expense upon
Lease termination.
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11. UTILITIES OF THE BUILDING IN WHICH THE PREMISES ARE LOCATED As Additional
Rent and in accordance with paragraph 4 D of this Lease. Tenant shall pay its
proportionate share (calculated on a square footage or other equitable basis as
calculated by Landlord) of the cost of all utility charges such as water, gas,
electricity, telephone, telex and other electronic communication, service, sewer
service, waste-pick-up and any other utilities, materials or services furnished
directly to the building in which the Premises are located, including, without
limitation, any temporary or permanent utility surcharge or other exactions
whether or not hereinafter imposed.
Landlord shall not be liable for and Tenant shall not be entitled to any
abatement or reduction of rent by reason of any interruption or failure of
utility services to the Premises when such interruption or failure is caused by
accident, breakage, repair, strikes, lockouts, or other labor disturbances or
labor disputes of any nature, or by any other cause, similar or dissimilar,
beyond the reasonable control of Landlord.
Provided that Tenant is not in default in the performance or observance of any
of the terms, covenants or conditions of this Lease to be performed or observed
by it. Landlord shall furnish to the Premises between the hours of 8:00AM and
6:00PM Mondays through Fridays (holidays excepted) and subject to the rules and
regulations of the Complex hereinbefore referred to, reasonable quantities of
water gas and electricity suitable for the intended use of the Premises and heat
and airconditioning required in Landlord's judgment for the comfortable use and
occupation of the Premises for such purposes. Tenant agrees that at all times it
will cooperate fully with Landlord and abide by all regulations and requirements
that Landlord may prescribe for the proper functioning and protection of the
building heating, ventilating and airconditioning systems. Whenever heat
generating machines, equipment or any other devices (including exhaust fans) are
used in the Premises by Tenant which affect the temperature or otherwise
maintained by the airconditioning system. Landlord shall have the right to
install supplementary airconditioning units in the Premises and the cost
thereof, including the cost of installation and the cost of operation and
maintenance thereof, shall be paid by Tenant to Landlord upon demand by
Landlord, Tenant will not, without the written consent of Landlord, use any
apparatus or device in the Premises (including, without limitation) electronic
data processing machines or machines using current in excess of 110 Volts which
will in any way increase the amount of electricity, gas, water or
airconditioning usually furnished or supplied to premises being used as general
office space, or connect with electric current (except through existing
electrical outlets in the Premises), or with gas or water pipes an apparatus or
device for the purposes of using electric current gas or water. If Tenant shall
require water, gas, or electric current in excess of that usually furnished or
supplied to premises being used as general office space, Tenant shall first
obtain the written consent of Landlord which consent shall not be unreasonably
withheld and Landlord may cause an electric current gas, or water meter to be
installed in the Premises in order to measure the amount of electric current,
gas or water consumed for any such excess use. The cost of any such meter and of
the installation, maintenance and repair thereof all charges for such excess
water, gas and electric current consumed (as shown by such meters and at the
rates then charged by the furnishing public utility): and any additional expense
incurred by Landlord in keeping account of electric current, gas or water so
consumed shall be paid by Tenant, and Tenant agrees to pay Landlord therefor
promptly upon demand by Landlord. Tenant may, from time to time, have its staff
and equipment operate on a twenty-four (24) hours-a-day seven (7) days-a-week
schedule, and Tenant shall pay for any extra utilities used by Tenant. Landlord
acknowledges that Tenant may use electrical current up to 220 volts subject to
the terms and conditions of this Paragraph 11.
12. TAXES. A. As Additional Rent and in accordance with Paragraph 4 D of this
Lease. Tenant shall pay to Landlord Tenant's proportionate share of all Real
Property Taxes. which prorata share shall be allocated to the leased Premises by
square footage or other equitable basis, as calculated by Landlord. The term
"Real Property Taxes", as used herein, shall mean (i) all taxes assessments,
levies and other charges of any kind or nature whatsoever, general and special,
foreseen and unforeseen (including all installments of principal and interest
required to pay any general or special assessments for public improvements and
any increases resulting from reassessments caused by any change in ownership of
the Complex) now or hereafter imposed by any governmental or quasi-governmental
authority or special district having the direct or indirect power to tax or levy
assessments, which are levied or assessed against, or with respect to the value,
occupancy or use of all or any portion of the Complex (as now constructed or as
may at any time hereafter be constructed, altered or otherwise changed) or
Landlord's interest therein: any improvements located within the Complex
(regardless of ownership): the fixtures, equipment and other property of
Landlord. real or personal, that are an integral part of and located in the
Complex; or parking areas, public utilities, or energy within the Complex; (ii)
all charges, levies or fees imposed by reason of environmental regulation or
other governmental control of the Complex; and (iii) all costs and fees
(including attorneys' fees) incurred by Landlord in contesting any Real Property
Tax and in negotiating with public authorities as to any Real Property Tax. If
at any time during the term of this Lease the taxation or assessment of the
Complex prevailing as of the commencement date of this Lease shall be altered so
that in lieu of or in addition to any Real Property Tax described above there
shall be levied, assessed or imposed (whether by reason of a change in the
method of taxation or assessment, creation of a new tax or charge, or any other
cause) an alternate or additional tax or charge (i) on the value, use or
occupancy of the Complex or Landlord's interest therein or (ii) on or measured
by the gross receipts, income or rentals from the Complex, on Landlords business
of leasing the Complex, or computed in any manner with respect to the operation
of the Complex, then any such tax or charge, however designated, shall be
included within the meaning of the term "Real Property Taxes" for purposes of
this Lease. If any Real Property Tax is based upon property or rents unrelated
to the Complex, then only that part of such real Property Tax that is fairly
allocable to the Complex shall be included within the meaning of the term "Real
Property Taxes". Notwithstanding the foregoing, the term "Real Property Taxes"
shall not include estate, inheritance, gift or franchise taxes of Landlord or
the federal or state net income tax imposed on Landlord's income from all
sources.
B. Taxes of Tenant's Property.
(a) Tenant shall be liable for and shall pay ten days before delinquency,
taxes levied against any personal property or trade fixtures placed by Tenant in
or about the Premises If any such taxes on Tenant's personal property or trade
fixtures are levied against Landlord or Landlord's property or if the assessed
value of the Premises is increased by the inclusion therein of a value placed
upon such personal property or trade fixtures of Tenant and if Landlord. after
written notice to Tenant. pays the taxes based on such increased assessment,
which Landlord shall have the right to do regardless of the validity thereof,
but only under proper protest if requested by Tenant. Tenant shall upon demand,
as the case may be, repay to Landlord the taxes so levied against Landlord. or
the proportion of such taxes resulting from such increase in the assessment;
provided that in any such event Tenant shall have the right, in the name of
Landlord and with Landlord's full cooperation, to bring suit in any court of
competent jurisdiction to recover the amount of any such taxes so paid under
protest, and any amount so recovered shall belong to Tenant.
(b) if the Tenant improvements in the Premises, whether installed, and/or paid
for by Landlord or Tenant and whether or not affixed to the real property so as
to become a part thereof, are assessed for real property tax purposes at a
valuation higher than the valuation at which standard office improvements in
other space in the Complex are assessed, then the real property taxes and
assessments levied against Landlord or the Complex by reason of such excess
assessed valuation shall be deemed to be taxes levied against personal property
of Tenant and shall be governed by the provisions of 1213a, above. If the
records of the County Assessor are available and sufficiently detailed to serve
as a basis for determining whether said Tenant improvements are assessed at a
higher valuation than standard office improvements in other space in the
Complex, such records shall be binding on both the Landlord and the Tenant. If
the records of the County Assessor are not available or sufficiently detailed to
serve as a basis for making said determination the actual cost of construction
shall be used.
13. LIABILITY INSURANCE Tenant at Tenant's expense, agrees to keep in force
during the term of this Lease a policy of commercial general insurance with
combined single limit coverage of not less than Two Million Dollars (2,000,000)
for injuries to or death of persons occurring in, on or about the Premises or
the Complex, and property damage. The policy or policies affecting such
insurance, certificates of insurance of which shall be furnished to Landlord,
shall name Landlord as additional insureds, and shall insure any liability of
Landlord, contingent or otherwise, as respects acts or omissions of Tenant, its
agents, employees or invitees or otherwise by any conduct or transactions of any
of said persons in or about or concerning the Premises, including any failure of
Tenant to observe or perform any of its obligations hereunder; shall be issued
by an insurance company admitted to transact business in the State of
California; and shall provide that the insurance effected thereby shall not be
canceled, except upon thirty (30) days' prior written notice to Landlord. If,
during the term of this Lease, in the considered opinion of Landlord's Lender,
insurance advisor, or counsel, the amount of insurance described in this
paragraph 13 is not adequate, Tenant agrees to increase said coverage to such
reasonable amount as Landlord's Lender, insurance advisor, or counsel shall deem
adequate.
14. TENANT'S PERSONAL PROPERTY INSURANCE AND WORKMAN'S COMPENSATION INSURANCE
Tenant shall maintain a policy or policies of fire and property damage insurance
in "all risk" form with a sprinkler leakage endorsement insuring the personal
property, inventory, trade fixtures, and leasehold improvements within the
leased Premises for the full replacement value thereof. The proceeds from any of
such policies shall be used for the repair or replacement of such items so
insured.
Tenant shall also maintain a policy or policies of workman's compensation
insurance and any other employee benefit insurance sufficient to comply with all
laws.
15. PROPERTY INSURANCE Landlord shall purchase and keep in force and as
Additional Rent and in accordance with Paragraph 4D of this Lease, Tenant shall
pay to Landlord (or Landlord's agent if so directed by Landlord) Tenant's
proportionate share (calculated on a square footage or other equitable basis as
calculated by Landlord) of the deductibles on insurance claims and the cost of
policy or policies of insurance covering loss or damage to the Premises and
Complex in the amount of the full replacement value thereof, providing
protection against those perils included within the classification of "all
risks" insurance and flood and/or earthquake insurance, if available, plus a
policy of rental income insurance in the amount of one hundred ( 100% ) percent
of twelve (12) months Basic Rent. plus sums paid as Additional Rent. If such
insurance cost is increased due to Tenant's use of the Premises or the Complex.
Tenant agrees to pay to Landlord the full cost of such increase. Tenant shall
have no interest in nor any right to the proceeds of any insurance procured by
Landlord for the Complex. Landlord and Tenant do each hereby respectively
release the other, to the extent of insurance coverage of the releasing party,
from any liability for loss or damage caused by fire or any of the extended
coverage casualties included in the releasing party's insurance policies,
irrespective of the cause of such fire or casualty; provided, however, that if
the insurance policy of either releasing party prohibits such waiver, then this
waiver shall not take effect until consent to such waiver is obtained. If such
waiver is so prohibited, the insured party affected shall promptly notify the
other party thereof.
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16. INDEMNIFICATION Landlord shall not be liable to Tenant and Tenant hereby
waives all claims against Landlord for any injury to or death of any person or
damage to or destruction of property in or about the Premises or the Complex by
or from any cause whatsoever, including, without limitation, gas, fire, oil,
electricity or leakage of any character from the roof, walls, basement or other
portion of the Premises or the Complex but excluding, however, the willful
misconduct or negligence of Landlord, its agents, servants, employees, invitees,
or contractors of which negligence Landlord has knowledge and reasonable time to
correct. Except as to injury to persons or damage to property to the extent
arising from the willful misconduct or the negligence of Landlord, its agents,
servants, employees, invitees, or contractors, Tenant shall hold Landlord
harmless from and defend Landlord against any and all expenses, including
reasonable attorneys' fees, in connection therewith, arising out of any injury
to or death of any person or damage to or destruction of property occurring in,
on or about the Premises, or any part thereof, from any cause whatsoever.
17. COMPLIANCE Tenant, at its sole cost and expense, shall promptly comply with
all laws, statutes, ordinances and governmental rules; regulations or
requirements now or hereafter in effect; with the requirements of any board of
fire underwriters or other similar body now or hereafter constituted: and with
any direction or occupancy certificate issued pursuant to law by any public
officer; provided, however, that no such failure shall be deemed a breach of the
provisions if Tenant, immediately upon notification, commences to remedy or
rectify said failure. The judgment of any court of competent jurisdiction or the
admission of Tenant in any action against Tenant, whether Landlord be a party
thereto or not, that Tenant has violated any such law, statute, ordinance or
governmental rule, regulation, requirement, direction or provision. shall be
conclusive of that fact as between Landlord and Tenant. This paragraph shall not
be interpreted as requiring Tenant to make structural changes or improvements,
except to the extent such changes or improvements are required as a result of
Tenant's use of the Premises. Tenant shall, at its sole cost and expense, comply
with any and all requirements pertaining to said Premises. of any insurance
organization or company, necessary or the maintenance of reasonable fire and
public liability insurance coveting the Premises. SEE PARAGRAPH 54.
18. LIENS Tenant shall keep the Premises and the Complex free from any liens
arising out of any work performed, materials furnished or obligation incurred by
Tenant. In the event that Tenant shall not, within ten (10) days following the
imposition of such lien, cause the same to be released of record, Landlord shall
have, in addition to all other remedies provided herein and by law, the right,
but no obligation, to cause the same to be released by such means as it shall
deem proper, including payment of the claim giving rise to such lien. All sums
paid by Landlord for such purpose, and all expenses incurred by it in connection
therewith, shall be payable to Landlord by Tenant on demand with interest at the
prime rate of interest as quoted by the Bank of America.
19. ASSIGNMENT AND SUBLETTING Tenant shall not assign, transfer, or hypothecate
the leasehold estate under this Lease, or any interest therein, and shall hot
sublet the Premises, or any part thereof, or any right or privilege appurtenant
thereto, or suffer any other person or entity to occupy or use the Premises, or
any portion thereof, without, in each case, the prior written consent of
Landlord which consent will not be unreasonably withheld. As a condition for
granting this consent to any assignment, transfer, or subletting, Landlord may
require that Tenant agrees to pay to Landlord, as additional rent, fifty percent
(50%) of all rents or additional consideration provided, however, that for
sharing such excess rent, Tenant shall first be entitled to recover from such
excess rent the amount of any reasonable leasing commissions paid by Tenant to
third parties not affiliated with Tenant received by Tenant from its assignees,
transferees, or subtenants in excess of the rent payable by Tenant to Landlord
hereunder. Tenant shall, by thirty (30) ------- days written notice, advise
Landlord of its intent to assign or transfer Tenant's interest in the Lease or
sublet the Premises or any portion thereof for any portion of the term hereof.
Within thirty (30) days after receipt of said written notice, Landlord may, in
its sole discretion, elect to terminate this Lease as to the portion of the
Premises described in Tenant's notice on the date specified in Tenant's notice
by giving written notice of such election to terminate. If no such notice to
terminate is given to Tenant within said thirty (30) day period, Tenant may
proceed to locate an acceptable sublessee, assignee, or other transferee for
presentment to Landlord for Landlord's approval, all in accordance with the
terms, covenants, and conditions of this paragraph 19. If Tenant intends to
sublet the entire Premises and Landlord elects to terminate this Lease, this
Lease shall be terminated on the date specified in Tenant's notice. If, however,
this Lease shall terminate pursuant to the foregoing with respect to less than
all the Premises, the rent, as defined and reserved hereinabove shall be
adjusted on a pro rata basis to the number of square feet retained by Tenant,
and this Lease as so amended shall continue in full force and effect. In the
event Tenant is allowed to assign, transfer or sublet the whole or any part of
the Premises. with the prior written consent of Landlord, no assignee,
transferee or subtenant shall assign or transfer this Lease, either in whole or
in part, or sublet the whole or any part of the Premises, without also having
obtained the prior written consent of Landlord which consent shall not be
unreasonably withheld. A consent of Landlord to one assignment, transfer,
hypothecation, subletting, occupation or use by any other person shall not
release Tenant from any of Tenant's obligations hereunder or be deemed to be a
consent to any subsequent similar or dissimilar assignment, transfer,
hypothecation, subletting, occupation or use by any other person. Any such
assignment, transfer, hypothecation, subletting, occupation or use without such
consent shall be void and shall constitute a breach of this Lease by Tenant and
shall, at the option of Landlord exercised by written notice to Tenant.
terminate this Lease. The Leasehold estate under this Lease shall not, nor shall
any interest therein, be assignable for any purpose by operation of law without
the written consent of Landlord which consent shall not be unreasonably
withheld. As a condition to its consent, Landlord may require Tenant to pay all
expenses in connection with the assignment, and Landlord may require Tenant's
assignee or transferee (or other assignees or transferees) to assume in writing
all of the obligations under this Lease and for Tenant to remain liable to
Landlord under the Lease. SEE PARAGRAPH 56.
20. SUBORDINATION AND MORTGAGES In the event Landlord's title or leasehold
interest is now or hereafter encumbered by a deed of trust, upon the interest of
Landlord in the land and buildings in which the demised Premises are located, to
secure a loan from a lender (hereinafter referred to as "Lender") to Landlord,
Tenant shall, at the request of Landlord or Lender, execute in writing an
agreement subordinating its rights under this Lease to the lien of such deed of
trust, or, if so requested, agreeing that the lien of Lender's deed of trust
shall be or remain subject and subordinate to the rights of Tenant under this
Lease. Notwithstanding any such subordination, Tenant's possession under this
Lease shall not be disturbed if Tenant is not in default and so long as Tenant
shall pay all rent and observe and perform all of the provisions set forth in
this Lease.
21. ENTRY BY LANDLORD Landlord reserves, and shall at all reasonable times
after at least 24 hours notice (except in emergencies) have, the right to enter
the Premises to inspect them; to perform any services to be provided by Landlord
hereunder; to submit the Premises to prospective purchasers, mortgagers or
tenants; to post notices of nonresponsibility; and to alter, improve or repair
the Premises and any portion of the Complex, all without abatement of rent; and
may erect scaffolding and other necessary structures in or through the Premises
where reasonably required by the character of the work to be performed;
provided, however that the business of Tenant shall be interfered with to the
least extent that is reasonably practical. For each of the foregoing purposes
any entry to the Premises obtained by Landlord by any of said means, or
otherwise, shall not under any circumstances be construed or deemed to be a
forcible or unlawful entry into or a detainer of the Premises or an eviction,
actual or constructive, of Tenant from the Premises or any portion thereof.
Landlord shall also have the right at any time to change the arrangement or
location of entrances or passageways, doors and doorways, and corridors,
elevators, stairs, toilets or other public parts of the Complex and to change
the name, number or designation by which the Complex is commonly known, and none
of the foregoing shall be deemed an actual or constructive eviction of Tenant,
or shall entitle Tenant to any reduction of rent hereunder.
22. BANKRUPTCY AND DEFAULT The commencement of bankruptcy action or liquidation
action or reorganization action or insolvency action or an assignment of or by
Tenant for the benefit of creditors, or any similar action undertaken by Tenant,
or the insolvency of Tenant, shall, at Landlord's option, constitute a breach of
this Lease by Tenant. If the trustee or receiver appointed to serve during a
bankruptcy, liquidation, reorganization, insolvency or similar action elects to
reject Tenant's unexpired Lease, the trustee or receiver shall notify Landlord
in writing of its election within thirty (30) days after an order for relief in
a liquidation action or within thirty (30) days after the commencement of any
action.
Within thirty (30) days after court approval of the assumption of this Lease,
the trustee or receiver shall cure (or provide adequate assurance to the
reasonable satisfaction of Landlord that the trustee or receiver shall cure) any
and all previous defaults under the unexpired Lease and shall compensate
Landlord for all actual pecuniary loss and shall provide adequate assurance of
future performance under said Lease to the reasonable satisfaction of Landlord.
Adequate assurance of future performance, us used herein, includes, but shall
not be limited to: (i) assurance of source and payment of rent, and other
consideration due under this Lease; (ii) assurance that the assumption or
assignment of this Lease will not breach substantially any provision, such as
radius, location, use, or exclusivity provision, in any agreement relating to
the above described Premises.
Nothing contained in this section shall affect the existing right of Landlord
to refuse to accept an assignment upon commencement of or in connection with a
bankruptcy, liquidation, reorganization or insolvency action or an assignment of
Tenant for the benefit of creditors or other similar act. Nothing contained in
this Lease shall be construed as giving or granting or creating an equity in the
demised Premises to Tenant. In no event shall the leasehold estate under this
Lease, or any interest therein, be assigned by voluntary or involuntary
bankruptcy proceeding without the prior written consent of Landlord. In no event
shall this Lease or any rights or privileges hereunder be an asset of Tenant
under any bankruptcy, insolvency or reorganization proceedings.
The failure to perform or honor any covenant, condition or representation made
under this Lease shall constitute a default hereunder by Tenant upon expiration
of the appropriate grace period hereinafter provided. Tenant shall have a period
of five (5) days from the date of written notice from Landlord within which to
cure any default in the payment of rental or adjustment thereto. Tenant shall
have a period of thirty (30) days from the date of written notice from Landlord
within which to cure any other default under this Lease; provided, however, that
if the nature of Tenant's failure is such that more than thirty (30) days is
reasonably required to cure the same, Tenant shall not be in default so long as
Tenant commences performance within such thirty (30) day period and thereafter
prosecutes the same to completion. Upon an uncured default of this Lease by
Tenant, Landlord shall have the following rights and remedies in addition to any
other rights or remedies available to Landlord at law or in equity:
(a). The rights and remedies provided for by California Civil Code Section
1951.2, including but not limited to recovery of the worth at the time of award
of the amount by which the unpaid rent for the balance of the term after the
time of award exceeds the amount of rental loss for the same period that Tenant
proves could be reasonably avoided, as computed pursuant to subsection (b) of
said Section 1952.2. Any proof by Tenant under subparagraphs (2) and (3) of
Section 1951.2 of the California Civil Code of the amount of rental loss that
could be reasonably avoided shall be made in the following manner: Landlord and
Tenant shall each select a licensed real estate broker in the business of rented
property of the same type and use as the Premises and in the same geographic
vicinity. Such two real estate brokers shall select a third licensed real
estate
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<PAGE>
broker, and the three licensed real estate brokers so selected shall determine
the amount of the rental loss that could be reasonably avoided from the balance
of the term of this Lease after the time of award. The decision of the majority
of said licensed real estate brokers shall be final and binding upon the panics
hereto.
(b). The rights and remedies provided by California Civil Code Section which
allows Landlord to continue the Lease in effect and to enforce all of its rights
and remedies under this Lease, including the right to recover rent as it becomes
due, for so long as Landlord does not terminate Tenant's right to possession;
acts of maintenance or preservation, efforts to relet the Premises, or the
appointment of a receiver upon Landlord's initiative to protect its interest
under this Lease shall not constitute a termination of Tenant's right to
possession.
(c). The right to terminate this Lease by giving notice to Tenant in
accordance with applicable law.
(d). To the extent permitted by law the right and power to enter the Premises
and remove therefrom all persons and property, to store such property in a
public warehouse or elsewhere at the cost of and for the account of Tenant, and
to sell such property and apply such proceeds therefrom pursuant to applicable
California law. Landlord may from time to time sublet the Premises or any part
thereof for such term or terms (which may extend beyond the term of this Lease)
and at such rent and such other terms as Landlord in its sole discretion may
deem advisable, with the right to make alterations and repairs to the Premises.
Upon each subletting. (i) Tenant shall be immediately liable to pay Landlord, in
addition to indebtedness other than rent due hereunder, the cost of such
subletting, including, but not limited to, reasonable attorneys' fees, and any
real estate commissions actually paid. and the cost of such alterations and
repairs incurred by Landlord and the amount, if any, by which the rent hereunder
for the period of such subletting (to the extent such period does not exceed the
term hereof exceeds the amount to be paid as rent for the Premises for such
period or (it) at the option of Landlord, rents received from such subletting
shall be applied first to payment of indebtedness other than rent due hereunder
from Tenant to Landlord; second, to the payment of any costs of such subletting
and of such alterations and repairs; third to payment of rent due and unpaid
hereunder; and the residue, if any, shall be held by Landlord and applied in
payment of future rent as the same becomes due hereunder. If Tenant has been
credited with any rent to be received by such subletting under option (i) and
such rent shall not be promptly paid to Landlord by the subtenant(s), or if such
rentals received from such subletting under option (it) during any month be less
than that to be paid during that month by Tenant hereunder. Tenant shall pay any
such deficiency to Landlord. Such deficiency shall be calculated and paid
monthly. For all purposes set forth in this subparagraph. No taking possession
of the Premises by Landlord shall be construed as an election on its part to
terminate this Lease unless a written notice of such intention be given to
Tenant. Notwithstanding any such subletting without termination, Landlord may at
any time hereafter elect to terminate this Lease for such previous breach.
(e). The right to have a receiver appointed for Tenant upon application by
Landlord, to take possession of the Premises and to apply any rental collected
from the Premises and to exercise all other rights and remedies granted to
Landlord pursuant to subparagraph d. above.
23. ABANDONMENT Tenant shall not vacate or abandon the Premises at any time
during the term of this Lease (except that Tenant may vacate so long as it pays
rent, provides an on-site security guard during normal business hours from
Monday through Friday, and otherwise performs its obligations hereunder) and if
Tenant shall abandon, vacate or surrender said Premises or be dispossessed by
the process of law, or otherwise, any personal Property belonging to Tenant and
left on the premises shall be deemed to be abandoned, at the option of Landlord,
except such property as may be mortgaged to Landlord.
24. DESTRUCTION In the event the Premises are destroyed in whole or in part
from any cause, except for routine maintenance and repairs and incidental damage
and destruction caused from vandalism and accidents for which Tenant is
responsible for under Paragraph 10, Landlord may, at its option:
(a) Rebuild or restore the Premises to their condition prior to the damage or
destruction, or
(b) Terminate this Lease. (providing that the Premises is damaged to the
extent of 33 1/3% of the replacement cost)
If Landlord does not give Tenant notice in writing within thirty (30) days
from the destruction of the Premises of its election to either rebuild and
restore them, or to terminate this Lease, Landlord shall be deemed to have
elected to rebuild or restore them, in which event Landlord agrees, at its
expense, promptly to rebuild or restore the Premises to their condition prior to
the damage or destruction. Tenant shall be entitled to a reduction in rent while
such repair is being made in the proportion that the area of the Premises
rendered untenantable by such damage bears to the total area of the Premises. If
Landlord initially estimates that the rebuilding or restoration will exceed 180
days or if Landlord does not complete the rebuilding or restoration within one
hundred eighty (180) days following the date of destruction (such period of time
to be extended for delays caused by the fault or neglect of Tenant or because of
Acts of God, acts of public agencies, labor disputes, strikes, fires, freight
embargoes, rainy or stormy weather inability to obtain materials, supplies or
fuels, acts of contractors or subcontractors, or delay of the contractors or
subcontractors due to such causes or other contingencies beyond the control of
Landlord), then Tenant shall have the right to terminate this Lease by giving
fifteen (15) days prior written notice to Landlord. Notwithstanding anything
herein to the contrary, Landlord's obligation to rebuild or restore shall be
limited to the building and interior improvements constructed by Landlord as
they existed as of the commencement date of the Lease and shall not include
restoration of Tenant's trade fixtures, equipment, merchandise, or any
improvements, alterations or additions made by Tenant to the Premises, which
Tenant shall forthwith replace or fully repair at Tenant's sole cost and expense
provided this Lease is not cancelled according to the provisions above.
Unless this Lease is terminated pursuant to the foregoing provisions this
Lease shall remain in full force and effect. Tenant hereby expressly waives the
provisions of Section 1932. Subdivision 2, in Section 1933, Subdivision 4 of the
California Civil Code.
In the event that the building in which the Premises are situated is damaged
or destroyed to the extent of not less that 33 1/3 % of the replacement cost
thereof. Landlord may elect to terminate this Lease, whether the Premises be
injured or not.
25 EMINENT DOMAIN If all or any part of the Premises shall be taken by any
public or quasi-public authority under the power of eminent domain or conveyance
in lieu thereof, this Lease shall terminate as to any portion of the Premises so
taken or conveyed on the date when title vests in the condemnor, and Landlord
shall be entitled to any and all payment, income, rent, award, or any interest
therein whatsoever which may be paid or made in connection with such taking or
conveyance, and Tenant shall have no claim against Landlord or otherwise for the
value of any unexpired term of this Lease. Notwithstanding the foregoing
paragraph, any compensation specifically awarded Tenant for loss of business,
Tenant's personal property, moving cost or loss of goodwill, shall be and remain
the property of Tenant.
If (i) any action or proceeding is commenced for such taking of the Premises
or any part thereof, or if Landlord is advised in writing by any entity or body
having the right or power of condemnation of its intention to condemn the
premises or any portion thereof, or (ii) any of the foregoing events occur with
respect to the taking of any space in the Complex not leased hereby, or if any
such spaces so taken or conveyed in lieu of such taking and Landlord shall
decide to discontinue the use and operation of the Complex, or decide to
demolish, alter or rebuild the Complex, then, in any of such events landlord
shall have the right to terminate this Lease by giving Tenant written notice
thereof within sixty (60) days of the date of receipt of said written advice, or
commencement of said action or proceeding, or taking conveyance, which
termination shall take place as of the first to occur of the last day of the
calendar month next following the month in which such notice is given or the
date of which title to the Premises shall vest in the condemnor.
In the event of such a partial taking or conveyance of the Premises, if the
portion of the premises taken or conveyed is so substantial that the Tenant can
no longer reasonably conduct its business. Tenant shall have the privilege of
terminating this Lease within sixty (60) days from the date of such taking or
conveyance, upon written notice to landlord of its intention so to do, and upon
giving of such notice this lease shall terminate on the last day of the calendar
month next following the month in which such notice is given, upon payment by
Tenant of the rent from the date of such taking or conveyance to the date of
termination.
If a portion of the premises be taken by condemnation or conveyance in lieu
thereof and neither Landlord nor Tenant shall terminate this Lease as provided
herein, this Lease shall continue in full force and effect as to the part of the
Premises not so taken or conveyed, and the rent herein shall be apportioned as
of the date of such taking or conveyance so that thereafter the rent to be paid
by Tenant shall be in the ratio that the area of the portion of the Premises not
so taken or conveyed bears to the total area of the Premises prior to such
taking.
26. SALE OR CONVEYANCE BY LANDLORD In the event of a sale or conveyance of the
Complex or any interest therein, by any owner of the reversion then constituting
Landlord, the transferor shall thereby be released from any further liability
upon any of the terms, covenants or conditions (express or implied) herein
contained in favor of Tenant, and in such event, insofar as such transfer is
concerned, Tenant agrees to look solely to the responsibility of the successor
in interest of such transferor in and to the Complex and this Lease. This Lease
shall not be affected by any such sale or conveyance, and Tenant agrees to
attorn to the successor in interest of such transferor. SEE PARAGRAPH 57.
27. ATTORNMENT TO LENDER OR THIRD PARTY In the event the interest of Landlord in
the land and buildings in which the leased Premises are located (whether such
interest of Landlord is a fee title interest or a leasehold interest ) is
encumbered by deed of trust, and such interest is acquired by the' lender or any
third party through judicial foreclosure or by exercise of a power of sale at
private trustee's foreclosure sale, Tenant hereby agrees to attorn to the
purchaser at any such foreclosure sale and to recognize such purchaser as the
Landlord under this Lease. In the event the lien of the deed of trust securing
the loan from a Lender to Landlord is prior and paramount to the Lease. this
Lease shall nonetheless continue in full force and effect for the remainder of
the unexpired term hereof, at the same rental herein reserved and upon all the
other terms, conditions and covenants herein contained.
28. HOLDING OVER Any holding over by Tenant after expiration or other
termination of the term of this Lease with the written consent of Landlord
delivered to Tenant shall not constitute a renewal or extension of the Lease or
give Tenant any rights in or to the leased Premises except as expressly provided
in this Lease. Any holding over after the expiration or other termination of the
term of this Lease, with the consent of Landlord, shall be construed to be a
tenancy from month to month on the same terms and conditions herein specified
insofar as applicable except that the monthly Basic Rent shall be increased to
an amount equal to one hundred fifty (150%) percent of the monthly Basic Rent
required during the last month of the Lease term.
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29. CERTIFICATE OF ESTOPPEL Tenant shall at any time upon not less than ten (10)
business days' prior written notice to Landlord execute, acknowledge and deliver
to Landlord a statement in writing (i) certifying that this Lease is unmodified
and in full force and effect (or. if modified. Mating the nature of such
modification and certifying that this Lease, as so modified, is in full force
and effect) and the date to which the rent and other charges are paid in
advance, if any, and (ii) acknowledging that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord hereunder, or specifying
such defaults, if any, are claimed. Any such statement may be conclusively
relied upon by any prospective purchaser or encumbrancer of the Premises.
Tenant's failure to deliver such statement within such time shall be conclusive
upon Tenant that this Lease is in full force and effect, without modification
except as may be represented by Landlord; that there are no uncured default, in
Landlord's performance, and that not more than one month's rent has been paid in
advance.
30. CONSTRUCTION CHANGES It is understood that the description of the Premises
and the location of ductwork, plumbing and other facilities therein are subject
to such minor changes as Landlord or Landlord's architect determines to be
desirable in the course of construction of the Premises, and no such changes, or
any changes in plans for any other portions of the Complex shall affect this
Lease or entitle Tenant to any reduction of rent hereunder or result in any
liability of Landlord to Tenant. Landlord does not guarantee the accuracy of any
drawings supplied to Tenant and verification of the accuracy of such drawings
rests with Tenant.
31. RIGHT OF LANDLORD TO PERFORM All terms, covenants and conditions of this
Lease to be performed or observed by Tenant shall be performed or observed by
Tenant at Tenant's sole cost and expense and without any reduction of rent. If
Tenant shall fail to pay any sum of money, or other rent. required to be paid by
it hereunder or shall fail to perform any other term or covenant hereunder on
its part to be performed, and such failure shall continue for five (5) days
after written notice thereof by Landlord, Landlord, without waiving or releasing
Tenant from any obligation of Tenant hereunder, may. but shall not be obligated
to. make any such payment or perform any such other term or covenant on Tenant's
part to be performed. All sums so paid by Landlord and all necessary costs of
such performance by Landlord together with interest thereon at the rate of the
prime rate of interest per annum as quoted by the Bank of America from the date
of such payment or performance by Landlord, shall be paid (and Tenant covenants
to make such payment) to Landlord on demand by Landlord, and Landlord shall have
(in addition to any other right or remedy of Landlord) the same rights and
remedies in the event of nonpayment by Tenant as in the case of failure by
Tenant in the payment of rent hereunder.
32. ATTORNEYS' FEES.
(A) In the event that either Landlord or Tenant should bring suit for the
possession of the Premises, lot the recovery of any sum due under this Lease, or
because of the breach of any provision of this Lease, or for any other relief
against the other party hereunder, then all costs and expenses, including
reasonable attorneys' fees, incurred by the prevailing party therein shall be
paid by the other party, which obligation on the part of the other party shall
be deemed to have accrued on the date of the commencement of such action and
shall be enforceable whether or not the action is prosecuted to judgement.
(B) Should Landlord be named as a defendant in any suit brought against Tenant
in connection with or arising out of Tenant's occupancy hereunder. Tenant shall
pay to Landlord its costs and expenses incurred in such suit, including a
reasonable attorney's fee.
33. WAIVER The waiver by either party of the other party's failure to perform
or observe any term, covenant or condition herein contained to be performed or
observed by such waiving party shall not be deemed to be a waiver of such term.
covenant or condition or of any subsequent failure of the party failing to
perform or observe the same or any other such term, covenant or condition
therein contained, and no custom or practice which may develop between the
parties hereto during the term hereof shall be deemed a waiver of or in any way
affect, the right of either party to insist upon performance and observance by
the other party in strict accordance with the terms hereof.
34. NOTICES All notices, demands, requests, advices or designations which may be
or are required to be given by either party to the other hereunder shall be in
writing. All notices, demands, requests, advices or designations by Landlord to
Tenant shall be sufficiently given, made or delivered if personally served on
Tenant by leaving the same at the Premises or if sent by United States certified
or registered mail, postage prepaid, addressed to Tenant at the Premises. All
notices demands, requests, advices or designations by Tenant to Landlord shall
be sent by United States certified or registered mail, postage prepaid,
addressed to Landlord at its offices at Peery/Arrillaga, 2560 Mission College
Blvd., Suite 101 Santa Clara, CA 95054. Each notice, request, demand, advice or
designation referred to in this paragraph shall be deemed received on the date
of the personal service/or mailing thereof in the manner herein provided, as the
case may be.
35. EXAMINATION OF LEASE Submission of this instrument for examination or
signature by Tenant does not constitute a reservation of or option for a lease,
and this instrument is not effective as a lease or otherwise until its execution
and delivery by both Landlord and Tenant.
36. DEFAULT BY LANDLORD Landlord shall not be in default unless Landlord fails
to perform obligations required of Landlord within a reasonable time, but in no
event earlier than thirty (30) days after written notice by Tenant to Landlord
and to the holder of any first mortgage or deed of trust coveting the Premises
whose name and address shall have heretofore been furnished to Tenant in
writing, specifying wherein Landlord has tailed to perform such obligations;
provided, however, that if the nature of Landlord's obligations is such that
more than thirty (30) days are required for performance, then Landlord shall not
be in default if Landlord commences performance within such thirty (30) day
period and thereafter diligently prosecutes the same to completion.
37. CORPORATE AUTHORITY If Tenant is a corporation, (or a partnership) each
individual executing this Lease on behalf of said corporation (or partnership)
represents and warrants that he is duly authorized to execute and deliver this
Lease on behalf of said corporation (or partnership) in accordance with the by-
laws of said corporation (or partnership in accordance with the partnership
agreement) and that this Lease is binding upon said corporation (or partnership)
in accordance with its terms. If Tenant is a corporation, Tenant shall, within
thirty (30) days after execution of this Lease. deliver to Landlord a certified
copy of the resolution of the Board of Directors of said corporation authorizing
or ratifying the execution of this Lease.
39. LIMITATION OF LIABILITY In consideration of the benefits accruing hereunder.
Tenant and all successors and assigns covenant and agree that. in the event of
any actual or alleged failure, breach or default hereunder by Landlord:
(i) the sole and exclusive remedy shall be against Landlord and Landlord's
assets:
(ii) no partner of Landlord shall be sued or named as a party in any suit or
action (except as may be necessary to secure jurisdiction of the
partnership)
(iii) no service of process shall be made against any partner of Landlord
(except as may be necessary to secure jurisdiction of the partnership)
(iv) no partner of Landlord shall be required to answer or otherwise plead
to any service of process:
(v) no judgment will be taken against any partner of Landlord:
(vi) any judgment taken against any partner of Landlord may be vacated and
set aside at any time without hearing:
(vii) no writ of execution will ever be levied against the assets of any
partner of Landlord:
(viii) these covenants and agreements are enforceable both by Landlord and
also by any partner of Landlord.
Tenant agrees that each of the foregoing covenants and agreements shall be
applicable to any covenant or agreement either expressly contained in this Lease
or imposed by statute or at common law.
Page 7 of 8
<PAGE>
40. MISCELLANEOUS AND GENERAL PROVISIONS
a. Tenant shall not, without the written consent of Landlord, use the name of
the building for any purpose other than as the address of the business
conducted by Tenant in the Premises.
b. This Lease shall in all respects be governed by and construed in accordance
with the laws of the State of California. If any provision of this Lease shall
be invalid, unenforceable or ineffective for any reason whatsoever, all other
provisions hereof shall be and remain in full force and effect.
c. The term "Premises" includes the space leased hereby and any improvements
now or hereafter installed therein or attached thereto. The term "Landlord" or
any pronoun used in place thereof includes the plural as well as the singular
and the successors and assigns of Landlord. The term "Tenant or any pronoun
used in place thereof includes the plural as well as the singular and
individuals, firms, associations, partnerships and corporations, and their and
each of their respective heir, executors, administrators, successors and
permitted assigns, according to the context hereof, and the provisions of this
Lease shall inure to the benefit of and bind such heirs, executors,
administration, successors and permitted assigns.
The term "person" includes the plural as well as the singular and
individuals, firms, associations, partnerships and corporations. Words used in
any gender include other genders. If there be more than one Tenant the
obligations of Tenant hereunder are joint and several. The paragraph headings
of this Lease are for convenience of reference only and shall have no effect
upon the construction or interpretation of any provision hereof.
d. Time is of the essence of this Lease and of each and all of its provisions.
e. At the expiration or earlier termination of this Lease, Tenant shall
execute, acknowledge and deliver to Landlord, within ten (10) days after
written demand from Landlord to Tenant. any quitclaim deed or other document
required by any reputable title company, licensed to operate in the State of
California, to remove the cloud or encumbrance created by this Lease from the
real properly of which Tenant's Premises are a part.
f. This instrument along with any exhibits and attachments hereto constitutes
the entire agreement between Landlord and Tenant relative to the Premises and
this agreement and the exhibits and attachments may be altered, amended or
revoked only by an instrument in writing signed by both Landlord and Tenant.
Landlord and Tenant agree hereby that all prior or contemporaneous oral
agreements between and among themselves and their agents or representatives
relative to the leasing of the Premises are merged in or revoked by this
agreement.
g. Neither Landlord nor Tenant shall record this Lease or a short form
memorandum hereof without the consent of the other.
h. Tenant further agrees to execute any amendments required by a lender to
enable Landlord to obtain financing, so long as Tenant's rights hereunder are
not substantially affected.
i. Paragraphs 43 through 58 are added hereto and are included as a part of
this lease.
j. Clauses, plats and riders, if any, signed by Landlord and Tenant and
endorsed on or affixed to this Lease are a part hereof.
k. Tenant covenants and agrees that no diminution or shutting off of light,
air or view by any structure which may be hereafter erected (whether or not by
Landlord) shall in any way affect his Lease entitle Tenant to any reduction of
rent hereunder or result in any liability of Landlord to Tenant.
41. BROKERS Tenant warrants that it had dealings with only the following real
estate brokers or agents in connection with the negotiation of this Lease: none
----
and that it knows of no other real estate broker or agent who is entitled to a
commission in connection with this Lease.
42. SIGNS No sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed or printed or affixed on or to any part of the outside of
the Premises or any exterior windows of the Premises without the written consent
of Landlord first had and obtained and Landlord shall have the right to remove
any such sign, placard, picture, advertisement, name or notice without notice to
and at the expense of Tenant. If Tenant is allowed to print or affix or in any
way place a sign in, on, or about the Premises, upon expiration or other sooner
termination of this Lease, Tenant at Tenant's sole cost and expense shall both
remove such sign and repair all damage in such a manner as to restore all
aspects of the appearance of the Premises to the condition prior to the
placement of said sign.
All approved signs or lettering on outside doors shall be printed, painted,
affixed or inscribed at the expense of Tenant by a person approved of by
Landlord. Tenant shall not place anything or allow anything to be placed
near the glass of any window, door partition or wall which may appear
unsightly from outside the Premises.
Subject to approval by the City of Santa Clara, Landlord shall install, at
Landlord's cost and expense, a monument on the berm, in a location to be
selected by Landlord, and Tenant may use up to 76% of said monument for its
sign. In the event Tenant leases 100% of said building, Tenant may use 100%
of said monument for its sign. Tenant shall pay for all costs and expenses
related to the installation of its sign and the eventual removal thereof.
IN WITNESS WHEREOF. Landlord and Tenant have executed and delivered this Lease
as of the day and year last written below.
LANDLORD: TENANT:
ARRILLAGA FAMILY TRUST LATITUDE COMMUNICATIONS,
a California corporation
By /s/ John Arrillaga By /s/ Emil Wang
------------------------------------- --------------------------
John Arrillaga, Trustee
Dated: 8/24/95 Title PRESIDENT & CEO
---------------------------------- ----------------------
RICHARD T. PEERY SEPARATE PROPERTY TRUST
Type or Print Name EMIL WANG
---------
BY /s/ Richard T. Peery Dated: 8/24/95
-------------------------------------- ----------------------
Richard T. Peery, Trustee
Dated: 8/30/95
----------------------------------
<PAGE>
Paragraphs 43 through 58 to Lease Agreement Dated July 31, 1995, By and Between
the Arrillaga Family Trust and the Richard T. Peery Separate Property Trust, as
Landlord, and LATITUDE COMMUNICATIONS, a California corporation, as Tenant for
39,157+ Square Feet of Space Located at 2121 Tasman Drive, Santa Clara,
California.
43. BASIC RENT: In accordance with Paragraph 4A herein, the total aggregate sum
---------
of TWO MILLION TWO HUNDRED THIRTY ONE THOUSAND NINE HUNDRED FORTY NINE AND
NO/100 DOLLARS ($2,231,949.00), shall be payable as follows:
On January 1, 1996, the sum of THIRTY THREE THOUSAND TWO HUNDRED EIGHTY
THREE AND 45/100 DOLLARS ($33,283.45) shall be due, and a like sum due on the
first day of each month thereafter, through and including December 1, 1996.
On January 1, 1997, the sum of THIRTY FIVE THOUSAND TWO HUNDRED FORTY ONE
AND 30/100 DOLLARS ($35,241.30) shall be due, and a like sum due on the first
day of each month thereafter, through and including December 1, 1997.
On January 1, 1998, the sum of THIRTY SEVEN THOUSAND ONE HUNDRED NINETY
NINE AND 15/100 DOLLARS ($37,199.15) shall be due, and a like sum due on the
first day of each month thereafter, through and including December 1, 1998.
On January 1, 1999, the sum of THIRTY NINE THOUSAND ONE HUNDRED FIFTY SEVEN
AND NO/100 DOLLARS ($39,157.00) shall be due, and a like sum due on the first
day of each month thereafter, through and including December 1, 1999.
On January 1, 2000, the sum of FORTY ONE THOUSAND ONE HUNDRED FOURTEEN AND
85/100 DOLLARS ($41,114.85) shall be due, and a like sum due on the first day of
each month thereafter, through and including December 1, 2000; or until the
entire aggregate sum of TWO MILLION TWO HUNDRED THIRTY ONE THOUSAND NINE HUNDRED
FORTY NINE AND NO/100 DOLLARS ($2,231,949.00) has been paid.
44. EARLY ENTRY: Subject to the provisions of Paragraph 47, ("Tenant Interior
-----------
Improvements") Tenant and its agents and contractors shall be permitted to enter
the Premises prior to the Commencement Date for the purpose of installing at
Tenant's sole cost and expense, Tenant's trade fixtures and equipment, telephone
equipment, security systems and cabling for computers. Such entry shall be
subject to all of the terms and conditions of this Lease, except that Tenant
shall not be required to pay any Rent on account thereof. Any entry or
installation work by Tenant and its agents in the Premises pursuant to this
Paragraph 44 shall (i) be undertaken at Tenant's sole risk, (ii) not interfere
---------
with or delay Landlord's work in the Premises (if any), and (iii) not be deemed
occupancy or possession of the Premises for purposes of the Lease. Tenant shall
indemnify, defend, and hold Landlord harmless From any and all loss, damage,
liability, expense (including reasonable attorney's fees), claim or demand of
whatsoever character, direct or consequential, including, but without limiting
thereby the generality of the foregoing, injury to or death of persons and
damage to or loss of property arising out of the exercise by Tenant of any early
entry right granted hereunder. In the event Tenant's work in said Premises
delays the completion of the interior improvements to be provided by Landlord,
if any, or in the event Tenant has not completed construction of it's interior
improvements by the scheduled Commencement Date, it is agreed between the
parties that this Lease will commence on the scheduled Commencement Date of
January 1, 1996 regardless of the construction status of said interior
improvements completed or to be completed by Tenant or Landlord. Landlord and
Tenant acknowledge that the date on which Tenant's obligation to pay Rent under
the Lease would otherwise commence may be delayed because of a delay in
completion of construction of the Tenant Improvements due to (i) any act by
Tenant which interferes with or delays construction of the Tenant Improvements,
including Tenant's entry to install trade fixtures pursuant to Paragraph 44
hereof, (ii) any changes, modifications and/or additions in the Tenant
Improvements requested by Tenant and approved by Landlord, or (iii) special
materials or equipment ordered or specified by Tenant that cannot be obtained by
Landlord at normal cost within a reasonable period of time because of limited
availability. It is the intent of the parties hereto that the commencement of
Tenant's obligation to pay Rent under the Lease not be delayed by any of such
causes or by any other act of Tenant (except as expressly provided herein) and,
in the event it is so delayed, Tenant's obligation to pay Rent under the Lease
shall commence as of the date it would otherwise have commenced absent delay
caused by Tenant.
Page 9
<PAGE>
45. EARLY OCCUPANCY: Notwithstanding anything to the contrary in this Lease, in
---------------
the event the Premises leased hereunder become available for Tenant's use and
occupancy prior to the scheduled Commencement Date hereof, Tenant shall have the
right to occupy the Premises as of the date Landlord so completes said Premises
for Tenant's use and occupancy. This Lease shall commence and Tenant shall pay
to Landlord, effective as of the data Premises are delivered to Tenant, all
Additional Rent expenses which are Tenant's responsibility hereunder (however,
Tenant shall not be responsible for paying Basic Rent during the early occupancy
period), and Tenant shall be obligated to perform, and be bound by, each and
every term, covenant, and condition of this Lease. In the event Tenant occupies
the Premises prior to January 1, 1996, the Term of this Lease will be extended
to include the early occupancy period (i.e. If Tenant occupies said space on
December 1, 1995, the Lease Term will be extended for one month from a five year
Term to a five year one month Term).
46. "AS-IS" BASIS: Subject only to Paragraphs 47, 54 and 55, and to Landlord
------------
making the improvements shown on Exhibit B to be attached hereto, it is hereby
---------
agreed that the Premises leased hereunder is leased strictly on an "as-is" basis
and in its present condition, and in the configuration as shown on Exhibit B to
---------
be attached hereto, and by reference made a part hereof. Except as noted herein,
it is specifically agreed between the parties that after Landlord makes the
interior improvements as shown on Exhibit B, Landlord shall not be required to
---------
make, nor be responsible for any cost, in connection with any repair,
restoration, and/or improvement to the Premises in order for this Lease to
commence, or thereafter, throughout the Term of this Lease. Landlord makes no
warranty or representation of any kind or nature whatsoever as to the condition
or repair of the Premises, nor as to the use or occupancy which may be made
thereof.
47. TENANT INTERIOR IMPROVEMENTS: Landlord shall, at its sole cost and expense,
----------------------------
construct certain interior improvements (the "Tenant Improvements") in the
Premises, as shown on Exhibit B to be attached to the Lease and Landlord agrees
---------
to deliver the Premises leased hereunder to Tenant, at Landlord's expense, in
the configuration shown in Red on Exhibit B to be attached hereto.
---------
Notwithstanding anything to the contrary above, it is specifically understood
and agreed that Landlord shall be required to furnish only a standard air
conditioning/heating system, normal electrical outlets, standard fire sprinkler
systems, standard bathroom, standard lobby, 2'x 4' suspended acoustical tile
drop ceiling throughout the entire space leased, carpeting and/or vinyl-coated
floor tile, and standard office partitions and doors, as shown on Exhibit B to
---------
be attached hereto; provided however, that any special HVAC and/or plumbing
and/or electrical requirements over and above that normally supplied by Landlord
shall be 100 percent the responsibility of and be paid for 100 percent by
Tenant.
Notwithstanding anything to the contrary, it is agreed that in the event Tenant
makes changes, additions, or modifications to the plans and specifications to be
constructed by Landlord as set forth herein, or improvements are installed for
Tenant in excess of those to be provided Tenant by Landlord as set forth on
Exhibit B, any increased cost(s) resulting from said changes, additions, and/or
- ---------
modifications and/or improvements in excess of those to be provided Tenant shall
be contracted for with Landlord and paid for one hundred percent (100%) by
Tenant.
The interior shall be constructed in accordance with Exhibit B of the Lease, it
---------
being agreed, however, that if the interior improvements relating thereto do not
conform exactly to the plans and specifications as set forth in the Lease, and
the general appearance, structural integrity, and Tenant's uses and occupancy of
the Premises and interior improvements relating thereto are not materially or
unreasonably affected by such deviation, it is agreed that the commencement date
of the Lease, and Tenant's obligation to pay rental, shall not be affected, and
Tenant hereby agrees, in such event, to accept the Premises and interior
improvements as constructed by Landlord.
Tenant shall have forty five (45) days after the Commencement Date to provide
Landlord with a "punch list" pertaining to Landlord's work With respect to
Tenants interior improvements. As soon as reasonably possible thereafter,
Landlord, or one of Landlord's representatives (if so approved by Landlord), and
Tenant shall conduct a joint walk-through of the Premises (if Landlord so
requires), and inspect such Tenant Improvements, using their best efforts to
agree on the incomplete or defective construction related to the Tenant
Improvements Landlord. After such inspection has been completed, Landlord shall
prepare, and both parties shall sign, a list of all "punch list" items which the
parties reasonably agree are to be corrected
Page 10
<PAGE>
by Landlord (but which shall exclude any damage or defects caused by Tenant, its
employees, agents or parties Tenant has contracted with to work on the
Premises). Landlord shall have thirty (30) days thereafter (or longer if
necessary, provided Landlord is diligently pursuing the completion of the same)
to complete, at Landlord's expense, the repairs on the "punch list" without the
Commencement Date of the Lease and Tenant's obligation to pay Rental thereunder
being affected. This Paragraph shall be of no force and effect if Tenant shall
fail to give any such notice to Landlord within thirty (30) days after the
Commencement Date of this Lease.
48. OPTION TO EXTEND LEASE FOR FIVE (5) YEARS: Provided Tenant is not in
-----------------------------------------
default (pursuant to Paragraph 22 of the Lease, i.e., Tenant has received notice
----
and any applicable cure period has expired without cure) of any of the terms,
covenants, and conditions of this Lease Agreement, Landlord hereby grants to
Tenant an Option to Extend this Lease Agreement for an additional five (5) year
period (the "Extended Term") upon the following terms and conditions:
A. Tenant shall give Landlord written notice of Tenant's exercise of this
Option to Extend not later than six (6) months prior to the scheduled Lease
Termination Date, which Termination Date is currently projected to be December
31, 2000, in which event the Lease shall be considered extended for an
additional five (5) years upon the same terms and conditions, absent this
Paragraph 48, and subject to the Basic Rental set forth below. In the event that
Tenant fails to timely exercise Tenant's option as set forth herein in writing,
Tenant shall have no further Option to Extend this Lease, and this Lease shall
continue in full force and effect for the full remaining term hereof, absent of
this Paragraph 48.
B. The following summarizes the per square foot charge by period under the
Lease Agreement that would be applied to the Extended Term:
<TABLE>
<CAPTION>
Extended Monthly
Term Period PSF Rate Basic Rental
----------- -------- ------------
<S> <C> <C>
01/01/01-12/31/01 $1.10 $43,072.70
01/01/02-12/31/02 $1.15 $45,030.55
01/01/03-12/31/03 $1.20 $46,988.40
01/01/04-12/31/04 $1.25 $48,946.25
01/01/05-12/31/05 $1.30 $50,904.10
</TABLE>
C. The option rights of Tenant under this Paragraph 48, and the Extended
Term thereunder, are granted for Tenant's personal benefit and may not be
assigned or transferred by Tenant, except to a parent corporation, subsidiary
corporation, or corporation with which Tenant merges or consolidates or to whom
Tenant sells all or substantially all of its assets as provided for in Paragraph
56, either voluntarily or by operation of law, in any manner whatsoever. In the
event that Landlord consents to a sublease or assignment under Paragraph 19, the
option granted herein and any Extended Term thereunder shall be Void and of no
force and effect, whether or not Tenant shall have purported to exercise such
option prior to such assignment or sublease.
D. INCREASED SECURITY DEPOSIT: In the event the Term of Tenant's Lease is
--------------------------
extended pursuant to this Paragraph 48, Tenant's Security Deposit shall be
increased to equal twice the Basic Rental due for the last month of the Extended
Term (i.e. $50,904.10 per month X 2 = $101,808.20).
49. FIRST RIGHT OF REFUSAL: Beginning with the thirty-sixth month of the Lease
----------------------
Term, and provided Tenant is not in default in any of the terms, covenants, and
conditions of this Lease Agreement, Tenant, during the Term of this Lease and
subject to the provisions hereinafter contained, shall have the First Right of
Refusal to lease approximately 12,043+ square feet of space as shown in Blue on
the attached Exhibit C, consisting of the remaining space on the first floor in
---------
the building in which the Leased Premises are located (hereinafter referred to
as "First Right Space") upon the following terms and conditions:
A. It is understood that said First Right Space is, as of the date of
this Lease, vacant and unleased. Landlord agrees that, after the thirty-sixth
month of the Lease Term, in the event Landlord receives an offer to lease said
First Right Space from a third party, rental and upon terms and conditions which
are satisfactory to Landlord, Landlord shall, prior to executing a lease
agreement with a third party for said First Right Space, offer said First Right
Page 11
<PAGE>
Space to Tenant at the same Basic Rent per square foot rate as scheduled in this
Lease Agreement dated July 3l, 1995, as amended, between Landlord and Tenant,
and upon the same terms, covenants, and conditions outlined in this Lease
Agreement between Landlord and Tenant. If said third party lease offer is for a
period which extends beyond this Tenant's Lease Termination Date, Landlord shall
have the right to require Tenant's Lease Term be extended to coincide with the
termination of said third party lease, in which case Tenant's Basic Rent per
square foot rate shall be increased by $.05 per square foot on an annual basis,
commencing with the extended term or, Landlord may elect, at its sole and
absolute discretion, not to extend Tenant's Term. Tenant shall have five (5)
business days after receipt of said rental and terms and conditions in which to
accept said rental and terms and conditions in writing. In the event Tenant
rejects or fails to accept said rent, terms, and conditions and execute a lease
agreement for said First Right Space at the rental and upon the terms and
conditions so presented by Landlord within said five (5) business day period,
Tenant shall have no further First Right of Refusal and Landlord shall be free
to execute a lease with a third party without further obligation to Tenant with
respect to said First Right Space, and this Lease Agreement dated July 3 l, 1995
shall continue in full force and effect for the full remaining term hereof,
absent of this Paragraph 49.
B. The First Right of Refusal of Tenant under this Paragraph 49 is
granted for Tenant's personal benefit and may not be assigned or transferred by
Tenant, except to a parent corporation, subsidiary corporation, or corporation
with which Tenant merges or consolidates or to whom Tenant sells all or
substantially all of its assets as provided for in Paragraph 56, either
voluntarily or by operation of law, in any manner whatsoever. In the event that
Landlord consents to a sublease or assignment under Paragraph 19, the First
Right option granted herein shall be void and of no force and effect, whether or
not Tenant shall have purported to exercise such First Right option prior to
such assignment or sublease.
C. Notwithstanding the above, Landlord acknowledges that during the first
thirty-six (36) months of the Lease Term, Landlord shall not lease the First
Right Space to a third party tenant for a term that exceeds the first thirty-six
(36) months of the Lease Term. In the event Landlord enters into a third party
lease as described above during said thirty-six (36) month period, Tenant's
First Right of Refusal option shall be effective as of the termination date of
said third party lease, upon the terms and conditions set forth in Paragraph 49A
above.
50. SECURITY DEPOSIT CONTINUED: Providing Tenant (i) is not in default
--------------------------
(pursuant to Paragraph 22 of the Lease, i.e., Tenant has received notice and any
----
applicable cure period has expired without cure) of any of the terms, covenants,
and conditions of this Lease Agreement and (ii) pays all Basic Rent and
Additional Rent by the due date, as specified in Paragraph 4D and Paragraph 43,
during the first twelve months of the Lease Term, the maturity date of the
Promissory Note (representing one-half of Tenant's Security Deposit), shall be
extended to January l, 1998. Notwithstanding the above, in the event the
Promissory Note is extended pursuant to this Paragraph 50, said Promissory Note
shall be due in full immediately if: (i) Tenant subsequently fails to pay its
Basic Rent and/or Additional Rent by the due date and/or (ii) Tenant is in
default of the Lease at any time prior to January l, 1998.
51. UTILITIES: It is understood that Tenant is the sole occupant of the
---------
building located at 2121 Tasman Drive, Santa Clara, of which the Leased Premises
is a part. Tenant agrees to be responsible for paying 100% of the utilities,
including, but not limited to, water, sewer, gas and electricity, for the entire
building until such time as the remaining vacant space in the building is
leased. Tenant agrees that the utilities for said building will be placed in
Tenant's name and that Tenant will pay all utilities directly to the respective
company(s). When any of the remaining vacant space in said building is leased,
Landlord will notify Tenant and Landlord will transfer all utilities into
Landlord's name and Tenant will pay its share of said utilities monthly in
advance as described in and subject to Paragraph 4 "Rent" and Paragraph 11
"Utilities of the Building in Which the Premises are Located" of this Lease.
52. CONSENT: Whenever the consent of one party to the other is required
-------
hereunder, such consent shall not be unreasonably withheld.
53. HAZARDOUS MATERIALS: Landlord and Tenant agree as follows with respect to
-------------------
existence or use of "Hazardous Materials" (as defined herein) on, in, under or
about the Premises and real property located beneath said Premises (hereinafter
collectively referred to as
Page 12
<PAGE>
the "Property") and the Complex:
As used herein, the term "Hazardous Materials" shall mean any hazardous or toxic
substance, material or waste which is or becomes subject to or regulated by any
local governmental authority, the State of California, or the United States
Government. The term "Hazardous Materials" includes, without limitation any
material or hazardous substance which is (i) listed under Article 9 or defined
as "hazardous" or "extremely hazardous" pursuant to Article 11 of Title 22 of
the California Administrative Code, Division 4, Chapter 30, (ii) listed or
defined as a "hazardous waste" pursuant to the Federal Resource Conservation and
Recovery Act, Section 42 U.S.C. Section 6901 et. seq., (iii) listed or defined
as a "hazardous substance" pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601 et. seq. (42 U.S.C.
Section 9601), (iv) petroleum or any derivative of petroleum, or (v) asbestos.
To the best of Landlord's knowledge, the Property, including all underlying land
and groundwater, are free from contamination by toxic or otherwise hazardous
substances; however, Landlord shall have no obligation to investigate. Subject
to the terms of this Paragraph 53, Tenant shall have no obligation to "clean
up", reimburse, release, indemnify, or defend Landlord with respect to any
Hazardous Materials or wastes which Tenant (prior to and during the term of the
Lease) or other parties on the Property or Complex, as described below, (during
the term of this Lease) did not store, dispose, or transport in, use, or cause
to be on the Property or which Tenant, its agents, employees, contractors,
invitees or its future subtenants and/or assignees (if any) (during the Term of
this Lease), did not store, dispose, or transport in, use or cause to be on the
Complex in violation of applicable law as stated below.
Tenant shall be 100 percent liable and responsible for: (i) any and all
"investigation and cleanup" of said Hazardous Materials contamination which
Tenant, its agents, employees, contractors, invitees or its future subtenants
and/or assignees (if any), or other parties on the Property, does store,
dispose, or transport in, use or cause to be on the Property, and which Tenant,
its agents, employees, contractors, invitees or its future subtenants and/or
assignees (if any) does store, dispose, or transport in, use or cause to be on
the Complex and Tenant shall not be responsible for such hazardous materials
contamination stored, disposed, transported in, used, or caused to be on the
Complex by other parties on the Complex, and (ii) any claims, including third
party claims, resulting from such Hazardous Materials contamination. Tenant
shall indemnify Landlord and hold Landlord harmless from any liabilities,
demands, costs, expenses and damages, including, without limitation, attorney
fees incurred as a result of any claims resulting from such Hazardous Materials
contamination.
Tenant also agrees not to use or dispose of any Hazardous Materials on the
Property or the Complex without first obtaining Landlord's written consent.
Tenant agrees to complete compliance with governmental regulations regarding the
use or removal or remediation of Hazardous Materials used, stored, disposed of,
transported or caused to be on the Property or the Complex as stated above, and
prior to the termination of said Lease Tenant agrees to follow the proper
closure procedures and will obtain a clearance from the local fire department
and/or the appropriate governing agency. If Tenant uses Hazardous Materials,
Tenant also agrees to install, at Tenant's expense, such Hazardous Materials
monitoring devices as Landlord deems reasonably necessary. It is agreed that the
Tenant's responsibilities related to Hazardous Materials will survive the
termination date of the Lease and that Landlord may obtain specific performance
of Tenant's responsibilities under this Paragraph 53.
54. COMPLIANCE CONTINUED: Any non-conformance of the improvements installed and
--------------------
paid for by Landlord as set forth on Exhibit B, required to be corrected by the
---------
governing agency, shall be corrected at the cost and expense of Landlord if such
non-conformance exists as of the Commencement Date of the Lease and further
provided that such governing agency's requirement to correct the non-conformance
is not initiated as a result of: (i) any future improvements made by or for
Tenant; or (ii) any permit request made to a governing agency by or for Tenant.
Any non-conformance of the Premises occurring after the Commencement Date of
this Lease Agreement shall be the responsibility of Tenant to correct at
Tenant's cost and expense.
Landlord agrees to amortize the cost of capital improvements necessitated by any
new laws, statutes, ordinances or governmental rules, regulations, or
requirements as an operating expense over the life of said improvement and
Tenant shall pay its pro rata share of said capital improvement cost based on
the remaining Term (and/or extended Term, if any) of the Lease. For example: (i)
Landlord incurs capital improvement costs of $10,000 one year prior to Lease
Page 13
<PAGE>
Termination Date, and (ii) said capital improvement's life is ton (10) years;
Tenant shall pay upon receipt of invoice from Landlord its pro rata share of
$1,000.00).
In the event the Term of the Lease is extended, pursuant to Paragraph 48 or by
any other agreement between Landlord and Tenant, Tenant's pro rata share of the
capital improvement cost shall be increased to include the additional amount
payable to Landlord due to the Extended Term of the Lease. For Example: In the
event: (i) Landlord incurred capital, improvement costs illustrated above; and
(ii) Tenant exercises its Option to Extend this Lease for an additional five (5)
year period, Tenant would be liable for an additional payment to Landlord of
$5,000.00 as Additional Rent. Said payment would be due in full immediately upon
Tenant's exercise of its Option to Extend.
55. MAINTENANCE OF THE PREMISES: In addition to, and notwithstanding anything
---------------------------
to the contrary in Paragraph 10, Landlord shall maintain the structural shell,
foundation, and roof structure (but not the interior improvements, roof
membrane, or glazing) of the building leased hereunder at Landlord's cost and
expense provided Tenant has not caused such damage, in which event Tenant shall
be responsible for 100 percent of any such costs for repair or damage so caused
by the Tenant. Notwithstanding the foregoing, a crack in the foundation, or
exterior walls that does not endanger the structural integrity of the building,
or which is not life-threatening, shall not be considered material, nor shall
Landlord be responsible for repair of same.
56. ASSIGNMENT AND SUBLETTING CONTINUED: In addition to and notwithstanding
-----------------------------------
anything to the contrary in Paragraph 19 of this Lease, Tenant shall be entitled
to assign or sublet without Landlord's consent (but shall still give Landlord
notice thereof) to: (i) any parent or subsidiary corporation, or corporation
with which Tenant merges or consolidates, or (ii) any third party or entity to
whom Tenant sells all or substantially all of its assets; provided, that the net
worth of the resulting or acquiring corporation has a net worth after the
merger, consolidation or acquisition equal to or greater than the net worth of
Tenant at the time of such merger, consolidation or acquisition. No such
assignment or subletting will release the Tenant from its liability and
responsibility under this Lease to the extent Tenant continues in existence
following such transaction. Notwithstanding the above, Tenant shall be required
to (a) give Landlord written notice prior to such assignment or subletting to
any party as described in (i) and (ii) above, and (b) execute an acknowledgement
document prepared by Landlord reflecting the assignment or subletting.
57. SALE OR CONVEYANCE BY LANDLORD (CONTINUED): Not withstanding anything to
-----------------------------------------
the contrary in the Lease, if Landlord sells or otherwise conveys its interest
in the Premises, Landlord shall not be relieved of its obligation under the
Lease, unless and until the successor assumes in writing Landlord's obligations
under the Lease.
58. ASSIGNMENT OF WARRANTIES: Upon Lease commencement and during the Term of
------------------------
the Lease, Landlord hereby assigns to Tenant all of Landlord's Contractor's
warranties specifically related to Tenant's Leased Premises and shall cooperate
with Tenant in enforcing any of such warranties except that Landlord shall not
be required to pay any legal fees or incur any expenses in this regard.
(THIS SPACE LEFT INTENTIONALLY BLANK)
Initial: /s/ EW,JA
-------------------------
Page 14
<PAGE>
[GRAPHIC: FLOOR PLAN DEPICTING THREE
BUILDINGS IN WHICH PORTION OF
BUILDING BEING LEASED IS HIGHLIGHTED.]
EXHIBIT A TO LEASE AGREEMENT DATED JULY 31, 1995 BY AND BETWEEN ARRILLAGA FAMILY
- ---------
TRUST AND RICHARD T. PEERY SEPERATE PROPERTY TRUST, AS LANDLORD, AND LATITUDE
COMMUNICATIONS, AS TENANT.
GUADELUPE A
<PAGE>
EXHIBIT B TO LEASE AGREEMENT DATED JULY 31, 1995 BY AND BETWEEN THE ARRILLAGA
- ---------
FAMILY TRUST AND THE RICHARD T. PEERY SEPARATE PROPERTY TRUST, AS LANDLORD, AND
LATITUDE COMMUNICATIONS, AS TENANT.
TENANT IMPROVEMENT SPECIFICATIONS
- ---------------------------------
Responsible Party (L = Landlord; T = Tenant)
DOORS:
- ------
L Building standard, solid core veneer (ash) three foot by 9'-0" doors and
frames to comply with all necessary fire ratings as required. Doors stained
and sealed to match architect's finish selection. Schlage or equal door
lever hardware in polished stainless steel finish, provide all necessary
hardware.
L New roll up door to be installed in Manufacturing area (per drawing).
L Provide locksets on ten (10) doors.
T Provide locksets on any doors over the ten (10) doors to be furnished by
Landlord.
T Provide Card Key access for the doors leading to the restroom core area (if
desired).
PARTITIONS AND GLAZING:
- -----------------------
L Provide layout per drawing. All interior partitions shall be 3 1/2", metal
studs with 5/8" drywall each side. Provide approximately 20 LF of Herc.
glass and double doors in the board room.
CEILING:
- --------
L 2'x 4' ceiling grid system (with 2'x 2' "second look" tile). 9' 0" FF. with
standard ceiling tile in open staff areas, offices, lounges, etc.
WINDOW COVERING:
- ----------------
T All perimeter windows shall receive vertical blind window treatment.
MILLWORK:
- ---------
L As indicated on drawings, in utility areas, all exposed surfaces to be
plastic laminate.
(2 of 2)
<PAGE>
FLOOR-COVERING:
- ---------------
L Carpet Border: In conference room and lobby: Shaw or approved equivalent.
All carpet to be glue down, base is to be 2 1/2" rubber. Lunch room,
coffee/copy, lab, supply rooms and data room shall have 12" x 12" Vinyl
tile. Provide allowance for granite or ceramic tile in the lobby area.
HVAC:
- -----
L Predicated on population density and equipment, and lighting levels,
Landlord shall design and install a complete building standard and
supplemental heating, cooling and ventilation system. Separate zone control
shall be provided for the conference rooms, and any other areas deemed
necessary by the mechanical engineers.
* Assume that each desk, workstation, office, etc. shall eventually receive
a Macintosh or IBM personal computer at an average of 300 watts of power.
HVAC calculations shall assume a 100% operating demand for any given time
period (based on 250 square feet per person load).
L In all occupied areas, exhaust and supply fresh air conditioning to the
latest accepted standards as set forth by the American Society of Heating,
Refrigeration, Air Conditioning and Engineers.
T Upgrade HVAC systems to be capable of accommodating 110% of equipment heat
loads within any one room (10% safety margin) - if requested.
T Provide a remote motor ducted exhaust fan in all conference rooms.
T Lab area is to be on a dedicated zone with 24 hour operation; suitable to
accommodate electrical load in the lab.
T Any other requirements above those provided for by Landlord above.
LIGHTING/ELECTRICAL AND DATA:
- -----------------------------
L For all lighting, switch each room and/or area separately. Provide slide
bar dimmer switches on incandescent downlights in conference rooms.
L Florescent lighting shall be illuminated with 2'x 4' lamp parabolic
fixtures (recessed) or approved equal throughout the space. Upgrade lights
to be installed in the boardroom, lunchroom and sconce type fixtures to be
installed in the stairways.
L In addition to building standard lighting, additional fluorescent lighting
shall be
(2 of 2)
<PAGE>
installed so as to initially allow 80' candle lighting at all remaining
conference room, offices, and open office areas.
L Provide all necessary exit and emergency lighting as required. All lighting
to comply with local and state title 24 requirements.
L All conference rooms shall have one phone and two electrical outlets each.
L Open office area is to receive J-boxes above the suspended ceiling system
24'-0" on center for open office cubicles. Each office cubicle is to be
capable of having one phone/data and two electrical outlets. All Hardwall
offices are to have two electrical outlets and two phone/data outlets. The
data and lab areas are to have two electrical and two data outlets per
wall.
L Provide separate circuit outlets at all copiers and lounge areas as
required in locations to be specified by Tenant.
L Provide all necessary electrical components including panels, transformers,
as required.
T Provide occupancy switch sensors by "Novitas" or approved equal for all
offices.
T Hook up electrical to furniture provided by Tenant.
T Provide separate circuit outlets for any sensitive equipment.
T The lab area is to have a total of thirty 120 volt 20 amp single phase
circuits with 26 of those circuits being duplex. Install 8 cord drops 48"
from the finish floor. Provide additional panel capacity for 40% growth
serving this area.
L The lunch room will require sufficient electrical capacity to service
additional vending equipment that Tenant may elect to install at their
expense.
TELEPHONE:
- ----------
T All offices, workstations, secretary and conference areas shall be wired
for data and to telephone room for network connections. Outlets to receive
modular receptacles for both telephone and data (Tenant to provide
requirements)
T Design, engineer, furnish and install a empty conduit stub - ups as may be
required to install tenant telephone and data system wiring as noted above,
including all necessary back boards and electrical outlets.
DATA PROCESSING:
- ----------------
(2 of 2)
<PAGE>
T Provide conduit and power feeds as required for internal accounting, word
processing computer systems and PC rooms. Power feeds for c.p.u.'s must be
dedicated, isolated grounded outlets.
PLUMBING:
- ---------
L Engineer, furnish and install at the lunch room, a stainless steel sink
with goose neck faucet. Hot and cold running water. Water taps and for ice
maker and coffee maker (which will be provided by Tenant).
L Provide an 120 gallon water heater.
L Men's and women's toilet rooms to comply with local, California and ADA
codes and requirements as required.
FIRE PROTECTION:
- ----------------
T Provide fire alarm system and fire monitoring system.
MISCELLANEOUS:
- --------------
L Exterior entry way is to be upgraded and re-worked per the requirements of
Tenant.
Initial: /s/ EW, JA
-------------------------
(2 of 2)
<PAGE>
Guadalupe A
AMENDMENT NO.1
TO LEASE
THIS AMENDMENT NO 1 is made and entered into this December 22, 1998, by
and between JOHN ARRILLAGA, Trustee, or his Successor Trustee UTA dated 7/20/77
(JOHN ARRILLAGA SURVEYOR'S TRUST) (previously known as the "Arrillaga Family
Trust") as amended, and RICHARD T. PEERY, Trustee, or his Successor Trusty UTA
dated 7/20/77 (RICHARD T. PEERY SEPARATE PROPERTY TRUST) as amended,
collectively as LANDLORD, and LATTITUTE COMMUNICATIONS, a California
corporation, as TENANT.
RECITALS
A. WHEREAS, by Lease Agreement dated July 31, 1995 Landlord leased to
Tenant approximately 39,157+ square feet of that certain 51,200+ square foot
- -
building located at 2121 Tasman Drive, Santa Clara, California, the details of
which are more particularly set forth in said July 31, 1995 Lease Agreement, and
B. WHEREAS, said Lease was amended by the Commencement Letter dated
December 13, 1995 which changed the Commencement Date of the Lease from January
1, 1996 to December 1, 1995, and confirmed the Termination Date of December 31,
2000, and,
C. WHEREAS, it is now the desire of the parties hereto to amend the Lease
by (i) increasing the square footage of the Leased Premises effective June1,
1999, (ii) amending the Basic Rent schedule and Aggregate Rent accordingly,
(iii) increasing the Security Deposit required under the Lease, (iv) increasing
Tenant's non-exclusive parking spaces, (v) amending the Lease Paragraphs 19
("Assignment and Subletting") and 48 ("Option to Extend Lease for Five (f)
Years"), (vi) replacing Lease Paragraphs 7 ("Expenses of Operation, Management,
and Maintenance"), 11 ("Utilities of the Building in Which the Premises are
Located"), 39 ("Limitation of Liability"), (vii) deleting Lease Paragraphs 49
("First Right of Refusal") and 51 ("Utilities"), and (viii) adding paragraphs
("Choice of Law: Severability") and (Authority to Execute") to said Lease
Agreement as hereinafter set forth.
AGREEMENT
NOW THEREFORE, for valuable consideration, receipt of which is hereby
acknowledged, and in consideration of the hereinafter mutual promises, the
parties hereto do agree as follows:
1. INCREASED PREMISES: Effective June 1, 1999, the size of the Leased
------------------
Premises will be increased by 12,043+ square feet, or from 39,157+ square feet
- -
to 51,200+ square feet of space (one hundred percent of the Building). Total
-
said Premises are more particularly shown within the area outlined in Red on
Exhibit A. The entire parcel, of which the Leased Premises is a part, is shown
- ---------
within the area outlined in Green on Exhibit A. The additional 12,043+ square
--------- -
feet of space is leased on an "as-is" basis, in its present condition and
configuration, as set forth in blue on Exhibit B attached hereto, with the
---------
entire interior leased Premises shown in Red on Exhibit B.
---------
2. BASIC RENT SCHEDULE: The Basic Rent schedule, as shown in Paragraph
-------------------
4(A) of the Lease Agreement, shall be amended as follows:
On June 1, 1999, the sum of FIFTY ONE THOUSAND TWO HUNDRED AND NO/100
DOLLARS ($51,200.00) shall be due, and a like sum on the first day of each month
thereafter, through and including December 1, 1999.
On January 1, 2000, the sum of FIFTY THREE THOUSAND SEVEN HUNDRED SIXTY
AND NO/100 DOLLARS ($53,760.00) shall be due, and a like sum on the first day of
each month thereafter, through and including December 1, 2000.
As a result of the increase in square feet leased, the Aggregate Rental
shall be increased by $236,042.80, or from $2,231,949.00 to $2,467,991.80.
Initial:
--------
<PAGE>
Guadalupe A
3. INCREASED PARKING: Effective June 1, 1999, Tenant's nonexclusive
-----------------
parking spaces shall be increased by 45 spaces or from 144 spaces to 189 spaces.
4. SECURITY DEPOSIT: Tenant's Security Deposit shall be increased by
----------------
$25,290.30, or from $82,229.70 to $107,520.00, payable upon Tenant's execution
of this Amendment No. 1.
5. ASSIGNMENT AND SUBLETTING: Lease Paragraph 19 ("Assignment and
-------------------------
Subletting") shall be amended to include the following language:
"A. Notwithstanding the foregoing, Landlord and Tenant agree that it
shall not be unreasonable for Landlord to refuse to consent to a proposed
assignment, sublease or other transfer ("Proposed Transfer") if the Premises or
any other portion of the Property would become subject to additional or
different Government Requirements as a direct or indirect consequence of the
Proposed Transfer and/or the Proposed Transferee's use and occupancy of the
Premises and the Property. However, Landlord may, in its sole discretion,
consent to such a Proposed Transfer where Landlord is indemnified by Tenant and
(i) Subtenant or (ii) Assignee, in form and substance satisfactory to Landlord's
counsel, by Tenant and/or the Proposed Transferee from and against any and all
costs, expenses, obligations and liability arising out of the Proposed Transfer
and/or the Proposed Transferee's use and occupancy of the Premises and the
Property.
B. Any and all sublease agreement(s) between Tenant and any and all
subtenant(s) (which agreements must be consented to by Landlord, pursuant to the
requirements of this Lease) shall contain the following language:
"If Landlord and Tenant jointly and voluntarily elect, for any reason
whatsoever, to terminate the Master Lease prior to the scheduled master
Lease termination date, then this Sublease (if then still in effect) shall
terminate concurrently with the termination of the Master Lease. Subtenant
expressly acknowledges and agrees that (1) the voluntary termination of the
master Lease by Landlord and Tenant and the resulting termination of this
Sublease shall not give Subtenant any right or power to make any legal or
equitable claim against Landlord, including without limitation any claim
for interference with contract or interference with prospective economic
advantage, and (2) Subtenant hereby waives any and all rights it may have
under law or at equity against Landlord to challenge such an early
termination of the Sublease, and unconditionally releases and relieves
landlord, and its officers, directors, employees and agents, from any and
all claims, demands, and/or causes of action whatsoever (collectively,
"Claims"), whether such matters are known or unknown, latent or apparent,
suspected or unsuspected, foreseeable or unforseeable, which Subtenant may
have arising out of or in connection with any such early termination of
this Sublease. Subtenant knowingly and intentionally waives any and all
protection which is or may be given by Section 1542 of the California Civil
Code which provides as follows: "A general release does not extend to
claims which the creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him must have
materially affected his settlement with debtor.
The term of this Sublease is therefor subject to early termination.
Subtenant's initials here below evidence (Subtenant's consideration of and
agreement to this early termination provision, (b) Subtenant's
acknowledgement that, in determining the net benefits to be derived by
Subtenant under the terms of this Sublease, Subtenant has anticipated the
potential for early termination, and (c) Subtenant's agreement to the
general waiver and release of Claims above.
Initials: _______ Initials:________"
Subtenant Tenant
6. OPTION TO EXTEND LEASE FOR FIVE (5) YEARS: Due to the increase in the
-----------------------------------------
square footage of the Leased Premises, Section B of Lease Paragraph 48 ("Option
to Extend Lease for Five (5) Years") is hereby deleted and replaced with the
following:
B. The following summarizes the per square foot charge by period under
the Lease Agreement that would be applied to the Extended Term:
Initial:
--------
<PAGE>
Guadalupe A
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Extended PSF Rate Monthly
Term Period Basic Rent
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
<S> <C> <C>
01/01/01-12/31/01 $1.10 $56,320.00
- --------------------------------------------------------------------------------------------
01/01/01-12/31/02 $1.15 $58,880.00
- --------------------------------------------------------------------------------------------
01/01/03-12/31/03 $1.20 $61,440.00
- --------------------------------------------------------------------------------------------
01/01/04-12/31/04 $1.25 $64,000.00
- --------------------------------------------------------------------------------------------
01/01/05-12/31/05 $1.30 $66,560.00
- --------------------------------------------------------------------------------------------
</TABLE>
7. EXPENSES OF OPERATION, MANAGEMENT, AND MAINTENANCE OF THE COMMON
----------------------------------------------------------------
AREAS OF THE COMPLEX AND BUILDING IN WHICH THE PREMISES ARE LOCATED: Effective
- -------------------------------------------------------------------
June 1, 1999, Tenant shall occupy one hundred percent (100%) of the Building in
which the Premises are located, and as a result, Lease Paragraph 7 shall be
deleted in its entirety and replaced with the following:
"7. EXPENSES OF OPERATION, MANAGEMENT, AND MAINTENANCE OF THE COMMON
AREAS OF THE COMPLEX: As Additional Rent and in accordance with Paragraph 4D of
this Lease, Tenant shall pay to Landlord Tenant's proportionate share
(calculated on a square footage or other equitable basis as calculated by
Landlord) of all expenses or operation, management, maintenance and repair of
the common Areas of the Complex including, but not limited to, license, permit,
and inspection fees; security; utility charges associated with exterior
landscaping and lighting (including water and sewer charges); all charges
incurred in the maintenance and replacement of landscaped areas, lakes, parking
lots and paved areas (including repair, replacement, resealing and restriping),
sidewalks, driveways; maintenance, repair, and replacement of all fixtures and
electrical, mechanical and plumbing systems; structural elements and exterior
surfaces of the buildings; salaries and employees benefits of personnel and
payroll taxes applicable thereto; supplies, materials, equipment and tools; the
cost of capital expenditures which have the effect of reducing operating
expenses, provided, however, that in the event Landlord makes such capital
improvements, Landlord may amortize its investment in said improvements
(together with interest at the rate of fifteen percent (15%) per annum on the
unamortized balance) as an operating expense in accordance with standard
accounting practices, provided, that such amortization is not at a rate greater
than the anticipated savings in the operating expenses.
"Additional Rent" as used herein shall not include Landlord's debt
repayments, interest on charges; expenses directly or indirectly incurred by
Landlord for the benefit of any other tenant; cost for the installation of
partitioning or any other tenant improvements; cost of attracting tenants;
depreciation; interest or executive salaries."
8. TENANT MAINTENANCE: Effective June 1, 1999, Tenant shall occupy one
------------------
hundred percent (100%) of the building in which the Premises are located, and as
a result, Lease Paragraph 10 shall be deleted in its entirety and replaced with
the following:
Initial:
--------
<PAGE>
Guadalupe A
"10. TENANT MAINTENANCE. Tenant shall, at its sole cost and expense, keep and
maintain the Premises (including appurtenances) and every part thereof in a high
standard of maintenance and repair, or replacement, and in good and sanitary
condition. Tenant's maintenance and repair responsibilities herein referred to
include, but are not limited to, janitorization, all windows (interior and
exterior), window frames, plate glass and glazing (destroyed by accident or act
of third parties), truck doors, plumbing systems (such as water and drain lines,
sinks, toilets, faucets, drains, showers and water fountains), electrical
systems (such as panels, conduits, outlets, lighting fixtures, lamps, bulbs,
tubes and ballasts), heating and air conditioning systems (such as compressors,
fans, air handlers, ducts, mixing boxes, thermostats, time clocks, boilers,
heaters, supply and return grills), structural elements and exterior surfaces of
the building, store fronts, roofs, downspouts, all interior improvements within
the Premises including but not limited to wall coverings, window coverings,
carpet, floor coverings, partitioning, ceilings, doors (both interior and
exterior), including closing mechanisms, latches, locks, skylights (if any),
automatic fire extinguishing systems, and elevators and all other interior
improvements of any nature whatsoever. Tenant agrees to provide carpet shields
under all rolling chairs or to otherwise be responsible for wear and tear of the
carpet caused by such rolling chairs if such wear and tear exceeds that caused
by normal foot traffic in surrounding areas. Areas of excessive wear shall be
replaced at Tenant's sold expense upon Lease termination. Tenant hereby waives
all rights under, and benefits of, Subsection 1 of Section 1932 and Section 1941
and 1942 of the California Civil code and under any similar law, statute or
ordinance now or hereafter in effect. In the event any of the above maintenance
responsibilities apply to any other tenant(s) of Landlord where there is common
usage with other tenant(s), such maintenance responsibilities and charges shall
be allocated to the Leased Premises by square footage or other equitable basis
as calculated and determined by Landlord."
Initial:
---------
<PAGE>
Guadalupe A
9. UTILITIES OF THE BUILDING IN WHICH THE PREMISES ARE LOCATED: Effective
-----------------------------------------------------------
June 1, 1999, Tenant shall occupy one hundred percent (100%) of the
Building in which the Premises are located, and as a result, Lease
Paragraph 11 shall be deleted in its entirety and replaced with the
following:
"11. UTILITIES. Tenant shall have all utilities servicing the
Premises transferred into Tenant's name effective June1, 1999. Tenant
shall pay promptly, as the same become due, all charges for water,
gas, electricity, telephone, telex and other electronic communication
service, sewer service, waste pick-up and any other utilities,
materials or services furnished directly to or used by Tenant on or
about the Premises during the Term of this Lease, including, without
limitation, any temporary or permanent utility surcharge or other
exactions whether or not hereinafter imposed. In the event the above
charges apply to any other tenant(s) of Landlord where there is common
usage with other tenant(s), such charges shall be allocated to the
Leased Premises by square footage or other equitable basis as
calculated and determined by Landlord.
Landlord shall not be liable for and Tenant shall not be entitled
to any abatement or reduction of Rent by reason of any interruption or
failure of utility services to the Premises when such interruption or
failure is caused by accident, breakage, repair, strikes, lockouts, or
other labor disturbances or labor disputes of any nature, or by any
other cause, similar or dissimilar, beyond the reasonable control of
Landlord."
10. LIMITATION OF LIABILITY: Lease Paragraph 39 ("Limitation of
Liability") shall be deleted and replaced in its entirety by the
following:
"39. LIMITATION OF LIABILITY In consideration of the benefits accruing
-----------------------
hereunder, Tenant and all successors and assigns covenant and agree that,
in the event of any actual or alleged failure, breach or default hereunder
by Landlord:
(i) the sole and exclusive remedy shall be against Landlord's interest in the
Premises leased herein;
(ii) no partner of Landlord shall be sued or named as a party in any suit or
action (except as may be necessary to secure jurisdiction of the
partnership);
(iii) no service of process shall be made against any partner of Landlord
(except as may be necessary to secure jurisdiction of the partnership);
(iv) no partner of Landlord shall be required to answer or otherwise plead to
any service of process;
(v) no judgment will be taken against any partner of Landlord;
(vi) any judgment taken against any partner of Landlord may be vacated and set
aside at any time without hearing;
(vii) no writ of execution will every be levied against the assets of any
partner of Landlord;
(viii) these covenants and agreements are enforceable both by Landlord and also
by any partner of Landlord.
Tenant agrees that each of the foregoing covenants and agreements shall
be applicable to any covenant or agreement either expressly contained in
this Lease or imposed by stature or at common law."
11. RIGHT OF FIRST REFUSAL: It is agreed between the parties that Lease
----------------------
Paragraph 49 ("First Right of Refusal") is hereby deleted in its entirety and
shall be of no further force or effect.
12. UTILITIES: It is agreed between the parties that Lease Paragraph 51
("Utilities") is hereby deleted in its entirety and shall be of no further force
or effect.
13. CHOICE OF LAW: SEVERABILITY. This Lease shall in all respects be
---------------------------
governed by and construed in accordance with the laws of the State of
California. If any provisions of this Lease shall be invalid, unenforceable, or
ineffective for any reason whatsoever, all other provisions hereof shall be and
remain in full force and effect.
Initial:
--------
<PAGE>
Guadalupe A
14. AUTHORITY TO EXECUTE. The parties executing this Agreement hereby
--------------------
warrant and represent that they are properly authorized to execute this
Agreement and bind the parties on behalf of whom they execute this Agreement and
to all of the terms, covenants and conditions of this Agreement as they relate
to the respective parties hereto.
EXCEPT AS MODIFIED HEREIN, all other terms, covenants, and conditions of
said July 31, 1995 Lease Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment No. 1
to Lease as of the day and year last written below.
LANDLORD: TENANT:
JOHN ARRILLAGA SURVIVOR'S TRUST LATTITUDE COMMUNICATIONS
A California corporation
By
-------------------------- ---------------------------
John Arrillaga, Trustee
------------------------------
Print or Type Name
Date:
------------------------
RICHARD T. PEERY SEPARATE Title:
PROPERTY TRUST --------------------
Date:
--------------------
By
---------------------------
Richard T. Peery, Trustee
Date:
-------------------------
<PAGE>
Guadalupe A
[GRAPHIC: FLOOR PLAN DEPICTING THREE
BUILDINGS IN WHICH BUILDING
BEING LEASED PURSUANT TO
AMENDMENT IS HIGHLIGHTED.]
EXHIBIT A TO AMENDMENT NO.1 DATED DECEMBER 22,
---------
1998 BY AND BETWEEN THE JOHN ARRILLAGA SURVIVOR'S
TRUST AND THE RICHARD T. SEPARATE PROPERTY TRUST,
AS LANDLORD, AND LATTITUDE COMMUNICATIONS, AS
TENANT.
Initial:
--------
<PAGE>
Guadalupe A
[GRAPHIC: FLOOR PLAN OF THE SECOND FLOOR
OF BUILDING BEING LEASED IN WHICH ADDITIONAL
SPACE LEASED PURSUANT TO AMENDMENT TO LEASE
AGREEMENT IS HIGHLIGHTED.]
EXHIBIT B TO AMENDMENT NO.1 DATED DECEMBER 22,
---------
1998 BY AND BETWEEN THE JOHN ARRILLAGA SURVIVOR'S
TRUST AND THE RICHARD T. SEPARATE PROPERTY TRUST,
AS LANDLORD, AND LATTITUDE COMMUNICATIONS, AS
TENANT.
2121 TASMAN DRIVE
SANTA CLARA, CA
Initial:
--------
<PAGE>
Guadalupe A
[GRAPHIC: FLOOR PLAN OF THE FIRST FLOOR
OF BUILDING BEING LEASED IN WHICH
PORTION OF BUILDING WITH TENANT IMPROVEMENTS
IS HIGHLIGHTED.]
EXHIBIT B TO AMENDMENT NO.1 DATED DECEMBER 22,
---------
1998 BY AND BETWEEN THE JOHN ARRILLAGA SURVIVOR'S
TRUST AND THE RICHARD T. SEPARATE PROPERTY TRUST,
AS LANDLORD, AND LATTITUDE COMMUNICATIONS, AS
TENANT.
Initial:
--------
<PAGE>
Exhibit 10.11
1999 Executive Incentive
Robbie, I am pleased to announce your executive incentive compensation package
that will be an integral part of your total compensation for 1999. Your targeted
annualized incentive compensation for the year will be $40,000. This target
amount will be paid out on a quarterly basis, with a target quarterly payout of
$10,000.
The incentive will be determined as follows. For 1999, the sole metric for
determining the payout will be revenue. In future years, you should assume that
additional metrics, such as profitability, will be added. The revenue target
metric that will be used to determine your incentive payout will be the
company's quarterly revenue target as determined by the 1999 plan adopted by the
board of directors.
If the company achieves 100% of its quarterly revenue target, you will be paid
your targeted quarterly incentive of $10,000. If the company achieves 120% or
more of its targeted quarterly revenue, you will receive 200% of your quarterly
incentive target, or $20,000. If the company achieves 80% or less of its
targeted quarterly revenue, you will not receive a quarterly incentive payout.
Between 80% and 120% performance, your payout will be prorated accordingly
between 0% and 200%. This calculation will be performed following the end of
each quarter and paid in the next payroll cycle.
As an additional part of your 1999 executive compensation package, you will be
eligible to receive up to $1000 in reimbursed expenses. The expenses eligible
for this reimbursement include income tax preparation costs, estate planning
costs, and an annual physical examination. You are free to choose your own tax
preparation, estate planning, or medical service. To receive your reimbursement,
simply submit an expense report. Expenses exceeding $1000 will be your personal
responsibility.
<PAGE>
1999 Executive Incentive
Ted, I am pleased to announce your executive incentive compensation package that
will be an integral part of your total compensation for 1999. Your targeted
annualized incentive compensation for the year will be $30,000. This target
amount will be paid out on a quarterly basis, with a target quarterly payout of
$7,500.
The incentive will be determined as follows. For 1999, the sole metric for
determining the payout will be revenue. In future years, you should assume that
additional metrics, such as profitability, will be added. The revenue target
metric that will be used to determine your incentive payout will be the
company's quarterly revenue target as determined by the 1999 plan adopted by the
board of directors.
If the company achieves 100% of its quarterly revenue target, you will be paid
your targeted quarterly incentive of $7,500. If the company achieves 120% or
more of its targeted quarterly revenue, you will receive 200% of your quarterly
incentive target, or $15,000. If the company achieves 80% or less of its
targeted quarterly revenue, you will not receive a quarterly incentive payout.
Between 80% and 120% performance, your payout will be prorated accordingly
between 0% and 200%. This calculation will be performed following the end of
each quarter and paid in the next payroll cycle.
As an additional part of your 1999 executive compensation package, you will be
eligible to receive up to $1000 in reimbursed expenses. The expenses eligible
for this reimbursement include income tax preparation costs, estate planning
costs, and an annual physical examination. You are free to choose your own tax
preparation, estate planning, or medical service. To receive your reimbursement,
simply submit an expense report. Expenses exceeding $1000 will be your personal
responsibility.
<PAGE>
1999 Executive Incentive
Rick, I am pleased to announce your executive incentive compensation package
that will be an integral part of your total compensation for 1999. Your targeted
annualized incentive compensation for the year will be $40,000. This target
amount will be paid out on a quarterly basis, with a target quarterly payout of
$10,000.
The incentive will be determined as follows. For 1999, the sole metric for
determining the payout will be revenue. In future years, you should assume that
additional metrics, such as profitability, will be added. The revenue target
metric that will be used to determine your incentive payout will be the
company's quarterly revenue target as determined by the 1999 plan adopted by the
board of directors.
If the company achieves 100% of its quarterly revenue target, you will be paid
your targeted quarterly incentive of $10,000. If the company achieves 120% or
more of its targeted quarterly revenue, you will receive 200% of your quarterly
incentive target, or $20,000. If the company achieves 80% or less of its
targeted quarterly revenue, you will not receive a quarterly incentive payout.
Between 80% and 120% performance, your payout will be prorated accordingly
between 0% and 200%. This calculation will be performed following the end of
each quarter and paid in the next payroll cycle.
As an additional part of your 1999 executive compensation package, you will be
eligible to receive up to $1000 in reimbursed expenses. The expenses eligible
for this reimbursement include income tax preparation costs, estate planning
costs, and an annual physical examination. You are free to choose your own tax
preparation, estate planning, or medical service. To receive your reimbursement,
simply submit an expense report. Expenses exceeding $1000 will be your personal
responsibility.
<PAGE>
1999 Executive Incentive
Glenn, I am pleased to announce your executive incentive compensation package
that will be an integral part of your total compensation for 1999. Your targeted
annualized incentive compensation for the year will be $20,000. This target
amount will be paid out on a quarterly basis, with a target quarterly payout of
$5,000.
The incentive will be determined as follows. For 1999, the sole metric for
determining the payout will be revenue. In future years, you should assume that
additional metrics, such as profitability, will be added. The revenue target
metric that will be used to determine your incentive payout will be the
company's quarterly revenue target as determined by the 1999 plan adopted by the
board of directors.
If the company achieves 100% of its quarterly revenue target, you will be paid
your targeted quarterly incentive of $5,000. If the company achieves 120% or
more of its targeted quarterly revenue, you will receive 200% of your quarterly
incentive target, or $10,000. If the company achieves 80% or less of its
targeted quarterly revenue, you will not receive a quarterly incentive payout.
Between 80% and 120% performance, your payout will be prorated accordingly
between 0% and 200%. This calculation will be performed following the end of
each quarter and paid in the next payroll cycle.
As an additional part of your 1999 executive compensation package, you will be
eligible to receive up to $1000 in reimbursed expenses. The expenses eligible
for this reimbursement include income tax preparation costs, estate planning
costs, and an annual physical examination. You are free to choose your own tax
preparation, estate planning, or medical service. To receive your reimbursement,
simply submit an expense report. Expenses exceeding $1000 will be your personal
responsibility.
<PAGE>
1999 Executive Incentive
Emil, I am pleased to announce your executive incentive compensation package
that will be an integral part of your total compensation for 1999. Your targeted
annualized incentive compensation for the year will be $50,000. This target
amount will be paid out on a quarterly basis, with a target quarterly payout of
$12,500.
The incentive will be determined as follows. For 1999, the sole metric for
determining the payout will be revenue. In future years, you should assume that
additional metrics, such as profitability, will be added. The revenue target
metric that will be used to determine your incentive payout will be the
company's quarterly revenue target as determined by the 1999 plan adopted by the
board of directors.
If the company achieves 100% of its quarterly revenue target, you will be paid
your targeted quarterly incentive of $12,500. If the company achieves 120% or
more of its targeted quarterly revenue, you will receive 200% of your quarterly
incentive target, or $25,000. If the company achieves 80% or less of its
targeted quarterly revenue, you will not receive a quarterly incentive payout.
Between 80% and 120% performance, your payout will be prorated accordingly
between 0% and 200%. This calculation will be performed following the end of
each quarter and paid in the next payroll cycle.
As an additional part of your 1999 executive compensation package, you will be
eligible to receive up to $1000 in reimbursed expenses. The expenses eligible
for this reimbursement include income tax preparation costs, estate planning
costs, and an annual physical examination. You are free to choose your own tax
preparation, estate planning, or medical service. To receive your reimbursement,
simply submit an expense report. Expenses exceeding $1000 will be your personal
responsibility.
<PAGE>
1999 Executive Incentive
Janet, I am pleased to announce your executive incentive compensation package
that will be an integral part of your total compensation for 1999. Your targeted
annualized incentive compensation for the year will be $20,000. This target
amount will be paid out on a quarterly basis, with a target quarterly payout of
$5,000.
The incentive will be determined as follows. For 1999, the sole metric for
determining the payout will be revenue. In future years, you should assume that
additional metrics, such as profitability, will be added. The revenue target
metric that will be used to determine your incentive payout will be the
company's quarterly revenue target as determined by the 1999 plan adopted by the
board of directors.
If the company achieves 100% of its quarterly revenue target, you will be paid
your targeted quarterly incentive of $5,000. If the company achieves 120% or
more of its targeted quarterly revenue, you will receive 200% of your quarterly
incentive target, or $10,000. If the company achieves 80% or less of its
targeted quarterly revenue, you will not receive a quarterly incentive payout.
Between 80% and 120% performance, your payout will be prorated accordingly
between 0% and 200%. This calculation will be performed following the end of
each quarter and paid in the next payroll cycle.
As an additional part of your 1999 executive compensation package, you will be
eligible to receive up to $1000 in reimbursed expenses. The expenses eligible
for this reimbursement include income tax preparation costs, estate planning
costs, and an annual physical examination. You are free to choose your own tax
preparation, estate planning, or medical service. To receive your reimbursement,
simply submit an expense report. Expenses exceeding $1000 will be your personal
responsibility.
<PAGE>
1999 Executive Incentive
Chris, I am pleased to announce your executive incentive compensation package
that will be an integral part of your total compensation for 1999. Your targeted
annualized incentive compensation for the year will be $30,000. This target
amount will be paid out on a quarterly basis, with a target quarterly payout of
$7,500.
The incentive will be determined as follows. For 1999, the sole metric for
determining the payout will be revenue. In future years, you should assume that
additional metrics, such as profitability, will be added. The revenue target
metric that will be used to determine your incentive payout will be the
company's quarterly revenue target as determined by the 1999 plan adopted by the
board of directors.
If the company achieves 100% of its quarterly revenue target, you will be paid
your targeted quarterly incentive of $7,500. If the company achieves 120% or
more of its targeted quarterly revenue, you will receive 200% of your quarterly
incentive target, or $15,000. If the company achieves 80% or less of its
targeted quarterly revenue, you will not receive a quarterly incentive payout.
Between 80% and 120% performance, your payout will be prorated accordingly
between 0% and 200%. This calculation will be performed following the end of
each quarter and paid in the next payroll cycle.
As an additional part of your 1999 executive compensation package, you will be
eligible to receive up to $1000 in reimbursed expenses. The expenses eligible
for this reimbursement include income tax preparation costs, estate planning
costs, and an annual physical examination. You are free to choose your own tax
preparation, estate planning, or medical service. To receive your
reimbursement, simply submit an expense report. Expenses exceeding $1000 will
be your personal responsibility.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 (File
No. 333-72935) of our reports, dated February 24, 1999, on our audit of the
financial statements and the financial statement schedule of Latitude
Communications, Inc. We also consent to the references to our firm under the
caption "Experts" and "Selected Consolidated Financial Data."
/s/ PricewaterhouseCoopers LLP
San Jose, California
April 2, 1999
