<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 10, 1999
REGISTRATION NO. -
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ONDISPLAY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
DELAWARE 7372 68-0391052
<S> <C> <C>
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
ONDISPLAY, INC.
12667 ALCOSTA BOULEVARD, SUITE 300
SAN RAMON, CA 94583
925-355-3200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MARK PINE
CHIEF EXECUTIVE OFFICER
ONDISPLAY, INC.
12667 ALCOSTA BOULEVARD, SUITE 300
SAN RAMON, CA 94583
925-355-3200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
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<S> <C>
MARIO M. ROSATI, ESQ. CURTIS L. MO, ESQ.
ADAM D. LEVY, ESQ. J. OMAR MAHMUD, ESQ.
ROSE ANN ROTANDARO, ESQ. ALAN C. WANG, ESQ.
WILSON SONSINI GOODRICH & ROSATI BROBECK, PHLEGER & HARRISON LLP
PROFESSIONAL CORPORATION TWO EMBARCADERO PLACE
650 PAGE MILL ROAD 2200 GENG ROAD
PALO ALTO, CA 94304 PALO ALTO, CA 943034
650-493-9300 650-424-0160
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
- ----------------------------------------------------------------------------------------------------------------------
Common stock, $0.001 par
value....................... $ $46,000,000 $12,788.00
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
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(1) Includes shares which the underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(c) under the Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES, IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED SEPTEMBER 10, 1999
LOGO
SHARES
COMMON STOCK
OnDisplay, Inc. is offering shares of our common stock. This
is our initial public offering, and no public market currently exists for our
shares. Our common stock have been approved for quotation on the Nasdaq National
Market under the symbol "ONDS," subject to official notice of issuance. We
anticipate that the initial public offering price will be between $ and
$ per share.
------------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.
------------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- --------
<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discounts and Commissions...................... $ $
Proceeds to OnDisplay, Inc.................................. $ $
</TABLE>
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
OnDisplay has granted the underwriters a 30-day option to purchase up to an
additional shares of common stock to cover over-allotments.
------------------------
BANCBOSTON ROBERTSON STEPHENS DEUTSCHE BANC ALEX. BROWN
SG COWEN
The date of this prospectus is , 1999
<PAGE> 3
ONDISPLAY
GRAPHICS
FRONT COVER:
FOLD: table of contents
INSIDE FOLD: as follows:
Written in bold at the top of the diagram/graphic:
AUTOMATING THE E-BUSINESS COMMUNITY
The diagram is as follows:
Two rectangular computer servers are centered on the page back to back with
arrows pointing to each other: the left computer server has: E-BUSINESS PORTAL
written below the graphic: The right computer server has: E-MARKETPLACE written
above graphic.
From the E-BUSINESS PORTAL computer server = five arrows (with two points <->)
lead to four smaller servers and a computer screen and are as follows from top
to bottom in a crescent shape:
1(st) computer server has the word: AFFILIATE written to the left of the server
2(nd) computer server has the word: TRADING PARTNER written to the left of the
server
3(rd) is a computer screen which has the word: SUPPLIER written to the left of
the computer screen
4(th) is a computer server with the word: CUSTOMER written to the left of the
computer server
5(th) is a computer server with the word: E-MARKETPLACE written to the left of
the computer
From the E-MARKETPLACE computer server = four arrows (with two points <->) lead
to three smaller computer servers and a computer screen and are as follows from
top to bottom in a crescent shape:
1(st) computer server has the word: BUYER written to the right of the server
2(nd) computer server has the word: SUPPLIER written to the right of the server
3(rd) is a computer screen and has the word: SUPPLIER written to the right of
the computer screen
4(th) computer server has the word: BUYER written to the right of the computer
server
Underneath the diagram will read as follows:
OnDisplay's CenterStage(R) product suite enables e-business portals and
e-marketplaces to exchange information and services automatically and
seamlessly. Using CenterStage, e-Business entities in both business-to-business
(B2B and business-to-consumer (B2C) markets can:
- Slash their time-to-market for delivery of rich, relevant information and
services
- Engage and retain customers by building strong lasting relationships with
personalized services (one line for each bullet)
- Increase revenues and expand their market share with superior Internet
services
- Scale their e-Businesses effectively to meet market demand
OnDisplay's CenterStage product suite enables e-Business portals and
e-Marketplaces to:
- Aggregate rich, relevant content and services for diverse communities of
customers, suppliers, affiliates, and trading partners
- Integrate e-Business applications with back-office operational systems
- Personalize content of interest to customers proactively
<PAGE> 4
- Exchange complex business transactions with partners using XML
- Share customized information with partners and affiliates
ONDISPLAY
GRAPHICS
BACK COVER:
INSIDE BACK COVER:
Centered on the top of the inside back cover page reads:
ONDISPLAY E-BUSINESS CUSTOMERS
And the following customer logos are floating around on the top half of the
page:
ClubComputer.com
Fastxchange
Grainger.com
Travelocity.com
Trip.com
Centered on the second half of the inside back cover page reads:
ONDISPLAY E-BUSINESS PARTNERS
And the following business partners logos are floating around on the bottom half
of the page:
Ariba
IBM
Microsoft
BroadVision
Vignette
Commerce One
OUTSIDE BACK COVER:
Centered on the back cover page is the OnDisplay Logo with the address written
to the left of the logo:
12667 Alcosta Blvd.
Suite 300
San Ramon, CA 94583
<PAGE> 5
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF THE COMMON STOCK. IN THIS PROSPECTUS, REFERENCES TO
"ONDISPLAY," "WE," "US" AND "OUR" REFER TO ONDISPLAY, INC.
UNTIL , 1999, ALL DEALERS THAT BUY, SELL OR TRADE OUR COMMON
STOCK, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER
A PROSPECTUS. THIS REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
-------------------------
TABLE OF CONTENTS
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PAGE
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Summary..................................................... 4
Risk Factors................................................ 7
Use of Proceeds............................................. 18
Dividend Policy............................................. 18
Capitalization.............................................. 19
Dilution.................................................... 20
Selected Financial Data..................................... 21
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 23
Business.................................................... 33
Management.................................................. 45
Certain Transactions........................................ 53
Principal Stockholders...................................... 55
Description of Capital Stock................................ 57
Shares Eligible For Future Sale............................. 60
Underwriting................................................ 62
Legal Matters............................................... 64
Experts..................................................... 64
Where You Can Find Additional Information................... 65
Index to Financial Statements............................... F-1
</TABLE>
-------------------------
CenterStage(R) and the OnDisplay(R) name and logo and the names of products
and services offered by us (including those referred to in "Business") are
trademarks, registered trademarks, service marks or registered service marks of
OnDisplay. Other service marks, trademarks and trade names referred to in this
prospectus are the property of their respective owners.
3
<PAGE> 6
SUMMARY
Because this is only a summary, it does not contain all the information
that may be important to you. You should read the entire prospectus, especially
"Risk Factors" and the Financial Statements and notes to those statements
appearing elsewhere in this prospectus, before deciding to invest in our common
stock. Except as described in the financial statements or as otherwise specified
in this prospectus, all information in this prospectus: (1) assumes no exercise
of the underwriters' over-allotment option; and (2) reflects the conversion of
all of our outstanding preferred stock into common stock upon the effectiveness
of the registration statement related to this offering.
We provide a comprehensive suite of e-business infrastructure applications
for powering e-business portals and e-marketplaces.
As the Internet has emerged as the fastest growing global communications
medium in history, companies across multiple industries have been forced to
leverage the ubiquity and openness of the Web to remain competitive. Nearly
every company in the world today faces the strategic imperative of re-creating
itself into an electronic commerce, or e-commerce, company, augmenting or even
replacing its traditional distribution, supply chain and customer-service
channels with Internet-based channels. Although the first generation of
e-commerce consisted primarily of basic Web sites offering product information
for marketing purposes, today the stakes are higher. Successful companies now
need to create value-added relationships with partners and suppliers and offer
differentiated and unique online services to customers. This next generation of
e-commerce, often referred to as e-business, is transforming the way business is
done and has given rise to the "Internet economy."
In the Internet economy, businesses must deliver comprehensive online
services and information to offer enhanced value to their customers, partners
and suppliers. In particular, companies seek to participate in two complementary
e-business channels -- e-business portals and e-marketplaces -- as distinct ways
to capitalize on the Internet, expand their businesses and protect their revenue
opportunities. An e-business portal is an online destination site where vendors
create value-added relationships with their customers or business partners by
offering an expanded set of information and services. An e-marketplace is a
comprehensive trading hub designed to efficiently broker transactions and
services among multiple buyers and sellers. According to Forrester Research, the
volume of business-to-business e-commerce transacted through e-business portals,
e-marketplaces and other e-business offerings will grow from $43 billion in 1998
to $1.3 trillion in 2003.
There are many demands placed on the infrastructure of e-business portals
and e-marketplaces. Companies deploying e-business portals and e-marketplaces
must be able to offer a broad range of dynamic information and services from a
large, diverse set of partners, suppliers and customers, and do so faster than
their competitors. Compounding this challenge is the fact that these e-business
relationships require agility in terms of flexible, adaptable connections that
accommodate rapid change. To successfully address these business requirements,
e-business portals and e-marketplaces must meet complicated technical
requirements for aggregating, exchanging, integrating, personalizing and
syndicating a diverse array of critical information and services among a broad
range of business partners. Given the complexity of meeting these demands,
e-business portals and e-marketplaces face significant challenges in effectively
scaling their businesses to fully capitalize on the opportunities created by the
Internet.
We provide a comprehensive suite of e-business infrastructure applications
for powering e-business portals and e-marketplaces. Our CenterStage product
suite addresses the unique challenges faced by e-business portals and
e-marketplaces in both business-to-business and business-to-consumer e-commerce.
We provide an integrated solution for enabling the rapid aggregation, exchange,
integration, personalization, and syndication of critical e-business information
and services for e-business portals and e-marketplaces. We believe our solution
enables these customers to: achieve rapid time-to-market, engage and retain
customers, increase revenues and market share, and enable scalable and agile
e-business.
4
<PAGE> 7
Our objective is to become the leading provider of comprehensive e-business
infrastructure applications for powering e-business portals and e-marketplaces.
Key elements of our strategy to achieve this objective include:
- targeting e-business portal and e-marketplace markets;
- leveraging customer network effects;
- extending our technology leadership;
- building upon our network of relationships; and
- expanding our international presence.
We market our CenterStage products and related services primarily through a
direct sales organization. Our direct sales organization focuses on recently
formed companies that are creating e-business portals and e-marketplaces and
larger corporate customers building or improving their Web presence. Our
e-business portal and e-marketplace customers include: Aspect Development,
ClubComputer.com, FASTXchange, Harbinger Corporation, Impulse! Buy Network, The
Trip.com, Sabre/Travelocity.com and telstreet.com.
CORPORATE INFORMATION
OnDisplay, Inc. was incorporated in Delaware in August 1996. Our principal
executive offices are located at 12667 Alcosta Boulevard, Suite 300, San Ramon,
California 94583. Our telephone number at this location is (925) 355-3200. Our
corporate Internet address is www.ondisplay.com. The information contained on
our website is not a part of this prospectus.
------------------------
THE OFFERING
Common stock to be offered by OnDisplay..... shares
Common stock outstanding after the
offering.................................... shares
Use of proceeds............................. See "Use of Proceeds."
Nasdaq National Market Symbol............... ONDS
5
<PAGE> 8
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM YEAR ENDED SIX MONTHS ENDED
AUGUST 14, 1996 DECEMBER 31, JUNE 30,
(DATE OF INCEPTION) TO ------------------------ ------------------------
DECEMBER 31, 1996 1997 1998 1998 1999
---------------------- ---------- ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
License revenues............. $ -- $ 265 $ 2,229 $ 876 $ 1,937
Service revenues............. -- -- 1,114 276 1,718
---------- ---------- ----------- ---------- -----------
Total revenues..... $ -- $ 265 $ 3,343 $ 1,152 $ 3,655
---------- ---------- ----------- ---------- -----------
Loss from operations......... (617) (5,689) (8,479) (3,616) (6,076)
Net loss..................... (572) (5,534) (8,348) (3,581) (6,074)
Net loss per share -- basic
and diluted................ $ (0.17) $ (1.62) $ (2.34) $ (1.04) $ (1.56)
========== ========== =========== ========== ===========
Shares used in per share
calculation -- basic and
diluted.................... 3,400,000 3,410,313 3,572,353 3,432,260 3,881,291
========== ========== =========== ========== ===========
Pro forma net loss per
share -- basic and
diluted.................... $ (0.75) $ (0.48)
=========== ===========
Shares used in pro forma net
loss per share -- basic and
diluted.................... 11,174,494 12,772,845
=========== ===========
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<CAPTION>
JUNE 30, 1999
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 2,970 $ 2,970 $
Working capital........................................... 1,337 1,337
Total assets.............................................. 6,975 6,975
Long-term debts, net of current portion................... 2,367 2,367 2,367
Mandatorily redeemable convertible preferred stock........ 18,982 --
Accumulated deficit....................................... (20,528) (20,528)
Total stockholders' equity (deficit)...................... (18,835) 147
</TABLE>
6
<PAGE> 9
RISK FACTORS
You should consider the risks described below before making an investment
decision. The risks and uncertainties described below are not the only ones
facing our company. Additional risks that we are unaware of or that we currently
believe are immaterial may become important factors that affect our business.
Our business, operating results or financial condition could be materially
adversely affected by any of the following risks. The trading price of our
common stock could decline due to any of the following risks, and you might lose
all or part of your investment.
WE HAVE A HISTORY OF LOSSES AND EXPECT LOSSES IN THE FUTURE. IF WE DO NOT
ACHIEVE OR SUSTAIN PROFITABILITY OUR BUSINESS WILL SUFFER AND OUR STOCK PRICE
MAY DECLINE.
We were incorporated in August 1996 and first recognized revenues in the
fourth quarter of 1997. As of June 30, 1999, we had an accumulated deficit of
approximately $20.5 million. To date, we have not had a profitable quarter and
do not expect to have a profitable quarter in 2000. If we do achieve
profitability, we cannot be certain that we can sustain or increase
profitability on a quarterly or annual basis in the future. To date, we have
funded our operations from the sale of equity securities and have not generated
cash from operations. We expect to continue to incur significant costs
developing and introducing enhancements to our suite of e-business
infrastructure applications and related services and on expanding our direct
sales and marketing activities, leading to losses at least through 2001. These
losses could harm our business and cause a decrease in the market price of our
common stock. Although our revenues have grown in recent quarters, we do not
believe that we can sustain these growth rates, or that these growth rates are
indicative of future revenue growth rates. See "Selected Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
OUR QUARTERLY OPERATING RESULTS ARE VOLATILE AND DIFFICULT TO PREDICT AND IF WE
FAIL TO MEET THE EXPECTATIONS OF PUBLIC MARKET ANALYSTS AND INVESTORS, THE
MARKET PRICE OF OUR COMMON STOCK MAY DECREASE SIGNIFICANTLY.
Our quarterly operating results have varied in the past and may vary
significantly in the future. Because our business is evolving rapidly and we
have a limited operating history, we have little experience in forecasting our
revenues. Since our operating results are volatile and difficult to predict, we
believe that period-to-period comparisons of our operating results are not a
good indication of our future performance. Our future quarterly operating
results may be below the expectations of public market analysts and investors.
In this event, the market price of our common stock may decrease significantly.
Our future quarterly operating results may vary for several reasons, including:
- demand for and the timing of sales of our CenterStage products and
related services;
- actions taken by our competitors, including new product introductions and
enhancements;
- changes in the rapidly evolving market for e-business infrastructure
applications;
- our ability to develop, introduce and market e-business infrastructure
applications and enhancements to our existing CenterStage products on a
timely basis;
- changes in our pricing policies and those of our competitors; and
- our inability to complete large sales on schedule.
Historically, we have recognized a substantial portion of our revenues in
the last few days of a quarter. Accordingly, we cannot accurately predict our
financial results for any quarter until very late in that quarter. A delay in an
anticipated sale near the end of a quarter can seriously harm our operating
results for that quarter. In addition, we derive a significant portion of our
revenues from the license of our CenterStage products in each quarter from a
small number of large orders. Although we do not believe that the loss of any
particular customer would have an adverse effect on our business, our operating
results could be adversely affected if we are unable to complete one or more
substantial license sales in any future period.
7
<PAGE> 10
Our expense levels are relatively fixed in the short term and are based, in
part, on our expected future revenues. We cannot be certain that our revenues
expectations will be accurate or that we will be able to adjust spending in a
timely manner to compensate for any unexpected revenue shortfall. As a result,
any delay in generating or recognizing revenues could cause significant
variations in our operating results from quarter to quarter and could result in
increased operating losses.
WE HAVE RELIED AND EXPECT TO CONTINUE TO RELY ON OUR CENTERSTAGE PRODUCT SUITE
FOR OUR REVENUES, INCLUDING NEW PRODUCTS WITH WHICH WE HAVE LIMITED EXPERIENCE
SELLING.
Most of our revenues in 1998 were derived from software license and service
fees from one suite of products, CenterStage, which until recently has consisted
of CenterStage eContent and CenterStage eIntegrate. We have recently introduced
three new products to our CenterStage product suite, CenterStage eNotify,
CenterStage eBizXchange and CenterStage eSyndicate. Given our limited experience
selling these three new products, we cannot forecast the level and timing of
their market acceptance.
We expect that this suite of products will continue to account for the
substantial majority of our total revenues for at least the next several
quarters. However, we may not receive these revenues if:
- broad standards for conducting e-business emerge and become widely
adopted, thus reducing the need for our infrastructure products;
- information services departments of companies choose to create their
e-business portals and e-marketplaces internally or use third-party
professional developers to create and maintain their sites;
- competitors develop products, technologies or capabilities that render
our CenterStage products and related services obsolete or noncompetitive
or that shorten the life cycles of these products and services;
- our CenterStage products do not meet customer performance needs or fail
to remain free of significant software defects or bugs; or
- we are unable to recruit and retain the additional sales personnel needed
to effectively market our CenterStage products.
Furthermore, to remain competitive, software products like ours typically
require frequent updates that add new features. There can be no assurance that
we will succeed in creating and selling updated or new versions of our
CenterStage products. A decline in demand for, or in the average selling price
of, our CenterStage products, may significantly hurt our business and cause our
stock price to fall.
THE MARKET FOR E-BUSINESS PORTALS AND E-MARKETPLACES IS NEW AND EMERGING AND IF
IT DOES NOT GROW AS RAPIDLY AS WE ANTICIPATE OR FAILS TO EMERGE AT ALL, OUR
BUSINESS WILL SUFFER.
Our success is dependent on the emergence of the market for e-business
portals and e-marketplaces. We are planning to dedicate all of our sales,
marketing and product development efforts toward e-business portals and
e-marketplaces and if these markets do not develop as rapidly as we expect, our
business will be harmed. A number of factors could prevent or hinder the
emergence of these markets, including the following:
- the unwillingness of customers to change their traditional method of
conducting commerce;
- the failure of the Internet network infrastructure to keep pace with
substantial growth; and
- adverse publicity and consumer concern about the security of electronic
commerce transactions.
8
<PAGE> 11
IT IS DIFFICULT TO PREDICT THE TIMING OF INDIVIDUAL ORDERS BECAUSE OUR
CENTERSTAGE PRODUCTS HAVE LONG AND VARIABLE SALES CYCLES.
Variations in the length of our sales cycles could cause our revenues to
fluctuate widely from period to period. Because our operating expenses are
relatively fixed over the short term, these fluctuations could cause our
operating results to suffer in some future periods. To date, the average sales
cycle for our CenterStage products has been three to six months and has required
pre-purchase evaluation by a significant number of decision makers, including
senior management. Our sales cycles can be much longer for larger opportunities
with new customers. Since a number of factors influence the sales process, the
period between our initial contact with a new customer and the time we recognize
revenues from that customer varies widely. We spend significant time educating
and providing information to our prospective customers regarding the use and
benefits of our CenterStage products. Even after purchase, our customers tend to
deploy our solution slowly and deliberately. Deployment schedules depend on the
specific technical capabilities of each customer, the size of the deployment,
the complexity of each customer's network environment, and the quantity of
hardware and the degree of hardware configuration required.
WE FACE COMPETITION PRIMARILY FROM COMPANIES DEVELOPING THEIR OWN INTERNAL
E-BUSINESS INFRASTRUCTURE SYSTEMS AND OTHER PROVIDERS OF E-BUSINESS
INFRASTRUCTURE SOLUTIONS AND IF WE ARE UNABLE TO COMPETE SUCCESSFULLY, OUR
BUSINESS WILL BE SERIOUSLY HARMED.
The market for e-business infrastructure applications and services is
intensely competitive, evolving and subject to rapid technological change. We
expect the intensity of our competition to increase in the future. We may not be
able to compete successfully against current and future competitors. Competitors
vary in size and in the scope and breadth of the products and services offered.
To date, we have faced competition from the internal information technology
departments of current and potential customers that have developed or may
develop in-house e-business infrastructure systems that may substitute for those
we offer. We expect that internally developed e-business infrastructure systems
will continue to be a principal source of competition in the future. With regard
to the license of e-business infrastructure applications, we primarily encounter
competition from webMethods. If we are successful, we expect to encounter many
additional competitors in the future. In addition, because there are relatively
low barriers to entry in the e-business infrastructure applications market, we
expect additional competition from other established and emerging companies as
this market continues to develop and expand. In particular, we believe we may
face competition from IBM, Microsoft, Oracle and Sun Microsystems if they
perceive entry into our market segment as strategic. We may also face
competition from established companies in the enterprise application
integration, enterprise application, procurement software and e-business
platform software markets, any of whom could move into the Web exchange market
or build and market products. Competition could also emerge from established
companies in the application server market or from companies that specialize in
creating and distributing content over the Web.
Many of our competitors have longer operating histories, significantly
greater financial, technical, marketing and other resources, significantly
greater name recognition and a larger installed base of customers than we have.
In addition, many of our competitors have well-established relationships with
current and potential customers of ours, have extensive knowledge of our
industry and are capable of offering alternative solutions. As a result, our
competitors may be able to respond more quickly to new or emerging technologies
and changes in customer requirements, or to devote greater resources to the
development, promotion and sale of their products and services than we can. In
addition, many of our current and potential competitors have established or may
establish cooperative relationships among themselves or with third parties that
may improve their ability to address customer needs. Accordingly, it is possible
that new competitors or alliances among competitors may emerge and rapidly
acquire significant market share. Increased competition is likely to result in
price reductions, reduced gross margins and loss of market share, any of which
could harm our business, operating results and financial condition.
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<PAGE> 12
WE NEED TO EXPAND OUR DIRECT SALES OPERATIONS IF WE ARE TO INCREASE MARKET
AWARENESS AND SALES OF OUR CENTERSTAGE PRODUCTS AND RELATED SERVICES AND
MAINTAIN GROWTH.
If we fail to increase our direct sales capabilities as we have planned,
our business, operating results and financial condition will be harmed. Our
CenterStage products and related services require a sophisticated sales effort
targeted at senior management of our prospective customers. We have recently
expanded our direct sales force and plan to hire additional sales personnel.
Competition for qualified sales personnel is intense in each of the locations we
plan to expand, and we might not be able to hire and retain the type and number
of sales personnel we are targeting. New hires will require extensive training
and typically take several months to achieve productivity. We cannot be certain
that our recent hires will be as productive as necessary.
OUR BUSINESS MAY BE HARMED IF WE ARE UNABLE TO RETAIN OUR KEY PERSONNEL OR
ATTRACT ADDITIONAL KEY PERSONNEL, PARTICULARLY SINCE EXPERIENCED PERSONNEL AND
NEW SKILLED PERSONNEL ARE IN SHORT SUPPLY.
We have experienced difficulties attracting, hiring, training and retaining
new personnel in the past, and all of our personnel, including members of our
management team, may terminate their employment with us or decide to work for
one of our competitors at any time for any reason. Currently, we are
particularly dependent upon the services of our founder, President and Chief
Executive Officer, Mark Pine, and founder and Chief Technical Officer, Trung
Dung. The loss of Mr. Pine's or Mr. Dung's services would materially impede the
operation and growth of our business.
Competition for key personnel is intense, particularly in the San Francisco
Bay Area, where our headquarters is located, and we may fail to retain our key
employees, or attract, assimilate or retain other highly qualified personnel in
the future. If so, our business, operating results and financial condition could
be seriously harmed. In addition, we expect to face greater difficulty
attracting these personnel with equity incentives as a public company than we
did as a privately-held company. We do not maintain key person life insurance
for any of our personnel.
OUR BUSINESS WILL SUFFER IF WE FAIL TO SUCCESSFULLY MANAGE OUR GROWTH.
Our ability to offer our CenterStage products and related services in a
quickly evolving market requires an effective planning and management process.
Therefore, we have expanded our operations rapidly since inception, and we
intend to continue to expand them in the foreseeable future. This rapid growth
places significant demand on our managerial and operational resources and our
internal training capabilities. In addition, we have recently hired a
significant number of employees and plan to further increase our total
headcount. We also plan to expand the geographic scope of our operations, both
domestically and internationally. This expansion will continue to substantially
burden our management team. To manage growth effectively, we must:
- implement and improve our operational, financial and other systems,
procedures and controls on a timely basis;
- expand, train and manage our workforce, particularly our sales and
marketing and support organizations; and
- identify and move into suitable office space to expand our facilities.
We cannot be certain that our systems, procedures or controls will be
adequate to support our current or future operations or that our management will
be able to manage expansion and still achieve the rapid execution necessary to
meet our growth expectations. Failure to manage our growth effectively could
harm our business.
10
<PAGE> 13
IF WE FAIL TO ADEQUATELY RESPOND TO RAPID TECHNOLOGICAL CHANGES, OUR EXISTING
PRODUCTS WILL BECOME OBSOLETE OR UNMARKETABLE.
New approaches to aggregate, exchange, integrate, personalize and syndicate
information over the Internet based on new technologies and industry standards
could render our CenterStage products obsolete and unmarketable. We believe that
to succeed we must enhance our CenterStage products, develop new products on a
timely basis to keep pace with technological developments and satisfy the
increasingly sophisticated requirements of our customers. Therefore, we cannot
be certain that we will successfully respond to technological change, evolving
industry standards or customer requirements. If we are unable to adequately
respond to these changes, our revenues and market share could rapidly decline.
In addition, we have experienced development delays and related cost overruns on
occasion, and we cannot be certain that we will not encounter these problems in
the future. Any delays in developing and releasing new products or enhancements
to our CenterStage products could result in:
- customer dissatisfaction;
- cancellation of orders and license agreements;
- negative publicity;
- loss of revenues;
- slower market acceptance; and
- legal action by customers against us.
Our CenterStage products are designed to work on a variety of hardware and
software platforms used by our customers. However, these products may not
operate well with future versions of hardware and software platforms,
programming languages, database environments, accounting and other systems that
our customers use. We must constantly modify and improve our technology to keep
pace with changes made to these platforms and to operational applications and
other Internet-related applications. This may result in uncertainty relating to
the timing and nature of new product announcements, introductions or
modifications, which may harm our business. If we fail to modify or improve our
CenterStage products in response to evolving industry standards, they could
rapidly become obsolete or unmarketable, which would harm our business.
OUR BUSINESS WILL SUFFER IF OUR CENTERSTAGE PRODUCTS CONTAIN ERRORS.
Our e-business infrastructure applications are complex and may contain
undetected errors or result in system failures, especially when first introduced
or when new versions or enhancements are released. Despite extensive testing,
errors could occur in any of our current or future product offerings after
commencement of commercial shipments. Testing of our CenterStage products is
particularly challenging because it is difficult to simulate the wide variety of
computer environments into which they are deployed. The implementation of our
CenterStage products typically involves working with sophisticated software,
computing and communications systems. If our software contains undetected errors
or we fail to meet our customers' expectations in a timely manner we could
experience:
- loss of or delay in revenues and loss of market share;
- loss of customers;
- failure to achieve market acceptance;
- diversion of development resources;
- diversion of customer support resources;
- negative publicity;
- increased service and warranty costs;
11
<PAGE> 14
- legal actions by customers against us; and
- increased insurance costs.
Our licenses with customers generally contain provisions designed to limit
our exposure to potential product liability claims such as disclaimers of
warranties and limitations on liability for special, consequential and
incidental damages. In addition, our license agreements generally limit the
amounts recoverable for damages to the amounts paid by our customers to us for
the products or services giving rise to the damages. We cannot be certain that
the limitations of liability we include in our contracts will be enforceable
since existing or future laws or unfavorable judicial decisions could negate
these liability limiting provisions. The successful assertion of one or more
large claims that exceed contractual limitations on our liability, could cause
our revenues to decrease and our stock price to fall.
Because our customers use our CenterStage products for mission-critical
applications, errors or defects in or other performance problems associated with
these products could result in financial or other damages to our customers. Our
customers may then seek damages for losses from us. We have not experienced any
product liability claims to date. However, a product liability claim brought
against us, even if not successful, would likely be time-consuming and costly
and could harm our business.
IF WE FAIL TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS OR FACE A
CLAIM OF INTELLECTUAL PROPERTY INFRINGEMENT BY A THIRD PARTY, WE COULD LOSE OUR
INTELLECTUAL PROPERTY RIGHTS OR BE LIABLE FOR SIGNIFICANT DAMAGES.
Our success depends in large part on our ability to adequately protect our
intellectual property rights. We require our customers to enter into license
agreements, which impose restrictions on our customers' ability to utilize our
CenterStage products. In addition, we seek to avoid disclosure of our trade
secrets by, among other methods, restricting access to our source code and
requiring those persons with access to our proprietary information to execute
confidentiality agreements with us. However, some of these confidentiality
agreements contain provisions that may permit these persons, in certain
circumstances, to develop products based on our proprietary information as a
result of their access to our source code. If these persons develop products
based on our proprietary information, the value of our proprietary information
will be adversely impacted. We seek to protect our source code, documentation
and other written materials under trade secret and copyright laws, which afford
only limited protection. We also seek to protect our trademarks, but our actions
may be inadequate to prevent misappropriation or infringement or to prevent
others from claiming violations of their trademarks by us.
Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our technology or to obtain and use information
that we regard as proprietary. Policing unauthorized use of our technology is
difficult, and while we are unable to determine the extent to which piracy of
our CenterStage products exists, software piracy can be a persistent problem. In
addition, as we expand our operations globally, we become increasingly exposed
to intellectual property infringement since the laws of some foreign countries
do not protect our proprietary rights to as great an extent as the laws of the
United States. Our means of protecting our proprietary rights may not be
adequate and our competitors may independently develop similar technology,
duplicate our CenterStage products or design around our other intellectual
property. There has been a substantial amount of litigation in the software
industry regarding intellectual property rights. It is possible that in the
future third parties may claim that our current or future products infringe
their intellectual property. We expect that software developers will
increasingly be subject to infringement claims as the number of products and
competitors in our industry segment grows and the functionality of products in
different industry segments overlaps. Any intellectual property claims, with or
without merit, could be time-consuming, result in costly litigation, cause
product shipment delays or require us to enter into royalty or licensing
agreements. Any royalty or licensing agreements, if required, may not be
available on terms acceptable to us, or at all, which could seriously harm our
business, operating results and financial condition.
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<PAGE> 15
THERE IS SUBSTANTIAL RISK THAT FUTURE REGULATIONS COULD BE ENACTED THAT EITHER
DIRECTLY RESTRICT OUR BUSINESS OR INDIRECTLY IMPACT OUR BUSINESS BY LIMITING THE
GROWTH OF INTERNET COMMERCE.
As Internet commerce evolves, we expect federal, state or foreign agencies
to adopt regulations covering many issues, including user privacy, pricing,
content and quality of products and services. If enacted, these laws, rules or
regulations could limit the market for our CenterStage products and related
services, which could adversely affect our business, operating results and
financial condition. Although many of these regulations may not apply to our
business directly, we expect that laws regulating the solicitation, collection
or processing of personal/consumer information could indirectly affect our
business. The Telecommunications Act of 1996 prohibits certain types of
information and content from being transmitted over the Internet. The
prohibition's scope and the liability associated with a Telecommunications Act
violation are currently unsettled. In addition, although substantial portions of
the Communications Decency Act were held to be unconstitutional, we are unsure
whether similar legislation will be enacted and upheld in the future. It is
possible that legislation could expose companies involved in Internet commerce
to liability, which could limit the growth of Internet commerce generally.
Legislation like the Telecommunications Act and the Communications Decency Act
could dampen the growth of Internet usage and decrease its acceptance as a
commercial medium. Moreover, the applicability to the Internet of existing laws
in various jurisdictions governing issues such as property ownership, sales tax,
libel and personal privacy is uncertain and may take years to resolve. Our costs
could increase and our growth could be harmed by any new legislation or
regulation, the application of laws and regulations from jurisdictions whose
laws do not currently apply to our business, or the application of existing laws
and regulations to the Internet and on-line businesses.
OUR PLANNED INTERNATIONAL OPERATIONS MAY NOT BE SUCCESSFUL AND WILL MAKE US
SUSCEPTIBLE TO RISKS FROM INTERNATIONAL OPERATIONS.
We intend to begin our international operations during the fourth quarter
of 1999. Any expanded international operations will be subject to a variety of
risks associated with conducting business internationally that could adversely
affect our business, including:
- little or no protection of our intellectual property rights in some
foreign countries;
- difficulties in staffing and managing international operations;
- expenses associated with customizing products for foreign countries;
- protectionist laws and business practices that favor local competition;
- multiple, conflicting and changing governmental laws and regulations;
- slower adoption of the Internet for e-commerce infrastructure
applications;
- longer sales and payment cycles;
- greater difficulties in collecting accounts receivable;
- fluctuations in currency exchange rates;
- political and economic instability;
- potentially adverse tax consequences;
- seasonal reductions in business activity during the summer months in
Europe and other parts of the world; and
- increases in tariffs, duties, price controls or other restrictions on
foreign currencies or trade barriers imposed by foreign countries.
We expect international revenues to account for a significant percentage of
our total revenues in the future and we believe that we must expand our
international sales activities in order to be successful. This will require
significant management attention and financial resources and could harm our
financial
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<PAGE> 16
performance by increasing our costs. We have very limited experience in
marketing, selling and distributing our CenterStage products and related
services internationally. We currently have no employees located outside of the
United States. The establishment and growth of our international operations will
be limited if we are unable to establish additional foreign operations, launch
and expand international sales channel management and support organizations,
hire personnel, customize products and services for local markets and develop
relationships with international service providers. Even if we are able to
successfully establish and expand international operations, we cannot be certain
that we will be able to create, maintain or increase international market demand
for our CenterStage products and related services. The acceptance and use of the
Internet for conducting commerce in international markets are in earlier stages
of development than in the United States. Furthermore, our international
revenues will be denominated in U.S. dollars. Therefore, a strengthening of the
dollar versus other currencies could make our products less competitive in
foreign markets. We do not currently engage in currency hedging activities. If
the Internet or e-commerce fail to gain sufficient acceptance in international
markets or we fail to establish and expand our international operations in a
timely manner, our business, operating results and financial condition could be
harmed.
ACQUISITIONS OF COMPANIES OR TECHNOLOGIES MAY RESULT IN DISRUPTIONS TO OUR
BUSINESS AND MANAGEMENT DUE TO DIFFICULTIES IN ASSIMILATING PERSONNEL AND
OPERATIONS.
In the future we may make acquisitions of, or large investments in
products, technologies or businesses that offer products, services and
technologies that we believe would help expand our product offerings. Although
we have not made acquisitions of, or investments in products, technologies or
other companies in the past, this may become an important part of our strategy.
Any future acquisitions or investments would present risks, including the
difficulty of combining the technology, operations or workforce of the acquired
business with our own, disruption of our ongoing businesses and difficulty in
realizing the anticipated financial or strategic benefits of the transaction. We
may be unable to maintain uniform standards, controls, procedures and policies
if we fail in these efforts. Similarly, acquisitions may cause disruptions in
our operations and divert management's attention from day-to-day operations,
which could impair our relationships with our current employees, customers and
strategic partners.
To make these acquisitions or large investments we might use cash, common
stock or a combination of cash and common stock. If we use common stock, these
acquisitions could further dilute existing stockholders. Amortization of
goodwill or other intangible assets resulting from acquisitions could materially
impair our business, operating results and financial condition. Furthermore,
there can be no assurance that we will be able to obtain acquisition financing,
or that any acquisition, if consummated, will be smoothly integrated into our
business. If we make acquisitions or large investments and are unable to
surmount these risks, our business could be harmed, our revenues could decrease
and our stock price could fall.
PROBLEMS RELATED TO THE "YEAR 2000 ISSUE" COULD ADVERSELY AFFECT OUR BUSINESS.
The "year 2000 issue" refers generally to the problems that some software
may have in determining the correct century for the year. For example, software
with date-sensitive functions that is not year 2000 compliant may not be able to
distinguish whether "00" means 1900 or 2000, which may result in failures or the
creation of erroneous results. We designed our CenterStage products to be year
2000 compliant provided that the underlying operating system of the host machine
and any other software used with our products are year 2000 compliant. We are
exposed to various risks arising out of year 2000 issues which could adversely
affect our business and operating results. Risks are posed if, despite our
investigation and remediation efforts, one or more of the following occurs:
- our own CenterStage software products contain undetected errors or
defects associated with the year 2000 problem;
- third party hardware and software used with our CenterStage products
experiences problems which are wrongly attributed to us;
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<PAGE> 17
- our suppliers, internal information technology systems or non-information
technology systems, including telecommunications systems and utilities,
experience problems; and
- our customers experience year 2000 problems.
The occurrence of any of the foregoing problems could result in delays or
losses of revenues, diversion of our development resources, damage to our
reputation, increased service and warranty costs and litigation costs. We do not
currently have any information concerning the year 2000 compliance status of our
customers. Our current or future customers may incur significant expenses to
achieve year 2000 compliance. If our customers are not year 2000 compliant, they
may experience material costs to remedy problems, they may face litigation costs
and they may delay purchases or implementation of our CenterStage products. Year
2000 issues could reduce or eliminate the budgets that current or potential
customers could have for purchases of our CenterStage products and related
services. As a result, our business, operating results and financial condition
could be seriously harmed. Regardless of whether we experience year 2000
problems, enterprises may reduce their spending on software and systems during
the latter part of 1999 and into 2000 in connection with the potential effects
of the year 2000 or to concentrate their resources on remediation. In addition,
we may experience material problems and costs with year 2000 compliance that
could adversely affect our business, operating results, and financial condition.
We have established a year 2000 compliance team, whose purpose is to evaluate
any year 2000 risks that we face and to remedy any year 2000 problems. Our year
2000 compliance team is in process of completing its assessment of our internal
systems or our suppliers' systems or products. Although it is the duty of this
team to identify and correct any year 2000 problems, it may fail to identify
material year 2000 problems that we face. Further, even if this team
successfully identifies year 2000 problems, it may not be able to adequately
remedy any year 2000 problems. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Year 2000 Compliance." 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 a year 2000 contingency plan may be
material.
WE MAY SPEND A PORTION OF THE NET PROCEEDS OF THIS OFFERING IN WAYS WITH WHICH
YOU MAY NOT AGREE.
We have not designated any specific use for a significant amount of the net
proceeds from this offering. We intend to use the net proceeds from this
offering for general corporate purposes, including working capital to fund
anticipated operating losses and capital expenditures. Accordingly, management
will have significant flexibility in applying the remaining net proceeds from
this offering. We cannot predict that investment of the net proceeds of this
offering will generate a favorable or any return. The failure of management to
apply the net proceeds from this offering effectively could cause our revenues
to decrease and our stock price to fall.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL THAT MAY NOT BE AVAILABLE ON TERMS
FAVORABLE TO US, IF AT ALL.
We expect that the net proceeds from this offering will be sufficient to
meet our working capital and capital expenditure needs for at least the next
twelve months. After that, we may need to raise additional capital and we cannot
be certain that we will be able to obtain additional financing on favorable
terms, if at all. If we cannot raise additional capital on acceptable terms, we
may not be able to develop or enhance our products and services, take advantage
of future opportunities or respond to competitive pressures or unanticipated
requirements, which could seriously harm our business, operating results and
financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
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<PAGE> 18
THERE HAS BEEN NO PRIOR PUBLIC MARKET FOR OUR COMMON STOCK, AND THE PRICE OF OUR
COMMON STOCK MAY BE VOLATILE.
Prior to this offering, you could not buy or sell our common stock
publicly. An active public market for our common stock may not develop or be
sustained after this offering. We negotiated and determined the initial public
offering price of the common stock in this offering with the representatives of
the underwriters based on several factors. However, this price may vary from the
market price of our common stock after this offering. The market price of our
common stock may fluctuate significantly in response to the following factors,
some of which are beyond our control:
- variations in quarterly operating results;
- failure to meet the expectations of industry analysts;
- changes in financial estimates by securities analysts;
- changes in market valuations of Internet software companies;
- announcements by us, or our competitors, of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments;
- the loss of a major client or failure to complete significant license
transactions;
- increased price competition;
- additions or departures of key personnel;
- sales of our common stock in the future; and
- fluctuations in stock market price and volume, which are particularly
common among highly volatile securities of Internet software companies.
OUR BUSINESS MAY BE ADVERSELY AFFECTED BY CLASS ACTION LAWSUITS DUE TO STOCK
PRICE VOLATILITY.
In the past, securities class action lawsuits have often been brought
against companies similar to ours following periods of volatility in the market
price of its securities. We may be the target of similar lawsuits in the future.
A securities class action lawsuit could result in substantial costs and divert
our management's attention and resources, which could have a material adverse
effect on our business, operating results and financial condition.
A THIRD PARTY COULD BE PREVENTED FROM ACQUIRING YOUR SHARES OF COMMON STOCK AT A
PREMIUM TO THE MARKET PRICE BECAUSE OF OUR ANTI-TAKEOVER PROVISIONS.
Our current stockholders will own approximately % of our outstanding
stock immediately following this offering, assuming conversion of all
outstanding warrants and no exercise of outstanding options. This ownership
interest in addition to provisions of our charter, bylaws and Delaware law could
make it more difficult for a third party to acquire us, even if a change in
control would result in the purchase of your shares of common stock at a premium
to the market price. These anti-takeover provisions are further described in
"Certain Transactions" and "Description of Capital Stock."
FUTURE SALES OF OUR COMMON STOCK COULD ADVERSELY AFFECT OUR STOCK PRICE.
If our stockholders sell substantial amounts of our common stock, including
shares issued upon the exercise of outstanding options and warrants, in the
public market after this offering, the market price of our common stock could be
adversely affected. In addition, the sale of these shares could impair our
ability to raise capital through the sale of additional equity securities.
Upon completion of this offering, we will have shares of
common stock outstanding or shares if the underwriters'
over-allotment option is exercised in full and shares subject to
currently exercisable options and warrants. The shares sold in
this offering, or
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<PAGE> 19
shares if the underwriters' over-allotment option is exercised in
full, will be freely tradable without restriction or further registration under
the Federal securities laws unless purchased by "affiliates" of OnDisplay as
that term is defined in Rule 144. The remaining shares of common
stock outstanding upon completion of this offering will be "restricted
securities" as that term is defined in Rule 144. Our directors, executive
officers, and stockholders have executed lock-up agreements that limit their
ability to sell common stock. These stockholders have agreed not to sell or
otherwise dispose of any shares of common stock for a period of at least 180
days after the date of this prospectus without the prior written approval of
BancBoston Robertson Stephens. When these lock-up agreements expire, these
shares and the shares underlying the options will become eligible for sale, in
some cases only pursuant to the volume, manner of sale and notice requirements
of Rule 144. See "Shares Eligible for Future Sale."
YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION IN THIS OFFERING.
The initial public offering price is expected to be substantially higher
than the book value per share of our outstanding common stock immediately after
this offering. Accordingly, if you purchase common stock in the offering, you
will incur immediate dilution of approximately $ in the book value per
share of our common stock from the price you pay for our common stock.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS; THESE STATEMENTS ARE NOT
GUARANTEES OF FUTURE PERFORMANCE AND ARE SUBJECT TO CERTAIN RISKS, UNCERTAINTIES
AND OTHER FACTORS, SOME OF WHICH ARE BEYOND OUR CONTROL.
This prospectus contains forward-looking statements that involve risks and
uncertainties. We use the words "anticipates," "believes," "plans," "expects,"
"future," "seeks," "estimates" and "intends" and similar expressions to identify
forward-looking statements. This prospectus also contains forward-looking
statements attributed to certain third parties relating to their estimates
regarding the growth of e-commerce and the use of the Internet for engaging in
purchasing transactions. Our actual results could differ materially from those
anticipated in these forward-looking statements for many reasons, including the
risks faced by us described in "Risk Factors" and elsewhere in this prospectus.
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<PAGE> 20
USE OF PROCEEDS
Our proceeds from the sale of the shares of Common Stock we
are offering are estimated to be $ million ($ million if the
underwriters' over-allotment option is exercised in full) assuming a public
offering price of $ per share and after deducting the underwriting discount
and our estimated offering expenses.
We plan to use the proceeds for general corporate purposes, including
working capital, increases in our sales and marketing operations, product
development and international expansion. We may also use some of the proceeds to
acquire other companies, technology or products that complement our business,
although we are not currently planning any of these transactions. Pending these
uses, the net proceeds of this offering will be invested in short-term,
interest-bearing securities.
The principal purposes of this offering are to obtain additional capital,
to create a public market for the Common Stock, to facilitate future access to
public equity markets and to provide increased visibility and credibility in a
marketplace where many of our current and potential competitors are or are
likely to become publicly-held companies.
DIVIDEND POLICY
We have never declared or paid cash dividends on our capital stock. We
currently expect to retain our future earnings, if any, for use in the operation
and expansion of our business and do not anticipate paying any cash dividends in
the foreseeable future. Under an agreement with a secured lender we may not pay
dividends without prior approval.
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<PAGE> 21
CAPITALIZATION
The following table sets forth:
- The actual capitalization of OnDisplay at June 30, 1999;
- The pro forma capitalization of OnDisplay after giving effect to the
conversion of all outstanding shares of preferred stock into 8,891,554
shares of common stock immediately prior to the completion of this
offering.
- The pro forma as adjusted capitalization, which gives effect to the sale
in this offering of shares of common stock at an estimated
initial public offering price of $ per share and after deducting the
estimated underwriting discounts and commissions and estimated offering
expenses.
<TABLE>
<CAPTION>
JUNE 30, 1999
-----------------------------------
PRO PRO FORMA
ACTUAL FORMA AS ADJUSTED
-------- -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt, less current portion...................... $ 2,367 $ 2,367 $ 2,367
Mandatorily redeemable convertible preferred stock, Series
A, B and C, $0.001 par value; 9,500,000 shares
authorized, actual 8,891,554 shares issued and
outstanding, proforma none.............................. 18,982 -- --
Stockholders' equity (deficit):
Common stock, $0.001 par value; 20,000,000 shares
authorized, shares issued and outstanding, at amount
paid in(1):
Actual: 4,592,978 shares;
Pro forma: 13,484,532 shares; and
Pro forma as adjusted: shares(1)......... 1 10
Additional paid-in capital.............................. 4,882 23,855
Deferred stock-based compensation....................... (3,190) (3,190) (3,190)
Accumulated deficit..................................... (20,528) (20,528) (20,528)
-------- -------- --------
Total stockholders' deficit.......................... (18,835) 147
-------- -------- --------
Total capitalization............................ $ 2,514 $ 2,514
======== ======== ========
</TABLE>
This table excludes the following shares:
- Shares issuable upon exercise of stock options outstanding as of June 30,
1999;
- Shares available for future grant or issuance under of stock option and
stock purchase plans as of June 30, 1999; and
- Shares issuable upon exercise of warrants outstanding as of June 30, 1999
See Notes 8 and 9 to the Financial Statements.
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DILUTION
Our net tangible book value as of June 30, 1999 was approximately
$ million, or approximately $ per share of common stock. Net
tangible book value per share represents the amount of tangible assets less
total liabilities, divided by the number shares of common stock outstanding,
assuming the conversion of all outstanding shares of preferred stock into common
stock.
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 pro forma net tangible book value per share of our common
stock immediately after this offering. After giving effect to our sale of
shares of common stock in this offering at an assumed public offering
price of $ per share and after deduction of the underwriting discount and
estimated offering expenses, our pro forma net tangible book value as of June
30, 1999 would have been approximately $ million, or $ per share. This
represents an immediate increase in pro forma net tangible book value of
$ per share to existing stockholders and an immediate dilution in pro forma
net tangible book value of $ per share to purchasers of common stock in this
offering.
<TABLE>
<S> <C> <C>
Public offering price per share.............................
Net tangible book value per share before offering.........
Increase per share attributable to new investors..........
Pro forma net tangible book value per share after
offering..................................................
Net tangible book value dilution per share to new
investors.................................................
</TABLE>
This table excludes all options and warrants that will remain outstanding
upon completion of this offering. See Note of Notes to 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 June 30, 1999 the total consideration
paid and the average price per share paid by the existing stockholders and by
new investors, before deducting estimated underwriting discounts and commissions
and offering expenses payable by the Company at an assumed public offering price
of $ per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT NUMBER PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders..............
New investors......................
Total....................
</TABLE>
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<PAGE> 23
SELECTED FINANCIAL DATA
You should read the following selected financial data in conjunction with
our financial statements and notes and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
prospectus. The statement of operations data for the period from inception to
December 31, 1996, and the years ended December 31, 1997 and 1998 and the
balance sheet data as of December 31, 1997 and 1998 are derived from our
Financial Statements that have been audited by PricewaterhouseCoopers LLP,
independent auditors, and are included elsewhere in this prospectus. The balance
sheet data for the year ended December 31, 1996 is derived from our Financial
Statements audited by PricewaterhouseCoopers LLP, that are not included in this
prospectus. The statement of operations data for the six months ended June 30,
1998 and 1999 and the balance sheet data as of June 30, 1999 are derived from
unaudited financial statements included elsewhere in this prospectus. The
results of operations for the six months ended June 30, 1999 are not necessarily
indicative of the results to be expected for the entire year. The pro forma net
loss per share data assume conversion of all outstanding shares of preferred
stock into common stock. See Note 11 of Notes to Financial Statements.
<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 14,
1996
(DATE OF YEAR ENDED SIX MONTHS
INCEPTION) TO DECEMBER 31, ENDED JUNE 30,
DECEMBER 31, ------------------------ ------------------------
1996 1997 1998 1998 1999
------------- ---------- ----------- ---------- -----------
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
License revenues................... $ -- $ 265 $ 2,229 $ 876 $ 1,937
Service revenues................... -- -- 1,114 276 1,718
---------- ---------- ----------- ---------- -----------
Total revenues.............. -- 265 3,343 1,152 3,655
Cost of revenues................... -- -- 1,620 470 1,981
---------- ---------- ----------- ---------- -----------
Gross profit....................... -- 265 1,723 682 1,674
Operating expenses:
Sales and marketing.............. 42 2,810 5,747 2,388 4,093
Research and development......... 393 1,986 2,636 1,355 1,638
General and administrative....... 182 1,158 1,201 361 1,250
Amortization of deferred
stock-based compensation...... -- -- 618 194 769
---------- ---------- ----------- ---------- -----------
Total operating expenses.... 617 5,954 10,202 4,298 7,750
---------- ---------- ----------- ---------- -----------
Loss from operations............... (617) (5,689) (8,479) (3,616) (6,076)
Interest income and other, net..... 45 155 131 35 2
---------- ---------- ----------- ---------- -----------
Net loss........................... $ (572) $ (5,534) $ (8,348) $ (3,581) $ (6,074)
========== ========== =========== ========== ===========
Net loss per share -- basic and
diluted.......................... $ (0.17) $ (1.62) $ (2.34) $ (1.04) $ (1.56)
========== ========== =========== ========== ===========
Shares used in per share
calculation -- basic and
diluted.......................... 3,400,000 3,410,313 3,572,353 3,432,260 3,881,291
========== ========== =========== ========== ===========
Pro forma net loss per
share -- basic and diluted....... $ (0.75) $ (0.48)
=========== ===========
Shares used in pro forma net loss
per share calculation -- basic
and diluted...................... 11,174,494 12,772,845
=========== ===========
</TABLE>
21
<PAGE> 24
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1997 1998 JUNE 30, 1999
------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA (IN THOUSANDS)
Cash and cash equivalents................................. $ 3,900 $ 4,648 $ 2,970
Working capital........................................... 3,748 4,584 1,337
Total assets.............................................. 4,710 8,253 6,975
Long-term debt, less current portion...................... 128 240 2,367
Mandatorily redeemable convertible preferred stock........ 10,200 18,982 18,982
Accumulated deficit....................................... (6,106) (14,454) (20,528)
Total stockholders' deficit............................... (6,098) (13,729) (18,835)
</TABLE>
22
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements based upon current
expectations that involve risks and uncertainties. When used in this prospectus,
the words "intend," "anticipate," "believe," "estimate," "plan" and "expect" and
similar expressions as they relate to OnDisplay are included to identify
forward-looking statements. The following discussion should be read in
conjunction with the Financial Statements and Notes thereto included elsewhere
in this prospectus. Our actual results and the timing of certain events could
differ materially from those anticipated in these forward-looking statements as
a result of certain factors, including those set forth under "Risk Factors" and
elsewhere in this prospectus.
OVERVIEW
We provide a comprehensive suite of e-business infrastructure applications
for powering e-business portals and e-marketplaces. Our solution addresses the
unique challenges faced by e-business portals and e-marketplaces in both
business-to-business and business-to-consumer e-commerce. Our product suite
provides an open, scalable, adaptable solution to enable the rapid aggregation,
exchange, integration, personalization and syndication of e-business information
and services from a broad range of partners, suppliers and customers. Our
products enable our e-business portal and e-marketplace customers to: achieve
rapid time-to-market, engage and retain customers, increase revenues and
marketshare, and attain scalable and agile e-business relationships.
We were incorporated and commenced operations in August 1996. At that time,
we began developing our CenterStage technology platform and shipped our first
applications, now known as CenterStage eContent and CenterStage eIntegrate, in
the fourth quarter of 1997. These products were used to help customers rapidly
migrate from legacy systems to enterprise applications as well as to aggregate
content for emerging e-business applications. In the second quarter of 1999, in
response to evolving business requirements from our customers, we released and
shipped three new products, CenterStage eNotify, CenterStage eBizXchange and
CenterStage eSyndicate, to complete our CenterStage suite of e-business
products.
We sell our CenterStage products and related services primarily through a
direct sales force based in the United States. In addition, we have entered into
strategic relationships to enhance our indirect sales channels. In the future,
we expect that the majority of our revenues will continue to be derived from our
direct sales force.
We expect that the significant majority of our revenues will continue to be
derived from our CenterStage product suite and related services for the
foreseeable future. Our revenues, which consist of software license revenues and
service revenues, totaled $265,000 and $3.3 million for the years ended December
31, 1997 and 1998, and $3.7 million for the six months ended June 30, 1999.
Substantially all of our revenues since inception have been derived from the
license of applications based on our CenterStage technology platform and related
services. Our product pricing is principally based on the number of computer
servers on which our software resides and content sources used by each customer.
Service revenues consist of fees received for consulting, maintenance, customer
support and training.
Revenues from software license agreements are recognized upon shipment or
upon notification to the customer of the downloadable software location,
provided that a signed contract exists, the fee is fixed and determinable and
collection of the resulting receivable is probable and, if applicable,
acceptance criteria are met. Service revenues are recognized as services are
performed or, with respect to maintenance, ratably over the contract term,
typically over one year.
Our cost of revenues includes costs associated with the electronic
transmission of software and royalties for third party embedded software, which
are not material, salaries and related expenses for our consulting and training
services and customer support organizations, cost of third parties contracted to
provide consulting services to customers and an allocation of our facilities and
depreciation expenses.
23
<PAGE> 26
Our operating expenses are classified into three general categories: sales
and marketing, research and development and general and administrative. We
classify all charges to these operating expense categories based on the nature
of the expenditures. Although each category includes expenses that are unique to
the category type, there are commonly recurring expenditures that are typically
included in these categories in our operating expenses such as salaries,
employee benefits, incentive compensation, bonuses, sales commissions,
facilities, communications, third party consultant fees, and travel and
entertainment. The sales and marketing category also includes expenses related
to marketing programs such as public relations, trade shows, marketing
collateral and informational seminars.
We allocate the total costs for facilities to each functional area that
uses the overhead and facilities services based on their headcount. These
allocated charges include facility rent for the corporate office, communication
charges, and depreciation expense for office furniture and equipment.
Since inception, we have incurred substantial research and development
costs and invested heavily in the expansion of our sales, marketing and
professional services organizations to build an infrastructure to support our
long-term growth strategy. The number of our full-time employees increased from
39 as of December 31, 1997, to 65 as of December 31, 1998, representing an
increase of 66.7%. As a result of investments in our infrastructure, we have
incurred net losses in each fiscal quarter since inception and, as of June 30,
1999, had an accumulated deficit of $20.5 million. We anticipate that our
operating expenses will increase substantially for the foreseeable future as we
expand our product development, sales and marketing and professional services
staff. In addition, we expect to incur substantial expenses associated with
marketing programs and expanding our sales channels internationally in future
periods. In order to manage this significant growth we must invest and implement
scalable operational systems, procedures and controls. Accordingly, we expect to
incur net losses for the foreseeable future.
We have recorded aggregate deferred stock-based compensation of $4.6
million. Deferred stock-based compensation is amortized over the life of the
options, generally four years. During fiscal 1998, we recorded amortization of
deferred stock-based compensation of $618,000 and during the first six-months of
fiscal 1999, we recorded amortization of deferred stock-based compensation of
$769,000.
We believe that period-to-period comparisons of our operating results are
not meaningful and should not be relied upon as indicative of future
performance. Our prospects must be considered in light of the risks, expenses
and difficulties frequently encountered by companies in early stages of
development, particularly companies in new and rapidly evolving markets. There
can be no assurance we will be successful in addressing such risks and
difficulties. Although we have experienced significant revenue growth recently,
this trend may not continue. In addition, we may not achieve or maintain
profitability in the future.
24
<PAGE> 27
RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data as a
percentage of total revenues for the periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED JUNE 30,
DECEMBER 31, -----------------
1998 1998 1999
------------ ------- -------
(UNAUDITED)
<S> <C> <C> <C>
License revenues............................................ 66.7% 76.0% 53.0%
Service revenues............................................ 33.3 24.0 47.0
------- ------- -------
Total revenues......................................... 100.0 100.0 100.0
Cost of revenues............................................ 48.5 40.8 54.2
------- ------- -------
Gross profit................................................ 51.5 59.2 45.8
------- ------- -------
Operating expenses
Sales and marketing....................................... 171.9 207.3 112.0
Research and development.................................. 78.9 117.6 44.8
General and administrative................................ 35.9 31.3 34.2
Amortization of stock-based compensation.................. 18.5 16.8 21.0
------- ------- -------
Total operating expenses............................... 305.2 373.0 212.0
Loss from operations........................................ (253.6) (313.8) (166.2)
Interest income and other, net.............................. 3.9 3.0 0.1
------- ------- -------
Net loss.................................................... (249.7)% (310.8)% (166.2)%
======= ======= =======
</TABLE>
SIX MONTHS ENDED JUNE 30, 1998 AND 1999
Revenues
Our revenues are derived from software licenses and related services. Our
revenues were $1.2 million and $3.7 million for the six months ended June 30,
1998 and 1999. In the six months ended June 30, 1998 three customers accounted
for more than 10.0% of our total revenues, and in the six months ended June 30,
1999 one customer accounted for more than 10.0% of our total revenues.
License Revenues. Our license revenues were $876,000 and $1.9 million for
the six months ended June 30, 1998 and 1999. License revenues represented 76.0%
and 53.0% of total revenues for the six months ended June 30, 1998 and 1999.
This increase reflected the increased market acceptance of our CenterStage
application suite, and an increase in the size and productivity of the sales
force.
Service Revenues. Our service revenues were $276,000 and $1.7 million for
the six months ended June 30, 1998 and 1999. Service revenues consist primarily
of fees received for consulting and implementation, maintenance, customer
support and training services. Service revenues represented 24.0% and 47.0% of
total revenues for the six months ended June 30, 1998 and 1999. The increase in
service revenues for the six months ended June 30, 1999 over the six months
ended June 30, 1998 was primarily due to the increase in our customer base and
service contracts performed during this period. We believe that the percentage
of total revenues represented by service revenues in prior fiscal periods may
not be indicative of levels to be expected in future periods. Due to our limited
experience selling our CenterStage product suite, there can be no assurance that
continued increases in our license revenues will result in increased service
revenues. In addition, we expect that the proportion of our service revenues to
total revenues will fluctuate in the future, depending in part on our customers'
breadth and scope of implementation and the mix of products implemented.
Cost of Revenues
Cost of revenues includes personnel and other costs related to consulting
and implementation, customer support and training. Our cost of revenues was
$470,000 and $2.0 million for the six months ended June 30, 1998 and 1999. Cost
of revenues was 40.8% and 54.2% of revenues for the six months
25
<PAGE> 28
ended June 30, 1998 and 1999. This increase was primarily due to an increase in
professional service support personnel to manage and support our growing
customer base. To date, cost of service revenues has exceeded service revenues
primarily due to our investment in our consulting and training services and
customer support organizations. Cost of revenues as a percentage of revenues may
vary between periods due to the mix of services we provide.
Operating Expenses
Sales and Marketing. Our sales and marketing expenses increased 71.4% from
$2.4 million in the six months ended June 30, 1998 to $4.1 million in the six
months ended June 30, 1999. This increase was primarily due to increased sales
commissions, an increase in the number of sales and marketing employees, and
increases in marketing program spending. We believe that a significant increase
in our sales and marketing efforts is essential for us to maintain our market
position and further increase acceptance of our CenterStage products and related
services. Accordingly, we believe sales and marketing will increase in future
periods as we continue to invest significantly in these functions.
Research and Development. Our research and development expenses increased
20.9% from $1.4 million in the six months ended June 30, 1998 to $1.6 million in
the six months ended June 30, 1999. This increase was primarily due to increased
charges for consulting services. We believe that continued investment in our
research and development efforts is essential for us to improve our market
position, expand our product line and enhance the common technology platform for
our suite of products. Accordingly, we anticipate that we will continue to
significantly invest in research and development for the foreseeable future, and
research and development expenses are likely to increase in future periods.
Technological feasibility of our software is generally not established until
substantially all product development is complete. Historically, software
development costs eligible for capitalization have been insignificant, and all
costs related to research and development have been expensed as incurred.
General and Administrative. Our general and administrative expenses were
$361,000 and $1.3 million for the six months ended June 30, 1998 and 1999. This
increase was primarily due to the addition of finance and administrative
personnel to support the growth of our business, an increase of outside service
expenses associated with increased recruiting efforts and human resource
programs, and an increase in the allowance for doubtful accounts related to our
increase in revenues. We believe that our general and administrative expenses
will continue to increase as a result of the expansion of our administrative
staff and expenses associated with being a public company, including annual and
other public reporting costs, directors' and officers' liability insurance,
investor relations programs and professional services fees.
Amortization of Stock-Based Compensation. Amortization of stock-based
compensation was $194,000 and $769,000 for the six months ended June 30, 1998
and 1999. Deferred stock-based compensation is based on the estimated value of
common stock as of the date of grant based on our decision to undertake this
offering, compared to the option exercise price, which was deemed to be the fair
market value as of the date of grant. Deferred stock-based compensation is
amortized over the vesting period of such options, usually four years. The
increase in amortization of stock-based compensation in 1999 is primarily due to
the increased number of option grants and the estimated fair value of our common
stock.
Interest Income and Other, Net. Net interest income and other, net was
$35,000 and $2,000 for the six months ended June 30, 1998 and 1999. This
decrease was primarily due to higher interest expense incurred from additional
borrowings and higher capital lease obligations during the six months ended June
30, 1999, including the expense related to the valuation of warrants granted to
a lender as part of these borrowings.
26
<PAGE> 29
THE PERIOD FROM INCEPTION TO DECEMBER 31, 1996 AND THE YEARS ENDED DECEMBER 31,
1997 AND 1998
Revenues
Our revenues were $265,000 and $3.3 million for 1997 and 1998. In 1997,
three customers accounted for more than 10.0% of total revenues, and in 1998 two
customers accounted for more than 10.0% of our total revenues.
License Revenues. Our license revenues were $265,000 and $2.2 million in
1997 and 1998. This increase in license revenues was attributable to an increase
in sales to new customers resulting from increased headcount in our sales force.
Service Revenues. Our service revenues were $1.1 million in 1998, which was
the first year we offered consulting, implementation, maintenance, training and
customer support services. We began recognition of revenues from maintenance
contracts in 1998. Service revenues represented 33.3% of our total revenues in
1998.
Cost of Revenues
Our cost of revenues was $1.6 million in 1998, which was the first year we
offered consulting, implementation, maintenance, training and customer support
services. In 1998 we invested in establishing a consulting and customer support
organization, which required hiring and training of personnel prior to selling
and recognizing revenues for such services. We will continue to build our
consulting and customer support organization in the future to support growing
customer volume.
Operating Expenses
Sales and Marketing. Our sales and marketing expenses were $42,000, $2.8
million and $5.7 million in 1996, 1997 and 1998. These increases were primarily
due to our continuing investment in our sales and marketing infrastructure,
which included significant personnel-related expenses such as salaries, benefits
and commissions, recruiting fees, travel and entertainment expenses, marketing
programs, and related costs of hiring sales management, sales representatives,
sales engineers and marketing personnel.
Research and Development. Our research and development expenses were
$393,000, $2.0 million and $2.6 million in 1996, 1997 and 1998. These increases
were primarily due to the increase in the number of software developers and
quality assurance personnel and outside contractors to support our product
development and testing activities related to the development and release of our
CenterStage suite of products.
General and Administrative. Our general and administrative expenses were
$182,000, $1.2 million and $1.2 million in 1996, 1997 and 1998. The increase
from 1996 through 1997 was primarily due to our efforts to increase
administrative infrastructure to support our operations, including
personnel-related expenses and outside services. Expenses remained flat from
1997 to 1998, primarily due to our efforts to increase infrastructure in revenue
related functions during this period, which resulted in no growth in general and
administrative expenses.
Amortization of Stock-Based Compensation. We have recorded aggregate
deferred stock-based compensation of $2.2 million through December 31, 1998.
Deferred stock-based compensation is amortized over the vesting period of the
options, generally four years. During 1998, we recorded amortization of deferred
stock-based compensation of $618,000.
Interest Income and Other, Net. Our interest income and other, net were
$45,000, $155,000 and $131,000 in 1996, 1997 and 1998. This increase in interest
income and other, net from 1996 to 1997 was primarily due to the net impact of
an increase in proceeds received from the issuance of series B and series C
preferred stock. The decrease in interest income and other, net, from 1997 to
1998 was primarily due to the combination of interest income as noted
previously, offset by an increase in interest expense resulting from a financing
agreement established in June 1997 to purchase equipment.
27
<PAGE> 30
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth unaudited statement of operations data for
the six quarters in the 18-month period ended June 30, 1999 and data expressed
as a percentage of our total revenues for the periods indicated. This data has
been derived from our unaudited Financial Statements that have been prepared on
the same basis as the audited Financial Statements and, in the opinion of our
management, include all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of the information when read in conjunction
with the Financial Statements and Notes thereto. Our quarterly results have been
in the past and may in the future be subject to significant fluctuations. As a
result, we believe that results of operations for interim periods should not be
relied upon as any indication of the results to be expected in any future
period.
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------
MAR. 31, JUN. 30, SEPT. 30, DEC. 31, MAR. 31, JUN. 30,
1998 1998 1998 1998 1999 1999
-------- -------- --------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
License revenues........................ $ 445 $ 431 $ 692 $ 661 $ 628 $ 1,309
Service revenues........................ 87 189 376 462 922 796
------- ------- ------- ------- ------- -------
Total revenues...................... 532 620 1,068 1,123 1,550 2,105
Cost of revenues:....................... 114 356 485 665 878 1,103
------- ------- ------- ------- ------- -------
Gross profit............................ 418 264 583 458 672 1,002
------- ------- ------- ------- ------- -------
Operating expenses:
Sales and marketing................... 1,092 1,296 1,737 1,622 1,600 2,493
Research and development.............. 673 682 648 633 738 900
General and administrative............ 194 167 324 516 564 686
Amortization of deferred stock-based
compensation........................ 77 117 182 242 322 447
------- ------- ------- ------- ------- -------
Total operating expenses............ 2,036 2,262 2,891 3,013 3,224 4,526
Loss from operations.................... (1,618) (1,998) (2,308) (2,555) (2,552) (3,524)
Interest income (expenses) and other,
net................................... 29 6 48 48 73 (71)
------- ------- ------- ------- ------- -------
Net loss................................ $(1,589) $(1,992) $(2,260) $(2,507) $(2,479) $(3,595)
======= ======= ======= ======= ======= =======
AS A PERCENTAGE OF TOTAL REVENUES
License revenues........................ 83.6% 69.5% 64.8% 58.9% 40.5% 62.2%
Service revenues........................ 16.4 30.5 35.2 41.1 59.5 37.8
------- ------- ------- ------- ------- -------
Total revenues...................... 100.0 100.0 100.0 100.0 100.0 100.0
Cost of revenues:....................... 21.4 57.4 45.4 59.2 56.6 52.4
------- ------- ------- ------- ------- -------
Gross profit............................ 78.6 42.6 54.6 40.8 43.4 47.6
------- ------- ------- ------- ------- -------
Operating expenses:
Sales and marketing................... 205.3 209.0 162.6 144.4 103.2 118.4
Research and development.............. 126.5 110.0 60.7 56.4 47.6 42.8
General and administrative............ 36.5 26.9 30.3 45.9 36.4 32.6
Amortization of deferred stock-based
compensation........................ 14.5 18.9 17.0 21.5 20.8 21.2
------- ------- ------- ------- ------- -------
Total operating expenses............ 382.7 364.8 270.7 268.3 208.0 215.0
Loss from operations.................... (304.1) (322.3) (216.1) (227.5) (164.6) (167.4)
Interest income and other, net.......... 5.5 1.0 4.5 4.3 4.7 (3.4)
------- ------- ------- ------- ------- -------
Net loss................................ (298.7)% (321.3)% (211.6)% (223.2)% (159.9)% (170.8)%
======= ======= ======= ======= ======= =======
</TABLE>
28
<PAGE> 31
Our quarterly operating results have fluctuated significantly in the past,
and will continue to fluctuate in the future, as a result of a number of
factors, many of which are outside our control. These factors include:
- demand for and timing of the sales of our CenterStage products and
related services;
- actions taken by our competitors, including new product introductions and
enhancements;
- changes in the rapidly evolving market for e-business infrastructure
applications;
- our ability to develop, introduce and market e-business infrastructure
applications and enhancements to our existing CenterStage products on a
timely basis;
- changes in our pricing policies and those of our competitors; and
- our inability to complete large sales on schedule.
We have experienced delays in the planned release dates of our new software
products or upgrades in the past, and have discovered software defects in our
new products after their introduction. Our new products or upgrades may not be
released according to schedule, or when released may contain defects. Either of
these situations could result in adverse publicity, loss of revenues, delay in
market acceptance and claims by customers brought against us, any of which could
harm our business. In addition, the timing of individual sales has been
difficult for us to predict, and large individual sales have, in some cases,
occurred in quarters subsequent to those anticipated by us. The loss or deferral
of one or more significant sales may harm our quarterly operating results.
Although our first quarter 1999 license revenues were higher than those for
the fourth quarter of 1998, in future periods, we expect that seasonal trends
may cause first quarter revenues to be lower than the level achieved in the
preceding fourth quarter.
LIQUIDITY AND CAPITAL RESOURCES
Through June 30, 1999, we have funded our operations primarily through
sales of equity securities, with net proceeds of $19.0 million, and, to a lesser
extent, the use of long-term debt and equipment leases. We had raised $3.0
million from the issuance of long-term debt, and had financed equipment
purchases totaling approximately $690,000. Our sources of liquidity, as of June
30, 1999, consisted principally of cash and cash equivalents of $3.0 million. In
August 1999, we sold equity securities through the issuance of series D
preferred stock, with net proceeds of $16.4 million.
Net cash used in operating activities was $488,000, $5.4 million and $7.8
million for 1996, 1997 and 1998, and $4.4 million for the six months ended June
30, 1999. For these periods, net cash used by operating activities was primarily
a result of funding ongoing operations.
To date, our investing activities have consisted of purchases of property
and equipment. Capital expenditures, including those under capital leases,
totaled $137,000, $624,000 and $556,000 for 1996, 1997 and 1998, and $438,000 in
the six months ended June 30, 1999. We finance the acquisition of property and
equipment, which consists mainly of computer hardware and software for our
increasing employee base as well as for our management information systems,
primarily through capital leases. We expect to experience an increase in our
capital expenditures and lease commitments consistent with our anticipated
growth in operations, infrastructure and personnel. We do not expect to incur
significant costs to make our products or internal information systems year 2000
compliant, because we believe our products and information systems are designed
to function properly through and beyond the year 2000.
Net cash from financing activities was $3.4 million, $7.0 million and $8.8
million in 1996, 1997 and 1998, and $3.0 million for the six months ended June
30, 1999. For 1997, proceeds from financing activities were primarily received
from the private sale of preferred stock of $6.8 million and $200,000 from the
sale and lease back of property and equipment. In 1998, proceeds provided by
financing activities were primarily from the sale of preferred stock of $8.8
million. For the six months ended June 30, 1999,
29
<PAGE> 32
cash provided by financing activities consisted primarily of $3.0 million from
long-term borrowings offset in part by principal payments on capital lease
obligations and long-term debt of $108,000.
We expect to experience significant growth in our operating expenses in the
future, particularly in sales and marketing and research and development in
order to execute our business plan. As a result, we anticipate that these
operating expenses, as well as planned capital expenditures, will constitute a
material use of our cash resources. In addition, we may utilize cash resources
to fund acquisitions or investments in complementary businesses, technologies or
product lines. We believe that the net proceeds from the sale of common stock in
this offering will be sufficient to meet our working capital and operating
resource expenditure requirements for at least the next twelve months.
Thereafter, we may find it necessary to obtain additional equity or debt
financing. In the event additional financing is required, we may not be able to
raise it on acceptable terms or at all.
YEAR 2000 COMPLIANCE
Background of Year 2000 Issues
Many currently installed computer systems and software products are unable
to distinguish between twentieth century dates and twenty-first century dates
because these systems were developed using two digits rather than four to
determine the applicable year. For example, computer programs that have
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This error could result in system failures or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices or engage
in similar normal business activities. As a result, many companies' software and
computer systems may need to be upgraded or replaced to comply with year 2000
requirements.
State of Readiness
Our business is dependent on the operation of numerous systems that could
potentially be affected by year 2000-related problems. Those systems include,
among others:
- software products sold to customers;
- hardware and software systems used by us to deliver products and services
to customers, including our proprietary software systems as well as
software supplied by third parties;
- communications networks such as the Internet and private Intranets;
- the internal systems of our customers and suppliers;
- the hardware and software systems used internally by us in the management
of our business; and
- non-information technology systems and services, such as power, telephone
systems and building systems.
We have tested our software products and have determined that current
versions of all of our software products are year 2000 compliant by ensuring our
products support the use, output, storage, entry and creation of all dates
before, on, and after January 1, 2000. This assumes that all other hardware and
software products used in conjunction with our products can properly exchange
accurate date data. We are evaluating the year 2000 compliance of our products
currently under development.
We have established a year 2000 compliance team, composed of high-level
representatives of the product, information systems, and general administrative
departments to evaluate our internal and external systems. The team has been
charged with the responsibility of formulating and implementing our year 2000
readiness and is applying a phased approach to analyzing our operations and
relationships as they relate to the year 2000 problem. The phases of our year
2000 program are as follows:
Phase 1: establishment of a year 2000 team;
Phase 2: assignment of responsibility for external issues, such as
products licensed by us, internal issues, such as systems,
facilities, equipment, software and legal audit;
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<PAGE> 33
Phase 3: inventory of all aspects of our operations and relationships
subject to the year 2000 problem; and
Phase 4: remediation and testing.
We plan to complete testing of our internal and external systems by October
1999. We have completed Phases 1 and 2 of our program and are currently in the
process of completing Phase 3.
Risks Related to Year 2000 Issues
Based on our assessment to date, we believe the current versions of our
software products are year 2000 compliant. However, our products are generally
integrated into enterprise and other systems involving sophisticated hardware
and complex software products which may not be year 2000 compliant. In addition,
in some cases, certain earlier year 2000 compliant versions of our software,
while compatible with earlier, non-year 2000 compliant versions of other
software products with which our software is integrated, are not compatible with
certain more recent year 2000 compliant versions of other software providers.
While we do not believe we have any obligation under these circumstances given
that these customers are using our older versions of our software products,
there can be no assurance that we will not be subject to claims or complaints by
our customers. Our year 2000 compliance efforts may depend on our customers'
ability to manage their own year 2000 issues. We sell our products to companies
in a variety of industries, each of which is experiencing different year 2000
compliance issues. Customer difficulties with year 2000 issues might require us
to devote additional resources to resolve underlying problems.
Although we have not been a party to any litigation or arbitration
proceeding related to year 2000 compliance issues to date involving our products
or services, there can be no assurance that we will not be required to defend
our products or services in such proceedings, or to negotiate resolutions of
claims based on year 2000 issues. The costs of defending and resolving year
2000-related disputes, regardless of the merits of such disputes, and any
liability for year 2000-related damages, including consequential damages, would
have a material adverse effect on our business, operating results and financial
condition. In addition, we believe that purchasing patterns of customers and
potential customers may be affected by year 2000 issues as companies expend
significant resources to correct or upgrade their current software systems for
year 2000 compliance or defer additional software purchases until after 2000. To
the extent year 2000 issues cause significant delay in, or cancellation of,
decisions to purchase our products or services, our business would be adversely
affected.
We are also reviewing our internal management information and other
external systems in order to identify any products, services or systems that are
not year 2000 compliant. To date, we have not encountered any material year 2000
problems with our computer systems or any other equipment that might be subject
to such problems. Our plan for the year 2000 calls for compliance verification
of external vendors supplying software and information systems to us and
communication with significant suppliers to determine the readiness of third
parties' remediation of their own year 2000 issues. In the event that any such
third parties' products, services or systems do not meet year 2000 requirements
on a timely basis, our business could be adversely affected. We could also
experience adverse effects on our business if we fail to identify all year 2000
dependencies in our systems and in the systems of our suppliers, customers and
financial institutions. Therefore, we plan to develop contingency plans for
continuing operations in the event such problems arise, but do not presently
have a contingency plan for handling year 2000 problems that are not detected
and corrected prior to their occurrence. We have not completed our year 2000
investigation, and there can be no assurance that the total cost of our year
2000 compliance efforts will not be material to our business. We may not
identify and remediate all significant year 2000 problems on a timely basis,
remediation efforts may involve significant time and expense, and unremediated
problems may have an adverse effect on our business.
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RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") No. 98-1, Software for Internal Use, which
provides guidance on accounting for the cost of computer software developed or
obtained for internal use. SOP No. 98-1 is effective for financial statements
for fiscal years beginning after December 15, 1998. The Company is in the
process of evaluating the impact of this pronouncement.
In April 1998, the Accounting Standards Executive Committee released
Statement of Position No. 98-5, "Reporting on the Costs of Start-Up Activities."
SOP No. 98-5 is effective for fiscal years beginning after December 15, 1998 and
requires companies to expense all costs incurred or unamortized in connection
with start-up activities. The adoption of this SOP is not expected to have any
significant effect on the Company's results of operations as the Company had
expensed such start-up costs in prior years.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and hedging activities and will be adopted
in the year 2000. It requires that an entity recognize all derivatives as either
assets or liabilities in the balance sheet and measure those instruments at fair
value. The Company is in process of evaluating the impact of this pronouncement.
In December 1998, the Accounting Standards Executive Committee ("AcSEC")
issued Statement of Position 98-9, modification of SOP 97-2, "Software Revenue
Recognition," with Respect to Certain Transactions. 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 in process of
evaluating the impact of this pronouncement.
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BUSINESS
OVERVIEW
We provide a comprehensive suite of e-business infrastructure applications
for powering e-business portals and e-marketplaces. Our solution addresses the
unique challenges faced by e-business portals and e-marketplaces in both
business-to-business and business-to-consumer e-commerce. Our product suite
provides an open, scalable, adaptable solution to enable the rapid aggregation,
exchange, integration, personalization and syndication of e-business information
and services from a broad range of partners, suppliers and customers. Our
products enable our e-business portal and e-marketplace customers to: achieve
rapid time-to-market, engage and retain customers, increase revenues and
marketshare, and attain scalable and agile e-business relationships. Our
customers include: Aspect Development, ClubComputer.com, FASTXchange, Harbinger
Corporation, Impulse! Buy!, The Trip.com, Sabre/Travelocity.com and
telstreet.com.
INDUSTRY BACKGROUND
As the Internet has emerged as the fastest growing global communications
medium in history, companies across multiple industries have been forced to
leverage the ubiquity and openness of the Web to remain competitive. Nearly
every company in the world today faces the strategic imperative of re-creating
itself into an electronic commerce, or e-commerce, company, augmenting or even
replacing its traditional distribution, supply chain, and customer-service
channels with Internet-based channels. Although the first generation of
e-commerce consisted primarily of basic Web sites offering product information
for marketing purposes, today the stakes are higher. Successful companies now
need to create value-added relationships with partners and suppliers and offer
differentiated and unique online services to customers. By extending core
business processes over the Internet and integrating systems with partners,
suppliers, and customers, these companies seek to achieve significant
competitive advantage, increased customer satisfaction and new sources of
revenues. This next generation of e-commerce, often referred to as e-business,
is transforming the way business is done and has given rise to the "Internet
economy."
With the evolution of the Internet as a primary means of conducting
business, both in business-to-business and business-to-consumer markets,
competitive pressures have driven new and more sophisticated forms of e-commerce
to emerge. In the Internet economy, companies find it increasingly difficult to
differentiate their offerings on the basis of products, price or location. As a
result, vendors must deliver comprehensive business services and information to
offer enhanced value to their partners, suppliers and customers. In particular,
companies seek to participate in two complementary e-business channels --
e-business portals and e-marketplaces -- as distinct ways to capitalize on the
Internet, expand their businesses and protect their revenue opportunities. These
channels are complementary since many vendors will create their own e-business
portal to directly sell their own goods and services in addition to offering
those goods and services through participation in an e-marketplace.
E-BUSINESS PORTALS. An e-business portal is an online destination site
where vendors create value-added relationships with their customers or business
partners by offering an expanded set of information and services. For example, a
business-to-consumer, travel-oriented e-business portal enables visitors to gain
information about all aspects of the travel experience, including airfare, hotel
availability, cultural activities, weather and current events, and then purchase
all of the goods and services for a particular trip without having to leave the
portal at any point in the process.
E-MARKETPLACES. An e-marketplace is a comprehensive trading hub designed to
efficiently broker transactions and services among multiple buyers and sellers.
For example, a business-to-business e-marketplace acts as an intermediary to
enable businesses to interact with potentially thousands of discrete vendors,
compare parts, prices and configurations among those vendors, and then purchase
all of the goods and services from one or several vendors without having to
leave the e-marketplace at any point in the process.
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The Internet economy is poised for rapid growth, across both
business-to-business and business-to-consumer markets. According to Forrester
Research, the volume of business-to-business e-commerce transacted through
e-business portals, e-marketplaces and other e-business offerings will grow from
$43 billion in 1998 to $1.3 trillion in 2003.
There are many demands placed on the infrastructure of e-business portals
and e-marketplaces. Companies deploying e-business portals and e-marketplaces
must be able to offer a broad range of dynamic information and services from a
large, diverse set of partners, suppliers and customers, and do so faster than
their competitors. Compounding this challenge is the fact that these e-business
relationships require agility in terms of flexible, adaptable connections that
accommodate rapid change. No single standard can be imposed on all suppliers of
information and services offered by e-business portals and e-marketplaces.
To successfully address these business requirements, e-business portals and
e-marketplaces must meet complicated technical requirements. Key technical
requirements include:
- Aggregation -- capturing and transforming diverse information from a
broad range of sources and in multiple formats;
- Exchange -- enabling the exchange of business documents, including
purchase orders, for secure, real-time process automation among business
partners;
- Integration -- integrating e-business portals and e-marketplaces with
operational systems to synchronize and automate services and
transactions;
- Personalization -- offering proactive notification of the availability of
new information and events based on criteria defined by the end user; and
- Syndication -- enabling businesses to package and publish critical
information in a broad range of formats to their customers and business
partners.
Given these requirements, e-business portals and e-marketplaces face
significant challenges in effectively scaling their businesses to fully
capitalize on the opportunities created by the Internet. Existing approaches for
addressing these challenges are limited. The most common approaches consist of
manual, custom systems, which may be adequate initially, but tend to break down
as the e-business portals and e-marketplaces expand to provide additional
services and information from an ever-increasing number of partners, suppliers
and customers. Many of these custom approaches incorporate single-function
products that address particular infrastructure needs but do not offer a
comprehensive solution that spans each of the important requirements. These
custom approaches often lack:
- Speed of deployment;
- Scalability to accommodate growth to thousands of discrete participants;
- Agility to accommodate rapid change; and
- Comprehensiveness to meet the demands of a broad range of e-business
relationships and interactions.
As a result, there is a need for e-business infrastructure applications
that provide a comprehensive solution for powering e-business portals and
e-marketplaces. This solution must be open, scalable and adaptable to enable the
rapid aggregation, exchange, integration, personalization and syndication of
dynamic information and services from a broad range of partners, suppliers, and
customers.
ONDISPLAY SOLUTION
We provide a comprehensive suite of e-business infrastructure applications
for powering e-business portals and e-marketplaces. Our solution addresses the
unique challenges faced by e-business portals and e-marketplaces in both
business-to-business and business-to-consumer e-commerce. Our product suite
spans each of the key infrastructure requirements: aggregation and syndication
of diverse content and
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information; automation of critical business-to-business transactions;
integration with operational systems; and proactive notification to enhance
customer loyalty.
Our solution enables our e-business portal and e-marketplace customers to:
- ACHIEVE RAPID TIME-TO-MARKET. Our products enable our customers to
rapidly deploy e-business portals and e-marketplaces. We provide a
comprehensive application suite that eliminates the need for months of
custom programming and that reduces the customer's reliance on complex
systems integration. As a result, we enable our customers to dramatically
shrink their time-to-market.
- ENGAGE AND RETAIN CUSTOMERS. By automating the aggregation of a wide
variety of rich, relevant, and timely information and services, our
solution enables e-business portals and e-marketplaces to transform their
Web sites into highly convenient destination locations for their
customers. In addition to aggregating diverse information and services,
we offer a personalization product that enables our customers to
automatically notify their participants of newly available information.
These personalization and rich content capabilities enable e-business
portals and e-marketplaces to turn temporary visitors into buyers and to
then build high-quality relationships with those buyers over time.
- INCREASE REVENUES AND MARKET SHARE. Our products enable our customers to
create superior Internet revenue channels through the rapid delivery of
high quality information and services, and through achieving efficient
interactions with suppliers and other business partners. These superior
Internet revenue channels may, in turn, drive market share expansion as
our customers are able to enhance their competitive position and extend
their market leadership.
- ENABLE SCALABLE AND AGILE E-BUSINESS. Our solution enables our customers
to be more agile in responding to the rapid pace of change associated
with the Internet economy. By delivering an easy-to-use and highly
flexible product suite, we provide our customers with the ability to
handle a broad range of rapidly changing business relationships. Our
solution is scalable to support thousands of participants and partners,
flexible to accommodate rapidly changing relationships and industry
standards, and adaptable to manage disparate systems and ways of doing
business.
ONDISPLAY STRATEGY
Our objective is to become the leading provider of comprehensive,
e-business infrastructure applications for powering e-business portals and
e-marketplaces. Key elements of our strategy to achieve this objective are:
- TARGET E-BUSINESS PORTAL AND E-MARKETPLACE MARKETS. We intend to
establish our brand and expand market share in two large and growing
e-business markets: e-business portals and e-marketplaces. In the
e-business portal market we will target both traditional and
Internet-based businesses across specific markets with critical and
urgent e-business needs. Our strategy is to pursue industries that have a
large number of fragmented buyers and sellers and conduct large amounts
of commerce. At the same time, we intend to aggressively expand our
presence in the e-marketplace market, which we believe represents a huge
opportunity as e-marketplace businesses become pioneers in the use of
automated, robust and scalable information exchange solutions.
- LEVERAGE CUSTOMER NETWORK EFFECTS. As our customers use our solution
across their network of suppliers, buyers and other trading partners,
numerous other e-business participants become aware of our products and
their features and are continually exposed to our products with
subsequent exchanges of critical business information. This allows
parties throughout the e-business community to experience the benefits
that our products deliver first hand, which creates a powerful network
effect that drives more rapid product recognition and adoption. We intend
to leverage this visibility across our targeted markets in order to drive
increased sales, which in turn should further accelerate the network
effect.
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- EXTEND OUR TECHNOLOGICAL LEADERSHIP. We intend to continue to innovate
comprehensive e-business infrastructure solutions based on our technology
and emerging industry standards. Our core CenterStage technology provides
a powerful foundation for seamless information exchange between
e-business participants. With each succeeding generation of our
technology, we have extended this foundation and added features that
increase the range of functions and ease-of-use of our solutions. For
example, as the Internet becomes the preferred medium for business
transactions of all types, companies are increasingly using extensible
markup language (XML) as the standard upon which to base their
interactions with customers and trading partners. We intend to take
advantage of this trend by continuing to offer a highly automated,
easy-to-use XML solution.
- BUILD UPON OUR NETWORK OF RELATIONSHIPS. We are building strategic
relationships with a variety of industry leading independent software
vendors, platform providers and systems integrators. We intend to utilize
and extend this network to reach target markets, accelerate the adoption
of our technologies, and test and validate our next-generation product
and technology. These relationships enable us to focus on our core
competencies, while offering our customers highly complementary
technologies from industry leaders and innovators. We believe that these
relationships, in addition to others that we intend to pursue, will help
validate and accelerate the widespread adoption of our e-business
infrastructure solutions.
- EXPAND OUR INTERNATIONAL PRESENCE. We intend to penetrate global markets
through aggressive expansion of our worldwide field sales, marketing, and
services organizations. We are currently establishing and staffing
international headquarters and field sales offices in Europe. We also
expect to establish relationships with international distributors and
systems integrators.
PRODUCTS
We provide an integrated solution for enabling the rapid aggregation,
exchange, integration, personalization and syndication of critical information
and services for e-business portals and e-marketplaces. Our products are
complementary, but can be purchased separately, so that online businesses can
select the individual products they need to meet their immediate business
objectives and then add additional CenterStage products as their requirements
evolve.
Each CenterStage product is sold based on the number of servers and content
sources. The CenterStage product suite includes:
- CENTERSTAGE ECONTENT. Our CenterStage eContent application enables the
rapid aggregation and preparation of disparate content for e-business
portals and e-marketplaces. Whether the source format is HTML, XML, flat
file, database, real-time feed or application, CenterStage eContent lets
users load, update and manage diverse content rapidly and easily.
- CENTERSTAGE EBIZXCHANGE. Our CenterStage eBizXchange application takes
advantage of XML technologies to enable the rapid and transparent
exchange of business transactions across a web of trading partners. This
can be accomplished across corporate firewalls using both "tight" and
"loose" collaboration models. CenterStage eBizXchange's tight
collaboration model allows business partners to define a standard
approach for business-to-business commerce exchange, using XML or another
chosen format. CenterStage eBizXchange provides the ability to prepare
and deliver formatted transactions to such business partners, and also to
receive transactions and transform them into the appropriate format for
internal use. This product's loose collaboration model, meanwhile,
enables the e-business to complete a transaction by automatically
"driving" a partner's Web site without the need for explicit format
agreement.
- CENTERSTAGE EINTEGRATE. Our CenterStage eIntegrate product provides a
complete solution for creating and deploying comprehensive interfaces to
tie the e-business portal or e-marketplace with existing internal
applications, behind the corporate firewall. This integration enables the
portal's customers, partners, and suppliers to perform functions such as
placing an order or checking
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inventory availability, with the source data accessible from an internal
enterprise resource planning or other operational system including
applications from SAP, PeopleSoft, and Oracle.
- CENTERSTAGE ENOTIFY. Our CenterStage eNotify product allows e-businesses
to offer personalized updates to customers through e-mail or pager, to
foster long-lasting, profitable relationships. Unlike many existing
personalization programs that track behavior patterns to implement
targeted sales offers, CenterStage eNotify enables online visitors to
enter their own preferences on the e-business Web site to receive
personalized alerts. CenterStage eNotify can support large numbers of
concurrent subscriptions.
- CENTERSTAGE ESYNDICATE. Our CenterStage eSyndicate product enables
real-time content exchange among trading partners, leveraging a powerful
publish-and-subscribe engine. CenterStage eSyndicate intelligently
brokers and routes content among trading partners and can be configured
to deliver content using any electronic format, open standard or industry
protocol. CenterStage eSyndicate is capable of continuously routing a
wide range of dynamic, heterogeneous content.
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<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
PRODUCT FEATURES BENEFITS
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
CenterStage eContent - Rapid, automated content - Quick access to rich, relevant
aggregation from diverse content from the most
sources appropriate source available
- Dynamic access to structured - Fresh content delivered
and unstructured data automatically
- Easy-to-use interface - Reduces deployment cost by not
requiring programmer support
- Scalable execution - Supports high volumes of data
and large numbers of concurrent
users
- --------------------------------------------------------------------------------------------------
CenterStage eBizXchange - Automated transaction exchange - Time and cost savings from
with business partners elimination of manual processes
- Support for "loose" - Exchange transactions with
collaboration multiple trading partners
without requiring changes to
the partner's infrastructure
- Support for "tight" - Rapidly facilitates business
collaboration models using transactions using reliable,
industry standards highly secure connections
- Scalable, high-volume execution - Quick and reliable business
environment exchange processing
- --------------------------------------------------------------------------------------------------
CenterStage eIntegrate - Automated, rapid integration of - Reduces manual integration
e-business portal with internal processes
applications
- Scalable, real-time execution - Support for high transaction
volumes with complex business
process routing
- Integration with industry - Flexibility to route
leading message brokers transactions and messages while
leveraging existing enterprise
infrastructures
- PeopleSoft, Oracle and SAP - Tight integration with leading
Integration Toolkits Enterprise Resource Planning
applications
- --------------------------------------------------------------------------------------------------
CenterStage eNotify - Personalized subscription-based - Proactive, permission-based
notification interaction to engage and
retain customers
- Event-based execution - Notifications based on fresh,
environment relevant content
- Delivery of alerts via email - Immediate, reliable
and pager notification using customer's
preferred medium
- --------------------------------------------------------------------------------------------------
CenterStage eSyndicate - Automated, rules-based content - Customized information based on
publication based upon user partner-specific requirements
subscriptions
- Content publishing in multiple - Flexibility to syndicate
formats content to a wide range of
business partners
- Continuous routing of dynamic - Automatic support for fast-
data using industry standards changing information
- --------------------------------------------------------------------------------------------------
</TABLE>
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LOGO
Using the CenterStage application suite, an e-business portal can rapidly
automate and continuously manage the flow of information among its customers,
suppliers and other business partners. In the diagram above, the e-business
portal uses CenterStage eContent to quickly gather and transform diverse product
and other information from a large community of suppliers, regardless of source
format. In addition, the e-business portal uses CenterStage eBizXchange to
automate business transactions with suppliers and also with e-marketplaces and
other trading partners, including affiliates. CenterStage eIntegrate is used to
synchronize internal information with the e-business portal. The e-business
portal may use CenterStage eNotify to proactively deliver personalized
notifications to customers, while it uses CenterStage eSyndicate to publish
customized product catalogs and price lists to affiliates and e-marketplaces.
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LOGO
An e-marketplace may use the CenterStage product suite to automate and
seamlessly manage the flow of information and transactions among multiple
buyers, suppliers and trading partners. The e-marketplace is able to leverage
CenterStage eContent to aggregate and transform diverse data from multiple
suppliers, while using CenterStage eBizXchange to handle multiple simultaneous
transactions among buyers, affiliates and suppliers. CenterStage eSyndicate can
be used to proactively syndicate content of interest to buyers and affiliates
using a variety of formats. Concurrently, participant buyers and suppliers can
use CenterStage eIntegrate to synchronize their internal applications with their
e-business operations.
Each of the participants in the e-business value chain are able to use our
CenterStage product suite to exchange information and services with other
participants. For example, suppliers may use CenterStage eSyndicate to publish
information to multiple e-marketplaces simultaneously, just as an e-business
portal is able to publish information to its customers. Similarly, corporate
buyers may use CenterStage eIntegrate to link their Web-based procurement
applications to operational systems.
SERVICES
Our professional services organization works with customers to ensure that
they meet their business objectives and achieve their expected return on
investment. We focus on the rapid deployment of e-business solutions by taking
advantage of an experienced team of consultants. Our professional services
organization brings a diverse set of skills and experiences -- combining both
business and technical expertise to quickly meet our customers' requirements.
Our professional services include:
- On-site training;
- Installation and implementation;
- System and application design;
- Data transformation;
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- Interface development; and
- Maintenance and support.
ARCHITECTURE
Our CenterStage product suite is based on the CenterStage technology
platform. This platform provides a means to develop and execute agents for
accessing, harvesting, transforming and distributing content and transactions
using multiple approaches. Our CenterStage technology platform provides easy
application customization capabilities along with a high-performance execution
engine for run-time environments.
The CenterStage architecture provides the following environments:
- Rapid development environment -- graphical development environment for
creating CenterStage agents and for tailoring the resulting information
display; and
- Execution/routing environment -- featuring a high-volume, scalable
execution server for processing information agents.
CENTERSTAGE ARCHITECTURE GRAPHIC
Rapid Development Environment
At the core of our CenterStage technology platform is a graphical
development environment to create and test information retrieval and
transformation agents. These agents have the ability to access information from
multiple sources in many different formats. Some of these sources include the
Web, databases, software applications and various information systems. Formats
supported include Internet
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communication standards, including HTML, XML and EDI, reports, tables and
application data. Once this data is accessed, a parsing and query engine
retrieves the appropriate information and provides it to the user in an
easy-to-use manner for transformation and mapping into one or more outputs. The
retrieved data can also be output in various formats, including HTML, XML, text,
tables, EDI and as application data into vendor-delivered application
interfaces.
Flexible Execution/Routing Environment
Our flexible CenterStage technology architecture can process agents in
three ways:
- The Agent Engine processes large batches of information on a one-time or
regularly scheduled basis;
- The Agent Server handles multiple requests simultaneously and also
includes a load balancing feature, which distributes requests across
multiple servers; and
- The Content Broker enables the publishing of agents based on user-defined
events. These agents can be published through a wide variety of delivery
mechanisms, including message brokers, application interfaces, Internet
connections, e-mail and pagers.
CUSTOMERS
The following is a list of our customers as of August 31, 1999 who have
purchased CenterStage products for use in e-business portal or e-marketplace
applications.
<TABLE>
<S> <C>
Aspect Development International eCommerce
Bridge Information Systems MARS Music
Carlson Travel Group Micro Warehouse
Classified Ventures Orlando Sentinel Communications
ClubComputer.com RMI.NET
FASTXchange Sabre/Travelocity.com
Harbinger Corporation telstreet.com
Impulse! Buy Network TheTrip.com
</TABLE>
SALES AND MARKETING
We market our CenterStage products and related services primarily through a
direct sales organization. Our direct sales organization focuses on sales to
recently formed companies that are creating e-business portals and
e-marketplaces and larger corporate customers building or improving their Web
presence. We maintain a sales office in our headquarters in San Ramon, CA and in
offices located in the following metropolitan areas: Atlanta, Boston, Denver,
Houston, Indianapolis, Los Angeles, Mt. Laurel, NJ and New York. We intend to
increase our North American sales force by opening additional field sales
offices and adding sales representatives to our existing territories.
Additionally, we intend to expand our presence in international markets by
building an international sales force.
Since our inception, we have invested substantial resources in a broad
range of marketing activities to generate demand, gain corporate brand identity,
establish the e-business portal and e-marketplace product category and educate
the market about our products and services. These activities have included
advertising, including both print and online, direct marketing, including direct
mail and e-mail and online seminars, public relations, participating in trade
shows and conferences and providing product information through our Web site.
In addition to the direct sales channel, we have also entered into several
marketing and referral agreements with industry leading software companies. As
part of these agreements our partners introduce our products and services to
prospective customers to generate qualified sales leads. These agreements enable
us to expand our potential market and help to validate our solution.
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As part of our sales and service offerings, we provide comprehensive
product support through a variety of methods. Our experienced support team
members understand the problems our customers face and work closely with them to
help provide solutions. This comprehensive support enables us to ensure our
customers' satisfaction and increases opportunities for repeat sales and
positive customer references.
COMPETITION
The market for our products and services is intensely competitive, evolving
and subject to rapid technological change. We expect the intensity of
competition to increase in the future. Competitors vary in size and in the scope
and breadth of the products and services offered. To date, we have faced
competition and sales resistance from the internal information technology
departments of current and potential customers that have developed or may
develop in-house systems that may substitute for those we offer. We expect that
internally developed infrastructure systems will continue to be a principal
source of competition for the foreseeable future. In the license of e-commerce
products, we primarily encounter competition from webMethods. If we are
successful, we expect to encounter many additional competitors in the future. In
addition, because there are relatively low barriers to entry in the software
market, we expect additional competition from other established and emerging
companies as the Internet software market continues to develop and expand. In
particular, we believe we may face competition from IBM, Microsoft, Oracle and
Sun Microsystems as those companies may perceive entry into our market segment
as strategic. We also may face competition from established companies in the
enterprise application integration and e-business platform markets, any of which
could build and market products that would reduce or eliminate the need for our
technology.
We believe that the principal competitive factors affecting our market
include core technology, product features, product quality and performance and
customer service. Although we believe that our products and services currently
compete favorably with respect to these factors, our market is relatively new
and is rapidly evolving. We may not be able to maintain our competitive position
against current and potential competitors, especially those with significantly
greater financial, marketing, service, support, technical and other resources.
Many of our competitors have longer operating histories, significantly
greater financial, technical, marketing and other resources, significantly
greater name recognition and a larger installed base of customers than we have.
In addition, many of our competitors have well-established relationships with
current and potential customers of ours, have extensive knowledge of our
industry and are capable of offering a comparable solution. As a result, our
competitors may be able to respond more quickly to new or emerging technologies
and changes in customer requirements, or to devote greater resources to the
development, promotion and sale of their products and services than we can. In
addition, current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties to increase the
ability of their products and services to address customer needs. Accordingly,
it is possible that new competitors or alliances among competitors may emerge
and rapidly acquire significant market share. We also expect that competition
will increase as a result of software industry consolidations.
Increased competition is likely to result in price reductions, reduced
gross margins and loss of market share, any of which could seriously harm our
business, operating results and financial condition. We may not be able to
compete successfully against current and future competitors.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
Our success and ability to compete are substantially dependent on our
internally developed technologies and trademarks, which we seek to protect
through a combination of copyright, trade secret and trademark law. We also
enter into confidentiality or license agreements with our employees and
consultants, and corporate and strategic partners and generally seek to control
access to and distribution of our documentation and other proprietary
information. Despite these precautions, it may be possible for a third party to
copy or otherwise obtain and use our proprietary information without
authorization or to
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<PAGE> 46
develop similar technology independently. We pursue the registration of our
trade and service marks in the United States and internationally, and we have
registered the trademarks OnDisplay and CenterStage in the United States.
Effective trademark, service mark, copyright and trade secret protection may not
be available in every country in which our services are distributed or made
available through the Internet, and policing unauthorized use of our proprietary
information is difficult.
Legal standards relating to the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related businesses are
uncertain and still evolving. We cannot give any assurance as to the future
viability or value of any of our proprietary rights. In addition, we cannot give
any assurance that the steps taken by us will prevent misappropriation or
infringement of our proprietary information. Any intellectual property
infringement or misappropriation, should it occur, could have a material adverse
effect on our business, operating results and financial condition.
In addition, litigation may be necessary in the future to enforce our
intellectual property rights, to protect our trade secrets or to determine the
validity and scope of the proprietary rights of others. Any intellectual
property litigation would result in substantial costs and diversion of resources
and management attention and could have a material adverse effect on our
business, operating results and financial condition. Our business activities may
infringe upon the proprietary rights of others, and other parties may assert
infringement claims against us. Any claim and resultant litigation, should it
occur, might subject us to significant liability for damages and might result in
invalidation of our proprietary rights and even if not meritorious, would be
time consuming and expensive to defend and would result in the diversion of
management time and attention, any of which might have a material adverse effect
on our business, operating results and financial condition.
EMPLOYEES
As of August 31, 1999, we employed 80 persons. Our success will depend in
large part upon our ability to attract and retain employees. We face competition
in this regard from other companies, but we believe that we maintain good
relations with our employees.
FACILITIES
We sublease approximately 20,000 square feet of office space in two office
locations in San Ramon, California and smaller sales offices located in the
following metropolitan areas: Atlanta, Boston, Denver Houston, Indianapolis, Los
Angeles, Mt. Laurel, NJ and New York. We believe that our San Ramon facilities
will meet our space requirements for the next year. The sublease for the San
Ramon facilities expire in July 2000 and July 2002 with no option to extend.
LEGAL PROCEEDINGS
We are not presently a party to any material legal proceeding.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth, as of August 31, 1999, certain information
concerning our executive officers and directors:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Mark Pine.................................... 45 President and Chief Executive Officer, Director
Carol Richwood............................... 38 Vice President, Corporate Controller
Trung Dung................................... 32 Chief Technology Officer
Mark Deppe................................... 47 Vice President, Software Development
Olivier Sermet............................... 34 Vice President, Worldwide Field Operations
Timothy Barrows(1)........................... 42 Director
Promod Haque(1)(2)........................... 51 Director
John Mandile................................. 38 Director
Christopher Spray............................ 43 Director
Margaret Taylor.............................. 48 Director
Carmine Villani(2)........................... 56 Director
</TABLE>
- ---------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
Mark Pine is a founder of OnDisplay and has served as our President and
Chief Executive Officer and as a member of our board of directors since August
1996. From 1994 to 1996, Mr. Pine served as a part-time consultant to various
software companies. From 1990 to 1994, Mr. Pine was the Vice President of
Engineering and Senior Vice President of Sybase, Inc. overseeing Sybase's
largest product division. Prior to joining Sybase, Mr. Pine was a part of the
founding management team of ARIX Corporation and Parallel Computers. Mr. Pine
holds a B.A. from University of California, San Diego.
Carol Richwood has served as our Vice President, Corporate Controller since
April 1999. From June 1997 to April 1999, Ms. Richwood served in various
positions at PeopleSoft, Inc, including Controller of PeopleSoft Select. From
October 1989 to June 1997, she served in various capacities, including Group
Controller of the software services division of VeriFone, Inc. Ms. Richwood
holds a B.S. from San Francisco State University and is a certified public
accountant.
Trung Dung is a founder of OnDisplay and has served as our Chief Technology
Officer since August 1996. Prior to joining OnDisplay, from August 1995 to June
1996, Mr. Dung held several senior software development positions at Open
Market, Inc. From 1991 to July 1995, Mr. Dung held various technical positions
with GTE Laboratories and Software Emancipation Technology. Mr. Dung holds a
B.S. from University of Massachusetts and attended graduate school at Boston
University from 1988 to 1993.
Mark Deppe has served as our Vice President Software Development since
October 1996. From August 1990 to October 1996, Mr. Deppe served in various
technical positions, including Senior Director of Engineering, at Sybase, Inc.
Prior to joining Sybase, Mr., Deppe held senior management positions at
Hewlett-Packard, Apple Computer, Software Publishing Corporation and Cooperative
Solutions. Mr. Deppe holds a B.S.E. and M.S.E. from University of Michigan.
Olivier Sermet has served as our Vice President, Worldwide Field Operations
since May 1997. From June 1995 to May 1997, Mr. Sermet served as Vice President
of Operations and General Manager for Dun & Bradstreet Software. From 1994 to
June 1995 Mr. Sermet served as Regional Sales Manager at Racal Datacom. Mr.
Sermet holds a Baccalaureate from Ecole de Provence (Marseille France) and an
M.B.A. from Northern Illinois University.
Timothy A. Barrows has served as one of our directors since September 1996.
Since 1985, Mr. Barrows has been a general partner of Matrix Partners. Mr.
Barrows serves as director of
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<PAGE> 48
SilverStream, Inc., Sycamore Networks, Inc. and several private companies. Mr.
Barrows holds a B.A. from Williams College and an M.B.A. from Stanford
University.
Promod Haque has served as one of our directors since August 1997. Dr.
Haque joined Norwest Venture Partners, a venture capital firm, in November 1990
and is currently managing general partner of the general partner of Norwest
Venture Partners. Dr. Haque is a director of Showcase Corporation, Extreme
Networks, Inc., Primus Knowledge Solutions, Cerent Corporation, Siara Systems,
Transaction Systems Architects, Inc. and several privately held companies. Dr.
Haque holds a Ph.D.E.E. degree and an M.S.E.E. degree from Northwestern
University, an M.M. degree from the J.L. Kellogg Graduate School of Management,
Northwestern University, and a B.S.E.E. degree from the University of Delhi,
India.
John Mandile has served as one of our directors since August 1996. Since
September 1996, Mr. Mandile has been a General Partner of Sigma Partners. From
August 1995 to April 1996, Mr. Mandile was the President & CEO of Vermeer
Technologies, Inc., a Web authoring company that was acquired by Microsoft. From
1988 to 1992 Mr. Mandile was Vice President of Engineering of SQL Solutions,
which was acquired by Sybase and after the acquisition served as Vice President
of System Management at Sybase from 1992 to July 1995. Mr. Mandile holds a
B.S.E. in Engineering Science from Tufts University and an MS in Computer
Science from Worcester Polytechnic State University.
Christopher Spray has served as one of our directors since September 1996.
Since 1986, Mr. Spray has been a general partner of Atlas Venture. Mr. Spray
holds a B.A. from Oxford University and an M.B.A. from INSEAD.
Margaret Taylor has served as one of our directors since March 1999. Since
1989, Ms. Taylor has been a Senior Vice President of Operations for PeopleSoft,
Inc. Ms. Taylor holds a B.A. from Lone Mountain College.
Carmine Villani has served as one of our directors since April 1997. Since
1992, Mr. Villani has been Senior Vice President and Chief Information Officer
of McKessonHBOC, Inc. Mr. Villani holds a B.A. from Rutgers University.
COMMITTEES OF THE BOARD OF DIRECTORS
Our compensation committee consists of Messrs. Barrows and Haque. The
compensation committee makes recommendations regarding our various incentive
compensation and benefit plans and determines salaries for our executive
officers and incentive compensation for our employees and consultants.
Our audit committee consists of Messrs. Haque and Villani. The audit
committee makes recommendations to the board of directors regarding the
selection of our independent auditors, reviews the results and scope of the
audit and other services provided by our independent auditors and reviews and
evaluates our control functions.
BOARD COMPOSITION
Our bylaws currently authorize seven directors. Our certificate of
incorporation and bylaws that become effective upon the completion of this
offering provide that our Board will be divided into three classes, Class I,
Class II and Class III, with each class serving staggered three-year terms. The
Class I directors, Messrs. Mandile and Spray will stand for reelection at the
2000 annual meeting of stockholders. The Class II directors, Messrs. Barrows and
Haque will stand for reelection at the 2001 annual meeting of stockholders. The
Class III directors, Messrs. Pine and Villani and Ms. Taylor, will stand for
reelection at the 2002 annual meeting of stockholders. Any additional
directorships resulting from an increase in the number of directors will be
distributed among the three classes so that, as nearly as possible, each class
will consist of one-third of the directors. This staggered classification of the
board of directors may have the effect of delaying or preventing changes in
control or management. There are no family relationships among any of our
directors, officers or key employees.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of our compensation committee was, at any time since
our formation, an officer or employee of OnDisplay. None of our executive
officers serves as a member of the board of directors or compensation committee
of any entity that has one or more executive officers serving as a member of our
board of directors or compensation committee. See "Certain Transactions" for a
description of transactions between OnDisplay and entities affiliated with
members of our compensation committee.
DIRECTOR COMPENSATION
Directors currently do not receive any cash compensation from OnDisplay for
their services as members of the board of directors, although members are
reimbursed for expenses in connection with attendance at board of directors and
committee meetings. At times in the past we have granted our outside directors
options to purchase shares of our common stock under the 1996 Stock Plan. In
October 1996, we granted John Mandile an option to purchase 42,500 shares at a
per share exercise price of $0.10. In April 1997, we granted Carmine Villani an
option to purchase 20,000 shares at per share exercise price of $0.10 and in
January 1999, we granted Mr. Villani an option to purchase an additional 20,000
shares at a per share exercise price of $0.40. In March 1999, we granted
Margaret Taylor an option to purchase 30,000 shares at per share exercise price
of $0.40.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by us during the year
ended December 31, 1998, to our Chief Executive Officer and to our other most
highly compensated executive officers during our last fiscal year. This
prospectus refers to these executives as the Named Executive Officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) OPTIONS
--------------------------- --------- -------- ------------
<S> <C> <C> <C>
Mark Pine................................................. 175,002 5,000 --
President and Chief Executive Officer, Director
Olivier Sermet............................................ 150,002 68,581 --
Vice President, Worldwide Field Operations
Mark Deppe................................................ 150,001 -- --
Vice President, Software Development
Trung Dung................................................ 96,667 -- --
Chief Technology Officer
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
No stock options were awarded to our Named Executive Officers during the
year ended December 31, 1998.
In 1998, we granted options to purchase an aggregate of 781,750 shares of
common stock to our employees, directors and consultants. Generally, we grant
options at an exercise price equal to the fair market value of the underlying
common stock on the date of grant, as determined by our board of directors, and
the options vest over four years from the date of grant. In determining the fair
market value of our common stock, our board of directors considers valuations of
comparable companies, valuations at which we have issued preferred stock,
valuation reports and analyses prepared by third parties, the relative rights
and preferences of our preferred stock as compared to our common stock, and the
lack of liquidity of our securities. Once we become a publicly-held company, the
fair market value of our stock will equal its trading market price.
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<PAGE> 50
In accordance with the rules of the Securities and Exchange Commission, the
above table sets forth the potential realizable value over the ten-year period
from the grant date to the expiration date, assuming rates of stock appreciation
of 5% and 10%, compounded annually. These amounts do not represent our estimate
of future stock price performance. Actual realizable values, if any, of stock
options will depend on the future performance of our common stock.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table set forth for each of the Named Executive Officers the
number of shares of common stock acquired and the dollar value realized upon
exercise of options during the year ended December 31, 1998 and the number and
value of securities underlying unexercised options held at December 31, 1998.
The "Value of Unexercised In-the-Money Options at December 31, 1998" is
based on a value of $0.40 per share, the fair market value of our common stock
as of December 8, 1998, as determined by the board of directors, less the per
share exercise price, multiplied by the number of shares issued upon exercise of
the option. All options were granted under our 1996 Stock Plan.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1998 DECEMBER 31, 1998
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Mark Pine...................................... -- -- -- --
Olivier Sermet................................. 54,688 -- $ 16,406.40 --
Trung Dung..................................... -- -- -- --
Mark Deppe..................................... 382,500 -- $114,750.00 --
</TABLE>
INCENTIVE STOCK PLANS
1996 STOCK PLAN
The Board of Directors adopted the 1996 Stock Plan (the "1996 Plan") on
August 13, 1996 and the stockholders initially approved the 1996 Plan on
September 17, 1996. The 1996 Plan provides for the grant of incentive stock
options within the meaning of Section 422 of the Internal Revenue Code (the
"Code") to employees, and for the grant of nonstatutory stock options and stock
purchase rights ("SPRs") to employees, directors and consultants.
Number of Shares of Common Stock Available under the 1996 Plan
As of August 31, 1999, a total of 3,475,000 shares of common stock were
reserved for issuance pursuant to the 1996 Plan, of which options to acquire
3,278,250 shares were issued and outstanding as of that date. The 1996 Plan
provides for annual increases in the number of shares available for issuance
thereunder, on the first day of each new fiscal year, effective beginning with
fiscal year 2001, equal to the lesser of % of the outstanding shares of
common stock on the first day of the fiscal year, shares or a
lesser amount as the Board may determine.
Administration of the 1996 Plan
The Board of Directors or a committee of the Board (as applicable, the
"Administrator") administers the 1996 Plan. In the case of options intended to
qualify as "performance-based compensation" within the meaning of Section 162(m)
of the Code, the committee will consist of two or more "outside directors"
within the meaning of Section 162(m) of the Code. The Administrator has the
power to determine the terms of the options or SPRs granted, including the
exercise price, the number of shares subject to each option or SPR, the
exercisability of the options and the form of consideration payable upon
exercise.
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<PAGE> 51
Options
The Administrator determines the exercise price of nonstatutory stock
options granted under the 1996 Plan, but with respect to nonstatutory stock
options intended to qualify as "performance-based compensation" within the
meaning of Section 162(m) of the Code, the exercise price must at least be equal
to the fair market value of the common stock on the date of grant. The exercise
price of all incentive stock options granted under the 1996 Plan must be at
least equal to the fair market value of the common stock on the date of grant
and the term of such option may not exceed ten years. With respect to any
participant who owns stock possessing more than 10% of the voting power of all
classes of the our outstanding capital stock, the exercise price of any
incentive stock option granted must equal at least 110% of the fair market value
on the grant date and the term of such incentive stock option must not exceed
five years. The Administrator determines the term of all other options.
No optionee may be granted an option to purchase more than
shares in any fiscal year. In connection with his or her initial service, an
optionee may be granted an option to purchase up to an additional
shares, which shall not count against the yearly limit set forth
in the previous sentence.
An optionee generally must exercise an option granted under the 1996 Plan
at the time set forth in the optionee's option agreement after termination of
the optionee's status as an employee, director or consultant. Generally, in the
case of the optionee's termination by death or disability, the option will
remain exercisable for twelve months. In all other cases, the option will
generally remain exercisable for a period of three months. However, an option
may never be exercised later than the expiration of the option's term.
Stock Purchase Rights ("SPRs")
The Administrator determines the exercise price of SPRs granted under the
1996 Plan. In the case of SPRs, unless the Administrator determines otherwise,
the restricted stock purchase agreement entered into in connection with the
exercise of the SPR shall grant us a repurchase option that we may exercise upon
the voluntary or involuntary termination of the purchaser's service with the us
for any reason (including death or disability). The purchase price for shares we
repurchase pursuant to restricted stock purchase agreements shall generally be
the original price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to us. The repurchase option shall lapse at a rate
that the Administrator determines.
Transferability of Options and SPRs
An optionee generally may not transfer options and SPRs granted under the
1996 Plan and only the optionee may exercise an option and SPR during his or her
lifetime.
Adjustments upon Merger or Asset Sale
The 1996 Plan provides that in the event of a merger, sale or
reorganization of OnDisplay with or into any other corporation or the sale of
all or substantially all of the assets or outstanding stock of OnDisplay, in
which transaction our stockholders immediately prior to such transaction own
immediately after such transaction less than 50% of the equity securities of the
surviving corporation, 18 months worth of vesting of outstanding options shall
accelerate and become exercisable. The 1996 Plan also provides that in the event
of a merger of OnDisplay with or into another corporation, the successor
corporation shall assume or substitute each option or SPR. If the outstanding
options or SPRs are not assumed or substituted, the Administrator shall provide
notice to the optionee that he or she has the right to exercise the option or
SPR as to all of the shares subject to the option or SPR, including shares which
would not otherwise be exercisable, for a period of 15 days from the date of the
notice. The option or SPR will terminate upon the expiration of the 15-day
period.
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<PAGE> 52
Amendment and Termination of the 1996 Plan
Unless terminated sooner, the 1996 Plan will terminate automatically in
2006. In addition, the Board of Directors has the authority to amend, suspend or
terminate the 1996 Plan, provided that no such action may affect any share of
common stock previously issued and sold or any option previously granted under
the 1996 Plan.
1999 EMPLOYEE STOCK PURCHASE PLAN
Concurrently with the offering, we intend to establish an Employee Stock
Purchase Plan (the "Purchase Plan").
Number of Shares of Common Stock Available under the Purchase Plan
A total of shares of common stock will be made available for
sale. In addition, the Purchase Plan provides for annual increases in the number
of shares available for issuance under the Purchase Plan on the first day of
each fiscal year, beginning with the fiscal year , equal to the lesser of
% of the outstanding shares of common stock on the first day of the fiscal
year, shares, or such other amount as may be determined by the
Board.
Administration of the Purchase Plan
The Board of Directors or a committee appointed by the Board of Directors
administers the Purchase Plan. The Board of Directors or its committee has full
and exclusive authority to interpret the terms of the Purchase Plan and
determine eligibility.
Eligibility to Participate
Employees are eligible to participate if they are customarily employed by
us or any participating subsidiary for at least 20 hours per week and more than
five months in any calendar year. However, an employee may not be granted an
option to purchase stock under the Purchase Plan if such employee:
- immediately after grant owns stock possessing 5% or more of the total
combined voting power or value of all classes of the capital stock of
OnDisplay, or
- whose rights to purchase stock under all employee stock purchase plans of
OnDisplay accrues at a rate that exceeds $25,000 worth of stock for each
calendar year.
Offering Periods and Contributions
The Purchase Plan, which is intended to qualify under Section 423 of the
Internal Revenue Code, contains consecutive, overlapping 24-month offering
periods. Each offering period includes four 6-month purchase periods. The
offering periods generally start on the first trading day on or after
and of each year, except for the first such
offering period which will commence on the first trading day on or after the
effective date of this offering and will end on the last trading day on or
before .
The Purchase Plan permits participants to purchase common stock through
payroll deductions of up to % of the participant's eligible compensation
which includes the participant's base salary, wages, overtime pay, commissions,
bonuses and other compensation remuneration paid directly to the employee. The
maximum number of shares a participant may purchase during a six-month purchase
period is shares.
Purchase of Shares
Amounts deducted and accumulated by the participant are used to purchase
shares of common stock at the end of each six-month purchase period. The price
of stock purchased under the Purchase Plan is 85% of the lower of the fair
market value of the common stock at the beginning of an offering period or
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<PAGE> 53
after a purchase period end. In the event the fair market value at the end of a
purchase period is less than the fair market value at the beginning of the
offering period, participants will be withdrawn from the current offering period
following their purchase of shares on the purchase date and will be
automatically re-enrolled in a new offering period. Participants may end their
participation at any time during an offering period, and they will be paid their
payroll deductions to date. Participation ends automatically upon termination of
employment with us.
Transferability of Rights
A participant may not transfer rights granted under the Purchase Plan other
than by will, the laws of descent and distribution or as otherwise provided
under the Purchase Plan.
Adjustments upon Merger or Asset Sale
The Purchase Plan provides that, in the event of a merger of OnDisplay with
or into another corporation or a sale of all or substantially all of our assets,
a successor corporation may assume or substitute for each outstanding option. If
the successor corporation refuses to assume or substitute for the outstanding
options, the offering period then in progress will be shortened, and a new
exercise date will be set.
Amendment and Termination of the Purchase Plan
The 1999 Purchase Plan will terminate in 2009. However, the board of
directors has the authority to amend or terminate the Purchase Plan, except
that, subject to certain exceptions described in the Purchase Plan, no such
action may adversely affect any outstanding rights to purchase stock under the
Purchase Plan.
CHANGE OF CONTROL ARRANGEMENTS
Under our 1996 Stock Plan, in the event of a merger, sale or reorganization
of OnDisplay into another corporation which results in a change of control of
OnDisplay, options that would have become vested within 18 months after the
closing date of the merger transaction will accelerate and become fully vested
upon the closing of the transaction.
LIMITATIONS 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 directors
of a corporation will not be personally liable for monetary damages for breach
of their fiduciary duties as directors, except liability for any of the
following:
- any breach of their duty of loyalty to the corporation or its
stockholders;
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
- any transaction from which the director derived an improper personal
benefit.
This limitation of liability does not apply to liabilities arising under
the federal securities laws and does not affect the availability of equitable
remedies, including injunctive relief or rescission.
Our bylaws provide that we shall indemnify our directors and executive
officers and may indemnify our other officers and employees and other agents to
the fullest extent permitted by law. We believe that indemnification under our
bylaws covers at least negligence and gross negligence on the part of
indemnified parties. Our bylaws also permit us to secure insurance on behalf of
any officer, director, employee or other agent for any liability arising out of
his or her actions in such capacity, regardless of whether the bylaws would
permit indemnification.
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We have entered into agreements to indemnify our directors and executive
officers, in addition to indemnification provided for in our bylaws. These
agreements, among other things, indemnify our directors and executive officers
for certain expenses, including attorneys' fees, judgments, fines and settlement
amounts incurred by any person in any action or proceeding, including any action
by us arising out of that person's services as our director or executive
officer, any of our subsidiaries or any other company or enterprise to which the
person provides services at our request. We believe that these provisions and
agreements are necessary to attract and retain qualified persons as directors
and executive officers.
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CERTAIN TRANSACTIONS
OUR FORMATION
In connection with our incorporation in August 1996, we issued 1,554,525
shares of common stock to Mark Pine, 1,554,525 shares of common stock to Trung
Dung and 85,000 shares to Thang Tran at a purchase price of $.001 per share,
paid in cash. These founders' shares are subject to a right of repurchase by us
at the original purchase of $.001 per share. This repurchase right lapsed as to
one-fourth of the shares upon the one year anniversary of the vesting start date
(which in the case of Messrs. Pine and Dung was August 1996) and lapses as to
the remaining shares on a cumulative monthly basis over a period of 36 months
from the one year anniversary of the vesting start date.
PREFERRED STOCK FINANCINGS
In September 1996 and June 1997, OnDisplay issued to various investors a
total of 3,500,000 shares of series A preferred stock at a purchase price of
$1.00 per share. In June 1997 and January 1998, OnDisplay issued to various
investors a total of 3,202,381 shares of series B preferred stock at a purchase
price of $2.10 per share. In July 1998 and October 1998, OnDisplay issued to
various investors a total of 2,189,173 shares of series C preferred stock at a
purchase price of $4.00 per share. In August 1999, OnDisplay issued to various
investors 1,723,739 shares of series D preferred stock at a purchase price of
$9.52 per share.
Pursuant to our series C preferred stock financing, we agreed to offer ATGF
II the opportunity to purchase a number of shares in this offering sufficient to
maintain their percentage ownership.
The holders of our preferred stock include, among others, the following
directors and holders of more than 5% of our outstanding stock:
<TABLE>
<CAPTION>
PREFERRED STOCK
-------------------------------------------
PREFERRED STOCKHOLDER SERIES A SERIES B SERIES C SERIES D
--------------------- --------- --------- -------- --------
<S> <C> <C> <C> <C>
HOLDERS OF MORE THAN 5%:
ATGF II.............................................. -- -- 945,000 52,521
Matrix Partners IV, L.P(1)........................... 1,800,000 629,870 340,909 137,214
Atlas Venture Fund II, L.P........................... 1,500,000 524,892 284,091 52,521
Norwest Venture Partners VI, LP...................... -- 1,904,762 500,000 119,088
DIRECTORS:
Timothy Barrows(2)................................... 1,800,000 629,870 340,909 137,214
Christopher Spray(3)................................. 1,500,000 524,892 284,091 52,521
Promod Haque(4)...................................... -- 1,904,762 500,000 119,088
John Mandile......................................... 100,000 11,905 -- --
Margaret Taylor...................................... -- -- 25,000 --
</TABLE>
- ---------------
(1) Includes 145,400 shares held by the Matrix IV Entrepreneurs Fund, L.P.
(2) Includes shares held by Matrix Partners IV, L.P and Matrix IV Entrepreneurs
Fund, L.P. Mr. Barrows, a general partner of Matrix Partners IV, L.P and
Matrix IV Entrepreneurs Fund, L.P., disclaims beneficial ownership of the
shares held by Matrix Partners IV, L.P and Matrix IV Entrepreneurs Fund,
L.P., except to the extent of his proportionate pecuniary interest therein.
Mr. Barrows is a member of our board of directors.
(3) Includes shares held by Atlas Venture Fund II, L.P. Mr. Spray, a general
partner of Atlas Venture Fund II, L.P., disclaims beneficial ownership of
the shares held by Atlas Venture Fund II, L.P., except to the extent of his
proportionate pecuniary interest therein. Mr. Spray is a member of our board
of directors.
(4) Includes shares held by Norwest Venture Partners VI, LP. Mr. Haque, a
general partner of Norwest Venture Partners VI, LP, disclaims beneficial
ownership of the shares held by Norwest Venture
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<PAGE> 56
Partners VI, LP, except to the extent of his proportionate pecuniary
interest therein. Mr. Haque is a member of our board of directors.
POLICY REGARDING TRANSACTIONS WITH AFFILIATES
All future transactions with affiliates, including any loans we make to our
officers, directors, principal stockholders or other affiliates, will be
approved by a majority of our Board of Directors, including a majority of the
independent and disinterested members or, if required by law, a majority of
disinterested stockholders, and will be on terms no less favorable to us than we
could have obtained from unaffiliated third parties.
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<PAGE> 57
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock as of August 31, 1999, by the following
individuals or groups:
- each person, or group of affiliated persons, whom we know beneficially
owns more than 5% of our outstanding stock;
- each of our executive officers;
- each of our directors; and
- all of our directors and executive officers as a group.
Unless otherwise indicated, the address for each stockholder on this table
is c/o OnDisplay, Inc., 12667 Alcosta Boulevard, Suite 300, San Ramon, CA 94583.
Except as otherwise noted, and subject to applicable community property laws, to
the best of our knowledge, the persons named in this table have sole voting and
investing power with respect to all of the shares of common stock held by them.
This table lists applicable percentage ownership based on 15,313,026 shares
of common stock outstanding as of August 31, 1999, as adjusted to reflect the
conversion of all outstanding shares of preferred stock upon the closing of this
offering, and also lists applicable percentage ownership based on
shares of common stock outstanding after completion of this offering. Options to
purchase shares of our common stock that are exercisable within 60 days of
August 31, 1999 are deemed to be beneficially owned by the persons holding these
options or warrants for the purpose of computing percentage ownership of that
person, but are not treated as outstanding for the purpose of computing any
other person's ownership percentage.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
---------------------------------------------
PERCENT BEFORE PERCENT AFTER
BENEFICIAL OWNER NUMBER OFFERING OFFERING
---------------- ---------- -------------- -------------
<S> <C> <C> <C>
Matrix Partners IV, L.P(1)........................... 2,907,993 19.0% %
Bay Colony Corporate Center
1000 Winter Street, Suite 4500
Waltham, MA 02154
Norwest Venture Partners VI, LP...................... 2,523,850 16.5
245 Lytton Avenue, Suite 250
Palo Alto, CA 94111
Atlas Venture Fund II, L.P........................... 2,361,504 15.4
222 Berkeley Street
Boston, MA 02116
ATGF II.............................................. 997,521 6.5
c/o Amerindo Investment Advisors
One Embarcadero, Suite 2300
San Francisco, CA 94111
Mark Pine(2)......................................... 1,473,275 9.6
Trung Dung........................................... 1,090,775 7.1
Mark Deppe(3)........................................ 406,406 2.6
Olivier Sermet(4).................................... 160,312 1.0
Timothy Barrows(5)................................... 2,907,993 19.0
Promod Haque(6)...................................... 2,523,850 16.5
John Mandile(7)...................................... 144,665 1.0
Christopher Spray(8)................................. 2,361,504 15.4
Margaret Taylor...................................... 25,000 *
Carmine Villani(9)................................... 40,000 *
All directors and executive officers as a group (10
persons)........................................... 11,133,780
</TABLE>
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<PAGE> 58
- ---------------
* Less than 1% of the outstanding shares of common stock.
(1) Includes 145,400 shares held by the Matrix IV Entrepreneurs Fund, L.P.
(2) Includes 249,000 shares beneficially held by trusts for the benefit of Mr.
Pine's minor children and other family members.
(3) Includes 278,906 shares of common stock issuable upon the exercise of stock
options exercisable within 60 days of August 31, 1999.
(4) As of August 31, 1999, 58,229 of the shares held by Mr. Sermet are subject
to OnDisplay's right of repurchase in the event Mr. Sermet's employment is
terminated.
(5) Includes shares held by Matrix Partners IV, L.P and Matrix IV Entrepreneurs
Fund, L.P. Mr. Barrows, a general partner of Matrix Partners IV, L.P and
Matrix IV Entrepreneurs Fund, L.P., disclaims beneficial ownership of the
shares held by Matrix Partners IV, L.P and Matrix IV Entrepreneurs Fund,
L.P., except to the extent of his proportionate pecuniary interest therein.
(6) Includes shares held by Norwest Venture Partners VI, LP. Mr. Haque, a
general partner of Norwest Venture Partners VI, LP, disclaims beneficial
ownership of the shares held by Norwest Venture Partners VI, LP, except to
the extent of his proportionate pecuniary interest therein.
(7) Includes 32,760 shares of common stock issuable upon the exercise of stock
options exercisable within 60 days of August 31, 1999.
(8) Includes shares held by Atlas Venture Fund II, L.P. Mr. Spray, a general
partner of Atlas Venture Fund II, L.P., disclaims beneficial ownership of
the shares held by Atlas Venture Fund II, L.P., except to the extent of his
proportionate pecuniary interest therein.
(9) As of August 31, 1999, 28,333 of the shares held by Mr. Villani are subject
to OnDisplay's right of repurchase in the event Mr. Villani service to the
corporation as a director or consultant is terminated.
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<PAGE> 59
DESCRIPTION OF CAPITAL STOCK
Our certificate of incorporation that becomes effective upon the closing of
this offering authorizes the issuance of up to 100,000,000 shares of common
stock, $0.001 par value, and authorizes the issuance of 10,000,000 shares of
undesignated preferred stock, $0.001 par value. From time to time, our board of
directors may establish the rights and preferences of the preferred stock. As of
August 31, 1999, 4,697,733 shares of common stock were issued and outstanding
and held by 92 stockholders, and 10,615,293 shares of preferred stock were
issued and outstanding and held by 29 stockholders. Upon the closing of this
offering, all outstanding shares of preferred stock will convert into an
aggregate of 10,615,293 shares of common stock. The following description of our
capital stock is, by necessity, not complete. We encourage you to refer to our
certificate of incorporation and bylaws, which are included as exhibits to the
registration statement of which this prospectus forms a part, and applicable
provisions of Delaware law for a more complete description.
COMMON STOCK
Each holder of common stock is entitled to one vote for each share held on
all matters to be voted upon by the stockholders and there are no cumulative
voting rights. Subject to preferences that may be applicable to any outstanding
preferred stock, holders of common stock are entitled to receive ratably
dividends, if any, as may be declared time to time by the board of directors out
of funds legally available for that purpose. See "Dividend Policy." In the event
of a liquidation, dissolution or winding up of OnDisplay, the holders of common
stock are entitled to share in our assets remaining after the payment of
liabilities and the satisfaction of any liquidation preference granted to the
holders of any outstanding shares of preferred stock. Holders of common stock
have no preemptive or conversion rights or other subscription rights. There are
no redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of common stock are fully paid and nonassessable. The rights,
preferences and privileges of the holders of common stock are subject to, and
may be adversely affected by the rights of the holders of shares of any series
of preferred stock which we may designate in the future.
PREFERRED STOCK
The board of directors has the authority, without action by the
stockholders, to designate and issue preferred stock in one or more series and
to designate the rights, preferences and privileges of each series, which may be
greater than the rights of the common stock. It is not possible to state the
actual effect of the issuance of any shares of preferred stock upon the rights
of holders of the common stock until the board of directors determines the
specific rights of the holders of preferred stock. However, the effects might
include, among other things:
- restricting dividends on the common stock;
- diluting the voting power of the common stock;
- impairing the liquidation rights of the common stock; or
- delaying or preventing a change in control of OnDisplay without further
action by the stockholders.
Upon the closing of this offering, no shares of preferred stock will be
outstanding, and OnDisplay has no present plans to issue any shares of preferred
stock.
WARRANTS AND OTHER OBLIGATIONS TO ISSUE CAPITAL STOCK
As of August 31, 1999, we have outstanding warrants to purchase an
aggregate of 85,537 shares of series C preferred stock at an exercise price of
$6.05 per share. This warrant is currently exercisable in full and will expire
on the third anniversary of the effective date of this offering. Upon the
closing of this offering, this warrant will become exercisable for shares of
common stock, based on the conversion rate applicable at the closing.
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<PAGE> 60
REGISTRATION RIGHTS OF CERTAIN HOLDERS
After this offering, holders of 10,615,293 shares of common stock and
85,537 shares of common stock issuable upon exercise of outstanding warrants
(the "registrable securities") or their transferees are entitled to certain
rights with respect to the registration of shares under the Securities Act.
These rights are provided under the terms of an agreement between OnDisplay and
the holders of the registrable securities. Beginning six months following the
date of this prospectus, holders of the registrable securities may require on
two occasions, that we use our best efforts to register the registrable
securities for public resale. On the first occasion holders of at least 10% may
request a registration and on the second occasion holders of 40% may request a
registration. OnDisplay is obligated to register these shares only if the
outstanding registrable securities have an anticipated public offering price of
at least $5,000,000. Also, holders of 10% of the registrable securities may
require, no more than once during any twelve-month period, that OnDisplay
register their shares for public resale on Form S-3 or similar short-form
registration if the value of the securities to be registered is at least
$1,000,000. Furthermore, in the event OnDisplay elects to register any of its
shares of common stock for purposes of effecting any public offering (with the
exception of our initial public offering), the holders of registrable securities
are entitled to include their shares of common stock in the registration, but
OnDisplay may reduce the number of shares proposed to be registered in view of
market conditions. OnDisplay will bear all expenses in connection with any
registration, other than underwriting discounts and commissions. All
registration rights will terminate five years following the consummation of this
offering.
CERTAIN CHARTER AND BYLAW PROVISIONS AND DELAWARE LAW
Certain provisions of Delaware law and OnDisplay's certificate of
incorporation and bylaws could make the following more difficult:
- the acquisition of OnDisplay by means of a tender offer;
- acquisition of OnDisplay by means of a proxy contest or otherwise; or
- the removal of OnDisplay's incumbent officers and directors.
These provisions, summarized below, are expected to discourage certain
types of coercive takeover practices and inadequate takeover bids. These
provisions are also designed to encourage persons seeking to acquire control of
OnDisplay to first negotiate with OnDisplay's board. OnDisplay believes that the
benefits of increased protection of its potential ability to negotiate with the
proponent of an unfriendly or unsolicited proposal to acquire or restructure
OnDisplay outweigh the disadvantages of discouraging proposals because
negotiation of these proposals could result in an improvement of their terms.
Election And Removal Of Directors.
Our board of directors is divided into three classes. The directors in each
class will serve for a three-year term, with OnDisplay's stockholders electing
one class each year. See "Management-Board Composition." This system of electing
and removing directors may tend to discourage a third party from making a tender
offer or otherwise attempting to obtain control of OnDisplay, because it
generally makes it more difficult for stockholders to replace a majority of the
directors.
Stockholder Meetings.
Under our bylaws, only the board of directors, the chairman of the board
and the president may call special meetings of stockholders.
Requirements For Advance Notification Of Stockholder Nominations And
Proposals.
Our bylaws establish advance notice procedures for stockholder proposals
and the nomination of candidates for election as directors, other than
nominations made by or at the direction of the board of directors or a committee
of the board.
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<PAGE> 61
Delaware Anti-takeover Law.
OnDisplay is subject to Section 203 of the Delaware General Corporation
Law, an anti-takeover law. In general, Section 203 prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years following the date the
person became an interested stockholder, unless the "business combination" or
the transaction in which the person became an interested stockholder is approved
in a prescribed manner. Generally, a "business combination" includes a merger,
asset or stock sale, or other transaction resulting in a financial benefit to
the interested stockholder. Generally, an "interested stockholder" is a person
who, together with affiliates and associates, owns or within three years prior
to the determination of interested stockholder status, did own, 15% or more of a
corporation's voting stock. The existence of this provision may have an anti-
takeover effect with respect to transactions not approved in advance by the
board of directors, including discouraging attempts that might result in a
premium over the market price for the shares of common stock held by
stockholders.
Elimination Of Stockholder Action By Written Consent.
Our certificate of incorporation eliminates the right of stockholders to
act by written consent without a meeting.
No Cumulative Voting.
Our certificate of incorporation does not provide for cumulative voting in
the election of directors.
Undesignated Preferred Stock.
The authorization of undesignated preferred stock makes it possible for the
board of directors to issue preferred stock with voting or other rights or
preferences that could impede the success of any attempt to change control of
OnDisplay. These and other provisions may have the effect of deferring hostile
takeovers or delaying changes in control or management of OnDisplay.
Amendment Of Charter Provisions.
The amendment of any of the above provisions would require approval by
holders of at least 66 2/3% of the outstanding common stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is ChaseMellon
Shareholder Services.
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<PAGE> 62
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock, and
we cannot assure you 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, including shares issued upon exercise of outstanding options
and warrants, in the public market following this offering could adversely
affect market prices prevailing from time to time and could impair our ability
to raise capital through sale of our equity securities. As described below, no
shares currently outstanding will be available for sale immediately after this
offering because of certain contractual restrictions on resale. Sales of
substantial amounts of our common stock in the public market after the
restrictions lapse could adversely affect the prevailing market price and our
ability to raise equity capital in the future.
Upon completion of this offering, we will have outstanding shares
of common stock based upon shares outstanding as of August 31, 1999, assuming no
exercise of the underwriters' over-allotment option and no exercise of
outstanding options or warrants that do not expire prior to completion of this
offering. Of these shares, the shares sold in this offering will be
freely tradable without restriction under the Securities Act, except for any
shares purchased by our "affiliates" as Rule 144 under the Securities Act
defines that term. The remaining 15,313,026 shares of common stock held by
existing stockholders are "Restricted Shares" as Rule 144 defines that term. All
Restricted Shares are subject to lock-up agreements providing that, with certain
limited exceptions, the stockholder will not offer, sell, contract to sell or
otherwise dispose of any common stock or any securities that are convertible
into common stock for a period of 180 days after the date of this prospectus
without the prior written consent of BancBoston Robertson Stephens. As a result
of these lock-up agreements, notwithstanding possible earlier eligibility for
sale under the provisions of Rules 144, 144(k) and 701, none of these shares
will be resellable until 181 days after the date of this prospectus. Beginning
181 days after the date of this prospectus, approximately Restricted
Shares will be eligible for sale in the public market, all of which are subject
to volume limitations under Rule 144, except shares eligible for sale
under Rule 144(k) and shares eligible for sale under Rule 701 (subject
in some cases to repurchase rights in favor of OnDisplay). In addition, as of
August 31, 1999, there were 1,160,426 outstanding options and warrants to
purchase preferred stock convertible into shares of common stock, some
of which will be exercised prior to this offering. All options and warrants are
subject to lock-up agreements. BancBoston Robertson Stephens may, in their sole
discretion and at any time without notice, release all or any portion of the
securities subject to lock-up agreements, however any release shall apply
pro-rata to all stockholders subject to lock-up agreements.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned Restricted
Shares for at least one year including the holding period of any prior owner
except an affiliate would be entitled to sell within any three-month period a
number of shares that does not exceed the greater of:
- 1% of the number of shares of common stock then outstanding which will
equal approximately shares immediately after this
offering; or
- the average weekly trading volume of the common stock during the four
calendar weeks preceding the filing of a Form 144 with respect to a sale.
Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about OnDisplay. Under Rule 144(k), a person who is not deemed to have been an
affiliate of OnDisplay at any time during the three months preceding a sale, and
who has beneficially owned the shares proposed to be sold for at least two years
including the holding period of any prior owner except an affiliate, is entitled
to sell shares without complying with the manner of sale, public information,
volume limitation or notice provisions of Rule 144.
Rule 701, as currently in effect, permits resales of shares in reliance
upon Rule 144 but without compliance with certain restrictions, including the
holding period requirement, of Rule 144. Any employee, officer or director of or
consultant to OnDisplay who purchased shares pursuant to a written compensatory
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<PAGE> 63
plan or contact may be entitled to rely on the resale provisions of Rule 701.
Rule 701 permits affiliates to sell their Rule 701 shares under Rule 144 without
complying with the holding period requirements of Rule 144. Rule 701 further
provides that non-affiliates may sell shares in reliance on Rule 144 without
having to comply with the holding period, public information, volume limitation
or notice provisions of Rule 144. All holders of Rule 701 shares are required to
wait until 90 days after the date of this prospectus before selling shares.
However, all Rule 701 shares are subject to lock-up agreements and will only
become eligible for sale at the earlier of the expiration of the 180-day lock-up
agreements or no sooner than 90 days after the offering upon obtaining the prior
written consent of BancBoston Robertson Stephens.
After this offering, we intend to file a registration statement on Form S-8
registering shares of common stock subject to outstanding options or reserved
for future issuance under our stock plans. As of August 31, 1999, options to
purchase a total of 1,160,426 shares were outstanding and 1,036,084 shares were
reserved for future issuance under our stock plans. Common stock issued upon
exercise of outstanding vested options or issued pursuant to our Employee Stock
Purchase Plan, other than common stock issued to our affiliates is available for
immediate resale in the open market.
Also beginning six months after the date of this offering, holders of
Restricted Shares and holders of warrants to purchase preferred stock
convertible into shares of common stock will be entitled to certain
rights with respect to registration of shares for sale in the public market. See
"Description of Capital Stock -- Registration Rights of Certain Holders."
Registration of shares under the Securities Act would result in those shares
becoming freely tradable without restriction under the Securities Act, except
for shares purchased by affiliates, immediately upon the effectiveness of the
registration statement.
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UNDERWRITING
The underwriters named below, acting through their representatives,
BancBoston Robertson Stephens Inc., Deutsche Banc Alex. Brown and SG Cowen
Securities Corporation, have severally agreed with OnDisplay, subject to the
terms and conditions of the underwriting agreement, to purchase the number of
shares of common stock set forth opposite their respective names below. The
underwriters are committed to purchase and pay for all shares, if any are
purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
BancBoston Robertson Stephens Inc...........................
Deutsche Banc Alex. Brown...................................
SG Cowen Securities Corporation.............................
--------
Total.............................................
========
</TABLE>
The representatives have advised us that the underwriters propose to offer
the shares of common stock to the public at the public offering price set forth
on the cover page of this prospectus and to certain dealers at a price less a
concession of not more than $ per share, of which $ may be
reallowed to other dealers. After the completion of this offering, the public
offering price, concession and reallowance to dealers may be reduced by the
representatives. No reduction shall change the amount of proceeds to be received
by us as set forth on the cover page of this prospectus.
The following table sets forth the items of compensation considered to be
underwriting compensation under the rules of the National Association of
Securities Dealers:
<TABLE>
<CAPTION>
Total
-----------------------------
Per Without Over- With Over-
Share Allotment Allotment
----- ------------- -------------
<S> <C> <C> <C>
Underwriting fees paid by us............................
Expenses payable by us..................................
Deemed compensation paid by us..........................
Total.................................................
</TABLE>
Over-Allotment Option
We have granted to the underwriters an option, exercisable during the
30-day period after the date of this prospectus, to purchase up to
additional shares of common stock at the same price per share as we will receive
for the shares that the underwriters have agreed to purchase from us.
To the extent that the underwriters exercise the option, each of the
underwriters will have a firm commitment to purchase approximately the same
percentage of additional shares that the number of shares of common stock to be
purchased by it shown in the above table represents as a percentage of the total
number of shares offered hereby. If purchased, the additional shares will be
sold by the underwriters on the same terms as those on which the shares are
being sold.
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Indemnity
The underwriting agreement contains covenants of indemnity among the
underwriters and OnDisplay against certain civil liabilities, including
liabilities under the Securities Act and liabilities arising from breaches of
representations and warranties contained in the underwriting agreement.
Lock-Up Agreements
The Company's shareholders and option holders have agreed, for a period of
180 days after the date of this Prospectus (the "Lock-Up Period"), not to offer,
pledge, sell, offer to sell, contract to sell, sell any option or contract to
purchase, purchase any option to sell, grant any option right or warrant to
purchase, or otherwise transfer or dispose of, directly or indirectly, any of
the shares of common stock or any securities convertible into, or exercisable or
exchangeable for, common stock, owned as of the date of this prospectus or
thereafter acquired directly by the holders or with respect to which they have
or hereafter acquire the power of disposition, without the prior written consent
of the underwriters. However, the underwriters may, in their sole discretion and
at any time without notice, release all or any portion of the securities subject
to lock-up agreements. There are no agreements between the underwriters and any
of our shareholders providing consent by the underwriters to the sale of shares
prior to the expiration of the Lock-Up Period. In addition, we have agreed that
during the Lock-Up Period, we will not, subject to certain exceptions, issue,
sell, contract to sell, or otherwise dispose of, any shares of common stock, any
options or warrants to purchase any shares of common stock or any securities
convertible into, exercisable for or exchangeable for shares of common stock
other than OnDisplay's sale of shares in this offering, the issuance of common
stock upon the exercise of outstanding options or warrants, and our issuance of
option and shares under existing employee stock option and stock purchase plans,
without the prior written consent of the underwriters.
Future Sales
In addition, we have agreed that until 180 days after the date of this
prospectus, we will not, without prior written consent of BancBoston Robertson
Stephens Inc., subject to certain exceptions, offer, sell, contract to sell or
otherwise dispose of any shares of common stock, any options to purchase any
share of common stock or any securities convertible into, exercisable for or
exchangeable for shares of common stock other than our sale of shares in this
offering, the issuance of shares of common stock upon the exercise of
outstanding options and the grant of options to purchase shares of common stock
under existing employee stock option or stock purchase plans. See "Shares
Eligible For Future Sale."
The underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
Reserved Shares
At our request, some of the underwriters have reserved up to % of the
shares of common stock for sale at the initial public offering price to our
directors, officers or employees, and to persons who are otherwise associated
with us and our affiliates, and who have advised us of their desire to purchase
shares in the offering. In addition, the underwriters will reserve, at the
initial public offering price, up to $ million of common stock offered
in this offering for entities affiliated with Omega Ventures and Amerindo
Investment Advisors, all of which are existing stockholders. As a result, the
number of shares of common stock available for sale to the general public in the
offering will be reduced to the extent of sales of shares to any of the persons
for whom they have been reserved. Any shares not so purchased will be offered by
the underwriters to the general public on the same basis as all other shares of
common stock in the offering. We have agreed to indemnify those underwriters
against certain liabilities and expenses, including liabilities under the
Securities Act, in connection with the sales of these reserved shares.
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No Prior Public Market
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for the common stock
offered hereby will be determined through negotiations between us and the
representatives. Among the factors to be considered in such negotiations are
prevailing market conditions, certain of our financial information, market
valuations of other companies that we and the Representatives believe to be
comparable to us, estimates of our business potential, the present state of our
development and other factors deemed relevant.
Stabilization
The representatives have advised us that, pursuant to Regulation M under
the Exchange Act, certain persons participating in the offering may engage in
transactions, including stabilizing bids, syndicate covering transactions or the
imposition of penalty bids which may have the effect of stabilizing or
maintaining the market price of the common stock at a level above that which
might otherwise prevail in the open market. A "stabilizing bid" is a bid for or
the purchase of the common stock on behalf of the underwriters for the purpose
of fixing or maintaining the price of the common stock. A "syndicate covering
transaction" is the bid for or the purchase of the common stock on behalf of the
underwriters to reduce a short position incurred by the underwriters in
connection with the offering. A "penalty bid" is an arrangement permitting the
representatives to reclaim the selling concession otherwise accruing to an
underwriter or syndicate member in connection with the offering if the common
stock originally sold by the underwriter or syndicate member is purchased by the
representatives in a syndicate covering transaction and has therefore not been
effectively placed by the underwriter or syndicate member. The representatives
have advised us that these transactions may be effected on the Nasdaq National
Market or otherwise and, if commenced, may be discontinued at any time.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
OnDisplay by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California. Certain legal matters with this offering will be passed upon
for the underwriters by Brobeck, Phleger & Harrison LLP, Palo Alto, California.
As of August 31, 1999, a certain investment partnership and members of Wilson
Sonsini Goodrich & Rosati, Professional Corporation, beneficially owned an
aggregate of 43,155 shares of common stock of OnDisplay. Mario M. Rosati, our
secretary, is a member of Wilson Sonsini Goodrich & Rosati.
EXPERTS
The financial statements of OnDisplay, Inc. at December 31, 1997 and 1998,
for each of the two years in the period ended December 31, 1998 and for the
period from August 14, 1996 to December 31, 1996 included in this prospectus
have been so included in reliance on the report of PricewaterhouseCoopers, LLP,
independent accountants, given upon the authority of said firm as experts in
accounting and auditing.
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WHERE YOU CAN FIND ADDITIONAL INFORMATION
OnDisplay has filed with the Securities and Exchange Commission a
registration statement on Form S-1 under the Securities Act with respect to the
common stock offered hereby. This prospectus does not contain all of the
information set forth in the registration statement and the exhibits and
schedules thereto. For further information with respect to OnDisplay and our
common stock, reference is made to the registration statement and the exhibits
and schedules filed as a part thereof. Statements contained in this prospectus
as to the contents of any contract or any other document referred to are not
necessarily complete. In each instance, reference is made to the copy of the
contract or document filed as an exhibit to the registration statement, and each
statement is qualified in all respects by that reference. Copies of the
registration statement, including exhibits and schedules thereto, may be
inspected without charge at the Securities and Exchange Commission's principal
office in Washington, D.C., or obtained at prescribed rates from the Public
Reference Section of the Securities and Exchange Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. The Securities and Exchange Commission maintains a
World Wide Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Securities and Exchange Commission. The address of the site is
http://www.sec.gov.
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<PAGE> 68
ONDISPLAY, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Accountants' Report............................. F-2
Balance Sheets as of December 31, 1997, 1998 and June 30,
1999 (Unaudited).......................................... F-3
Statements of Operations for the period from inception to
December 31, 1996, Years ended December 31, 1997 and 1998
and the Six Months ended June 30, 1998 and 1999
(Unaudited)............................................... F-4
Statements of Changes in Stockholders' deficit for the
period from inception to December 31, 1996, Years ended
December 31, 1997 and 1998 and the Six Months ended June
30, 1999 (Unaudited)...................................... F-5
Statements of Cash Flows for the period from inception to
December 31, 1996, Years ended December 31, 1997 and 1998
and the Six Months ended June 30, 1998 and 1999
(Unaudited)............................................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 69
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
OnDisplay, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, changes in stockholders' deficit and cash flows present fairly,
in all material respects, the financial position of OnDisplay, Inc. at December
31, 1997 and 1998 and the results of its operations and its cash flows for the
period from August 14, 1996 (date of inception) to December 31, 1996 and the
years ended December 31, 1997 and 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.
PricewaterhouseCoopers LLP
San Jose, California
July 2, 1999
F-2
<PAGE> 70
ONDISPLAY, INC.
BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY AT
------------------ JUNE 30, JUNE 30,
1997 1998 1999 1999
------- -------- ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................ $ 3,900 $ 4,648 $ 2,970
Trade accounts receivable, net of allowance for
doubtful accounts of $0 in 1997, $250 in 1998
and $330 in 1999.............................. 189 2,600 2,683
Prepaid and other current assets................. 139 96 145
------- -------- --------
Total current assets........................ 4,228 7,344 5,798
------- -------- --------
Property and equipment, net........................ 482 720 941
Deposits and other assets.......................... -- 189 236
------- -------- --------
Total assets................................ $ 4,710 $ 8,253 $ 6,975
======= ======== ========
LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable................................. $ 220 $ 386 $ 996
Accrued liabilities.............................. 196 823 1,110
Deferred revenue................................. 11 1,402 1,288
Current portion of long term debts............... 53 149 1,067
------- -------- --------
Total current liabilities................... 480 2,760 4,461
------- -------- --------
Long term debts, net of current portion............ 128 240 2,367
------- -------- --------
Commitments (Note 4)
Mandatorily redeemable convertible preferred stock,
Series A, B and C, $0.001 par value:
Authorized: 9,500,000 shares; issued and
outstanding: 6,690,476 shares at December 31,
1997 and 8,891,554 shares at December 31, 1998
and June 30, 1999............................. 10,200 18,982 18,982
------- -------- --------
(Liquidation value: $18,981,693 as of June 30,
1999)
Stockholders' equity (deficit):
Common stock, $0.001 par value:
Authorized: 20,000,000 shares; issued and
outstanding: 3,420,625, 4,133,751 and
4,592,978 (unaudited) at December 31, 1997 and
1998 and June 30, 1999........................ -- 1 1 $ 10
Additional paid-in capital......................... 8 2,328 4,882 23,855
Deferred stock-based compensation.................. -- (1,604) (3,190) (3,190)
Accumulated deficit................................ (6,106) (14,454) (20,528) (20,528)
------- -------- -------- --------
Total stockholders' equity (deficit)........ (6,098) (13,729) (18,835) $ 147
------- -------- -------- ========
Total liabilities, mandatory redeemable
convertible preferred stock and
stockholders' deficit.................... $ 4,710 $ 8,253 $ 6,975
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 71
ONDISPLAY, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 14,
1996
(DATE OF YEAR ENDED SIX MONTHS ENDED
INCEPTION) TO DECEMBER 31, JUNE 30,
DECEMBER 31, ------------------------ -------------------------
1996 1997 1998 1998 1999
------------- ---------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
License revenues................... $ -- $ 265 $ 2,229 $ 876 $ 1,937
Service revenues................... -- -- 1,114 276 1,718
---------- ---------- ----------- ---------- -----------
Total revenues.............. -- 265 3,343 1,152 3,655
Cost of revenues................... -- -- 1,620 470 1,981
---------- ---------- ----------- ---------- -----------
Gross profit....................... -- 265 1,723 682 1,674
Operating expenses:
Sales and marketing.............. 42 2,810 5,747 2,388 4,093
Research and development......... 393 1,986 2,636 1,355 1,638
General and administrative....... 182 1,158 1,201 361 1,250
Amortization of deferred
stock-based compensation...... -- -- 618 194 769
---------- ---------- ----------- ---------- -----------
Total operating expenses.... 617 5,954 10,202 4,298 7,750
---------- ---------- ----------- ---------- -----------
Loss from operations............... (617) (5,689) (8,479) (3,616) (6,076)
Interest income.................... 46 163 194 97 73
Interest expense and other......... (1) (8) (63) (62) (71)
---------- ---------- ----------- ---------- -----------
Net loss........................... $ (572) $ (5,534) $ (8,348) $ (3,581) $ (6,074)
========== ========== =========== ========== ===========
Net loss per share -- basic and
diluted.......................... $ (0.17) $ (1.62) $ (2.34) $ (1.04) $ (1.56)
========== ========== =========== ========== ===========
Shares used in per share
calculation -- basic and
diluted.......................... 3,400,000 3,410,313 3,572,353 3,432,260 3,881,291
========== ========== =========== ========== ===========
Pro forma net loss per
share -- basic and diluted
(unaudited)...................... $ (0.75) $ (0.48)
----------- -----------
Shares used in pro forma net loss
per share calculation -- basic
and diluted (unaudited).......... 11,174,494 12,772,845
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 72
ONDISPLAY, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL DEFERRED TOTAL
------------------ PAID-IN STOCK-BASED ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL COMPENSATION DEFICIT DEFICIT
--------- ------ ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Changes in the period from August 14, 1996
(date of inception) to December 31, 1996:
Issuance of common stock in exchange for
services rendered............................ 3,400,000 $-- $ 8 $ -- $ -- $ 8
Net loss....................................... -- -- -- -- (572) (572)
--------- -- ------ ------- -------- --------
BALANCES, DECEMBER 31, 1996.................... 3,400,000 -- 8 -- (572) (564)
Issuance of common stock in exchange for
services rendered............................ 20,000 -- -- -- -- --
Issuance of common stock in connection with
option exercises............................. 625 -- -- -- -- --
Net loss....................................... -- -- -- -- (5,534) (5,534)
--------- -- ------ ------- -------- --------
BALANCES, DECEMBER 31, 1997.................... 3,420,625 -- 8 -- (6,106) (6,098)
Issuance of common stock in connection with
options exercised............................ 754,520 1 106 -- -- 107
Repurchase of unvested common stock............ (41,394) -- (8) -- -- (8)
Deferred compensation related to stock options
granted...................................... -- -- 2,222 (2,222) -- --
Amortization of deferred stock-based
compensation................................. -- -- -- 618 -- 618
Net loss....................................... -- -- -- -- (8,348) (8,348)
--------- -- ------ ------- -------- --------
BALANCES, DECEMBER 31, 1998.................... 4,133,751 1 2,328 (1,604) (14,454) (13,729)
Issuance of common stock in connection with
options exercised............................ 520,343 -- 127 -- -- 127
Repurchase of unvested common stock............ (67,366) -- (12) -- -- (12)
Issuance of common stock in connection with
services rendered............................ 6,250 -- 38 -- -- 38
Amortization of discount related to warrants
issued in connection with long term loan..... -- -- 46 -- -- 46
Deferred compensation related to stock options
granted...................................... -- -- 2,355 (2,355) -- --
Amortization of deferred stock-based
compensation................................. -- -- -- 769 -- 769
Net loss....................................... -- -- -- -- (6,074) (6,074)
--------- -- ------ ------- -------- --------
BALANCES, JUNE 30, 1999 (UNAUDITED)............ 4,592,978 $1 $4,882 $(3,190) $(20,528) $(18,835)
========= == ====== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 73
ONDISPLAY, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 14,
1996
(DATE OF YEAR ENDED SIX MONTHS ENDED
INCEPTION) TO DECEMBER 31, JUNE 30,
DECEMBER 31, ----------------- -------------------------
1996 1997 1998 1998 1999
------------- ------- ------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $ (572) $(5,534) $(8,348) $(3,581) $(6,074)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 8 123 306 101 217
Loss (gain) from sale of property and equipment......... (4) -- 9 -- --
Provision for doubtful accounts......................... -- -- 250 -- 80
Amortization of deferred stock compensation............. -- -- 618 194 769
Amortization of warrants issued in connection with long
term loan received.................................... -- -- -- -- 46
Issuance of common stock in connection with services
rendered.............................................. 8 -- -- -- 38
Change in operating assets and liabilities
Trade accounts receivable............................. (2) (187) (2,661) (589) (163)
Prepaid and other current assets...................... (46) (96) 43 (18) (49)
Accounts payable...................................... 87 125 166 333 610
Accrued liabilities................................... 33 163 627 186 287
Deferred revenue...................................... -- 11 1,391 242 (114)
Other long term assets................................ -- -- (189) -- (47)
------ ------- ------- ------- -------
Net cash used in operating activities................. (488) (5,395) (7,788) (3,132) (4,400)
------ ------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment..................... (133) (428) (219) (64) (285)
Proceeds from sales of property and equipment............. 7 -- 3 -- --
------ ------- ------- ------- -------
Net cash used in investing activities................. (126) (428) (216) (64) (285)
------ ------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales and lease back of property and
equipment............................................... -- 200 -- -- --
Proceeds from issuance of Series A preferred stock........ 3,400 100 -- -- --
Proceeds from issuance of common stock.................... -- -- 107 26 127
Proceeds from issuance of Series B preferred stock........ -- 6,700 25 25 --
Principal payments under capital lease obligations........ -- (11) (129) (41) --
Proceeds from borrowings under long term loan received.... -- -- -- -- 3,000
Repayment of long term loan............................... -- -- -- -- (108)
Repayment of note issued for capital equipment............ (35) (17) -- -- --
Proceeds from issuance of Series C preferred stock........ -- -- 8,757 -- --
Repurchases unvested common stock......................... -- -- (8) -- (12)
------ ------- ------- ------- -------
Net cash provided by financing activities............. 3,365 6,972 8,752 10 3,007
------ ------- ------- ------- -------
Net increase (decrease) in cash and cash equivalents........ 2,751 1,149 748 (3,186) (1,678)
Cash and cash equivalents at beginning of period............ -- 2,751 3,900 3,900 4,648
------ ------- ------- ------- -------
Cash and cash equivalents at end of period.................. $2,751 $ 3,900 $ 4,648 $ 714 $ 2,970
====== ======= ======= ======= =======
NONCASH INVESTING AND FINANCING ACTIVITY:
Property and equipment acquired under capital lease
obligations............................................. $ 4 $ 196 $ 337 $ 196 $ 153
====== ======= ======= ======= =======
Property and equipment financed under notes payable....... $ 52 $ -- $ -- $ -- $ --
====== ======= ======= ======= =======
Deferred stock-based compensation......................... $ -- $ -- $ 2,222 $ 1,048 $ 2,355
====== ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 74
ONDISPLAY, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO JUNE 30, 1999 AND FOR
THE TWO SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
NOTE 1. FORMATION AND BUSINESS OF THE COMPANY:
OnDisplay, Inc. (the "Company") was incorporated under the laws of the
state of Delaware in August 1996 to develop and market applications for powering
e-business portals and e-marketplaces in both business-to-business and
business-to-consumer e-commerce. The Company's product suite provides an open,
scalable, adaptable solution to enable the rapid aggregation, exchange,
integration, personalization and syndication of e-business information and
services from a broad range of partners, suppliers and customers. Through the
use of the Internet, customers are able to link information systems with
business allies without modification to existing applications or to migrate
rapidly from their existing systems to new enterprise applications. The Company
has determined that it operates in a single business segment and does not have
any separately reportable business segments as of December 31, 1998.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
UNAUDITED INTERIM FINANCIAL INFORMATION
The accompanying financial statements at June 30, 1999 and for the six
month periods ended June 30, 1998 and 1999, together with the related notes, are
unaudited but include all adjustments, consisting only of normal recurring
adjustments which, in the opinion of management, are necessary for a fair
presentation, in all material respects, of the financial position and the
operating results and cash flows for the interim date and periods presented.
Results for the interim period ended June 30, 1999 are not necessarily
indicative of results for the entire fiscal year or future periods.
MANAGEMENT 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. These estimates include levels of allowances for accounts
receivable, valuation of deferred tax assets and value of the Company's capital
stock. Actual results could differ from these estimates.
CASH AND CASH EQUIVALENTS
The Company considers all investments purchased with an original or
remaining maturity of three months or less to be cash equivalents.
CONCENTRATION OF CREDIT RISK
The Company maintains its cash and cash equivalents in accounts with two
major financial institutions in the United States. The Company has not
experienced any losses on its deposits of cash and cash equivalents.
The Company performs ongoing credit evaluations of its customers, and
collateral is not required. The Company records an allowance for doubtful
accounts for credit losses at the end of each period based on an analysis of
individual aged accounts receivable balances. As a result of this analysis, the
Company believes that its allowance for doubtful accounts is adequate but not
excessive at December 31, 1997 and 1998 and June 30, 1999.
F-7
<PAGE> 75
ONDISPLAY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO JUNE 30, 1999 AND FOR
THE TWO SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
At December 31, 1997, two customers accounted for 35% and 55% of accounts
receivable and at December 31, 1998 two different customers accounted for 24%
and 12% of accounts receivable. No customer accounted for more than 10% of
accounts receivable at June 30, 1999.
The Company derives most of its license service and support revenues from
one suite of products. The following table sets forth customers comprising 10%
or more of the revenue for each of the periods reported:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
------------ ------------
CUSTOMER 1997 1998 1998 1999
- -------------------------- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C>
A 37% -- -- --
B 30% -- -- --
C 21% -- -- --
D -- 13% -- --
E -- 11% 17% --
F -- -- 17% --
G -- -- 13% --
H -- -- -- 16%
</TABLE>
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of certain of the Company's financial instruments,
including cash, cash equivalents, trade accounts receivable, accounts payable
and accrued liabilities approximate fair value due to their short maturities.
Based on borrowing rates currently available to the Company for loans with
similar terms, the carrying value of its long-term debts approximates fair
value.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful life of the related assets of
three years. Leasehold improvements and leased assets are amortized on a
straight line basis over the lesser of their estimated useful life or the lease
term. 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.
REVENUE RECOGNITION
Revenue consists of revenue earned under software license agreements,
service agreements, and maintenance agreements. Revenue from software license
agreements is recognized upon shipment or upon notification to the customer of
the downloadable software location, provided that a signed contract exists, the
fee is fixed and determinable and collection of the resulting receivable is
probable and, if applicable, acceptance criteria are met.
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 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 from maintenance fees,
including amounts allocated from product revenues 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
F-8
<PAGE> 76
ONDISPLAY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO JUNE 30, 1999 AND FOR
THE TWO SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
installation and training and for such services sold separately, the Company
recognizes revenues as the related services are performed.
Deferred revenue consists of payments received prior to delivery of
licenses, fulfillment of acceptance criteria, or performance of services.
RESEARCH AND DEVELOPMENT EXPENDITURES
Expenditures for research and development are charged to expense as
incurred. Under Statement of Financial Accounting Standards ("SFAS") No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed" certain software development costs are capitalized after technological
feasibility has been established. Development costs incurred in the period
between achievement of technological feasibility, which the Company defines as
the establishment of a working model, until the general availability of such
software to customers, has been short and software development costs qualifying
for capitalization have been insignificant. Accordingly, the Company has not
capitalized any software development costs to date.
STOCK-BASED COMPENSATION
Pursuant to SFAS No. 123, "Accounting for Stock-Based Compensation," the
Company accounts for employee stock options under Accounting Principles Board
Opinion ("APB") No. 25 and follows the disclosure-only provisions of SFAS 123.
Under APB No. 25, compensation expense is based on the difference, if any, on
the date of the grant, between the estimated fair value of the Company's stock
and the exercise price of options to purchase that stock.
INCOME TAXES
Deferred income tax assets and liabilities are computed for differences
between the financial statement and tax bases of assets and liabilities that
will result in taxable or deductible amounts in the future based on enacted tax
laws and rates applicable to the periods in which the differences are expected
to affect taxable income. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized.
NET LOSS PER SHARE
Basic net loss per share is computed by dividing net loss available to
common stockholders by the weighted average number of vested common shares
outstanding for the period. Diluted net loss per share is computed giving effect
to all dilutive potential common stock, including options, warrants and
preferred stock. Options, warrants, non vested common stock and preferred stock
were not included in the computation of diluted net loss per share in the
periods reported because the effect would be antidilutive.
F-9
<PAGE> 77
ONDISPLAY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO JUNE 30, 1999 AND FOR
THE TWO SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
Antidilutive securities not included in net loss per share calculation for
the periods:
<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 14, 1996 YEAR ENDED SIX MONTHS
(DATE OF DECEMBER 31, JUNE 30,
INCEPTION) TO ---------------------- ----------------------
DECEMBER 31, 1996 1997 1998 1998 1999
----------------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Non vested common stock...... -- -- 148,792 3,293 429,840
Common stock options......... 77,430 65,531 562,450 714,529 307,222
Warrants..................... -- -- -- -- 57,025
Convertible Preferred
Stock...................... 3,400,000 4,787,698 7,602,141 4,787,698 8,891,554
--------- --------- --------- --------- ---------
3,477,430 4,853,229 8,313,383 5,505,520 9,685,641
========= ========= ========= ========= =========
</TABLE>
PRO FORMA NET LOSS PER SHARE (UNAUDITED)
Pro forma net loss per share for the year ended December 31, 1998 and the
six months ended June 30, 1999 is computed using the weighted average number of
common shares outstanding, including the pro forma effects of the automatic
conversion of the Company's Series A, Series B and Series C mandatorily
redeemable preferred stock into shares of the Company's common stock as
contemplated upon the closing of the Company's initial public offering (See Note
12 -- Subsequent Events) as if such conversion occurred on January 1, 1998, or
at the date of original issuance, if later. The resulting pro forma adjustment
results in an increase in the weighted average shares used to compute basic and
diluted net loss per share of 7,602,141 shares for the year ended December 31,
1998. Pro forma common equivalent shares, composed of unvested restricted common
stock and incremental common shares issuable upon the exercise of stock options
and warrants, are not included in pro forma diluted net loss per share because
they would be anti-dilutive.
PRO FORMA STOCKHOLDERS' EQUITY (UNAUDITED)
As contemplated upon the closing of the Company's initial public offering,
the outstanding shares of Series A, Series B and Series C mandatorily redeemable
preferred stock will convert into 8,891,554 shares of common stock. The pro
forma effects of these transactions are unaudited and have been reflected in the
accompanying pro forma balance sheet at June 30, 1999 (see Note 12 -- Subsequent
Events).
COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted the provisions of SFAS No.
130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for
reporting comprehensive income and its components in financial statements.
Comprehensive income, as defined, includes all changes in equity (net assets)
during a period from non-owner sources. The Company has no comprehensive income
components other than its net loss.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") No. 98-1, "Software for Internal Use,"
which provides guidance on accounting for the cost of computer software
developed or obtained for internal use. SOP No. 98-1 is effective for financial
statements for fiscal years beginning after December 15, 1998. The Company is in
process of evaluating the impact of this pronouncement.
F-10
<PAGE> 78
ONDISPLAY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO JUNE 30, 1999 AND FOR
THE TWO SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
In April 1998, the Accounting Standards Executive Committee released
Statement of Position No. 98-5, "Reporting on the Costs of Start-Up Activities."
SOP No. 98-5 is effective for fiscal years beginning after December 15, 1998 and
requires companies to expense all costs incurred or unamortized in connection
with start-up activities. The adoption of this SOP did not have any significant
effect on the Company's results of operations as the Company had expensed such
start-up costs in prior years.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and hedging activities and will be adopted
in the year 2000. It requires that an entity recognize all derivatives as either
assets or liabilities in the balance sheet and measure those instruments at fair
value. The Company is in process of evaluating the impact of this pronouncement.
In December 1998, the Accounting Standards Executive Committee issued
Statement of Position 98-9, modification of SOP 97-2, "Software Revenue
Recognition," with Respect to Certain Transactions. 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 in process of
evaluating the impact of this pronouncement.
NOTE 3. BALANCE SHEET ACCOUNTS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- JUNE 30,
PROPERTY AND EQUIPMENT (IN THOUSANDS) 1997 1998 1999
------------------------------------- ----- ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Computer hardware.................................... $ 463 $ 869 $1,007
Computer software.................................... 82 177 340
Furniture and fixtures............................... 68 93 222
Leasehold improvements............................... -- 13 21
----- ------ ------
613 1,152 1,590
Less accumulated depreciation and amortization....... (131) (432) (649)
----- ------ ------
$ 482 $ 720 $ 941
===== ====== ======
</TABLE>
Included in property and equipment at December 31, 1997 and 1998 and June
30, 1999 is approximately $200,000, $537,000 and $690,000 of computer equipment
purchased under capital leases. Accumulated amortization of assets acquired
under capital leases is approximately $28,000, $241,000 and $402,000 at December
31, 1997 and 1998 and June 30, 1999.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- JUNE 30,
1997 1998 1999
------------ ------------ -----------
ACCRUED LIABILITIES (IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C>
Accrued commissions.......................... $ 16 $275 $ 425
Accrued professional fees.................... -- 132 241
Accrued vacation............................. 94 190 249
Accrued bonuses.............................. 67 226 85
Other........................................ 19 -- 110
---- ---- ------
$196 $823 $1,110
==== ==== ======
</TABLE>
F-11
<PAGE> 79
ONDISPLAY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO JUNE 30, 1999 AND FOR
THE TWO SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
NOTE 4. COMMITMENTS:
OPERATING LEASES
The Company leases various facilities under operating leases expiring
through 2002. Under these leases, the Company is responsible for maintenance and
insurance.
The minimum lease payments, net of sublease income, required under these
operating leases as of December 31, 1998 are as follows (in thousands):
<TABLE>
<S> <C>
1999........................................................ $ 466
2000........................................................ 392
2001........................................................ 315
2002........................................................ 184
------
$1,357
======
</TABLE>
Rent expense, net of sublease income, for the years ended December 31, 1997
and 1998 and the six months ended June 30, 1999, was approximately $186,000,
$270,000 and $237,000 (unaudited).
CAPITAL LEASE OBLIGATIONS
In June 1997, the Company entered into a capital lease agreement which was
amended March 16, 1998 under which the Company had $550,000 available to acquire
equipment. As of December 31, 1998, the Company had drawn a total of
approximately $535,000 under this line. Borrowings under this agreement are
collateralized by the assets purchased under this equipment facility and are
included in the capital lease obligations at December 31, 1998. In February
1999, the Company entered into another financing agreement under which the
Company has $1,350,000 available to purchase equipment. The draw down period
under this agreement expires on August 19, 2000.
Future minimum lease payments under the capital lease agreements as of
December 31, 1998 are as follows (in thousands):
<TABLE>
<S> <C>
1999........................................................ $ 184
2000........................................................ 182
2001........................................................ 82
---------
Total minimum lease payments................................ 448
Less amount representing interest........................... (59)
---------
Present value of minimum lease payments..................... 389
Less current portion........................................ (149)
---------
$ 240
=========
</TABLE>
F-12
<PAGE> 80
ONDISPLAY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO JUNE 30, 1999 AND FOR
THE TWO SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
NOTE 5. LONG TERM DEBTS:
Long term debts consist of (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- JUNE 30,
1997 1998 1999
-------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Long term loan.................................. $ -- $ -- $ 2,928
Capital lease obligations (see Note 4).......... 181 389 506
-------- --------- -----------
181 389 3,434
Less current portion............................ (53) (149) (1,067)
-------- --------- -----------
$ 128 $ 240 $ 2,367
======== ========= ===========
</TABLE>
In February 1999 the Company entered into a loan agreement which allows for
borrowings of $3,000,000 bearing interest at 12.5% per annum. The Company
borrowed the full amount in May 1998 and is required to make monthly payments of
principal and interest of approximately $100,000 in 36 installments commencing
June 1, 1999 through May 1, 2002. Long-term debt is collateralized by
substantially all of the Company's assets. Dividends declared by the Company are
subject to the approval of the lender under this loan agreement.
Annual maturities under the loan as of June 30, 1999 are as follows (in
thousands):
<TABLE>
<S> <C>
FISCAL YEAR ENDING DECEMBER 31,
1999...................................................... $ 429
2000...................................................... 943
2001...................................................... 1,068
2002...................................................... 488
----------
Total.................................................. $ 2,928
==========
</TABLE>
NOTE 6. 401(k) SAVINGS PLAN:
In February 1997, the Company established a 401(k) Savings Plan (the
"Plan") that covers substantially all employees. Under the Plan, employees are
permitted to contribute a portion of gross compensation not to exceed standard
limitations provided by the Internal Revenue Service. The Company maintains the
right to match employee contributions, but for the year ended December 31, 1997
and 1998 and for the six months ended June 30, 1999, no Company matching
contributions were made.
NOTE 7. MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK:
As of December 31, 1998 the convertible preferred stock comprises:
<TABLE>
<CAPTION>
NUMBER
NUMBER OF SHARES LIQUIDATION
OF SHARES ISSUED AND DIVIDEND VALUE
AUTHORIZED OUTSTANDING PER SHARE PER SHARE
---------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Series A............................... 3,500,000 3,500,000 $0.08 $1.00
Series B............................... 3,500,000 3,202,381 $0.17 $2.10
Series C............................... 2,500,000 2,189,173 $0.32 $4.00
--------- ---------
9,500,000 8,891,554
========= =========
</TABLE>
F-13
<PAGE> 81
ONDISPLAY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO JUNE 30, 1999 AND FOR
THE TWO SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
DIVIDENDS
The holders of Series A, Series B, Series C and preferred stock are
entitled to receive the above annual dividends, when and if declared by the
Board of Directors. After payment of any required dividends to the Series A,
Series B and Series C stockholders, declared dividends shall be distributed
among all holders of common stock and all holders of Series A, Series B or
Series C preferred stock in proportion to the number of shares of common stock
which would be held by each such holder if all shares of Series A, Series B and
Series C preferred stock were converted to common stock.
LIQUIDATION
In the event of any liquidation, dissolution, or winding up of the Company,
either voluntary or involuntary, the holders of Series A, Series B and Series C
preferred stock are entitled to receive, prior and in preference to any
distribution of any of the assets of the Company to the holders of common stock
by reason of their ownership, an amount equal to the sum of $1.00, $2.10, and
$4.00 for each outstanding share of Series A, Series B, and Series C preferred
stock, (as adjusted for any stock dividends, combinations or splits) plus any
declared but unpaid dividends on such shares. If upon the occurrence of such
event, the assets distributed among the holders of preferred stock are
insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then the entire assets of the Company legally available
for distribution are to be distributed first ratably among the holders of the
preferred stock in proportion to the aggregate liquidation preference of the
shares of preferred stock then held by them.
After payment has been made to the holders of preferred stock, any
remaining assets and funds are to be distributed pro rata among the holders of
the preferred stock and the common stock on a per share basis, treating all
shares of preferred stock convertible into shares of common stock as if
converted; provided, however, that after the receipt by each share of preferred
stock of distributions equal to two times the original purchase price for the
preferred stock, then all remaining assets shall be distributed equally among
the holders of the common stock on a per-share basis.
CONVERSION
Each share of preferred stock, at the option of the holder thereof, shall
be convertible into such number of fully paid and nonassessable shares of common
stock which results from dividing the issuance price per share by the conversion
price per share in effect for the shares of preferred stock at the time of
conversion. The issuance price per share and initial conversion price per share
of Series A, B and C preferred stock are $1.00, $2.10, and $4.00. The number of
shares of common stock into which a share of a series of preferred stock is
convertible is referred to as the conversion rate of such series. The initial
conversion price of Series A, B, and C preferred stock is subject to adjustment
from time to time, as described in the Company's Restated Articles of
Incorporation. At December 31, 1998 and June 30, 1999 the conversion ratio was
one to one.
Conversion is automatic at the then effective conversion price of such
series immediately prior to the closing of a qualified initial public offering
or at any time upon the affirmative election of the holders of at least 66 2/3%
of the outstanding shares of preferred stock.
VOTING
The holders of Series A, Series B and Series C preferred stock are entitled
to voting rights equal to the number of shares of common stock into which each
share of preferred stock could be converted at the
F-14
<PAGE> 82
ONDISPLAY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO JUNE 30, 1999 AND FOR
THE TWO SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
record date for a vote or consent of stockholders, except as otherwise required
by law, and have voting rights and powers equal to the voting rights and powers
of the shares of common stock.
REDEMPTION
Preferred stock shall be redeemable at the option of the holders of a
majority of the outstanding shares of preferred stock at any time after
September 30, 2001 if the Company has not completed a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
common stock for the account of the Corporation with an aggregate offering price
to the public of not less than $20,000,000 defined hereafter as a "Qualified
IPO." Such redemption right may be exercised by giving at least 120 day notice
prior to the date of commencement of the redemption. After receipt of such
notice of a redemption, the Company shall redeem all of the outstanding shares
of preferred stock in three equal annual installments on the last day of each
fiscal year (commencing with the first fiscal year ending after the 120 day
notice period). The redemption price of the preferred stock shall be the
original purchase price per share (as adjusted for any stock dividends,
combinations or splits) plus any accrued but unpaid dividends. Any redemption of
only a part of the outstanding preferred stock by the Company shall be pro rata
as among all holders of preferred stock in proportion to the aggregate
redemption price to be paid to such holders.
NOTE 8. STOCK OPTION PLAN:
The Company adopted the 1996 Stock Plan (the "Plan") under which 1,700,000
shares of common stock were reserved for issuance to employees, directors and
consultants of the Company. The number of shares reserved for issuance under the
Plan was increased by 450,000 and 400,000 in 1997 and 1998. The Plan expires in
2006, or if earlier, upon approval of the Board of Directors.
Under the Plan, incentive options to purchase the Company's common stock
may be granted to employees at prices not lower than the fair market value per
share on the date of grant, as determined by the Board of Directors.
Nonstatutory options may be granted to key employees, including directors and
consultants, at prices not lower than 85% of the fair market value (110% for
qualified incentive stock options in certain cases) at the date of grant, as
determined by the Board of Directors. The Board also has the authority to set
the term of the options (no longer than ten years from date of grant and no more
than five years in certain instances). Options granted generally vest over four
years. Holders of options granted under the Plan may exercise their options
prior to complete vesting of shares, subject to the Company's right of
repurchase, such that, in the event of a termination of the optionee's
employment or consulting relationship, any unvested shares may be repurchased at
a price per share equal to the original exercise price per share for the option.
Unexercised vested options expire three months after termination of employment
with the Company. Shares repurchased by the Company were none and 41,394 in 1997
and 1998.
At December 31, 1997 and 1998 and June 30, 1999 none, 377,732 and 627,930
shares of common stock outstanding were subject to the Company's repurchase
rights.
F-15
<PAGE> 83
ONDISPLAY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO JUNE 30, 1999 AND FOR
THE TWO SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
Activity under the Plan is set forth below:
<TABLE>
<CAPTION>
NUMBER WEIGHTED
NUMBER OF OPTIONS AVERAGE
OF SHARES ISSUED AND EXERCISE AGGREGATE
AUTHORIZED OUTSTANDING PRICE PRICE
---------- ----------- -------- ---------
<S> <C> <C> <C> <C>
Balances, January 1, 1997...................... 933,000 767,000 $0.10 $ 76,700
Shares reserved................................ 450,000 -- --
Options granted................................ (1,080,000) 1,080,000 $0.12 131,540
Options exercised.............................. -- (625) $0.10 (62)
Options cancelled.............................. 243,625 (243,625) $0.10 (24,363)
---------- --------- ---------
Balances, December 31, 1997.................... 546,625 1,602,750 $0.11 183,815
Shares reserved................................ 400,000 -- --
Options granted................................ (781,750) 781,750 $0.27 213,948
Options exercised.............................. -- (754,520) $0.14 (107,366)
Options repurchased............................ 41,394 -- -- --
Options cancelled.............................. 263,792 (263,792) $0.17 (45,575)
---------- --------- ---------
Balances, December 31, 1998.................... 470,061 1,366,188 $0.18 244,822
Options granted................................ (557,750) 557,750 $0.51 283,200
Options exercised.............................. -- (520,343) $0.24 (126,912)
Options repurchased............................ 67,366 -- --
Options cancelled.............................. 197,969 (197,969) $0.21 (41,258)
---------- --------- ---------
Balances, June 30, 1999 (unaudited)............ 177,646 1,205,626 $0.30 $ 359,852
========== ========= =========
</TABLE>
For financial reporting purposes, the Company has determined that the
estimated value of common stock determined in anticipation of this offering was
in excess of the exercise price, which was deemed to be the fair market value as
of the date of grant for 781,750 options issued in 1998 and 557,750 options
issued in the six month period ended June 30, 1999. In connection with the
grants of such options, the Company has recognized deferred compensation of
approximately $2,222,000 in 1998 and $2,355,000 during the six month period
ended June 30, 1999. Deferred stock-based compensation will be amortized over
the vesting period which is generally 48 months from the date of grant;
approximately $618,000 was expensed in the year ended December 31, 1998 and
$769,000 in the six month period ended June 30, 1999. Future amortization based
on options granted through June 30, 1999 is expected to be $1,012,000 for the
six months ended December 31, 1999, and $1,243,000, $634,000, $263,000 and
$38,000 in the years 2000, 2001, 2002 and 2003.
The options outstanding and currently exercisable by exercise price at
December 31, 1998 are as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS CURRENTLY
- ----------------------------------------------- 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>
$0.10 766,438 7.8 years 0.10 381,707 $0.10
$0.21 342,750 8.2 years 0.21 3,327 $0.21
$0.40 257,000 9.5 years 0.40 -- --
--------- -------
1,366,188 385,034
========= =======
</TABLE>
F-16
<PAGE> 84
ONDISPLAY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO JUNE 30, 1999 AND FOR
THE TWO SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." Had compensation cost for the Plan been determined based on the
fair value at grant date for all awards consistent with the provisions of SFAS
No. 123, the impact on the Company's financial statements would be (in
thousands) as follows:
<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 14, 1996 YEAR ENDED DECEMBER 31,
TO ------------------------
DECEMBER 31, 1996 1997 1998
----------------- --------- ---------
<S> <C> <C> <C>
Net loss:
As reported........................................... $ (572) $(5,534) $(8,348)
Pro forma............................................. $ (572) $(5,542) $(8,364)
Basic and diluted net loss per share:
As reported........................................... $(0.17) $ (1.62) $ (2.34)
Pro forma............................................. $(0.17) $ (1.62) $ (2.34)
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the minimum value method with the following weighted average assumptions:
<TABLE>
<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rate................................. 5.85% 6.31% 5.0%
Expected life........................................... 5 years 5 years 5 years
Expected dividends...................................... $ -- $ -- $ --
</TABLE>
The weighted average per share fair value of common stock options granted
during 1996, 1997 and 1998 were $0.04, $0.10 and $0.27.
NOTE 9. WARRANTS:
As part of a long-term borrowing agreement entered into in February 1999,
the Company is committed to issue warrants to purchase 85,537 shares of Series C
preferred stock at an exercise price of $6.05 per share. The warrants are
exercisable immediately upon grant and expire in January 2009.
NOTE 10. INCOME TAXES:
At December 31, 1998, the Company had net operating loss carryforwards of
approximately $11,800,000 and $12,300,000 for Federal and California purposes,
respectively, available to reduce future taxable income, if any. These
carryforwards expire through 2011 and 2004 for Federal and California purposes,
respectively, if not utilized beforehand.
At December 31, 1998, the Company had research and development credit
carryforwards of approximately $372,000 and $176,000 for Federal and California
income tax purposes, respectively. The research and development credit
carryforwards expire beginning in the year 2004.
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. In the event the Company has had a change in ownership,
utilization of the carryforwards could be restricted.
F-17
<PAGE> 85
ONDISPLAY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO JUNE 30, 1999 AND FOR
THE TWO SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
Temporary differences which gave rise to significant portions of deferred
tax assets and liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1998
------- -------
<S> <C> <C>
Net operating losses........................................ $ 2,312 $ 4,761
Research and development credits............................ 272 548
Depreciation and amortization............................... (3) (10)
Other....................................................... 47 467
------- -------
2,628 5,766
Valuation allowance......................................... (2,628) (5,766)
------- -------
$ -- $ --
======= =======
</TABLE>
Due to uncertainty of realizing the benefits of the deferred tax assets,
the Company has provided a valuation allowance against the net deferred tax
assets.
The difference between the Company's effective income tax rate and the
federal statutory rate is as follows:
<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 14, 1996 YEAR ENDED SIX MONTHS ENDED
(DATE OF INCEPTION) DECEMBER 31, JUNE 30,
TO ----------------- -----------------
DECEMBER 31, 1996 1997 1998 1998 1999
------------------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Statutory tax benefit............... (194) (1,882) (2,838) (1,218) (2,065)
Permanent
differences -- non-deductible
expenses.......................... 1 79 364 182 447
State taxes, net of federal tax
benefit........................... (33) (327) (510) (220) (385)
Research and development
experimentation credit............ -- (273) (276) (138) (170)
Change in valuation allowance....... 226 2,402 3,138 1,394 2,533
Other............................... -- 1 122 -- (360)
------ ------- ------- ------- -------
Net tax provision................... $ -- $ -- $ -- $ -- $ --
====== ======= ======= ======= =======
</TABLE>
NOTE 11. UNAUDITED PRO FORMA LOSS PER SHARE AND PRO FORMA STOCKHOLDERS' EQUITY
(DEFICIT):
Pro forma basic net loss per share has been computed as described in Note 2
and also gives effect to common equivalent shares from preferred stock that will
convert upon the closing of the Company's initial public offering (using the
as-if-converted-method).
F-18
<PAGE> 86
ONDISPLAY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO JUNE 30, 1999 AND FOR
THE TWO SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
A reconciliation of the numerator and denominator used in the calculation
of pro forma basic and diluted net loss per share follow:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1998 1999
------------ -----------
(UNAUDITED)
<S> <C> <C>
PRO FORMA NET LOSS PER SHARE, BASIC AND DILUTED:
Net loss.................................................. $(8,348,000) $(6,074,000)
----------- -----------
Shares used in computing net loss per share, basic and
diluted................................................ 3,572,353 3,881,291
Adjustment to reflect the effect of the assumed conversion
of mandatorily redeemable convertible preferred
stock.................................................. 7,602,141 8,891,554
Shares used in computing pro forma net loss per share,
basic and diluted...................................... 11,174,494 12,772,845
----------- -----------
Pro forma net loss per share, basic and diluted........... $ (0.75) $ (0.48)
=========== ===========
</TABLE>
If the offering contemplated by this Prospectus is consummated as
contemplated, all of the convertible preferred stock outstanding as of the
closing date will be converted into an aggregate of approximately 8,891,554
shares of common stock based on the shares of mandatorily redeemable convertible
preferred stock outstanding at June 30, 1999. Unaudited pro forma stockholders'
equity at June 30, 1999, as adjusted for the conversion of preferred stock, is
disclosed on the balance sheet.
NOTE 12. SUBSEQUENT EVENTS (UNAUDITED):
SERIES D PREFERRED STOCK
In August 1999 the Company issued 1,723,739 shares of Series D mandatorily
redeemable convertible preferred stock for proceeds of approximately
$16,400,000. The Company is authorized to issue 2,100,000 shares of Series D
preferred stock, which bear dividends at $0.76 per share, when and if declared
by the Board of Directors, and have a liquidation value of $9.52 per share.
Series D preferred stock is convertible into the number of common stock shares
equal to the issuance price of $9.52 divided by the conversion price of $9.52,
subject to adjustment from time to time. The holders of Series D preferred stock
are entitled to voting rights equal to the number of shares of common stock into
which each share of preferred stock could be converted.
INITIAL PUBLIC OFFERING
In September 1999, the Company's Board of Directors authorized the Company
to file a registration statement with the Securities and Exchange Commission for
the purpose of an initial public offering of the Company's common stock. Upon
the completion of this offering, if requirements set forth in its Certificate of
Incorporation are met, the Company's preferred stock will be converted into
common stock, and all outstanding shares of preferred stock will be cancelled
and retired. Upon the conversion of the preferred stock, all rights to accrued
and unpaid dividends will be waived.
EMPLOYEE STOCK PURCHASE PLAN
In September 1999, the Company adopted an employee stock purchase plan (the
"Purchase Plan"), which will become effective upon the closing of the initial
public offering. 1,500,000 shares of common stock have been reserved for
issuance under the Purchase Plan (subject to an annual increase), none of which
have been issued.
STOCK OPTION PLAN
Through September 1999, the Company's Board of Directors authorized an
additional 925,000 shares for grant under the Company's stock option plan.
F-19
<PAGE> 87
LOGO
<PAGE> 88
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all fees and expenses payable by OnDisplay
in connection with the registration of the common stock hereunder. All of the
amounts shown are estimates except for the SEC registration fee, NASD filing fee
and the Nasdaq National Market listing fees.
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
---------
<S> <C>
SEC Registration Fee........................................ 12,788
NASD Filing Fee............................................. 7,500
Nasdaq National Market Listing Fee.......................... 100,000
Printing and Engraving Expenses............................. 250,000
Legal Fees and Expenses..................................... 300,000
Accounting Fees and Expenses................................ 250,000
Transfer Agent and Registrar Fees and Expenses.............. 25,000
Miscellaneous Expenses...................................... 54,712
---------
Total............................................. 1,000,000
=========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law allows for the
indemnification of officers, directors and any corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act. Our Amended and Restated Certificate of Incorporation and our
Amended and Restated Bylaws provide for indemnification of our directors,
officers, employees and other agents to the extent and under the circumstances
permitted by the Delaware General Corporation Law. We have also entered into
agreements with our directors and executive officers that require OnDisplay
among other things to indemnify them against certain liabilities that may arise
by reason of their status or service as directors and executive officers to the
fullest extent permitted by Delaware law. We have also purchased directors and
officers liability insurance, which provides coverage against certain
liabilities including liabilities under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
(a) Since our formation in August 1996, and through August 1999, we have
issued and sold the following unregistered securities:
(1) In August 1996, we issued and sold an aggregate of 3,300,000 shares
of common stock to the founding officers and directors of OnDisplay, Inc. and to
certain other individuals for an aggregate purchase price of $3,300.00
(2) Since our inception, we have granted options to purchase 3,278,250
shares of common stock to employees, directors and consultants under our 1996
stock plan at exercises prices ranging from $0.10 to $1.20 per share. Of the
3,278,250 shares granted, 1,160,426 remain outstanding, 1,391,438 shares of
common stock have been purchased pursuant to exercises of stock options and
839,334 shares have been cancelled and returned to the 1996 stock plan.
(3) In September of 1996, we sold an aggregate of 3,400,000 shares of
series A preferred stock at a price of $1.00 per share to a total of four
investors.
(4) In June of 1997, we sold an aggregate of 100,000 shares of series A
preferred stock at a price of $1.00 per share to a total of three investors.
II-1
<PAGE> 89
(5) Between June 1997 and January 1998, we sold an aggregate of
3,202,381 shares of series B preferred stock at a price of $2.10 per share to a
total of eight investors.
(6) Between July 1998 and October 1998, we sold an aggregate of
2,189,173 shares of series C preferred stock at a price of $4.00 per share to a
total of thirteen investors. On February 25, 1999 in conjunction with entering
into an equipment lease, we issued warrants for the purchase of 85,537 shares of
series C preferred stock at an exercise price of $6.05 per shares.
(7) In August 1999, we sold an aggregate of 1,723,739 shares of series D
preferred stock at a price of $9.52 per share to a total of seventeen investors.
All of these investors qualified as "accredited investors" under Securities and
Exchange Commission Rule 501.
The sales and issuances of securities in the transactions described
above were deemed to be exempt from registration under the Securities Act in
reliance upon Section 4(2) of the Securities Act, Regulation D promulgated
thereunder or Rule 701 promulgated under Section 3(b) of the Securities Act, as
transactions by an issuer not involving any public offering or transactions
pursuant to compensatory benefit plans and contracts relating to compensation as
provided under Rule 701. The recipients of securities in each transaction
represented their intentions to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof and
appropriate legends were affixed to the securities issued in such transactions.
All recipients had adequate access, through their relationship to OnDisplay,
Inc. to information about us.
(b) There were no underwritten offerings employed in connection with any of
the transactions set forth in Item 15(a).
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1.1 Form of Underwriting agreement
3.1(a) Amended and Restated Certificate of Incorporation, as in
effect upon filing of the registration statement
3.1(b) Certificate of Incorporation to be filed upon completion of
the offering
4.1(a) Bylaws of the registrant as currently in effect
4.1(b) Bylaws of the registrant as in effect upon completion of the
offering
4.2 Form of Lock-Up Agreements
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
10.1(a) Third Restated Investor Rights Agreement dated August 2,
1999
10.1(b)* Amendment to Third Restated Investor Rights Agreement dated
.
10.2 1996 Stock Plan and forms of agreements thereunder
10.3 1999 Employee Stock Purchase Plan
10.4 Form of Director and Executive Officer Indemnification
Agreement
10.5 Sublease between the registrant and Irwin Home Equity
Corporation dated December 2, 1998 for office space located
at 12667 Alcosta Boulevard, San Ramon, California
10.6 Sublease between registrant and Knutson Mortgage Corporation
dated September 17, 1996 for office space located at 2682
Bishop Drive, San Ramon, California
10.7 Master Equipment Lease Agreement dated February 25, 1999
between registrant and Comdisco, Inc.
10.8 Senior Loan and Security Agreement dated June 2, 1997
between the registrant and Phoenix Leasing, Inc.
23.1 Consent of PricewaterhouseCoopers LLP, independent
accountants
23.2 Consent of Counsel (included in exhibit 5.1)
</TABLE>
II-2
<PAGE> 90
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
24.1 Power of Attorney (see page II-4)
27.1 Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by amendment.
(b) Financial Statement Schedules:
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
ITEM 17. UNDERTAKINGS
Insofar as indemnification by OnDisplay for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of OnDisplay, we have been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
OnDisplay of expenses incurred or paid by a director, officer or controlling
person of OnDisplay in the successful defense of any action, suit or proceeding)
is asserted by a director, officer or controlling person in connection with the
securities being registered, we will, unless in the opinion of our counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by OnDisplay
is against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
We hereby undertake that:
(a) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of a registration
statement in reliance upon Rule 430A and contained in the form of prospectus
filed by OnDisplay pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of the registration statement as of
the time it was declared effective.
(b) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-3
<PAGE> 91
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
OnDisplay has duly caused this Registration Statement on Form S-1 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of San
Ramon, State of California, on the 10th day of September, 1999.
ONDISPLAY, INC.
By: /s/ MARK PINE
------------------------------------
Mark Pine
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Mark Pine and Carol Richwood and each of
them, his attorneys-in-fact, each with the power of substitution, for him and in
his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and to sign any registration statement for the same Offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act of 1933, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto in all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every Act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that such attorneys-in-fact and agents or any of them, or his or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement on Form S-1 has been signed by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MARK PINE Chief Executive Officer, September 10, 1999
- --------------------------------------------------- President and Director
Mark Pine
/s/ CAROL RICHWOOD Vice President, Corporate September 10, 1999
- --------------------------------------------------- Controller
Carol Richwood
/s/ TIMOTHY BARROWS Director September 10, 1999
- ---------------------------------------------------
Timothy Barrows
/s/ PROMOD HAQUE Director September 10, 1999
- ---------------------------------------------------
Promod Haque
/s/ JOHN MANDILE Director September 10, 1999
- ---------------------------------------------------
John Mandile
/s/ CHRISTOPHER SPRAY Director September 10, 1999
- ---------------------------------------------------
Christopher Spray
/s/ MARGARET TAYLOR Director September 10, 1999
- ---------------------------------------------------
Margaret Taylor
/s/ CARMINE VILLANI Director September 10, 1999
- ---------------------------------------------------
Carmine Villani
</TABLE>
II-4
<PAGE> 92
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES, IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED SEPTEMBER 10, 1999
LOGO
SHARES
COMMON STOCK
OnDisplay, Inc. is offering shares of our common stock. This
is our initial public offering, and no public market currently exists for our
shares. Our common stock have been approved for quotation on the Nasdaq National
Market under the symbol "ONDS," subject to official notice of issuance. We
anticipate that the initial public offering price will be between $ and
$ per share.
------------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.
------------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- --------
<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discounts and Commissions...................... $ $
Proceeds to OnDisplay, Inc.................................. $ $
</TABLE>
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
OnDisplay has granted the underwriters a 30-day option to purchase up to an
additional shares of common stock to cover over-allotments.
------------------------
BANCBOSTON ROBERTSON STEPHENS INTERNATIONAL LIMITED DEUTSCHE BANK
SG COWEN
The date of this prospectus is , 1999
<PAGE> 93
UNDERWRITING
The underwriters named below, acting through their representatives,
BancBoston Robertson Stephens Inc., Deutsche Bank AG, London Alex. Brown and
Societe Generale S.A., have severally agreed with OnDisplay, subject to the
terms and conditions of the underwriting agreement, to purchase the number of
shares of common stock set forth opposite their respective names below. The
underwriters are committed to purchase and pay for all shares, if any are
purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
BancBoston Robertson Stephens Inc...........................
Deutsche Banc Alex. Brown...................................
S.G. Cowen Securities Corporation...........................
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL UNDERWRITERS
--------------------------
<S> <C>
BancBoston Robertson Stephens International Limited.........
Deutsche Bank AG, London....................................
Societe Generale S.A. ......................................
--------
Total.............................................
========
</TABLE>
The representatives have advised us that the underwriters propose to offer
the shares of common stock to the public at the public offering price set forth
on the cover page of this prospectus and to certain dealers at a price less a
concession of not more than $ per share, of which $ may be
reallowed to other dealers. After the completion of this offering, the public
offering price, concession and reallowance to dealers may be reduced by the
representatives. No reduction shall change the amount of proceeds to be received
by us as set forth on the cover page of this prospectus.
Over-Allotment Option
We have granted to the underwriters an option, exercisable during the
30-day period after the date of this prospectus, to purchase up to
additional shares of common stock at the same price per share as we will receive
for the shares that the underwriters have agreed to purchase from us.
To the extent that the underwriters exercise the option, each of the
underwriters will have a firm commitment to purchase approximately the same
percentage of additional shares that the number of shares of common stock to be
purchased by it shown in the above table represents as a percentage of the total
number of shares offered hereby. If purchased, the additional shares will be
sold by the underwriters on the same terms as those on which the shares are
being sold.
Indemnity
The underwriting agreement contains covenants of indemnity among the
underwriters and OnDisplay against certain civil liabilities, including
liabilities under the Securities Act and liabilities arising from breaches of
representations and warranties contained in the underwriting agreement.
Lock-Up Agreements
The Company's shareholders and option holders have agreed, for a period of
180 days after the date of this Prospectus (the "Lock-Up Period"), not to offer,
pledge, sell, offer to sell, contract to sell, sell any option or contract to
purchase, purchase any option to sell, grant any option right or warrant to
purchase, or otherwise transfer or dispose of, directly or indirectly, any of
the shares of common stock or any securities convertible into, or exercisable or
exchangeable for, common stock, owned as of the date of this prospectus or
thereafter acquired directly by the holders or with respect to which they have
or hereafter
62
<PAGE> 94
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1.1 Form of Underwriting agreement
3.1(a) Amended and Restated Certificate of Incorporation, as in
effect upon filing of the registration statement
3.1(b) Certificate of Incorporation to be filed upon completion of
the offering
4.1(a) Bylaws of the registrant as currently in effect
4.1(b) Bylaws of the registrant as in effect upon completion of the
offering
4.2 Form of Lock-Up Agreements
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
10.1(a) Third Restated Investor Rights Agreement dated August 2,
1999
10.1(b)* Amendment to Third Restated Investor Rights Agreement dated
.
10.2 1996 Stock Plan and forms of agreements thereunder
10.3 1999 Employee Stock Purchase Plan
10.4 Form of Director and Executive Officer Indemnification
Agreement
10.5 Sublease between the registrant and Irwin Home Equity
Corporation dated December 2, 1998 for office space located
at 12667 Alcosta Boulevard, San Ramon, California
10.6 Sublease between registrant and Knutson Mortgage Corporation
dated September 17, 1996 for office space located at 2682
Bishop Drive, San Ramon, California
10.7 Master Equipment Lease Agreement dated February 25, 1999
between registrant and Comdisco, Inc.
10.8 Senior Loan and Security Agreement dated June 2, 1997
between the registrant and Phoenix Leasing, Inc.
23.1 Consent of PricewaterhouseCoopers LLP, independent
accountants
23.2 Consent of Counsel (included in exhibit 5.1)
24.1 Power of Attorney (see page II-4)
27.1 Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by amendment.
<PAGE> 1
Exhibit 1.1
UNDERWRITING AGREEMENT
______________, 1999
BancBoston Robertson Stephens Inc.
Deutsche Banc Alex. Brown Incorporated
SG Cowen Securities Corporation
As Representatives of the several Underwriters
c/o BancBoston Robertson Stephens Inc.
555 California Street, Suite 2600
San Francisco, CA 94104
Ladies and Gentlemen:
INTRODUCTORY. OnDisplay, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to the several underwriters named in
Schedule A (the "Underwriters") an aggregate of [___] shares (the "Firm Shares")
of its Common Stock, par value $0.001 per share (the "Common Shares"). In
addition, the Company has granted to the Underwriters an option to purchase up
to an additional [___] Common Shares (the "Option Shares") as provided in
Section 2. The Firm Shares and, if and to the extent such option is exercised,
the Option Shares, are collectively called the "Shares". BancBoston Robertson
Stephens Inc., Deutsche Banc Alex. Brown Incorporated and SG Cowen Securities
Corporation have agreed to act as representatives of the several Underwriters
(in such capacity, the "Representatives") in connection with the offering and
sale of the Shares.
The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement on Form S-1
(File No. 333-[___]), which contains a form of prospectus to be used in
connection with the public offering and sale of the Shares. Such registration
statement, as amended, including the financial statements, exhibits and
schedules thereto, in the form in which it was declared effective by the
Commission under the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (collectively, the "Securities Act"),
including any information deemed to be a part thereof at the time of
effectiveness pursuant to Rule 430A or Rule 434 under the Securities Act, is
called the "Registration Statement". Any registration statement filed by the
Company pursuant to Rule 462(b) under the Securities Act is called the "Rule
462(b) Registration Statement", and from and after the date and time of filing
of the Rule 462(b) Registration Statement the term "Registration Statement"
shall include the Rule 462(b) Registration Statement. Such prospectus, in the
form first used by the Underwriters to confirm sales of the Shares, is called
the "Prospectus"; provided, however, if the Company has, with the consent of
BancBoston Robertson Stephens Inc., elected to rely upon Rule 434 under the
Securities Act, the term "Prospectus" shall mean the Company's prospectus
subject to completion (each, a "preliminary prospectus") dated [___] (such
preliminary prospectus is called the "Rule 434 preliminary prospectus"),
together with the applicable term sheet (the "Term Sheet") prepared
<PAGE> 2
and filed by the Company with the Commission under Rules 434 and 424(b) under
the Securities Act and all references in this Agreement to the date of the
Prospectus shall mean the date of the Term Sheet. All references in this
Agreement to the Registration Statement, the Rule 462(b) Registration Statement,
a preliminary prospectus, the Prospectus or the Term Sheet, or any amendments or
supplements to any of the foregoing, shall include any copy thereof filed with
the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval
System ("EDGAR").
The Company hereby confirms its agreements with the Underwriters
as follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents, warrants and covenants to each Underwriter as follows:
(a) Compliance with Registration Requirements. The Registration
Statement and any Rule 462(b) Registration Statement have been declared
effective by the Commission under the Securities Act. The Company has complied
to the Commission's satisfaction with all requests of the Commission for
additional or supplemental information. No stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement is in effect and no proceedings for such purpose have been instituted
or are pending or, to the best knowledge of the Company, are contemplated or
threatened by the Commission.
Each preliminary prospectus and the Prospectus when filed
complied in all material respects with the Securities Act and, if filed by
electronic transmission pursuant to EDGAR (except as may be permitted by
Regulation S-T under the Securities Act), was identical to the copy thereof
delivered to the Underwriters for use in connection with the offer and sale of
the Shares. Each of the Registration Statement, any Rule 462(b) Registration
Statement and any post-effective amendment thereto, at the time it became
effective and at all subsequent times, complied and will comply in all material
respects with the Securities Act and did not and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading. The
Prospectus, as amended or supplemented, as of its date and at all subsequent
times, did not and will not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
The representations and warranties set forth in the two immediately preceding
sentences do not apply to statements in or omissions from the Registration
Statement, any Rule 462(b) Registration Statement, or any post-effective
amendment thereto, or the Prospectus, or any amendments or supplements thereto,
made in reliance upon and in conformity with information relating to any
Underwriter furnished to the Company in writing by the Representatives expressly
for use therein. There are no contracts or other documents required to be
described in the Prospectus or to be filed as exhibits to the Registration
Statement which have not been described or filed as required.
(b) Offering Materials Furnished to Underwriters. The Company has
delivered to each Representative one complete conformed copy of the Registration
Statement and of each consent and certificate of experts filed as a part
thereof, and conformed copies of the Registration Statement (without exhibits)
and preliminary prospectuses and the Prospectus, as amended or supplemented, in
such quantities and at such places as the Representatives have reasonably
requested for each of the Underwriters.
(c) Distribution of Offering Material By the Company. The Company
has not distributed and will not distribute, prior to the later of the Second
Closing Date (as defined
2
<PAGE> 3
below) and the completion of the Underwriters' distribution of the Shares, any
offering material in connection with the offering and sale of the Shares other
than a preliminary prospectus, the Prospectus or the Registration Statement.
(d) The Underwriting Agreement. This Agreement has been duly
authorized, executed and delivered by, and is a valid and binding agreement of,
the Company, enforceable in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and except as the
enforcement hereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles.
(e) Authorization of the Shares. The Shares to be purchased by the
Underwriters from the Company have been duly authorized for issuance and sale
pursuant to this Agreement and, when issued and delivered by the Company
pursuant to this Agreement, will be validly issued, fully paid and
nonassessable.
(f) No Applicable Registration or Other Similar Rights. There are no
persons with registration or other similar rights to have any equity or debt
securities registered for sale under the Registration Statement or included in
the offering contemplated by this Agreement, except for such rights as have been
duly waived.
(g) No Material Adverse Change. Subsequent to the respective dates
as of which information is given in the Prospectus: (i) there has been no
material adverse change, or any development that could reasonably be expected to
result in a material adverse change, in the condition, financial or otherwise,
or in the earnings, business, operations or prospects, whether or not arising
from transactions in the ordinary course of business, of the Company (any such
change or effect, where the context so requires, is called a "Material Adverse
Change" or a "Material Adverse Effect"); (ii) the Company has not incurred any
material liability or obligation, indirect, direct or contingent, not in the
ordinary course of business nor entered into any material transaction or
agreement not in the ordinary course of business; and (iii) there has been no
dividend or distribution of any kind declared, paid or made by the Company on
any class of capital stock or repurchase or redemption by the Company of any
class of capital stock.
(h) Independent Accountants. PricewaterhouseCoopers LLP, who have
expressed their opinion with respect to the financial statements (which term as
used in this Agreement includes the related notes thereto) and supporting
schedules filed with the Commission as a part of the Registration Statement and
included in the Prospectus, are independent public or certified public
accountants as required by the Securities Act.
(i) Preparation of the Financial Statements. The financial
statements filed with the Commission as a part of the Registration Statement and
included in the Prospectus present fairly the financial position of the Company
as of and at the dates indicated and the results of its operations and cash
flows for the periods specified. The supporting schedules included in the
Registration Statement present fairly the information required to be stated
therein. Such financial statements and supporting schedules have been prepared
in conformity with generally accepted accounting principles as applied in the
United States applied on a consistent basis throughout the periods involved,
except as may be expressly stated in the related notes thereto. No other
financial statements or supporting schedules are required to be included in the
Registration Statement. The financial data set forth in the Prospectus under the
captions "Summary--Summary Selected Financial Data", "Selected Financial Data"
and "Capitalization"
3
<PAGE> 4
fairly present the information set forth therein on a basis consistent with that
of the audited financial statements contained in the Registration Statement.
(j) Company's Accounting System. The Company maintains a system of
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles as applied in the United States and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(k) Subsidiaries of the Company. The Company has no subsidiaries and
does not own or control, directly or indirectly, any corporation, association or
other entity.
(l) Incorporation and Good Standing of the Company. The Company has
been duly organized and is validly existing as a corporation in good standing
under the laws of the jurisdiction in which it is organized with full corporate
power and authority to own its properties and conduct its business as described
in the prospectus, and is duly qualified to do business as a foreign
corporation, except for qualification in jurisdictions in which the failure to
qualify as a foreign corporation could not reasonably be expected to result in a
Material Adverse Effect, and is in good standing under the laws of each
jurisdiction which requires such qualification.
(m) Capitalization and Other Capital Stock Matters. The authorized,
issued and outstanding capital stock of the Company is as set forth in the
Prospectus under the caption "Capitalization" (other than for subsequent
issuances, if any, pursuant to employee benefit plans described in the
Prospectus or upon exercise of outstanding options or warrants described in the
Prospectus). The Common Shares (including the Shares) conform in all material
respects to the description thereof contained in the Prospectus. All of the
issued and outstanding Common Shares have been duly authorized and validly
issued, are fully paid and nonassessable and have been issued in compliance with
federal and state securities laws. None of the outstanding Common Shares were
issued in violation of any preemptive rights, rights of first refusal or other
similar rights to subscribe for or purchase securities of the Company. There are
no authorized or outstanding options, warrants, preemptive rights, rights of
first refusal or other rights to purchase, or equity or debt securities
convertible into or exchangeable or exercisable for, any capital stock of the
Company other than those accurately described in the Prospectus. The description
of the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted thereunder, set forth in
the Prospectus accurately and fairly presents the information required to be
shown with respect to such plans, arrangements, options and rights.
(n) Stock Exchange Listing. The Shares have been approved for
inclusion on the Nasdaq National Market, subject only to official notice of
issuance.
(o) No Consents, Approvals or Authorizations Required. No consent,
approval, authorization, filing with or order of any court or governmental
agency or regulatory body is required in connection with the transactions
contemplated herein, except such as have been obtained or made under the
Securities Act and such as may be required (i) under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the Shares by
the
4
<PAGE> 5
Underwriters in the manner contemplated here and in the Prospectus, (ii) by the
National Association of Securities Dealers, LLC and (iii) by the federal and
provincial laws of Canada.
(p) Non-Contravention of Existing Instruments Agreements. Neither
the issue and sale of the Shares nor the consummation of any other of the
transactions herein contemplated nor the fulfillment of the terms hereof will
conflict with, result in a breach or violation or imposition of any lien, charge
or encumbrance upon any property or assets of the Company pursuant to, (i) the
charter or by-laws of the Company, (ii) the terms of any indenture, contract,
lease, mortgage, deed of trust, note agreement, loan agreement or other
agreement, obligation, condition, covenant or instrument to which the Company is
a party or bound or to which its property is subject or (iii) any statute, law,
rule, regulation, judgment, order or decree applicable to the Company of any
court, regulatory body, administrative agency, governmental body, arbitrator or
other authority having jurisdiction over the Company or any of its properties.
(q) No Defaults or Violations. The Company is not in violation or
default of (i) any provision of its charter or by-laws, (ii) the terms of any
material indenture, contract, lease, mortgage, deed of trust, note agreement,
loan agreement or other agreement, obligation, condition, covenant or instrument
to which it is a party or bound or to which its property is subject or (iii) any
statute, law, rule, regulation, judgment, order or decree of any court,
regulatory body, administrative agency, governmental body, arbitrator or other
authority having jurisdiction over the Company or any of its properties, except
any such violation or default which would not, singly or in the aggregate,
result in a Material Adverse Change except as otherwise disclosed in the
Prospectus.
(r) No Actions, Suits or Proceedings. Except to the extent described
in the Prospectus, no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the Company
or its property is pending or, to the best knowledge of the Company, threatened
that (i) could reasonably be expected to have a Material Adverse Effect on the
performance of this Agreement or the consummation of any of the transactions
contemplated hereby or (ii) could reasonably be expected to result in a Material
Adverse Effect.
(s) All Necessary Permits, Etc. Except to the extent described in
the Prospectus, the Company possesses such valid and current certificates,
authorizations or permits issued by the appropriate state, federal or foreign
regulatory agencies or bodies necessary to conduct its business, and the Company
has not received any notice of proceedings relating to the revocation or
modification of, or non-compliance with, any such certificate, authorization or
permit which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, could result in a Material Adverse Change.
(t) Title to Properties. Except to the extent described in the
Prospectus, the Company has good and marketable title to all the properties and
assets reflected as owned in the financial statements referred to in Section
1(i) above (or elsewhere in the Prospectus), in each case free and clear of any
security interests, mortgages, liens, encumbrances, equities, claims and other
defects, except such as do not materially and adversely affect the value of such
property and do not materially interfere with the use made or proposed to be
made of such property by the Company. The real property, improvements, equipment
and personal property held under lease by the Company are held under valid and
enforceable leases, with such exceptions as are not material and do not
materially interfere with the use made or proposed to be made of such real
property, improvements, equipment or personal property by the Company.
5
<PAGE> 6
(u) Tax Law Compliance. The Company has filed all necessary federal,
state and foreign income and franchise tax returns or has properly requested
extensions thereof and has paid all taxes required to be paid by it, and, if due
and payable, any related or similar assessment, fine or penalty levied against
it. The Company has made adequate charges, accruals and reserves in the
applicable financial statements referred to in Section 1(i) above in respect of
all federal, state and foreign income and franchise taxes for all periods as to
which the tax liability of the Company has not been finally determined. The
Company is not aware of any tax deficiency that has been or might be asserted or
threatened against the Company that could result in a Material Adverse Change.
(v) Intellectual Property Rights. The Company owns or possesses
adequate rights to use all patents, patent rights or licenses, inventions,
collaborative research agreements, trade secrets, know-how, trademarks, service
marks, trade names and copyrights which are necessary to conduct its businesses
as described in the Registration Statement and Prospectus; the expiration of any
patents, patent rights, trade secrets, trademarks, service marks, trade names or
copyrights would not result in a Material Adverse Change that is not otherwise
disclosed in the Prospectus; except to the extent described in the Prospectus,
the Company has not received any notice of, and has no knowledge of, any
infringement of or conflict with asserted rights of the Company by others with
respect to any patent, patent rights, inventions, trade secrets, know-how,
trademarks, service marks, trade names or copyrights; and the Company has not
received any notice of, and has no knowledge of, any infringement of or conflict
with asserted rights of others with respect to any patent, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, trade names or
copyrights which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, might have a Material Adverse Change. There is no
claim being made against the Company regarding patents, patent rights or
licenses, inventions, collaborative research, trade secrets, know-how,
trademarks, service marks, trade names or copyrights. The Company does not, in
the conduct of its business as now or proposed to be conducted as described in
the Prospectus, infringe or conflict with any right or patent of any third
party, or any discovery, invention, product or process which is the subject of a
patent application filed by any third party, known to the Company, which such
infringement or conflict is reasonably likely to result in a Material Adverse
Change.
(w) Year 2000 Preparedness. There are no issues related to the
Company's preparedness for the Year 2000 that (i) are of a character required to
be described or referred to in the Registration Statement or Prospectus by the
Securities Act which have not been accurately described in the Registration
Statement or Prospectus or (ii) might reasonably be expected to result in any
Material Adverse Change or that might materially affect their properties, assets
or rights. Except to the extent described in the Prospectus, all internal
computer systems and each Constituent Component (as defined below) of those
systems and all computer-related products and each Constituent Component (as
defined below) of those products of the Company fully comply with Year 2000
Qualification Requirements. "Year 2000 Qualifications Requirements" means that
the internal computer systems and each Constituent Component (as defined below)
of those systems and all computer-related products and each Constituent
Component (as defined below) of those products of the Company (i) have been
reviewed to confirm that they store, process (including sorting and performing
mathematical operations, calculations and computations), input and output data
containing date and information correctly regardless of whether the date
contains dates and times before, on or after January 1, 2000, (ii) have been
designated to ensure date and time entry recognition and calculations, and date
data interface values that reflect the century, (iii) accurately manage and
manipulate data involving dates and times, including single century formulas and
multi-century formulas, and will not cause an abnormal ending scenario within
the application or generate
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incorrect values or invalid results involving such dates, (iv) accurately
process any date rollover, and (v) accept and respond to two-digit year date
input in a manner that resolves any ambiguities as to the century. "Constituent
Component" means all software (including operating systems, programs, packages
and utilities), firmware, hardware, networking components, and peripherals
provided as part of the configuration. The Company has inquired of material
vendors as to their preparedness for the Year 2000 and has disclosed in the
Registration Statement or Prospectus any issues that might reasonably be
expected to result in any Material Adverse Change.
(x) No Transfer Taxes or Other Fees. There are no transfer taxes or
other similar fees or charges under Federal law or the laws of any state, or any
political subdivision thereof, required to be paid in connection with the
execution and delivery of this Agreement or the issuance and sale by the Company
of the Shares.
(y) Company Not an "Investment Company". The Company has been
advised of the rules and requirements under the Investment Company Act of 1940,
as amended (the "Investment Company Act"). The Company is not, and after receipt
of payment for the Shares will not be, an "investment company" or an entity
"controlled" by an "investment company" within the meaning of the Investment
Company Act and will conduct its business in a manner so that it will not become
subject to the Investment Company Act.
(z) Insurance. The Company is insured by recognized, financially
sound and reputable institutions with policies in such amounts and with such
deductibles and covering such risks as are generally deemed adequate and
customary for its business in its industry including, but not limited to,
policies covering real and personal property owned or leased by the Company
against theft, damage, destruction, acts of vandalism and earthquakes, general
liability and Directors and Officers liability. The Company has no reason to
believe that it will not be able (i) to renew its existing insurance coverage as
and when such policies expire or (ii) to obtain comparable coverage from similar
institutions as may be necessary or appropriate to conduct its business as now
conducted and at a cost that would not result in a Material Adverse Change. The
Company has not been denied any insurance coverage which it has sought or for
which it has applied.
(aa) Labor Matters. To the best of the Company's knowledge, no labor
disturbance by the employees of the Company exists or is imminent; and the
Company is not aware of any existing or imminent labor disturbance by the
employees of any of its principal suppliers, resellers, subcontractors,
authorized dealers or distributors that might reasonably be expected to result
in a Material Adverse Change.
(bb) No Price Stabilization or Manipulation. The Company has not
taken and will not take, directly or indirectly, any action designed to or that
might be reasonably expected to cause or result in stabilization or manipulation
of the price of the Common Stock to facilitate the sale or resale of the Shares.
(cc) Lock-Up Agreements. Each officer and director of the Company and
each beneficial owner of one or more percent of the outstanding issued share
capital of the Company has agreed to sign an agreement substantially in the form
attached hereto as Exhibit A (the "Lock-up Agreements"). The Company has
provided to counsel for the Underwriters a complete and accurate list of all
securityholders of the Company and the number and type of securities held by
each securityholder. The Company has provided to counsel for the Underwriters
true, accurate and complete copies of all of the Lock-up Agreements presently in
effect or effected
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hereby. The Company hereby represents and warrants and agrees that it will not
release any of its officers, directors or other securityholders from any Lock-up
Agreements currently existing or hereafter effected without the prior written
consent of BancBoston Robertson Stephens Inc.
(dd) Related Party Transactions. There are no business relationships
or related-party transactions involving the Company or any other person required
to be described in the Prospectus which have not been described as required.
(ee) No Unlawful Contributions or Other Payments. Neither the Company
nor, to the best of the Company's knowledge, any employee or agent of the
Company, has made any contribution or other payment to any official of, or
candidate for, any federal, state or foreign office in violation of any law or
of the character required to be disclosed in the Prospectus.
(ff) Environmental Laws. (i) The Company is in compliance with all
rules, laws and regulations relating to the use, treatment, storage and disposal
of toxic substances and protection of health or the environment ("Environmental
Laws") which are applicable to its business, except where the failure to comply
would not result in a Material Adverse Change, (ii) the Company has received no
notice from any governmental authority or third party of an asserted claim under
Environmental Laws, which claim is required to be disclosed in the Registration
Statement and the Prospectus, (iii) the Company will not be required to make
future material capital expenditures to comply with Environmental Laws and (iv)
no property which is owned, leased or occupied by the Company has been
designated as a Superfund site pursuant to the Comprehensive Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601, et
seq.), or otherwise designated as a contaminated site under applicable state or
local law.
(gg) ERISA Compliance. The Company and any "employee benefit plan"
(as defined under the Employee Retirement Income Security Act of 1974, as
amended, and the regulations and published interpretations thereunder
(collectively, "ERISA")) established or maintained by the Company or its "ERISA
Affiliates" (as defined below) are in compliance in all material respects with
ERISA. "ERISA Affiliate" means, with respect to the Company, any member of any
group of organizations described in Sections 414(b),(c),(m) or (o) of the
Internal Revenue Code of 1986, as amended, and the regulations and published
interpretations thereunder (the "Code") of which the Company is a member. No
"reportable event" (as defined under ERISA) has occurred or is reasonably
expected to occur with respect to any "employee benefit plan" established or
maintained by the Company or any of its ERISA Affiliates. No "employee benefit
plan" established or maintained by the Company or any of its ERISA Affiliates,
if such "employee benefit plan" were terminated, would have any "amount of
unfunded benefit liabilities" (as defined under ERISA). Neither the Company nor
any of its ERISA Affiliates has incurred or reasonably expects to incur any
liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "employee benefit plan" or (ii) Sections 412, 4971, 4975 or
4980B of the Code. Each "employee benefit plan" established or maintained by the
Company or any of its ERISA Affiliates that is intended to be qualified under
Section 401(a) of the Code is so qualified and nothing has occurred, whether by
action or failure to act, which would cause the loss of such qualification.
(hh) Any certificate signed by an officer of the Company and
delivered to the Representatives or to counsel for the Underwriters shall be
deemed to be a representation and warranty by the Company to each Underwriter as
to the matters set forth therein.
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SECTION 2. PURCHASE, SALE AND DELIVERY OF THE SHARES.
The Firm Shares. The Company agrees to issue and sell to the several
Underwriters the Firm Shares upon the terms herein set forth. On the basis of
the representations, warranties and agreements herein contained, and upon the
terms but subject to the conditions herein set forth, the Underwriters agree,
severally and not jointly, to purchase from the Company the respective number of
Firm Shares set forth opposite their names on Schedule A. The purchase price per
Firm Share to be paid by the several Underwriters to the Company shall be $[___]
per share.
(a) The First Closing Date. Delivery of the Firm Shares to be
purchased by the Underwriters and payment therefor shall be made by the Company
and the Representatives at 6:00 a.m. San Francisco time, at the offices of
Wilson Sonsini Goodrich & Rosati, P.C., 650 Page Mill Road, Palo Alto, CA 94304
(or at such other place as may be agreed upon among the Representatives and the
Company), (i) on the third (3rd) full business day following the first day that
Shares are traded, (ii) if this Agreement is executed and delivered after 1:30
P.M., San Francisco time, the fourth (4th) full business day following the day
that this Agreement is executed and delivered or (iii) at such other time and
date not later that seven (7) full business days following the first day that
Shares are traded as the Representatives and the Company may determine (or at
such time and date to which payment and delivery shall have been postponed
pursuant to Section 8 hereof), such time and date of payment and delivery being
herein called the "Closing Date;" provided, however, that if the Company has not
made available to the Representatives copies of the Prospectus within the time
provided in Section 2(f) and 3(e) hereof, the Representatives may, in their sole
discretion, postpone the Closing Date until no later than two (2) full business
days following delivery of copies of the Prospectus to the Representatives.
(b) The Option Shares; the Second Closing Date. In addition, on the
basis of the representations, warranties and agreements herein contained, and
upon the terms but subject to the conditions herein set forth, the Company
hereby grants an option to the several Underwriters to purchase, severally and
not jointly, up to an aggregate of [___] Option Shares from the Company at the
purchase price per share to be paid by the Underwriters for the Firm Shares. The
option granted hereunder is for use by the Underwriters solely in covering any
over-allotments in connection with the sale and distribution of the Firm Shares.
The option granted hereunder may be exercised at any time upon notice by the
Representatives to the Company, which notice may be given at any time within 30
days from the date of this Agreement. The time and date of delivery of the
Option Shares, if subsequent to the First Closing Date, is called the "Second
Closing Date" and shall be determined by the Representatives and shall not be
earlier than three nor later than five full business days after delivery of such
notice of exercise. If any Option Shares are to be purchased, each Underwriter
agrees, severally and not jointly, to purchase the number of Option Shares
(subject to such adjustments to eliminate fractional shares as the
Representatives may determine) that bears the same proportion to the total
number of Option Shares to be purchased as the number of Firm Shares set forth
on Schedule A opposite the name of such Underwriter bears to the total number of
Firm Shares. The Representatives may cancel the option at any time prior to its
expiration by giving written notice of such cancellation to the Company.
(c) Public Offering of the Shares. The Representatives hereby advise
the Company that the Underwriters intend to offer for sale to the public, as
described in the Prospectus, their respective portions of the Shares as soon
after this Agreement has been executed and the
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Registration Statement has been declared effective as the Representatives, in
their sole judgment, have determined is advisable and practicable.
(d) Payment for the Shares. Payment for the Shares shall be made at
the First Closing Date (and, if applicable, at the Second Closing Date) by wire
transfer in immediately available-funds to the order of the Company.
It is understood that the Representatives have been authorized,
for their own account and the accounts of the several Underwriters, to accept
delivery of and receipt for, and make payment of the purchase price for, the
Firm Shares and any Option Shares the Underwriters have agreed to purchase.
BancBoston Robertson Stephens Inc., individually and not as a Representative of
the Underwriters, may (but shall not be obligated to) make payment for any
Shares to be purchased by any Underwriter whose funds shall not have been
received by the Representatives by the First Closing Date or the Second Closing
Date, as the case may be, for the account of such Underwriter, but any such
payment shall not relieve such Underwriter from any of its obligations under
this Agreement.
(e) Delivery of the Shares. The Company shall deliver, or cause to
be delivered, a credit representing the Firm Shares to an account or accounts at
The Depository Trust Company, as designated by the Representatives for the
accounts of the Representatives and the several Underwriters at the First
Closing Date, against the irrevocable release of a wire transfer of immediately
available funds for the amount of the purchase price therefor. The Company shall
also deliver, or cause to be delivered, a credit representing the Option Shares
the Underwriters have agreed to purchase at the First Closing Date (or the
Second Closing Date, as the case may be), to an account or accounts at The
Depository Trust Company as designated by the Representatives for the accounts
of the Representatives and the several Underwriters, against the irrevocable
release of a wire transfer of immediately available funds for the amount of the
purchase price therefor. Time shall be of the essence, and delivery at the time
and place specified in this Agreement is a further condition to the obligations
of the Underwriters.
(f) Delivery of Prospectus to the Underwriters. Not later than 12:00
noon on the second business day following the date the Shares are released by
the Underwriters for sale to the public, the Company shall deliver or cause to
be delivered copies of the Prospectus in such quantities and at such places as
the Representatives shall request.
SECTION 3. COVENANTS OF THE COMPANY. The Company further covenants and
agrees with each Underwriter as follows:
(a) Registration Statement Matters. The Company will (i) use its
best efforts to cause a registration statement on Form 8-A (the "Form 8-A
Registration Statement") as required by the Securities Exchange Act of 1934 (the
"Exchange Act") to become effective simultaneously with the Registration
Statement, (ii) use its best efforts to cause the Registration Statement to
become effective or, if the procedure in Rule 430A of the Securities Act is
followed, to prepare and timely file with the Commission under Rule 424(b) under
the Securities Act a Prospectus in a form approved by the Representatives
containing information previously omitted at the time of effectiveness of the
Registration Statement in reliance on Rule 430A of the Securities Act and (iii)
not file any amendment to the Registration Statement or supplement to the
Prospectus of which the Representatives shall not previously have been advised
and furnished with a copy or to which the Representatives shall have reasonably
objected in writing or which is not in compliance with the Securities Act. If
the Company elects to rely on
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Rule 462(b) under the Securities Act, the Company shall file a Rule 462(b)
Registration Statement with the Commission in compliance with Rule 462(b) under
the Securities Act prior to the time confirmations are sent or given, as
specified by Rule 462(b)(2) under the Securities Act, and shall pay the
applicable fees in accordance with Rule 111 under the Securities Act.
(b) Securities Act Compliance. The Company will advise the
Representatives promptly (i) when the Registration Statement or any
post-effective amendment thereto shall have become effective, (ii) of receipt of
any comments from the Commission, (iii) of any request of the Commission for
amendment of the Registration Statement or for supplement to the Prospectus or
for any additional information and (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or the use
of the Prospectus or of the institution of any proceedings for that purpose. The
Company will use its best efforts to prevent the issuance of any such stop order
preventing or suspending the use of the Prospectus and to obtain as soon as
possible the lifting thereof, if issued.
(c) Blue Sky Compliance. The Company will cooperate with the
Representatives and counsel for the Underwriters in endeavoring to qualify the
Shares for sale under the securities laws of such jurisdictions (both national
and foreign) as the Representatives may reasonably have designated in writing
and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction where it is not now so
qualified or required to file such a consent. The Company will, from time to
time, prepare and file such statements, reports and other documents, as are or
may be required to continue such qualifications in effect for so long a period
as the Representatives may reasonably request for distribution of the Shares.
(d) Amendments and Supplements to the Prospectus and Other
Securities Act Matters. The Company will comply with the Securities Act and the
Exchange Act, and the rules and regulations of the Commission thereunder, so as
to permit the completion of the distribution of the Shares as contemplated in
this Agreement and the Prospectus. If during the period in which a prospectus is
required by law to be delivered by an Underwriter or dealer, any event shall
occur as a result of which, in the judgment of the Company or in the reasonable
opinion of the Representatives or counsel for the Underwriters, it becomes
necessary to amend or supplement the Prospectus in order to make the statements
therein, in the light of the circumstances existing at the time the Prospectus
is delivered to a purchaser, not misleading, or, if it is necessary at any time
to amend or supplement the Prospectus to comply with any law, the Company
promptly will prepare and file with the Commission, and furnish at its own
expense to the Underwriters and to dealers, an appropriate amendment to the
Registration Statement or supplement to the Prospectus so that the Prospectus as
so amended or supplemented will not, in the light of the circumstances when it
is so delivered, be misleading, or so that the Prospectus will comply with the
law.
(e) Copies of any Amendments and Supplements to the Prospectus. The
Company agrees to furnish the Representatives, without charge, during the period
beginning on the date hereof and ending on the later of the First Closing Date
or such date, as in the opinion of counsel for the Underwriters, the Prospectus
is no longer required by law to be delivered in connection with sales by an
Underwriter or dealer (the "Prospectus Delivery Period"), as many copies of the
Prospectus and any amendments and supplements thereto as the Representatives may
request.
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(f) Insurance. The Company shall (i) obtain Directors and Officers
liability insurance in the minimum amount of $10 million which shall apply to
the offering contemplated hereby and (ii) shall cause BancBoston Robertson
Stephens Inc. to be added as an additional insured to such policy in respect of
the offering contemplated hereby.
(g) Notice of Subsequent Events. If at any time during the ninety
(90) day period after the Registration Statement becomes effective, any rumor,
publication or event relating to or affecting the Company shall occur as a
result of which in your opinion the market price of the Company Shares has been
or is likely to be materially affected (regardless of whether such rumor,
publication or event necessitates a supplement to or amendment of the
Prospectus), the Company will, after written notice from you advising the
Company to the effect set forth above, forthwith prepare, consult with you
concerning the substance of and disseminate a press release or other public
statement, reasonably satisfactory to you, responding to or commenting on such
rumor, publication or event.
(h) Use of Proceeds. The Company shall apply the net proceeds from
the sale of the Shares sold by it in the manner described under the caption "Use
of Proceeds" in the Prospectus.
(i) Transfer Agent. The Company shall engage and maintain, at its
own expense, a registrar and transfer agent for the Company Shares.
(j) Earnings Statement. As soon as practicable, the Company will
make generally available to its security holders and to the Representatives an
earnings statement (which need not be audited) covering the twelve-month period
ending [THE DATE OF THE END OF THE FIRST QUARTER ENDING ONE YEAR FOLLOWING THE
EFFECTIVE DATE] that satisfies the provisions of Section 11(a) of the Securities
Act.
(k) Periodic Reporting Obligations. During the Prospectus Delivery
Period the Company shall file, on a timely basis, with the Commission and the
Nasdaq National Market all reports and documents required to be filed under the
Exchange Act.
(l) Agreement Not to Offer or Sell Additional Securities. The
Company will not, without the prior written consent of BancBoston Robertson
Stephens Inc., for a period of 180 days following the date of the Prospectus,
offer, sell or contract to sell, or otherwise dispose of or enter into any
transaction which is designed to, or could be expected to, result in the
disposition (whether by actual disposition or effective economic disposition due
to cash settlement or otherwise by the Company or any affiliate of the Company
or any person in privity with the Company or any affiliate of the Company)
directly or indirectly, or announce the offering of, any other Common Shares or
any securities convertible into, or exchangeable for, Common Shares; provided,
however, that the Company may (i) issue and sell Common Shares pursuant to any
director or employee stock option plan, stock ownership plan, stock purchase
plan or dividend reinvestment plan of the Company in effect at the date of the
Prospectus and described in the Prospectus so long as none of those shares may
be transferred on during the period of 180 days from the date that the
Registration Statement is declared effective (the "Lock-Up Period") and the
Company shall enter stop transfer instructions with its transfer agent and
registrar against the transfer of any such Common Shares and (ii) the Company
may issue Common Shares issuable upon the conversion of securities or the
exercise of warrants outstanding at the date of the Prospectus and described in
the Prospectus.
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(m) Future Reports to the Representatives. During the period of five
years hereafter the Company will furnish to the Representatives (i) as soon as
practicable after the end of each fiscal year, copies of the Annual Report of
the Company containing the balance sheet of the Company as of the close of such
fiscal year and statements of income, stockholders' equity and cash flows for
the year then ended and the opinion thereon of the Company's independent public
or certified public accountants; (ii) as soon as practicable after the filing
thereof, copies of each proxy statement, Annual Report on Form 10-K, Quarterly
Report on Form 10-Q, Current Report on Form 8-K or other report filed by the
Company with the Commission, the National Association of Securities Dealers, LLC
or any securities exchange; and (iii) as soon as available, copies of any report
or communication of the Company mailed generally to holders of its capital
stock.
SECTION 4. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of the several Underwriters to purchase and pay for the Shares as
provided herein on the First Closing Date and, with respect to the Option
Shares, the Second Closing Date, shall be subject to the accuracy of the
representations and warranties on the part of the Company set forth in Section 1
hereof as of the date hereof and as of the First Closing Date as though then
made and, with respect to the Option Shares, as of the Second Closing Date as
though then made, to the timely performance by the Company of its covenants and
other obligations hereunder, and to each of the following additional conditions:
(a) Compliance with Registration Requirements; No Stop Order; No
Objection from the National Association of Securities Dealers, LLC. The
Registration Statement shall have become effective prior to the execution of
this Agreement, or at such later date as shall be consented to in writing by
you; and no stop order suspending the effectiveness thereof shall have been
issued and no proceedings for that purpose shall have been initiated or, to the
knowledge of the Company or any Underwriter, threatened by the Commission, and
any request of the Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been complied
with to the satisfaction of Underwriters' Counsel; and the National Association
of Securities Dealers, LLC shall have raised no objection to the fairness and
reasonableness of the underwriting terms and arrangements.
(b) Corporate Proceedings. All corporate proceedings and other legal
matters in connection with this Agreement, the form of Registration Statement
and the Prospectus, and the registration, authorization, issue, sale and
delivery of the Shares, shall have been reasonably satisfactory to Underwriters'
Counsel, and such counsel shall have been furnished with such papers and
information as they may reasonably have requested to enable them to pass upon
the matters referred to in this Section.
(c) No Material Adverse Change. Subsequent to the execution and
delivery of this Agreement and prior to the First Closing Date, or the Second
Closing Date, as the case may be, there shall not have been any Material Adverse
Change in the condition (financial or otherwise), earnings, operations, business
or prospects of the Company from that set forth in the Registration Statement or
Prospectus, which, in your sole judgment, is material and adverse and that makes
it, in your sole judgment, impracticable or inadvisable to proceed with the
public offering of the Shares as contemplated by the Prospectus;
(d) Opinion of Counsel for the Company. You shall have received on
the First Closing Date, or the Second Closing Date, as the case may be, an
opinion of Wilson Sonsini Goodrich & Rosati, P.C., counsel for the Company
substantially in the form of Exhibit B attached
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hereto, dated the First Closing Date, or the Second Closing Date, addressed to
the Underwriters and with reproduced copies or signed counterparts thereof for
each of the Underwriters.
Counsel rendering the opinion contained in Exhibit B may rely as
to questions of law not involving the laws of the United States, the State of
New York or the State of California or general corporate laws of the State of
Delaware upon opinions of local counsel, and as to questions of fact upon
representations or certificates of officers of the Company, and of government
officials, in which case their opinion is to state that they are so relying and
that they have no knowledge of any material misstatement or inaccuracy in any
such opinion, representation or certificate. Copies of any opinion,
representation or certificate so relied upon shall be delivered to you, as
Representatives of the Underwriters, and to Underwriters' Counsel.
(e) Opinion of Counsel for the Underwriters. You shall have received
on the First Closing Date or the Second Closing Date, as the case may be, an
opinion of Brobeck, Phleger & Harrison LLP, substantially in the form of Exhibit
C hereto. The Company shall have furnished to such counsel such documents as
they may have requested for the purpose of enabling them to pass upon such
matters.
(f) Accountants' Comfort Letter. You shall have received on the
First Closing Date and on the Second Closing Date, as the case may be, a letter
from PricewaterhouseCoopers LLP addressed to the Underwriters, dated the First
Closing Date or the Second Closing Date, as the case may be, confirming that
they are independent certified public accountants with respect to the Company
within the meaning of the Securities Act and the applicable published Rules and
Regulations and based upon the procedures described in such letter delivered to
you concurrently with the execution of this Agreement (herein called the
"Original Letter"), but carried out to a date not more than four (4) business
days prior to the First Closing Date or the Second Closing Date, as the case may
be, (i) confirming, to the extent true, that the statements and conclusions set
forth in the Original Letter are accurate as of the First Closing Date or the
Second Closing Date, as the case may be, and (ii) setting forth any revisions
and additions to the statements and conclusions set forth in the Original Letter
which are necessary to reflect any changes in the facts described in the
Original Letter since the date of such letter, or to reflect the availability of
more recent financial statements, data or information. The letter shall not
disclose any change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company from that set forth in
the Registration Statement or Prospectus, which, in your sole judgment, is
material and adverse and that makes it, in your sole judgment, impracticable or
inadvisable to proceed with the public offering of the Shares as contemplated by
the Prospectus. The Original Letter from PricewaterhouseCoopers LLP shall be
addressed to or for the use of the Underwriters in form and substance
satisfactory to the Underwriters and shall (i) represent, to the extent true,
that they are independent certified public accountants with respect to the
Company within the meaning of the Securities Act and the applicable published
Rules and Regulations, (ii) set forth their opinion with respect to their
examination of the balance sheet of the Company as of June 30, 1999 and related
statements of operations, stockholders' equity, and cash flows for the twelve
(12) months ended June 30, 1999, (iii) state that PricewaterhouseCoopers LLP has
performed the procedures set out in Statement on Auditing Standards No. 71 ("SAS
71") for a review of interim financial information and providing the report of
PricewaterhouseCoopers LLP as described in SAS 71 on the financial statements
for each of the quarters in the one-quarter period ended September 30, 1999 (the
"Quarterly Financial Statements"), (iv) state that in the course of such review,
nothing came to their attention that leads them to believe that any material
modifications need to be made to any of the Quarterly Financial Statements in
order for them to be in compliance with generally accepted accounting principles
consistently applied across the periods presented, (v)
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state that PricewaterhouseCoopers LLP has performed the procedures set out in
Statement of Auditing standards No. 86 with respect to "Management's Discussion
and Analysis of Financial Condition and Results of Operations" contained in the
Prospectus and (vi) address other matters agreed upon by PricewaterhouseCoopers
LLP and you. In addition, you shall have received from PricewaterhouseCoopers
LLP a letter addressed to the Company and made available to you for the use of
the Underwriters stating that their review of the Company's system of internal
accounting controls, to the extent they deemed necessary in establishing the
scope of their examination of the Company's financial statements as of June 30,
1999, did not disclose any weaknesses in internal controls that they considered
to be material weaknesses.
(g) Officers' Certificate. You shall have received on the First
Closing Date and the Second Closing Date, as the case may be, a certificate of
the Company, dated the First Closing Date or the Second Closing Date, as the
case may be, signed by the Chief Executive Officer and Chief Financial Officer
of the Company, to the effect that, and you shall be satisfied that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the First
Closing Date or the Second Closing Date, as the case may be, and the
Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
First Closing Date or the Second Closing Date, as the case may be;
(ii) No stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or threatened under the Act;
(iii) When the Registration Statement became effective and at all
times subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus, and any amendments or
supplements thereto contained all material information required to be
included therein by the Securities Act and in all material respects
conformed to the requirements of the Securities Act; the Registration
Statement and the Prospectus, and any amendments or supplements thereto,
did not and does not include any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; and, since the effective
date of the Registration Statement, there has occurred no event required
to be set forth in an amended or supplemented Prospectus which has not
been so set forth; and
(iv) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been
(a) any material adverse change in the condition (financial or
otherwise), earnings, operations, business or prospects of the Company,
(b) any transaction that is material to the Company, except transactions
entered into in the ordinary course of business, (c) any obligation,
direct or contingent, that is material to the Company incurred by the
Company, except obligations incurred in the ordinary course of business,
(d) any change in the capital stock or outstanding indebtedness of the
Company that is material to the Company, (e) any dividend or
distribution of any kind declared, paid or made on the capital stock of
the Company, or (f) any loss or damage (whether or not insured) to the
property of the Company which has been sustained or will have been
sustained which has a material adverse effect on the condition
(financial or otherwise), earnings, operations, business or prospects of
the Company.
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(h) Lock-up Agreement from Certain Stockholders of the Company. The
Company shall have obtained and delivered to you an agreement substantially in
the form of Exhibit A attached hereto from each officer and director of the
Company, and each beneficial owner of one or more percent of the outstanding
issued share capital of the Company.
(i) Stock Exchange Listing. The Shares shall have been approved for
inclusion on the Nasdaq National Market, subject only to official notice of
issuance.
(j) Compliance with Prospectus Delivery Requirements. The Company
shall have complied with the provisions of Sections 2(g) and 3(e) hereof with
respect to the furnishing of Prospectuses.
(k) Additional Documents. On or before each of the First Closing
Date and the Second Closing Date, as the case may be, the Representatives and
counsel for the Underwriters shall have received such information, documents and
opinions as they may reasonably require for the purposes of enabling them to
pass upon the issuance and sale of the Shares as contemplated herein, or in
order to evidence the accuracy of any of the representations and warranties, or
the satisfaction of any of the conditions or agreements, herein contained.
If any condition specified in this Section 4 is not satisfied
when and as required to be satisfied, this Agreement may be terminated by the
Representatives by notice to the Company at any time on or prior to the First
Closing Date and, with respect to the Option Shares, at any time prior to the
Second Closing Date, which termination shall be without liability on the part of
any party to any other party, except that Section 5 (Payment of Expenses),
Section 6 (Reimbursement of Underwriters' Expenses), Section 7 (Indemnification
and Contribution) and Section 10 (Representations and Indemnities to Survive
Delivery) shall at all times be effective and shall survive such termination.
SECTION 5. PAYMENT OF EXPENSES. The Company agrees to pay all costs,
fees and expenses incurred in connection with the performance of its obligations
hereunder and in connection with the transactions contemplated hereby, including
without limitation (i) all expenses incident to the issuance and delivery of the
Shares (including all printing and engraving costs), (ii) all fees and expenses
of the registrar and transfer agent of the Common Stock, (iii) all necessary
issue, transfer and other stamp taxes in connection with the issuance and sale
of the Shares to the Underwriters, (iv) all fees and expenses of the Company's
counsel, independent public or certified public accountants and other advisors,
(v) all costs and expenses incurred in connection with the preparation,
printing, filing, shipping and distribution of the Registration Statement
(including financial statements, exhibits, schedules, consents and certificates
of experts), each preliminary prospectus and the Prospectus, and all amendments
and supplements thereto, and this Agreement, (vi) all filing fees, attorneys'
fees and expenses incurred by the Company or the Underwriters in connection with
qualifying or registering (or obtaining exemptions from the qualification or
registration of) all or any part of the Shares for offer and sale under the
state securities or blue sky laws or the provincial securities laws of Canada or
any other country, and, if requested by the Representatives, preparing and
printing a "Blue Sky Survey", an "International Blue Sky Survey" or other
memorandum, and any supplements thereto, advising the Underwriters of such
qualifications, registrations and exemptions, (vii) the filing fees incident to,
and the reasonable fees and expenses of counsel for the Underwriters in
connection with, the National Association of Securities Dealers, LLC review and
approval of the Underwriters' participation in the offering and distribution of
the Common Shares, (viii) the fees and expenses associated with including the
Common Shares on the
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Nasdaq National Market, (ix) all costs and expenses incident to the preparation
and undertaking of "road show" preparations to be made to prospective investors,
and (x) all other fees, costs and expenses referred to in Item 13 of Part II of
the Registration Statement. Except as provided in this Section 5, Section 6, and
Section 7 hereof, the Underwriters shall pay their own expenses, including the
fees and disbursements of their counsel.
SECTION 6. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If this Agreement is
terminated by the Representatives pursuant to Section 4, Section 7, Section 8,
Section 9, or if the sale to the Underwriters of the Shares on the First Closing
Date is not consummated because of any refusal, inability or failure on the part
of the Company to perform any agreement herein or to comply with any provision
hereof, the Company agrees to reimburse the Representatives and the other
Underwriters (or such Underwriters as have terminated this Agreement with
respect to themselves), severally, upon demand for all out-of-pocket expenses
that shall have been reasonably incurred by the Representatives and the
Underwriters in connection with the proposed purchase and the offering and sale
of the Shares, including but not limited to fees and disbursements of counsel,
printing expenses, travel expenses, postage, facsimile and telephone charges.
SECTION 7. INDEMNIFICATION AND CONTRIBUTION.
(a) Indemnification of the Underwriters. The Company shall indemnify
and hold harmless each Underwriter, its officers and employees, and each person,
if any, who controls any Underwriter within the meaning of the Securities Act
and the Exchange Act against any loss, claim, damage, liability or expense, as
incurred, to which such Underwriter or such controlling person may become
subject, under the Securities Act, the Exchange Act or other federal or state
statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of the Company, which consent shall not be unreasonably withheld),
insofar as such loss, claim, damage, liability or expense (or actions in respect
thereof as contemplated below) arises out of or is based (i) upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, or any amendment thereto, including any information
deemed to be a part thereof pursuant to Rule 430A or Rule 434 under the
Securities Act, or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading; or (ii) upon any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto), or the omission or alleged omission therefrom
of a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; or (iii)
in whole or in part upon any inaccuracy in the representations and warranties of
the Company contained herein; or (iv) in whole or in part upon any failure of
the Company to perform its obligations hereunder or under law; or (v) any act or
failure to act or any alleged act or failure to act by any Underwriter in
connection with, or relating in any manner to, the Shares or the offering
contemplated hereby, and which is included as part of or referred to in any
loss, claim, damage, liability, action or expense arising out of or based upon
any matter covered by clause (i), (ii), (iii) or (iv) above, provided that the
Company shall not be liable under this clause (v) to the extent that a court of
competent jurisdiction shall have determined by a final judgment that such loss,
claim, damage, liability or action resulted directly from any such acts or
failures to act undertaken or omitted to be taken by such Underwriter through
its bad faith or willful misconduct; and to reimburse each Underwriter and each
such controlling person for any and all expenses (including the fees and
disbursements of counsel chosen by BancBoston Robertson Stephens Inc.) as such
expenses are reasonably incurred by such Underwriter or such controlling person
in connection with
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investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action; provided, however, that the foregoing
indemnity agreement shall not apply to any loss, claim, damage, liability or
expense to the extent, but only to the extent, arising out of or based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
the Company by the Representatives expressly for use in the Registration
Statement, any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto); and provided, further, that with respect to any preliminary
prospectus, the foregoing indemnity agreement shall not inure to the benefit of
any Underwriter from whom the person asserting any loss, claim, damage,
liability or expense purchased Shares, or any person controlling such
Underwriter, if copies of the Prospectus were timely delivered to the
Underwriter pursuant to Section 2 and a copy of the Prospectus (as then amended
or supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such Underwriter
to such person, if required by law so to have been delivered, at or prior to the
written confirmation of the sale of the Shares to such person, and if the
Prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage, liability or expense. The indemnity agreement
set forth in this Section 7(a) shall be in addition to any liabilities that the
Company may otherwise have. Notwithstanding the foregoing, any amounts to be
paid by an indemnifying party shall be offset by any amounts paid to the
indemnified parties pursuant to the insurance described in Section 1(z).
(b) Indemnification of the Company, its Directors and Officers. Each
Underwriter agrees, severally and not jointly, to indemnify and hold harmless
the Company, each of its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of the Securities Act or the Exchange Act, against any loss, claim,
damage, liability or expense, as incurred, to which the Company, or any such
director, officer or controlling person may become subject, under the Securities
Act, the Exchange Act, or other federal or state statutory law or regulation, or
at common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of such Underwriter), insofar as
such loss, claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based upon any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or arises out of or is based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in the Registration Statement, any preliminary
prospectus, the Prospectus (or any amendment or supplement thereto), in reliance
upon and in conformity with written information furnished to the Company by the
Representatives expressly for use therein; and to reimburse the Company, or any
such director, officer or controlling person for any legal and other expense
reasonably incurred by the Company, or any such director, officer, or
controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action. The indemnity agreement set forth in this Section 7(b) shall be in
addition to any liabilities that each Underwriter may otherwise have.
(c) Information Provided by the Underwriters. The Company hereby
acknowledges that the only information that the Underwriters have furnished to
the Company expressly for use in the Registration Statement, any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto) are the
statements set forth in the table in the first paragraph, the
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second paragraph and the [________] paragraph under the caption "Underwriting"
in the Prospectus; and the Underwriters confirm that such statements are
correct.
(d) Notifications and Other Indemnification Procedures. Promptly
after receipt by an indemnified party under this Section 7 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 7, notify
the indemnifying party in writing of the commencement thereof, but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party for contribution or otherwise than under
the indemnity agreement contained in this Section 7 or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action is
brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded on
advice of counsel that a conflict may arise between the positions of the
indemnifying party and the indemnified party in conducting the defense of any
such action or that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of such indemnifying party's election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 7 for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding sentence
(it being understood, however, that the indemnifying party shall not be liable
for the expenses of more than one separate counsel (together with local
counsel), approved by the indemnifying party (BancBoston Robertson Stephens Inc.
in the case of Section 7(b) and Section 8), representing the indemnified parties
who are parties to such action), (ii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of the
action, or (iii) the indemnifying party has authorized the employment of counsel
for the indemnified party at the expense of the indemnifying party, in each of
which cases the fees and expenses of counsel shall be at the expense of the
indemnifying party.
(e) Settlements. The indemnifying party under this Section 7 shall
not be liable for any settlement of any proceeding effected without its written
consent, which consent shall not be unreasonably withheld, but if settled with
such consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party against any loss, claim, damage,
liability or expense by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by Section 7(d) hereof, the indemnifying party agrees
that it shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 30 days
after receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No indemnifying party
shall, without the prior
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written consent of the indemnified party, effect any settlement, compromise or
consent to the entry of judgment in any pending or threatened action, suit or
proceeding in respect of which any indemnified party is or could have been a
party and indemnity was or could have been sought hereunder by such indemnified
party, unless such settlement, compromise or consent includes (i) an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such action, suit or proceeding and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act by or on behalf of any indemnified party.
(f) Contribution. If the indemnification provided for in this
Section 7 is unavailable to or insufficient to hold harmless an indemnified
party under Section 7(a) or (b) above in respect of any losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) then each
indemnifying party shall contribute to the aggregate amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law then each indemnifying party shall contribute to such amount paid or payable
by such indemnified party in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of the Company on one
hand and the Underwriters on the other hand in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, (or
actions or proceedings in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriter on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bears to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on one hand or the Underwriters
on the other hand and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 7(f) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7(f). The amount paid
or payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to above in
this Section 7(f) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim after taking into account amounts paid
pursuant to the insurance described in Section 1(z). Notwithstanding the
provisions of this subsection (f), (i) no Underwriter shall be required to
contribute any amount in excess of the underwriting discounts and commissions
applicable to the Shares purchased by such Underwriter and (ii) no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this Section 7(f) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(g) Timing of Any Payments of Indemnification. Any losses, claims,
damages, liabilities or expenses for which an indemnified party is entitled to
indemnification or contribution under this Section 7 shall be paid by the
indemnifying party to the indemnified party as such
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losses, claims, damages, liabilities or expenses are incurred, but in all cases,
no later than thirty (30) days of invoice to the indemnifying party.
(h) Survival. The indemnity and contribution agreements contained in
this Section 7 and the representation and warranties of the Company set forth in
this Agreement shall remain operative and in full force and effect, regardless
of (i) any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Company, its directors or officers or any
persons controlling the Company, (ii) acceptance of any Shares and payment
therefor hereunder, and (iii) any termination of this Agreement. A successor to
any Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 7.
(i) Acknowledgements of Parties. The parties to this Agreement
hereby acknowledge that they are sophisticated business persons who were
represented by counsel during the negotiations regarding the provisions hereof
including, without limitation, the provisions of this Section 7, and are fully
informed regarding said provisions. They further acknowledge that the provisions
of this Section 7 fairly allocate the risks in light of the ability of the
parties to investigate the Company and its business in order to assure that
adequate disclosure is made in the Registration Statement and Prospectus as
required by the Securities Act and the Exchange Act.
SECTION 8. DEFAULT OF ONE OR MORE OF THE SEVERAL UNDERWRITERS. If, on
the First Closing Date or the Second Closing Date, as the case may be, any one
or more of the several Underwriters shall fail or refuse to purchase Shares that
it or they have agreed to purchase hereunder on such date, and the aggregate
number of Common Shares which such defaulting Underwriter or Underwriters agreed
but failed or refused to purchase does not exceed 10% of the aggregate number of
the Shares to be purchased on such date, the other Underwriters shall be
obligated, severally, in the proportions that the number of Firm Common Shares
set forth opposite their respective names on Schedule A bears to the aggregate
number of Firm Shares set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as may be specified by the
Representatives with the consent of the non-defaulting Underwriters, to purchase
the Shares which such defaulting Underwriter or Underwriters agreed but failed
or refused to purchase on such date. If, on the First Closing Date or the Second
Closing Date, as the case may be, any one or more of the Underwriters shall fail
or refuse to purchase Shares and the aggregate number of Shares with respect to
which such default occurs exceeds 10% of the aggregate number of Shares to be
purchased on such date, and arrangements satisfactory to the Representatives and
the Company for the purchase of such Shares are not made within 48 hours after
such default, this Agreement shall terminate without liability of any party to
any other party except that the provisions of Section 4, and Section 7 shall at
all times be effective and shall survive such termination. In any such case
either the Representatives or the Company shall have the right to postpone the
First Closing Date or the Second Closing Date, as the case may be, but in no
event for longer than seven days in order that the required changes, if any, to
the Registration Statement and the Prospectus or any other documents or
arrangements may be effected.
As used in this Agreement, the term "Underwriter" shall be
deemed to include any person substituted for a defaulting Underwriter under this
Section 8. Any action taken under this Section 8 shall not relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
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SECTION 9. TERMINATION OF THIS AGREEMENT. Prior to the First Closing
Date, this Agreement may be terminated by the Representatives by notice given to
the Company if at any time (i) trading or quotation in any of the Company's
securities shall have been suspended or limited by the Commission or by the
Nasdaq Stock Market, or trading in securities generally on either the Nasdaq
Stock Market or the New York Stock Exchange shall have been suspended or
limited, or minimum or maximum prices shall have been generally established on
any of such stock exchanges by the Commission or the National Association of
Securities Dealers, LLC; (ii) a general banking moratorium shall have been
declared by any of federal, New York or California authorities; (iii) there
shall have occurred any outbreak or escalation of national or international
hostilities or any crisis or calamity, or any change in the United States or
international financial markets, or any substantial change or development
involving a prospective change in United States' or international political,
financial or economic conditions, as in the judgment of the Representatives is
material and adverse and makes it impracticable or inadvisable to market the
Common Shares in the manner and on the terms described in the Prospectus or to
enforce contracts for the sale of securities; (iv) in the judgment of the
Representatives there shall have occurred any Material Adverse Change; or (v)
the Company shall have sustained a loss by strike, fire, flood, earthquake,
accident or other calamity of such character as in the judgment of the
Representatives may interfere materially with the conduct of the business and
operations of the Company regardless of whether or not such loss shall have been
insured. Any termination pursuant to this Section 9 shall be without liability
on the part of (a) the Company to any Underwriter, except that the Company shall
be obligated to reimburse the expenses of the Representatives and the
Underwriters pursuant to Sections 5 and 6 hereof, (b) any Underwriter to the
Company, or (c) of any party hereto to any other party except that the
provisions of Section 7 shall at all times be effective and shall survive such
termination.
SECTION 10. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers and of the several Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or the Company or any of its or their partners, officers or directors or any
controlling person as the case may be, and will survive delivery of and payment
for the Shares sold hereunder and any termination of this Agreement.
SECTION 11. NOTICES. All communications hereunder shall be in writing
and shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Representatives:
BANCBOSTON ROBERTSON STEPHENS INC.
555 California Street
San Francisco, California 94104
Facsimile: (415) 676-2696
Attention: General Counsel
If to the Company:
OnDisplay, Inc.
12667 Alcosta Boulevard, Suite 300
San Ramon, CA 94583
Facsimile: (925) 355-3222
Attention: Chief Financial Officer
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With a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, CA 94304
Attention: Mario Rosati
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
SECTION 12. SUCCESSORS. This Agreement will inure to the benefit of and
be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 9 hereof, and to the benefit of the employees, officers and
directors and controlling persons referred to in Section 7, and to their
respective successors, and no other person will have any right or obligation
hereunder. The term "successors" shall not include any purchaser of the Shares
as such from any of the Underwriters merely by reason of such purchase.
SECTION 13. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability
of any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision hereof.
If any Section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid
and enforceable.
SECTION 14. GOVERNING LAW PROVISIONS.
(a) Governing Law. This agreement shall be governed by and construed
in accordance with the internal laws of the State of New York applicable to
agreements made and to be performed in such state.
(b) Consent to Jurisdiction. Any legal suit, action or proceeding
arising out of or based upon this Agreement or the transactions contemplated
hereby ("Related Proceedings") may be instituted in the federal courts of the
United States of America located in the City and County of San Francisco or the
courts of the State of California located in the City and County of San
Francisco (collectively, the "Specified Courts"), and each party irrevocably
submits to the exclusive jurisdiction (except for proceedings instituted in
regard to the enforcement of a judgment of any such court (a "Related
Judgment"), as to which such jurisdiction is non-exclusive) of such courts in
any such suit, action or proceeding. Service of any process, summons, notice or
document by mail to such party's address set forth above shall be effective
service of process for any suit, action or other proceeding brought in any such
court. The parties irrevocably and unconditionally waive any objection to the
laying of venue of any suit, action or other proceeding in the Specified Courts
and irrevocably and unconditionally waive and agree not to plead or claim in any
such court that any such suit, action or other proceeding brought in any such
court has been brought in an inconvenient forum. Each party not located in the
United States irrevocably appoints CT Corporation System, which currently
maintains a San Francisco office at 49 Stevenson Street, San Francisco,
California 94105, United States of America, as its agent to receive service of
process or other legal summons for purposes of any such suit, action or
proceeding that may be instituted in any state or federal court in the City and
County of San Francisco.
(c) Waiver of Immunity. With respect to any Related Proceeding, each
party irrevocably waives, to the fullest extent permitted by applicable law, all
immunity (whether on the
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basis of sovereignty or otherwise) from jurisdiction, service of process,
attachment (both before and after judgment) and execution to which it might
otherwise be entitled in the Specified Courts, and with respect to any Related
Judgment, each party waives any such immunity in the Specified Courts or any
other court of competent jurisdiction, and will not raise or claim or cause to
be pleaded any such immunity at or in respect of any such Related Proceeding or
Related Judgment, including, without limitation, any immunity pursuant to the
United States Foreign Sovereign Immunities Act of 1976, as amended.
SECTION 15. GENERAL PROVISIONS. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in two
or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to benefit.
The Table of Contents and the Section headings herein are for the convenience of
the parties only and shall not affect the construction or interpretation of this
Agreement.
[The remainder of this page has been intentionally left blank.]
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If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company the enclosed copies hereof,
whereupon this instrument, along with all counterparts hereof, shall become a
binding agreement in accordance with its terms.
Very truly yours,
ONDISPLAY, INC.
By:
---------------------------------------
Mark Pine,
Chief Executive Officer
The foregoing Underwriting Agreement is hereby confirmed and
accepted by the Representatives as of the date first above written.
BANCBOSTON ROBERTSON STEPHENS INC.
DEUTSCHE BANC ALEX. BROWN INCORPORATED
SG COWEN SECURITIES CORPORATION
On their behalf and on behalf of each of the several underwriters named in
Schedule A hereto.
BY BANCBOSTON ROBERTSON STEPHENS INC.
By:
------------------------------------
Authorized Signatory
25
<PAGE> 26
SCHEDULE A
<TABLE>
<CAPTION>
NUMBER OF FIRM COMMON
UNDERWRITERS SHARES TO BE PURCHASED
- ---------------------------------------------------------------------- ----------------------
<S> <C>
BANCBOSTON ROBERTSON STEPHENS INC..................................... [___]
DEUTSCHE BANC ALEX. BROWN INCORPORATED................................ [___]
SG COWEN SECURITIES CORPORATION....................................... [___]
Total......................................................... [___]
</TABLE>
A-1
<PAGE> 27
EXHIBIT A
LOCK-UP AGREEMENT
A-1
<PAGE> 28
LOCK-UP AGREEMENT
__________________, 1999
BancBoston Robertson Stephens Inc.
Deutsche Banc Alex. Brown Incorporated
SG Cowen Securities Corporation
As Representatives of the Several Underwriters
555 California Street
San Francisco, CA 94104
Ladies and Gentlemen:
The undersigned understands that you, as Representatives of the
several underwriters (the "Underwriters"), propose to enter into an Underwriting
Agreement (the "Underwriting Agreement") with OnDisplay, Inc. (the "Company")
providing for the initial public offering (the "Public Offering") by the
Underwriters, including yourselves, of Common Stock of the Company (the "Common
Stock") pursuant to the Company's Registration Statement on Form S-1 to be filed
with the Securities and Exchange Commission on or about the week of September
10, 1999 (the "Registration Statement").
In consideration of the Underwriters' agreement to purchase and
make the Public Offering of the Common Stock, and for other good and valuable
consideration, receipt of which is hereby acknowledged, the undersigned hereby
agrees, for a period of 180 days after the effective date of the Registration
Statement (the "Lock-Up Period"), not to offer to sell, contract to sell or
otherwise sell, dispose of, loan, pledge or grant any rights with respect to
(collectively, a "Disposition") any shares of Common Stock, any options or
warrants to purchase any shares of Common Stock or any securities convertible
into or exchangeable for shares of Common Stock (collectively, "Securities"),
now owned or hereafter acquired directly by the undersigned or with respect to
which the undersigned has or hereafter acquires the power of disposition,
otherwise than (i) as a bona fide gift or gifts, provided the donee or donees
thereof agree to be bound by this Lock-Up Agreement, (ii) as a distribution to
limited partners or shareholders of the undersigned, provided that the
distributees thereof agree in writing to be bound by the terms of this Lock-Up
Agreement or (iii) with the prior written consent of BancBoston Robertson
Stephens. The foregoing restriction is expressly agreed to preclude the holder
of the Securities from engaging in any hedging or other transaction which is
designed to or reasonably expected to lead to or result in a Disposition of
Securities during the Lock-Up Period even if such Securities would be disposed
of by someone other than the undersigned. Such prohibited hedging or other
transactions would include without limitation any short sale (whether or not
against the box) or any purchase, sale or grant of any right (including without
limitation any put or call option) with respect to any Securities or with
respect to any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value from
Securities. Notwithstanding the foregoing, this Lock-Up Agreement does not
prohibit the sale of shares of the Common Stock by the undersigned to the
Underwriters in the Public Offering.
Furthermore, the undersigned hereby agrees and consents to the
entry of stop transfer instructions with the Company's transfer agent against
the transfer of the Securities held by the undersigned except in compliance with
this Lock-Up Agreement. In the event that
A-2
<PAGE> 29
the Registration Statement shall not have been declared effective on or before
March 31, 1999 this Lock-Up Agreement shall be of no further force or effect.
Very truly yours,
-------------------------------------------
(signature)
Name:
----------------------------------
Address:
----------------------------------
----------------------------------
----------------------------------
Accepted as of the date
first set forth above:
BancBoston Robertson Stephens Inc.
Deutsche Banc Alex. Brown Incorporated
SG Cowen Securities Corporation
As Representatives of
the Several Underwriters
BancBoston Robertson Stephens
By:
----------------------------------
Name:
The Company requests that this Lock-Up Agreement be completed and delivered to
underwriters' counsel, Brobeck, Phleger & Harrison LLP, Attn: Alan C. Wang.
A-3
<PAGE> 30
EXHIBIT B
MATTERS TO BE COVERED IN THE OPINION OF COMPANY COUNSEL
(i) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the jurisdiction of
its incorporation;
(ii) The Company has the corporate power and authority to own, lease
and operate its properties and to conduct its business as described in
the Prospectus;
(iii) The Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction, if any, in
which the ownership or leasing of its properties or the conduct of its
business requires such qualification, except where the failure to be so
qualified or be in good standing would not have a Material Adverse
Effect. To such counsel's knowledge, the Company does not, directly or
indirectly, own any voting security of or equity interest in, or
control, any corporation, association or other entity;
(iv) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus under the caption
"Capitalization" as of the dates stated therein, the issued and
outstanding shares of capital stock of the Company have been duly and
validly issued and are fully paid and nonassessable, and, to such
counsel's knowledge, will not have been issued in violation of or
subject to any preemptive right, co-sale right, registration right,
right of first refusal or other similar right;
(v) The Firm Shares or the Option Shares, as the case may be, to be
issued by the Company pursuant to the terms of this Agreement have been
duly authorized and, upon issuance and delivery against payment therefor
in accordance with the terms hereof, will be duly and validly issued and
fully paid and nonassessable, and will not have been issued in violation
of or subject to any preemptive right, co-sale right, registration
right, right of first refusal or other similar right;
(vi) The Company has the corporate power and authority to enter into
this Agreement and to issue, sell and deliver to the Underwriters the
Shares to be issued and sold by it hereunder;
(vii) This Agreement has been duly authorized by all necessary
corporate action on the part of the Company and has been duly executed
and delivered by the Company and, assuming due authorization, execution
and delivery by you, is a valid and binding agreement of the Company,
enforceable in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or affecting creditors' rights
generally or by general equitable principles;
(viii) The Registration Statement has become effective under the Act
and, to such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or
threatened under the Securities Act;
(ix) The 8-A Registration Statement complied as to form in all
material respects with the requirements of the Exchange Act; the 8-A
Registration Statement has become
B-1
<PAGE> 31
effective under the Exchange Act; and the Firm Shares or the Option
Shares have been validly registered under the Securities Act and the
Rules and Regulations of the Exchange Act and the applicable rules and
regulations of the Commission thereunder;
(x) The Registration Statement and the Prospectus, and each
amendment or supplement thereto (other than the financial statements
(including supporting schedules) and financial data derived therefrom as
to which such counsel need express no opinion), as of the effective date
of the Registration Statement, complied as to form in all material
respects with the requirements of the Act and the applicable Rules and
Regulations;
(xi) The information in the Prospectus under the caption "Description
of Capital Stock," to the extent that it constitutes matters of law or
legal conclusions, has been reviewed by such counsel and is a fair
summary of such matters and conclusions; and the forms of certificates
evidencing the Common Stock and filed as exhibits to the Registration
Statement comply with Delaware law;
(xii) The description in the Registration Statement and the Prospectus
of the charter and bylaws of the Company and of statutes are accurate
and fairly present the information required to be presented by the
Securities Act;
(xiii) To such counsel's knowledge, there are no agreements, contracts,
leases or documents to which the Company is a party of a character
required to be described or referred to in the Registration Statement or
Prospectus or to be filed as an exhibit to the Registration Statement
which are not described or referred to therein or filed as required;
(xiv) The performance of this Agreement and the consummation of the
transactions herein contemplated (other than performance of the
Company's indemnification obligations hereunder, concerning which no
opinion need be expressed) will not (a) result in any violation of the
Company's charter or bylaws or (b) to such counsel's knowledge, result
in a material breach or violation of any of the terms and provisions of,
or constitute a default under, any bond, debenture, note or other
evidence of indebtedness, or any lease, contract, indenture, mortgage,
deed of trust, loan agreement, joint venture or other agreement or
instrument known to such counsel to which the Company is a party or by
which its properties are bound, or any applicable statute, rule or
regulation known to such counsel or, to such counsel's knowledge, any
order, writ or decree of any court, government or governmental agency or
body having jurisdiction over the Company, or over any of its properties
or operations;
(xv) No consent, approval, authorization or order of or qualification
with any court, government or governmental agency or body having
jurisdiction over the Company, or over any of its properties or
operations is necessary in connection with the consummation by the
Company of the transactions herein contemplated, except (i) such as have
been obtained under the Securities Act, (ii) such as may be required
under state or other securities or Blue Sky laws in connection with the
purchase and the distribution of the Shares by the Underwriters, (iii)
such as may be required by the National Association of Securities
Dealers, LLC and (iv) such as may be required under the federal or
provincial laws of Canada;
(xvi) To such counsel's knowledge, there are no legal or governmental
proceedings pending or threatened against the Company of a character
required to be disclosed in
B-2
<PAGE> 32
the Registration Statement or the Prospectus by the Securities Act,
other than those described therein;
(xvii) To such counsel's knowledge, the Company is not presently (a) in
material violation of its charter or bylaws, or (b) in material breach
of any applicable statute, rule or regulation known to such counsel or,
to such counsel's knowledge, any order, writ or decree of any court or
governmental agency or body having jurisdiction over the Company, or
over any of its properties or operations;
(xviii) To such counsel's knowledge, except as set forth in the
Registration Statement and Prospectus no holders of Company Shares or
other securities of the Company have registration rights with respect to
securities of the Company and, except as set forth in the Registration
Statement and Prospectus, all holders of securities of the Company
having rights known to such counsel to registration of such shares of
Company Shares or other securities, because of the filing of the
Registration Statement by the Company have, with respect to the offering
contemplated thereby, waived such rights or such rights have expired by
reason of lapse of time following notification of the Company's intent
to file the Registration Statement or have included securities in the
Registration Statement pursuant to the exercise of and in full
satisfaction of such rights;
(xix) The Company is not and, after giving effect to the offering and
the sale of the Shares and the application of the proceeds thereof as
described in the Prospectus, will not be, an "investment company" as
such term is defined in the Investment Company Act of 1940, as amended;
(xx) To such counsel's knowledge, the Company owns or possesses
sufficient trademarks, trade names, patent rights, copyrights, licenses,
approvals, trade secrets and other similar rights (collectively,
"Intellectual Property Rights") reasonably necessary to conduct their
business as now conducted; and the expected expiration of any such
Intellectual Property Rights would not result in a Material Adverse
Effect; the Company has not received any notice of infringement or
conflict with asserted Intellectual Property Rights of others, which
infringement or conflict, if the subject of an unfavorable decision,
would result in a Material Adverse Effect; to such counsel's knowledge,
the Company's discoveries, inventions, products, or processes referred
to in the Registration Statement or Prospectus do not infringe or
conflict with any right or patent which is the subject of a patent
application known to the Company; and
(xxi) In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of
the Company, the Representatives, Underwriters' Counsel and the
independent certified public accountants of the Company, at which such
conferences the contents of the Registration Statement and Prospectus
and related matters were discussed, and although they have not verified
the accuracy or completeness of the statements contained in the
Registration Statement or the Prospectus, nothing has come to the
attention of such counsel which leads them to believe that, at the time
the Registration Statement became effective and at all times subsequent
thereto up to and on the First Closing Date or Second Closing Date, as
the case may be, the Registration Statement and any amendment or
supplement thereto (other than the financial statements including
supporting schedules and other financial and statistical information
derived therefrom, as to which such counsel need express no comment)
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary
B-3
<PAGE> 33
to make the statements therein not misleading, or at the First Closing
Date or the Second Closing Date, as the case may be, the Registration
Statement, the Prospectus and any amendment or supplement thereto
(except as aforesaid) contained any untrue statement of a material fact
or omitted to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
B-4
<PAGE> 34
EXHIBIT C
MATTERS TO BE COVERED IN THE OPINION OF UNDERWRITERS' COUNSEL
(i) The Firm Shares have been duly authorized and, upon issuance and
delivery and payment therefor in accordance with the terms of the
Underwriting Agreement, will be validly issued, fully paid and
non-assessable;
(ii) The Registration Statement complied as to form in all material
respects with the requirements of the Act; the Registration Statement
has become effective under the Act and, to such counsel's knowledge, no
stop order proceedings with respect thereto have been instituted or
threatened or are pending under the Securities Act;
(iii) The 8-A Registration Statement complied as to form in all
material respects with the requirements of the Exchange Act; the 8-A
Registration Statement has become effective under the Exchange Act; and
the Firm Shares or the Option Shares have been validly registered under
the Securities Act and the Rules and Regulations of the Exchange Act and
the applicable rules and regulations of the Commission thereunder; and
(iv) The Underwriting Agreement has been duly authorized, executed
and delivered by the Company.
Such counsel shall state that such counsel has reviewed the
opinions addressed to the Representatives from Wilson Sonsini Goodrich & Rosati,
P.C., each dated the date hereof, and furnished to you in accordance with the
provisions of the Underwriting Agreement. Such opinion appears on its face to be
appropriately responsive to the requirements of the Underwriting Agreement.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company, the Representatives, Underwriters' Counsel and the independent
certified public accountants of the Company, at which such conferences the
contents of the Registration Statement and Prospectus and related matters were
discussed, and although they have not verified the accuracy or completeness of
the statements contained in the Registration Statement or the Prospectus,
nothing has come to the attention of such counsel which leads them to believe
that, at the time the Registration Statement became effective and at all times
subsequent thereto up to and on the First Closing Date or Second Closing Date,
as the case may be, the Registration Statement and any amendment or supplement
thereto (other than the financial statements including supporting schedules and
other financial and statistical information derived therefrom, as to which such
counsel need express no comment) contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or at the First Closing
Date or the Second Closing Date, as the case may be, the Registration Statement,
the Prospectus and any amendment or supplement thereto (except as aforesaid)
contained any untrue statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
C-1
<PAGE> 1
EXHIBIT 3.1(a)
RESTATED CERTIFICATE OF INCORPORATION
OF
ONDISPLAY, INC.
A DELAWARE CORPORATION
OnDisplay, Inc., a corporation organized and existing under the laws of
the State of Delaware, hereby certifies as follows:
A. The name of the Corporation is OnDisplay, Inc. The Corporation was
originally incorporated under the same name and the original Certificate of
Incorporation of the Corporation was filed with the Delaware Secretary of State
on August 14, 1996.
B. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, this Restated Certificate of Incorporation restates and
amends the provisions of the Certificate of Incorporation of this Corporation.
C. The text of the Certificate of Incorporation is hereby amended and
restated in its entirety to read as follows:
ONE. The name of this Corporation is OnDisplay, Inc. (the
"Corporation").
TWO. The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle, Zip Code 19801. The name of its registered
agent at such address is The Corporation Trust Company.
THREE. The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOUR. The Corporation is authorized to issue two classes of capital stock:
Preferred Stock, $0.001 par value per share, and Common Stock, $0.001 par value
per share. The total number of shares of Common Stock which the Corporation
shall have the authority to issue is Twenty Five Million (25,000,000). The total
number of shares of Preferred Stock the Corporation shall have the authority to
issue is Eleven Million Six Hundred Thousand (11,600,000) shares, Three Million
Five Hundred Thousand (3,500,000) of which has been designated Series A
Preferred Stock, Three Million Five Hundred Thousand (3,500,000) of which has
been designated Series B Preferred Stock, Two Million Five Hundred Thousand
(2,500,000) of which has been designated Series C Preferred Stock and Two
Million One Hundred Thousand (2,100,000) of which has been designated Series D
Preferred Stock.
<PAGE> 2
The Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of the Preferred Stock, such number of
its shares of Common Stock as shall from time to time be sufficient to effect
the conversion of all outstanding shares of the Preferred Stock. If at any time
the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of the
Preferred Stock, the Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.
The relative powers, preferences, special rights, qualifications,
limitations and restrictions granted to or imposed on the respective classes of
the shares of capital stock or the holders thereof are as follows:
1. Dividends.
a. Dividends on Preferred Stock. The holders of the Preferred Stock
shall be entitled to receive, when, as and if declared by the board of
directors, out of any funds legally available therefor, dividends at an annual
rate of eight per cent (8%) per share of the "Original Issue Price" per annum on
each outstanding share of a series of Preferred Stock. The Original Issue Price
of the Series A Preferred Stock shall be One Dollar ($1.00) (as adjusted for any
stock dividend, stock splits, recapitalization, reorganizations and other
similar transactions); the Original Issue Price of the Series B Preferred Stock
shall be Two Dollars and Ten Cents ($2.10) (as adjusted for any stock dividend,
stock splits, recapitalization, reorganizations and other similar transactions),
the Original Issue Price of the Series C Preferred Stock shall be Four Dollars
($4.00) (as adjusted for any stock dividend, stock splits, recapitalization,
reorganizations and other similar transactions)and the Original Issue Price of
the Series D Preferred Stock shall be Nine Dollars and Fifty Two Cents ($9.52)
(as adjusted for any stock dividend, stock splits, recapitalization,
reorganizations and other similar transactions). Dividends on the Preferred
Stock shall be payable in preference and prior to any payment of any dividend on
the Common Stock. Thereafter, holders of Preferred Stock and Common Stock shall
be entitled to receive, when, as and if declared by the board of directors, out
of any funds legally available therefor, dividends; provided, however, that no
dividend or distribution shall be declared or paid on any shares of Common Stock
or Preferred Stock unless at the same time an equivalent dividend or
distribution is declared or paid on all outstanding shares of Common Stock and
Preferred Stock, and provided further that any dividend or distribution on
Preferred Stock shall be payable at the same rate per share as would be payable
on the shares of Common Stock which the holder of Preferred Stock would be
entitled to receive if he had converted the shares of Preferred Stock into
Common Stock immediately prior to the record date of such distribution.
"Distribution" in this Section 1 means the transfer of cash or property without
consideration, whether by way of dividend or otherwise or the purchase or
redemption of shares of the Corporation for cash or property (except the
purchase of shares of Common Stock from employees, directors or consultants
pursuant to restricted stock purchase agreements). The right to dividends on
shares of Common Stock and Preferred Stock shall not be cumulative, and no right
shall accrue to holders of Common
-2-
<PAGE> 3
Stock or Preferred Stock by reason of the fact that dividends on said shares are
not declared in any prior period.
2. Liquidation Preference. In the event of any liquidation, dissolution,
or winding up of the Corporation, either voluntary or involuntary, distributions
to the stockholders of the Corporation shall be made in the following manner:
a. Preferred Stock Preference. The holders of Preferred Stock shall
be entitled to receive, prior and in preference to any distribution of any of
the assets or surplus funds of the Corporation to the holders of the Common
Stock by reason of their ownership of such shares, an amount equal to the
Original Issue Price for each share of a series of Preferred Stock plus an
amount equal to any declared but unpaid dividends per share of Preferred Stock
with respect to such liquidation, dissolution or winding up. If the assets and
funds thus distributed among the holders of the Preferred Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amount, then the entire assets and funds of the Corporation legally
available for distribution shall be distributed on a pro rata basis among the
holders of the Preferred Stock in proportion to the aggregate liquidation
preference of the shares of Preferred Stock then held by them.
b. Remaining Assets. If the assets of the Corporation available for
distribution to the Corporation's stockholders exceed the aggregate amount
payable to the holders of the Preferred Stock pursuant to Section 2(a) hereof
(such assets being hereafter referred to as the "Remaining Assets"), then after
the payments required by Section 2(a) shall have been made or irrevocably set
apart, such Remaining Assets shall be distributed pro rata among the holders of
the Preferred Stock and the Common Stock on a per share basis, treating all
shares of Preferred Stock convertible into shares of Common Stock as if
converted; provided, however, that after the receipt by each share of Preferred
Stock of distributions equal to, in the aggregate, the greater of (i) three (3)
times the Original Purchase Price for the Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock (including all amounts paid
pursuant to Section 2(a)) and two (2) times the Original Purchase Price for the
Series D Preferred Stock (including all amounts paid pursuant to Section 2(a));
or (ii) the value such holders of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock would receive,
respectively, if each outstanding share of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock had been
converted into Common Stock pursuant to Section 5(a) hereof immediately prior to
such liquidation, dissolution or winding up of the corporation; then all
Remaining Assets shall be distributed equally among the holders of the Common
Stock on a per-share basis.
c. Reorganization or Merger. A merger or reorganization of the
Corporation with or into any other corporation or corporations or a sale of
all or substantially all of the assets or outstanding stock of the
Corporation, in which transaction the Corporation's stockholders immediately
prior to such transaction own immediately after such transaction less than
50% of the equity securities of the surviving corporation or its parent,
shall be deemed to be a liquidation within the meaning of this Section 2 and
the proceeds payable in such transaction shall be divided among the
stockholders in accordance with this Section 2; provided that the holders of
Preferred Stock and
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<PAGE> 4
Common Stock shall be paid in cash or in securities received or in a combination
thereof (which combination shall be in the same proportions as the consideration
received in the transaction). Any securities to be delivered to the holders of
the Preferred Stock and Common Stock upon a merger, reorganization or sale of
substantially all of the assets of the Corporation shall be valued as follows:
(i) If traded on a securities exchange, the value
shall be deemed to be the average of the closing prices of the securities on
such exchange over the 30-day period ending three (3) business days prior to the
closing;
(ii) If actively traded over-the counter, the value
shall be deemed to be the average of the closing bid prices over the 30-day
period ending three (3) business days prior to the closing; and
(iii) If there is no active public market, the value
shall be the fair market value thereof, as mutually determined by the
Corporation and the holders of not less than a majority of the outstanding
shares of Preferred Stock, provided that if the Corporation and the holders of a
majority of the outstanding shares of Preferred Stock are unable to reach
agreement, then by independent appraisal by an investment banker hired and paid
by the Corporation, but acceptable to the holders of a majority of the
outstanding shares of Preferred Stock.
3. Redemption Rights.
a. Redemption at the Holders' Option. The Preferred Stock shall be
redeemable in whole or in part at the option of the holders of a majority of the
outstanding shares of Preferred Stock (voting together as a single class) at any
time and from time to time after September 30, 2001 if the Corporation has not
closed an underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer and
sale of Common Stock for the account of the Corporation with an aggregate
offering price to the public of not less than $20,000,000 at a per share
issuance price of at least $15.00, (as adjusted for stock splits, subdivisions,
combinations, recapitalizations, reorganizations). Notwithstanding the prior
sentence, the Series C Preferred Stock shall not be redeemed without the prior
approval by a majority of the holders of Series C Preferred Stock and the Series
D Preferred Stock shall not be redeemed without the prior approval by a more
than two thirds (2/3) of the holders of Series D Preferred Stock. Such
redemption right may be exercised by giving at least 120 day notice prior to the
date of commencement of the redemption (the "Redemption Date") by certified or
registered mail, postage prepaid, to the Corporation at its principal office.
After receipt of such notice of a redemption pursuant to this Section 3(a), the
Corporation shall, to the extent it may lawfully do so and to the extent such
redemption will not be violative of senior lending covenants, redeem all of the
outstanding shares of Preferred Stock in three equal annual installments on the
last day of each fiscal year (commencing with the first fiscal year ending after
the 120 day notice period). The Redemption Price of the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock shall be the Original Purchase Price per share for such series (as
adjusted for any stock dividends, combinations or splits) plus any accrued but
unpaid dividends. Any redemption of
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<PAGE> 5
only a part of the outstanding Preferred Stock by the Corporation pursuant to
this Section 3 shall be pro rata as among all holders of Preferred Stock in
proportion to the aggregate Redemption Price to be paid to such holders.
b. Notice Regarding Redemption. At least thirty (30) but no more
than sixty (60) days prior to any Redemption Date, written notice shall be
mailed, postage prepaid, to each holder of record (determined at the close of
business on the business day next preceding the day on which notice is given) of
Preferred Stock to be redeemed, at his post office address last shown on the
records of the Corporation, notifying such holder of the redemption of such
shares, specifying the Redemption Date, the Redemption Price and the date on
which such holder's Conversion Rights (as hereinafter defined) as to such shares
terminate (such Conversion Rights to expire on the day prior to the Redemption
Date) and calling upon such holder to surrender to the Corporation, in the
manner and at the place designated in the continental United States, his
certificate or certificates representing the shares to be redeemed (such notice
is hereinafter referred to as the "Redemption Notice"). Unless such holder
elects to convert his shares in accordance with Section 3 prior to the
Redemption Date, on or after the Redemption Date, each holder of Preferred Stock
to be redeemed shall surrender his certificate or certificates representing such
shares to the Corporation, in the manner and at the place designated in the
Redemption Notice, and thereupon the Redemption Price of such shares shall be
payable to the order of the person whose name appears on such certificate or
certificates as the owner thereof and each surrendered certificate shall be
canceled. In the event less than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares. If, on or prior to the Redemption Date, the funds necessary
for such redemption shall have been set aside by the Corporation and deposited
with a bank or trust company, for the benefit of the holders of Preferred Stock
whose shares are being redeemed, then from and after the close of business on
the Redemption Date, all rights of the holders of such shares as holders of
Preferred Stock of the Corporation (except the right to receive the Redemption
Price without interest upon surrender of their certificate or certificates)
shall cease with respect to such shares, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be outstanding for
any purpose whatsoever.
c. Trust Fund. On or prior to the Redemption Date, the Corporation
shall deposit the Redemption Price of all shares of Preferred Stock designated
for redemption in the Redemption Notice and not yet redeemed or converted with a
bank or trust company as a trust fund for the benefit of the respective holders
of the shares designated for redemption and not yet redeemed or converted. Any
monies deposited by the Corporation pursuant to this Section 3(c) for the
redemption of shares thereafter converted into shares of Common Stock pursuant
to Section 3 hereof no later than the close of business on the Redemption Date
shall be returned to the Corporation forthwith upon such conversion. The balance
of any monies deposited by the Corporation pursuant to this Section 3(c)
remaining unclaimed at the expiration of one (1) year following the Redemption
Date shall thereafter be returned to the Corporation upon its request expressed
in a resolution of the board of directors of the Corporation, provided that the
stockholder to which such monies would be payable hereunder shall be entitled,
upon surrender of his certificates representing such shares of Series A
Preferred
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Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock to the Corporation, to receive such monies but without interest from the
Redemption Date.
d. Insufficient Funds. If the funds of the Corporation legally
available for redemption of Preferred Stock on any Redemption Date are
insufficient to redeem the total number of shares of Preferred Stock to be
redeemed on such date, those funds which are legally available will be used to
redeem the shares of Preferred Stock ratably among the holders in accordance
with the last sentence of Section 3(a). The balance of the redemption funds that
are not paid on any Redemption Date shall bear interest from the due date at 8%
per annum. At any time thereafter when additional funds of the Corporation are
legally available for the redemption of Preferred Stock, such funds will be
immediately used to redeem the balance of the shares of Preferred Stock which
the Corporation became obligated to redeem on such Redemption Date but which it
has not redeemed.
4. Voting Rights.
a. Preferred Stock. Except as otherwise provided herein or required
by law, the holder of each share of Preferred Stock shall be entitled to vote on
all matters and shall be entitled to the number of votes equal to the number of
shares of Common Stock into which each share of Preferred Stock could be
converted pursuant to Section 5 hereof at the record date for the determination
of the stockholders entitled to vote on such matters or, if no such record date
is established, at the date such vote is taken. Except as otherwise provided
herein or required by law, the Preferred Stock shall have voting rights and
powers equal to the voting rights and powers of the Common Stock. Fractional
votes shall not, however, be permitted and any fractional voting rights
resulting from the above formula shall be rounded to the nearest whole number
(with one-half rounded upward to one).
b. Election of Directors. The holders of Series A Preferred Stock,
voting as a separate class, shall elect two (2) members of the Corporation's
board of directors. The holders of Series B Preferred Stock, voting as a
separate class, shall elect one (1) member of the Corporation's board of
directors. The holders of Common Stock, voting as a separate class, shall elect
two (2) members of the Corporation's board of directors. The holders of Common
Stock and Preferred Stock, voting together as a class, shall elect the remaining
directors. In the case of any vacancy in the office of a director elected by a
specific class or series of capital stock, a successor shall be elected to hold
office for the unexpired term of such director by the affirmative vote of a
majority of the shares of such class or series given at a special meeting of
such stockholders duly called or by an action by written consent for that
purpose. Any director who shall have been elected by a specified group of
stockholders may be removed during the aforesaid term of office, either for or
without cause, by, and only by, the affirmative vote of the holders of a
majority of the shares of such class or series, given at a special meeting of
such stockholders duly called or by an action by written consent for that
purpose and any such vacancy thereby created may be filled by the vote of the
holders of a majority of the shares of such series or class of capital stock
represented at such meeting or in such consent.
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<PAGE> 7
c. Common Stock. Each holder of shares of Common Stock shall be
entitled to one vote for each share thereof held.
d. Election by Ballot. The election of directors need not be by
written ballot unless the Bylaws of the Corporation shall so provide.
5. Conversion. The holders of the Preferred Stock have conversion rights
as follows (the "Conversion Rights"):
a. Right to Convert. Each share of Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share at the office of the Corporation or any transfer agent
for the Preferred Stock, into such number of fully paid and nonassessable shares
of Common Stock as is determined by dividing the Original Issue Price for such
series of Preferred Stock (as defined in Section 1(a)) by the Conversion Price,
determined as hereinafter provided, in effect at the time of the conversion (the
"Conversion Rate"). The Conversion Price for Series A Preferred Stock shall
initially be $1.00; for Series B Preferred Stock shall initially be $2.10; for
Series C Preferred Stock shall initially be $4.00; and for Series D Preferred
Stock shall initially be $9.52. Such initial Conversion Prices shall be subject
to adjustment as hereinafter provided.
b. Automatic Conversion. Each share of each series of Preferred
Stock shall automatically be converted into shares of Common Stock at the then
effective Conversion Price of such series immediately prior to the closing of an
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock for the account of the Corporation with an aggregate offering price
to the public of not less than $20,000,000 at a per share issuance price of at
least $15.00, (as adjusted for stock splits, subdivisions, combinations,
recapitalizations, reorganizations) or at any time upon the affirmative election
of the holders of at least 66 2/3% of the outstanding shares of Preferred Stock,
provided that the Series A, Series B And Series C Preferred Stock shall not be
converted without the majority approval of the holders of such Series and the
Series D Preferred Stock shall not be converted without the approval by more
than two thirds (2/3) of the holders of the Series D Preferred Stock. Upon such
automatic conversion, any declared and unpaid dividends shall be paid in
accordance with the provisions of Section 5(c). In the event of the automatic
conversion of the Preferred Stock upon a public offering as aforesaid, the
person(s) entitled to receive the Common Stock issuable upon such conversion of
Preferred Stock shall not be deemed to have converted such Preferred Stock until
immediately prior to the closing of such sale of securities. Notwithstanding the
foregoing provisions of this Section 5(b), no automatic conversion of the
Preferred Stock shall be effected unless and until such conversion will not
violate any laws, rules, regulations, orders or other legal requirements of any
governing body (such as, without limitation, compliance with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and such
automatic conversion shall be held in abeyance pending compliance with any such
requirements, provided that the holders of Preferred Stock will use their best
efforts to comply with such requirements.
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<PAGE> 8
c. Mechanics of Conversion. Before any holder of Preferred Stock
shall be entitled to convert the same into full shares of Common Stock and to
receive certificates therefor, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or of any
transfer agent for the Preferred Stock, and shall give written notice to the
Corporation at such office that such holder elects to convert the same;
provided, however, that in the event of an automatic conversion pursuant to
Section 5(b), the outstanding shares of Preferred Stock shall be converted
automatically without any further action by the holders of such shares and
whether or not the certificates representing such shares are surrendered to the
Corporation or its transfer agent, and provided further that the Corporation
shall not be obligated to issue certificates evidencing the shares of Common
Stock issuable upon such automatic conversion unless the certificates evidencing
such shares of Preferred Stock are either delivered to the Corporation or its
transfer agent as provided above, or the holder notifies the Corporation or its
transfer agent that such certificates have been lost, stolen or destroyed and
executes an agreement satisfactory to the Corporation to indemnify the
Corporation from any loss incurred by it in connection with such certificates.
The Corporation shall, as soon as practicable after such delivery, or such
agreement and indemnification in the case of a lost certificate, issue and
deliver at such office to such holder of Preferred Stock, a certificate or
certificates for the number of shares of Common Stock to which the holder shall
be entitled as aforesaid and a check payable to the holder in the amount of any
cash amounts payable as the result of a conversion into fractional shares of
Common Stock. Thereupon, the Corporation shall promptly pay in cash or, to the
extent sufficient funds are not then legally available therefor, in Common Stock
(at the Common Stock's fair market value determined by the board of directors of
the Corporation as of the date of such conversion), any declared and unpaid
dividends on the shares of Preferred Stock being converted. Such conversion
shall be deemed to have been made immediately prior to the close of business on
the date of such surrender of the shares of Preferred Stock to be converted, or
in the case of automatic conversion on the date of closing of the offering and
the person or persons entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date.
d. Fractional Shares. In lieu of any fractional shares to which the
holder of Preferred Stock would otherwise be entitled, the Corporation shall pay
cash equal to such fraction multiplied by the then effective Conversion Price.
Whether or not fractional shares are issuable upon such conversion shall be
determined on the basis of the total number of shares of Preferred Stock of each
holder at the time converting into Common Stock and the number of shares of
Common Stock issuable upon such aggregate conversion.
e. Adjustment of Conversion Price. The Conversion Price of each
series of Preferred Stock shall be subject to adjustment from time to time as
follows:
(i) If the Corporation shall issue (or, pursuant to
Subsections 5(e)(i)(b)(3) hereof, shall be deemed to have issued) any Common
Stock other than "Excluded Stock" (as defined below) for a consideration per
share less than the Conversion Price for any series of Preferred Stock in effect
immediately prior to the issuance of such Common Stock (excluding stock
dividends,
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<PAGE> 9
subdivisions, split-ups, combinations, dividends or recapitalizations which are
covered by Subsections 5(e)(iii), (iv), (v) and (vi)), the Conversion Price for
such series of Preferred Stock in effect immediately after each such issuance
shall forthwith (except as provided in this Section 5(e)) be adjusted to a price
equal to the quotient obtained by dividing:
a. an amount equal to the sum of
(x) the total number of shares of Common
Stock outstanding (including any shares of Common Stock issuable upon conversion
of such series of Preferred Stock, or deemed to have been issued pursuant to
subdivision (3) of this clause (i) and to clause (ii) below) immediately prior
to such issuance multiplied by the Conversion Price for such series of Preferred
Stock in effect immediately prior to such issuance, plus
(y) the consideration received by the
Corporation upon such issuance, by
b. the total number of shares of Common Stock
outstanding immediately prior to such issuance of Common Stock (including any
shares of Common Stock issuable upon conversion of such series of Preferred
Stock or deemed to have been issued pursuant to subdivision (3) of this clause
(i) and to clause (ii) below) plus the number of shares of Common Stock actually
issued in the transaction which resulted in the adjustment pursuant to this
Subsection 5(e)(i).
For the purposes of any adjustment of the Conversion Price for any series
of Preferred Stock pursuant to this clause (i), the following provisions shall
be applicable:
(1) In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
after deducting any discounts or commissions paid or incurred by the Corporation
in connection with the issuance and sale thereof.
(2) In the case of the issuance of Common Stock for
a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair value thereof as mutually determined by
the Corporation and the holders of not less than a majority of the outstanding
shares of Preferred Stock, provided that if the Corporation and the holders of a
majority of the outstanding shares of Preferred Stock are unable to reach
agreement, then by independent appraisal by an investment banker hired and paid
by the Corporation, but acceptable to the holders of a majority of the
outstanding shares of Preferred Stock.
(3) In the case of the issuance of (i) options to
purchase or rights to subscribe for Common Stock (other than Excluded Stock),
(ii) securities by their terms convertible into or exchangeable for Common Stock
(other than Excluded Stock), or (iii) options to purchase or rights to subscribe
for such convertible or exchangeable securities:
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<PAGE> 10
(A) the aggregate maximum number of shares of
Common Stock deliverable upon exercise of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the time such
options or rights were issued and for a consideration equal to the consideration
(determined in the manner provided in subdivisions (1) and (2) above), if any,
received by the Corporation upon the issuance of such options or rights plus the
minimum purchase price provided in such options or rights for the Common Stock
covered thereby;
(B) the aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities, or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof, shall be deemed to have been
issued at the time such securities were issued or such options or rights were
issued and for a consideration equal to the consideration received by the
Corporation for any such securities and related options or rights (excluding any
cash received on account of accrued interest or accrued dividends), plus the
additional minimum consideration, if any, to be received by the Corporation upon
the conversion or exchange of such securities or the exercise of any related
options or rights (the consideration in each case to be determined in the manner
provided in subdivisions (1) and (2) above);
(C) on any change in the number of shares of
Common Stock deliverable upon exercise of any such options or rights or
conversion of or exchange for such convertible or exchangeable securities, or on
any change in the minimum purchase price of such options, rights or securities,
other than a change resulting from the antidilution provisions of such options,
rights or securities, the Conversion Price shall forthwith be readjusted to such
Conversion Price as would have obtained had the adjustment made upon (x) the
issuance of such options, rights or securities not exercised, converted or
exchanged prior to such change or (y) the options or rights related to such
securities not converted or exchanged prior to such change, as the case may be,
been made upon the basis of such change; and
(D) on the expiration of any such options or
rights, the termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or exchangeable
securities, the Conversion Price shall forthwith be readjusted to such
Conversion Price as would have obtained had the adjustment made upon the
issuance of such options, rights, convertible or exchangeable securities or
options or rights relate to such convertible or exchangeable securities, as the
case may be, been made upon the basis of the issuance of only the number of
shares of Common Stock actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such convertible or exchangeable
securities or upon the exercise of the options or rights related to such
convertible or exchangeable securities, as the case may be.
(ii) "Excluded Stock" shall mean:
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(A) all shares of Common Stock and Preferred
Stock issued and outstanding on the date this certificate is filed with the
Delaware Secretary of State, and all shares of Common Stock issuable upon
conversion of such Preferred Stock; and
(B) up to 3,000,000 shares of Common Stock or
other securities hereafter issued to officers, directors, consultants,
employees, strategic partners, lessors, lenders or licensors of the Corporation
pursuant to plans and arrangements approved by the board of directors.
All outstanding shares of Excluded Stock
(including shares issuable upon conversion of the Preferred Stock) shall be
deemed to be outstanding for all purposes of the computations of Subsections
5(e)(i) above.
(iii) If the number of shares of Common Stock
outstanding at any time after the date hereof is increased by a stock dividend
payable in shares of Common Stock or by a subdivision or split-up of shares of
Common Stock, then, on the date such payment is made or such change is
effective, the Conversion Price of each series of Preferred Stock shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of any shares of each series of Preferred Stock shall be increased in
proportion to such increase of outstanding shares.
(iv) If the number of shares of Common Stock
outstanding at any time after the date hereof is decreased by a combination of
the outstanding shares of Common Stock, then, on the effective date of such
combination, the Conversion Price of each series of Preferred Stock shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion of any shares of each series of Preferred Stock shall be decreased in
proportion to such decrease in outstanding shares.
(v) In case the Corporation shall declare a cash
dividend upon its Common Stock payable otherwise than out of retained earnings
or shall distribute to holders of its Common Stock shares of its capital stock
(other than Common Stock), stock or other securities of other persons, evidences
of indebtedness issued by the Corporation or other persons, assets (excluding
cash dividends) or options or rights (excluding options to purchase and rights
to subscribe for Common Stock or other securities of the Corporation convertible
into or exchangeable for Common Stock), then, in each such case, the holders of
shares of Preferred Stock shall, concurrent with the distribution to holders of
Common Stock, receive a like distribution based upon the number of shares of
Common Stock into which Preferred Stock is then convertible.
(vi) In case, at any time after the date hereof, of
any capital reorganization, or any reclassification of the stock of the
Corporation (other than as a result of a stock dividend or subdivision, split-up
or combination of shares), or the consolidation or merger of the Corporation
with or into another person (other than a consolidation or merger in which the
Corporation is the continuing entity and which does not result in any change in
the Common Stock), the shares of Preferred Stock shall, after such
reorganization, reclassification, consolidation, merger, sale or other
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<PAGE> 12
disposition, be convertible into the kind and number of shares of stock or other
securities or property of the Corporation or otherwise to which such holder
would have been entitled if immediately prior to such reorganization,
reclassification, consolidation, merger, sale or other disposition such holder
had converted its shares of Preferred Stock into Common Stock. The provisions of
this clause (vi) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, sales or other dispositions.
(vii) All calculations under this Section 5 shall be
made to the nearest cent or to the nearest one hundredth (1/100) of a share,
as the case may be.
f. Minimal Adjustments. No adjustment in the Conversion Price for
any series of Preferred Stock need be made if such adjustment would result in a
change in the Conversion Price of less than $0.01. Any adjustment of less than
$0.01 which is not made shall be carried forward and shall be made at the time
of and together with any subsequent adjustment which, on a cumulative basis,
amounts to an adjustment of $0.01 or more in the Conversion Price.
g. No Impairment. The Corporation will not 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 Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 5 and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights of the holders of each series of Preferred Stock against
impairment. This provision shall not restrict the Corporation's right to amend
its Certificate of Incorporation with the requisite stockholder consent.
h. Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Rate for any series of Preferred
Stock pursuant to this Section 5, the Corporation at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to each holder of such series of Preferred Stock a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Corporation
shall, upon written request at any time of any holder of any series of Preferred
Stock, furnish or cause to be furnished to such holder a like certificate
setting forth (i) all such adjustments and readjustments, (ii) the Conversion
Rate at the time in effect, and (iii) the number of shares of Common Stock and
the amount, if any, of other property which at the time would be received upon
the conversion of such holder's shares of Preferred Stock.
i. Notices of Record Date and Proposed Liquidation Distribution. In
the event of any taking by the Corporation of a record of the holders of any
class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend (other than a cash dividend) or other
distribution, any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property or to receive
any other right, the Corporation shall mail to each holder of Preferred Stock at
least thirty (30) days prior to such record date, a notice
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specifying the date on which any such record is to be taken for the purpose of
such dividend or distribution or right, and the amount and character of such
dividend, distribution or right. In the event of a liquidation distribution
pursuant to Section 2 hereof, the Corporation shall mail to each holder of
Preferred Stock at least thirty (30) days prior to the date of such distribution
a notice (i) certifying as to (x) the anticipated aggregate proceeds available
for distribution to holders of Preferred Stock and Common Stock, (y) the amount
expected to be distributed pursuant to Section 2 in respect of each share of
each outstanding series of Preferred Stock and each share of Common Stock and
(z) the amount expected to be distributed pursuant to Section 2 in respect of
each share of each outstanding series of Preferred Stock if the holder of each
such share of Preferred Stock converted such share of Preferred Stock into
Common Stock immediately prior to the liquidation distribution and (ii) stating
that in connection with such liquidation distribution the holders of shares of
each series of Preferred Stock may prior to such liquidation distribution
convert their shares of such series of Preferred Stock into Common Stock at the
applicable Conversion Rate for such series.
j. Notices. Any notice required by the provisions of this Section 5
to be given to the holder of shares of the Preferred Stock shall be deemed given
if deposited in the United States mail, postage prepaid, and addressed to each
holder of record at such holder's address appearing on the Corporation's books.
k. Payment of Taxes. The Corporation will pay all taxes (other than
taxes based upon income) and other governmental charges that may be imposed with
respect to the issue or delivery of shares of Common Stock upon conversion of
shares of Preferred Stock, excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which shares of Preferred Stock so
converted were registered.
6. Covenants.
a. In addition to any other rights provided by law, so long as
700,000 shares of Preferred Stock or any shares of Series C Preferred Stock or
Series D Preferred Stock shall be outstanding, this Corporation shall not,
without first obtaining the affirmative vote or written consent of the holders
of not less than a majority of the outstanding shares of Preferred Stock (voting
or consenting as a separate class);
(i) Certificate and Bylaws. Amend or repeal any
provision of, or add any provision to, this Corporation's Certificate of
Incorporation or Bylaws if such action would adversely alter or change the
preferences, rights, privileges or powers of, or the restrictions provided for
the benefit of, such shares of Preferred Stock;
(ii) Section 305. Do any act or thing which would
result in taxation of the holders of Preferred Stock under Section 305 of the
Internal Revenue Code of 1986, as amended (or any successor provision of such
Code as such provision may be amended);
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(iii) Authorized Shares. Increase or decrease the
authorized number of shares of Common or Preferred Stock;
(iv) Senior Securities. Any authorization or any
designation, whether by reclassification or otherwise, of any new class or
series of stock or any other securities convertible into equity securities of
the Corporation ranking on a parity with or senior to the Series A, Series B,
Series C or Series D Preferred Stock in right of redemption, liquidation
preference, voting or dividends or any increase in the authorized or designated
number of any such new class or series;
(v) Distribution. Any redemption, repurchase, payment
of dividends or other distributions with respect to Common Stock (except for
acquisitions of Common Stock by the Corporation pursuant to agreements which
permit the Corporation to repurchase such shares upon termination of services to
the Corporation or in exercise of the Corporation's right of first refusal upon
a proposed transfer);
(vi) Reorganization or Merger. Any agreement by the
Corporation or its stockholders regarding reorganization or merger as
described in Section 2(c);
(vii) Dividend. Any action that results in the
payment or declaration of a dividend on any shares of Common Stock or
Preferred Stock;
(viii) Liquidation. Any voluntary dissolution or
liquidation of the Corporation; or
(ix) Directors. Any increase or decrease in the
authorized number of members of the Corporation's board of directors.
b. For so long as Series C Preferred Stock is outstanding, this
Corporation shall not, without first obtaining the affirmative vote or written
consent of the holders of not less than a majority of the outstanding shares of
Series C Preferred Stock (voting or consenting as a separate class):
(i) Adverse Effect. Amend, alter or restate the
Corporation's Certificate of Incorporation in a manner that would adversely
effect the rights preferences or privileges of the Series C Preferred Stock; or
(ii) Additional Series. Authorize, create or issue
any shares or series of stock having a preference or priority superior to or on
a parity with the Series C Preferred Stock.
c. For so long as Series D Preferred Stock is outstanding, this
Corporation shall not, without first obtaining the affirmative vote or written
consent of the holders of not less than two thirds (2/3) of the outstanding
shares of Series D Preferred Stock (voting or consenting as a separate class):
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(i) Adverse Effect. Amend, alter or restate the
Corporation's Certificate of Incorporation in a manner that would adversely
effect the rights, preferences or privileges of the Series D Preferred Stock; or
(ii) Additional Series. Authorize, create or issue
any shares or series of stock having a preference or priority superior to or on
a parity with the Series D Preferred Stock.
7. No Reissuance of Preferred Stock. No share or shares of Preferred Stock
acquired by the Corporation by reason of purchase, conversion or otherwise shall
be reissued.
FIVE. The Corporation is to have perpetual existence.
SIX. In furtherance and not in limitation of the powers conferred by
statute and except as otherwise provided herein or required by law, the board of
directors of the Corporation is expressly authorized to make, alter, amend or
repeal the Bylaws of the Corporation.
SEVEN. The number of directors which constitute the whole board of
directors of the Corporation shall be as specified in the Bylaws of the
Corporation.
EIGHT. Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provisions contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
board of directors or in the Bylaws of the Corporation.
NINE. To the fullest extent permitted by the Delaware General Corporation
Law, a director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director. Neither any amendment nor repeal of this Article NINE, nor
the adoption of any provision of this Certificate of Incorporation inconsistent
with this Article NINE, shall eliminate or reduce the effect of this Article
NINE in respect of any matter occurring, or any cause of action, suit or claim
that, but for this Article NINE, would accrue or arise, prior to such amendment,
repeal or adoption of an inconsistent provision.
TEN. Advance notice of new business and stockholder nominations for
the election of directors shall be given in the manner and to the extent
provided in the Bylaws of the Corporation.
ELEVEN. The Corporation reserves the right to amend, alter, change or
repeal any provisions contained in this Certificate, in the manner now or
hereafter prescribed herein and by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
TWELVE. (a) The Corporation shall indemnify each of the Corporation's
directors and officers in each and every situation where, under Section 145 of
the General Corporation Law of the State of Delaware, as amended from time to
time ("Section 145"), the Corporation is permitted or empowered to make such
indemnification. The Corporation may, in the sole discretion of the board of
directors of the Corporation, indemnify any other person who may be indemnified
pursuant to
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Section 145 to the extent the board of directors deems advisable, as permitted
by Section 145. The Corporation shall promptly make or cause to be made any
determination required to be made pursuant to Section 145.
(b) No person shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided, however, that the foregoing shall not eliminate or limit the liability
of a director (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of the State of Delaware or (iv) for
any transaction from which the director derived an improper personal benefit. If
the General Corporation Law of the State of Delaware is subsequently amended to
further eliminate or limit the liability of a director, then a director of the
Corporation, in addition to the circumstances in which a director is not
personally liable as set forth in the preceding sentence, shall not be liable to
the fullest extent permitted by the amended General Corporation Law of the State
of Delaware. For purposes of this Article, "fiduciary duty as a director" shall
include any fiduciary duty arising out of serving at the Corporation's request
as a director of another corporation, partnership, joint venture or other
enterprise, and "personal liability to the Corporation or its stockholders"
shall include any liability to such other corporation, partnership, joint
venture, trust or other enterprise, and any liability to the Corporation in its
capacity as a security holder, joint venturer, partner, beneficiary, creditor or
investor of or in any such other corporation, partnership, joint venture, trust
or other enterprise.
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IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by Mark Pine, its President, and attested by Mario Rosati its Secretary,
this 24th day of August, 1999.
ONDISPLAY, INC.
By: /s/ MARK PINE
----------------------------------
Mark Pine, President
ATTEST:
/s/ MARIO ROSATI
--------------------------------------
Mario Rosati, Secretary
SIGNATURE PAGE
RESTATED CERTIFICATE OF INCORPORATION
<PAGE> 1
EXHIBIT 3.1(b)
RESTATED CERTIFICATE OF INCORPORATION
OF
ONDISPLAY, INC.
OnDisplay, Inc., a corporation organized and existing under the laws of
the State of Delaware, hereby certifies as follows:
A. The name of the corporation is OnDisplay, Inc. The corporation was
originally incorporated under the same name, and the original Certificate of
Incorporation was filed with the Secretary of State of the State of Delaware on
August 14, 1996.
B. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, this Restated Certificate of Incorporation restates and
amends the provisions of the Certificate of Incorporation of the corporation.
C. The text of the Certificate of Incorporation is hereby amended and
restated in its entirety to read as follows:
ARTICLE I
The name of this corporation is OnDisplay, Inc.
ARTICLE II
The address of the corporation's registered office in the State of
Delaware is 1209 Orange Street, City of Wilmington, County of New Castle,
Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE III
The purpose of the corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
Delaware.
ARTICLE IV
The corporation is authorized to issue two classes of shares of stock to
be designated, respectively, Common Stock, $0.001 par value, and Preferred
Stock, $0.001 par value. The total number of shares that the corporation is
authorized to issue is 110,000,000 shares. The number of
<PAGE> 2
shares of Common Stock authorized is 100,000,000. The number of shares of
Preferred authorized is 10,000,000.
The Preferred Stock may be issued from time to time in one or more series
pursuant to a resolution or resolutions providing for such issue duly adopted by
the board of directors (authority to do so being hereby expressly vested in the
board). The board of directors is further authorized to determine or alter the
rights, preferences, privileges and restrictions granted to or imposed upon any
wholly unissued series of Preferred Stock and to fix the number of shares of any
series of Preferred Stock and the designation of any such series of Preferred
Stock. The board of directors, within the limits and restrictions stated in any
resolution or resolutions of the board of directors originally fixing the number
of shares constituting any series, may increase or decrease (but not below the
number of shares in any such series then outstanding) the number of shares of
any series subsequent to the issue of shares of that series.
The authority of the board of directors with respect to each such class or
series shall include, without limitation of the foregoing, the right to
determine and fix:
(a) the distinctive designation of such class or series and the
number of shares to constitute such class or series;
(b) the rate at which dividends on the shares of such class or
series shall be declared and paid, or set aside for payment, whether dividends
at the rate so determined shall be cumulative or accruing, and whether the
shares of such class or series shall be entitled to any participating or other
dividends in addition to dividends at the rate so determined, and if so, on what
terms;
(c) the right or obligation, if any, of the corporation to redeem
shares of the particular class or series of Preferred Stock and, if redeemable,
the price, terms and manner of such redemption;
(d) the special and relative rights and preferences, if any, and the
amount or amounts per share, which the shares of such class or series of
Preferred Stock shall be entitled to receive upon any voluntary or involuntary
liquidation, dissolution or winding up of the corporation;
(e) the terms and conditions, if any, upon which shares of such
class or series shall be convertible into, or exchangeable for, shares of
capital stock of any other class or series, including the price or prices or the
rate or rates of conversion or exchange and the terms of adjustment, if any;
(f) the obligation, if any, of the corporation to retire, redeem or
purchase shares of such class or series pursuant to a sinking fund or fund of a
similar nature or otherwise, and the terms and conditions of such obligation;
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<PAGE> 3
(g) voting rights, if any, on the issuance of additional shares of
such class or series or any shares of any other class or series of Preferred
Stock;
(h) limitations, if any, on the issuance of additional shares of
such class or series or any shares of any other class or series of Preferred
Stock; and
(i) such other preferences, powers, qualifications, special or
relative rights and privileges thereof as the board of directors of the
corporation, acting in accordance with this Restated Certificate of
Incorporation, may deem advisable and are not inconsistent with law and the
provisions of this Restated Certificate of Incorporation.
ARTICLE V
The corporation reserves the right to amend, alter, change, or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon the stockholders
herein are granted subject to this right.
ARTICLE VI
The corporation is to have perpetual existence.
ARTICLE VII
1. Limitation of Liability. To the fullest extent permitted by the General
Corporation Law of the State of Delaware as the same exists or as may hereafter
be amended, a director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director.
2. Indemnification. The corporation may indemnify to the fullest extent
permitted by law any person made or threatened to be made a party to an action
or proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that such person or his or her testator or intestate is or
was a director, officer or employee of the corporation, or any predecessor of
the corporation, or serves or served at any other enterprise as a director,
officer or employee at the request of the corporation or any predecessor to the
corporation.
3. Amendments. Neither any amendment nor repeal of this Article VII, nor
the adoption of any provision of the corporation's Certificate of Incorporation
inconsistent with this Article VII, shall eliminate or reduce the effect of this
Article VII, in respect of any matter occurring, or any action or proceeding
accruing or arising or that, but for this Article VII, would accrue or arise,
prior to such amendment, repeal, or adoption of an inconsistent provision.
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<PAGE> 4
ARTICLE VIII
In the event any shares of Preferred Stock shall be redeemed or converted
pursuant to the terms hereof, the shares so converted or redeemed shall not
revert to the status of authorized but unissued shares, but instead shall be
canceled and shall not be re-issuable by the corporation.
ARTICLE IX
Holders of stock of any class or series of the corporation shall not be
entitled to cumulate their votes for the election of directors or any other
matter submitted to a vote of the stockholders, unless such cumulative voting is
required pursuant to Sections 2115 or 301.5 of the California General
Corporation Law, in which event each such holder shall be entitled to as many
votes as shall equal the number of votes which (except for this provision as to
cumulative voting) such holder would be entitled to cast for the election of
directors with respect to his shares of stock multiplied by the number of
directors to be elected by him, and the holder may cast all of such votes for a
single director or may distribute them among the number of directors to be voted
for, or for any two or more of them as such holder may see fit, so long as the
name of the candidate for director shall have been placed in nomination prior to
the voting and the stockholder, or any other holder of the same class or series
of stock, has given notice at the meeting prior to the voting of the intention
to cumulate votes.
1. Number of Directors. The number of directors which constitutes the
whole Board of Directors of the corporation shall be designated in the Amended
and Restated Bylaws of the corporation. The directors shall be divided into
three classes with the term of office of the first class (Class I) to expire at
the annual meeting of stockholders held in 2000; the term of office of the
second class (Class II) to expire at the annual meeting of stockholders held in
2001; the term of office of the third class (Class III) to expire at the annual
meeting of stockholders held in 2002; and thereafter for each such term to
expire at each third succeeding annual meeting of stockholders after such
election.
2. Election of Directors. Elections of directors need not be by written
ballot unless the Amended and Restated Bylaws of the corporation shall so
provide.
ARTICLE X
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend or repeal
the Amended and Restated Bylaws of the corporation.
ARTICLE XI
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No action shall be taken by the stockholders of the corporation except at
an annual or special meeting of the stockholders called in accordance with the
Amended and Restated Bylaws and no action shall be taken by the stockholders by
written consent. The affirmative vote of sixty-six and two-thirds percent (66
2/3%) of the then outstanding voting securities of the corporation, voting
together as a single class, shall be required for the amendment, repeal or
modification of the provisions of Article IX, Article X or Article XII of this
Restated Certificate of Incorporation or Sections 2.3 (Special Meeting), 2.4
(Notice of Stockholders' Meeting), 2.5 (Advanced Notice of Stockholder Nominees
and Stockholder Business), 2.10 (Voting), or 2.12 (Stockholder Action by Written
Consent Without a Meeting), or 3.2 (Number of Directors) of the corporation's
Amended and Restated Bylaws.
ARTICLE XII
Meetings of stockholders may be held within or without the State of
Delaware, as the Amended and Restated Bylaws may provide. The books of the
corporation may be kept (subject to any provision contained in the statutes)
outside of the State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the Amended and Restated
Bylaws of the corporation.
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<PAGE> 6
IN WITNESS WHEREOF, OnDisplay, Inc. has caused this certificate to be
signed by Chris Larsen, its Chief Executive Officer, this ___ day of
September, 1999.
-------------------------------------
Mark Pine, President
<PAGE> 1
EXHIBIT 4.1(a)
BYLAWS
OF
ONDISPLAY, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ARTICLE I CORPORATE OFFICES....................................................1
1.1 REGISTERED OFFICE..................................................1
1.2 OTHER OFFICES......................................................1
ARTICLE II MEETINGS OF STOCKHOLDERS............................................1
2.1 PLACE OF MEETINGS..................................................1
2.2 ANNUAL MEETING.....................................................1
2.3 SPECIAL MEETING....................................................2
2.4 NOTICE OF STOCKHOLDERS' MEETINGS...................................2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.......................2
2.6 QUORUM.............................................................2
2.7 ADJOURNED MEETING NOTICE...........................................2
2.8 VOTING.............................................................3
2.9 WAIVER OF NOTICE...................................................3
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING............3
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS........4
2.12 PROXIES............................................................4
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE..............................5
ARTICLE III DIRECTORS..........................................................5
3.1 POWERS.............................................................5
3.2 NUMBER OF DIRECTORS................................................5
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS............6
3.4 RESIGNATION AND VACANCIES..........................................6
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE...........................7
3.6 FIRST MEETINGS.....................................................7
3.7 REGULAR MEETINGS...................................................7
3.8 SPECIAL MEETINGS; NOTICE...........................................7
3.9 QUORUM.............................................................8
3.10 WAIVER OF NOTICE...................................................8
3.11 ADJOURNED MEETING; NOTICE..........................................8
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING..................8
3.13 FEES AND COMPENSATION OF DIRECTORS.................................8
3.14 APPROVAL OF LOANS TO OFFICERS......................................9
3.15 REMOVAL OF DIRECTORS...............................................9
ARTICLE IV COMMITTEES..........................................................9
4.1 COMMITTEES OF DIRECTORS............................................9
4.2 COMMITTEE MINUTES.................................................10
</TABLE>
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<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
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<S> <C>
4.3 MEETINGS AND ACTION OF COMMITTEES.................................10
ARTICLE V OFFICERS............................................................10
5.1 OFFICERS..........................................................10
5.2 ELECTION OF OFFICERS..............................................10
5.3 SUBORDINATE OFFICERS..............................................11
5.4 REMOVAL AND RESIGNATION OF OFFICERS...............................11
5.5 VACANCIES IN OFFICES..............................................11
5.6 CHAIRMAN OF THE BOARD.............................................11
5.7 PRESIDENT.........................................................11
5.8 VICE PRESIDENT....................................................12
5.9 SECRETARY.........................................................12
5.10 TREASURER.........................................................12
5.11 ASSISTANT SECRETARY...............................................13
5.12 ASSISTANT TREASURER...............................................13
5.13 AUTHORITY AND DUTIES OF OFFICERS..................................13
ARTICLE VI INDEMNITY..........................................................13
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS.........................13
6.2 INDEMNIFICATION OF OTHERS.........................................13
6.3 INSURANCE.........................................................14
ARTICLE VII RECORDS AND REPORTS...............................................14
7.1 MAINTENANCE AND INSPECTION OF RECORDS.............................14
7.2 INSPECTION BY DIRECTORS...........................................15
7.3 ANNUAL STATEMENT TO STOCKHOLDERS..................................15
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS....................15
ARTICLE VIII GENERAL MATTERS..................................................15
8.1 CHECKS............................................................15
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS..................16
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES............................16
8.4 SPECIAL DESIGNATION ON CERTIFICATES...............................16
8.5 LOST CERTIFICATES.................................................17
8.6 CONSTRUCTION; DEFINITIONS.........................................17
8.7 DIVIDENDS.........................................................17
8.8 FISCAL YEAR.......................................................17
8.9 SEAL..............................................................18
8.10 TRANSFER OF STOCK.................................................18
8.11 STOCK TRANSFER AGREEMENTS.........................................18
</TABLE>
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<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
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<S> <C>
8.12 REGISTERED STOCKHOLDERS...........................................18
ARTICLE IX AMENDMENTS.........................................................18
ARTICLE X DISSOLUTION.........................................................18
ARTICLE XI CUSTODIAN..........................................................19
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES.......................19
11.2 DUTIES OF CUSTODIAN...............................................20
</TABLE>
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<PAGE> 5
BYLAWS
OF
ONDISPLAY, INC.
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the registered
agent of the corporation at such location is The Corporation Trust Company.
1.2 OTHER OFFICES
The board of directors may at any time establish other offices at any
place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place, within or outside the
State of Delaware, designated by the board of directors. In the absence of any
such designation, stockholders' meetings shall be held at the registered office
of the corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date and
at a time designated by the board of directors. In the absence of such
designation, the annual meeting of stockholders shall be held on the second
Tuesday of May in each year at 10:00 a.m. However, if such day falls on a legal
holiday, then the meeting shall be held at the same time and place on the next
succeeding full business day. At the meeting, directors shall be elected and any
other proper business may be transacted.
<PAGE> 6
2.3 SPECIAL MEETING
A SPECIAL MEETING OF THE STOCKHOLDERS MAY BE CALLED, AT ANY TIME FOR
ANY PURPOSE OR PURPOSES, BY THE BOARD OF DIRECTORS OR BY SUCH PERSON
OR PERSONS AS MAY BE AUTHORIZED BY THE CERTIFICATE OF INCORPORATION
OR THE BYLAWS.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings with stockholders shall be in writing and shall be
sent or otherwise given in accordance with Section 2.5 of these bylaws not less
than ten (10) nor more than sixty (60) days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notice shall specify the
place, date, and hour of the meeting, and, in the case of a special meeting, the
purpose or purposes for which the meeting is called.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
2.6 QUORUM
The holders of a majority of the stock issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the certificate of incorporation.
If, however, such quorum is not present or represented at any meeting of the
stockholders, then the stockholders entitled to vote thereat, present in person
or represented by proxy, shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum is
present or represented. At such adjourned meeting at which a quorum is present
or represented, any business may be transacted that might have been transacted
at the meeting as originally noticed.
2.7 ADJOURNED MEETING NOTICE
When a meeting is adjourned to another time or place, unless these bylaws
otherwise require, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
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2.8 VOTING
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners
of stock and to voting trusts and other voting agreements).
Except as provided in the last paragraph of this Section 2.8, or as may be
otherwise provided in the certificate of incorporation, each stockholder shall
be entitled to one vote for each share of capital stock held by such
stockholder.
At a stockholders' meeting at which directors are to be elected, or at
elections held under special circumstances, a stockholder shall be entitled to
cumulate votes (i.e., cast for any candidate a number of votes greater than the
number of votes which such stockholder normally is entitled to cast). Each
holder of stock, or of any class or classes or of a series or series thereof,
who elects to cumulate votes shall be entitled to as many votes as equals the
number of votes which (absent this provision as to cumulative voting) he would
be entitled to cast for the election of directors with respect to his shares of
stock multiplied by the number of directors to be elected by him, and he may
cast all of such votes for a single director or may distribute them among the
number to be voted for, or for any two or more of them, as he may see fit.
2.9 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these bylaws.
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise provided in the certificate of incorporation, any action
required by this chapter to be taken at any annual or special meeting of
stockholders of a corporation, or any action that may be taken at any annual or
special meeting of such stockholders, may be taken without a meeting, without
prior notice, and without a vote if a consent in writing, setting forth the
action so taken, is signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted.
Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action
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which is consented to is such as would have required the filing of a certificate
under any section of the General Corporation Law of Delaware if such action had
been voted on by stockholders at a meeting thereof, then the certificate filed
under such section shall state, in lieu of any statement required by such
section concerning any vote of stockholders, that written notice and written
consent have been given as provided in Section 228 of the General Corporation
Law of Delaware.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.
If the board of directors does not so fix a record date:
(i) The record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held.
(ii) The record date for determining stockholders
entitled to express consent to corporate action in writing without a meeting,
when no prior action by the board of directors is necessary, shall be the day on
which the first written consent is expressed.
(iii) The record date for determining stockholders for
any other purpose shall be at the close of business on the day on which the
board of directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
2.12 PROXIES
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by a written proxy, signed by
the stockholder and filed with the secretary of the corporation, but no such
proxy shall be voted or acted upon after three (3) years from its date, unless
the proxy provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder or the
stockholder's attorney-in-fact. The revocability of a proxy that states on its
face
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<PAGE> 9
that it is irrevocable shall be governed by the provisions of Section 212(c) of
the General Corporation Law of Delaware.
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware and
any limitations in the certificate of incorporation or these bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
3.2 NUMBER OF DIRECTORS
The number of directors of the corporation shall be not less than three
(3) nor more than five (5). The exact number of directors shall be five (5)
until changed, within the limits specified above, by a bylaw amending this
Section 3.2, duly adopted by the board of directors or by the stockholders.* The
indefinite number of directors may be changed, or a definite number may be fixed
without provision for an indefinite number, by a duly adopted amendment to the
certificate of incorporation or by an amendment to this bylaw duly adopted by
the vote or written consent of the holders of amajority of the stock issued and
outstanding and entitled to vote or by resolution of the board of directors.
No reduction of the authorized number of directors shall have the effect
of removing any director before that director's term of office expires.
* Amended 6/17/96 and 2/12/98
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3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to fill
a vacancy, shall hold office until his successor is elected and qualified or
until his earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the
corporation. When one or more directors so resigns and the resignation is
effective at a future date, a majority of the directors then in office,
including those who have so resigned, shall have power to fill such vacancy or
vacancies, the vote thereon to take effect when such resignation or resignations
shall become effective, and each director so chosen shall hold office as
provided in this section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
(i) Vacancies and newly created directorships
resulting from any increase in the authorized number of directors elected by all
of the stockholders having the right to vote as a single class may be filled by
a majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of
stock or series thereof are entitled to elect one or more directors by the
provisions of the certificate of incorporation, vacancies and newly created
directorships of such class or classes or series may be filled by a majority of
the directors elected by such class or classes or series thereof then in office,
or by a sole remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole board
(as constituted immediately prior to any such increase), then the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten (10) percent of the total number of the shares at the time outstanding
having the
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<PAGE> 11
right to vote for such directors, summarily order an election to be held to fill
any such vacancies or newly created directorships, or to replace the directors
chosen by the directors then in office as aforesaid, which election shall be
governed by the provisions of Section 211 of the General Corporation Law of
Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The board of directors of the corporation may hold meetings, both regular
and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these
bylaws, members of the board of directors, or any committee designated by the
board of directors, may participate in a meeting of the board of directors, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 FIRST MEETINGS
The first meeting of each newly elected board of directors shall be held
at such time and place as shall be fixed by the vote of the stockholders at the
annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected board of directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
3.7 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice at
such time and at such place as shall from time to time be determined by the
board.
3.8 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two (2) directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
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communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.9 QUORUM
At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the board of
directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
3.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the certificate of
incorporation or these bylaws.
3.11 ADJOURNED MEETING; NOTICE
If a quorum is not present at any meeting of the board of directors, then
the directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise restricted by the certificate of incorporation or these
bylaws, any action required or permitted to be taken at any meeting of the board
of directors, or of any committee thereof, may be taken without a meeting if all
members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee.
3.13 FEES AND COMPENSATION OF DIRECTORS
Unless otherwise restricted by the certificate of incorporation or these
bylaws, the board of directors shall have the authority to fix the compensation
of directors.
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3.14 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.15 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, and as provided for in the
certificate of incorporation or these bylaws, any director or the entire board
of directors may be removed, with or without cause, by the holders of a majority
of the shares then entitled to vote at an election of directors.
No reduction of the authorized number of directors shall have the effect
of removing any director prior to the expiration of such director's term of
office.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution passed by a majority of the whole
board, designate one or more committees, with each committee to consist of one
or more of the directors of the corporation. The board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the board of
directors to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
board of directors or in the bylaws of the corporation, shall have and may
exercise all the powers and authority of the board of directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers that may require it; but no
such committee shall have the power or authority to (i) amend the certificate of
incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the board of directors as provided in Section 151(a) of the General
Corporation Law of Delaware, fix any of the preferences or rights of such shares
relating to dividends, redemption, dissolution, any distribution of assets of
the corporation or the conversion into, or the exchange of such shares for,
shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation), (ii) adopt an agreement of
merger or consolidation under Sections 251 or 252 of the General Corporation Law
of Delaware,
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(iii) recommend to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, (iv) recommend to
the stockholders a dissolution of the corporation or a revocation of a
dissolution, or (v) amend the bylaws of the corporation; and, unless the board
resolution establishing the committee, the bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws, Section
3.5 (place of meetings and meetings by telephone), Section 3.7 (regular
meetings), Section 3.8 (special meetings and notice), Section 3.9 (quorum),
Section 3.10 (waiver of notice), Section 3.11 (adjournment and notice of
adjournment), and Section 3.12 (action without a meeting), with such changes in
the context of those bylaws as are necessary to substitute the committee and its
members for the board of directors and its members; provided, however, that the
time of regular meetings of committees may also be called by resolution of the
board of directors and that notice of special meetings of committees shall also
be given to all alternate members, who shall have the right to attend all
meetings of the committee. The board of directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, one or more vice
presidents, a secretary, and a treasurer. The corporation may also have, at the
discretion of the board of directors, a chairman of the board, one or more
assistant vice presidents, assistant secretaries, assistant treasurers, and any
such other officers as may be appointed in accordance with the provisions of
Section 5.3 of these bylaws. Any number of offices may be held by the same
person.
5.2 ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Sections 5.3 or 5.5 of these bylaws, shall
be chosen by the board of directors, subject to the rights, if any, of an
officer under any contract of employment.
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5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or empower the president to appoint,
such other officers and agents as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these bylaws or as the board of directors may
from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
Any vacancy occurring in any office of the corporation shall be filled by
the board of directors.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the board
of directors to the chairman of the board, if there be such an officer, the
president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction, and control of the business and the officers of the corporation. He
shall preside at all meetings of the shareholders and, in the absence or
nonexistence of a chairman of the board, at all meetings of the board of
directors. He shall have the general powers and duties of management usually
vested in the office of president of a corporation and shall have such other
powers and duties as may be prescribed by the board of directors or these
bylaws.
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5.8 VICE PRESIDENT
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform all
the duties of the president and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the president. The vice presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the board of directors, these bylaws,
the president or the chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and shareholders. The minutes shall show the time and place of
each meeting, whether regular or special (and, if special, how authorized and
the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at shareholders'
meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the board of directors required to be given by law or by
these bylaws. He shall keep the seal of the corporation, if one be adopted, in
safe custody and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or by these bylaws.
5.10 TREASURER
The treasurer shall keep and maintain, or cause to be kept and maintained,
adequate and correct books and records of accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained earnings,
and shares. The books of account shall at all reasonable times be open to
inspection by any director.
The treasurer shall deposit all money and other valuables in the name and
to the credit of the corporation with such depositaries as may be designated by
the board of directors. He shall disburse the funds of the corporation as may be
ordered by the board of directors, shall render to the president and directors,
whenever they request it, an account of all of his transactions as treasurer and
of the financial condition of the corporation, and shall have such other powers
and perform such other duties as may be prescribed by the board of directors or
these bylaws.
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5.11 ASSISTANT SECRETARY
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.
5.12 ASSISTANT TREASURER
The assistant treasurer, or, if there is more than one, the assistant
treasurers, in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the treasurer or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the treasurer
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.
5.13 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from time
to time by the board of directors or the stockholders.
ARTICLE VI
INDEMNITY
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner permitted
by the General Corporation Law of Delaware, indemnify each of its directors and
officers against expenses (including attorneys' fees), judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding, arising by reason of the fact that such person is or was an
agent of the corporation. For purposes of this Section 6.1, a "director" or
"officer" of the corporation includes any person (i) who is or was a director or
officer of the corporation, (ii) who is or was serving at the request of the
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was a director or officer of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the extent and in the manner permitted
by the General Corporation Law of Delaware, to indemnify each of its employees
and agents (other than
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directors and officers) against expenses (including attorneys' fees), judgments,
fines, settlements, and other amounts actually and reasonably incurred in
connection with any proceeding, arising by reason of the fact that such person
is or was an agent of the corporation. For purposes of this Section 6.2, an
"employee" or "agent" of the corporation (other than a director or officer)
includes any person (i) who is or was an employee or agent of the corporation,
(ii) who is or was serving at the request of the corporation as an employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, or (iii) who was an employee or agent of a corporation which was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation.
6.3 INSURANCE
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of the General Corporation Law of Delaware.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at such
place or places as designated by the board of directors, keep a record of its
shareholders listing their names and addresses and the number and class of
shares held by each shareholder, a copy of these bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business
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hours, for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the
treasurer, the secretary or assistant secretary of this corporation, or any
other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
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8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of a corporation shall be represented by certificates, provided
that the board of directors of the corporation may provide by resolution or
resolutions that some or all of any or all classes or series of its stock shall
be uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the board of directors, or the president or vice-president, and by the treasurer
or an assistant treasurer, or the secretary or an assistant secretary of such
corporation representing the number of shares registered in certificate form.
Any or all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate has ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock
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a statement that the corporation will furnish without charge to each stockholder
who so requests the powers, the designations, the preferences, and the relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
8.7 DIVIDENDS
The directors of the corporation, subject to any restrictions contained in
the certificate of incorporation, may declare and pay dividends upon the shares
of its capital stock pursuant to the General Corporation Law of Delaware.
Dividends may be paid in cash, in property, or in shares of the corporation's
capital stock.
The directors of the corporation may set apart out of any of the funds of
the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
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8.9 SEAL
The corporation may adopt a corporate seal, which shall be adopted and
which may be altered by the board of directors, and may use the same by causing
it or a facsimile thereof to be impressed or affixed or in any other manner
reproduced.
8.10 TRANSFER OF STOCK
Upon surrender to the corporation or the transfer agent of the corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignation or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS
The corporation shall have power to enter into and perform any agreement
with any number of shareholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
8.12 REGISTERED STOCKHOLDERS
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
The original or other bylaws of the corporation may be adopted, amended or
repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its certificate of incorporation, confer the power to adopt,
amend or repeal bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal bylaws.
ARTICLE X
DISSOLUTION
If it should be deemed advisable in the judgment of the board of directors
of the corporation that the corporation should be dissolved, the board, after
the adoption of a resolution to that effect by
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a majority of the whole board at any meeting called for that purpose, shall
cause notice to be mailed to each stockholder entitled to vote thereon of the
adoption of the resolution and of a meeting of stockholders to take action upon
the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation entitled
to vote thereon votes for the proposed dissolution, then a certificate stating
that the dissolution has been authorized in accordance with the provisions of
Section 275 of the General Corporation Law of Delaware and setting forth the
names and residences of the directors and officers shall be executed,
acknowledged, and filed and shall become effective in accordance with Section
103 of the General Corporation Law of Delaware. Upon such certificate's becoming
effective in accordance with Section 103 of the General Corporation Law of
Delaware, the corporation shall be dissolved.
Whenever all the stockholders entitled to vote on a dissolution consent in
writing, either in person or by duly authorized attorney, to a dissolution, no
meeting of directors or stockholders shall be necessary. The consent shall be
filed and shall become effective in accordance with Section 103 of the General
Corporation Law of Delaware. Upon such consent's becoming effective in
accordance with Section 103 of the General Corporation Law of Delaware, the
corporation shall be dissolved. If the consent is signed by an attorney, then
the original power of attorney or a photocopy thereof shall be attached to and
filed with the consent. The consent filed with the Secretary of State shall have
attached to it the affidavit of the secretary or some other officer of the
corporation stating that the consent has been signed by or on behalf of all the
stockholders entitled to vote on a dissolution; in addition, there shall be
attached to the consent a certification by the secretary or some other officer
of the corporation setting forth the names and residences of the directors and
officers of the corporation.
ARTICLE XI
CUSTODIAN
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
The Court of Chancery, upon application of any stockholder, may appoint
one or more persons to be custodians and, if the corporation is insolvent, to be
receivers, of and for the corporation when:
(i) at any meeting held for the election of directors
the stockholders are so divided that they have failed to elect successors to
directors whose terms have expired or would have expired upon qualification of
their successors; or
(ii) the business of the corporation is suffering or is
threatened with irreparable injury because the directors are so divided
respecting the management of the affairs of the corporation that the required
vote for action by the board of directors cannot be obtained and the
stockholders are unable to terminate this division; or
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(iii) the corporation has abandoned its business and has
failed within a reasonable time to take steps to dissolve, liquidate or
distribute its assets.
11.2 DUTIES OF CUSTODIAN
The custodian shall have all the powers and title of a receiver appointed
under Section 291 of the General Corporation Law of Delaware, but the authority
of the custodian shall be to continue the business of the corporation and not to
liquidate its affairs and distribute its assets, except when the Court of
Chancery otherwise orders and except in cases arising under Sections 226(a)(3)
or 352(a)(2) of the General Corporation Law of Delaware.
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CERTIFICATE OF ADOPTION OF BYLAWS
OF
ONDISPLAY, INC.
Adoption by Incorporator
The undersigned person appointed in the Certificate of Incorporation to
act as the Incorporator of OnDisplay, Inc. hereby adopts the foregoing bylaws,
comprising twenty-one (21) pages, as the Bylaws of the corporation.
Executed this ____ day of _________ 19__.
--------------------------------------
Adam D. Levy, Incorporator
Certificate by Secretary of Adoption by Incorporator
The undersigned hereby certifies that he is the duly elected, qualified,
and acting Secretary of OnDisplay, Inc. and that the foregoing Bylaws,
comprising twenty-one (21) pages, were adopted as the Bylaws of the corporation
on _____________, 19__, by the person appointed in the Certificate of
Incorporation to act as the Incorporator of the corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and affixed
the corporate seal this ____ day of __________ 19__.
--------------------------------------
Mario M. Rosati, Secretary
<PAGE> 1
EXHIBIT 4.1 (b)
BYLAWS
OF
ONDISPLAY, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I CORPORATE OFFICES....................................................1
1.1 REGISTERED OFFICE..................................................1
1.2 OTHER OFFICES......................................................1
ARTICLE II MEETINGS OF STOCKHOLDERS............................................1
2.1 PLACE OF MEETINGS..................................................1
2.2 ANNUAL MEETING.....................................................1
2.3 SPECIAL MEETING....................................................2
2.4 NOTICE OF STOCKHOLDERS' MEETINGS...................................2
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS....2
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.......................3
2.7 QUORUM.............................................................4
2.8 ADJOURNED MEETING; NOTICE..........................................4
2.9 CONDUCT OF BUSINESS................................................4
2.10 VOTING.............................................................4
2.11 WAIVER OF NOTICE...................................................5
2.12 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING............5
2.13 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS........6
2.14 PROXIES............................................................6
2.15 LIST OF STOCKHOLDERS ENTITLED TO VOTE..............................7
ARTICLE III DIRECTORS..........................................................7
3.1 POWERS.............................................................7
3.2 NUMBER OF DIRECTORS................................................7
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS............7
3.4 RESIGNATION AND VACANCIES..........................................8
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE...........................9
3.6 REGULAR MEETINGS...................................................9
3.7 SPECIAL MEETINGS; NOTICE...........................................9
3.8 QUORUM.............................................................9
3.9 WAIVER OF NOTICE..................................................10
3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING.................10
3.11 FEES AND COMPENSATION OF DIRECTORS................................10
3.12 APPROVAL OF LOANS TO OFFICERS.....................................10
3.13 REMOVAL OF DIRECTORS..............................................11
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
ARTICLE IV COMMITTEES.........................................................11
4.1 COMMITTEES OF DIRECTORS...........................................11
4.2 COMMITTEE MINUTES.................................................12
4.3 MEETINGS AND ACTION OF COMMITTEES.................................12
ARTICLE V OFFICERS............................................................12
5.1 OFFICERS..........................................................12
5.2 APPOINTMENT OF OFFICERS...........................................12
5.3 SUBORDINATE OFFICERS..............................................13
5.4 REMOVAL AND RESIGNATION OF OFFICERS; FILLING VACANCIES............13
5.5 CHAIRMAN OF THE BOARD.............................................13
5.6 CHIEF EXECUTIVE OFFICER...........................................13
5.7 PRESIDENT.........................................................13
5.8 VICE PRESIDENTS...................................................14
5.9 SECRETARY.........................................................14
5.10 CHIEF FINANCIAL OFFICER...........................................14
5.11 ASSISTANT SECRETARY...............................................15
5.12 ASSISTANT TREASURER...............................................15
5.13 REPRESENTATION OF SHARES OF OTHER CORPORATIONS....................15
5.14 AUTHORITY AND DUTIES OF OFFICERS..................................15
ARTICLE VI INDEMNITY..........................................................16
6.1 THIRD PARTY ACTIONS...............................................16
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION.....................16
6.3 SUCCESSFUL DEFENSE................................................17
6.4 DETERMINATION OF CONDUCT..........................................17
6.5 PAYMENT OF EXPENSES IN ADVANCE....................................17
6.6 INDEMNITY NOT EXCLUSIVE...........................................17
6.7 INSURANCE INDEMNIFICATION.........................................18
6.8 THE CORPORATION...................................................18
6.9 EMPLOYEE BENEFIT PLANS............................................18
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES.......18
ARTICLE VII RECORDS AND REPORTS...............................................19
7.1 MAINTENANCE AND INSPECTION OF RECORDS.............................19
7.2 INSPECTION BY DIRECTORS...........................................19
7.3 ANNUAL STATEMENT TO STOCKHOLDERS..................................20
ARTICLE VIII GENERAL MATTERS..................................................20
8.1 CHECKS............................................................20
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS..................20
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES............................20
8.4 SPECIAL DESIGNATION ON CERTIFICATES...............................21
8.5 LOST CERTIFICATES.................................................21
8.6 CONSTRUCTION; DEFINITIONS.........................................22
8.7 DIVIDENDS.........................................................22
8.8 FISCAL YEAR.......................................................22
8.9 SEAL..............................................................22
8.10 TRANSFER OF STOCK.................................................22
8.11 STOCK TRANSFER AGREEMENTS.........................................22
8.12 REGISTERED STOCKHOLDERS...........................................23
ARTICLE IX AMENDMENTS.........................................................23
</TABLE>
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<PAGE> 5
BYLAWS
OF
ONDISPLAY, INC.
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the registered
agent of the corporation at such location is The Corporation Trust Company.
1.2 OTHER OFFICES
The board of directors may at any time establish other offices at any
place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place, either within or
without the State of Delaware, as may be designated by the board of directors or
in the manner provided in these bylaws. In the absence of any such designation,
stockholders' meetings shall be held at the registered office of the corporation
in the State of Delaware.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date and at a
time designated by the board of directors. In the absence of such designation,
the annual meeting of stockholders shall be held on the second Tuesday of May of
each year at 10:00 a.m. However, if such day falls on
<PAGE> 6
a legal holiday, then the meeting shall be held at the same time and place on
the next succeeding business day. At the meeting, directors shall be elected and
any other proper business may be transacted.
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president.
If a special meeting is called by any person or persons other than the
board of directors, the request shall be in writing, specifying the time of such
meeting and the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the chairman of the board, the president or the
secretary of the corporation. No business may be transacted at such special
meeting otherwise than specified in such notice. The officer receiving the
request shall cause notice to be promptly given to the stockholders entitled to
vote, in accordance with the provisions of Sections 2.4 and 2.5 of this Article
II, that a meeting will be held at the time requested by the person or persons
calling the meeting, not less than ten (10) nor more than sixty (60) days after
the receipt of the request. Nothing contained in this paragraph of this Section
2.3 shall be construed as limiting, fixing, or affecting the time when a meeting
of stockholders called by action of the board of directors may be held.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings with stockholders shall be in writing and shall be
sent or otherwise given in accordance with Section 2.5 of these bylaws not less
than ten (10) nor more than sixty (60) days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notice shall specify the
place, date, and hour of the meeting, and, in the case of a special meeting, the
purpose or purposes for which the meeting is called.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
Subject to the rights of holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation,
(i) nominations for the election of directors, and
(ii) business proposed to be brought before any stockholder meeting
may be made by the board of directors or proxy committee appointed by the board
of directors or by any stockholder entitled to vote in the election of directors
generally if such nomination or business proposed is otherwise proper business
before such meeting. However, any such stockholder may nominate one or more
persons for election as directors at a meeting or propose business to be
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<PAGE> 7
brought before a meeting, or both, only if such stockholder has given timely
notice in proper written form of their intent to make such nomination or
nominations or to propose such business. To be timely, such stockholder's notice
must be delivered to or mailed and received at the principal executive offices
of the corporation not less than one hundred twenty (120) calendar days in
advance of the first anniversary date of mailing of the corporation's proxy
statement released to stockholders in connection with the previous year's annual
meeting of stockholders; provided, however, that in the event that no annual
meeting was held in the previous year or the date of the annual meeting has been
changed by more than thirty (30) days from the date contemplated at the time of
the previous year's proxy statement, notice by the stockholder to be timely must
be so received a reasonable time before the solicitation is made. To be in
proper form, a stockholder's notice to the secretary shall set forth:
(a) the name and address of the stockholder who intends to
make the nominations or propose the business and, as the case may be, of
the person or persons to be nominated or of the business to be proposed;
(b) a representation that the stockholder is a holder of
record of stock of the corporation entitled to vote at such meeting and,
if applicable, intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice;
(c) if applicable, a description of all arrangements or
understandings between the stockholder and each nominee and any other
person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder;
(d) such other information regarding each nominee or each
matter of business to be proposed by such stockholder as would be required
to be included in a proxy statement filed pursuant to the proxy rules of
the Securities and Exchange Commission had the nominee been nominated, or
intended to be nominated, or the matter been proposed, or intended to be
proposed by the board of directors; and
(e) if applicable, the consent of each nominee to serve as
director of the corporation if so elected.
The chairman of the meeting shall refuse to acknowledge the nomination of
any person or the proposal of any business not made in compliance with the
foregoing procedure.
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer
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<PAGE> 8
agent of the corporation that the notice has been given shall, in the absence of
fraud, be prima facie evidence of the facts stated therein.
2.7 QUORUM
The holders of a majority of the stock issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the certificate of incorporation.
If, however, such quorum is not present or represented at any meeting of the
stockholders, then either (i) the Chairman of the meeting or (ii) the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
2.8 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time or place, unless these bylaws
otherwise require, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.9 CONDUCT OF BUSINESS
The chairman of any meeting of stockholders shall determine the order of
business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of business.
2.10 VOTING
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.12 of these bylaws,
subject to the provisions of Sections 217 and 218 of the Delaware General
Corporation Law (relating to voting rights of fiduciaries, pledgors and joint
owners of stock and to voting trusts and other voting agreements).
Except as provided in the last paragraph of this Section 2.10, or as may
be otherwise provided in the certificate of incorporation, each stockholder
shall be entitled to one vote for each share of capital stock held by such
stockholder.
At a stockholders' meeting at which directors are to be elected, each
stockholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of
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<PAGE> 9
votes greater than the number of votes which such stockholder normally is
entitled to cast) if the candidates' names have been properly placed in
nomination (in accordance with these bylaws) prior to commencement of the voting
and the stockholder requesting cumulative voting or any other stockholder voting
at the meeting in person or by proxy has given notice prior to commencement of
the voting of the stockholder's intention to cumulate votes. If cumulative
voting is properly requested, each holder of stock, or of any class or classes
or of a series or series thereof, who elects to cumulate votes shall be entitled
to as many votes as equals the number of votes which (absent this provision as
to cumulative voting) such person would be entitled to cast for the election of
directors with respect to his shares of stock multiplied by the number of
directors to be elected by such person, and that such person may cast all of
such votes for a single director or may distribute them among the number to be
voted for, or for any two or more of them, as such person may see fit.
2.11 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
Delaware General Corporation Law or of the certificate of incorporation or these
bylaws, a written waiver, signed by the person entitled to notice, whether
before or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors, or members of a committee of directors need be
specified in any written waiver of notice unless so required by the certificate
of incorporation or these bylaws.
2.12 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise provided in the certificate of incorporation, any action
required to be taken at any annual or special meeting of stockholders of a
corporation, or any action that may be taken at any annual or special meeting of
such stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent or consents in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted.
Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the
Delaware General Corporation Law if such action had been voted on by
stockholders at a meeting thereof, then the certificate filed under such section
shall state, in lieu of any statement required by such section concerning any
vote of stockholders, that written notice and written consent have been given as
provided in Section 228 of the Delaware General Corporation Law.
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<PAGE> 10
2.13 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.
If the board of directors does not so fix a record date:
(i) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held.
(ii) The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the board of directors is necessary, shall be the first date on which
a signed written consent is delivered to the corporation.
(iii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
2.14 PROXIES
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for such stockholder by a written
proxy, signed by such stockholder and filed with the secretary of the
corporation, but no such proxy shall be voted or acted upon after three (3)
years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if such stockholder's name is placed on the proxy by any
reasonable means including, but not limited to, by facsimile signature, manual
signature, typewriting, telegraphic transmission or otherwise, by such
stockholder or such stockholder's attorney-in-fact. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(e) of the Delaware General Corporation Law.
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<PAGE> 11
2.15 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present. Such list shall
presumptively determine the identity of the stockholders entitled to vote at the
meeting and the number of shares held by each of them.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the Delaware General Corporation Law and any
limitations in the certificate of incorporation or these bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
3.2 NUMBER OF DIRECTORS
The number of directors of the corporation shall be seven (7) until
changed by a bylaw amending this Section 3.2, duly adopted by the board of
directors or by the stockholders. No reduction of the authorized number of
directors shall have the effect of removing any director before that director's
term of office expires.
Upon the firmly underwritten registered public offering of the company's
securities (the "IPO"), the directors shall be divided into three classes with
the term of office of the first class to expire at the first annual meeting of
stockholders held after the IPO; the term of office of the second class to
expire at the second annual meeting of stockholders held after the IPO; the term
of office of the third class to expire at the third annual meeting of
stockholders held after the IPO; and thereafter for each such term to expire at
each third succeeding annual meeting of stockholders after such election.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
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<PAGE> 12
Except as provided in Section 3.4 of these bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to fill
a vacancy, shall hold office until his successor is elected and qualified or
until his earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the attention
of the Secretary of the corporation. When one or more directors shall resign
from the board of directors, effective at a future date, a majority of the
directors then in office, including those who have so resigned, shall have power
to fill such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective, and each director so chosen
shall hold office as provided in this section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the certificate of
incorporation, vacancies and newly created directorships of such class or
classes or series may be filled by a majority of the directors elected by such
class or classes or series thereof then in office, or by a sole remaining
director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the Delaware General Corporation Law.
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole board
(as constituted immediately prior to any such increase), then the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten (10) percent of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or
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<PAGE> 13
newly created directorships, or to replace the directors chosen by the directors
then in office as aforesaid, which election shall be governed by the provisions
of Section 211 of the Delaware General Corporation Law as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The board of directors of the corporation may hold meetings, both regular
and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these
bylaws, members of the board of directors, or any committee designated by the
board of directors, may participate in a meeting of such board of directors, or
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and such participation in a meeting pursuant to this section shall constitute
presence in person at the meeting.
3.6 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice at
such time and at such place as shall from time to time be determined by the
board.
3.7 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two (2) directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.8 QUORUM
At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as
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may be otherwise specifically provided by statute, the certificate of
incorporation, or these bylaws. If a quorum is not present at any meeting of the
board of directors, then the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum is present.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for that meeting.
3.9 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
Delaware General Corporation Law, the certificate of incorporation, or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when such person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the certificate of
incorporation or these bylaws.
3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise restricted by the certificate of incorporation or these
bylaws, any action required or permitted to be taken at any meeting of the board
of directors, or of any committee thereof may be taken without a meeting if all
members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee.
3.11 FEES AND COMPENSATION OF DIRECTORS
Unless otherwise restricted by the certificate of incorporation or these
bylaws, the board of directors shall have the authority to fix the compensation
of directors.
3.12 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
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3.13 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of
incorporation or by these bylaws, any director or the entire board of directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors; provided, however,
that, so long as stockholders of the corporation are entitled to cumulative
voting, if less than the entire board is to be removed, no director may be
removed without cause if the votes cast against his removal would be sufficient
to elect such director if then cumulatively voted at an election of the entire
board of directors or, if there be classes of directors, at an election of the
class of directors of which such director is a part.
No reduction of the authorized number of directors shall have the effect
of removing any director prior to the expiration of such director's term of
office.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution passed by a majority of the
whole board, designate one or more committees, with each committee to consist of
one or more of the directors of the corporation. The board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint another member of
the board of directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the board of directors, or in the bylaws of the corporation, shall
have and may exercise all the powers and authority of the board of directors in
the management of the business and affairs of the corporation, and may authorize
the seal of the corporation to be affixed to all papers that may require it; but
no such committee shall have the power or authority (i) approving or adopting or
recommending to the stockholders, any action or matter expressly required by the
Delaware General Corporation Law to be submitted to stockholders for approval or
(ii) adopting, amending, or repealing any bylaws of the corporation; and, unless
the board resolution establishing the committee, the bylaws or the certificate
of incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the Delaware
General Corporation Law.
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4.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws, Section
3.5 (place of meetings and meetings by telephone), Section 3.6 (regular
meetings), Section 3.7 (special meetings and notice), Section 3.8 (quorum),
Section 3.9 (waiver of notice), and Section 3.10 (action without a meeting),
with such changes in the context of those bylaws as are necessary to substitute
the committee and its members for the board of directors and its members;
provided, however, that the time of regular meetings of committees may be
determined either by resolution of the board of directors or by resolution of
the committee, that special meetings of committees may also be called by
resolution of the board of directors and that notice of special meetings of
committees shall also be given to all alternate members, who shall have the
right to attend all meetings of the committee. The board of directors may adopt
rules for the government of any committee not inconsistent with the provisions
of these bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, a secretary, and a
chief financial officer. The corporation may also have, at the discretion of the
board of directors, a chairman of the board, one or more vice presidents, one or
more assistant vice presidents, one or more assistant secretaries, one or more
assistant treasurers, and any such other officers as may be appointed in
accordance with the provisions of Section 5.3 of these bylaws. Any number of
offices may be held by the same person.
5.2 APPOINTMENT OF OFFICERS
The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Sections 5.3 or 5.5 of these bylaws, shall
be appointed by the board of directors, subject to the rights, if any, of an
officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or empower the president to appoint,
such other officers and agents as the business of the corporation may require,
each of whom shall hold office for such
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period, have such authority, and perform such duties as are provided in these
bylaws or as the board of directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS; FILLING VACANCIES
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
Any vacancy occurring in any office of the corporation shall be filled by
the board of directors.
5.5 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to the
chairman of the board by the board of directors or as may be prescribed by these
bylaws. If there is no president and no one has been appointed chief executive
officer, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.6 of these bylaws.
5.6 CHIEF EXECUTIVE OFFICER
The board of directors shall select a chief executive officer of the
corporation who shall be subject to the control of the board of directors and
have general supervision, direction and control of the business and the officers
of the corporation. The chief executive officer shall preside at all meetings of
the stockholders and, in the absence or nonexistence of a chairman of the board,
at all meetings of the board of directors.
5.7 PRESIDENT
The president shall have the general powers and duties of management
usually vested in the office of president of a corporation and shall have such
other powers and duties as may be prescribed by the board of directors or these
bylaws. In addition and subject to such supervisory powers, if any, as may be
given by the board of directors to the chairman of the board, if no one has been
appointed
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chief executive officer, the president shall be the chief executive officer of
the corporation and shall, subject to the control of the board of directors,
have the powers and duties described in Section 5.6.
5.8 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform all
the duties of the president and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the president. The vice presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the board of directors, these bylaws,
the president or the chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and stockholders. The minutes shall show the time and place of
each meeting, whether regular or special (and, if special, how authorized and
the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at stockholders'
meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the board of directors required to be given by law or by
these bylaws. The secretary shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the board of directors or by these bylaws.
5.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other valuables
in the name and to the credit of the corporation with such depositories as may
be designated by the board of directors. The chief financial officer shall
disburse the funds of the corporation as may be ordered by the board of
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directors, shall render to the president and directors, whenever they request
it, an account of all his transactions as chief financial officer and of the
financial condition of the corporation, and shall have other powers and perform
such other duties as may be prescribed by the board of directors or these
bylaws.
The chief financial officer shall be the treasurer of the corporation.
5.11 ASSISTANT SECRETARY
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as may be
prescribed by the board of directors or these bylaws.
5.12 ASSISTANT TREASURER
The assistant treasurer, or, if there is more than one, the assistant
treasurers, in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the chief financial officer or in the event of his or
her inability or refusal to act, perform the duties and exercise the powers of
the chief financial officer and shall perform such other duties and have such
other powers as may be prescribed by the board of directors or these bylaws.
5.13 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the chief
financial officer, the secretary or assistant secretary of this corporation, or
any other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
5.14 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from time
to time by the board of directors or the stockholders.
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ARTICLE VI
INDEMNITY
6.1 THIRD PARTY ACTIONS
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that such person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement (if such settlement is approved
in advance by the corporation, which approval shall not be unreasonably
withheld) actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which the person reasonably believed to be in or not
opposed to the best interest of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that the person's
conduct was unlawful.
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director, officer, employee or
agent of corporation, or is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) and amounts paid in settlement (if such settlement is approved in advance
by the corporation, which approval shall not be unreasonably withheld) actually
and reasonably incurred by such person in connection with the defense or
settlement of such action or suit if such person acted in good faith and in
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Delaware Court of
Chancery or such other court shall deem proper. Notwithstanding any other
provision of this Article VI, no person shall be
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indemnified hereunder for any expenses or amounts paid in settlement with
respect to any action to recover short-swing profits under Section 16(b) of the
Securities Exchange Act of 1934, as amended.
6.3 SUCCESSFUL DEFENSE
To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 6.1 and 6.2, or in defense of
any claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection therewith.
6.4 DETERMINATION OF CONDUCT
Any indemnification under Sections 6.1 and 6.2 (unless ordered by a court)
shall be made by the corporation only as authorized in the specific case upon a
determination that the indemnification of the director, officer, employee or
agent is proper in the circumstances because such person has met the applicable
standard of conduct set forth in Sections 6.1 and 6.2. Such determination shall
be made (1) by the Board of Directors or the Executive Committee by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding or (2) or if such quorum is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (3) by the stockholders. Notwithstanding the
foregoing, a director, officer, employee or agent of the Corporation shall be
entitled to contest any determination that the director, officer, employee or
agent has not met the applicable standard of conduct set forth in Sections 6.1
and 6.2 by petitioning a court of competent jurisdiction.
6.5 PAYMENT OF EXPENSES IN ADVANCE
Expenses incurred in defending a civil or criminal action, suit or
proceeding, by an individual who may be entitled to indemnification pursuant to
Section 6.1 or 6.2, shall be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the director, officer, employee or agent to repay such amount if
it shall ultimately be determined that such person is not entitled to be
indemnified by the corporation as authorized in this Article VI.
6.6 INDEMNITY NOT EXCLUSIVE
The indemnification and advancement of expenses provided by or granted
pursuant to the other sections of this Article VI shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office.
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6.7 INSURANCE INDEMNIFICATION
The corporation shall have the power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against such
person and incurred by such person in any such capacity or arising out of such
person's status as such, whether or not the corporation would have the power to
indemnify such person against such liability under the provisions of this
Article VI.
6.8 THE CORPORATION
For purposes of this Article VI, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under and subject to the provisions of this Article VI (including,
without limitation the provisions of Section 6.4) with respect to the resulting
or surviving corporation as such person would have with respect to such
constituent corporation if its separate existence had continued.
6.9 EMPLOYEE BENEFIT PLANS
For purposes of this Article VI, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this Article
VI.
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article VI shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
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ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive officer or at
such place or places as designated by the board of directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent so to act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, showing the address of each stockholder and the number of
shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any
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limitations or conditions with reference to the inspection, or award such other
and further relief as the Court may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of the corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the board of directors, or the president or vice-president, and by the chief
financial officer or an assistant treasurer, or the secretary or an assistant
secretary of such corporation representing the
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number of shares registered in certificate form. Any or all of the signatures on
the certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate has ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the corporation with the same
effect as if such person were such officer, transfer agent or registrar at the
date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.
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8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
8.7 DIVIDENDS
The directors of the corporation, subject to any restrictions contained in
(i) the Delaware General Corporation Law or (ii) the certificate of
incorporation, may declare and pay dividends upon the shares of its capital
stock. Dividends may be paid in cash, in property, or in shares of the
corporation's capital stock.
The directors of the corporation may set apart out of any of the funds of
the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
8.9 SEAL
The corporation may adopt a corporate seal, which shall be adopted and
which may be altered by the board of directors, and may use the same by causing
it or a facsimile thereof to be impressed or affixed or in any other manner
reproduced.
8.10 TRANSFER OF STOCK
Upon surrender to the corporation or the transfer agent of the corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignation or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS
The corporation shall have power to enter into and perform any agreement
with any number of stockholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the Delaware General Corporation Law.
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<PAGE> 27
8.12 REGISTERED STOCKHOLDERS
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
The bylaws of the corporation may be adopted, amended or repealed by the
stockholders entitled to vote; provided, however, that the corporation may, in
its certificate of incorporation, confer the power to adopt, amend or repeal
bylaws upon the directors. The fact that such power has been so conferred upon
the directors shall not divest the stockholders of the power, nor limit their
power to adopt, amend or repeal bylaws.
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<PAGE> 1
EXHIBIT 4.2
LOCK-UP AGREEMENT
August 27, 1999
BancBoston Robertson Stephens
As Representatives of the Several Underwriters
555 California Street
San Francisco, CA 94104
Ladies and Gentlemen:
The undersigned understands that you, as Representatives of the several
underwriters (the "Underwriters"), propose to enter into an Underwriting
Agreement (the "Underwriting Agreement") with OnDisplay, Inc. (the "Company")
providing for the initial public offering (the "Public Offering") by the
Underwriters, including yourselves, of Common Stock of the Company (the "Common
Stock") pursuant to the Company's Registration Statement on Form S-1 to be filed
with the Securities and Exchange Commission on or about September 9, 1999 (the
"Registration Statement").
In consideration of the Underwriters'agreement to purchase and make the
Public Offering of the Common Stock, and for other good and valuable
consideration, receipt of which is hereby acknowledged, the undersigned hereby
agrees, for a period of 180 days after the effective date of the Registration
Statement (the "Lock-Up Period"), not to offer to sell, contract to sell or
otherwise sell, dispose of, loan, pledge or grant any rights with respect to
(collectively, a "Disposition") any shares of Common Stock, any options or
warrants to purchase any shares of Common Stock or any securities convertible
into or exchangeable for shares of Common Stock (collectively, "Securities"),
now owned or hereafter acquired directly by the undersigned or with respect to
which the undersigned has or hereafter acquires the power of disposition, other
than (i) as a bona fide gift or gifts, provided the donee or donees thereof
agree to be bound by this Lock-Up Agreement, (ii) as a distribution to limited
partners or shareholders of the undersigned, provided that the distributees
thereof agree in writing to be bound by the terms of this Lock-Up Agreement or
(iii) with the prior written consent of BancBoston Robertson Stephens. The
foregoing restriction is expressly agreed to preclude the holder of the
Securities from engaging in any hedging or other transaction which is designed
to or reasonably expected to lead to or result in a Disposition of Securities
during the Lock-Up Period even if such Securities would be disposed of by
someone other than the undersigned. Such prohibited hedging or other
transactions would include without limitation any short sale (whether or not
against the box) or any purchase, sale or grant of any right (including without
limitation any put or call option) with respect to any Securities or with
respect to any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value from
Securities. Notwithstanding the foregoing, this Lock-Up Agreement does not
prohibit the sale of shares of the Common Stock by the undersigned to the
Underwriters in the Public Offering.
<PAGE> 2
Furthermore, the undersigned hereby agrees and consents to the entry of
stop transfer instructions with the Company's transfer agent against the
transfer of the Securities held by the undersigned except in compliance with
this Lock-Up Agreement.
Very truly yours,
______________________________________
(signature)
Name: _____________________________
Address: _____________________________
_____________________________
Accepted as of the date first set forth above:
BancBoston Robertson Stephens
As Representatives of the Several Underwriters
BancBoston Robertson Stephens
By: ___________________________________
(authorized signatory)
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<PAGE> 1
EXHIBIT 5.1
[WILSON SONSINI GOODRICH & ROSATI LETTERHEAD]
September __, 1999
BancBoston Robertson Stephens
Deutsche Bank - Alex. Brown
SG COWEN
as Representatives of the several Underwriters
c/o BancBoston Robertson Stephens
555 California Street
San Francisco, California 94104
Re: OnDisplay, Inc.
Ladies and Gentlemen:
We have acted as counsel for OnDisplay, Inc., a Delaware corporation (the
"Company") in connection with the public offering of __________ shares of the
Company's common stock (the "Shares"), pursuant to that certain Underwriting
Agreement dated September __, 1999 (the "Underwriting Agreement"), among the
Company, the Selling Stockholder, BancBoston Robertson Stephens, Deutsche Bank -
Alex. Brown, and SG COWEN., as Representatives of the several Underwriters named
in Schedule I thereto (the "Underwriters"). This opinion is being rendered to
you pursuant to Section [7(c)] of the Underwriting Agreement. Capitalized terms
used herein shall have the same meanings given to them in the Underwriting
Agreement unless otherwise defined herein.
We are licensed to practice law only in the State of California.
Accordingly, except as otherwise specifically stated herein, the opinions
expressed herein are limited in all respects to existing laws of the State of
California, the corporate laws of the State of Delaware and applicable federal
laws, and we have made no inquiry into, and express no opinion as to, the
statutes, regulations, treaties or common laws of any other nation, state or
jurisdiction, or the effect on the transaction in the Underwriting Agreement of
non-compliance under any such statutes, regulations, treaties or common laws. We
have assumed that the laws of any state, other than California or the corporate
laws of Delaware, applicable to the opinions rendered herein are identical to
the laws of the State of California or the corporate laws of Delaware.
As counsel for the Company, we have made such legal and factual
examinations and inquiries as we have deemed advisable or necessary for the
purpose of rendering this opinion and we have examined, among other things,
originals, certified copies or copies otherwise identified to us as
<PAGE> 2
being true copies of the originals of, or have received where other than in
written form, the following:
(a) The Restated Certificate of Incorporation of the Company as in effect
on the date hereof and as proposed to be amended simultaneously with or
following the Closing;
(b) The Bylaws of the Company as in effect on the date hereof (the
"Bylaws");
(c) Minutes of meetings of the Board of Directors of the Company and the
Pricing Committee of the Board of Directors of the Company with respect to the
transactions covered by this opinion;
(d) The Registration Statement on Form S-1 (Registration No. __________)
filed by the Company under the Act with the Commission on September __, 1999,
(the "Registration Statement") and the prospectus in the form filed with the
Commission on __________, 1999 pursuant to Rule 424(b) under the Act
(hereinafter referred to as the "Prospectus");
(e) Oral confirmation from the Commission staff that the Registration
Statement became effective at _____ p.m., Eastern Daylight Time, on __________,
1999;
(f) Specimen certificate for shares of the Company's Common Stock;
(g) Executed copies of the Underwriting Agreement;
(h) The letter dated __________, 1999 of PricewaterhouseCoopers LLP
addressed and delivered to you pursuant to Section [7(f)] of the Underwriting
Agreement;
(i) The Officers' Certificate dated __________, 1999, delivered to you
pursuant to Section [7(l)] of the Underwriting Agreement; and
(j) The certificate of Chase Mellon Shareholder Services, the Transfer
Agent and Registrar for the Company, delivered to you on the date hereof.
In addition, we have obtained from public officials and officers of the
Company such other certificates and assurances, and we have examined such
corporate records, other documents and questions of law as we have considered
necessary or appropriate for the purposes of rendering this opinion, which
certificates and assurances, records, documents and the like have been delivered
to you herewith.
In connection with such examination, we have assumed the genuineness of
all signatures on original documents, the authenticity of all documents
submitted to us as originals, the conformity to originals of all documents
submitted to us as copies thereof, and the due execution of all documents where
due execution and delivery are a prerequisite to the effectiveness thereof,
other than the signatures of the Company's officers and directors with respect
to the Underwriting Agreement and the Registration Statement. In addition, we
have assumed that the Underwriting Agreement has been duly authorized, executed
and delivered by you and that the representations and warranties as to
-2-
<PAGE> 3
factual matters, but not legal conclusions, made by the Company in the
Underwriting Agreement and pursuant thereto are correct and complete.
As used in this opinion, the expressions "to our knowledge", "to the best
of our knowledge", "known to us" or similar language with reference to matters
of fact mean that, after an examination of documents made available to us by the
Company, and after inquiries of officers of the Company, but without any further
independent factual investigation, nothing has come to our attention which
causes us to believe that the opinions expressed herein are factually incorrect.
Further, the expressions "to our knowledge", "to the best of our knowledge",
"known to us" or similar language with reference to matters of fact refer to the
current actual knowledge solely of the attorneys of this firm who have worked on
matters for the Company. Except to the extent expressly set forth herein or as
we otherwise believe to be necessary to our opinion, we have not undertaken any
independent investigation to determine the existence or absence of any fact, and
no inference as to our knowledge of the existence or absence of any fact should
be drawn from our representation of the Company or the rendering of the opinions
set forth below.
The opinions expressed are subject to the following qualifications:
(i) We express no opinion as to the effect of applicable bankruptcy,
insolvency, reorganization, moratorium or other similar federal or state laws
relating to or affecting the rights of creditors generally or of general
equitable principles;
(ii) We express no opinion as to the effect of rules of law governing
specific performance, injunctive relief or other equitable remedies (regardless
of whether any such remedy is considered in a proceeding at law or in equity);
(iii) In rendering our opinion in Paragraph 3, we have relied solely upon
good standing certificates issued by the appropriate state officers in each
state in which the Company owns or leases properties or conducts any business;
and
(iv) We express no opinion as to the enforceability of the
indemnification and contribution provisions of Section [8] of the Underwriting
Agreement to the extent such provisions may be subject to limitations of public
policy and the effect of applicable statutes and judicial decisions.
Based upon, and subject to the foregoing, we are of the opinion that:
(1) The Company has been duly incorporated and is validly existing as a
corporation and in good standing under the laws of the State of Delaware, with
power and authority (corporate and other) to own its properties and conduct its
business as described in the Prospectus;
(2) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
(including the Shares being delivered at such Time of Delivery) have been duly
and validly authorized and issued and are fully paid and non-assessable; and the
Shares conform to the description of the Stock contained in the Prospectus;
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<PAGE> 4
(3) The Company has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties or conducts any business so
as to require such qualification, except where the failure to be so qualified
would not have a material adverse effect on the Company;
(4) To our knowledge and other than as set forth in the Prospectus, there
are no legal or governmental proceedings pending to which the Company is a party
or of which any property of the Company is the subject which, if determined
adversely to the Company, would individually or in the aggregate have a material
adverse effect on the current consolidated financial position, stockholders'
equity or results of operations of the Company and its subsidiaries; and, to our
knowledge, no such proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(5) The Underwriting Agreement has been duly authorized, executed and
delivered by the Company;
(6) The issue and sale of the Shares being delivered at the Time of
Delivery by the Company and the compliance by the Company with all of the
provisions of the Underwriting Agreement and the consummation of the
transactions therein contemplated will not conflict with or result in a breach
or violation of any of the terms or provisions of, or constitute a default
under, any agreement included as an exhibit to the Registration Statement, nor
will such action result in any violation of the provisions of the Restated
Certificate of Incorporation or Bylaws of the Company or any statute or any
order, rule or regulation known to us of any court or governmental agency or
body having jurisdiction over the Company or any of its subsidiaries or any of
their properties;
(7) No consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the issue and sale of the Shares or the consummation by the Company
of the transactions contemplated by the Underwriting Agreement, except (i) in
certain states where the Company is licensed as a mortgage lender or broker,
(ii) the registration under the Act of the Shares, and (iii) such consents,
approvals, authorizations, registrations or qualifications as may be required
under state securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters;
(8) Neither the Company nor any of its subsidiaries is in violation of its
Certificate of Incorporation or Bylaws;
(9) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a summary
of the terms of the Stock and under the caption "Underwriting", insofar as they
purport to describe the provisions of the laws and documents referred to
therein, are accurate, complete and fair;
(10) The Company is not an "investment company", as such term is defined
in the Investment Company Act;
(11) The Registration Statement and the Prospectus and any further
amendments and supplements thereto made by the Company prior to the Time of
Delivery (other than the financial statements and related schedules and
financial data therein, as to which we express no opinion) comply as to form in
all material respects with the requirements of the Act and the rules and
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<PAGE> 5
regulations thereunder; and we do not know of any amendment to the Registration
Statement required to be filed or of any contracts or other documents of a
character required to be filed as an exhibit to the Registration Statement or
required to be described in the Registration Statement or the Prospectus which
are not filed or described as required; and
(12) To the best of our knowledge and other than as set forth in the
Prospectus, neither the Company nor any of its officers, directors or employees
is a party or subject to the provisions of any regulatory action, injunction,
judgment, decree or order of any federal or state mortgage banking regulatory
agency, nor is there any charge, action, suit, proceeding or investigation
pending before or threatened by any federal or state mortgage banking regulatory
agency.
We have participated in conferences with officers and other
representatives of the Company, including the independent certified public
accountants of the Company and with you and your counsel, at which such
conferences the contents of the Registration Statement and Prospectus and
related matters were discussed, and although we have not verified the accuracy
or completeness of the statements contained in the Registration Statement or the
Prospectus, except for those referred to in paragraph 9 above, nothing has come
to our attention which leads us to believe that, at the time the Registration
Statement became effective and at all times subsequent thereto up to and at the
Time of Delivery, the Registration Statement and any amendment or supplement
thereto (other than the financial statements and related schedules and financial
data therein, as to which we express no opinion) contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or at the
date of the Prospectus or at the Time of Delivery, the Prospectus and any
amendment or supplement thereto (except as aforesaid) contained any untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
This opinion is furnished by us, as counsel for the Company, to you in
connection with the sale by the Company and the purchase by you of the Shares
pursuant to the Underwriting Agreement. This opinion may not be relied upon by
you for any other purpose or made available to or relied upon by any other
person or entity for any purpose without our prior written consent.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
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<PAGE> 1
EXHIBIT 10.1(a)
ONDISPLAY, INC.
THIRD RESTATED
INVESTOR RIGHTS AGREEMENT
AUGUST 2, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. Restrictions on Transfer...................................................1
1.1 Transfer.............................................................1
1.2 Legend...............................................................2
1.3 Legend Removal.......................................................2
2. Registration Rights........................................................3
2.1 Definitions..........................................................3
2.2 Demand Registration..................................................4
2.3 Piggyback Registration...............................................5
2.4 Obligations of the Company...........................................5
2.5 Furnish Information..................................................6
2.6 Expenses of Demand Registration......................................7
2.7 Expenses of Piggyback Registration...................................7
2.8 Underwriting Requirements............................................7
2.9 Delay of Registration................................................8
2.10 Indemnification......................................................8
2.11 Reports Under Securities Exchange Act of 1934.......................10
2.12 Form S-3 Registration...............................................11
2.13 Assignment of Registration Rights...................................12
2.14 Limitations on Subsequent Registration Rights.......................12
2.15 "Market Stand-Off" Agreement........................................13
2.16 Termination of Registration Rights..................................13
3. Right of First Offer......................................................13
3.1 Grant of Right......................................................13
3.2 Future Shares.......................................................13
3.3 Special Right of First Refusal in Qualified IPO.....................14
3.4 Notice..............................................................14
3.5 Sale after Notice...................................................15
3.6 Assignment..........................................................16
3.7 Termination of Rights...............................................16
4. Information Rights; Board Observation Rights, Vesting.....................16
4.1 Financial Information...............................................16
4.2 Inspection Rights...................................................17
4.3 Assignment of Rights................................................17
4.4 Board Observation Rights............................................17
4.5 Termination of Covenants............................................18
4.6 Stock Vesting.......................................................18
</TABLE>
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<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
5. Termination of Prior Rights Agreements....................................18
6. Waiver of Right of First Offer............................................18
7. Miscellaneous Provisions...................................................19
7.1 Waivers and Amendments..............................................19
7.2 Notices.............................................................19
7.3 Governing Law.......................................................19
7.4 Counterparts........................................................19
7.5 Expenses............................................................19
7.6 Successors and Assigns..............................................19
7.7 Entire Agreement; Superseding Prior Rights Agreement................19
7.8 Separability; Severability..........................................20
7.9 Stock Splits........................................................20
7.10 Delays or Omissions.................................................20
7.11 Aggregation.........................................................20
</TABLE>
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<PAGE> 4
ONDISPLAY, INC.
THIRD RESTATED INVESTOR RIGHTS AGREEMENT
This Third Restated Investor Rights Agreement (the "Agreement") is
effective as of August 2, 1999 by and among OnDisplay, Inc. (the "Company") and
the investors listed on Schedule A attached hereto (the "Investors").
RECITALS
A. The Company sold and issued to certain of the Investors (the "Existing
Holders") 3,400,000 shares of Series A Preferred Stock of the Company on
September 23, 1996, 100,000 shares of Series A Preferred Stock of the Company on
June 12, 1997, 3,190,476 shares of the Series B Preferred Stock of the Company
on June 30, 1997, 11,905 shares of Series B Preferred Stock of the Company on
January 9, 1998, 2,146,673 shares of Series C Preferred Stock of the Company on
July 28, 1998 and 42,500 shares of Series C Preferred Stock of the Company on
October 16, 1998. Pursuant to that certain Second Restated Investor Rights
Agreement dated as of July 28, 1998 (the "Prior Rights Agreement") the Company
granted to such Existing Holders certain rights and the Existing Holders entered
into certain covenants between themselves.
B. Pursuant to that certain Series D Preferred Stock Purchase Agreement
of even date herewith and a Second Series D Preferred Stock Purchase Agreement
dated August __, 1999 (collectively referred to as the "Series D Agreement"),
the Company has agreed to sell to certain Investors (the "Series D Holders") a
total of up to 2,100,000 shares of the Series D Preferred Stock of the Company
and, as an inducement for the Series D Holders to purchase such shares, the
Company and the Existing Holders have agreed to enter into this Agreement to
supersede, amend and restate the rights granted to and covenants agreed by the
Existing Holders in the Prior Rights Agreement. The outstanding shares of Series
A Preferred Stock, the Series B Preferred Stock and Series C Preferred Stock,
and the shares of Series D Preferred Stock sold pursuant to the Series D
Agreement are collectively referred to herein as the "Preferred Shares." The
Existing Holders and the Series D Holders are collectively referred to herein as
the "Holders."
1. Restrictions on Transfer.
1.1 Transfer. Each Holder agrees not to make any disposition of all
or any portion of the Preferred Shares (or shares of Common Stock issuable upon
conversion of the Preferred Shares) unless and until:
(a) There is then in effect a registration statement under the
Securities Act of 1933, as amended (the "Securities Act") covering such proposed
disposition and such disposition is made in accordance with such registration
statement; or
<PAGE> 5
(b) (1) The transferee has agreed in writing to be bound by the
terms of this Agreement, (2) such Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (3) if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(c) Notwithstanding the provisions of paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by a Holder which is (A) a partnership to its partners or former
partners in accordance with partnership interests, (B) a corporation to its
shareholders in accordance with their interest in the corporation, (C) a limited
liability company to its members or former members in accordance with their
interest in the limited liability company, or (D) to the Holder's family member
or trust for the benefit of an individual Holder, provided the transferee will
be subject to the terms of this Agreement to the same extent as if the
transferee were an original Holder hereunder.
1.2 Legend. Each certificate representing Preferred Shares (or shares
of Common Stock issuable upon conversion of the Preferred Shares) shall (unless
otherwise permitted by the provisions of the Agreement) be stamped or otherwise
imprinted with a legend substantially similar to the following (in addition to
any legend required under applicable state securities laws or as provided
elsewhere in this Agreement):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY
HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
1.3 Legend Removal.
(a) The Company shall be obligated to reissue promptly
unlegended certificates at the request of any holder thereof if the holder shall
have obtained an opinion of counsel (which counsel may be counsel to the
Company) reasonably acceptable to the Company to the effect that the securities
proposed to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(b) Any legend endorsed on an instrument pursuant to applicable
state securities laws and the stop-transfer instructions with respect to such
securities shall be removed
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<PAGE> 6
upon receipt by the Company of an order of the appropriate blue sky authority
authorizing such removal.
2. Registration Rights.
2.1 Definitions. For purposes of this Section 2:
(a) The term "register," "registered," and "registration" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document;
(b) The term "Registrable Securities" means (1) the Preferred
Shares, (2) the Common Stock issued upon conversion of the Preferred Shares, (3)
any Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
such Preferred Shares or Common Stock, excluding in all cases, however, (i) any
Registrable Securities sold by a person in a transaction in which such person's
rights under this Section 2 are not assigned, or (ii) any Registrable Securities
sold to or through a broker or dealer or underwriter in a public distribution or
a public securities transaction;
(c) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities;
(d) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 2.13 hereof;
(e) The term "Form S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the Securities and Exchange Commission (the "SEC") which permits
inclusion or incorporation of substantial information by reference to other
documents filed by the Company with the SEC; and
(f) The term "Securities Act" shall mean the Securities Act of
1933, as amended.
(g) The term "Qualified IPO" shall mean the first underwritten
public offering of Common Stock of the Company that is pursuant to a
registration statement filed with, and declared effective by, the Securities and
Exchange Commission (or any other federal agency at the time administering the
Securities Act) under the Securities Act, covering the offer and sale of Common
Stock to the public at a public offering price (prior to the underwriter
commissions and expenses) equal to or exceeding Fifteen Dollars ($15.00) per
share of Common Stock (appropriately adjusted for stock splits, stock dividends,
recapitalization, reorganizations or other similar
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<PAGE> 7
transactions) and at an aggregate offering price (before deduction for
underwriter commissions and expenses) of not less than Twenty Million Dollars
($20,000,000).
2.2 Demand Registration.
(a) If the Company shall receive at any time after the earlier
of (i) September 30, 2000 or (ii) six (6) months after the effective date of the
first registration statement for a public offering of securities of the Company
(other than a registration statement relating either to the sale of securities
to employees of the Company pursuant to a stock option, stock purchase or
similar plan or a SEC Rule 145 transaction), a written request from the Holders
of at least ten percent (10%) of the Registrable Securities then outstanding
(including securities convertible into Registrable Securities) for the first
registration pursuant to this Section 2.2(b), and at least forty percent (40%)
of the Registrable Securities then outstanding (including securities convertible
into Registrable Securities) for the second registration pursuant to this
Section 2.2(b), that the Company file a registration statement under the Act
covering the registration of Registrable Securities having an aggregate offering
price in excess of Five Million Dollars ($5,000,000), then the Company shall,
within ten (10) days of the receipt thereof, give written notice of such request
to all Holders and shall, subject to the limitations of Section 2.2(b), effect
as soon as practicable, and in any event within ninety (90) days of the receipt
of such request, the registration under the Act of all Registrable Securities
which the Holders request to be registered within twenty (20) days of the
mailing of such written notice by the Company; provided, however, that the
Company shall not be obligated to take any action to effect any such
registration, qualification or compliance pursuant to this Section 2.2(a):
(i) During the period starting with the date sixty (60)
days prior to the Company's estimated date of filing of, and ending on the date
120 days immediately following the effective date of, any registration statement
pertaining to securities of the Company (other than a registration of securities
in a Rule 145 transaction or with respect to an employee benefit plan), provided
that the Company is actively employing in good faith all reasonable efforts to
cause such registration statement to become effective;
(ii) After the Company has effected two such registrations
pursuant to this Section 2.2(a), and such registrations have been declared or
ordered effective; or
(iii) If the Company shall furnish to such Holders a
certificate signed by the Chairman of the Board of the Company stating that in
the good faith judgment of the Board of Directors it would be seriously
detrimental to the Company or its stockholders for a registration statement to
be filed at such time, then the Company's obligation to use its best efforts to
register, qualify or comply under this Section 2.2(a) shall be deferred for a
period not to exceed 120 days from the date of receipt of written request from
the Holders; provided, however, that the Company may not utilize this right more
than once in any twelve-month period.
(b) If the Holders initiating the registration request hereunder
(the "Initiating Holders") intend to distribute the Registrable Securities
covered by their request by means
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of an underwriting, they shall so advise the Company as a part of their request
made pursuant to this Section 2.2 and the Company shall include such information
in the written notice referred to in Section 2.2(a). In such event, the right of
any Holder to include his Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company as provided in Section 2.4(e)) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders.
Notwithstanding any other provision of this Section 2.2, if the underwriter
advises the Initiating Holders in writing that marketing factors require a
limitation of the number of shares to be underwritten, then the Company shall so
advise all Holders of Registrable Securities which would otherwise be
underwritten pursuant hereto, and the number of shares of Registrable Securities
that may be included in the underwriting shall be allocated among all Holders
thereof, including the Initiating Holders, in proportion (as nearly as
practicable) to the amount of Registrable Securities of the Company owned by
each Holder. In any event, the Holders shall have the first right to include all
of their shares in the offering before any other shares.
2.3 Piggyback Registration. If (but without any obligation to do so)
the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
stock or other securities under the Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, or a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities), the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon the
written request of each Holder given within twenty (20) days after mailing of
written notice by the Company, the Company shall, subject to the provisions of
Section 2.8, cause to be registered under the Act all of the Registrable
Securities that each such Holder has requested to be registered.
2.4 Obligations of the Company. Whenever required under this Section
2 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to ninety (90) days, or other period as
required in Section 2.12.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as
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may be necessary to comply with the provisions of the Act with respect to the
disposition of all securities covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement provided that such underwriting agreement
shall not provide for indemnification or contribution obligations on the part of
the holders greater than the obligations set forth in Section 2.10(b).
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 2, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 2, if such securities
are being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) if such offering is being
underwritten, a letter dated such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters.
2.5 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 2 with
respect to the Registrable Securities of
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any selling Holder that such holder shall furnish to the Company such
information regarding itself, the Registrable Securities held by it, and the
intended method of disposition of such securities as shall be required to effect
the registration of such Holder's Registrable Securities.
2.6 Expenses of Demand Registration. All expenses other than
underwriting discounts and commissions incurred in connection with the
registration, filing or qualification pursuant to Section 2.2 (which right may
be assigned as provided in Section 2.13), including all registration, filing and
qualification fees, printers' and accounting fees, fees and disbursements of
counsel for the Company, and the reasonable fees and disbursements of one
counsel for the selling Holders shall be borne by the Company; provided,
however, that the Company shall not be required to pay for any expenses of any
registration proceeding begun 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 a demand registration
pursuant to Section 2.2; provided further, however, that if at the time of such
withdrawal, the Holders have learned of a material adverse change in the
condition, business, or prospects of the Company from that known to the Holders
at the time of their request, then the Holders shall not be required to pay any
of such expenses and shall retain their rights pursuant to Section 2.2.
2.7 Expenses of Piggyback Registration. The Company shall bear and
pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 2.3 for each Holder (which right may be assigned as provided
in Section 2.13), including all registration, filing, and qualification fees,
printers and accounting fees relating or apportionable thereto and the fees and
disbursements of one counsel for the selling Holders selected by them, but
excluding underwriting discounts and commissions relating to Registrable
Securities.
2.8 Underwriting Requirements. In connection with any offering
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 2.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it, and then
only in such quantity as will not, in the opinion of the underwriters,
jeopardize the success of the offering by the Company; provided that such
underwriting agreement shall not provide for indemnification or contribution
obligations on the part of the Holders greater than the obligations set forth in
Section 2.10(b). If the total amount of securities, including Registrable
Securities, requested by stockholders to be included in such offering exceeds
the amount of securities sold other than by the Company that the underwriters
reasonably believe compatible with the success of the offering, then the Company
shall be required to include in the offering only that number of such
securities, including Registrable Securities, which the underwriters believe
will not jeopardize the success of the offering (the securities so included to
be apportioned pro rata among the selling stockholders according to the total
amount of securities entitled to be included therein owned by each selling
stockholder or in such other proportions as shall mutually be agreed to by such
selling stockholders,
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provided that the Holders shall have the first right to include all of their
shares in the offering before any shares held by other selling stockholders) and
in no event shall the Holder's shares be reduced below 25% of the shares sold in
any offering with the exception of the Qualified IPO. In the event the Company
reduces the number of Holder's shares included in the offering, as set forth in
the previous sentence, the underwriter must first set forth its reasons for the
reduction in writing. For purposes of apportionment, any selling stockholder
which is a Holder of Registrable Securities and which is a partnership or
corporation, the partners, retired partners and stockholders of such Holder, or
the estates and family members of any such partners and retired partners and any
trusts for the benefit of any of the foregoing persons shall be deemed to be a
single "selling stockholder", and any pro rata reduction with respect to such
"selling stockholder" shall be based upon the aggregate amount of shares
carrying registration rights owned by all entities and individuals included in
such "selling stockholder," as defined in this sentence.
2.9 Delay of Registration. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 2.
2.10 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 2:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, any underwriter (as defined in the Securities
Act) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Securities Act or the Securities Exchange
Act of 1934, amended (the "Exchange Act"), against any losses, claims, damages,
or liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law; and the Company will pay to each
such Holder, underwriter or controlling person, as incurred, any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this Section 2.10(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be liable in
any such case for any such loss, claim, damage, liability, or action to the
extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished
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<PAGE> 12
expressly for use in connection with such registration by any such Holder,
underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter,
any other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages, or liabilities (severally and not jointly) to which any of the
foregoing persons may become subject, under the Securities Act, the Exchange Act
or other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such registration;
and each such Holder will pay, as incurred, any legal or other expenses
reasonably incurred by any person intended to be indemnified pursuant to this
Section 2.10(b), in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this Section 2.10(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided, that, in no event shall any indemnity
under this Section 2.10(b) exceed the net proceeds from the offering received by
such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. If the indemnified party
fails to deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action, the indemnity party's liability
under this Section 2.10 shall be reduced to the extent such failure to notify
was prejudicial to the indemnifying party's ability to defend such action, but
the omission to so deliver written notice to the indemnifying party will not
relieve it of any liability that it may have to any indemnified party otherwise
than under this Section 2.10.
(d) If the indemnification provided for in Section 2.10 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
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amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, that in no event shall any contribution by a
Holder hereunder exceed the net proceeds from the offering received by such
Holder.
(e) The obligations of the Company and Holders under this
Section 2.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 2.
2.11 Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration of
its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements), or that it qualifies as a registrant whose securities may be
resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of
the most recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company, and (iii) such other information as may
be reasonably requested
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in availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
2.12 Form S-3 Registration.
(a) In case the Company shall receive from any Holder or Holders
who hold in excess of ten percent (10%) of the Company's Registrable Securities,
a written request or requests that the Company effect a registration on Form S-3
and any related qualification or compliance with respect to all or a part of the
Registrable Securities owned by such Holder or Holders, the Company will:
(i) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders;
and
(ii) as soon as practicable, effect such registration and
all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any other
Holder or Holders joining in such request as are specified in a written request
given within 15 days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 2.12: (1) if
Form S-3 is not available for such offering by the Holders; (2) if the Holders,
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $1,000,000; (3) if the
Company shall furnish to the Holders a certificate signed by the Chairman of the
Board of the Company stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its stockholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than 120 days after receipt of
the request of the Holder or Holders under this Section 2.12; provided, however,
that the Company shall not utilize this right more than once in any twelve (12)
month period; (4) if the Company has already effected one registration on Form
S-3 in any twelve (12) month period for the Holders pursuant to this Section
2.12; or (5) in any particular jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to service of
process in effecting such registration, qualification or compliance.
(b) If the Holders initiating the registration request hereunder
(the "Initiating Holders") intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise the
Company as part of their request made pursuant to this Section 2.12 and the
Company shall include such information in the written notice referred to in
Section 2.12(a)(i). In such event, the right of any Holder to include his
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the
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inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company as provided in Section 2.4(e)) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders.
Notwithstanding any other provision of this Section 2.12, if the underwriter
advises the Initiating Holders in writing that marketing factors require a
limitation of the number of shares to be underwritten, then the Company shall so
advise all Holders of Registrable Securities which would otherwise be
underwritten pursuant hereto, and the number of shares of Registrable Securities
that may be included in the underwriting shall be allocated among all Holders
thereof, including the Initiating Holders, in proportion (as nearly as
practicable) to the amount of Registrable Securities of the Company owned by
each Holder.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders and use its best efforts to keep such
registration statement effective until the registered shares are sold or for
three months, whichever comes first. All expenses incurred in connection with a
registration requested pursuant to Section 2.12, including all registration,
filing, qualification, printer's and accounting fees and the reasonable fees and
disbursements of one counsel for the selling Holders selected by them, but
excluding any underwriters' discounts or commissions associated with Registrable
Securities, shall be borne by the Company. Registrations effected pursuant to
this Section 2.12 shall not be counted as demands for registration or
registrations effected pursuant to Section 2.2 or 2.3, respectively.
2.13 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 2 may be
assigned by a Holder to a transferee or assignee who acquires at least 200,000
shares of Registrable Securities, provided 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 provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act. Notwithstanding the above, such rights may
be assigned by a Holder to a limited partner, general partner, former partner or
other affiliate of an Investor (the "Transferee") regardless of the number of
shares acquired by such Transferee.
2.14 Limitations on Subsequent Registration Rights. From and after the
date of this Agreement, the Company shall not, without the prior written consent
of the Holders of at least sixty percent (60%) of the outstanding Registrable
Securities, enter into any agreement with any holder or prospective holder of
any securities of the Company which would allow such holder or prospective
holder to include such securities in any registration filed under Section 2.2
hereof, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of his securities will not reduce the amount of the
Registrable Securities of the Holders which is included.
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2.15 "Market Stand-Off" Agreement. Each holder of securities which are
or at one time were Registrable Securities (or which are or were convertible
into Registrable Securities) hereby agrees that, during a period not to exceed
180 days, following the effective date of a registration statement of the
Company filed under the Securities Act, it shall not, to the extent requested by
the Company and such underwriter, sell or otherwise transfer or dispose of
(other than to donees, partners or former partners in accordance with their
partnership interests who agree to be similarly bound) any Registrable
Securities except Registrable Securities included in such registration;
provided, however, that:
(a) such agreement shall be applicable only to the first such
registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
and
(b) all officers and directors of the Company enter into similar
agreements. In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
2.16 Termination of Registration Rights. No stockholder shall be
entitled to exercise any right provided for in this Section 2 after five (5)
years following the Qualified IPO.
3. Right of First Offer.
3.1 Grant of Right.
(a) By Company. Subject to the terms and conditions specified in
this Section 3, the Company hereby grants to each Investor a right of first
offer with respect to future sales by the Company of its Future Shares (as
hereinafter defined) and grants to each holder of Series C Preferred Stock and
Series D Preferred Stock the rights set forth in Section 3.3.
(b) By Investors. Each Investor grants to the Company a right of
first offer with respect to all future sales of the shares listed opposite each
Investor's name on Schedule A attached hereto ("Investor Shares").
3.2 Future Shares. "Future Shares" shall mean shares of any capital
stock of the Company, whether now authorized or not, and any rights, options or
warrants to purchase such capital stock, and securities of any type that are, or
may become, convertible into such capital stock; provided however, that "Future
Shares" do not include (i) the shares of Preferred Stock or the Common Stock
issued or issuable upon the conversion of such Preferred Stock, (ii) securities
offered pursuant to the Qualified IPO, (iii) securities issued pursuant to the
acquisition of another corporation by the Company by merger of, purchase of
substantially all of the assets of or other reorganization, and (iv) up to
3,000,000 shares reserved for issuance under an incentive stock plan
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or other securities issued or issuable to officers, directors, employees,
consultants, strategic partners, licensors or lessors of the Company pursuant to
any employee or consultant stock offering, plan or arrangement.
3.3 Special Right of First Refusal in Qualified IPO
(a) In the event the Company proposes to undertake a Qualified
IPO subject to the conditions set forth in Section 3.3(b), the holders of Series
C Preferred Stock and Series D Preferred Stock shall have the right to purchase
their pro rata share of the shares issued in the Qualified IPO (the "Special
Right of First Refusal"). The provisions of Section 3.4 below shall apply to the
implementation of the Special Right of First Refusal.
(b) The underwriter of the Qualified IPO, in the exercise of its
reasonable judgment and discretion, may reduce or eliminate this Special Right
of First Refusal to the extent it is deemed reasonably necessary (i) to the
success of the offering due to marketing factors as set forth in writing no less
than one week prior to the anticipated effective date of the registration
statement covering such offering, or (ii) to comply with applicable SEC or NASD
rules and regulations for reasons set forth in writing no less than one day
prior to the anticipated effective date of the registration statement covering
such offering.
3.4 Notice. In the event the Company proposes to offer any of its
Future Shares, the Company shall first make an offering of such Future Shares to
each Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail (the
"Notice") to the Investors stating (i) its bona fide intention to offer such
Future Shares, (ii) the number of such Future Shares to be offered, (iii) the
price, if any, for which it proposes to offer such Future Shares, and (iv) a
statement as to the number of days from receipt of such Notice within which the
Investor must respond to such Notice.
(b) Within twenty (20) calendar days after receipt of the
Notice, the Investor may elect to purchase or obtain, at the price and on the
terms specified in the Notice, up to that portion of such Future Shares which
equals the proportion that the number of shares of Common Stock issued and held,
or issuable upon conversion of the Shares then held, by such Investor bears to
the total number of shares of Common Stock issued and outstanding, including
shares issuable upon conversion of convertible securities issued and
outstanding. The Company shall promptly, in writing, inform each Investor which
purchases all the Future Shares available to it (the "Fully-Exercising
Investor") of any other Investor's failure to do likewise. During the ten-day
period commencing after receipt of such information, each Fully-Exercising
Investor shall be entitled to obtain that portion of the Future Shares offered
to the Investors which was not subscribed for, which is equal to the proportion
that the number of shares of Common Stock issued and outstanding, or issuable
upon conversion of the Shares then held, held by such Fully-Exercising Investor
bears to the total number of shares of Common Stock issued and outstanding,
including shares issuable upon
-14-
<PAGE> 18
conversion of convertible securities issued and outstanding then held, held by
all Fully-Exercising Investors who wish to purchase some of the unsubscribed
shares. This Section 3.4 shall apply to the exercise of the rights of the Series
C Preferred Stock and Series D Preferred Stock set forth in Section 3.3 hereof;
for such purposes "Future Shares" shall mean the securities offered by the
Company in the Qualified IPO and such rights shall apply only to the holders of
Series C Preferred Stock and Series D Preferred Stock.
In the case of a proposed sale by an Investor:
(a) The Investor shall deliver a notice by certified mail (the
"Investor's Notice") to the Company stating (i) the Investor's bona fide
intention to offer the Investor Shares, (ii) the number of such Investor Shares
to be offered, (iii) the price for which it proposes to offer such Investor
Shares, and (iv) a statement as to the number of days from receipt of such
Investor's Notice within which the Company must respond to such Investor's
Notice.
(b) Within twenty (20) calendar days after receipt of the
Investor's Notice, the Company may elect to purchase or obtain, at the price and
on the terms specified in the Investor's Notice, all or a portion of the
Investor Shares so offered. If the Company elects not to purchase the Investor
shares, the Company shall promptly, in writing, inform each Investor of such
election. During the ten-day period commencing after receipt of such
information, each Investor shall be entitled to obtain that portion of the
Investor Shares offered, which is equal to the proportion that the number of
shares of Common Stock issued and outstanding, or issuable upon conversion of
the Shares then held, held by such Fully-Exercising Investor bears to the total
number of shares of Common Stock issued and outstanding, including shares
issuable upon conversion of convertible securities issued and outstanding then
held, held by all Investors (with the exception of the Investor proposing to
sell its shares) who wish to purchase some of the Investor Shares.
3.5 Sale after Notice
(a) By Company. If all such Future Shares referred to in the
Notice are not elected to be obtained as provided in Section 3.4 hereof, the
Company may, during the 90-day period following the expiration of the period
provided in Section 3.4 hereof, offer the remaining unsubscribed Future Shares
to any person or persons at a price not less than, and upon terms no more
favorable to the offeree than those specified in the Notice. If the Company does
not enter into an agreement for the sale of the Future Shares within such
period, or if such agreement is not consummated within ninety (90) days of the
execution thereof, the right provided hereunder shall be deemed to be revived
and such Future Shares shall not be offered unless first reoffered to the
Investors in accordance herewith.
(b) By Investor. If all such Investor Shares referred to in the
Investor's Notice are not elected to be purchased as provided in Section 3.4
hereof, the Investor may, during the 90-day period following the expiration of
the period provided in Section 3.4 hereof, offer the
-15-
<PAGE> 19
remaining unsubscribed Investor Shares to any person or persons at a price not
less than, and upon terms no more favorable to the offeree than those specified
in the Investor's Notice. If the Investor does not enter into an agreement for
the sale of the Investor Shares within such period, or if such agreement is not
consummated within 90 days of the execution thereof, the right provided
hereunder shall be deemed to be revived and such Investor Shares shall not be
offered unless first reoffered to the Company in accordance herewith.
3.6 Assignment. The right of first offer granted under this Section 3
is assignable by the Company without limitation and by the Investors to (i) any
partner or retired partner of any Investor which is a partnership, (ii) any
family member or trust for the benefit of any individual holder, (iii) any
shareholder of any Investor which is a corporation, (iv) any member of any
Investor who is limited liability company, or (v) any transferee who acquires at
least 200,000 shares of Series C Preferred Stock or Series D Preferred Stock;
provided the Company is given written notice thereof.
3.7 Termination of Rights. Neither the Company not any Investor shall
be entitled to exercise any right provided for in this Section 3 following the
Qualified IPO.
4. Information Rights; Board Observation Rights, Vesting
4.1 Financial Information. The Company will provide each Investor the
following reports for so long as the Investor is a holder of a minimum of
200,000 Shares or an equivalent amount of Conversion Stock or of an equivalent
combination of Shares and Conversion Stock (as adjusted for stock splits, stock
dividends, reorganizations, recapitalizations and other similar transactions) (a
"Major Investor"), including for purposes of this Section 4 any such Shares
which have been transferred to a constituent partner of an Investor:
(a) As soon as practicable after the end of each fiscal year,
and in any event within ninety (90) days thereafter, consolidated balance sheets
of the Company and its subsidiaries, if any, as of the end of such fiscal year,
and consolidated statements of income, stockholders' equity and cash flows of
the Company and its subsidiaries, if any, for such year, prepared in accordance
with generally accepted accounting principles and setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail and audited by independent public accountants of national standing
selected by the Company.
(b) As soon as practicable after the end of each fiscal quarter,
and in any event within twenty (20) days thereafter, a consolidated balance
sheet of the Company and its subsidiaries, if any, as of the end of each such
quarter, consolidated statements of income, consolidated statements of changes
in financial condition, and a consolidated statement of cash flow of the Company
and its subsidiaries for such period and for the current fiscal year to date,
and setting forth in each case in comparative form the figures for corresponding
periods in the previous fiscal year, and setting forth in comparative form the
budgeted figures for such period and for the current fiscal year then reported,
prepared in accordance with generally accepted accounting principles
-16-
<PAGE> 20
(other than for accompanying notes), subject to changes resulting from year-end
audit adjustments, all in reasonable detail and signed by the principal
financial or accounting officer of the Company.
(c) At least thirty (30) days prior to the beginning of each
fiscal year an annual budget and operating plans for such fiscal year (and as
soon as available, any subsequent revisions thereto); and
(d) As soon as practicable after the end of each month, and in
any event within twenty (20) days thereafter, a consolidated balance sheet of
the Company as of the end of each such month, and a consolidated statement of
income and a consolidated statement of cash flows of the Company for such month
and for the current fiscal year to date, including a comparison to plan figures
for such period, prepared in accordance with generally accepted accounting
principles consistently applied, with the exception that no notes need be
attached to such statements and year-end audit adjustments need not have been
made.
4.2 Inspection Rights. Each Major Investor shall have the right to
visit and inspect any of the properties of the Company or any of its
subsidiaries, and to discuss the affairs, finances and accounts of the Company
or any of its subsidiaries with its officers and to review such information as
is reasonably requested all at such reasonable times and as often as may be
reasonably requested; provided, however, that the Company shall not be obligated
under this Section 4.2 with respect to a competitor of the Company or with
respect to information which the Board of Directors believes in good faith upon
the advice of counsel is reasonably necessary to not disclose in order to
preserve the attorney client privilege.
4.3 Assignment of Rights. Subject to the limitations set forth in
Sections 4.1, the rights granted pursuant to Sections 4.1 and 4.2 may be
assigned or otherwise conveyed by the Investors or by any subsequent transferee
to an investor who acquires a minimum of 200,000 Shares, Conversion Stock, or a
combination thereof, other than a competitor of the Company, as reasonably
determined by the Board of Directors of the Company excluding any director with
an interest in such transferee, provided that written notice of such assignment
or conveyance is given to the Company.
4.4 Board Observation Rights
(a) Series C Observer. For as long as Amerindo Investors and its
affiliates holds Preferred Shares, a representative shall be invited to
participate in all meetings of the Board of Directors as an observer and the
Company shall send such observer a copy of all notices, minutes and other
materials distributed by the Company to the directors. The initial Series C
observer shall be Emeric McDonald. In the event Amerindo Investors wishes to
replace the Series C observer, the nominee to become the new Series C Observer
must be approved by a majority of the then current Board of Directors.
(b) Series D Observer. For as long as Omega Venture Partners and
its affiliates holds Preferred Shares, a representative shall be invited to
participate in all meetings of the
-17-
<PAGE> 21
Board of Directors as an observer and the Company shall send such observer a
copy of all notices, minutes and other materials distributed by the Company to
the directors. The initial Series D observer shall be Michael Stark. In the
event Omega Venture Partners wishes to replace the Series D observer, the
nominee to become the new Series D Observer must be approved by a majority of
the then current Board of Directors.
(c) Restrictions. The Company reserves the right to exclude the
Series C Observer and the Series D Observer from access to any material or
meeting or portion thereof if the Board of Directors believes in good faith upon
advice of counsel that such exclusion is reasonably necessary to preserve the
attorney-client privilege.
4.5 Termination of Covenants. The covenants set forth in Sections
4.1, 4.2 and 4.4, shall terminate and be of no further force or effect upon the
closing of the Company's initial underwritten public offering pursuant to an
effective registration statement filed by the Company under the Securities Act
(other than a registration of securities in a Rule 145 transaction or with
respect to an employee benefit plan).
4.6 Stock Vesting. Unless otherwise approved by the Board of
Directors, all stock options and other stock equivalents issued after the date
of this Agreement to employees, directors, consultants and other service
providers shall be subject to vesting as follows: (i) twenty-five percent (25%)
of such stock shall vest at the end of the first year following the earlier of
the date of issuance or such person's services commencement date with the
Company, and (ii) seventy-five percent (75%) of such stock shall vest monthly
over the remaining three (3) years. With respect to any shares of stock
purchased by any such person, the Company will have a repurchase option that
shall provide that upon such person's termination of employment or service with
the Company, with or without cause, the Company or its assignee (to the extent
permissible under applicable securities laws and other laws) shall have the
option to purchase at cost any unvested shares of stock held by such person. In
the event the Company does not exercise the repurchase option, the Company
hereby agrees to assign such right to the Investors on a pro rata basis.
5. Termination of Prior Rights Agreements. The Prior Rights Agreement is
hereby terminated and superseded by this Agreement. This termination is
effective upon the execution of this Agreement by Investors who are holders of a
sixty percent (60%) of the Registrable Securities under the Prior Rights
Agreement.
6. Waiver of Right of First Offer. To the extent that an Investor under
the Prior Rights Agreement is not purchasing its pro rata share of Series D
Preferred Stock pursuant to the Series D Agreement, all rights under the Right
of First Offer set forth in Section 3 of the Prior Rights Agreement to purchase
such securities are hereby waived. This waiver is effective upon the execution
of this Agreement by the holders of sixty percent (60%) of the Registrable
Securities under the Prior Rights Agreement.
-18-
<PAGE> 22
7. Miscellaneous Provisions.
7.1 Waivers and Amendments Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the holders of at least sixty
percent (60%) of the shares of Registrable Securities, provided, however, that
the rights of the Series C Preferred Stock shall not be materially changed
without the written consent of a majority of the holders of Series C Preferred
Stock and that the rights of the Series D Preferred Stock shall not be
materially changed without the written consent of more than two thirds (2/3) of
the holders of Series D Preferred Stock. In the event such amendment or waiver
adversely affects the rights and or obligations of any party under this
agreement in a different manner than other parties, such amendment or waiver
must be approved by the holders of more than two thirds (2/3) of the securities
held by the affected party. Any amendment or waiver effected in accordance with
this Section 7.1 shall be binding upon each person or entity which are granted
certain rights under this Agreement and the Company.
7.2 Notices. All notices and other communications required or
permitted hereunder shall be in writing and, except as otherwise noted herein,
shall be deemed effectively given upon personal delivery, delivery by nationally
recognized courier or five business days after deposit with the United States
Post Office (by first class mail, postage prepaid), addressed: (a) if to the
Company, at 12667 Alcosta Boulevard, Suite 300, San Ramon, California 94583 (or
at such other address as the Company shall have furnished to the Investors in
writing) attention of President and (b) if to an Investor, at the latest address
of such person shown on the Company's records.
7.3 Governing Law. This Agreement shall be governed by and
interpreted under the laws of the State of California as applied to agreements
among California residents, made and to be performed entirely within the State
of California.
7.4 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument, but only one of which
need be produced.
7.5 Expenses. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
7.6 Successors and Assigns. Except as otherwise expressly provided in
this Agreement, this Agreement shall benefit and bind the successors, assigns,
heirs, executors and administrators of the parties to this Agreement.
7.7 Entire Agreement; Superseding Prior Rights Agreement. This
Agreement constitutes the entire agreement among the parties hereto with respect
to the specific subject matter hereof. Without in any manner limiting the
foregoing, the parties hereto agree that this Agreement
-19-
<PAGE> 23
supersedes and replaces the Prior Rights Agreement, and that the Prior Rights
Agreement shall hereafter have no further force or effect.
7.8 Separability; Severability. Unless expressly provided in this
Agreement, the rights of each Investor under this Agreement are several rights,
not rights jointly held with any other Investors. Any invalidity, illegality or
limitation on the enforceability of this Agreement with respect to any Investor
shall not affect the validity, legality or enforceability of this Agreement with
respect to the other Investors. If any provision of this Agreement is judicially
determined to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not be affected or impaired.
7.9 Stock Splits. All references to numbers of shares in this
Agreement shall be appropriately adjusted to reflect any stock dividend, split,
combination, recapitalization, reorganization or other similar transaction of
shares by the Company occurring after the date of this Agreement.
7.10 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any Holder upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power or remedy nor shall it be construed to be a waiver of any such
breach, default or noncompliance or any acquiescence therein or of any similar
breach, default or noncompliance thereafter occurring. It is further agreed that
any waiver, permit, consent or approval of any kind or character on any Holder's
part of any breach, default or noncompliance under the Agreement or any waiver
on such Holder's part of any provisions or conditions of this Agreement must be
in writing and shall be effective only to the extent specifically set forth in
such writing. All remedies, either under this Agreement, by law, or otherwise
afforded to Holders shall be cumulative and not alternative.
7.11 Aggregation. For the purposes of determining the availability of
any rights under the transaction documents, all shares of the Series C Preferred
Stock and Series D Preferred Stock held by or acquired by affiliate entities,
entities under common management or persons associated with such entities shall
be aggregated together.
-20-
<PAGE> 24
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first set forth above.
COMPANY: ONDISPLAY, INC.
By:
------------------------------------
Title: President
Address: 12667 Alcosta Boulevard,
Suite 300
San Ramon, CA 95483
INVESTORS:
OMEGA VENTURES III, L.L.C.
By: RS Omega III Holdings, L.L.C.,
Authorized Signatory
By:
------------------------------------
Managing Member
Address:
RS & CO. OFFSHORE OMEGA VENTURES III
By: RS Omega III Holdings, L.L.C.,
Authorized Signatory
By:
------------------------------------
Managing Member
Address:
SIGNATURE PAGE
THIRD RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 25
OMEGA BAYVIEW, L.L.C.
By:
------------------------------------
Authorized Signatory
Address:
CROSSOVER FUND II, L.P.
By: Crossover Investment
Management, L.L.C., Its General
Partner
By:
------------------------------------
Michael J. Stark, Managing Member
Address:
COMDISCO, INC.
By:
------------------------------------
Title:
---------------------------------
Address: 6111 North River Road
Rosemont, IL 60018
Attn: Venture Group
---------------------------------------
BRET ARSENAULT
SIGNATURE PAGE
THIRD RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 26
----------------------------------------
Howard L. Karr & Louise C. Karr,
trustees, or the successor trustee(s),
of the Karr Family 1982 Trust,
dated 12/01/82, as amended
BANCBOSTON CAPITAL INC.
By:
------------------------------------
Title:
---------------------------------
Address:
ANDERSON ONDISPLAY, L.P.
By: Spring Creek Partners
its General Partner
By:
------------------------------------
Address: 330 Spring Creek Road
Rockford, IL 61107
ATGF II, a Panamanian Corporation
By:
------------------------------------
Alberto W. Vilar
Title: Director
----------------------------------------
Emeric McDonald
SIGNATURE PAGE
THIRD RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 27
----------------------------------------
James Stableford
NORWEST VENTURE PARTNERS VI, LP
By: Itasca VC Partners
By:
------------------------------------
Promod Haque, General Partner
MATRIX PARTNERS IV, L.P.
By: Matrix IV Management Co., L.P.,
its General Partner
By:
------------------------------------
Address: Bay Colony Corporate Center
1000 Winter Street,
Suite 4500
Waltham, MA 02154
MATRIX IV ENTREPRENEURS FUND, LP.
By:
------------------------------------
Address: Bay Colony Corporate Center
1000 Winter Street,
Suite 4500
Waltham, MA 02154
ATLAS VENTURE FUND II, L.P.
By:
------------------------------------
Title:
---------------------------------
Address:
SIGNATURE PAGE
THIRD RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 28
----------------------------------------
Robert S. Colman, as trustee under
declaration of trust dated 3/13/85 or
any successor trustee(s) under said
declaration of trust
WS INVESTMENT COMPANY 99A
By:
------------------------------------
Title:
---------------------------------
Address: 650 Page Mill Road
Palo Alto, CA 94304
----------------------------------------
Mario M. Rosati
----------------------------------------
Peggy Taylor
----------------------------------------
Mark Olsen
----------------------------------------
Anthony Damaschino
SIGNATURE PAGE
THIRD RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 29
W.W. GRAINGER, INC.
By:
------------------------------------
P. O. Loux
Senior Vice President, Finance &
Chief Financial Officer
Address: 100 Grainger Parkway
Lake Forest, IL 60045
EXPERTEYES EXPANSIONS CAPITAL N.V.
By:
------------------------------------
Title:
---------------------------------
Address: Ajuinlei 1
B-9000 Gent -- Belgium
SIGNATURE PAGE
THIRD RESTGATED INVESTOR RIGHTS AGREEMENT
<PAGE> 30
EXHIBIT A
LIST OF INVESTORS
<TABLE>
<CAPTION>
PREFERRED
INVESTOR NAME AND ADDRESS NUMBER OF SHARES SERIES
- ------------------------- ---------------- ---------
<S> <C> <C>
ExpertEyes Expansions Capital N.V. 36,765 Series D
W.W. Grainger, Inc. 315,126 Series D
Omega Ventures III, L.L.C. 204,516 Series D
RS & Co. Offshore Omega Ventures III 318,921 Series D
Omega Bayview, L.L.C. 28,196 Series D
Crossover Fund II, L.P. 52,358 Series D
BancBoston Capital Inc. 210,084 Series D
Anderson OnDisplay, L.P. (Spring Creek Partners) 26,261 Series D
Comdisco Ventures 105,042 Series D
Bret Arsenault 10,504 Series D
Howard L. Karr & Louise C. Karr, trustees, or the successor
trustee(s), of the Karr Family 1982 Trust, dated 12/01/82, as
amended. 2,101 Series D
52,521 Series D
ATFG II, a Panamanian Corporation 945,000 Series C
52,521 Series D
Emeric McDonald 50,000 Series C
James Stableford 5,000 Series C
119,088 Series D
500,000 Series C
Norwest Venture Partners VI, LP 1,904,762 Series B
130,353 Series D
323,864 Series C
598,376 Series B
Matrix Partners IV, L.P. 1,710,000 Series A
6,861 Series D
17,045 Series C
31,494 Series B
Matrix IV Entrepreneurs Fund, L.P. 90,000 Series A
</TABLE>
<PAGE> 31
EXHIBIT A
LIST OF INVESTORS
<TABLE>
<CAPTION>
PREFERRED
INVESTOR NAME AND ADDRESS NUMBER OF SHARES SERIES
- ------------------------- ---------------- ---------
<S> <C> <C>
52,521 Series D
284,091 Series C
524,892 Series B
Atlas Venture Fund II, L.P. 1,500,000 Series A
Robert S. Colman, as trustee under declaration of trust dated
3/13/85 or any successor trustee(s) under said declaration of trust 15,248 Series C
119,047 Series B
11,905 Series B
John Mandile 100,000 Series A
4,727 Series C
11,905 Series B
WS Investments (Mario Rosati) 25,000 Series A
Peggy Taylor 25,000 Series C
Mark Olsen 12,500 Series C
Anthony Damaschino 5,000 Series C
Qamar Aziz 75,000 Series A
</TABLE>
<PAGE> 1
EXHIBIT 10.2
ONDISPLAY, INC.
AMENDED AND RESTATED 1996 STOCK PLAN
1. Purposes of the Plan. The purposes of this 1996 Stock Plan are:
- to attract and retain the best available personnel for positions
of substantial responsibility,
- to provide additional incentive to Employees, Directors and
Consultants, and
- to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. 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 as shall
be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a committee of Directors appointed by the Board
in accordance with Section 4 of the Plan.
(f) "Common Stock" means the common stock of the Company.
(g) "Company" means OnDisplay, Inc., a Delaware corporation.
(h) "Consultant" means any person, including an advisor, engaged by
the Company or a Parent or Subsidiary to render services to such entity.
(i) "Director" means a member of the Board.
<PAGE> 2
(j) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "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 Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, 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 regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(p) "Notice of Grant" means a written or electronic notice evidencing
certain terms and conditions of an individual Option or Stock Purchase Right
grant. The Notice of Grant is part of the Option Agreement.
-2-
<PAGE> 3
(q) "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.
(r) "Option" means a stock option granted pursuant to the Plan.
(s) "Option Agreement" means an agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.
(t) "Option Exchange Program" means a program whereby outstanding
Options are surrendered in exchange for Options with a lower exercise price.
(u) "Optioned Stock" means the Common Stock subject to an Option or
Stock Purchase Right.
(v) "Optionee" means the holder of an outstanding Option or Stock
Purchase Right granted under the Plan.
(w) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(x) "Plan" means this Amended and Restated 1996 Stock Plan.
(y) "Restricted Stock" means shares of Common Stock acquired pursuant
to a grant of Stock Purchase Rights under Section 11 of the Plan.
(z) "Restricted Stock Purchase Agreement" means a written agreement
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.
(aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(bb) "Section 16(b) " means Section 16(b) of the Exchange Act.
(cc) "Service Provider" means an Employee, Director or Consultant.
(dd) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(ee) "Stock Purchase Right" means the right to purchase Common Stock
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ff) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
-3-
<PAGE> 4
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 2,550,000 Shares, plus an annual increase to be added on the
first day of the Company's fiscal year beginning in [YEAR], equal to the lesser
of (i) [________] shares, (ii) [___%] of the outstanding shares on such date or
(iii) a lesser amount determined by the Board. The Shares may be authorized, but
unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
the Plan, whether upon exercise of an Option or Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be administered
by different Committees with respect to different groups of Service Providers.
(ii) Section 162(m). To the extent that the Administrator
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder
shall be structured to satisfy the requirements for exemption under Rule 16b-3.
(iv) Other Administration. Other than as provided above, the Plan
shall be administered by (A) the Board or (B) a Committee, which committee shall
be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to 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;
(ii) to select the Service Providers to whom Options and Stock
Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;
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<PAGE> 5
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any Option or Stock Purchase Right granted hereunder.
Such terms and conditions include, but are not limited to, the exercise 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
or Stock Purchase Right or the shares of Common Stock relating thereto, based in
each case on such factors as the Administrator, in its sole discretion, shall
determine;
(vi) to reduce the exercise price of any Option or Stock Purchase
Right to the then current Fair Market Value if the Fair Market Value of the
Common Stock covered by such Option or Stock Purchase Right shall have declined
since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(x) to modify or amend each Option or Stock Purchase Right
(subject to Section 15(c) of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon exercise
of an Option or Stock Purchase Right 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. All elections by an Optionee to have Shares
withheld for this purpose shall be made in such form and under such conditions
as the Administrator may deem necessary or advisable;
(xii) to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Option or Stock Purchase Right
previously granted by the Administrator;
(xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights.
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<PAGE> 6
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may
be granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
6. Limitations.
(a) Each Option shall be designated in the Option Agreement as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal year of
the Company, Options to purchase more than [] Shares.
(ii) In connection with his or her initial service, a Service
Provider may be granted Options to purchase up to an additional [] Shares which
shall not count against the limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 13.
(iv) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 13), the cancelled Option will be counted against the
limits set forth in subsections (i) and (ii) above. For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 19 of the 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 terminated earlier under Section 15 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Option
Agreement. In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Option Agreement. Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock
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<PAGE> 7
Option shall be five (5) years from the date of grant or such shorter term as
may be provided in the Option Agreement.
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 determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive
Stock 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 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 Employee other than an Employee
described in paragraph (A) immediately above, 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, the per Share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with
a per Share exercise price of less than 100% of the Fair Market Value per Share
on the date of grant pursuant to a merger or other corporate transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised.
(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six months
on the date of surrender, and
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<PAGE> 8
(B) 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;
(v) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement;
(vii) any combination of the foregoing methods of payment; or
(viii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. Unless the Administrator provides otherwise,
vesting of Options granted hereunder shall be tolled during any unpaid leave of
absence. An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i) written
or electronic notice of exercise (in accordance with the Option Agreement) from
the person entitled to exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan. Shares issued upon exercise of
an Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse. Until the Shares
are 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 Shares 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 Shares are issued, except as provided
in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the number of Shares
thereafter 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 Relationship as a Service Provider. If an Optionee
ceases to be a Service Provider, other than upon the Optionee's death or
Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the
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<PAGE> 9
Optionee's termination. If, on the date of termination, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified by the
Administrator, the Option shall terminate, and the Shares covered by such Option
shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
to the extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider,
the Option may be exercised within such period of time as is specified in the
Option Agreement (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee's estate or by a
person who acquires the right to exercise the Option by bequest or inheritance,
but only to the extent that the Option is vested on the date of death. In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee's termination. If, at
the time of death, the Optionee is not vested as to his or her entire Option,
the Shares covered by the unvested portion of the Option shall immediately
revert to the Plan. The Option may be exercised by the executor or administrator
of the Optionee's estate or, if none, by the person(s) entitled to exercise the
Option under the Optionee's will or the laws of descent or distribution. If the
Option is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(e) 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.
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 or electronically, by means of a Notice of Grant, of the
terms, conditions and restrictions related to the offer, including the number of
Shares that the offeree shall be entitled to purchase, the price to be paid, and
the time within which the offeree must accept such offer. The offer shall be
accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.
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<PAGE> 10
(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 service with the Company for any reason (including death or
Disability). 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 cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.
(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.
(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. Non-Transferability of Options and Stock Purchase Rights. Unless
determined otherwise by the Administrator, 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. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
13. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(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 and 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.
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<PAGE> 11
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. To the extent it has not been previously exercised, an Option or
Stock Purchase Right will terminate immediately prior to the consummation of
such proposed action.
(c) Merger or Asset Sale. In the event of a merger, sale or
reorganization of the Company with or into any other corporation or corporations
or a sale of all or substantially all of the assets or outstanding stock of the
Company, in which transaction the Company's stockholders immediately prior to
such transaction own immediately after such transaction less than 50% of the
equity securities of the surviving corporation or its parent, all Options that
have not been terminated in accordance with the Stock Option Agreement that will
become vested within 18 months of the closing date of such merger, sale or
reorganization will be accelerated. In the event of a merger of the Company with
or into another corporation, each outstanding Option or Stock Purchase Right may
be assumed or an equivalent option or right may be substituted by such successor
corporation or a parent or subsidiary of such successor corporation. If, in such
event, an Option or Stock Purchase Right is not assumed or substituted, the
Option or Stock Purchase Right shall terminate as of the date of the closing of
the merger. For the purposes of this paragraph, the Option or Stock Purchase
Right shall be considered assumed if, following the merger, the Option or Stock
Purchase Right confers the right to purchase or receive, for each Share of
Optioned Stock subject to the Option or Stock Purchase Right immediately prior
to the merger, the consideration (whether stock, cash, or other securities or
property) received in the merger by holders of Common Stock for each Share held
on the effective date of the transaction (and if the holders are offered a
choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares). If such consideration received in the
merger is 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 the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right, 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 merger.
14. Date of Grant. The date of grant of an Option or Stock Purchase Right
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall be
provided to each Optionee 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 terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
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<PAGE> 12
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
16. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the issuance and delivery of such Shares shall
comply with Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
(b) Investment Representations. 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.
17. Inability to Obtain Authority. 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. 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. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
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<PAGE> 13
ONDISPLAY, INC.
AMENDED AND RESTATED 1996 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
<TABLE>
<S> <C>
Grant Number ____________________________________
Date of Grant ____________________________________
Vesting Commencement Date ____________________________________
Exercise Price per Share $___________________________________
Total Number of Shares Granted ____________________________________
Total Exercise Price $___________________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: ____________________________________
</TABLE>
Vesting Schedule:
Subject to accelerated vesting as set forth below, this Option may be
exercised, in whole or in part, in accordance with the following schedule:
25% of the Shares subject to the Option shall vest twelve months after
the Vesting Commencement Date, and 1/48 of the Shares subject to the Option
shall vest each month thereafter, subject to the Optionee continuing to be a
Service Provider on such dates.
<PAGE> 14
Termination Period:
This Option may be exercised for three months after Optionee ceases to
be a Service Provider. Upon the death or Disability of the Optionee, this Option
may be exercised for twelve months after Optionee ceases to be a Service
Provider. In no event shall this Option be exercised later than the
Term/Expiration Date as provided above.
II. AGREEMENT
A. Grant of Option.
The Plan Administrator of the Company hereby grants to the
Optionee named in the Notice of Grant attached as Part I of this Agreement (the
"Optionee") an option (the "Option") to purchase the number of Shares, as 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 and conditions of
the Plan, which is incorporated herein by reference. Subject to Section 15(c) of
the Plan, in the event of a conflict between the terms and conditions of the
Plan and the terms and conditions of this Option Agreement, the terms and
conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
B. 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 Grant and
the applicable provisions of the Plan and this 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
completed by the Optionee and delivered to 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 Applicable Laws. 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.
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<PAGE> 15
C. 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:
1. cash; or
2. check; or
3. consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan; or
4. 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; or
5. a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program.
D. 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 the Optionee. The terms of the Plan and this
Option Agreement shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
E. 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 Agreement.
F. Tax Consequences.
Some of the federal tax consequences relating to this Option, as
of the date of this Option, are set forth below. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE
SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE
SHARES.
1. Exercising the Option.
(a) Nonstatutory Stock Option. The Optionee may incur
regular federal income tax liability upon exercise of a NSO. 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. If
the Optionee is an Employee or a former Employee, the Company will be required
to withhold from
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<PAGE> 16
his or her compensation or collect from Optionee and pay to the applicable
taxing authorities an amount in cash equal to a percentage of this compensation
income at the time of exercise, and may refuse to honor the exercise and refuse
to deliver Shares if such withholding amounts are not delivered at the time of
exercise.
(b) Incentive Stock Option. If this Option qualifies as
an ISO, the Optionee will have no regular federal income tax liability upon its
exercise, although the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price will be
treated as an adjustment to alternative minimum taxable income for federal tax
purposes and may subject the Optionee to alternative minimum tax in the year of
exercise. In the event that the Optionee ceases to be an Employee but remains a
Service Provider, any Incentive Stock Option of the Optionee that remains
unexercised shall cease to qualify as an Incentive Stock Option and will be
treated for tax purposes as a Nonstatutory Stock Option on the date three (3)
months and one (1) day following such change of status.
2. Disposition of Shares.
(a) NSO. If the Optionee holds NSO Shares for at least
one year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes.
(b) ISO. If the Optionee holds ISO Shares for at least
one year after exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, 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 lesser of (A) the difference
between the Fair Market Value of the Shares acquired on the date of exercise and
the aggregate Exercise Price, or (B) the difference between the sale price of
such Shares and the aggregate Exercise Price. Any additional gain will be taxed
as capital gain, short-term or long-term depending on the period that the ISO
Shares were held.
(c) Notice of Disqualifying Disposition of ISO Shares.
If the Optionee sells or otherwise disposes of any of the Shares acquired
pursuant to an ISO on or before the later of (i) two years after the grant date,
or (ii) one year after the exercise date, the Optionee shall immediately notify
the Company in writing of such disposition. The Optionee agrees that he or she
may be subject to income tax withholding by the Company on the compensation
income recognized from such early disposition of ISO Shares by payment in cash
or out of the current earnings paid to the Optionee.
G. Entire Agreement; Governing Law.
The Plan is incorporated herein by reference. The Plan and this
Option Agreement constitute the entire agreement of the parties with respect to
the subject matter hereof and supersede in their entirety all prior undertakings
and agreements of the Company and Optionee with respect to the subject matter
hereof, and may not be modified adversely to the Optionee's interest except by
means of a writing signed by the Company and Optionee. The internal substantive
laws, but not the choice of law rules, of California govern this agreement.
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<PAGE> 17
H. NO GUARANTEE OF CONTINUED SERVICE.
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES
PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A
SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING
HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER). OPTIONEE FURTHER
ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED
HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS
OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING
PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT
OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE
PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
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 Option
Agreement. Optionee has reviewed the Plan and this Option Agreement in their
entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Option Agreement and fully understands all provisions of the Plan
and 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 Option Agreement. Optionee further agrees to
notify the Company upon any change in the residence address indicated below.
OPTIONEE: ONDISPLAY, INC.
- ----------------------------------- -----------------------------------
Signature By
- ----------------------------------- -----------------------------------
Print Name Title
- ----------------------------------- -----------------------------------
Residence Address
- -----------------------------------
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<PAGE> 18
EXHIBIT A
ONDISPLAY, INC.
AMENDED AND RESTATED 1996 STOCK PLAN
EXERCISE NOTICE
OnDisplay, Inc.
[address]
Attention: [Title]
1. Exercise of Option. Effective as of today, ________________,
_____, the undersigned ("Purchaser") hereby elects to purchase ______________
shares (the "Shares") of the Common Stock of OnDisplay, Inc. (the "Company")
under and pursuant to the Amended and Restated 1996 Stock Plan (the "Plan") and
the Stock Option Agreement dated, _____ (the "Option Agreement"). The purchase
price for the Shares shall be $_____, as required by the Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the
full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
4. Rights as Shareholder. 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 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 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 of issuance, except as provided in Section 13 of the
Plan.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
<PAGE> 19
6. Entire Agreement; Governing Law. The Plan and Option Agreement
are incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing signed by the Company and Purchaser. The internal substantive
laws, but not the choice of law rules, of California govern this agreement.
Submitted by: Accepted by:
PURCHASER: ONDISPLAY, INC.
- ----------------------------------- -----------------------------------
Signature By
- ----------------------------------- -----------------------------------
Print Name Its
Address: Address:
- ----------------------------------- OnDisplay, Inc.
- ----------------------------------- [address]
-----------------------------------
Date Received
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<PAGE> 1
EXHIBIT 10.3
ONDISPLAY, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1999 Employee Stock Purchase
Plan of On Display, 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 through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall 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" shall mean the Board of Directors of the Company or any
committee thereof designated by the Board of Directors of the Company in
accordance with Section 14 of the Plan.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the common stock of the Company.
(d) "Company" shall mean OnDisplay, Inc., a Deleware Corporation, and
any Designated Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross earnings
and commissions, but exclusive of payments for overtime, shift premium,
incentive compensation, incentive payments, bonuses and other compensation.
(f) "Designated Subsidiary" shall mean any Subsidiary that has been
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the
Company for tax purposes whose customary employment with the Company is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
(h) "Enrollment Date" shall mean the first Trading Day of each
Offering Period.
(i) "Exercise Date" shall mean the last Trading Day of each Purchase
Period.
<PAGE> 2
(j) "Fair Market Value" shall mean, 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 Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, 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 date of determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock prior
to the date of determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable;
(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
Board; or
(iv) For purposes of the Enrollment Date of the first Offering
Period under the Plan, the Fair Market Value shall be the initial price to the
public as set forth in the final prospectus included within the registration
statement in Form S-1 filed with the Securities and Exchange Commission for the
initial public offering of the Company's Common Stock (the "Registration
Statement").
(k) "Offering Periods" shall mean the periods of approximately
twenty-four (24) months during which an option granted pursuant to the Plan may
be exercised, commencing on the first Trading Day on or after [_____________]
and [______________] of each year and terminating on the last Trading Day in the
periods ending twenty-four months later; provided, however, that the first
Offering Period under the Plan shall commence with the first Trading Day on or
after the date on which the Securities and Exchange Commission declares the
Company's Registration Statement effective and ending on the last Trading Day on
or before [______________]. The duration and timing of Offering Periods may be
changed pursuant to Section 4 of this Plan.
(l) "Plan" shall mean this 1999 Employee Stock Purchase Plan.
(m) "Purchase Period" shall mean the approximately six month period
commencing after one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of any Offering Period shall commence on
the Enrollment Date and end with the next Exercise Date.
(n) "Purchase Price" shall mean 85% of the Fair Market Value of a
share of Common Stock on the Enrollment Date or on the Exercise Date, whichever
is lower; provided however, that the Purchase Price may be adjusted by the Board
pursuant to Section 20.
(o) "Reserves" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
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<PAGE> 3
(p) "Subsidiary" shall mean 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.
(q) "Trading Day" shall mean a day on which national stock exchanges
and the Nasdaq System are open for trading.
3. Eligibility.
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
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 such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares 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 consecutive,
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after [_______________] and [_______________] each year, or on
such other date as the Board shall determine, and continuing thereafter until
terminated in accordance with Section 20 hereof; provided, however, that the
first Offering Period under the Plan shall commence with the first Trading Day
on or after the date on which the Securities and Exchange Commission declares
the Company's Registration Statement effective and ending on the last Trading
Day on or before [________________]. The Board shall have the power to change
the duration of Offering Periods (including the commencement dates thereof) with
respect to future offerings without shareholder approval if such change is
announced at least five (5) days prior to the scheduled beginning of the first
Offering Period to be affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
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<PAGE> 4
6. Payroll Deductions.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding [_______________ (__%)] of
the Compensation which he or she receives on each pay day during the Offering
Period.
(b) All payroll deductions made for a participant shall be credited
to his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may increase or decrease the rate of
his or her payroll deductions during the Offering Period by completing or filing
with the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at any time during a
Purchase Period. Payroll deductions shall recommence at the rate provided in
such participant's subscription agreement at the beginning of the first Purchase
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than
[___________] shares of the Company's Common Stock (subject to any adjustment
pursuant to Section 19), and provided further that such purchase shall be
subject to the limitations set forth in Sections 3(b) and 12 hereof. The Board
may, for future Offering Periods, increase or decrease, in its absolute
discretion, the maximum number of shares of
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<PAGE> 5
the Company's Common Stock an Employee may purchase during each Purchase Period
of such Offering Period. Exercise of the option shall occur as provided in
Section 8 hereof, unless the participant has withdrawn pursuant to Section 10
hereof. The option shall expire on the last day of the Offering Period.
8. Exercise of Option.
(a) Unless a participant withdraws from the Plan as provided in
Section 10 hereof, his or her option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; 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
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.
(b) If the Board determines that, on a given Exercise 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 Enrollment Date of the applicable Offering Period, or (ii) the
number of shares available for sale under the Plan on such Exercise Date, the
Board may in its sole discretion (x) provide that the Company shall make a pro
rata allocation of the shares of Common Stock available for purchase on such
Enrollment Date or Exercise 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
Exercise Date, and continue all Offering Periods then in effect, or (y) provide
that the Company shall make a pro rata allocation of the shares available for
purchase on such Enrollment Date or Exercise 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 Exercise Date, and terminate any or all Offering Periods
then in effect pursuant to Section 20 hereof. The Company may make pro rata
allocation of the shares available on the Enrollment 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
shareholders subsequent to such Enrollment Date.
9. Delivery. As promptly as practicable after each Exercise Date on which
a purchase of shares occurs, the Company shall arrange the delivery to each
participant, as appropriate, of a certificate representing the shares purchased
upon exercise of his or her option.
10. Withdrawal.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account shall be paid to such participant
-5-
<PAGE> 6
promptly after receipt of notice of withdrawal and such participant's option for
the Offering Period shall be automatically terminated, and no further payroll
deductions for the purchase of shares shall be made for such Offering Period. If
a participant withdraws from an Offering Period, payroll deductions shall not
resume at the beginning of the succeeding Offering Period unless the participant
delivers to the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall not have
any effect upon his or her eligibility to participate in any similar plan which
may hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the participant
withdraws.
11. Termination of Employment.
Upon a participant's ceasing to be an Employee, for any reason, he or she
shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period,
but not yet used to exercise the option, shall be returned to such participant
or, in the case of his or her death, to the person or persons entitled thereto
under Section 15 hereof, and such participant's option shall be automatically
terminated. The preceding sentence notwithstanding, a participant who receives
payment in lieu of notice of termination of employment shall be treated as
continuing to be an Employee for the participant's customary number of hours per
week of employment during the period in which the participant is subject to such
payment in lieu of notice.
12. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
13. Stock.
(a) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be [_____________ (__________)] shares plus an annual increase to be added
on the first day of the Company's fiscal year beginning in [Year], equal to the
lesser of (i) [______] shares, (ii) [___%] of the outstanding shares on such
date or (iii) a lesser amount determined by the Board.
(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.
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<PAGE> 7
14. Administration. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
15. 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 an Exercise Date
on which the option is exercised but prior to delivery to such participant 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 exercise of the
option. 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
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, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
16. Transferability. Neither payroll deductions 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 15 hereof) 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 from an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions 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 payroll deductions.
18. Reports. Individual accounts shall be maintained for each participant
in the Plan. Statements of account shall be given to participating Employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
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<PAGE> 8
19. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the Reserves, the maximum number of shares each
participant may purchase each Purchase Period (pursuant to Section 7), as well
as the price per share and the number of shares 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 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 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) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering Period
as provided in Section 10 hereof.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, any Purchase Periods
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date") and any Offering Periods then in progress shall end on the New
Exercise Date. The New Exercise Date shall be before the date of the Company's
proposed sale or merger. The Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
20. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 19 hereof, no
such termination can
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<PAGE> 9
affect options previously granted, provided that an Offering Period may be
terminated by the Board of Directors on any Exercise Date if the Board
determines that the termination of the Offering Period or the Plan is in the
best interests of the Company and its shareholders. Except as provided in
Section 19 and this Section 20 hereof, no amendment may make any change in any
option theretofore granted which adversely affects the rights of any
participant. To the extent necessary to comply with Section 423 of the Code (or
any successor rule or provision or any other applicable law, regulation or stock
exchange rule), the Company shall obtain shareholder approval in such a manner
and to such a degree as required.
(b) Without shareholder 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.
(c) In the event the Board determines that the ongoing operation of
the Plan may result in unfavorable financial accounting consequences, the Board
may, in its discretion and, to the extent necessary or desirable, modify or
amend the Plan to reduce or eliminate such accounting consequence including, but
not limited to:
(i) altering the Purchase Price for any Offering Period
including an Offering Period underway at the time of the change in Purchase
Price;
(ii) shortening any Offering Period so that Offering Period ends
on a new Exercise Date, including an Offering Period underway at the time of the
Board action; and
(iii) allocating shares.
Such modifications or amendments shall not require stockholder approval or
the consent of any Plan participants.
21. 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.
22. 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 Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock
-9-
<PAGE> 10
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.
23. 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. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 20 hereof.
24. Automatic Transfer to Low Price Offering Period. To the extent
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period as of the first day thereof.
-10-
<PAGE> 11
EXHIBIT A
ONDISPLAY, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: ___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. ____________________ hereby elects to participate in the OnDisplay, Inc.
Employee Stock Purchase Plan (the "Employee Stock Purchase Plan") and
subscribes to purchase shares of the Company's Common Stock in accordance
with this Subscription Agreement and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday (from 1 to _____%) during the
Offering Period in accordance with the Employee Stock Purchase Plan.
(Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in
all respects subject to the terms of the Plan. I understand that my ability
to exercise the option under this Subscription Agreement is subject to
shareholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only).
6. I understand that if I dispose of any shares received by me pursuant to the
Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after the
Exercise Date, I will be treated for federal income tax purposes as having
received ordinary income at the time of such disposition in an amount equal
to the excess of the fair market value of the shares at the time such
shares were purchased by me over the price which I paid for the shares. I
hereby agree to notify the Company in writing within 30 days after the date
of any disposition of my shares and I will make adequate provision for
Federal, state or other tax withholding obligations, if any, which arise
upon the
<PAGE> 12
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 sale or early disposition of Common Stock by me. If I dispose of such
shares at any time after the 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 income only at the time of such disposition,
and that such income will be taxed as ordinary 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, or (2) 15% of the fair market value of the shares on
the first day of the Offering Period. The remainder of the gain, if any,
recognized on such disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon my
eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)_____________________________________________________
(First) (Middle) (Last)
_________________________ __________________________________________
Relationship
__________________________________________
(Address)
-2-
<PAGE> 13
Employee's Social
Security Number: ____________________________________
Employee's Address: ____________________________________
____________________________________
____________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:_________________________ ____________________________________
Signature of Employee
____________________________________
Spouse's Signature
(If beneficiary other than spouse)
-3-
<PAGE> 14
EXHIBIT B
ONDISPLAY, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the OnDisplay, Inc.
Employee Stock Purchase Plan which began on ____________, ______ (the
"Enrollment Date") hereby notifies the Company that he or she hereby withdraws
from the Offering Period. He or she hereby directs the Company to pay to the
undersigned as promptly as practicable all the payroll deductions credited to
his or her account with respect to such Offering Period. The undersigned
understands and agrees that his or her option for such Offering Period will be
automatically terminated. The undersigned understands further that no further
payroll deductions will be made for the purchase of shares in the current
Offering Period and the undersigned shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new Subscription
Agreement.
Name and Address of Participant:
--------------------------------
--------------------------------
--------------------------------
Signature:
--------------------------------
Date:
---------------------------
<PAGE> 1
EXHIBIT 10.4
ONDISPLAY, INC.
FORM OF
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is effective as of September
__, 1999 by and between OnDisplay, Inc., a Delaware corporation (the "Company"),
and <<NAME>> ("Indemnitee").
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve the Company and its related
entities;
WHEREAS, in order to induce Indemnitee to continue to provide services to
the Company, the Company wishes to provide for the indemnification of, and the
advancement of expenses to, Indemnitee to the maximum extent permitted by law;
WHEREAS, the Company and Indemnitee recognize the continued difficulty in
obtaining liability insurance for the Company's directors, officers, employees,
agents and fiduciaries, the significant increases in the cost of such insurance
and the general reductions in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, agents and fiduciaries to expensive litigation risks at the same time
as the availability and coverage of liability insurance has been severely
limited; and
WHEREAS, in connection with the Company's reincorporation, the Company and
Indemnitee desire to continue to have in place the additional protection
provided by an indemnification agreement, with such changes as are required to
conform the existing agreement to Delaware law and to provide indemnification
and advancement of expenses to the Indemnitee to the maximum extent permitted by
Delaware law;
WHEREAS, in view of the considerations set forth above, the Company desires
that Indemnitee shall be indemnified and advanced expenses by the Company as set
forth herein;
NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth below.
1. Certain Definitions.
a. "Change in Control" shall mean, and shall be deemed to have
occurred if, on or after the date of this Agreement, (i) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended), other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company acting in such capacity or a corporation
owned directly or indirectly by the stockholders of the Company in substantially
the same proportions as their ownership of stock of the Company, becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing more than 50% of the total
voting power represented by the Company's then outstanding Voting Securities,
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors of the Company and
any new director whose election by the Board of Directors or nomination for
election by the Company's stockholders was approved by a vote of at least two
thirds (2/3) of the directors then still in office who either were directors at
the beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority thereof,
(iii) the stockholders of the Company approve a merger or consolidation of the
Company with any other corporation other than a merger or consolidation which
would result in the Voting Securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into Voting Securities of the surviving entity) at least 80% of
the total voting power represented by the Voting Securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or (iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of (in one transaction or a series of related transactions) all
or substantially all of the Company's assets.
b. "Claim" shall mean with respect to a Covered Event: any
threatened, pending or completed action, suit, proceeding or alternative dispute
resolution mechanism, or any hearing, inquiry or investigation that Indemnitee
in good faith believes might lead to the institution of any such action, suit,
proceeding or alternative dispute resolution mechanism, whether civil, criminal,
administrative, investigative or other.
c. References to the "Company" shall include, in addition to
OnDisplay, Inc., any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger to which OnDisplay, Inc. (or
any of its wholly owned subsidiaries) is a party which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees, agents or fiduciaries, so that if Indemnitee is
or was a director, officer, employee, agent or fiduciary of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee, agent or fiduciary of another corporation,
partnership, joint venture, employee benefit plan, trust or other enterprise,
Indemnitee shall stand in the same position under the provisions of this
Agreement with respect to the resulting or surviving corporation as Indemnitee
would have with respect to such constituent corporation if its separate
existence had continued.
d. "Covered Event" shall mean any event or occurrence related to the
fact that Indemnitee is or was a director, officer, employee, agent or fiduciary
of the Company, or any subsidiary of the Company, or is or was serving at the
request of the Company as a director, officer, employee, agent or fiduciary of
another corporation, partnership, joint venture, trust or other enterprise, or
by reason of any action or inaction on the part of Indemnitee while serving in
such capacity.
e. "Expenses" shall mean any and all expenses (including attorneys'
fees and all other costs, expenses and obligations incurred in connection with
investigating, defending, being a
2
<PAGE> 2
witness in or participating in (including on appeal), or preparing to defend, to
be a witness in or to participate in, any action, suit, proceeding, alternative
dispute resolution mechanism, hearing, inquiry or investigation), judgments,
fines, penalties and amounts paid in settlement (if such settlement is approved
in advance by the Company, which approval shall not be unreasonably withheld) of
any Claim and any federal, state, local or foreign taxes imposed on the
Indemnitee as a result of the actual or deemed receipt of any payments under
this Agreement.
f. "Expense Advance" shall mean a payment to Indemnitee pursuant to
Section 3 of Expenses in advance of the settlement of or final judgement in any
action, suit, proceeding or alternative dispute resolution mechanism, hearing,
inquiry or investigation which constitutes a Claim.
g. "Independent Legal Counsel" shall mean an attorney or firm of
attorneys, selected in accordance with the provisions of Section 2(d) hereof,
who shall not have otherwise performed services for the Company or Indemnitee
within the last three years (other than with respect to matters concerning the
rights of Indemnitee under this Agreement, or of other Indemnitees under similar
indemnity agreements).
h. References to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on
Indemnitee with respect to an employee benefit plan; and references to "serving
at the request of the Company" shall include any service as a director, officer,
employee, agent or fiduciary of the Company which imposes duties on, or involves
services by, such director, officer, employee, agent or fiduciary with respect
to an employee benefit plan, its participants or its beneficiaries; and if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to
be in the interest of the participants and beneficiaries of an employee benefit
plan, Indemnitee shall be deemed to have acted in a manner "not opposed to the
best interests of the Company" as referred to in this Agreement.
i. "Reviewing Party" shall mean, subject to the provisions of
Section 2(d), any person or body appointed by the Board of Directors in
accordance with applicable law to review the Company's obligations hereunder and
under applicable law, which may include a member or members of the Company's
Board of Directors, Independent Legal Counsel or any other person or body not a
party to the particular Claim for which Indemnitee is seeking indemnification.
j. "Section" refers to a section of this Agreement unless otherwise
indicated.
k. "Voting Securities" shall mean any securities of the Company that
vote generally in the election of directors.
2. Indemnification.
a. Indemnification of Expenses. Subject to the provisions of Section
2(b) below, the Company shall indemnify Indemnitee for Expenses to the fullest
extent permitted by law if Indemnitee was or is or becomes a party to or witness
or other participant in, or is threatened to be made a party to or witness or
other participant in, any Claim (whether by reason of or arising in part
3
<PAGE> 3
out of a Covered Event), including all interest, assessments and other charges
paid or payable in connection with or in respect of such Expenses.
b. Review of Indemnification Obligations. Notwithstanding the
foregoing, in the event any Reviewing Party shall have determined (in a written
opinion, in any case in which Independent Legal Counsel is the Reviewing Party)
that Indemnitee is not entitled to be indemnified hereunder under applicable
law, (i) the Company shall have no further obligation under Section 2(a) to make
any payments to Indemnitee not made prior to such determination by such
Reviewing Party, and (ii) the Company shall be entitled to be reimbursed by
Indemnitee (who hereby agrees to reimburse the Company) for all Expenses
theretofore paid to Indemnitee to which Indemnitee is not entitled hereunder
under applicable law; provided, however, that if Indemnitee has commenced or
thereafter commences legal proceedings in a court of competent jurisdiction to
secure a determination that Indemnitee is entitled to be indemnified hereunder
under applicable law, any determination made by any Reviewing Party that
Indemnitee is not entitled to be indemnified hereunder under applicable law
shall not be binding and Indemnitee shall not be required to reimburse the
Company for any Expenses theretofore paid in indemnifying Indemnitee until a
final judicial determination is made with respect thereto (as to which all
rights of appeal therefrom have been exhausted or lapsed). Indemnitee's
obligation to reimburse the Company for any Expenses shall be unsecured and no
interest shall be charged thereon.
c. Indemnitee Rights on Unfavorable Determination; Binding Effect.
If any Reviewing Party determines that Indemnitee substantively is not entitled
to be indemnified hereunder in whole or in part under applicable law, Indemnitee
shall have the right to commence litigation seeking an initial determination by
the court or challenging any such determination by such Reviewing Party or any
aspect thereof, including the legal or factual bases therefor, and, subject to
the provisions of Section 15, the Company hereby consents to service of process
and to appear in any such proceeding. Absent such litigation, any determination
by any Reviewing Party shall be conclusive and binding on the Company and
Indemnitee.
d. Selection of Reviewing Party; Change in Control. If there has not
been a Change in Control, any Reviewing Party shall be selected by the Board of
Directors, and if there has been such a Change in Control (other than a Change
in Control which has been approved by a majority of the Company's Board of
Directors who were directors immediately prior to such Change in Control), any
Reviewing Party with respect to all matters thereafter arising concerning the
rights of Indemnitee to indemnification of Expenses under this Agreement or any
other agreement or under the Company's Certificate of Incorporation or Bylaws as
now or hereafter in effect, or under any other applicable law, if desired by
Indemnitee, shall be Independent Legal Counsel selected by Indemnitee and
approved by the Company (which approval shall not be unreasonably withheld).
Such counsel, among other things, shall render its written opinion to the
Company and Indemnitee as to whether and to what extent Indemnitee would be
entitled to be indemnified hereunder under applicable law and the Company agrees
to abide by such opinion. The Company agrees to pay the reasonable fees of the
Independent Legal Counsel referred to above and to indemnify fully such counsel
against any and all expenses (including attorneys' fees), claims, liabilities
and damages arising out of or relating to this Agreement or its engagement
pursuant hereto. Notwithstanding any
4
<PAGE> 4
other provision of this Agreement, the Company shall not be required to pay
Expenses of more than one Independent Legal Counsel in connection with all
matters concerning a single Indemnitee, and such Independent Legal Counsel shall
be the Independent Legal Counsel for any or all other Indemnitees unless (i) the
employment of separate counsel by one or more Indemnitees has been previously
authorized by the Company in writing, or (ii) an Indemnitee shall have provided
to the Company a written statement that such Indemnitee has reasonably concluded
that there may be a conflict of interest between such Indemnitee and the other
Indemnitees with respect to the matters arising under this Agreement.
e. Mandatory Payment of Expenses. Notwithstanding any other
provision of this Agreement other than Section 10 hereof, to the extent that
Indemnitee has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in defense of any
Claim, Indemnitee shall be indemnified against all Expenses incurred by
Indemnitee in connection therewith.
3. Expense Advances.
a. Obligation to Make Expense Advances. Upon receipt of a written
undertaking by or on behalf of the Indemnitee to repay such amounts if it shall
ultimately be determined that the Indemnitee is not entitled to be indemnified
therefore by the Company hereunder under applicable law, the Company shall make
Expense Advances to Indemnitee.
b. Form of Undertaking. Any obligation to repay any Expense Advances
hereunder pursuant to a written undertaking by the Indemnitee shall be unsecured
and no interest shall be charged thereon.
c. Determination of Reasonable Expense Advances. The parties agree
that for the purposes of any Expense Advance for which Indemnitee has made
written demand to the Company in accordance with this Agreement, all Expenses
included in such Expense Advance that are certified by affidavit of Indemnitee's
counsel as being reasonable shall be presumed conclusively to be reasonable.
4. Procedures for Indemnification and Expense Advances.
a. Timing of Payments. All payments of Expenses (including without
limitation Expense Advances) by the Company to the Indemnitee pursuant to this
Agreement shall be made to the fullest extent permitted by law as soon as
practicable after written demand by Indemnitee therefor is presented to the
Company, but in no event later than thirty (30) business days after such written
demand by Indemnitee is presented to the Company, except in the case of Expense
Advances, which shall be made no later than ten (10) business days after such
written demand by Indemnitee is presented to the Company.
b. Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to Indemnitee's right to be indemnified or Indemnitee's
right to receive Expense Advances under this Agreement, give the Company notice
in writing as soon as practicable of any Claim made
5
<PAGE> 5
against Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to the Chief Executive
Officer of the Company at the address shown on the signature page of this
Agreement (or such other address as the Company shall designate in writing to
Indemnitee). In addition, Indemnitee shall give the Company such information and
cooperation as it may reasonably require and as shall be within Indemnitee's
power.
c. No Presumptions; Burden of Proof. For purposes of this Agreement,
the termination of any Claim by judgment, order, settlement (whether with or
without court approval) or conviction, or upon a plea of nolo contendere, or its
equivalent, shall not create a presumption that Indemnitee did not meet any
particular standard of conduct or have any particular belief or that a court has
determined that indemnification is not permitted by this Agreement or applicable
law. In addition, neither the failure of any Reviewing Party to have made a
determination as to whether Indemnitee has met any particular standard of
conduct or had any particular belief, nor an actual determination by any
Reviewing Party that Indemnitee has not met such standard of conduct or did not
have such belief, prior to the commencement of legal proceedings by Indemnitee
to secure a judicial determination that Indemnitee should be indemnified under
this Agreement under applicable law, shall be a defense to Indemnitee's claim or
create a presumption that Indemnitee has not met any particular standard of
conduct or did not have any particular belief. In connection with any
determination by any Reviewing Party or otherwise as to whether the Indemnitee
is entitled to be indemnified hereunder under applicable law, the burden of
proof shall be on the Company to establish that Indemnitee is not so entitled.
d. Notice to Insurers. If, at the time of the receipt by the Company
of a notice of a Claim pursuant to Section 4(b) hereof, the Company has
liability insurance in effect which may cover such Claim, the Company shall give
prompt notice of the commencement of such Claim to the insurers in accordance
with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay,
on behalf of the Indemnitee, all amounts payable as a result of such Claim in
accordance with the terms of such policies.
e. Selection of Counsel. In the event the Company shall be obligated
hereunder to provide indemnification for or make any Expense Advances with
respect to the Expenses of any Claim, the Company, if appropriate, shall be
entitled to assume the defense of such Claim with counsel approved by Indemnitee
(which approval shall not be unreasonably withheld) upon the delivery to
Indemnitee of written notice of the Company's election to do so. After delivery
of such notice, approval of such counsel by Indemnitee and the retention of such
counsel by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees or expenses of separate counsel subsequently retained by
or on behalf of Indemnitee with respect to the same Claim; provided that, (i)
Indemnitee shall have the right to employ Indemnitee's separate counsel in any
such Claim at Indemnitee's expense and (ii) if (A) the employment of separate
counsel by Indemnitee has been previously authorized by the Company, (B)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense,
or (C) the Company shall not continue to retain such counsel to defend
6
<PAGE> 6
such Claim, then the fees and expenses of Indemnitee's separate counsel shall be
Expenses for which Indemnitee may receive indemnification or Expense Advances
hereunder.
5. Additional Indemnification Rights; Nonexclusivity.
a. Scope. The Company hereby agrees to indemnify the Indemnitee to
the fullest extent permitted by law, notwithstanding that such indemnification
is not specifically authorized by the other provisions of this Agreement, the
Company's Certificate of Incorporation, the Company's Bylaws or by statute. In
the event of any change after the date of this Agreement in any applicable law,
statute or rule which expands the right of a Delaware corporation to indemnify a
member of its board of directors or an officer, employee, agent or fiduciary, it
is the intent of the parties hereto that Indemnitee shall enjoy by this
Agreement the greater benefits afforded by such change. In the event of any
change in any applicable law, statute or rule which narrows the right of a
Delaware corporation to indemnify a member of its board of directors or an
officer, employee, agent or fiduciary, such change, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement, shall
have no effect on this Agreement or the parties' rights and obligations
hereunder except as set forth in Section 10(a) hereof.
b. Nonexclusivity. The indemnification and the payment of Expense
Advances provided by this Agreement shall be in addition to any rights to which
Indemnitee may be entitled under the Company's Certificate of Incorporation, its
Bylaws, any other agreement, any vote of stockholders or disinterested
directors, the General Corporation Law of the State of Delaware, or otherwise.
The indemnification and the payment of Expense Advances provided under this
Agreement shall continue as to Indemnitee for any action taken or not taken
while serving in an indemnified capacity even though subsequent thereto
Indemnitee may have ceased to serve in such capacity.
6. No Duplication of Payments. The Company shall not be liable under
this Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, provision of the Company's Certificate of
Incorporation, Bylaws or otherwise) of the amounts otherwise payable hereunder.
7. Partial Indemnification. If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for some or a portion of
Expenses incurred in connection with any Claim, but not, however, for all of the
total amount thereof, the Company shall nevertheless indemnify Indemnitee for
the portion of such Expenses to which Indemnitee is entitled.
8. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge
that in certain instances, federal law or applicable public policy may prohibit
the Company from indemnifying its directors, officers, employees, agents or
fiduciaries under this Agreement or otherwise. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the Securities and Exchange Commission to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Indemnitee.
7
<PAGE> 7
9. Liability Insurance. To the extent the Company maintains liability
insurance applicable to directors, officers, employees, agents or fiduciaries,
Indemnitee shall be covered by such policies in such a manner as to provide
Indemnitee the same rights and benefits as are provided to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, agents or fiduciaries, if Indemnitee
is not an officer or director but is a key employee, agent or fiduciary.
10. Exceptions. Notwithstanding any other provision of this Agreement, the
Company shall not be obligated pursuant to the terms of this Agreement:
a. Excluded Actions or Omissions. To indemnify or make Expense
Advances to Indemnitee with respect to Claims arising out of acts, omissions or
transactions for which Indemnitee is prohibited from receiving indemnification
under applicable law.
b. Claims Initiated by Indemnitee. To indemnify or make Expense
Advances to Indemnitee with respect to Claims initiated or brought voluntarily
by Indemnitee and not by way of defense, counterclaim or crossclaim, except (i)
with respect to actions or proceedings brought to establish or enforce a right
to indemnification under this Agreement or any other agreement or insurance
policy or under the Company's Certificate of Incorporation or Bylaws now or
hereafter in effect relating to Claims for Covered Events, (ii) in specific
cases if the Board of Directors has approved the initiation or bringing of such
Claim, or (iii) as otherwise required under Section 145 of the Delaware General
Corporation Law, regardless of whether Indemnitee ultimately is determined to be
entitled to such indemnification, Expense Advances, or insurance recovery, as
the case may be.
c. Lack of Good Faith. To indemnify Indemnitee for any Expenses
incurred by the Indemnitee with respect to any action instituted (i) by
Indemnitee to enforce or interpret this Agreement, if a court having
jurisdiction over such action determines as provided in Section 13 that each of
the material assertions made by the Indemnitee as a basis for such action was
not made in good faith or was frivolous, or (ii) by or in the name of the
Company to enforce or interpret this Agreement, if a court having jurisdiction
over such action determines as provided in Section 13 that each of the material
defenses asserted by Indemnitee in such action was made in bad faith or was
frivolous.
d. Claims Under Section 16(b). To indemnify Indemnitee for Expenses
and the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. Binding Effect; Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns (including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company), spouses, heirs and
8
<PAGE> 8
personal and legal representatives. The Company shall require and cause any
successor (whether direct or indirect, and whether by purchase, merger,
consolidation or otherwise) to all, substantially all, or a substantial part, of
the business or assets of the Company, by written agreement in form and
substance satisfactory to Indemnitee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform if no such succession had taken place. This Agreement
shall continue in effect regardless of whether Indemnitee continues to serve as
a director, officer, employee, agent or fiduciary (as applicable) of the Company
or of any other enterprise at the Company's request.
13. Expenses Incurred in Action Relating to Enforcement or Interpretation.
In the event that any action is instituted by Indemnitee under this Agreement or
under any liability insurance policies maintained by the Company to enforce or
interpret any of the terms hereof or thereof, Indemnitee shall be entitled to be
indemnified for all Expenses incurred by Indemnitee with respect to such action
(including without limitation attorneys' fees), regardless of whether Indemnitee
is ultimately successful in such action, unless as a part of such action a court
having jurisdiction over such action makes a final judicial determination (as to
which all rights of appeal therefrom have been exhausted or lapsed) that each of
the material assertions made by Indemnitee as a basis for such action was not
made in good faith or was frivolous; provided, however, that until such final
judicial determination is made, Indemnitee shall be entitled under Section 3 to
receive payment of Expense Advances hereunder with respect to such action. In
the event of an action instituted by or in the name of the Company under this
Agreement to enforce or interpret any of the terms of this Agreement, Indemnitee
shall be entitled to be indemnified for all Expenses incurred by Indemnitee in
defense of such action (including without limitation costs and expenses incurred
with respect to Indemnitee's counterclaims and cross-claims made in such
action), unless as a part of such action a court having jurisdiction over such
action makes a final judicial determination (as to which all rights of appeal
therefrom have been exhausted or lapsed) that each of the material defenses
asserted by Indemnitee in such action was made in bad faith or was frivolous;
provided, however, that until such final judicial determination is made,
Indemnitee shall be entitled under Section 3 to receive payment of Expense
Advances hereunder with respect to such action.
14. Period of Limitations. No legal action shall be brought and no cause
of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's estate, spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a legal
action within such two year period; provided, however, that if any shorter
period of limitations is otherwise applicable to any such cause of action, such
shorter period shall govern.
15. Notice. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and signed for by the party addressed, on the date of such
delivery, or (ii) if mailed by domestic certified or registered mail with
postage prepaid, on the third business day after the date postmarked. Addresses
for notice to either party are as shown on the signature page of this Agreement,
or as subsequently modified by written notice.
9
<PAGE> 9
16. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be commenced, prosecuted and continued only in the Court of
Chancery of the State of Delaware in and for New Castle County, which shall be
the exclusive and only proper forum for adjudicating such a claim.
17. Severability. The provisions of this Agreement shall be severable in
the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including without limitation each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable, that is not
itself invalid, void or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.
18. Choice of Law. This Agreement, and all rights, remedies, liabilities,
powers and duties of the parties to this Agreement, shall be governed by and
construed in accordance with the laws of the State of Delaware as applied to
contracts between Delaware residents entered into and to be performed entirely
in the State of Delaware without regard to principles of conflicts of laws.
19. Subrogation. In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
20. Amendment and Termination. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless it is in writing signed
by both the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed to be or shall constitute a waiver of any other provisions
hereof (whether or not similar), nor shall such waiver constitute a continuing
waiver.
21. Integration and Entire Agreement. This Agreement sets forth the entire
understanding between the parties hereto and supersedes and merges all previous
written and oral negotiations, commitments, understandings and agreements
relating to the subject matter hereof between the parties hereto.
22. No Construction as Employment Agreement. Nothing contained in this
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries or affiliated entities.
10
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Indemnification
Agreement as of the date first above written.
ONDISPLAY, INC.
By:
---------------------------------
Name:
--------------------------------
Title:
------------------------------
Address: 12667 Alcosta Blvd., Ste. 300
San Ramon, CA 94583-4427
AGREED TO AND ACCEPTED
INDEMNITEE:
----------------------------------------
(Signature)
<<NAME>>
----------------------------------------
Name
----------------------------------------
Address
----------------------------------------
<PAGE> 1
EXHIBIT 10.5
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT ("Sublease"), made as of the 2nd day of December,
1998 between ONDISPLAY, INC., a Delaware corporation ("Sublessee") and IRWIN
HOME EQUITY CORPORATION, an Indiana corporation ("Sublessor").
WHEREAS, Sublessor is the Lessee under that certain Second Lease Addendum
("Addendum") (attached hereto as Exhibit "A" and made a part hereof by reference
thereto), dated June 24, 1997 to that certain Lease Agreement ("Master Lease"),
(attached hereto as Exhibit "B" and made a part hereof by reference thereto),
dated October 12, 1995, where Sunset Development Company, the Lessor, leased to
Sublessor approximately 13,140 rentable square feet of space on the third floor
in a building known as 12667 Alcosta Boulevard, Building BB in San Ramon,
California 94583 (the "Premises").
WHEREAS, Sublessee desires to sublease from Sublessor the Premises and
certain items of furniture, fixtures, and equipment ("Personal Property"), and
WHEREAS, the Lessor under the Master Lease shall consent to this Sublease
by executing the "Consent of Lessor" (attached hereto as Exhibit "D" and made a
part hereof by reference thereto).
NOW, THEREFORE, for valuable consideration, the receipt, adequacy and
sufficiency of which is hereby acknowledged by the parties hereto, the parties
agree as follows:
1. Demise. Sublessor leases to Sublessee, and Sublessee leases from
Sublessor the (a) Premises which are more particularly described in the
Addendum, and (b) the Personal Property more fully described in Exhibit "C".
2. Guaranty. [Intentionally Deleted]
3. Use. the Premises and Personal Property shall be used and occupied
only for general office use or any other use which is reasonably permitted under
the terms of the Master Lease and for no other purpose.
4. Subject to Master Lease. This Sublease is a sublease by the Sublessor
under the provisions of, and is subject and subordinate to, all of the terms and
conditions of the Master Lease which are incorporated herein by reference and
unless otherwise modified or excluded herein, Sublessee is entitled to the
rights and benefits conferred by the master Lease. All undefined capitalized
terms used herein shall have the meanings ascribed to such terms as set forth in
the Master Lease.
5. Term.
<PAGE> 2
(a) Commencement Date. The Sublease term shall begin on January 15, 1999
(the "Commencement Date"), and shall continue until midnight on July 30, 2002
(the "Term"). The Sublessor shall deliver the Premises and Personal Property to
the Sublessee on or before December 25, 1998 (the "Delivery Date"), solely for
the purpose of preparing the Premises for Sublessee's use and occupancy
("Pre-Occupancy Period"). In the event that Sublessee reasonably commences
utilizing the Premises for business purposes during this Pre-Occupancy Period,
Base Rent shall commence as of that date. In the event Landlord does not consent
to this Sublease, and/or Sublessor does not deliver the Premises and Personal
Property on or before the Delivery Date, Sublessee shall have a minimum
Pre-Occupancy Period of seven (7) days and Base Rent and Operating Costs shall
not commence until the end of said Pre-Occupancy Period.
(b) Delay in Delivery. In the event that Sublessor is unable to deliver
the Premises on the Delivery Date, Rent shall not due and payable until the
occurrence of delivery. In the event that delivery is delayed for thirty (30)
days beyond the anticipated Commencement Date, Sublessee shall have the right
to terminate this Sublease, by providing Sublessor with written notice of said
termination within fifteen (15) days after the end of said thirty (30) day
period. Upon receipt of said notice of termination, Sublessor shall return all
monies previously paid by Sublessee to Sublessor and the parties shall have no
further rights, responsibilities or obligations toward each other.
(c) Termination of Master Lease. In the event Sublessor's right to occupy
the Premises is terminated at any time following execution of this Sublease as
a result of the termination or expiration of the Master Lease, this Sublease
shall terminate upon the effective terminate date of the Master Lease after
prior written notice and be of no further force and effect, and except for any
indemnity obligations and Sublessee's obligations to remove its personal
property from the Premises (excluding Sublessor's Personal Property as defined
in Exhibit C), the parties hereto shall be released from all duties,
obligations, liabilities and responsibilities under this Sublease.
(d) Option to Extend. Sublessee shall have no right or option to extend
the term of this Sublease beyond the expiration of the original Term.
(e) Early Termination by Sublessor. At any time after May 1, 2000,
Sublessee shall have a continuing right to terminate this Sublease provided,
Sublessee: (i) provides Sublessor with six (6) months advance written notice of
its intent to terminate, and (ii) pays, concurrently with said notice, to
Sublessor the sum of Seventy Eight Thousand Eight Hundred and Forty dollars
($78,840.00) as an early termination penalty, and (iii) Sublessee is not in
default of any of the provisions of this Sublease at the time Sublessee
provides said notice or on the effective date of the early termination.
6. Rent.
- 2 of 11 -
<PAGE> 3
(a) Base Rent. During the Term, Sublease shall pay annual rent of Three
Hundred Fifteen Thousand Three Hundred Sixty dollars and 00/100 ($315,360.00)
to Sublessor, payable in equal monthly installments of Twenty-six Thousand Two
Hundred and Eighty and 00/100 ($26,280.00) with such rent due in advance,
beginning with the Commencement Date and on the first day of each month
thereafter. If Commencement Date is any other day than the first day of a
month, the first monthly installment shall be prorated. Sublessee shall mail
the monthly rental payments, in advance, to the Sublessor, or to such other
person, firm or place as the Sublessor may from time to time, designate in
writing at least thirty (30) days in advance of any rental payment date.
(b) Taxes. Sublease shall be responsible for the reporting and payment
when due of any tax directly related to ownership or operation of its business.
(c) Advance Rent. Concurrently with Sublessee's execution of this
Sublease, Sublessee shall pay to Sublessor the sum of Twenty Six Thousand Two
Hundred and Eighty Dollars ($26,280.00) ("Advance Rent") to be applied against
the first full month's Base Rent when it becomes due.
7. Security Deposit. Upon the execution of this Sublease by Sublessee,
Sublessee shall deposit with Sublessor the sum of Seventy Eight Thousand Eight
Hundred and Forty dollars ($78,840.00) (the "Security Deposit"). The Security
Deposit shall be held by Sublessor as security for the faithful performance by
Sublessor of all of the terms, covenants and conditions of this Sublease to be
performed by Sublessee during the Term. If Sublessee defaults with respect to
any provision of this Sublease, including the provisions relating to the payment
of any Base Rent or Operating Costs, Sublessor may (but shall not be required
to) use, apply or retain all or any part of the Security Deposit to cure such
default or to compensate Sublessor for any other loss or damage which Sublessor
may suffer by reason of Sublessee's default. If any portion of the Security
Deposit is so used or applied, Sublessee shall, within ten (10) days after
written demand for Sublessor, deposit with Sublessor an amount sufficient to
restore the Security Deposit to its original amount. Sublessee shall not be
entitled to interest on such deposit. If Sublessee is in not in default of any
of the provisions of this Sublease, Sublessor agrees to apply the sum of Twenty
Six Thousand Two Hundred Eighty dollars ($26,280.00) against the Base Rent due
for the month of January 2000 when it becomes due. If Sublessee shall fully and
faithfully perform every position of this Sublease as required to be performed
by it under the terms of this Sublease and the Master Lease, the Security
Deposit or any balance thereof shall be returned to Sublessee no later than
thirty (30) days after the expiration of the Term and Sublessee's vacation of
the premises.
8. Operating Costs. Sublessee shall, based on the square footage of the
Premises calculated by dividing the rentable square footage of the Premises by
the rentable
- 3 of 11 -
<PAGE> 4
square footage of the building, pay for its pro-rata share of any increases in
actual operating costs over a Base Year of 1999. For calculation purposes,
Operating Costs pass through increases shall not exceed five (5%) over the
immediately proceeding year.
9. Condition of Premises and Personal Property, Maintenance and
Repair, Alterations.
(a) Sublessee agrees that its act of taking possession will be an
acknowledgement that the Premises and Personal Property are in tenantable and
good condition and that Sublessee takes the Premises and Personal Property on an
"as-is" basis. Sublessee shall, at its sole cost and expense as required by the
terms of the Master Lease, keep and maintain the Premises and Personal Property
(excepting Landlord's obligations in Section 7 and Section 8 of the Master
Lease), including but not limited to windows, doors, and the interior of
Premises in good order, condition and repair. On the termination of this
Sublease, Sublessee shall surrender to Sublessor the Premises, Personal Property
and all improvements thereto, excepting personal property and trade fixtures
owned by the Sublessee, in the same condition as when received, reasonable use
and wear thereof excepted.
(b) Sublessee shall obtain the prior written approval of Sublessor
and Lessor for any alterations, additions or improvements to the Premises,
which approval shall not be unreasonably withheld. Such alterations and
improvements shall be made at Sublessee's sole expense and Sublessee shall be
required to obtain all necessary permits and fees for the alterations and
improvements. Further, Sublessee agrees to remove any tenant improvements,
modifications made by Sublessee and return the space to its original condition
at Sublessee's sole cost and expense if requested to do so by Sublessor or as
required by Master Lease.
(c) Sublessee shall obtain the prior written approval of Sublessor
for any alterations or additions to the Personal Property, which approval shall
not be unreasonably withheld. Such alterations, additions or improvements shall
be made at Sublessee's sole expense. Further, Sublessee agrees to return the
Personal Property to its original condition at Sublessee's sole cost and
expense if requested to do so by Sublessor.
(d) Sublessor shall make reasonable repairs to the damaged wall and
baseboard trim and touch up the paint, where reasonably deemed necessary,
throughout the Premises. Sublessor shall make reasonable commercial efforts to
complete these repairs prior to the Commencement Date.
10. Sublessor's Covenants. Sublessor covenants that during the term
of the Sublease, it shall:
- 4 of 11 -
<PAGE> 5
(a) Except as otherwise set forth in this Sublease, take no action
which would adversely affect Sublessee's use of the Premises or Personal
Property; and
(b) Upon Sublessee's payment of rent and performance of its
covenants, ensure Sublessee's quiet use and enjoyment of the Premises or
Personal Property.
11. Assignment or Subletting, No Liens.
(a) Sublessee shall not assign, convey, sublet or transfer its
interest in the Sublease without first obtaining Sublessor's and Lessor's
written approval in accordance with the terms of the Master Lease.
(b) Sublessee shall keep the Premises and Personal Property free
from any liens arising from any work performed, materials furnished or
obligations incurred by or at the request of Sublessee. All persons either
contracting with Sublessee or furnishing or rendering labor and materials to
Sublessee shall be notified in writing by Sublessee that they must look only to
Sublessee for payment for any labor or materials. If any lien is filed against
the Premises or Personal Property as a result of the acts or omissions of
Sublessee, its employees, agents or contractors, Sublessee shall discharge it
within twenty (20) days after Sublessee learns that the lien has been filed.
12. Insurance, Risk of Loss.
(a) Insurance. Prior to the commencement of the Sublease Term and to
having access to the Premises and Personal Property and at all times during the
tenancy of this Sublease, Sublessee shall provide proof of insurance, as
outlined below, satisfactory to Sublessor, and maintain the coverage's
specified below during the term hereof and until the termination hereof:
Comprehensive General Liability in an aggregate amount of
$2,000,000.
Worker's Compensation Coverage in the statutory amount.
All Risk Insurance with Standard Extended Coverage, Replacement Value
for full replacement of the Personal Property and Sublessee's personal property
located on the Premises.
(b) Additional Insured. Sublessor and Lessor shall be named as
additional insureds on the policy or policies. Sublessee may satisfy this
requirement by obtaining appropriate endorsements to any master or blanket
policy of liability insurance
- 5 of 11 -
<PAGE> 6
Sublessee may maintain. No policy may be cancelable or subject to reduction of
coverage except after thirty (30) days prior written notice to Sublessor.
(c) Sublessor Released from Liability in Certain Events. Except to
the extent caused by the negligent or otherwise wrongful acts or omissions of
Sublessor, its agents or employees, Sublessor shall not be responsible, at any
time or in any event, for any latent defects, deterioration or change in the
condition of the Premises except for circumstances existing prior to the date
hereof caused by or attributable to the use of the Premises by Sublessor.
Except to the extent caused by the negligent or otherwise wrongful acts or
omissions of Sublessor, its agents or employees, Sublessor shall also not be
responsible for any fire or earthquake damage, or overflow or leakage upon or
into the Premises, of water, steam, gas or electricity, or by any breakage in
pipes or plumbing, or breakage, leakage or obstruction of sewer pipes or other
damage occasioned by water being upon or coming through the roof skylight,
trapdoors, walls, basement or otherwise, not for failure of the heating (steam)
plant, nor for loss of property by theft or otherwise, nor for any damage
arising from any act or neglect of any co-tenant or other occupant of the
Premises, or for that of any owner or occupants of adjoining or contiguous
property. Notwithstanding the above, at Sublessee's written request, Sublessor
shall, at Sublessor's expense, take whatever action as is reasonable and
necessary to enforce the rights and benefits accruing to the Sublessee by
virtue of the Master Lease and this Sublease.
13. Indemnification. Except to the extent caused by the sole negligence
or willful misconduct of Sublessor, its agents or employees, Sublessee hereby
agrees to indemnify and save Sublessor and its agents and the Lessor harmless
from any claims, demands, or causes of action for property damage or personal
injuries caused by Sublessee, Sublessee's agents, employees, contractors and
customers, arising out of Sublessee's occupancy of or presence in the Premises.
14. Default.
(a) Each of the following shall be considered a default by the
Sublessee:
(i) The failure to pay the Base Rent or Operating Costs required
hereunder within five (5) days after receipt of Sublessor's
written notice of such failure;
(ii) The failure to cure, within twenty (20) days after receipt
of Sublessor's written notice thereof, any breach of any other term hereof.
Such breach shall not be deemed a default if within said twenty (20) day period
Sublessee has begun the process to cure the breach and is diligently working on
a cure; or
- 6 of 11 -
<PAGE> 7
(iii) The abandonment of the Premises without the payment of
Rent.
(b) Upon an uncured event of default of this Sublease by Sublessee,
and Sublessee's failure to cure as allowed in (a) above, in addition to all
other remedies provided at law or in equity, Sublessor may, after
Sublessor's prior written notice thereof, at its option:
(i) elect to remove all of the merchandise, fixtures and
equipment, without being guilty or liable in any manner for
trespass, thereby terminating this Sublease, and store the
personal property at Sublessee's expense, payable upon demand by
Sublessor, and recover from Sublessee those amounts necessary to
compensate Sublessor as permitted by applicable California law.
(ii) elect to treat this Sublease in full force and effect and
shall be entitled to collect the rent provided for hereunder.
15. Condemnation. If the entire Premises or so much thereof as to
interfere with the use thereof shall be taken or condemned by any competent
authority for any public or quasi-public use or purpose, this Sublease shall
terminate as of the date when possession is taken. In such event, Sublessor
shall be under no liability to Sublessee, and Sublessee shall be entitled to no
part of any condemnation award except so much thereof as the condemning
authority expressly allocates to moving or relocation expenses incurred by
Sublessee. Sublessor shall provide Sublessee with notice in writing of any
actual or threatened condemnation proceedings promptly after receiving notice
thereof.
16. Arbitration. Any dispute as to the interpretation or enforcement
of this Sublease shall be subject to binding arbitration pursuant to Section
25.29 of the Master Lease.
17. Brokers. Sublessee and Sublessor warrant and represent to each
other that in the negotiating or making of this Sublease neither Sublessee or
Sublessor nor anyone acting on their behalf has dealt with any real estate
broker or finder who might be entitled to a fee or commission for this Sublease
other than Ernst & Young, LLP, whose fee is to be paid by Sublessor per a
separate agreement. Each party agrees to indemnify and hold the other harmless
from any claim or claims, including costs, expenses and attorney's fees
incurred by the other asserted by any other broker or finder for a fee or
commission based upon any dealings with or statements made by the respective
party or its agents, employees or representatives.
18. Financial Information. (a) As soon as they become available, and
in no event later than April 30th of each year, Sublessee shall deliver, or
cause to be
- 7 of 11 -
<PAGE> 8
delivered, to Sublessor, copies of its audited consolidated financial
statements of operations, stockholders' equity and cash flows for such fiscal
year, prepared in accordance with generally accepted accounting principals,
consistently applied, and accompanied by the audit opinion of the Sublessee's
independent public accountants.
(b) Sublessor reserves the right to obtain, within sixty days after
the close of each of the first three fiscal quarters of each fiscal year,
copies of Sublessee's unaudited consolidated financial statements of
operations, stockholder's equity and cash flows for such quarter, prepared in
accordance with generally accepted accounting principals, consistently applied.
19. Entirety. This writing constitutes the entire agreement between
Sublessor and Sublessee and any modification hereof must, in order to be
effective, be in writing, signed by authorized representatives of each party.
20. Waiver. Failure or delay on the part of either party to exercise
any right, power, privilege or remedy hereunder shall not operate as a waiver
thereof, nor shall any single or partial exercise of any right under this
Sublease preclude any other or further exercise thereof or the exercise of any
other right.
21. Binding Effect. This Sublease shall extend to and bind the heirs,
personal representatives, successors, assigns, or its successors in interest of
the parties hereto.
22. Governing Law. This Sublease and performance hereunder shall be
governed, interpreted, construed and regulated by the laws of the State of
California without regard to its conflict of laws principles.
23. Notice. All notice and payments due hereunder shall be deemed
validly given if sent by certified mail, return receipt requested, or with a
nationally recognized courier which provides notice of receipt, postage fully
prepaid, addressed as follows, or to such other addresses as may be given from
either party in writing to the other:
SUBLESSEE: SUBLESSOR:
OnDisplay, Inc. Irwin Home Equity Corporation
12667 Alcosta Boulevard Building BB 12677 Alcosta Blvd., Suite 500
San Ramon, California 94583 San Ramon, California 94583
Attn.: Mark Pine, President Attn: Edwin K. Corbin
Vice President, Finance
- 8 of 11 -
<PAGE> 9
With a copy to:
Fern Prosnitz Vice President, Chief Counsel
Irwin Home Equity Corporation
12677 Alcosta Blvd., Suite 500
San Ramon, CA 94583
and
Irwin Financial Corporation
500 Washington Street
Columbus, IN 47201
Attn: Ellen Mufson Vice President, Legal
24. Headings. Section headings in this Sublease are included for the
convenience of reference only and shall not constitute a part of this Sublease
for any other purpose.
25. Counterparts. This Sublease may be executed in any number of
counterparts, each of which shall be an original, but all for which together
shall constitute but one instrument.
26. Authority. Each party hereby represents and warrants to the other
that all necessary corporate authorizations required for execution and
performance of this Sublease have been given and that the undersigned officer is
duly authorized to execute this Sublease and bind the party for this it signs.
27. Expansion Rights. Section 25.20 of the Master Lease,
notwithstanding, Sublessee is not granted any rights to expand its Premises by
virtue of this Sublease.
IN WITNESS WHEREOF, the parties hereto have set their hands the day and
year first above written.
ONDISPLAY, INC. IRWIN HOME EQUITY CORPORATION
by: [sig illegible] by: /s/ EDWIN K. CORBIN
-------------------------------- -------------------------------
Title: CEO Title: VP Finance
Attest: Attest: /s/ FERN P. PROSNITZ
--------------------------- ---------------------------
Secretary Assistant Secretary
- 9 of 11 -
<PAGE> 10
EXHIBIT A
Second Lease Addendum, dated June 24, 1997, by and between SDC 7 (Landlord) and
Irwin Home Equity Corporation (Tenant)
- 10 of 11 -
<PAGE> 11
EXHIBIT B
Master Lease dated September 11, 1995, by and between Sunset Development Company
(Landlord) and Irwin Home Equity Corporation (Tenant)
- 11 of 11 -
<PAGE> 12
FINAL 3RD FLOOR PROPERTY INVENTORY
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DESCRIPTION QUANTITY
- --------------------------------------------------------------------------------
<S> <C> <C>
1. Blue Desk Chairs (1 each at every cubicle) 52
- --------------------------------------------------------------------------------
2. Conference Room Chairs 10
- --------------------------------------------------------------------------------
3. Conference Room Table 1
- --------------------------------------------------------------------------------
4. Wood Guest Chairs for Private Offices 12
- --------------------------------------------------------------------------------
5. Regular Size Cubicles (6 x 7.5) 47
- --------------------------------------------------------------------------------
6. Large Size Cubicles (7.5 x 9.25) 5
- --------------------------------------------------------------------------------
7. Overhead Cabinet with light fixture 51
- --------------------------------------------------------------------------------
8. Furnished Regular Size Private Offices 11
- --------------------------------------------------------------------------------
9. Furnished Large Size Private Offices 1
- --------------------------------------------------------------------------------
10. Five-Drawer Lateral Filing Cabinets 17
- --------------------------------------------------------------------------------
11. Two-Drawer Lateral Filing Cabinets 47
- --------------------------------------------------------------------------------
12. One Dishwasher 1
- --------------------------------------------------------------------------------
13. Three-Drawer Pedestal 52
- --------------------------------------------------------------------------------
14. Desk Chairs for Private Offices 12
- --------------------------------------------------------------------------------
15. Egan Visual Boards 3
- --------------------------------------------------------------------------------
16. One Refrigerator 1
- --------------------------------------------------------------------------------
17. One Wood Credenza in Office 301 1
- --------------------------------------------------------------------------------
18. System Rack/Cabling 1
- --------------------------------------------------------------------------------
19. Honeywell Security System 1
- --------------------------------------------------------------------------------
</TABLE>
EXHIBIT "C"
<PAGE> 13
[SDC7 LETTERHEAD]
December 18, 1998
Fax 421-8322
Mr. Gary Iorfido
IRWIN HOME EQUITY CORPORATION
12677 Alcosta Blvd. Suite 500
San Ramon, CA 94583
Re: Landlord's Consent to Sublease
Sublessee: OnDisplay, Inc.
12667 Alcosta Blvd., Suite 300
San Ramon, CA
Dear Gary:
Pursuant to Section 15 Assignment and Subletting, Subsection 15.1 Landlord's
Consent Required, of that certain Lease dated September 11, 1995, by and between
SDC7 as Landlord and Irwin Home Equity Corporation as Tenant, Landlord hereby
consents to the Sublease of 13,140 square feet on the third floor of 12667
Alcosta Blvd., Suite 300, to OnDisplay, Inc.
Consent to this Sublease does not release Irwin Home Equity Corporation or
Irwin Financial Corporation of any of their obligations under the Lease.
This consent shall not be in effect until Landlord has received a fully
executed copy of the Sublease.
Sincerely,
/s/ EDWARD HAGOPIAN
- ---------------------
Edward Hagopian
Senior Vice President
EH:pm/b/f
cc: Jack Clark, Sunset Development Company
Douglas Hubert, Ernst & Young, via fax 415/248-2101
Exhibit "D"
<PAGE> 1
Exhibit 10.6
SUBLEASE
THIS AGREEMENT OF SUBLEASE made as of the 17th day of Sept., 1996, by and
between Knutson Mortgage Corporation, (hereinafter referred to as Sublessor)
and OnDisplay, Inc., (hereinafter referred to as Sublessee).
WITNESSETH
WHEREAS, Sublessor is the Lessee of the Premises as hereinafter described
under that certain agreement of Lease dated June 29, 1995, as amended November
29, 1995 by and between Annabel Investment Co. as Landlord (hereinafter
referred to as the "Master Lessor") and Knutson Mortgage Corporation a Tenant
(which Lease as amended is hereinafter referred to as the "Master Lease") which
Lease concerns 6,728 square feet of space in a Building known as 2682 Bishop
Drive, Building H, San Ramon, California 94583 ("Premises"); and,
WHEREAS, Sublessee desires to sublease a portion of the Premises from
Sublessor, and Sublessor desires to sublease a portion of the Premises to
Sublessee.
NOW THEREFORE, in consideration of the rents and covenants hereinafter
set forth to be paid and performed by Sublessee, Sublessor does hereby demise,
lease and let unto Sublessee, and the Sublessee does hereby lease and take from
Sublessor upon the terms and conditions hereinafter set forth the following:
6,728 contiguous square feet located on the second (2nd) floor of the
Premises a shown on the sketch attached hereto as Exhibit A hereinafter
described as the "Subleased Premises."
1. RELATIONSHIP TO MASTER LEASE. The Sublease and all its terms,
covenants and provisions are and each of them is subordinate to (i) the Master
Lease (a copy of which is attached hereto as Exhibit B and made a part hereof
by reference) under which Sublessor is granted a leasehold interest in the
Subleased Premises; (ii) the rights as contained in the Master Lease of the
owner or owners of the Premises and/or the land and Building of which the
Subleased Premises are a part; (iii) the rights of Master Lessor as contained
in the Master Lease; and (iv) to any and all mortgages or encumbrances now or
hereafter affecting the Subleased Premises to which the Master Lease would be
subordinated. Sublessee expressly agrees that if Sublessor's tenancy or right
to possession of the Premises (including the Subleased Premises) shall
terminate by expiration of the Master Lease or any other cause not due to the
fault of Sublessor, this Sublease shall thereupon immediately cease and
terminate and Sublessee shall give immediate possession to Sublessor.
2. PERFORMANCE OF MASTER LEASE TERMS. With respect to the Subleased
Premises, Sublessee shall receive all benefits which accrue to Sublessor under
the Master Lease. Sublessee hereby covenants and agrees to assume during the
term of this Sublease the obligation for performance of the responsibilities,
covenants, conditions and stipulations of
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Sublessor contained in the Master Lease, including payment when due of all
amounts constituting Rent, as defined in the Master Lease, including but not
limited to the payment of Operating Expenses. Sublessee hereby agrees to
indemnify and hold harmless Sublessor from and against any loss, claim, damage,
expense or injury (including reasonable attorneys' fees) which Sublessor may
incur as a result of Sublessee's failure to perform such obligations on behalf
of Sublessor. Sublessor covenants and agrees that if and so long as the
Sublessee pays the base rent and additional rent specified in this Sublease and
fully, faithfully and punctually observes the covenants and conditions hereof,
then (i) Sublessee shall during the term of this Sublease quietly enjoy the
Subleased Premises, subject, however, to the earlier termination of the Master
Lease; and (ii) Sublessor shall not do anything which would cause the Master
Lease to be canceled, terminated or forfeited including but not limited to,
elect to terminate the Master Lease pursuant to Section 26.19 thereof.
3. TERM. The term of this Sublease shall commence on the earlier
of (i) the date Sublessee occupies the Subleased Premises or (ii) September 15,
1996 ("Commencement Date") and shall expire on July 11, 2000.
4. RENT. During the term of this Sublease, Sublessee covenants to
pay monthly base rent ("Base Rent") for the Subleased Premises at the rate of
$1.52 per square foot, payable in monthly payments of ten thousand two hundred
twenty six and 56/100 Dollars ($10,226.56).
Base Rent is due and payable on the first day of each month in
advance to Sublessor at the address specified herein for providing notice. If
the Commencement Date is a date other than the first of the month, Base Rent
shall be prorated.
5. USE. Sublessee shall use the Subleased Premises for general
office purposes.
6. WORK OF IMPROVEMENT. Sublessee has inspected the Subleased
Premises and shall Lease the Subleased Premises in "as-is" condition.
7. INSURANCE AND INDEMNIFICATION. At all times during the term of
this Sublease, Sublessee shall keep in effect (i) a policy of Comprehensive
General Liability insurance with a reputable company in amounts not less than
$1,000,000 combined single limit and $500,000 property damage or in such
greater amounts deemed reasonably appropriate by Sublessor or Master Lessor
with due regard given to Sublessee's use of the Subleased Premises, which
policy shall name Sublessor and Master Lessor as additional insureds; (ii) a
policy of Worker's Compensation insurance in at lease the statutory amounts
covering Sublessee's employees using the Subleased Premises; and (iii)
insurance covering loss to Sublessee's personal property located on the
Subleased Premises by fire or other casualty. All policies of insurance shall
be issued by a company licensed to do business in the State of California and
reasonably approved by Sublessor. Within five (5) days after full execution
hereof, Sublessee shall provide Sublessor and Master Lessor with a certificate
evidencing such insurance coverage. Sublessee shall indemnify and hold harmless
of the Sublessor and Master Lessor except that references to "Tenant" shall
read "Sublessee" and
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Sublessee(___)
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references to "Landlord" shall read "Master Lessor and Sublessor".
8. SURRENDER. At the expiration or earlier termination of this Sublease,
Sublessee shall surrender the Subleased Premises to Sublessor in broom clean
condition in the same condition as on the Commencement Date, except for
ordinary wear and tear, damage by fire, earthquake, act of God, or the
elements, and not caused by the wrongful act or omission of Sublessee or
Sublessee's agents.
9. ASSIGNMENT AND SUBLETTING. Sublessee may not sublet all or any
portion of the Subleased Premise without the prior consent of Sublessor, which
consent subject to the Master Lease, shall not be unreasonably withheld. No
subletting by the Sublessee shall relieve Sublessee of its liability hereunder.
Notwithstanding anything herein to the contrary the Sublessor may, without
requiring Sublessee's consent, but with notice to the Sublessee, assign this
Sublease to any business entity that controls, is controlled by or is under
common control with or which acquires all or substantially all of the voting
stock or assets of Sublessor.
10. DEFAULT. If Sublessee shall default in the payment of Base Rent or
additional rent hereunder and such default shall continue for five (5) days
after written notice from Sublessor, Sublessor may exercise any of the rights
reserved to the Master Lessor pursuant to the Master Lease.
11. ACCESS. Sublessor and Master Lessor shall be permitted access to the
Subleased Premises at all reasonable times upon reasonable advance notice, or
at any time in case of emergency, to inspect the Subleased Premises, subject to
Sublessee's reasonable security requirements.
12. NOTICE. Any notice required or permitted to be sent pursuant to this
Agreement shall be in writing sent certified mail, return receipt requested,
effective upon receipt, postage prepaid to the parties at the following
addresses or to such other addresses as they shall from time to time indicate
by written notice pursuant to this Section:
Sublessee: Sublessor:
OnDisplay, Inc. Knutson Mortgage Corporation
Attn: Jeff Hodos Attn: Corporate Accounting
2682 Bishop Drive, Suite 215 3001 Metro Drive, #400
San Ramon, CA 94583 Minneapolis, MN 55425
13. SUBLESSOR RELEASED FROM LIABILITY IN CERTAIN EVENTS. Except to the
extent caused by the negligent or otherwise wrongful acts or omissions of
Sublessor or Master Lessor, its agents or employees, Sublessor shall not be
responsible, at any time or in any
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Sublessee (______)
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event, for any latent defects, deterioration or change in the condition of the
Subleased Premises except for circumstances existing prior to the date hereof
caused by or attributable to the use of the Subleased Premises by Sublessor
and/or any other party using the Subleased Premises of which the Sublessor had
knowledge prior to the date hereof. Except to the extent caused by the negligent
or otherwise wrongful acts or omissions of Sublessor, its agents or employees,
Sublessor shall also not be responsible for any damage to Sublessee's property
or for injury to persons, whether caused by riot or civil commotion, fire or
earthquake damage, or overflow or leakage upon or into the Subleased Premises,
of water, steam, gas or electricity, or by any breakage in pipes or plumbing, or
breakage, leakage or obstruction of sewer pipes or other damage occasioned by
water being upon or coming through the roof, skylight, trapdoors, walls,
basement or otherwise, nor for failure of the heating (steam) plant, nor for
loss of property by theft or otherwise, nor for any damage arising from any act
or neglect of Master Lessor, any co-tenant or other occupant of the Premises, or
for that of any owner or occupants of adjoining or contiguous property.
14. CONSENT OF MASTER LESSOR. This Sublease and any extension of the term
hereof is expressly conditioned on and subject to the prior consent of the
Master Lessor, which consent has been obtained by Sublessor. This Sublease is
presented for examination only and is valid only if signed by both parties.
Unsigned it represents neither a reservation of a sublease or an agreement to
sublease by either party.
15. ALTERATIONS. Sublessee may make no alterations, additions or
improvements to the Subleased Premises without the prior written approval of
Sublessor, which approval shall not be unreasonably withheld, and without the
prior written approval of Master Lessor, which approval shall not be
unreasonably withheld.
16. CONSENT OF SUBLESSOR. In all provisions requiring the approval or
consent of Sublessor in accordance with the Master Lease, Sublessor shall
promptly forward to Master Lessor such requests as Sublessee may submit for
approval and/or consent from Master Lessor. If Master Lessor shall grant its
approval or consent, except as otherwise provided in this Sublease, Sublessor
shall be deemed to have also granted such approval or consent without any
further action on the part of the Sublessor or Sublease as long as the matter
in question does not expand any liability of the Sublessor under the Master
Lease or provided that Sublessee shall separately agree in writing to indemnify
Sublessor from and against any such additional liability.
17. ENTIRE AGREEMENT. This Sublease (including the provision of the
Master Lease incorporated herein by reference) contains the entire agreement
between the parties concerning the Subleased Premises and any agreement
hereafter made shall be ineffective to change, modify or discharge this
Sublease in whole or in part unless such agreement is in writing and signed by
the parties hereto.
18. SUBLESSOR'S REPRESENTATIONS AND WARRANTIES. Sublessor represents and
warrants that (1) the Master Lease is in full force and effect and not modified
or
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Sublessee (____)
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amended except as set forth in the copies attached hereto; and (ii) Sublessor
is not in default of any of its obligations under the Master Lease and has
received no notice asserting that it is in default of any of its obligations
under the Master Lease.
19. MISCELLANEOUS.
a. If any term, covenant or condition of this Sublease or the
application thereof to any circumstance or to any person, corporation or other
entity shall be invalid or unenforceable to any extent, the remaining terms,
covenants and conditions of this Sublease shall not be affected thereby and
shall be valid and enforceable to the fullest extent permitted by law.
b. The paragraph headings contained in the Sublease have been
included for convenience only and shall not be used in the construction or
interpretation of the Sublease.
c. This Sublease shall be governed by and construed in accordance
with the laws of the State of California.
20. SUCCESSORS AND ASSIGNS. This Sublease shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns.
21. HAZARDOUS MATERIALS. Sublessee shall not (either with or without
negligence) cause or permit the escape, disposal or release of any biologically
or chemically active or other hazardous substances or materials. Sublessee shall
not allow the storage or use of such substances or materials in any manner not
sanctioned by law or by the highest standards prevailing in the industry for the
storage and use of such substances or materials, nor allow to be brought into
the Project any such materials or substances except to use in the ordinary
course of Sublessee's business, and then only after written notice is given to
Master Lessor of the identity of such substances or materials. Without
limitation, hazardous substances and materials shall include those described in
the Comprehensive Environmental Response Compensation and Liability Act of 1980,
as amended, 42 U.S.C. Section 9601 et seq., any applicable state or local laws
and the regulations adopted under these acts. If any lender or governmental
agency shall ever require testing to ascertain whether or not there has been any
release of hazardous materials, then the reasonable costs thereof shall be
reimbursed by Sublessee to Master Lessor upon demand as additional charges if
such requirement applies to the Sublessee's use of the Premises. In addition,
Sublessee shall execute affidavits, representations and the like from time to
time at Master Lessor's request concerning Sublessee's best knowledge and belief
regarding the presence of hazardous substances or materials on the Premises. In
all events, Sublessee shall indemnify Master Lessor in the manner elsewhere
provided in this Lease from any release of hazardous materials on the Premises
occurring while Sublessee is in possession, or elsewhere if caused by Sublessee
or persons acting under Sublessee. The within covenants shall survive the
expiration or earlier termination of the lease term.
22. FORCE MAJEURE. Neither party shall be responsible or liable for delays
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Sublessee (______)
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or failures of performance under this Sublease caused by events or
circumstances beyond a party's control which may not be overcome by due
diligence.
23. SECURITY DEPOSIT. Concurrently with Sublessee's execution of this
Sublease, Sublessee shall deposit with Sublessor the sum of Thirty Thousand Six
Hundred Seventy Nine and 68/100 Dollars ($30,679.68) (the "Security Deposit").
The Security Deposit shall be held by Sublessor as security for the faithful
performance by Sublessee of all of the terms, covenants and conditions of this
Sublease to be performed by Sublessee during the term hereof. If Sublessee
defaults with respect to any provision of this Sublease, including the
provisions relating to the payment of any Rent, Sublessor may (but shall not be
required to) use, apply or retain all or any part of the Security Deposit to
cure such default or to compensate Sublessor for any other loss or damage which
Sublessor may suffer by reason of Sublessee's default. If any portion of said
deposit is so used or applied, Sublessee shall, within ten (10) days after
written demand therefor, deposit cash with Sublessor in an amount sufficient to
restore the Security Deposit to its original amount; Sublessee's failure to do
so shall be a material breach of this Sublease. Sublessor shall not be required
to keep the Security Deposit separate from its general funds, and Sublessee
shall not be entitled to interest on such deposit. If Sublessee shall fully and
faithfully perform every provision of this Sublease to be performed by it, the
Security Deposit or any balance thereof shall be returned to Sublease (or, at
Sublessor's option, to the last assignee of Sublessee's interest hereunder)
upon the expiration of the Sublease term and Sublessee's vacating the Subleased
Premises. In the event of termination of Sublessor's interest in this Sublease,
Sublessor shall transfer the Security Deposit to Sublessor's successor in
interest whereupon Sublessor shall be released from liability for the return of
the Security Deposit or the accounting therefor.
24. BROKERS. Sublessee warrants and represents to Sublessor that in the
negotiating or making of this Sublease it has worked solely with Century 21
Hosking Associates, Inc. as broker. Sublessee agrees to indemnify and hold
harmless Sublessor and Master Lessor from any claim or claims including costs,
expenses and attorney's fees incurred by Sublessor or Master Lessor asserted by
any other broker or finder for a fee or commission based upon any dealings with
or statements made by Sublessee or its agents, employees, or representatives.
Sublessor hereby agrees to pay commission in the amount of Twenty Three
Thousand Five Hundred Forty Eight and 00/100 Dollars ($23,548.00) to Century 21
Hosking Associates, Inc., as Sublessee's broker, and in the amount of Six
Thousand Seven Hundred Twenty Eight and 00/100 Dollars ($6,728.00) to Sunset
Development Company as cooperating broker, payable upon full execution of this
Sublease and upon occupancy of the Subleased Premises by Sublessee. Sublessor
expressly limits the amount of commissions and finder fees to be paid in this
matter to the amounts described above.
25. BILL OF SALE. Concurrently with the execution hereof, Sublessee and
Sublessor shall execute that Bill of Sale attached hereto as Exhibit C and by
reference incorporated herein, pertaining to Sublessee's purchase of
Sublessor's furnishings in the Subleased Premises.
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Sublessee (____)
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<PAGE> 7
IN WITNESS WHEREOF, Sublessor and Sublessee have duly executed this
Agreement of Sublease on the day and year first-above written
SUBLESSOR: SUBLESSEE:
Knutson Mortgage Corporation OnDisplay, Inc.
By: [Signature illegible] By:
------------------------------ -------------------------------
Name: Name:
---------------------------- -----------------------------
Title: Title:
--------------------------- ----------------------------
Date: Date:
---------------------------- -----------------------------
ATTACHMENTS:
Exhibit A -Subleased Premises
Exhibit B -Master Lease
Exhibit C -Bill of Sale
Exhibit C-1 -Inventory of Personal Property
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Sublessee [_________]
September 15, 1996
7
<PAGE> 8
EXHIBIT A
SUBLEASED PREMISES
[DIAGRAM]
EXHIBIT A
BISHOP RANCH 2, BLDG. R
2682 BISHOP DRIVE
PRESENT PREMISES, SUITE 215 4,390 RSF
EXPANSION SPACE, SUITE 221 2,338 RSF
---------
TOTAL NEW PREMISES 6,728 RSF
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Sublessee [_________]
September 15, 1996
8
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EXHIBIT B
MASTER LEASE
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Sublessee [_________]
September 15, 1996
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EXHIBIT C
BILL OF SALE
THIS BILL OF SALE is entered into this ______ day of _______________, 1996, by
and between Knutson Mortgage Corporation, ("Seller") and OnDisplay, Inc.
("Buyer").
WITNESSETH
WHEREAS, Seller has sublet to Buyer 6,728 square feet of space known as Suite
215 in that building at 2682 Bishop Drive, San Ramon, CA 94583 (the "Sublet
Premises"); and
WHEREAS Buyer and Seller have agreed that certain personal property used by
Seller and located in the Sublet Premises shall be sold to Buyer.
NOW THEREFORE, Buyer hereby agrees to pay to seller $52,000.00, due and payable
in three installments as follows: (1) $17,333.34 upon execution hereof; (2)
$17,333.33 on or before December 15, 1996; and (3) $17,333.33 on or before
March 15, 1997. Seller hereby sells, transfers and assigns to Buyer all of
Seller's right, title, and interest in those items of personal property which
are in the Sublet Premises and which are described on Exhibit C-1 attached
hereto. Seller represents and warrants to Buyer that the property converted
herein is free of liens and encumbrances created by Seller and Seller will
warrant and defend the same unto the Buyer, its successors and assigns, against
the unlawful claims and demands of any persons resulting from the acts of
Seller.
By acceptance hereof, Buyer acknowledges and agrees that such property is
transferred and conveyed "as-is" and "where-is" as of the date Buyer first
occupies the Sublet Premises.
IN WITNESS WHEREOF, Seller has executed this Bill of Sale as of the day, month
and year first above written
SELLER:
KNUTSON MORTGAGE CORPORATION
By: [Signature Illegible]
-------------------------------------
Its:
-------------------------------------
BUYER:
ONDISPLAY, INC.
By:
-------------------------------------
Its:
------------------------------------------
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Sublessee [_________]
September 15, 1996
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EXHIBIT C-1
PERSONAL PROPERTY
<TABLE>
<S> <C>
32 Workstations, Steelcase
6 Desks, U-Shaped, metal Steelcase
9 Files, Lateral, 2-drawer
7 Bookcases, Metal
2 Desks, L-Shaped, Wood
3 Files, Lateral, 2-Drawer, Wood
2 Credenzas, Wood
3 Desks, Metal
2 Hutches, Wood
1 Conference Table, Wood, Oval, 6-Seater
1 Conference Table, wood, round, 2-Seater
1 Bookcase, Wood
8 Chairs, side, wood
29 Chairs, task
10 Files, 3-Drawer, metal
3 Chairs, Executive
18 Chairs, task w/arms (management)
1 Table, telephone, wood
2 Cabinets, metal, for forms
2 Cabinets, metal, large for supplies
4 Tables, folding, brown
2 Carts, utility with files
2 Coat racks, portable
39 Telephones, Meridian M5009
22 Art
1 Full size refrigerator
</TABLE>
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Sublessee [_________]
September 15, 1996
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<PAGE> 1
EXHIBIT 10.7
MASTER LEASE AGREEMENT
MASTER LEASE AGREEMENT (the "Master Lease") dated February 25, 1999 by and
between COMDISCO, INC. ("Lessor") and ONDISPLAY, INC. ("Lessee").
IN CONSIDERATION of the mutual agreements described below, the parties agree as
follows (all capitalized terms are defined in Section 14.18):
1. PROPERTY LEASED.
Lessor leases to Lessee all of the Equipment described on each Summary Equipment
Schedule in the event of a conflict, the terms of the applicable Schedule
prevail over this Master Lease.
2. TERM.
On the Commencement Date, Lessee will be deemed to accept the Equipment, will be
bound to its rental obligations for each item of Equipment and the term of a
Summary Equipment Schedule will begin and continue through the Initial Term and
thereafter until terminated by either party upon prior written notice received
during the Notice Period. No termination may be effective prior to the
expiration of the Initial Term.
3. RENT AND PAYMENT.
Rent is due and payable in advance on the first day of each Rent Interval at the
address specified in Lessor's invoice. Interim Rent is due and payable when
invoiced. If any payment is not made when due, Lessee will pay a Late Charge on
the overdue amount. Upon Lessee's execution of each Schedule, Lessee will pay
Lessor the Advance specified on the Schedule. The Advance will be credited
towards the final Rent payment if Lessee is not then in default. No interest
will be paid on the Advance.
4. SELECTION; WARRANTY AND DISCLAIMER OF WARRANTIES.
4.1 SELECTION. Lessee acknowledges that it has selected the Equipment and
disclaims any reliance upon statements made by the Lessor, other than as set
forth in the Schedule.
4.2 WARRANTY AND DISCLAIMER OF WARRANTIES. Lessor warrants to Lessee that, so
long as Lessee is not in default, Lessor will not disturb Lessee's quiet and
peaceful possession, and unrestricted use of the Equipment. To the extent
permitted by the manufacturer, Lessor assigns to Lessee during the term of the
Summary Equipment Schedule any manufacturer's warranties for the Equipment.
LESSOR MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED AS TO ANY MATTER WHATSOEVER,
INCLUDING, WITHOUT LIMITATION, THE MERCHANTABILITY OF THE EQUIPMENT OR ITS
FITNESS FOR A PARTICULAR PURPOSE. Lessor is not responsible for any liability,
claim, loss, damage or expense of any kind (including strict liability in tort)
caused by the Equipment except for any loss or damage caused by the willful
misconduct or negligent acts of Lessor. In no event is Lessor responsible for
special, incidental or consequential damages.
5. TITLE; RELOCATION OR SUBLEASE; AND ASSIGNMENT.
5.1 TITLE. Lessee holds the Equipment subject and subordinate to the rights of
the Owner, Lessor, any Assignee and any Secured Party. Lessee authorizes Lessor,
as Lessee's agent, and at Lessor's expense, to prepare, execute and file in
Lessee's name precautionary Uniform Commercial Code financing statements showing
the interest of the Owner. Lessor, and any Assignee or Secured Party in the
Equipment and to insert serial numbers in Summary Equipment Schedules as
appropriate Lessee will, at its expense, keep the Equipment free and clear from
any liens or encumbrances of any kind (except any caused by Lessor) and will
indemnify and hold the Owner, Lessor, any Assignee and Secured Party harmless
from and against any loss caused by Lessee's failure to do so, except where such
is caused by Lessor.
5.2 RELOCATION OR SUBLEASE. Upon prior written notice, Lessee may relocate
Equipment to any location within the continental United States provided (i) the
Equipment will not be used by an entity exempt from federal income tax, and (ii)
all additional costs (including any administrative fees, additional taxes and
insurance coverage) are reconciled and promptly paid by Lessee.
Lessee may sublease the Equipment upon the reasonable consent of the Lessor and
the Secured Party. Such consent to sublease will be granted if (i) Lessee meets
the relocation requirements set out above, (ii) the sublease is expressly
subject and subordinate to the terms of the Schedule, (iii) Lessee assigns its
rights in the sublease to Lessor and the Secured Party as additional collateral
and security, (iv) Lessee's obligation to maintain and insure the Equipment is
not altered, (v) all financing statements required to continue the Secured
Party's prior perfected security interest are filed, and (vi) Lessee executes
sublease documents acceptable to Lessor.
No relocation or sublease will relieve Lessee from any of its obligations under
this Master Lease and the relevant Schedule.
5.3 ASSIGNMENT BY LESSOR. The terms and conditions of each Schedule have been
fixed by Lessor in order to permit Lessor to sell and/or assign or transfer its
interest or grant a security interest in each Schedule and/or the Equipment to a
Secured Party or Assignee. In that event, the term Lessor will mean the Assignee
and any Secured Party. However, any assignment, sale, or other transfer by
Lessor will not relieve Lessor of its obligations to Lessee and will not
materially change Lessee's duties or materially increase the burdens or risks
imposed on Lessee. The Lessee consents to and will acknowledge such assignments
in a written notice given to Lessee. Lessee also agrees that:
(a) The Secured Party will be entitled to exercise all of Lessor's rights, but
will not be obligated to perform any of the obligations of Lessor. The Secured
Party will not disturb Lessee's quiet and peaceful possession and unrestricted
use of the Equipment so long as Lessee is not in default and the Secured Party
continues to receive all Rent payable under the Schedule, and
(b) Lessee will pay all Rent and all other amounts payable to the Secured
Party, despite any defense or claim which it has against Lessor. Lessee reserves
its right to have recourse directly against Lessor for any defense or claim.
(c) Subject to and without impairment of Lessee's leasehold rights in the
Equipment, Lessee holds the Equipment for the Secured Party to the extent of the
Secured Party's rights in that Equipment.
6. NET LEASE; TAXES AND FEES.
6.1 NET LEASE. Each Summary Equipment Schedule constitutes a net lease.
Lessee's obligation to pay Rent and all other amounts due hereunder is absolute
and unconditional and is not subject to any abatement, reduction, set-off,
defense, counterclaim, interruption, deferment or recoupment for any reason
whatsoever.
6.2 TAXES AND FEES. Lessee will pay when due or reimburse Lessor for all taxes,
fees or any other charges (together with any related interest or penalties not
arising from the negligence of Lessor) accrued for or arising during the term of
each Summary Equipment Schedule against Lessor, Lessee or the Equipment by any
governmental authority (except only Federal, state, local and franchise taxes on
the capital or the net income of Lessor). Lessor will file all personal property
tax returns for the Equipment and pay all such property taxes due. Lessee will
reimburse Lessor for property taxes within thirty (30) days of receipt of an
invoice.
7. CARE, USE AND MAINTENANCE; INSPECTION BY LESSOR.
7.1 CARE, USE AND MAINTENANCE. Lessee will maintain the Equipment in good
operating order and appearance, protect the Equipment from deterioration, other
than normal wear and tear, and will not use the Equipment for any purpose other
than that for which it was designed if commercially available and considered
common business practice for each item of Equipment. Lessee will maintain in
force a standard maintenance contract with the manufacturer of the Equipment, or
another party acceptable to Lessor, and will provide Lessor with a complete copy
of that contract. If Lessee has the Equipment maintained by a party other than
the manufacturer or self maintains, Lessee agrees to pay any costs necessary for
the manufacturer to bring the Equipment to then current release, revision and
engineering change levels, and to re-certify the Equipment as eligible for
manufacturer's maintenance at the expiration of the lease term, provided
re-certification is available and is required by Lessor. The lease term will
continue upon the same terms and conditions until recertification has been
obtained.
7.2 INSPECTION BY LESSOR. Upon reasonable advance notice, Lessee, during
reasonable business hours and subject to Lessee's security requirements, will
make the Equipment and its related log and maintenance records available to
Lessor for inspection.
8. REPRESENTATIONS AND WARRANTIES OF LESSEE. Lessee hereby represents,
warrants and covenants that with respect to the Master Lease and each Schedule
executed hereunder:
(a) The Lessee is a corporation duly organized and validly existing in good
standing under the laws of the jurisdiction of its incorporation, is duly
qualified to do business in each jurisdiction (including the jurisdiction where
the Equipment is, or is to be, located) where its ownership or lease of property
or the conduct of its business requires such qualification, except for where
such lack of qualification would not have a material adverse effect on the
Company's business, and has full corporate power and authority to hold property
under the Master Lease and each Schedule and to enter into and perform its
obligations under the Master Lease and each Schedule.
(b) The execution and delivery by the Lessee of the Master Lease and each
Schedule and its performance thereunder have been duly authorized by all
necessary corporate action on the part of the Lessee, and the Master Lease and
each Schedule are not inconsistent with the Lessee's Articles of Incorporation
or Bylaws, do not
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<PAGE> 2
contravene any law or governmental rule, regulation or order applicable to it,
do not and will not contravene any provision of, or constitute a default under,
any indenture, mortgage, contract or other instrument to which it is a party or
by which it is bound, and the Master Lease and each Schedule constitute legal,
valid and binding agreements of the Lessee, enforceable in accordance with
their terms, subject to the effect of applicable bankruptcy and other similar
laws affecting the rights of creditors generally and rules of law concerning
equitable remedies.
(c) There are no actions, suits, proceedings or patent claims pending or, to
the knowledge of the Lessee, threatened against or affecting the Lessee in any
court or before any governmental commission, board or authority which, if
adversely determined, will have a material adverse effect on the ability of the
Lessee to perform its obligations under the Master Lease and each Schedule.
(d) The Equipment is personal property and when subjected to use by the
Lessee will not be or become fixtures under applicable law.
(e) The Lessee has no material liabilities or obligations, absolute or
contingent (individually or in the aggregate), except the liabilities and
obligations of the Lessee as set forth in the Financial Statements and
liabilities and obligations which have occurred in the ordinary course of
business, and which have not been, in any case or in the aggregate, materially
adverse to Lessee's ongoing business.
(f) To the best of Lessee's knowledge, the Lessee owns, possesses, has access
to, or can become licensed on reasonable terms under all patents, patent
applications, trademarks, trade names, inventions, franchises, licenses,
permits, computer software and copyrights necessary for the operations of its
business as now conducted, with no known infringement of, or conflict with, the
rights of others.
(g) All material contracts, agreements and instruments to which the Lessee is
a party are in full force and effect in all material respects, and are valid,
binding and enforceable by the Lessee in accordance with their respective
terms, subject to the effect of applicable bankruptcy, and other similar laws
affecting the rights of creditors generally, and rules of law concerning
equitable remedies.
9. DELIVERY AND RETURN OF EQUIPMENT.
Lessee hereby assumes the full expense of transportation and in-transit
insurance to Lessee's premises and installation thereat of the Equipment. Upon
termination (by expiration or otherwise) of each Summary Equipment Schedule,
Lessee shall, pursuant to Lessor's instructions and at Lessee's full expense
(including, without limitation, expenses of transportation and in-transit
insurance), return the Equipment to Lessor in the same operating order, repair,
condition and appearance as when received, less normal depreciation and wear
and tear. Lessee shall return the Equipment to Lessor at 6111 North River Road,
Rosemont, Illinois 60018 or at such other address within the continental
United States as directed by Lessor, provided, however, that Lessor's address
expense shall be limited to the cost of returning the Equipment to Lessee's
address as set forth herein. During the period subsequent to receipt of a
notice under Section 2, Lessor may demonstrate the Equipment's operation in
place and Lessee will supply any of its personal as may reasonably be required
to assist in the demonstrations.
10. LABELING.
Upon request, Lessee will mark the Equipment indicating Lessor's interest with
labels provided by Lessor. Lessee will keep all Equipment free from any other
marking or labeling which might be interpreted as a claim of ownership.
11. INDEMNITY.
With regard to bodily injury and property damage liability only, Lessee will
indemnify and hold Lessor, any Assignee and any Secured Party harmless from and
against any and all claims, costs, expenses, damages and liabilities, including
reasonable attorneys' fees, arising out of the ownership (for strict liability
in tort only), selection, possession, leasing, operation, control, use,
maintenance, delivery, return or other disposition of the Equipment during the
term of this Master Lease or until Lessee's obligations under the Master Lease
terminate. However, Lessee is not responsible to a party indemnified hereunder
for any claims, costs, expenses, damages and liabilities occasioned by the
negligent acts of such indemnified party. Lessee agrees to carry bodily injury
and property damage liability insurance during the term of the Master Lease in
amounts and against risks customarily insured against by the Lessee on
equipment owned by it. Any amounts received by Lessor under that insurance will
be credited against Lessee's obligations under this Section.
12. RISK OF LOSS.
Effective upon delivery and until the Equipment is returned, Lessee relieves
Lessor of responsibility for all risks of physical damages to or loss or
destruction of the Equipment. Lessee will carry casualty insurance for each
item of Equipment in an amount not less than the Casualty Value. All policies
for such insurance will name the Lessor and any Secured Party as additional
insured and as loss payee, and will provide for at least thirty (30) days prior
written notice to the Lessor of cancellation or expiration, and will insure
Lessor's interests regardless of any breach or violation by Lessee of any
representation, warranty or condition contained in such policies and will be
primary without right of contribution from any insurance effected by Lessor.
Upon the execution of any Schedule, the Lessee will furnish appropriate
evidence of such insurance acceptable to Lessor.
Lessee will promptly repair any damaged item of Equipment unless such Equipment
has suffered a Casualty Loss. Within fifteen (15) days of a Casualty Loss,
Lessee will provide written notice of that loss to Lessor and Lessee will, at
Lessee's option, either (a) replace the item of Equipment with Like Equipment
and marketable title to the Like Equipment will automatically vest in Lessor or
(b) pay the Casualty Value and after that payment and the payment of all other
amounts due and owing with respect to that item of Equipment, Lessee's
obligation to pay further Rent for the item of Equipment will cease.
13. DEFAULT, REMEDIES AND MITIGATION.
13.1 DEFAULT. The occurrence of any one or more of the following Events of
Default constitutes a default under a Summary Equipment Schedule.
(a) Lessee's failure to pay Rent or other amounts payable by Lessee when due
if that failure continues for five (5) business days after written notice; or
(b) Lessee's failure to perform any other term or condition of the Schedule
or the material inaccuracy of any representation or warranty made by the Lessee
in the Schedule or in any document or certificate furnished to the Lessor
hereunder if that failure or inaccuracy continues for ten (10) business days
after written notice; or
(c) An assignment by Lessee for the benefit of its creditors, the failure by
Lessee to pay its debts when due, the insolvency of Lessee, the filing by
Lessee or the filing against Lessee of any petition under any bankruptcy or
insolvency law or for the appointment of a trustee or other officer with
similar powers, the adjudication of Lessee as insolvent, the liquidation of
Lessee, or the taking of any action for the purpose of the foregoing; or
(d) The occurrence of an Event of Default under any Schedule. Summary
Equipment schedule or other agreement between Lessee and Lessor or its Assignee
or Secured Party.
13.2 REMEDIES. Upon the occurrence of any of the above Events of Default,
Lessor, at its option, may:
(a) enforce Lessee's performance of the provisions of the applicable Schedule
by appropriate court action in law or in equity;
(b) recover from Lessee any damages and or expenses, including Default Costs;
(c) with notice and demand, recover all sums due and accelerate and recover
the present value of the remaining payment stream of all Rent due under the
defaulted Schedule (discounted at the same rate of interest at which such
defaulted Schedule was discounted with a Secured Party plus any prepayment fees
charged to Lessor by the Secured Party or, if there is no Secured Party, then
discounted at 6%) together with all Rent and other amounts currently due as
liquidated damages and not as a penalty;
(d) with notice and process of law and in compliance with Lessee's security
requirements, Lessor may enter on Lessee's premises to remove and repossess the
Equipment without being liable to Lessee for damages due to the repossession,
except those resulting from Lessor's, its assignees', agents' or
representatives' negligence; and
(e) pursue any other remedy permitted by law or equity.
The above remedies, in Lessor's discretion and to the extent permitted by law,
are cumulative and may be exercised successively or concurrently.
13.3 MITIGATION. Upon return of the Equipment pursuant to the terms of Section
13.2, Lessor will use its best efforts in accordance with its normal business
procedures (and without obligation to give any priority to such Equipment) to
mitigate Lessor's damages as describe below. EXCEPT AS SET FORTH IN THIS
SECTION, LESSEE HEREBY WAIVES ANY RIGHTS NOW OR HEREAFTER CONFERRED BY STATUTE
OR OTHERWISE WHICH MAY REQUIRE LESSOR TO MITIGATE ITS DAMAGES OR MODIFY ANY OF
LESSOR'S RIGHTS OR REMEDIES STATED HEREIN. Lessor may sell, lease or otherwise
dispose of all or any part of the Equipment at a public or private sale for
cash or credit with the privilege of purchasing the Equipment. The proceeds
from any sale, lease or other disposition of the Equipment are defined as
either:
(a) if sold or otherwise disposed of, the cash proceeds less the Fair Market
Value of the Equipment at the expiration of the Initial Term less the Default
Costs; or
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<PAGE> 3
b) if leased, the present value (discounted at 3 percent (3%) over the U.S.
Treasury Notes of comparable maturity to the term of the re-lease of the rentals
for a term not to exceed the Initial Term, less the default Costs.
Any proceeds will be applied against liquidated damages and any other sums due
to Lessor from Lessee. However, Lessee is liable to Lessor for, and Lessor may
recover, the amount by which the proceeds are less than the liquidated damages
and other sums due to Lessor from Lessee.
14. ADDITIONAL PROVISIONS.
14.1 BOARD ATTENDANCE. One representative of Lessor will have the right to
attend Lessee's corporate Board of Directors meetings and Lessee will give
Lessor reasonable notice in advance of any special Board of Directors meeting,
which notice will provide an agenda of the subject matter to be discussed at
such board meeting. Lessee will provide Lessor with a certified copy of the
minutes of each Board of Directors meeting within thirty (30) days following the
date of such meeting held during the term of this Master Lease.
14.2 FINANCIAL STATEMENTS. As soon as practicable at the end of each month (and
in any event within thirty (30) days). Lessee will provide to Lessor the same
information which Lessee provides to its Board of Directors, but which will
include not less than a monthly income statement, balance sheet and statement of
cash flows prepared in accordance with generally accepted accounting principles,
consistently applied (the "Financial Statements"). As soon as practicable at the
end of each fiscal year, Lessee will provide to Lessor audited Financial
Statements setting forth in comparative form the corresponding figures for the
fiscal year (and in any event within ninety (90) days), and accompanied by an
audit report and opinion of the independent certified public accountants
selected by Lessee. Lessee will promptly furnish to Lessor any additional
information (including, but not limited to, tax returns, income statements,
balance sheets and names of principal creditors) as Lessor reasonably believes
necessary to evaluate Lessee's continuing ability to meet financial obligations.
After the effective date of the initial registration statement covering a public
offering of Lessee's securities, the term "Financial Statements" will be deemed
to refer to only those statements required by the Securities and Exchange
Commission.
14.3 OBLIGATION TO LEASE ADDITIONAL EQUIPMENT. Upon notice to Lessee, Lessor
will not be obligated to lease any Equipment which would have a commencement
date after said notice if, (i) Lessee is in default under this Master Lease or
any Schedule; (ii) Lessee is in default under any loan agreement, the result of
which would allow the lender or any secured party to demand immediate payment of
any material indebtedness; (iii) there is a material adverse change in Lessee's
credit standing; or (iv) Lessor determines (in reasonable good faith) that
Lessee will be unable to perform its obligations under this Master Lease or any
Schedule.
14.4 MERGER AND SALE PROVISIONS. Lessee will notify Lessor of any proposed
Merger at least sixty (60) days prior to the closing date. Lessor may, in its
discretion, either (i) consent to the assignment of the Master Lease and all
relevant Schedules to the successor entity, or (ii) terminate the Lease and all
relevant Schedules. If Lessor elects to consent to the assignment, Lessee and
its successor will sign the assignment documentation provided by Lessor. If
Lessor elects to terminate the Master Lease and all relevant Schedules, then
Lessee will pay Lessor all amounts then due and owing and a termination fee
equal to the present value (discounted at 6%) of the remaining Rent for the
balance of the Initial Term(s) of all Schedules, and will return the Equipment
in accordance with Section 9. Lessor hereby consents to any Merger in which the
acquiring entity has a Moody's Bond Rating of BA3 or better or a commercially
acceptable equivalent measure of creditworthiness as reasonably determined by
Lessor.
14.5 ENTIRE AGREEMENT. This Master Lease and associated Schedules and Summary
Equipment Schedules supersede all other oral or written agreements or
understandings between the parties concerning the Equipment including, for
example, purchase orders. ANY AMENDMENT OF THIS MASTER LEASE OR A SCHEDULE, MAY
ONLY BE ACCOMPLISHED BY A WRITING SIGNED BY THE PARTY AGAINST WHOM THE AMENDMENT
IS SOUGH TO BE ENFORCED.
14.6 NO WAIVER. No action taken by Lessor or Lessee will be deemed to
constitute a waiver of compliance with any representation, warranty or covenant
contained in this Master Lease or a Schedule. The waiver by Lessor or Lessee of
a breach of any provision of this Master Lease or a Schedule will not operate or
be construed as a waiver of any subsequent breach.
14.7 BINDING NATURE. Each Schedule is binding, upon and inures to the benefit
of Lessor and its assigns. LESSEE MAY NOT ASSIGN ITS RIGHTS OR OBLIGATIONS.
14.8 SURVIVAL OF OBLIGATIONS. All agreements, obligations, including, but not
limited to those arising under Section 6.2, representations and warranties
contained in this Master Lease, any Schedule. Summary Equipment Schedule or in
any document delivered in connection with those agreements are for the benefit
of Lessor and any Assignee or Secured Party and survive the execution, delivery,
expiration or termination of this Master Lease.
14.9 NOTICES. Any notice, request or other communication to either party by
the other will be given in writing and deemed received upon the earlier of (1)
actual receipt or (2) three days after mailing if mailed postage prepaid by
regular or airmail to Lessor (to the attention of "the Comdisco Venture
Group")or Lessee, at the address set out in the Schedule, (3) one day after it
is sent by counter or (4) on the same day as sent via facsimile transmission,
provided that the original is sent by personal delivery or mail by the sending
party.
14.10 APPLICABLE LAW. THIS MASTER LEASE HAS BEEN, AND EACH SCHEDULE WILL HAVE
BEEN MADE, EXECUTED AND DELIVERED IN THE STATE OF ILLINOIS AND WILL BE GOVERNED
AND CONSTRUED FOR ALL PURPOSES IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS WITHOUT GIVING EFFECT TO CONFLICT OR LAW PROVISIONS. NO RIGHTS OR
REMEDIES REFERRED TO IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE WILL BE
CONFERRED ON LESSEE UNLESS EXPRESSLY GRANTED IN THIS MASTER LEASE OR A SCHEDULE.
14.11 SEVERABILITY. If any one or more of the provisions of this Master Lease
or any Schedule is for any reason held invalid, illegal or unenforceable, the
remaining provisions of this Master Lease and any such Schedule will be
unimpaired, and the invalid, illegal or unenforceable provision replaced by a
mutually acceptable valid, legal and enforceable provision that is closest to
the original intention of the parties.
14.12 COUNTERPARTS. This Master Lease and any Schedule may be executed in any
number of counterparts, each of which will be deemed an original, but all such
counterparts together constitute one and the same instrument. If Lessor grants a
security interest in all or any part of a Schedule, the Equipment or sums
payable thereunder, only that counterpart Schedule marked "Secured Party's
Original" can transfer Lessor's rights and all other counterparts will be marked
"Duplicate."
14.13 LICENSED PRODUCTS. Lessee will obtain no title to Licensed Products
which will at all time remain the property of the owner of the Licensed
Products. A license from the owner may be required and it is Lessee's
responsibility to obtain any required license before the use of the Licensed
Products. Lessee agrees to treat the Licensed Products as confidential
information of the owner, to observe all copyright restrictions, and not to
reproduce or sell the Licensed Products.
14.14 SECRETARY'S CERTIFICATE. Lessee will, upon execution of this Master
Lease, provide Lessor with a secretary's certificate of incumbency and
authority. Upon the execution of each Schedule with a purchase price in excess
of $1,000,000. Lessee will provide Lessor with an opinion from Lessee's counsel
in a form acceptable to Lessor regarding the representations and warranties in
Section 8.
14.15 ELECTRONIC COMMUNICATIONS. Each of the Parties may communicate with the
other by electronic means under mutually agreeable terms.
14.16 LANDLORD/MORTGAGE WAIVER. Lessee agrees to provide Lessor with a
Landlord/Mortgagee Waiver with respect to the Equipment. Such waiver shall be
in a form satisfactory to Lessor.
14.17 EQUIPMENT PROCUREMENT CHARGES/PROGRESS PAYMENTS. Lessee hereby agrees
that Lessor shall not, by virtue of its entering into this Master Lease, be
required to remit any payments to any manufacturer or other third party until
Lessee accepts the Equipment subject to this Master Lease.
14.18 DEFINITIONS,
ADVANCE - means the amount due to Lessor by Lessee upon Lessee's execution of
each Schedule.
ASSIGNEE - means an entity to whom Lessor has sold or assigned its rights as
owner and Lessor of Equipment.
CASUALTY LOSS - means the irreparable less or destruction of Equipment.
CASUALTY VALUE - means the greater of the aggregate Rent remaining to be paid
for the balance of the lease term of the Fair Market Value of the Equipment
immediately prior to the Casualty Loss. However, if a Casualty Value Table is
attached to the relevant Schedule its term will control.
COMMENCEMENT DATE - is defined in each Schedule.
DEFAULT COSTS - means reasonable attorney's fees and remarketing costs resulting
from a Lessee default or Lessor's enforcement of its remedies.
DELIVERY DATE - means date of delivery of Inventory Equipment to Lessee's
address.
EQUIPMENT - means the property described on a Summary Equipment Schedule and any
replacement for that property required or permitted by this Master Lease or a
Schedule.
EVENT OF DEFAULT - means the events described in subsection 13.1.
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<PAGE> 4
FAIR MARKET VALUE - means the aggregate amount which would be obtainable in an
arm's-length transaction between an informed and willing buyer/user and an
informed and willing seller under no compulsion to sell.
INITIAL TERM - means the period of time beginning on the first day of the first
full Rent Interval following the Commencement Date for all items of Equipment
and continuing for the number of Rent Intervals indicated on a Schedule.
INTERIM RENT - means the pro-rata portion of Rent due for the period from the
Commencement Date through but not including the first day of the first full
Rent Interval included in the Initial Term.
LATE CHARGE - means the lesser of five percent (5%) of the payment due or the
maximum amount permitted by the law of the state where the Equipment is located.
LICENSED PRODUCTS - means any software or other licensed products attached to
the Equipment.
LIKE EQUIPMENT - means replacement Equipment which is lien free and of the same
model, type, configuration and manufacture as Equipment.
MERGER - means any consolidation or merger of the Lessee with or into any
other corporation or entity, any sale or conveyance of all or substantially all
of the assets or stock of the Lessee by or to any other person or entity in
which Lessee is not the surviving entity.
NOTICE PERIOD - means not less than ninety (90) days nor more than twelve (12)
months prior to the expiration of the lease term.
OWNER - means the owner of Equipment.
RENT - means the rent Lessee will pay for each item of Equipment expressed in a
Summary Equipment Schedule either as a specific amount or an amount equal to
the amount which Lessor pays for an item of Equipment multiplied by a lease
rate factor plus all other amounts due to Lessor under this Master Lease or a
Schedule.
RENT INTERVAL - means a full calendar month or quarter as indicated on a
Schedule.
SCHEDULE - means either an Equipment Schedule or a Licensed Products Schedule
which incorporates all of the terms and conditions of this Master Lease.
SECURED PARTY - means an entity to whom Lessor has granted a security interest
for the purpose of securing a loan.
SUMMARY EQUIPMENT SCHEDULE - means a certificate provided by Lessor summarizing
all of the Equipment for which Lessor has received Lessee approved vendor
invoices, purchase documents and/or evidence of delivery during a calendar
quarter which will incorporate all of the terms and conditions of the related
Schedule and this Master Lease and will constitute a separate lease for the
equipment leased thereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Master Lease on or as
of the day and year first above written.
ONDISPLAY, INC. COMDISCO, INC.,
AS LESSEE AS LESSOR
By: /s/ DOUG JEFFRIES By: /s/ JAMES P. LABE
---------------------------- -----------------------------
JAMES P. LABE
Title: Vice President and CFO Title: PRESIDENT
------------------------- --------------------------
COMDISCO VENTURES DIVISION
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ADDENDUM TO THE
MASTER LEASE AGREEMENT DATED AS OF FEBRUARY 25, 1999
BETWEEN ONDISPLAY, INC., AS LESSEE
AND COMDISCO, INC., AS LESSOR
The undersigned hereby agree that the terms and conditions of the
above-referenced Master Lease Agreement are hereby modified and amended as
follows:
1) SECTION 4.2 "WARRANTY AND DISCLAIMER OF WARRANTIES."
First Sentence, line 2 delete the words "Lessee is not in
default" and insert "no Event of Default has occurred and is
continuing, neither Lessor nor any person or entity claiming
by or through Lessor".
2) SECTION 5. 1 "TITLE."
Delete the first sentence in its entirety and replace with:
Lessee shall have no right, title or interest in the Equipment
except as set forth in this Master Lease or in any Schedule."
Third Sentence, line 3, after the words "caused by Lessor",
insert "or parties claiming by or through Lessor".
3) SECTION 5.3 "ASSIGNMENT BY LESSOR."
In Paragraph (a), second sentence, lines 3 and 4, delete the
words "Lessee is not in default and the Secured Party
continues to receive all Rent Payable under the Schedule." and
replace with "no Event of Default has occurred and is
continuing".
In Paragraph (b), insert the following clause at the beginning
thereof: "Upon written notice from Lessor,".
4) SECTIONS 6.1 "NET LEASE."
At the end of second sentence insert the following,
";provided, however, that Lessee's ability to bring suit
against Lessor for breach of this Master Lease shall not be
affected by this Section 6.1.".
5) SECTION 6.2 "TAXES AND FEES."
First Sentence, line 3 delete "accrued for or arising" and
replace with "attributable to periods".
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<PAGE> 6
6) SECTION 7.1 "CARE, USE AND MAINTENANCE; INSPECTION BY LESSOR."
Delete the fourth sentence in its entirety and replace with: "With
Lessor's prior written consent, Lessee may have the Equipment maintained
by a party other than the manufacturer. Lessor approves Lessee as such
maintenance contractor.".
7) SECTION 7.2 "REPRESENTATIONS AND WARRANTIES OF LESSEE"
Paragraph (b), in line 6, after the words "under, any" insert "material".
8) SECTION 8 "REPRESENTATIONS AND WARRANTIES OF LESSEE."
Paragraph (b), in line 4, delete the word "Articles" and replace it with
"Certificate".
Paragraph (f) insert the following at the end thereof: ", except where the
failure to do so would not reasonably be expected to have a material
adverse effect.".
9) SECTION 9 "DELIVERY AND RETURN OF EQUIPMENT."
Second sentence, line 3, after the words "Summary Equipment Schedule,"
insert the following "unless Lessee has exercised its option to purchase
or re-lease the Equipment in accordance with each Summary Equipment
Schedule," and in line 4, after the words "to Lessor's" insert the word
"reasonable."
Fourth sentence, line 1, after the words "under Section 2" insert ",subject
to Lessee's security requirements,".
Insert the following sentence at the end of Section 9: "All such
demonstrations will be conducted in such manner as to minimize any
interference with Lessee's operations.".
10) SECTION 11 "INDEMNITY."
Second sentence, in line 3, after the words "negligent acts" insert "or
willful conduct".
11) SECTION 13.1 "DEFAULT."
Paragraph (c), insert the following at the end thereof: "(and any such
involuntary event has not been dismissed or vacated within 30 days)".
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<PAGE> 7
12) SECTION 13.2 "REMEDIES."
After the word "occurrence", insert the words "and continuance".
Paragraph (c), line 5, delete "6%" and insert "U.S. Treasury Notes of
comparable maturity to the remaining term of the defaulted Schedule".
13) SECTION 13.3 "MITIGATION."
Paragraph (b), lines 2 and 3, delete "3 percent (3%) over the U.S. Treasury
Notes of comparable maturity to the term of" and insert, "the same interest
rate implicit in".
14) SECTION 14.1 "BOARD ATTENDANCE"
Delete this section in its entirety.
15) SECTION 14.2., "FINANCIAL STATEMENTS"
In the first sentence, change the words "month" and "monthly" to "quarter"
and "quarterly".
16) SECTION 14.3 "OBLIGATION TO LEASE ADDITIONAL EQUIPMENT."
In line 3, delete "Lessee is in default" and replace with "an Event of
Default has occurred or is continuing".
In line 6 after the words "material indebtedness" insert "for borrowed
money in an amount in excess of $75,000".
17) SECTION 14.18., "DEFINITIONS
In the definition of "Interim Rent", delete "the pro-rata portion" and
replace with "interest only portion of", unless otherwise amended in the
applicable equipment schedule.
18) SECTION 14.4 "MERGER AND SALE PROVISIONS."
In line 2, delete "sixty (60)" and replace with "twenty (20)".
19) SECTION 14.6 "NO WAIVER."
First sentence, insert the following at the beginning thereof: "Except for
a written waiver,".
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<PAGE> 8
20) SECTION 14.7 "BINDING NATURE."
Second sentence, insert the following at the end thereof: "EXCEPT IN
ACCORDANCE WITH SECTION 14.4.".
21) SECTION 14.9 "NOTICES."
Line 3, delete "three (3)" and insert "five (5)"; delete "postage prepaid
by regular or air mail" and insert "certified mail, return receipt
requested".
22) SECTION 14.13 "LICENSED PRODUCTS."
After the first sentence insert: "To the extent that Lessor, by reason of
its ownership of the Equipment, holds any license to a Licensed Product,
Lessor shall obtain the right for Lessee to use any such Licensed Product
for the duration of the lease term.".
Third sentence, line 2, after the word "owner" insert "of such Licensed
Product".
23) SECTION 14.18 "DEFINITIONS."
"Delivery Date" revise the word "Inventory" to read "inventory".
"Like Equipment" delete the words "of the same model, type, configuration,
and manufacture as Equipment." and replace with "of the same manufacture
and of a type, model and feature configuration having a capability and
value equal to or greater than the Equipment being replaced.".
Except as amended hereby, all other terms and conditions of the Master Lease
Agreement remain in full force and effect.
ONDISPLAY, INC. COMDISCO, INC.
as Lessee as Lessor
By: /s/ DOUG JEFFRIES By: /s/ JAMES P. LABE
----------------------------- ---------------------------------
JAMES P. LABE
Title: Vice President & CFO Title: PRESIDENT
---------------------------- --------------------------------
COMDISCO VENTURES DIVISION
Date: 2/25/99 Date: February 26, 1999
----------------------------- ---------------------------------
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<PAGE> 9
EQUIPMENT SCHEDULE VL-1
DATED AS OF FEBRUARY 25, 1999
TO MASTER LEASE AGREEMENT
DATED AS OF FEBRUARY 25, 1999 (THE "MASTER LEASE")
LESSEE: ONDISPLAY, INC. LESSOR: COMDISCO, INC.
ADMIN. CONTACT/PHONE NO.: ADDRESS FOR ALL NOTICES:
_________________________ 6111 North River Road
Phone: (925) 355-3200 Rosemont, Illinois 60018
Fax: (925) 355-3222 Attn.: Venture Group
Address for Notices:
2667 Alcosta Blvd., Suite 300
San Ramon, CA 94583
Central Billing Location: Rental Interval: Monthly
same as above
Attn:
Lessee Reference No.: ___________________
(24 digits maximum)
Location of Equipment: Initial Term: 36 months
same as above (Number of Rental Intervals)
Lease Rate Factor: 3.091%
Attn.:
EQUIPMENT (as defined below): Advance: $41,728.50
Interim Rent: Interest Only (7.5%)
Equipment including without limitation, computers, prototypes, workstations,
peripherals, instrumentation, test equipment, office furniture, and
telecommunication equipment, specifically approved by Lessor, which shall be
delivered to and accepted by Lessee during the period February 19, 1999 through
August 19, 2000 ("Equipment Delivery Period"), for which Lessor receives vendor
invoices approved for payment, up to an aggregate purchase price of
$1,350,000.00 ("Commitment Amount"); excluding custom use equipment, leasehold
improvements, installation costs and delivery costs, rolling stock, special
tooling, "stand-alone" software, application software bundled into computer
hardware, hand held items, molds and fungible items.
<PAGE> 10
1. EQUIPMENT PURCHASE
This Schedule contemplates Lessor's acquisition of Equipment for lease to
Lessee, either by one of the first three categories listed below or by
providing Lessee with Equipment from the fourth category, in an aggregate value
up to the Commitment Amount referred to on the fact of this Schedule. If the
Equipment acquired is of category (i), (ii)(iii) below, the effectiveness of
this Schedule as it relates to those items of Equipment is contingent upon
Lessee's acknowledgment at the time Lessor acquires the Equipment that Lessee
has either received or approved the relevant purchase documentation between
vendor and Lessor for that Equipment.
(i) NEW ON-ORDER EQUIPMENT. Lessor will purchase new Equipment which is
obtained from a vendor by Lessee for its use subject to Lessor's
prior approval of the Equipment.
(ii) SALE-LEASEBACK EQUIPMENT. Any in-place Equipment installed at
Lessee' site and to which Lessee has clear title and ownership may
be considered by Lessor for inclusion under this Lease (the
"Sale-Leaseback Transaction"). Any request for a Sale-Leaseback
Transaction must be submitted to Lessor in writing (along with
accompanying evidence of Lessee's Equipment ownership satisfactory to
Lessor for all Equipment submitted) no later than April 25, 1999*.
Lessor will not perform a Sale-Leaseback Transaction for any request
or accompanying Equipment ownership documents which arrive after the
date marked above by an asterisk (*). Further, any sale-leaseback
Equipment will be placed on lease subject to: (1) Lessor prior
approval of the Equipment; and (2) if approved, at Lessor's actual
net appraised Equipment value pursuant to the Schedule below:
<TABLE>
<CAPTION>
ORIGINAL EQUIPMENT INVOICE PERCENT OF ORIGINAL MANUFACTURER'S
DATE NET EQUIPMENT COST PAID BY LESSOR
--------------------------- ----------------------------------
<S> <C>
Between 01/25/99 - 04/25/99 (90 days) 100%
</TABLE>
Lessee represents that it has paid all California sales tax due on the cost of
that portion of Equipment to be installed in California and agrees to provide
evidence of such payment to Lessor, if specifically requested. As a result of
the election, Lessor agrees that it will not invoice Lessee for use tax on the
monthly rental rate. Lessee understands that this is an irrevocable election to
measure the tax by the Equipment cost and cannot be changed except prior to
installation of the Equipment.
(iii) USED ON-ORDER EQUIPMENT. Lessor will purchase used Equipment which
is obtained from a third party by Lessee for its use subject to
Lessor's prior approval of the Equipment and at Lessor's appraised
value for such used Equipment.
(iv) 800 NUMBER EQUIPMENT. Upon Lessee's use of Comdisco's 1-800 Direct
Service, Lessor will purchase new or used Equipment from a third
party or Lessor will supply new or used Equipment from its inventory
for use by Lessee at rates provided by Lessor.
2. COMMENCEMENT DATE
The Commencement Date for each item of new on-order or used on-order
Equipment will be the install date as confirmed in writing by Lessee as set
forth on the vendor invoice of which a facsimile transmission will constitute an
original document. The Commencement Date for sale-leaseback Equipment shall be
the date Lessor tenders the purchase price. The Commencement Date for 800
Number Equipment shall be fifteen (15) days from the ship date, such ship date
to be set forth on the vendor invoice or if unavailable on the vendor invoice
the ship date will be determined by Lessor upon other supporting shipping
documentation Lessor will summarize all approved invoices, purchase
documentation and evidence of delivery, as applicable, received in the same
calendar quarter into a Summary Equipment Schedule in the form attached to this
Schedule as Exhibit 1, and the initial Term will begin the first day of the
calendar quarter thereafter. Each Summary Equipment Schedule will contain the
Equipment location, description, serial number(s) and cost and will incorporate
the terms and conditions of the Master Lease and this Schedule and will
constitute a separate lease.
2
<PAGE> 11
3. OPTIONS TO EXTEND
So long as no Event of Default has occurred and is continuing
hereunder, and upon written notice no earlier than twelve (12) months and no
later than ninety (90) days prior to the expiration of the Initial Term of a
Summary Equipment Schedule, Lessee will have the right to extend the Initial
Term of such Summary Equipment Schedule for a period of one (1) year. In such
event, the rent to be paid during said extended period shall be mutually agreed
upon and if the parties cannot mutually agree, then the Summary Equipment
Schedule shall continue in full force and effect pursuant to the existing terms
and conditions until terminated in accordance with its terms. The Summary
Equipment Schedule will continue in effect following said extended period until
terminated by either party upon not less than ninety (90) days prior written
notice, which notice shall be effective as of the date of receipt.
4. PURCHASE OPTION
So long as no Event of Default has occurred and is continuing
hereunder, and upon written notice no earlier than twelve (12) months and no
later than ninety (90) days prior to the expiration of the Initial Term or the
extended term of the applicable Summary Equipment Schedule, Lessee will have the
option at the expiration of the Initial Term of the Summary Equipment Schedule
to purchase all, but not less than all, of the Equipment listed therein for a
purchase price not to exceed 15% of Lessor's cost hereunder and upon terms and
conditions to be mutually agreed upon by the parties following Lessee's written
notice, plus any taxes applicable at time of purchase. Said purchase price shall
be paid to Lessor at least fifteen (15) days before the expiration date of the
Initial Term or extended term. Title to the Equipment shall automatically pass
to Lessee upon payment in full of the purchase price but, in no event, earlier
than the expiration of the fixed Initial Term or extended term, if applicable.
If the parties are unable to agree on the purchase price of the terms and
conditions with respect to said purchase, then the Summary Equipment Schedule
with respect to this Equipment shall remain in full force and effect.
Notwithstanding the exercise by Lessee of this option and payment of the
purchase price, until all obligations under the applicable Summary Equipment
Schedule have been fulfilled, it is agreed and understood that Lessor shall
retain a purchase money security interest in the Equipment listed therein and
the Summary Equipment Schedule shall constitute a Security Agreement under the
Uniform Commercial Code of the state in which the Equipment is located.
5. TECHNOLOGY EXCHANGE OPTION
If Lessee is not in default, and there is no material adverse change
in Lessee's credit, on or after the expiration of the 12th month of any Summary
Equipment Schedule, Lessee shall have the option to replace any of the Equipment
subject to such summary Equipment Schedule with new technology equipment ("New
Technology Equipment") utilizing the following guidelines:
A. Equipment being replaced with New Technology Equipment shall have an
aggregate original cost equal to or greater than $20,000 and be comprised of
full configurations of equipment.
B. This technology Exchange Option shall be limited to a maximum in the
aggregate of fifty percent (50%) of the original equipment cost and shall not
apply to software or any soft costs financed hereunder including but not limited
to tenant improvements and custom equipment.
C. The cost of the New Technology Equipment must be equal to or greater than
the original equipment cost of the replaced equipment, but in no event shall
exceed 150% of the original equipment cost.
D. The remaining lease payments applicable to the equipment being replaced
by the New Technology Equipment will be discounted to present value at 6%.
The wholesale market value of the equipment being replaced will be established
by Comdisco in its reasonable good faith judgment based upon then current market
conditions. Upon the return of the replaced equipment, the wholesale price will
be deducted from the present value of the remaining rentals and the differential
will be added to the cost of the New Technology Equipment in calculating the new
rental. The lease for the New Technology Equipment will contain terms and
conditions substantially similar to those for the replaced equipment and will
have an Initial Term not less than the balance of the remaining Initial Term for
the replaced equipment.
SPECIAL TERMS
The terms and conditions of the Lease as they pertain to this
Schedule are hereby modified and amended as follows:
3
<PAGE> 12
Master Lease: This Schedule is issued pursuant to the Lease identified on page
1 of this Schedule. All of the terms and conditions of the Lease are
incorporated in and made a part of this Schedule as if they were expressly set
forth in this Schedule. The parties hereby reaffirm all of the terms and
conditions of the Lease (including, without limitation, the representations and
warranties set forth in Section 8) except as modified herein by this Schedule.
This Schedule may not be amended or rescinded except by a writing signed by both
parties.
ONDISPLAY, INC. COMDISCO, INC.,
AS LESSEE AS LESSOR
By: /s/ DOUG JEFFRIES By: /s/ JAMES P. LABE
---------------------------- ----------------------------
JAMES P. LABE
Title: Vice President and CEO Title: PRESIDENT
------------------------- -------------------------
COMDISCO VENTURES DIVISION
Date: 2/25/99
------------------------- Date: Feb 26 1999
--------------------------
4
<PAGE> 13
EXHIBIT 1
SUMMARY EQUIPMENT SCHEDULE
This Summary Equipment Schedule dated XXXX is executed pursuant to
Equipment Schedule No. X to the Master Lease Agreement dated XXXX between
Comdisco, Inc. ("Lessor") and XXXX ("Lessee"). All of the terms, conditions,
representations and warranties of the Master Lease Agreement and Equipment
Schedule No. X are incorporated herein and made a part hereof, and this Summary
Equipment Schedule constitutes a Schedule for the Equipment on the attached
invoices.
1. For Period Beginning: And Ending:
2. Initial Term Starts on: Initial Term:
(Number of Rent Intervals)
3. Total Summary Equipment Cost:
4. Lease Rate Factor:
5. Rent:
6. Acceptance Doc Type:
5
<PAGE> 14
EQUIPMENT SCHEDULE VL-2
DATED AS OF FEBRUARY 25, 1999
TO MASTER LEASE AGREEMENT
DATED AS OF FEBRUARY 25, 1999 (THE "MASTER LEASE")
LESSEE: ONDISPLAY, INC. LESSOR: COMDISCO, INC.
ADMIN. CONTACT/PHONE NO.: ADDRESS FOR ALL NOTICES:
_________________________ 6111 North River Road
Phone: (925) 355-3200 Rosemont, Illinois 60018
Fax: (925) 355-3222 Attn.: Venture Group
Address for Notices:
2667 Alcosta Blvd., Suite 300
San Ramon, CA 94583
Central Billing Location: Rental Interval: Monthly
same as above
Attn:
Lessee Reference No.: ___________________
(24 digits maximum)
Location of Equipment: Initial Term: 36 months
same as above (Number of Rental Intervals)
Lease Rate Factor: 3.091%
Attn.:
EQUIPMENT (as defined below): Advance: $4,636.50
Interim Rent: Interest Only (7.5%)
Software, tenant improvements and other soft costs specifically approved by
Lessor, which shall be delivered to and accepted by Lessee during the period
February 25, 1999 through August 25, 2000 ("Equipment Delivery Period"), for
which Lessor receives vendor invoices approved for payment, up to an aggregate
purchase price of $150,000.00 ("Commitment Amount"); excluding custom use
equipment, installation costs and delivery costs, rolling stock, special
tooling, hand held items, molds and fungible items.
1
<PAGE> 15
1. EQUIPMENT PURCHASE
This Schedule contemplates Lessor's acquisition of Equipment for lease to
Lessee, either by one of the first three categories listed below or by providing
Lessee with Equipment from the fourth category, in an aggregate value up to the
Commitment Amount referred to on the face of this Schedule. If the Equipment
acquired is of category (i), (ii), (iii) below, the effectiveness of this
Schedule as it relates to those items of Equipment is contingent upon Lessee's
acknowledgement at the time Lessor acquires the Equipment that Lessee has either
received or approved the relevant purchase documentation between vendor and
Lessor for that Equipment.
(i) NEW ON-ORDER EQUIPMENT. Lessor will purchase new Equipment which is
obtained from a vendor by Lessee for its use subject to Lessor's
prior approval of the Equipment.
(ii) SALE-LEASEBACK EQUIPMENT. Any in-place Equipment installed at
Lessee's site and to which Lessee has clear title and ownership may
be considered by Lessor for inclusion under this Lease (the
"Sale-Leaseback Transaction"). Any request for a Sale-Leaseback
Transaction must be submitted to Lessor in writing (along with
accompanying evidence of Lessee's Equipment ownership satisfactory
to Lessor for all Equipment submitted) no later than April 25,
1999*. Lessor will not perform a Sale-Leaseback Transaction for any
request or accompanying Equipment ownership documents which arrive
after the date marked above by an asterisk (*). Further, any
sale-leaseback Equipment will be placed on lease subject to: (1)
Lessor prior approval of the Equipment; and (2) if approved, at
Lessor's actual net appraised Equipment value pursuant to the
schedule below:
<TABLE>
<CAPTION>
ORIGINAL EQUIPMENT INVOICE PERCENT OF ORIGINAL MANUFACTURER'S
DATE NET EQUIPMENT COST PAID BY LESSOR
-------------------------- ----------------------------------
<S> <C>
Between 01/25/99 - 04/25/99 100%
(90 days)
</TABLE>
(iii) USED ON-ORDER EQUIPMENT. Lessor will purchase used Equipment which
is obtained from a third party by Lessee for its use subject to
Lessor's prior approval of the Equipment and at Lessor's appraised
value for such used Equipment.
(iv) 800 NUMBER EQUIPMENT. Upon Lessee's use of Comdisco's 1-800 Direct
Service, Lessor will purchase new or used Equipment from a third
party or Lessor will supply new or used Equipment from its inventory
for use by Lessee at rates provided by Lessor.
2. COMMENCEMENT DATE
The Commencement Date for each item of new on-order or used on-order
Equipment will be the install date as confirmed in writing by Lessee as set
forth on the vendor invoice of which a facsimile transmission will constitute an
original document. The Commencement Date for sale-leaseback Equipment shall be
the date Lessor tenders the purchase price. The Commencement Date for 800 Number
Equipment shall be fifteen (15) days from the ship date, such ship date to be
set forth on the vendor invoice or if unavailable on the vendor invoice the ship
date will be determined by Lessor upon other supporting shipping documentation.
Lessor will summarize all approved invoices, purchase documentation and evidence
of delivery, as applicable, received in the same calendar quarter into a Summary
Equipment Schedule in the form attached to this Schedule as Exhibit 1, and the
Initial Term will begin the first day of the calendar quarter thereafter. Each
Summary Equipment Schedule will contain the Equipment location, description,
serial number(s) and cost and will incorporate the terms and conditions of the
Master Lease and this Schedule and will constitute a separate lease.
3. MISCELLANEOUS
In consideration of Lessor financing software and tenant improvements
hereunder, Lessee agrees in addition to its last Monthly Rent Payment to remit
to Lessor an amount equal to 15% of Lessor's aggregate cost of software and
tenant improvements provided hereunder.
4. SPECIAL TERMS
The terms and conditions of the Lease as they pertain to this Schedule are
hereby modified and amended as follows:
(a) Section 9. Delivery and Return of Equipment
2
<PAGE> 16
Delete second, third and fourth sentences in their entirety.
Master Lease: This Schedule is issued pursuant to the Lease identified on page 1
of this Schedule. All of the terms and conditions of the Lease are incorporated
in and made a part of this Schedule as if they were expressly set forth in this
Schedule. The parties hereby reaffirm all of the terms and conditions of the
Lease (including, without limitation, the representations and warranties set
forth in Section 8) except as modified herein by this Schedule. This Schedule
may not be amended or rescinded except by a writing signed by both parties.
ONDISPLAY, INC. COMDISCO, INC.
AS LESSEE AS LESSOR
By: /s/ DOUG JEFFRIES By: /s/ JAMES P. LABE
------------------------- -----------------------------
JAMES P. LABE
Title: Vice President and CFO Title: PRESIDENT
----------------------- ---------------------------
COMDISCO VENTURES DIVISION
Date: February 25, 1999 Date: February 26, 1999
------------------------ ----------------------------
3
<PAGE> 17
EXHIBIT 1
SUMMARY EQUIPMENT SCHEDULE
This Summary Equipment Schedule dated XXXX is executed pursuant to
Equipment Schedule No. X to the Master Lease Agreement dated XXXX between
Comdisco, Inc. ("Lessor") and XXXX ("Lessee"). All of the terms, conditions,
representations and warranties of the Master Lease Agreement and Equipment
Schedule No. X are incorporated herein and made a part hereof, and this Summary
Equipment Schedule constitutes a Schedule for the Equipment on the attached
invoices.
1. For Period Beginning: And Ending:
2. Initial Term Starts on: Initial Term:
(Number of Rent Intervals)
3. Total Summary Equipment Cost:
4. Lease Rate Factor:
5. Rent:
6. Acceptance Doc Type:
4
<PAGE> 18
PURCHASE/LEASEBACK AGREEMENT
BUYER: SELLER:
COMDISCO INC. ONDISPLAY, INC.
6111 North River Road 12667 ALCOSTA BOULEVARD #300
Rosemont, Illinois 60018 SAM RAMON, CA 94583
1. PURCHASE: Seller agrees to sell and Buyer agrees to purchase from Seller
the equipment listed below (the "Equipment") in accordance with the terms
and conditions specified in this Purchase/Leaseback Agreement dated as of
May 27, 1999.
<TABLE>
<CAPTION>
ITEM NO. MACHINE SERIAL
NO. QTY. MFG. TYPE/FEATURE DESCRIPTION NUMBER
-------- ---- ---- ------------ ----------- ------
<S> <C> <C> <C> <C> <C>
see attached invoices
</TABLE>
2. PURCHASE PRICE: $4,508.94. Purchase Price is due _______________. Upon
request, Seller will provide Buyer with copies of purchase documentation,
invoices and Bill of Sale to Seller to verify Seller's purchase of the
Equipment from the Equipment vendor. The Purchase Price will not be paid
to Seller until all requested documentation is received by, and is
satisfactory to Buyer.
3. LEASEBACK: This Agreement is contingent upon Seller leasing the Equipment
from Buyer pursuant to the Equipment Schedule No. VL-2 to the Master Lease
Agreement dated February 25, 1999 between Seller, as Lessee, and Buyer, as
Lessor (collectively the "Lease").
4. WARRANTY: SELLER MAKES NO WARRANTIES OTHER THAN THOSE SPECIFICALLY SET OUT
IN THIS AGREEMENT (IF ANY) AND SPECIFICALLY DISCLAIMS THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
5. TITLE: Title to the Equipment will be free and clear of all liens, claims
and encumbrances of any kind and will vest in Buyer upon payment of the
full Purchase Price. Upon request, Seller will provide Buyer with a Bill
of Sale to evidence such title.
6. TAXES: Buyer warrants that it is the business of buying and selling
computer, communications and high technology equipment and that the
purchase of the Equipment is for the purpose of resale only.
7. GOVERNING LAW: Illinois
8. MULTIPLE COUNTERPARTS: This Agreement may be executed in multiple
counterparts, each of which will be deemed to be an original and of equal
force and effect.
ONDISPLAY, INC. COMDISCO, INC.
as Seller as Buyer
By: /s/ CAROL RICHARD By:
--------------------------------- ---------------------------------
(authorized signature) (authorized signature)
TAX ON SOFTWARE $2999.94
TAX OFF SOFTWARE $1509.00
<PAGE> 19
PURCHASE/LEASEBACK AGREEMENT
Buyer: Seller:
COMDISCO INC. ONDISPLAY, INC.
6111 North River Road 12667 ALCOSTA BOULEVARD #300
Rosemont, Illinois 60018 San Ramon, CA 94583
1. PURCHASE: Seller agrees to sell and Buyer agrees to purchase from Seller
the equipment listed below (the "Equipment") in accordance with the terms
and conditions specified in this Purchase/Leaseback Agreement dated as of
May 27, 1999.
<TABLE>
<CAPTION>
ITEM MACHINE SERIAL
NO. QTY. MFE. TYPE/FEATURE DESCRIPTION NUMBER
---- ---- ---- ------------ ----------- ------
<S> <C> <C> <C> <C> <C>
see attached invoices
</TABLE>
2. PURCHASE PRICE. $93,681.91. Purchase Price is due ____________. Upon
request, Seller will provide Buyer with copies of purchase documentation,
invoices and Bill of Sale to Seller to verify Seller's purchase of the
Equipment from the Equipment Vendor. The Purchase Price will not be paid to
Seller until all requested documentation is received by, and is
satisfactory to Buyer.
3. LEASEBACK. This Agreement is contingent upon Seller leasing the Equipment
from Buyer pursuant to the Equipment Schedule No. VL-1 to the Master Lease
Agreement dated February 25, 1999 between Seller, as Lessee, and Buyer, as
Lessor (collectively the "Lease").
4. WARRANTY: SELLER MAKES NO WARRANTIES OTHER THAN THOSE SPECIFICALLY SET OUT
IN THIS AGREEMENT (IF ANY), AND SPECIFICALLY DISCLAIMS THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
TITLE: Title to the Equipment will be free and clear of all liens, claims
and encumbrances of any kind and will vest in Buyer upon payment of the
full Purchase Price. Upon request, Seller will provide Buyer with a Bill of
Sale to evidence such title.
6. TAXES: Buyer warrants that it is in the business of buying and selling
computer, communications and high technology equipment and that the
purchase of the Equipment is for the purpose of resale only.
7. GOVERNING LAW: Illinois
8. MULTIPLE COUNTERPARTS: This Agreement may be executed in multiple
counterparts, each of which will be deemed to be an original and of equal
force and effect.
OnDisplay, Inc. COMDISCO, INC.
as Seller as Buyer
By: /s/ CAROL RICHARD By:
----------------------------- -----------------------------------
(authorized signature) (authorized signature)
TAX ON PC $33,278.91
TAX OFF PC $54,826.00
TAX OFF FURN $ 5,587.00
<PAGE> 1
EXHIBIT 10.8
SENIOR LOAN AND SECURITY AGREEMENT NO. 0088
THIS SENIOR LOAN AND SECURITY AGREEMENT NO. 0088 (this "Security Agreement")
is dated as of June 2, 1997 between ONDISPLAY, INC., A Delaware corporation
("Borrower") and PHOENIX LEASING INCORPORATED, a California corporation
("Lender").
RECITALS
A. Borrower desires to borrow from Lender in one or more borrowings an
amount not to exceed $500,000 in the aggregate, and Lender desires to loan,
subject to the terms and conditions herein set forth, such amount to Borrower.
Such borrowings shall be evidenced by one or more Senior Secured Promissory
Notes (each, a "Note" and collectively, the "Notes"), in the form attached
hereto.
B. As security for Borrower's obligations to Lender under this Security
Agreement, the Notes and any other agreement between Borrower and Lender,
Borrower will grant to Lender hereunder a first perfected security interest in
certain of its equipment, machinery and fixtures and also certain custom use
equipment, installation and delivery costs, purchase tax, toolings, software
and generally considered fungible or expendable ("Soft Costs"), including but
not limited to personal computers, (including laptops), peripherals,
workstations, office equipment, furniture and other equipment approved by
Lender, whether now owned by Borrower or hereafter acquired, and all
substitutions and replacements of and additions, improvements, accessions and
accumulations to said equipment, machinery and fixtures, together with all
rents, issues, income, profits and proceeds therefrom (collectively, the
"Collateral") which is described on the Note attached hereto or any
subsequently-executed Note entered into by Lender and Borrower and which
incorporates this Security Agreement by reference. In addition to the foregoing
Collateral, under certain circumstances Borrower's obligations to Lender may
also be secured by certain "Additional Collateral" as provided below, in which
case the term "Collateral" shall include such Additional Collateral.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
SECTION 1. TERM OF AGREEMENT. The term of this Security Agreement begins on the
date set forth above and shall continue thereafter and be in effect so long as
and at any time any Note entered into pursuant to this Security Agreement is in
effect. The Base Term and monthly payment amount payable with respect to each
item of Collateral shall be as set forth in and as stated in the respective
Note(s). The terms of each Note hereto are subject to all conditions and
provisions of this Security Agreement as it may at any time be amended. Each
Note shall constitute a separate and independent loan and contractual
obligation of Borrower and shall incorporate the terms and conditions of this
Security Agreement and any additional provisions contained in such Note. In the
event of a conflict between the terms and conditions of this Security Agreement
and any additional provisions of such Note, the additional provisions of such
Note shall prevail with respect to such Note only.
SECTION 2. NON-CANCELLABLE SECURITY AGREEMENT. This Security Agreement and any
Note cannot be cancelled or terminated except as expressly provided herein.
This Security Agreement (including all Notes to this Security Agreement)
constitutes a net loan and Borrower agrees that its obligations to pay all
monthly payment amounts and other sums payable hereunder (and under any Note)
and the rights of Lender and assignee in and to such monthly payments and other
sums, are absolute and unconditional and are not subject to any abatement,
reduction, setoff, defense, counterclaim or recoupment due or alleged to be
due to, or by reason of, any past, present or future claims which Borrower may
have against Lender, any assignee, the manufacturer or seller of the
Collateral, or against any person for any reason whatsoever.
1
<PAGE> 2
SECTION 3. LENDER COMMITMENT. (a) General Terms. Subject to the terms and
conditions of this Security Agreement and so long as no Event of Default or
event which with the giving of notice or passage of time, or both, could become
an Event of Default has occurred or is continuing, Lender hereby agrees to
make one or more senior secured loans (each, a "Loan" and collectively, the
"Loans") to Borrower, subject to the following conditions: (1) each Loan shall
be evidenced by a Note; (ii) the total principal amount of the Loans shall not
exceed $500,000 in the aggregate (the "Commitment") provided that no more than
10% of the amount of the utilized Commitment may be used to finance Soft Costs;
(iii) at the time of each Loan, no Event of Default or event which with the
giving of notice or passage of time, or both, could become an Event of Default
shall have occurred and be continuing, as reasonably determined by Lender, and
certified by Borrower; (iv) the amount of each Loan shall be at least $25,000
except for a final Loan which may be less than $25,000; (v) Lender shall not be
obligated to make any Loan after March 31, 1998; (vi) for each Loan, Borrower
shall present to Lender a list of proposed Collateral for approval by Lender in
its sole discretion; (vii) for each Loan, Borrower shall have provided Lender
with each of the closing documents described in Exhibit A hereto (which
documents shall be in form and substance acceptable to Lender); (viii) for
each Loan, Borrower is performing according to its business plan referred to as
"On Display, Inc. Business Plan, 6 pages," dated April 24, 1997 (the "Business
Plan"), as may be amended from time to time in form and substance acceptable to
Lender; (ix) there shall be no material adverse change in Borrower's condition,
financial or otherwise, as reasonably determined by Lender, and Borrower so
certifies, from (yy) the date of the most recent financial statements delivered
by Borrower to Lender to (zz) the date of the proposed Loan; (x) prior to full
utilization of the Commitment amount, Borrower shall not offer any loan secured
by capital equipment to any other person or entity other than Lender, unless
Lender declines to finance such transaction or Borrower and Lender are unable
to agree on the terms of such financing; (xi) Borrower shall use the proceeds
of all Loans hereunder for working capital; (xii) at the time of each Loan,
Borrower has reimbursed Lender for all UCC filing and search costs and
appraisal fees; (xiii) all Collateral has been marked and labeled by Lender or
Lender's agent; and (xiv) Lender has received in form and substance acceptable
to Lender: (a) Borrower's interim financial statements signed by a financial
officer of Borrower, (b) evidence of Borrower's $1,660,000 cash position as of
March 31, 1997; and (c) complete copies of the Borrower's audit reports for its
most recent fiscal year, which shall include at least Borrower's balance sheet
as of the close of such year, and Borrower's statement of income and retained
earnings and of changes in financial position for such year, prepared on a
consolidated basis and certified by independent public accountants. Such
certificate shall not be qualified or limited because of restricted or limited
examination by such accountant of any material portion of the company's
records. Such reports shall be prepared in accordance with generally accepted
accounting principles and practices consistently applied.
(b) The Notes. Each Loan shall be evidenced by a Note. Each Note shall
bear interest and be payable and prepayable at the times and in the manner
provided therein. Following a payment of the indebtedness related to each Note,
Lender shall return such Note, marked "canceled," to Borrower.
SECTION 4. SECURITY INTERESTS. (a) Borrower hereby grants to Lender a first
security interest in all Collateral; (b) This Security Agreement secures (i)
the payment of the principal of and interest on the Notes and all other sums
due thereunder and under this Security Agreement (the "Indebtedness") and (ii)
the performance by Borrower of all of its other covenants now or hereafter
existing under the Notes, this Security Agreement and any other obligation owed
by Borrower to Lender (the "Obligations").
SECTION 5. BORROWER'S REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants that (a) it is in good standing under the laws of the state of its
formation, and duly qualified to do business and will remain duly qualified
during the term of this Security Agreement in each state where necessary to
carry on its present business and operations, including the jurisdiction(s)
where the Collateral will be located as specified on each Note; (b) it has full
authority to execute and deliver this Security Agreement and the Notes
2
<PAGE> 3
and perform the terms hereof and thereof, and this Security Agreement and the
Notes have been duly authorized, executed and delivered and constitute valid and
binding obligations of Borrower enforceable in accordance with their terms; (c)
the execution and delivery of this Security Agreement and the Notes will not
contravene any law, regulation or judgment affecting Borrower or result in any
breach of any agreement or other instrument binding on Borrower, (d) no consent
of Borrower's shareholders or holder of any indebtedness, or filing with, or
approval of, any governmental agency or commission, which has not already been
obtained or performed, as appropriate, is a condition to the performance of the
terms of this Security Agreement or the Notes; (e) there is no action or
proceeding pending or threatened against Borrower before any court or
administrative agency which might have a materially adverse effect on the
business, financial condition or operations of Borrower; (f) Borrower owns and
will keep all of the Collateral free and clear of all liens, claims and
encumbrances (excluding taxes, fees, assessments or other government charges
which exist in the ordinary course of business from time to time, but which
Borrower agrees to pay when due), and, except for this Security Agreement, there
is no deed of trust, mortgage, security agreement or other third party interest
against any of the Collateral; (g) Borrower has good and marketable title to the
Collateral; (h) all Collateral has been received, installed and is ready for use
and is satisfactory in all material respects for the purposes of this Security
Agreement; (i) the Collateral is, and will remain at all times under applicable
law, removable personal property, which is free and clear of any lien or
encumbrance except in favor of the Lender, notwithstanding the manner in which
the Collateral may be attached to any real property; (j) all credit and
financial information submitted to Lender herewith or at any other time is and
will at the time given be true and correct; and (k) the security interest
granted to Lender hereunder is a perfected first priority security interest.
SECTION 6. METHOD AND PLACE OF PAYMENT. Borrower shall pay to Lender, at its
office at the address specified in the Notes, or such other address as Lender
specifies in writing, all amounts payable to it in respect of the principal of
or interest on the Notes.
SECTION 7. LOCATION; INSPECTION; LABELS. All of the Collateral, with the
exception of portable laptop computers used by employees, shall be located at
the address (the "Collateral Location") shown on Exhibit A to each Note and
shall not be moved without Lender's prior written consent which location shall
in all events be within the United States. All of the records regarding the
Collateral shall be located at 2682 Bishop Drive, Suite 215, San Ramon,
California 94583. Lender shall have the right to inspect Collateral, including
records relating thereto, and Borrower's books and records at any time (upon
reasonable notification) during regular business hours, such books and records
to be maintained in accordance with generally accepted accounting principles.
Borrower shall be responsible for all labor, material and freight charges
incurred in connection with any removal or relocation of Collateral which is
requested by Borrower and consented to by Lender, as well as for any charges due
to the installation or moving of the Collateral. Payments under the Notes and
under this Security Agreement shall continue during any period in which the
Collateral is in transit during a relocation. Lender or its agent shall mark and
label Collateral, which labels (to be provided by Lender) shall state that such
Collateral is subject to a security interest of Lender, and Borrower shall keep
such labels on the Collateral as so labeled.
SECTION 8. COLLATERAL MAINTENANCE. (a) General. Borrower will at its sole
expense comply with all applicable laws, rules, regulations, requirements and
orders with respect to the use, maintenance, repair, condition, storage and
operation of each item of Collateral. Except as required herein, Borrower will
not make any addition or improvement to any item of Collateral that is not
readily removable without causing material damage to any item or impairing its
original value or utility. An addition or improvement that is so required or
cannot be so removed will immediately become Collateral of Lender. (b) Service
and Repair. Borrower will at its sole expense maintain and service and repair
any damage to each item of Collateral in a manner consistent with prudent
industry practice and Borrower's own practice so that such item of Collateral is
at all times (i) in the same
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condition as when delivered to Borrower, except for ordinary wear and tear, and
(ii) in good operating order for the function intended by its manufacturer's
warranties and recommendations.
SECTION 9. LOSS OR DAMAGE. Borrower assumes the entire risk of loss to the
Collateral through use, operation or otherwise. Borrower hereby indemnifies and
holds harmless Lender from and against all claims, loss of Loan payments, costs,
damages, and expenses relating to or resulting from any loss, damage or
destruction of the Collateral, any such occurrence being hereinafter called a
"Casualty Occurrence." On the first day payment is due on each Note following
the Casualty Occurrence or, if there is no such payment date, thirty (30) days
after such Casualty Occurrence Borrower shall pay to Lender an amount equal to
the Balance Due (as defined below) for each lost or damaged item of Collateral.
The Balance Due for each item such is the sum of: (i) all amounts for each item
which may be then due or accrued to the payment date, plus (ii) as of such
payment date, an amount equal to the product of the fraction specified below
times the sum of all remaining payments under the respective Note, including the
amount of any mandatory or optional payment required or permitted to be paid by
Borrower to Lender at the maturity of the Note. The numerator of the fraction
shall be the Collateral Value (as set forth on the applicable Note) of the item
and the denominator shall be the aggregate Collateral Value of all items under
the Note. Upon the making of such payments, Lender shall release such item of
Collateral from its lien hereunder.
Notwithstanding the above, within thirty (30) days following a Casualty
Occurrence, Borrower may replace any item of Collateral which has suffered a
Casualty Occurrence with Collateral of equivalent value in good condition and
repair and, in such event, the provisions of the previous paragraph shall not
apply. Borrower's tender of such Collateral shall constitute a representation
and warranty that it is free of all liens, claims and encumbrances (excluding
taxes, fees, assessments, or other government charges not yet due which exist
in the ordinary course of business from time to time, but which Borrower agrees
to pay when due), and otherwise qualifies as Collateral under this Security
Agreement. Following such tender, Lender shall have a first security interest
in such Collateral.
All insurance proceeds from policies required to be maintained hereunder
received by or payable to Lender on account of a Casualty Occurrence, shall be
released to the vendor of the replacement item of Collateral upon Borrower's
request if (i) no Event of Default has occurred and is continuing hereunder, and
(ii) Lender has received an invoice from Vendor describing the replacement item
of Collateral.
If Lender has received from Borrower the Balance Due and all other payments due
with respect to the item of Collateral which has suffered a Casualty
Occurrence, all insurance proceeds received by Lender thereafter or payable on
account of the Casualty Occurrence shall be paid over to Borrower as it may
direct.
SECTION 10. INSURANCE. Borrower at its expense shall keep the Collateral
insured against all risks of physical loss for at least the replacement value
of the Collateral and in no event for less than the amount payable following a
Casualty Occurrence (as provided in Section 9). Such insurance shall provide
for a loss payable endorsement to Lender and/or any assignee of Lender.
Borrower shall maintain commercial general liability insurance with respect to
loss or damage for personal injury, death or property damage in an amount not
less than $2,000,000 in the aggregate, naming Lender and/or Lender's assignee
as additional insured. Such insurance shall contain insurer's agreement to give
thirty (30) days' advance written notice to Lender before cancellation or
material change of any policy of insurance. Borrower will provide Lender and
any assignee of Lender with a certificate of insurance from the insurer
evidencing Lender's or such assignee's interest in the policy of insurance.
Such insurance shall cover any Casualty Occurrence to any unit of Collateral.
Notwithstanding anything in Section 9 or this Section 10 to the contrary, this
Security Agreement and Borrower's obligations hereunder shall remain in full
force and effect with respect to any unit of Collateral which is not subject to
a Casualty Occurrence. If Borrower fails to provide or maintain insurance as
required herein, Lender shall have the right, but shall not
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be obligated to obtain such insurance. In that event, Borrower shall pay to
Lender the cost thereof.
SECTION. 11. MISCELLANEOUS AFFIRMATIVE COVENANTS. So long as any portion of the
Indebtedness is unpaid and as long as any of the Obligations are outstanding
Borrower will (a) duly pay all governmental taxes and assessments at the time
they become due and payable; (b) comply with all applicable governmental laws,
rules and regulations; (c) maintain Lender's security interest in the
Collateral as a first and prior perfected security interest; (d) furnish Lender
with its annual audited financial statements within ninety (90) days following
the end of Borrower's fiscal year, unaudited quarterly financial statements
within twenty (20) days after the end of each fiscal quarter, and within twenty
(20) days of the end of each month a financial statement for that month prepared
by Borrower, including all financial information given to Borrower's Board of
Directors, and including an income statement and balance sheet, all of which
shall be certified by an officer of Borrower as true and correct and shall be
prepared in accordance with generally accepted accounting principles
consistently applied, and such other information as Lender may reasonably
request; (e) promptly (but in no event more than five (5) days after the
occurrence of such event) notify Lender of any material adverse change in
Borrower's condition during the commitment period and of the occurrence of any
Event of Default; and (f) take all steps deemed by Lender reasonable or
advisable to validate or perfect the security interest of Lender in the
Collateral.
SECTION 12. INDEMNITIES. Borrower will protect, indemnify and save harmless
Lender and any assignees on an after-tax basis from and against all
liabilities, obligations, claims, damages, penalties, causes of action, costs
and expenses (including reasonable attorneys' fees and expenses), imposed upon
or incurred by or asserted against Lender or any assignee of Lender by Borrower
or any third party by reason of the occurrence or existence (or alleged
occurrence or existence) of any act or event relating to or caused by any
portion of the Collateral, or its purchase, acceptance, possession use,
maintenance or transportation, including without limitation, consequential or
special damages of any kind, any failure on the part of Borrower to perform or
comply with any of the terms of this Security Agreement or the Notes, claims
for latent or other defects, claims for patent, trademark or copyright
infringement and claims for personal injury, death or property damage,
including those based on Lender's negligence or strict liability in tort and
excluding only those based on Lender's gross negligence or willful misconduct.
In the event that any action, suit or proceeding is brought against Lender by
reason of any such occurrence, Borrower, upon Lender's request, will, at
Borrower's expense, resist and defend such action, suit or proceeding or cause
the same to be resisted and defended by counsel designated and approved by
Lender. Borrower's obligations under this Section 11 shall survive the payment
in full of all the Indebtedness and the performance of all Obligations with
respect to acts or events occurring or alleged to have occurred prior to the
payment in full of all the Indebtedness and the performance of all Obligations.
SECTION 13. TAXES. Borrower agrees to reimburse Lender (or pay directly if
instructed by Lender) and any assignee of Lender for and to indemnify and hold
Lender and any assignee harmless from, all fees (including but not limited to,
license, documentation, recording and registration fees), and all sales, use,
gross receipts, personal property, occupation, value added or other taxes,
levies, imposts, duties assessments, charges, or withholdings of any nature
whatsoever, together with any penalties, fines, additions to tax, or interest
thereon (the foregoing collectively "Impositions"), except some as may be
attributable to Lender's income, arising at any time prior to or during the
term of any Notes or of this Security Agreement, or upon termination or early
termination of this Security Agreement and levied or imposed upon Lender
directly or otherwise by any Federal, state or local government in the United
States or by any foreign country or foreign or international taxing authority
upon or with respect to (a) the Collateral, (b)the exportation, importation,
registration, purchase, ownership, delivery, leasing, possession, use,
operation, storage, maintenance, repair, return, sale, transfer of title, or
other disposition thereof, (c) the rentals, receipts, or earnings arising from
the Collateral, or any disposition of the rights to such rentals, receipts, or
earnings, (d) any payment pursuant to this Security Agreement or the Notes, or
(e) this Security Agreement, the Notes or any transaction or any part hereof or
thereof.
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SECTION 14. RELEASE OF LIENS. Upon payment of all of the Indebtedness and
performance of all of the Obligations, Lender shall execute UCC termination
statements and such other documents as Borrower shall reasonably request to
evidence the release of Lender's lien relating to the Collateral.
SECTION 15. ASSIGNMENT. WITHOUT LENDER'S PRIOR WRITTEN CONSENT WHICH CONSENT
WILL NOT BE UNREASONABLY WITHHELD, BORROWER SHALL NOT (a) ASSIGN, TRANSFER,
PLEDGE, HYPOTHECATE OR OTHERWISE DISPOSE OF THIS SECURITY AGREEMENT, ANY
COLLATERAL, OR ANY INTEREST THEREIN, (b) LEASE OR LEND COLLATERAL OR PERMIT IT
TO BE USED BY ANYONE OTHER THAN BORROWER OR BORROWER'S EMPLOYEES OR (c) MERGE
INTO, CONSOLIDATE WITH OR CONVEY OR TRANSFER ITS PROPERTIES SUBSTANTIALLY AS AN
ENTIRETY TO ANY OTHER PERSON OR ENTITY. LENDER MAY ASSIGN ANY OF THE NOTES,
THIS SECURITY AGREEMENT OR ITS SECURITY INTEREST IN ANY OR ALL COLLATERAL, OR
ANY OR ALL OF THE ABOVE, IN WHOLE OR IN PART TO ONE OR MORE ASSIGNEES OR
SECURED PARTIES WITHOUT NOTICE TO BORROWER. If Borrower is given notice of such
assignment it agrees to acknowledge receipt thereof in writing and Borrower
shall execute such additional documentation as Lender's assignee and/or secured
party shall reasonably require. Each such assignee and/or secured party shall
have all of the rights, but (except as provided in this Section 15) none of the
obligations, of Lender under this Security Agreement, unless such assignee or
secured party expressly agrees to assume such obligations in writing. Borrower
shall not assert against any assignee and/or secured party any defense,
counterclaim or offset that Borrower may have against Lender. Notwithstanding
any such assignment, and providing no Event of Default has occurred and is
continuing, Lender, to is assignees, secured parties, or their agents or
assigns, shall not interfere with Borrower's right to quietly enjoy use of
Collateral subject to the terms and conditions of this Security Agreement.
Subject to the foregoing, the Notes and this Security Agreement shall inure to
the benefit of and are binding upon, the successors and assignees of the
parties hereto. Borrower acknowledges that any such assignment by Lender will
not materially change Borrower's duties or obligations under the Security
Agreement or increase any burden or risk on Borrower.
SECTION 16. DEFAULT. (a) Events of Default. Any of the following events or
conditions shall constitute an "Event of Default" hereunder, (i) Borrower's
failure to pay any monies due to Lender hereunder or under any Note beyond the
fifth (5th) day after the same is due; (ii) Borrower's failure to comply with
its obligations under Section 10 or Section 15; (iii) any representation or
warranty of Borrower made in this Security Agreement or the Notes or in any
other agreement, statement or certificate furnished to Lender in connection
with this Security Agreement or the Notes shall prove to have been incorrect in
any material respect when made or given; (iv) Borrower's failure to comply with
or perform any term, covenant or condition of this Security Agreement or any
Note or under any other agreement between Borrower and Lender or under any
lease of real property covering the location of the Equipment if such failure
to comply or perform is not cured by Borrower within ten (10) days after
Borrower knows of the noncompliance or nonperformance or notice from Lender;
(v) seizure of any of the Collateral under legal process; (vi) the filing by or
against Borrower or any guarantor under any guaranty executed in connection
with this Security Agreement ("Guarantor") of a petition for reorganization or
liquidation under the Bankruptcy Code or any amendment thereto or under any
other insolvency law providing for the relief of debtors; (vii) the voluntary
or involuntary making of an assignment of a substantial portion of its assets
by Borrower or by any Guarantor for the benefit of its creditors, the
appointment of a receiver or trustee for Borrower or any Guarantor or for any
of Borrower's or Guarantor's assets, the institution by or against Borrower or
any Guarantor of any formal or informal proceeding for dissolution,
liquidation, settlement of claims against or winding up of the affairs of
Borrower or any Guarantor provided that in the case of all such involuntary
proceedings, same are not dismissed within sixty (60) days after commencement;
or (vii) the making by Borrower or by any Guarantor of a transfer of all or a
material portion of Borrower's or Guarantor's assets or inventory not in the
ordinary course of business.
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(b) Remedies. If any Event of Default has occurred, Lender may in its sole
discretion exercise one or more of the following remedies with respect to any or
all of the Collateral: (i) declare due any or all of the aggregate sum of all
remaining payments under the Notes, including the amount of any mandatory or
optional payment required or permitted to be paid by Borrower to Lender at the
maturity of the Notes ("Remaining Payments"); (ii) proceed by appropriate court
action or actions either at law or in equity to enforce Borrower's performance
of the applicable covenants of the Notes and this Security Agreement or to
recover all damages and expenses incurred by Lender by reason of an Event of
Default; (iii) without court order or prior demand, enter upon the premises
where the Collateral is located and take immediate possession of and remove it
without liability of Lender to Borrower or any other person or entity; (iv)
terminate this Security Agreement and sell the Collateral at public or private
sale, or otherwise dispose of, hold, use or lease any or all of the Collateral;
or (v) exercise any other right or remedy available to it under applicable law.
If Lender has declared due any or all of the Remaining Payments, Borrower will
pay immediately to Lender (A) the Remaining Payments, (B) all amounts which may
be then due or occurred, and (C) all other amounts due under this Security
Agreement and under the Notes (Lender's Return, as referred to below, means the
amounts described in Clauses (A), (B) and (C) above). The net proceeds of any
sale or lease of such Collateral will be credited against Lender's Return. The
net proceeds of a sale of the Collateral pursuant to this Section 15(b) is
defined as the sales price of the Collateral less selling expenses, including,
without limitation, costs of remarketing the Collateral and all refurbishing
costs and commissions paid with respect to such remarketing. The net proceeds of
a lease of the Collateral pursuant to this Section 15(b) is defined as the
amount equal to the monthly payments due under such lease (discounted at a rate
per annum equal to the 3-year Treasury Bill yield as of the date on which Lender
notifies Borrower that this Security Agreement is terminated (the "Termination
Date") (as such yield is reported in the most recent Federal Reserve Statistical
Release H.15 (519) ("Statistical Release") (the "Discount Rate")) plus the
residual value of the Collateral at the end of the basic term of such lease, as
reasonably determined by Lender, and discounted at the Discount Rate.
In addition to the foregoing remedies, Lender may apply the security
deposit pledged to Lender pursuant to Section 26, including all interest paid
thereon, (A) to compensate Lender for losses or damages sustained as a result of
such Event of Default, and/or (B) to reimburse Lender for costs and expenses,
including reasonable attorney's fees, incurred by Lender in connection with such
failure to perform, whether or not litigation or other judicial proceedings are
commenced. Any surplus remaining thereafter shall be retained by Lender as
security hereunder.
Borrower agrees to pay all reasonable internal and out-of-pocket costs of
Lender incurred in enforcement of this Security Agreement, the Notes or any
instrument or agreement required under this Security Agreement, including, but
not limited to direct overhead costs of Lender allocated to the estimated time
spent by its employees (and the employees of its affiliates, including counsel
who are employees of Lender or its affiliates) and outside counsel legal fees
and litigation expenses and fees of collection agencies ("Remedy Expenses"). At
Lender's request, Borrower shall assemble the Collateral and make it available
to Lender at such time and location as Lender may designate. Borrower waives any
right it may have to redeem the Collateral.
Declaration that any or all amounts under this Security Agreement and/or
the Notes are immediately due and payable and/or Lender's taking possession of
any or all Equipment shall not terminate this Security Agreement or any of the
Notes unless Lender so notifies Borrower in writing. None of the above remedies
is intended to be exclusive but each is cumulative and may be enforced
separately or concurrently.
In addition to the foregoing remedies, if an Event of Default hereunder
shall have occurred and be continuing, Lender shall have the right to cause its
representative or representatives to attend any meeting of Borrower's Board of
Directors or any committee thereof. In such case, Borrower shall provide Lender
with the
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same notice of any such Board or Committee meeting that is given to the members
of Borrower's Board or committee thereof.
(c) Application of Proceeds. The proceeds of any sale of all or any part
of the Collateral and the proceeds of any remedy afforded to lender by this
Security Agreement shall be paid to and applied as follows:
First to the payment of reasonable costs and expenses of suit or
foreclosure, if any, and of the sale, if any, including, without limitation,
refurbishing costs, costs of remarketing and commissions related to remarketing,
all Remedy Expenses, all expenses, liabilities and advances incurred or made
pursuant to this Security Agreement or any Note by Lender in connection with
foreclosure, suit, sale or enforcement of this Security Agreement or the Notes,
and taxes, assessments or liens superior to Lender's security interest granted
by this Security Agreement;
Second, to the payment of all other amounts not described in item
Third below due under this Security Agreement and all Notes;
Third, to pay Lender an amount equal to Lender's Return, to the extent
not previously paid by Borrower; and
Fourth, to the payment of any surplus to Borrower or to whomever may
lawfully be entitled to receive it.
(d) Effect of Delay; Waiver, foreclosure on Collateral. No delay or
omission of Lender, in exercising any right or power arising from any Event of
Default shall prevent Lender from exercising that right or power if the Event of
Default continues. No waiver of an Event of Default, or to impair the rights of
lender in respect of any damages suffered as a result of the Event of Default.
The giving, taking or enforcement of any other or additional security,
collateral or guaranty for the payment or discharge of the Indebtedness and
performance of the Obligations shall in no way operate to prejudice, waive or
affect the security interest created by this security Agreement or any rights,
powers or remedies exercised hereunder or thereunder. Lender shall not be
required first to foreclose on the Collateral prior to bringing an action
against Borrower for sums owed to Lender under this security Agreement or under
any Note.
SECTION 17. LATE PAYMENTS. Borrower shall pay Lender a late charge in an amount
equal to 10% of each monthly payment owed Lender by Borrower which is not paid
when due, for every month such payment is not paid when due, but in no event an
amount greater than the highest rate permitted by applicable law. If such
amounts have not been received by Lender at Lender's place of business or by
Lender's designated agent by the date such amounts are due under this Security
Agreement or the Notes, Lender shall bill borrower for such charges. Borrower
acknowledges that invoices for amounts due hereunder or under the Notes are sent
by Lender for Borrower's convenience only. Borrower's non-receipt of an invoice
will not relieve Borrower of its obligation to make payments hereunder or under
the Notes.
SECTION 18. PAYMENTS BY LENDER. If Borrower shall fail to make any payment or
perform any act required hereunder (including, but not limited to, maintenance
of any insurance required by Section 10, then Lender may, but shall not be
required to, after such notice to Borrower as is reasonable under the
circumstances, make such payment or perform such act with the same effect as if
made or performed by Borrower. Borrower will upon demand reimburse Lender for
all sums paid and all costs and expenses incurred in connection with the
performance of any such act.
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SECTION 19. FINANCING STATEMENTS. Borrower will execute all financing
statements pursuant to the Uniform Commercial Code and all such other documents
reasonably requested by Lender to perfect Lender's security interests
hereunder. Borrower authorizes Lender to file financing statements signed only
by Lender (where such authorization is permitted by law) at all places where
Lender deems necessary.
SECTION 20. NATURE OF TRANSACTION. Lender makes no representation whatsoever,
express or implied, concerning the legal character of the transaction evidenced
hereby, for tax or any other purpose.
SECTION 21. SUSPENSION OF LENDER'S OBLIGATIONS. The obligations of Lender
hereunder will be suspended to the extent that Lender is hindered or prevented
from complying therewith because of labor disturbances, including but not
limited to strikes and lockouts, acts of God, fires, floods, storms, accidents,
industrial unrest, acts of war, insurrection, riot or civil disorder, any order
decree, law or governmental regulations or interference, failure of the
manufacturer to deliver any item of Collateral or any cause whatsoever not
within the sole and exclusive control of Lender.
SECTION 22. LENDER'S EXPENSE. Borrower shall pay Lender all reasonable costs
and expenses including reasonable attorney's fees and the fees of collection
agencies, incurred by Lender (a) in enforcing any of the terms, conditions or
provisions hereof and related to the exercise of its remedies, and (b) in
connection with any bankruptcy or post-judgment proceeding, whether or not suit
os filed and, in each and every action, suit or proceeding, including any and
all appeals and petitions therefrom.
SECTION 23. ALTERATIONS; ATTACHMENTS. No alterations or attachments shall be
made to the Collateral without Lender's prior written consent, which shall not
be given for changes that will affect the reliability and utility of the
Collateral or which cannot be removed without damage to the Collateral, or
which in any way affect the value of the Collateral for purposes of resale or
lease. All attachments and improvements to the Collateral shall be deemed to be
"Collateral" for purposes of the Security Agreement, and a first priority
security interest therein shall immediately vest in Lessor.
SECTION 24. CHATTEL PAPER. (a) One executed copy of the Security Agreement will
be marked "Original" and all other counterparts will be duplicates. To the
extent, if any, that this Security Agreement constitutes chattel paper (as such
term is defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction) no security interest in the Security Agreement may be created in
any documents other than the "Original." (b) There shall be only one original
of each Note and it shall be marked "Original," and all other counterparts will
be duplicates. To the extent, if any, that any Note(s) to this Security
Agreement constitutes chattel paper (or as such term is defined in the Uniform
Commercial Code as in effect in any applicable jurisdiction) no security
interest in any Note(s) may be created in any documents other than the
"Original."
SECTION 25. ADDITIONAL SECURITY (CASH). For each Note executed by Borrower
hereunder, before Lender's funding of the Note, Borrower shall provide to
Lender, as security for the timely performance and payment by Borrower of its
obligations hereunder, cash in a dollar amount equal to 10% of the Collateral
value ("Additional Security"). The Additional Security shall accrue interest at
6% per annum compounded monthly. If any Event of Default has occurred or is
continuing, the amount of any such interest shall be retained by Lender as
Additional Security.
Provided (a) no Event of Default hereunder has occurred or is continuing, (b)
Lender is satisfied that Borrower has theretofore continuously performed
according to its Business Plan and (c) Lender has timely received from Borrower
all monthly note payments, then Lender shall apply the Additional Security to
Borrower's Additional
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Interest Compensation requirement described in Section 31 hereof and the Note
provided, that if Borrower elects the 12 month extension period provided under
Section 31(b), Election No. 2, the Additional Security shall be applied in
prorata increments to the extended monthly note payments, with the balance of
the Additional Security continuing to earn interest as stated herein.
If an Event of Default by Borrower occurs hereunder, the amount of the
Additional Security for all Notes then retained by Lender, together with any
interest thereon, shall be applied against the amount of Borrower's default
obligation. In such event, Lender may apply all or part of the Additional
Security for the following purposes:
(a) to compensate Lender for losses or damages sustained as a result of
such Event of Default; and/or
(b) to reimburse Lender for costs and expenses, including reasonable
attorney's fees, incurred by Lender in connection with such failure to perform,
whether or not litigation or other judicial proceedings are commenced. Any
surplus remaining thereafter shall be retained by Lender as security hereunder.
Provided no Event of Default has occurred and is continuing under this Security
Agreement, upon payment by Borrower of all obligations under the Note, any
Additional Security, if any, held by Lender for such Note shall be returned to
Borrower.
SECTION 26. COMMITMENT FEE. Borrower has paid to Lender a commitment fee
("Fee") of $10,000. The Fee shall be applied by Lender first to reimburse
Lender for all out-of-pocket UCC and other search costs, inspections and
labeling costs and appraisal fees, if any, incurred by Lender, and then
proportionally to the first monthly payment for each Note hereunder in the
proportion that the Collateral Value for such Note bears to Lender's entire
commitment. However, the portion of the Fee which is not applied to such
monthly payments shall be non-refundable except if Lender defaults in its
obligations pursuant to Section 3.
SECTION 27. NOTICES. All notices hereunder shall be in writing, by registered
mail, or reliable messenger or delivery service and shall be directed, as the
case may be, to Lender at 2401 Kerner Boulevard, San Rafael, California 94901,
Attention: Asset Management and to Borrower at 2682 Bishop Drive, Suite 215,
San Ramon, CA 94583, Attention: Mr. Jaime Gonzales.
SECTION 28. MISCELLANEOUS. (a) Borrower shall provide Lender with such corporate
resolutions, financial statements and other documents as Lender shall reasonably
request from time to time. (b) Borrower represents that the Collateral hereunder
is used solely for business purposes. (c) Time is of the essence with respect to
this Security Agreement. (d) Borrower acknowledges that Borrower has read this
Security Agreement and the Notes, understands them and agrees to be bound by
their terms and further agrees that this Security Agreement and the Notes
constitute the entire agreement between Lender and Borrower with respect to the
subject matter hereof and supersede all previous agreements, promises, or
representations. (e) This Security Agreement and the Notes may not be changed,
altered or modified except by an instrument signed by an officer or authorized
representative of Lender and Borrower. (f) Any failure of Lender to require
strict performance by Borrower or any waiver by Lender of any provision herein
or in a Note shall not be construed as a consent or waiver of any other breach
of the same or any other provision. (g) If any provision of this Security
Agreement or a Note is held invalid, such invalidity shall not affect any other
provisions hereof or thereof. (h) The obligations of Borrower to pay the
Indebtedness and perform the Obligations shall survive the expiration or earlier
termination of this Security Agreement or the Notes until all Obligations of
Borrower to Lender have been met and all liabilities of Borrower to Lender and
any assignee have been paid in full. (i) Borrower will notify Lender at least 30
days before changing its name, principal place of business or chief executive
office. (j) Borrower will, at its expense, promptly execute and deliver to
Lender such documents and assurances (including financing statements) and take
such further action as Lender may reasonably request in order to carry out the
intent of this Security Agreement and Lender's rights and remedies. (k) Borrower
hereby appoints Lender (and each of Lender's officers, employees
10
<PAGE> 11
or agents designated by Lender), with full power of substitution by Lender, as
Borrower's attorney, with power to execute and deliver on Borrower's behalf
financing statements and other documents necessary to perfect and/or give
notice of Lender's security interest in any of the Collateral. (l) Borrower
shall keep its books and records in accordance with generally accepted
accounting principles and practices consistently applied and shall deliver to
Lender its annual audited financial statements, unaudited monthly financial
statements to include any financial information given to Borrower's Board of
Directors, and signed by an officer of Borrower and such other unaudited
financial statements as may be reasonably requested by Lender.
SECTION 29. JURISDICTION AND WAIVER OF JURY TRIAL. This Security Agreement and
the Notes shall be deemed to have been negotiated, entered into and performed
in the State of California and it is understood and agreed that the validity of
this Security Agreement and of any of the terms and provisions, of the Security
Agreement and Notes, as well as the rights and duties of Lender and Borrower,
shall be construed pursuant to and in accordance with laws of the State of
California, without giving effect to conflicts of law principles. It is agreed
that exclusive jurisdiction and venue for any legal action between the parties
arising out of relating to this Security Agreement or a Note shall be in the
Superior Court for Marin County, California, or, in cases where federal
diversity jurisdiction is available, in the United States District Court for
the Northern District of California situated in San Francisco. B0RROWER, TO THE
EXTENT IT MAY LAWFULLY DO SO, HEREBY WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY
ACTION BROUGHT ON OR WITH RESPECT TO THIS SECURITY AGREEMENT, ANY NOTE, ANY
SECURITY DOCUMENTS, OR ANY OTHER AGREEMENTS EXECUTED IN CONNECTION HEREWITH.
SECTION 30. ADDITIONAL INTEREST COMPENSATION: (a) General. If and as the Note
provides, Borrower is required to choose a final payment or Note extension
election ("Additional Interest Compensation") at the expiration of the first
Note's base term, that choice shall be an election of Borrower's Additional
Interest Compensation election for all, but not less than all, of the
Collateral under all Notes under the Security Agreement.
Until Borrower fulfills an End of Loan election, all Borrower's Obligations,
including payment of the Monthly Payment Amount, shall continue in full force
and effect, on a month-to-month basis.
(b) End of Loan Position Elections
Election No. 1
Make a final payment equal to 15% of the Collateral's original purchase price.
Election No. 2
Extended the Note's Base Term for an additional 12 months ("Extended Term") for
a monthly rate of 1.5% of the Collateral's original purchase price.
In the event Borrower does not provide 90 days' prior written notice of its
election, Borrower shall be deemed to have elected No. 1 above.
SECTION 31. ADJUST-A-LOAN OPTION: (a) General: After the first 12 months of the
term of any Note, Borrower shall have the option to remove such Note's
Collateral ("Removed Collateral") and finance new Collateral ("New Collateral")
under a new Note ("New Note"). (b) New Note Amount: The principal amount of the
New Note shall be an amount equal to the purchase price for the New Collateral
plus a prepayment figure for the Removed Collateral. The prepayment figure
shall be the original principal amount of the original Note ("Old Note") less:
(i) any trade-in value or resale proceeds received by Lender for the Removed
Collateral and (ii) a
11
<PAGE> 12
credit for Note payments already made (the total Old Note payments attributable
to the removed Collateral multiplied by the "Allowance Factor" indicated in the
table below). In no event shall the principal amount of the New Note be less
than original principal amount of the Old Note.
<TABLE>
<CAPTION>
REMOVAL DATE ALLOWANCE FACTOR
- ------------ ----------------
<S> <C>
After 12 Months of Old Note 55%
After 24 Months of Old Note 60%
After 36 Months of Old Note 65%
</TABLE>
(c) Old Note: If any Collateral remains on the Old Note, the monthly payment
amount for the Old Note will be reduced in proportion to the Removed
Collateral's value. (d) Option Preconditions: Borrower's right to exercise this
Adjust-A-Loan Option ("Option") is conditioned upon the following: (i) no Event
of Default under the Security Agreement has theretofore occurred or is
continuing; (ii) the New Collateral and prepayment of the Removed Collateral
are financed by Lender under a New Note, subject to Lender's current loan rates
and documentation acceptable to Lender; (iii) Lender is satisfied with
Borrower's creditworthiness; (iv) the New Collateral is acceptable to Lender;
and (v) Borrower has given Lender at least 90 days' prior written notice of its
desire to exercise the Option.
SECTION 32. PREPAYMENT. If, and as each Note provides, after the 24th month of
the term of the last Note funded pursuant to this Security Agreement, and
provided Borrower is not in default under this Security Agreement, Borrower
shall have the right to elect to prepay all amounts then owing under all Notes,
for the Prepayment Amount, as defined below. The Prepayment Amount shall be an
amount equal to the difference between (a) the sum of (i) all past due payments
and interest, costs, expenses or other amounts due Lender pursuant to this
Security Agreement and Notes, and (ii) the present value of the remaining
payments and Additional Interest due under the Security Agreement and Notes
discounted at 6% per annum compounded monthly, and (b) the then current balance
of Additional Security remaining.
IN WITNESS WHEREOF, Borrower and Lender have caused this Security Agreement to
be executed as of the date and year first above written.
PHOENIX LEASING INCORPORATED ONDISPLAY, INC.
By: [SIGNATURE ILLEGIBLE] By: /s/ MARK PINE
----------------------------- -----------------------------
Title: V.P. Title: Illegible
-------------------------- --------------------------
HEADQUARTERS LOCATION:
2682 Bishop Drive, Suite 215
San Ramon, CA 94583
County of Contra Costa
EXHIBITS AND SCHEDULES:
Exhibit A -- Closing Memorandum
12
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of
our report dated July 2, 1999 relating to the financial statements of OnDisplay,
Inc., which appear in such Registration Statement. We also consent to the
references to us under the headings "Experts" and "Selected Financial Data" in
such Registration Statement.
PricewaterhouseCoopers LLP
San Jose, California
September 10, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 2,970
<SECURITIES> 0
<RECEIVABLES> 2,683
<ALLOWANCES> 330
<INVENTORY> 0
<CURRENT-ASSETS> 5,798
<PP&E> 941
<DEPRECIATION> 649
<TOTAL-ASSETS> 6,975
<CURRENT-LIABILITIES> 4,461
<BONDS> 2,367
18,982
0
<COMMON> 1
<OTHER-SE> (18,836)
<TOTAL-LIABILITY-AND-EQUITY> 6,975
<SALES> 3,655
<TOTAL-REVENUES> 3,655
<CGS> 1,981
<TOTAL-COSTS> 1,981
<OTHER-EXPENSES> 7,677
<LOSS-PROVISION> 80
<INTEREST-EXPENSE> 71
<INCOME-PRETAX> (6,074)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,074)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,074)
<EPS-BASIC> (1.56)
<EPS-DILUTED> (1.56)
</TABLE>
